ICA’s Annual Report including the Corporate Responsibility Report for 2008 This is ICA President’s statement 2 What makes ICA unique? 6 ICA’s strengths 8 Goals and strategies 10 “Good Business” for customers 12 “Good Business” for stores 20 “Good Business” for the ICA Group 26 ICA Sweden 33 ICA Norway 34 Rimi Baltic 35 ICA Bank 36

Annual Report

Corporate Governance Report 38 Financial reports in 2009 Directors’ Report 44 Interim report January – March May 6 Defi nitions of key fi nancial ratios 46 Interim report January – June August 19 Consolidated Income statement 49 Interim report January – September November 4 Consolidated Balance Sheet 50 Financial information is also available at Changes in Consolidated Shareholders’ www.ICA.se > About ICA Equity 52 Consolidated Statement of Cash Flows 53 Contact Supplementary Information, the Group 54 Madelene Gummesson Parent Company Income Statement 67 Manager Financial Communication Parent Company Balance Sheet 67 Telephone: +46 8 561 505 83 Changes in Parent Company’s [email protected] Shareholders’ Equity 69 Parent Company Statement of Cash Flows 69 Supplementary Information, Parent Company 70 Audit Report 74

Corporate

Responsibility Report Contact Overview 76 Lisbeth Kohls Management approach 77 Senior Vice President Corporate Responsibility Environment 80 Telephone: +46 8 561 502 12 Society 85 [email protected] Human rights 85 Product safety 87 Healthy living 89 Employees 90 Community engagement 91 Economic development 93 GRI content index 94 Glossary and abbreviations This is ICA

The ICA Group is one of the Nordic region’s ICA’s values leading retail companies, with around 2,230 At ICA, a commitment to environmental work and com- of its own and retailer-owned stores in Swe- munity engagement go hand in hand with long-term pro- den, Norway and the Baltic countries. The fi tability. ICA’s customers and other stakeholders should Group includes ICA Sweden, ICA Norway and feel secure and have confi dence in ICA and its busines- Rimi Baltic, as well as ICA Bank, which offers ses. To describe its corporate responsibility, ICA has coi- fi nancial services to Swedish customers. ICA ned the term “ICA’s Good Business,” which means that AB is a joint venture 40 percent owned by ICA will: Hakon Invest AB and 60 percent by Royal · be driven by profi tability and high ethical standards Ahold N.V. · listen to customers and always base its decisions on their needs Vision We make every day a little easier. · nurture diversity and growth among employees Mission To be the leading retailer with a · maintain an open dialogue internally and with the focus on food and meals. community · ensure quality and safe products · promote a healthy lifestyle · adopt sound environment practices to promote sustainable development

Distribution by subsidiary Store formats

Sales % ICA Sweden ICA Nära ICA Supermarket ICA Kvantum 1. ICA Sweden 62.6 Format: Small, convenient stores Format: Wide assortment for eve- Format: Designed to be the leading with good service, a narrow pro- ryday meals or special occasions. local supermarket, with foods for 2. ICA Norway 22.3 duct range and quality fresh foods. Personal service is high, and the everyday, weekends and special 3. Rimi Baltic 13.9 Many serve as pick-up sites for stores carry a wide range of fresh occasions. Offer a variety of fresh 4. ICA Bank 0.6 Apoteket and Systembolaget, the foods. foods, alternatives for allergy suf- state-run pharmacy and alcohol Form of agreement: Independent ferers, healthy and organic choices, 5. Other 0.6 monopolies, and handle sales for retailers with ICA agreements. and local products. Total 100 ATG, the Swedish off-track betting Form of agreement: Independent service. retailers with ICA agreements. Operating income SEK m Form of agreement: Independent 1. ICA Sweden 2,644 retailers with ICA agreements. 2. ICA Norway –520 3. Rimi Baltic 182 ICA Norway ICA Nær ICA Supermarked ICA Maxi 4. ICA Bank 111 Format: Small convenience stores Format: A passion for good food Format: Everything in one location. 5. Other –300 offering good service, a specially and diversity, personal service and A wide selection of foods combi- designed product selection and lo- a wide selection. ned with non-foods. Convenient Total 2,117 cal choices. Form of agreement: Branch for drivers and transports. Number of employees Form of agreement: About 40 per- Form of agreement: Branch cent are branches and 60 percent 1. ICA Sweden 5,208 are franchises. 2. ICA Norway 4,826 3. Rimi Baltic 9,870 4. ICA Bank 234 Rimi Baltic SuperNetto (Latvia, Lithua- Rimi Supermarket Rimi Hypermarket and 5. Other 1,885 nia), Säästumarket (Estonia) Format: Wide selection for food lo- Rimi Compact Hypermarket. Total 22,023 Format: Discounters that emphasi- vers with an emphasis on fresh Format: Everything under one roof ze price and a wide selection of foods and good service for every- at good prices. Wide selection of everyday items. day needs. Located close to where fairly priced foods, combined with Form of agreement: Branch customers live or work. non-foods such as house wares and Form of agreement: Branch sporting goods.

ICA Bank Mission: To make life a little easier for ICA’s customers Business volume 2008: SEK 16,363 million through its fi nancial services and increase their loyalty (14,728 million) to ICA. Deposits 2008: SEK 8,683 million (7,509)

ICA Real Estate’s operations are included in ICA Sweden and ICA Norway. From January 2009, ICA Real Estate is reported as a separate segment. 2008 in brief • The ICA Group’s net sales amounted to SEK 90,963 million (82,326), an increase of 10.5 percent compared with 2007. • Operating income amounted to SEK 2,117 million (2,602), a decrease of 18.6 percent compared with 2007. • The operating margin was 2.3 percent, a decrease from 3.2 percent in 2007.

Net sales (SEK m) Operating income (SEK m) Income after net fi nancial Operating margin (%) items (SEK m)

3.5 90,963 2,282 2,602 82,326 2,046 2,297 73,334 1,794 71,663 2,117 1,741 67,395 1,671 1,977 1,958 3.0

2.5

2.0 04 05 06 07 08 04 05 06 07 08 04 05 06 07 08 04 05 06 07 08

Maxi ICA Hypermarket Number of stores* Store sales in Sweden Format: Everything at good prices Form of agreement: Independent under one roof. Wide variety of retailers with ICA agreements for ICA Nära 732 ICA Nära SEK 13,547 m foods and non-foods such as house food sales as well as separate wares, sporting goods and garden branch operations, Maxi Special ICA Supermarket 454 ICA Supermarket SEK 28,809 m supplies. Extended opening hours, AB, for non-food departments. ICA Kvantum 117 ICA Kvantum SEK 21,365 m convenient for drivers. Maxi ICA Stormarknad 66 Maxi ICA Stormarknad SEK 22,707 m

* Including retailer-owned stores

Rimi Number of stores* Store sales in Norway Format: Discount stores that make Form of agreement: About half of it easy and convenient for custo- the stores are managed as bran- ICA Nær 278 ICA Nær NOK 4,550 m mers to do their daily shopping. ches and half are franchises. ICA Supermarked 79 ICA Supermarked NOK 4,748 m Modern, airy stores designed for families, with everyday products ICA Maxi 26 ICA Maxi NOK 3,001 m at low prices. Rimi 253 Rimi NOK 7,698 m

* Including franchise stores

Rimi Compact Hypermarket emp- Number of stores Store sales in the Baltics hasizes atmosphere, comfort and Estonia 74 Estonia EUR 391 m effi cient use of space. Accessible by car with generous store hours. Latvia 97 Latvia EUR 642 m Form of agreement: Branch Lithuania 62 Lithuania EUR 276 m

Number of ATMs 2008: 136 (105) Number of payment terminals 2008: Sweden 6,300 (6,000), Norway 2,000 (0) CUSTOMERS

ICA GROUP

STORES

“Good Business” generates good business

Good business begins with satisfi ed customers. That’s something you learn if you help millions of people a day to make their lives a little easier. At ICA, customers can always feel secure in knowing that they will get a good deal – in several different ways. They will fi nd value for the money, high-quality products and service to fi t their needs. What’s more, customers will fi nd inspiration to eat well and healthier. Without question, they can also feel secure in know- ing that ICA is working long-term with major corporate responsibility issues, such as social responsibility and the environment.

The stores should also be a good business. In Sweden, the ICA stores are run according to the successful model of independent retailers. In Norway and the Baltics, the stores are wholly owned or run as franchises. Regardless of how it is run, the store is where relationships with customers are built and the foundation for success is laid. The stores should, of course, be a source of good business in the form of sound fi nances, as well as from a local perspec- tive. The stores often have a strong local connection and are positive contributors to the community.

Lastly, ICA should be a good business for its owners. Hakon Invest, which is publicly listed in Sweden, and the Dutch ICA ANNUAL REPORT 2008 public company Royal Ahold, which share ownership infl uence over ICA, should naturally receive a satisfactory return on their capital. Good business is also important for ICA to continue to reinvest wisely in the sustainable development of its stores, selections and products.

Only then can good business be even better. For everyone concerned.

1 President’s statement Well equipped for the challenges ahead

Measures to improve food quality in stores, efforts to turn the situation in Norway and the reorgan- ization were our priorities at ICA in 2008. Now we look ahead to a year of business development with a focus on pricing, effi ciencies and sustainable development.

I feel that fl exibility and the ability to quickly adapt to Fine performance good results. The Norwegian market is fragmented, the work is the initiative ICA took to introduce a change are ICA’s biggest strengths. 2008 was a year ICA Bank has performed well, with large business with twice as many stores per capita as in Sweden, new, industry-wide quality standard for food han- We cannot stress The ability to quickly in which we had the opportunity to live by our volumes and an increased customer base. Many cus- and Norwegians shop twice as often as Swedes. dling in Swedish stores. enough the importance of adapt is rooted in the ICA words. Not that we performed badly. We added tomers have felt secure having a small, innovative Food retailing is much about focusing on the short our private label program. idea, which balances co- another successful chapter to our history. Net sales bank owned by ICA, that focuses on simple solutions term perspective – today and this week. We can and New organization in place It will be especially critical ordination with local fl ex- increased by 10.5 percent to SEK 90,963 million and products. “ “ must make every day a little better. In Norway, we The ability to quickly adapt is rooted in the ICA idea, during a prolonged reces- ibility. This applies to the (82,326) and operating income was SEK 2,117 million The crisis affected the Baltic countries early and have tended to look a little too far ahead. which balances coordination with local fl exibility. sion in helping us to posi- Group as a whole as well as (2,602). While I am not totally pleased with the over- hard, but ICA has targeted correctly with Rimi Baltic’s ICA Sweden continues to be a major success in This applies to the Group as a whole as well as the tion ICA as offering value, the individual store.” all results for the Group, profi tability remains at a concept. The business is delivering stable results in terms of sales and earnings, and has further individual store. Last fall, we launched a major organ- quality, innovation and good level, particularly against the backdrop of the pace with growth. Although we cannot do anything strengthened its position as a market leader. This izational change to fi nd the right balance between sustainability. Everything economic slowdown. about the economies in these countries, we can does not mean that we don’t face challenges, espe- coordination and local modifi cations. we claim about ICA is put There is no lack of challenges ahead. The global quickly adapt to changing conditions. Rimi Baltic’s cially in non-foods, where our offering has not suffi - Our companies operate in different markets from to the test in our private fi nancial crisis is unlikely to affect ICA to the same three store formats are now successfully positioned ciently kept up with changes in consumer prefer- very different positions. As a result, synergies are label products. The proof extent as many other companies, but it does affect with customers, especially in the fast-growing dis- ences, buying habits and the competition. The entire limited. This is why in 2008 we restructured the is on the shelves.” our customers. When their wallets are thinner, price count segment, and we see this as a strength going market has focused on category killers, which are Group to pave the way for a stronger local presence. becomes more important, and ICA has to be able to forward. highly specialized in their niche. Maxi ICA Hypermar- Every subsidiary must have the leeway to develop offer alternatives for every price range. For us, it is a In Norway we have been working intensely during ket, like most hypermarkets, has tried to be good at their business based on local conditions. The com- question of continuing to make up a share in negotia- the last years to fi nd the right store structure, and I everything. Now we will concentrate our product panies are in different stages of the lifecycle curve. tions with our suppliers, but that is not enough. We believe we are now better positioned structurally range more on our core – the kitchen and home. In Sweden, ICA is a mature company and clearly also have to be more effi cient internally. We want to than the competition. But we have not placed In the end of 2007 it was found that a number of the market leader thanks to the successful ICA start a positive cycle: lower costs, lower prices, more enough focus on our customers and our offerings, Swedish stores had improperly changed the expira- model of independent retailers working in coopera- satisfi ed customers, more sales. ICA will also con- and this is the main reason for ICA Norway’s weak tion dates on packages of chopped meat. The inci- tion. Here the priority is to maintain market leader- tinue to add value through higher service and knowl- performance, though there have also been operat- dent led not only to stricter routines but also an ship by being even better at the things we are edgeable staff. And we will strike a balance between ing problems and excessive shrinkage. A new man- agreement between all ICA retailers and ICA Sweden already good at, to add value and modernize rather a wide product selection and good prices. But in agement team assigned to turn around the situation to intensify efforts to improve food quality in every than start anew. The emphasis now is on innovation these times, of course, our emphasis has to be on took over last fall and has developed and introduced respect. The goal was clear, to provide the best food in terms of the product range and pricing to create strong offerings and a good discount selection. a new discount concept for the Rimi chain with very quality in Sweden, and I dare say that is where we more value for customers. stand today. One of the most important results of In Norway, we are still at the beginning of the lifecy-

Important areas in 2008 Priorities in 2009

· Reorganization to improve the balance · Prices and quality between Group synergies and local conditions · Turnaround at ICA Norway · Even better price offerings due to the · Cost effi ciency recession · Renewal of stores · Strong measures to guarantee and strengthen food safety in stores · Development of food quality in stores

· HR development ICA ANNUAL REPORT 2008 ICA ANNUAL REPORT 2008 · Better offerings within non-foods

· Sustainable development

2 3 cle curve. What we have to do here is create a sound 2020 compared with 2006. A major effort is under money have always been our guiding principles. suit our customers. In 2009, we will be studying what foundation with the right cost base, the right operat- way to reduce energy consumption, which includes Last fall, we launched an important innovation for a convenience concept might look like for ICA. ing forms and the right customer focus. This requires putting locks on refrigeration equipment and testing One of ICA’s over- Our strategies and the future that increases customer value and value Just like 2008, 2009 will involve the unexpected. centralized control. solar panels on store roofs. In 2008, we also took a riding strategies is to techniques can always be for the money – personalized offerings for frequent But if we again demonstrate our fl exibility and adapt- The turbulence in the Baltic countries requires big step towards ensuring that our suppliers in Asia contribute to society’s copied, but our commit- customers, called “Mina varor”, based on previous ability, we will be well prepared for the year ahead. that Rimi Baltic is led by a steady hand in the years offer proper working conditions. The opening of “sustainable development. “ment will be more diffi cult. buying patterns. This is no less than a revolution that When changes are needed, we will act quickly, and ahead. But its profi tability shows that Rimi Baltic has sourcing offi ces in China and Vietnam gives us a The basis of our corporate It is why our culture gives changes how we communicate with customers and when things are going well we will try to be even bet- already come a long way in its development. much better opportunity to help suppliers on site to responsibility work is sum- us a competitive advan- earn their loyalty. The reception has been very posi- ter. This is essentially why we are in business, to meet our stringent requirements on human rights marized in seven position tage.” tive, confi rming previous surveys that indicated a essentially make every day a little easier for our cus- Sustainability issues and the environment in their production facilities. statements that describe strong demand for more targeted offerings. The tomers. Even though each of our subsidiaries now has how we want to try to be response rate – how many people that actually utilize greater freedom, we naturally have core values and Synergies worth protecting a positive force in society. the offers – has reached upwards of 20–30 percent Solna, Sweden, February approaches we will not compromise, for instance, in Despite decentralization, we will continue to take We call them ICA’s Good so far, which is signifi cantly higher than for conven- terms of sustainable development. advantage of synergies in purchasing, private label Business.” tional discount coupons. One of ICA’s overriding strategies is to contribute products, format and concept development, and risk Naturally, we won’t be alone for long in commu- to society’s sustainable development. The basis of management. nicating with and serving customers in a more per- our corporate responsibility work is summarized in We cannot stress enough the importance of our sonal, targeted way. Our strategies and techniques seven position statements that describe how we private label program. It will be especially critical dur- can always be copied, but our commitment will be Kenneth Bengtsson, President and CEO want to try to be a positive force in society. We call ing a prolonged recession in helping us to position more diffi cult. It is why our culture gives us a com- them ICA’s Good Business. We want everyone who ICA as offering value, quality, innovation and sustain- petitive advantage. works for ICA to know and believe in them. They ability. Everything we claim about ICA is put to the also cover the ten principles of the United Nations test in our private label products. The proof is on the Staying innovative Global Compact, which ICA is a member of. ICA has shelves. Since we have control over the entire value The main focus in 2009 will be on enhancing our signed the Global Compact’s Caring for Climate chain – who produces, how it is produced and trans- existing business based on external and internal con- action platform as well. ported – we also take full responsibility. Private labels ditions. The strategy is to maintain and strengthen In 2008, we worked intensely to achieve our long- play a slightly different role in different economic our position as a market leader by being more inno- term climate change objective: to reduce ICA’s scenarios. In a recession, they reaffi rm our value vative than the competition. known greenhouse gas emissions by 30 percent by proposition. Customer value and value for the Naturally we are always looking at new formats that ICA ANNUAL REPORT 2008 ICA ANNUAL REPORT 2008

4 5 What makes ICA unique? ICA’s efforts to create value focus on the customer

ICA consists of not just one model but several. The Swedish model is based on independent retailers, the Norwegian on a blend of franchises and branches, and the Baltic model is based on wholly owned stores. But the models have one thing in common. Creating value begins and always ends with customer needs.

ICA tries to incorporate the best of being both big and small by as sensi- The model of independent retailers relies strongly on entrepreneurship, tions, such as prepared salads and meals, to make life easier for the cus- This accounts for an average of 30 percent of the total business volume bly as possible combining entrepreneurship with economies of scale. which is especially critical when times are tough. Staying close to and tomer. Total value-added in the ICA Group amounts to SEK 9,640 billion from independent retailers. ICA is a group comprised of a parent company, ICA AB, and a number understanding the local market, coupled with the motivation to create (9,314), corresponding to a gross margin of 10.6 percent (11.3). In an industry ICA believes that free competition is the best way to meet customer needs of subsidiaries with different types of operations – primarily retail busi- profi ts in the own company, creates a fl exible, resource-effi cient busi- where margins are tight, it is crucial that every level and link contribute. and manage resources effi ciently. This is why every level of the organization nesses with stores with different ownership structures and formats, in ness that effectively builds value for customers and stores and, in the ICA’s core business is purchasing and logistics, in addition to inte- must be competitive, and competitive principles must be applied consist- addition to banking and real estate operations. long run, for ICA AB as well. Entrepreneurship is also an important driv- grated chain store operations. The focus on ICA’s private labels marks a ently. Many ICA retailers have another ICA retailer as their main competitor. The business is founded on close contact with customers and professio- ing force for franchises, even if franchisees do not have the same free- signifi cant shift toward earlier levels of the value chain. This shift affects New store openings are decided centrally by ICA. With few exceptions, nalism at every level. Retail is ICA’s main business; the stores are the basis dom as independent retailers. In an integrated retail chain, value is cre- ICA’s entire business, not only in the form of better margins at the same the property company ICA Real Estate/the ICA Group holds the lease or for all earnings. The stores are managed according to four business models. ated primarily through large volumes in an effi cient supply chain and time the prices can be held in check at the customer level, but also by owns the store property. In Sweden, ICA has around 600 leases, and owns The core model is “independent retailers working in cooperation,” professional store operations. allowing it to design a unique customer offering. 100 store properties. In Norway and the Baltics, practically all leases are which dominates operations in Sweden. This is complemented by Regardless of the business model, the value chain begins and ends Individual ICA retailers in Sweden are free to buy their products from signed with ICA. ICA’s independent retailer model differs contractually wholly owned stores integrated in chains in Norway and the Baltic coun- (see illustration) with the customer and customer value. The goal is to sources other than ICA. Consequently, ICA’s purchasing, product assort- from other voluntary chains in its leasing terms. The retailer “borrows” tries, as well as a combination in Maxi ICA Hypermarket, where food create value daily and consistently in every link of the chain. ment and logistics functions must consistently be the best in the mar- the store property, and clear guidelines stipulate what happens if the departments are managed by independent retailers, while non-foods Over a period of time, ICA has added various steps to its value chain. ket to remain the retailers’ fi rst choice. retailer may sell. The basic idea is that the individual retailer should earn are run by ICA Sweden’s subsidiary Maxi Special. Lastly, in Norway, It no longer merely buys goods at one end and sells them at the other. On average, every Swedish retailer has around 50 different suppliers, a profi t on his or her labor, not become rich by selling the store. Any about half the stores are franchises. In food retailing, the trend is away from ingredients and toward solu- many of which are local producers of bread, vegetables and fresh foods. capital gains, along with leasing revenue, are revenue sources for ICA.

Regardless of business model, the value chain begins and ends ICA’s earnings come from four principal sources: Various contractual models with the customer. The goal is to create value daily and consist- for the stores ently in every link of the chain. 1. Stores 2. Supply chain 3. Real estate 4. Banking ICA generates revenue through royalties ICA purchases goods and then sells them, ICA AB owns many store properties. Through ICA Bank, ICA sells fi nancial Sweden Norway and/or profi t distributions from the at a markup, to stores in Sweden and This generates revenue in the form of services in Sweden. Net interest income ICA agreements: Shareholder and Branches: ICA Norway’s own stores Swedish stores as well as fees from Nor- franchises in Norway. It also generates market-rate rents from retailers. ICA and commissions from the bank con- fi nancing agreements between ICA are branches. All ICA Maxi stores, wegian franchises. revenue from the sale of services to often owns the land and structure in tribute to earnings. ICA Bank also pro- Sweden and the individual retailer. ICA nearly all ICA Supermarked stores, 40 Retail sales are an important source stores, such as marketing communica- connection with new store openings. At vides infrastructure, such as payment Sweden retains the rights to the prop- percent of ICA Nær stores and half of of earnings in Norway, where ICA owns tions, logistics, training and technology. the time of sale, the property has usu- terminals and ATMs, to other compa- erty, while the retailer owns and runs all Rimi stores are branches. CUSTOMERS 53 percent of the stores, and in Rimi Bal- ally appreciated in value, which gener- nies for a fee. the store. tic in Estonia, Latvia and Lithuania, Earnings sources ICA Sweden: ates gains for ICA. New stores are usually opened by Franchise agreements: The retailer where all the stores are wholly owned. • From deliveries to ICA stores Earnings sources ICA Bank: ICA Sweden, which then offers attrac- operates the store as a separate com- ICA also receives revenue from stores • From the sale of services to ICA stores Earnings sources ICA Sweden: • From the sale of fi nancial services tive fi nancing terms to retailers to run pany. ICA Norway receives a franchise where ICA Sweden during a transition • From rental income and property sales • From other companies that use the them. Depending on the store’s size fee based on a percentage of sales. ICA period owns more than 50 percent of Earnings sources ICA Norway: bank’s infrastructure and sales, the retailer then pays a roy- Norway provides a number of central- the shares, which is the case with • From deliveries to franchise stores Earnings sources ICA Norway: alty to ICA and in some cases a profi t ized services, such as marketing and Product range development approximately 60 stores. • From the sale of services to franchise • From rental income and property sales share to ICA Sweden. ICA Real Estate administration. ICA Norway owns or In Sweden, ICA also generates reve- stores Sweden owns most of the store prop- holds leases on most franchised Purchasing nue from consumers through Maxi Spe- Earnings sources Rimi Baltic: erties or holds the leases on them. stores. About half of Rimi stores and 3. 4. Supply chain cial, the company that sells household • From rental income and property sales 60 percent of ICA Nær stores are oper- ICA GROUP and leisure products in Maxi ICA Hyper- Maxi Special: The retailer and ICA Swe- ated as franchises. Banking

markets. den manage operations under the Services 1. same roof at Maxi ICA Hypermarkets. Associated stores: Independent chains Earnings sources ICA Sweden: Dedicated home and leisure depart- such as Livi and Servicemat which ICA Logistics • From Maxi Special 2. ments are operated as branches of ICA Norway assists primarily with purchas- • From stores where ICA Sweden owns Marketing communications STORES Sweden’s subsidiary Maxi Special. The ing and distribution. more than 50 percent of the shares ICA ANNUAL REPORT 2008 subsidiary is responsible for purchases Store and business development ICA ANNUAL REPORT 2008 • Royalties and profi t distributions from and sales to these departments. The Baltics stores New stores and store renewals retailer manages the food retail opera- Branches: All Rimi Baltic stores are Distribution between the Earnings sources ICA Norway: tions as a separate company. Maxi operated as wholly owned branches. • From wholly owned stores four earnings sources (%) Special and the retailer in turn lease • From franchise fees 1. Stores, 41.9 space in the properties from ICA Real 2. Supply chain, 55.3 Estate Sweden. Earnings sources Rimi Baltic: 3. Real estate, 2.2 • From wholly owned stores 4. Banking, 0.6

6 7 ICA’s strengths ICA’s strategic strengths ICA develops its business based on a self-critical approach and periodic analysis of its strengths and weaknesses. ICA’s success is based in large part on a number of strategic strengths:

The ICA model Effi cient supply chain ICA’s centralized purchasing generates very high volumes, The Swedish ICA model of independent retailers working in which in turn leads to good prices and the ability to ensure cooperation is a cornerstone of this platform. ICA retailers the best quality. Retailer-owned stores offer a local assort- have a strong local connection, are committed and personally 5 1 ment in addition to ICA’s central product range. Swedish know their local markets and customers. They have a mandate to quickly retailers decide themselves which products they want to buy from ICA’s make decisions to accommodate customer demand or other changes. assortment, which means that ICA’s supply chain must be highly effi cient As a result, ICA has shorter lead times to adapt to its markets than any in every respect. Food sales are a low-margin business, so the entire supply of its competitors. The strength of the model at the same time creates chain must constantly maximize resources. ICA has developed effi cient challenges. The freedom of individual retailers to manage their operations systems to get the right products to stores just in time to fi ll shelves or means that local variations can arise for example in marketing. ICA’s prepare for campaigns. Logistics are designed around 16 distribution involvement in the supply chain to each retailer may vary as well. This terminals that handle an enormous volume of goods on a daily basis. places strong demands on internal communication to optimize cooper- The new, highly automated warehouse in Helsingborg is among the ation. As a whole, the model balances freedom and cooperation to most advanced in Europe. create value for everyone involved. Thus far, the model is used only in Sweden, but in a long term perspective it may be exported to other countries, if and when the right conditions exist.

Broad company portfolio ICA’s broad-based portfolio of companies provides stability The ICA brand and potential, in addition to spreading risks between coun- ICA is one of Sweden’s strongest brands. This is a huge asset tries and businesses. ICA’s operations in Sweden, Norway in its marketing. Customer confi dence is very high, and ICA’s 2 and the Baltic countries are in different stages of development. customers are more loyal than the competition’s. The ICA 6 brand is mainly a product of the strong commitment of its After last fall’s reorganization, it is now trying to fi nd a new, dynamic balance between Group-wide coordination and local operations, with retailers; it is built and reaffi rmed primarily in the stores. But it can also an emphasis on the latter. At the same time, ICA has great opportunities be put at risk in the stores. Customer preferences did not change in con- for future economies of scale, e.g., through a unifi ed infrastructure for nection with the so-called chopped meat scandal in late 2007, though customer and bank cards through ICA Bank. ICA’s ratings in terms of trustworthiness and quality fell temporarily. ICA is constantly striving to ensure that its core values are refl ected through- out the business. ICA should be considered as personable, straightfor- ward, inspiring and safe – in everything from individual stores to private labels. The success of the latter underscores the strength of the brand. These products should always provide customers with similar quality at a better price, and provide ICA a better margin. To a growing extent, pri- vate labels have also taken on another important role: to showcase ICA based on all its values, especially sustainability. The ICA I love eco and ICA Gott liv lines demonstrate that ICA puts its ideals into practice and in Unique understanding Strong fi nances that way make the brand even stronger. of customer needs The strong fi nances of the ICA Group are another corner- stone. ICA has resources to invest substantially based on its Committed employees Through its independent retailers and the stores, ICA keeps strategy, as well as to weather tough times and act offen- its ears to the ground and can follow trends. A continuous with a range of skills 34sively when the market is consolidating or business opportu- dialogue with customers is translated not only into the right Personal commitment is also a core value for ICA. Every day nities of various types arise. Cost effi ciencies are always important. products but also the right way to present them in an inspiring environ- 7 its employees rally around their mission to make life a little Financially, ICA has long focused on raising its earnings, and can do so ment. A passion for food and inspiration are refl ected in many ways, easier for customers. But serving millions of people a day isn’t easy. ICA ICA ANNUAL REPORT 2008 today through a further attention to costs. ICA ANNUAL REPORT 2008 such as recipes, cookbooks and store demonstrations. ICA has an therefore invests in skills management, primarily through its in-house extensive package of customer surveys, in order to secure the best training organization, ICA School in Sweden and Norway, and through knowledge of the customers’ habits, preferences and attitudes. The ICA job rotation to transfer know-how and experience between the stores Card helps the company to learn about customer preferences, allowing and Group functions. ICA also has high demands on itself to be an it to customize offerings that provide greater value. It also makes it pos- attractive employer. Doing its utmost to ensure that all employees sible to accommodate customer needs through the development of make the most of their professional development opportunities is a key private label products. element in ICA’s recipe for success.

8 9 Goals and strategies Important measures in 2008

ICA should be a sustainable company with a solid fi nancial foundation, a commitment to the environment and strong society engagement. Below is a summary of ICA’s most important goals in these efforts and how it is working to achieve them.

Economic development

ICA’s most important goals How ICA is working to reach its goals Important measures in 2008 Outcome 2008

• Increase sales faster than the total • Combines economies of scale with locally • New organization: ICA reorganized to enable • Expanding product range: ICA I love eco, ICA Operating margin (%) Return on equity (%) market in each sector. designed concepts. subsidiaries to better adapt to conditions in Home and ICA Cook & Eat were launched • Reach an operating margin of 3.5–4 • Offers competitive prices while maintaining each market. during the year. percent. the product quality. • “Mina varor”: A new concept with personal • New stores: 41 new stores were opened in 3.5 30 • Reach a return on equity at at least • Increases cost effi ciency. discount offers was launched for frequent fi ve countries. 14–16 percent over a business cycle. • Offers an attractive range focused on private customers. • Growing bank: ICA Banken attracted 50,000 25 Price: 3.0 • Have an equity/assets ratio at 30–35 labels, fresh foods and non-foods. • Measures were introduced to show- new customers. On site in Asia: 20 percent in the long term. • Opens new stores and modernizes existing case discount offerings. • ICA opened Asian offi ces to store network in a total of four formats: • Focus on food: Greater attention to food lov- make non-food sourcing more effi cient. 2.5 hypermarkets, supermarkets, convenience ers, including the publication of a popular 15 stores and discounters. cookbook, an “Eat local” initiative and a cam-

• Offers a wide range of banking services and paign to again make October Sweden’s 2.0 10 strengthens customer loyalty through ICA Bank. national food month. 06 07 08 06 07 08

Environment

ICA’s most important goals How ICA is working to reach its goals Important measures in 2008 Outcome 2008 • Reduce emissions of greenhouse gases • Works to increase the understanding of climate • Calculate the impact: An analysis was fi n- • Count the miles: ICA purchased carbon off- Known emissions of Organic product sales by 30 percent by 2020 compared to change among employees and customers. ished of the climate impact of 100 private sets for its air travel in Sweden and Norway. greenhouse gases, 2006. • Reduces energy consumption and substitutes label products from producer to customer. • Organics: The ICA I love eco line was excluding carbon- ICA-stores in Sweden, SEK m • Reduce energy consumption in stores to a better energy source. • Renewable electricity: Discounted contracts launched in Sweden and Norway. neutral air travel, ICA-stores in Norway, NOK m thousand tons with ten percent by 2010, compared to • Gives customers climate-smart tips on buy- on renewable electricity were prepared. Will • Free range meats: As part of its collaboration 318 317 1,277 2006. ing and preparing foods. be offered to all Swedish stores in 2009. with WWF, ICA launched its own free range 306 • Level out the total amount of ICA’s • Develops eco-labeled products under its own • Energy-effi cient lighting: Older lighting fi x- meats in Swedish stores. known greenhouse gas emissions brand. tures in warehouses, offi ces and stores in • Sustainable fi sh: New internal guidelines 827 during 2008. • Maintains a close dialogue with suppliers and Sweden and Norway were replaced with were introduced for which types of fi sh may • Expand the range and increase sales of stakeholders. more modern, energy-effi cient alternatives. be sold in Norwegian ICA and Rimi stores. Put a lock on that: eco-labeled products. • Stores in all countries worked on putting locks, doors or curtains • Reduce ICA’s environmental impact 93 113 on refrigeration equipment to reduce energy from hazardous substances and wastes. consumption. 06 07 08 07 08 07 08

Society

ICA’s most important goals How ICA is working to reach its goals Important measures in 2008 • Roadshow: Around 1,900 employees from Outcome 2008 700 stores took part in “food quality days” • Increase the number of socially audited • Encourages and supports suppliers to con- • Asian offi ces: Sourcing offi ces were opened No. of audited Sales development arranged in 18 locations in Sweden. suppliers of ICA’s private label products duct third-party audits for social issues. in Asia. Employees on site conduct quality production units “key hole” • Performance reviews: Further development ICA-stores in Sweden, SEK m in risk countries. • Conducts its own audits at suppliers. and social audits. ICA’s own audit method for in risk countries of the platform for performance reviews. 85 ICA-stores in Norway, NOK m ICA ANNUAL REPORT 2008 • Have a safe, secure handling of the • Makes extensive quality monitoring from social issues, ICA Social Audit, was created ICA Social Audit 9,909 ICA ANNUAL REPORT 2008 • Leadership: New leadership training was 9,340 foods at every level. producer to store. and implemented. BSCI introduced. • Prioritizes keyhole-labeled products. • New standard: ICA took the initiative to draft Fairtrade • Develop products that support a • Promoting health: More health-oriented • Commits itself to skills management through a new industry standard for food handling in healthy lifestyle. measures were taken in Norway, including training and opportunities for an internal Swedish stores. • Strengthen ICA’s employer brand. price cuts on fruit and vegetables and the 2,730 career. • Store audits: All Swedish stores were audited removal of sugary products from checkout 2,655 three times each, with regard to food safety. 15 12 areas in ICA Supermarked stores.

07 08 07 08

10 11 CUSTOMERS

ICA GROUP

STORES

“Good Business” for customers “My family and I like to eat healthy. Since ICA Norway launched the Keyhole la- bel, it has become much easier for me to fi nd products with more fi ber and less fat, sugar and salt. I used to have to read the list of ingredients. That took time and energy. Keyhole labeling on shelves and packaging makes it much easier for me. I’m happy that products keep getting added, but I would like to see even more. Mostly I’d like to see the Keyhole on more prepared foods, like soups and stews.”

Helle S. Grøttum, customer at ICA Supermarked Vinderen, Oslo, Norway.

Customer needs are the basis of everything ICA does. At ICA, customers should feel that they receive value and fi nd products that suit them. Those who want to buy the top brands or healthy products should be able to. Those who want to shop economically should be able to as well. Foodies looking for inspiration and ingredients for any meal should be able to fi nd pleasant surprises practically every day. And ICA’s private label products are always there to guarantee that customers have plenty of choices at different price points. ICA is constantly trying to better understand its customers’ needs, not only those that they have to- day but the needs they will have tomorrow. To succeed requires continuous dialogue. Only then can ICA improve and update its offerings. Customers notice new things. For example, the range of prepared foods is growing in pace with customer demand. The same applies to their growing interest in green and sustainable products. ICA satisfi es that with the ICA I love eco organic line. And what about person- al fi nances? Even here ICA can offer solutions. Customers can receive everything from personalized of- fers with their ICA Card to a mortgage from ICA Bank in Sweden. ICA ANNUAL REPORT 2008 ICA ANNUAL REPORT 2008

12 13 “GOOD BUSINESS” FOR CUSTOMERS

Crispy salmon hash “I came up with this recipe during my ‘cabbage period,’ when my Red beet dumplings stuffed with reindeer “My young son just loves these dumplings. husband always asked as soon as he came home at dinner time, ‘What are we having He is always happy to help me in the kitchen to roll them. When they are boiling, he with cabbage tonight?’ An extra plus is that the dish is naturally gluten- and lactose-free.” stands nearby, waiting for them to rise to the surface. The reason I began using beets Liselotte MacFie, Stenkullen was that I didn’t have enough potatoes, but I happened to have beets lying around.” Maria Lundqvist, Skellefteå

Lafi ta’s pork and plums “I have always liked plum-fi lled pork loin with applesauce, but feel it’s too much trouble to make. Here I have created a rec- ipe that’s quick and easy, but has all the right fl avors. Ginger gives the dish its heat and adds a modern twist.” Maria Tolestam, Arjeplog

Chanterelle burgers “When our family has picked a lot of chanterelles, there’s usually not enough room in the freezer after I have parboiled all of them. That’s when I make this treat. It’s a big hit among our friends.” Carina Larsson, Slottsbron

Chicken with prunes “My husband and I are both trying to eat less fat. Chicken is lean, at the same time we both enjoy it a lot. Prunes and bacon are also among our favorites, which made it natural to use them as well. Serve with roasted root vegetables and onions.” Elisabeth Malm, Vinslöv

culture still varies from north to south. Many submissions refl ect tradi- Traditional classics for everyday cooking tional, local ingredients. “Palt” is still eaten in Norrbotten, and tradi- tional cheese cake has retained its popularity in the southern province Liver pudding, stuffed cabbage rolls, pot roast and mother’s fi sh casserole. When asked to contribute with their best of Småland. October – Swedish food month traditional Swedish recipes, ICA’s customers never seemed to run out of ideas. The result was the cookbook, “Hela “The book is a historical document that provides an interesting pic- “Hela Sveriges husman” was released in October, traditionally Sveriges husman,” which has already been printed in a record edition and received a cultural achievement award. ture of what the Swedish people are eating in 2008,” says Tony Wallin. The competition also showed that current demand for simple yet Sweden’s food month. Back in the days when Sweden was still an The strong interest in traditional Swedish cooking was clearly evident some dishes several times to get a better idea,” says Helen Rundqvist, nutritious meal solutions can still go hand in hand with culinary tradi- agricultural society, that was when the harvests were brought in last year when ICA’s customers were asked to participate in a competi- who runs the ICA Kitchen, which selected the recipes together with the tions. Many of the recipes customers submitted have been passed and storehouses were stocked with healthy ingredients. tion for best modern rendition of a traditional Swedish recipe. The Buffé editors. down for generations, but were still modern enough to be included. With the Federation of Swedish Farmers (LRF) as a partner, ICA response was overwhelming; over 10,000 recipes were submitted, with The fi rst edition of 400,000 was the biggest ever for a Swedish cook- With a few simple twists, they have become a little easier to prepare, a is now trying to bring back October as the country’s national food plenty of stories and anecdotes where they came from. book. Still, that wasn’t enough, so a second edition of 170,000 copies little more nutritious and a little greener. In other words, better suited to month. Together, ICA and LRF can better satisfy customers’ growing The competition was a collaborative effort between ICA Sweden had to be printed. Moreover, the book received a cultural achievement today’s need to make life a little easier. interest in quality ingredients and inspire those who want to redis- ICA ANNUAL REPORT 2008 ICA ANNUAL REPORT 2008 and the editorial board of the customer magazine Buffé, with Editor-in- award from the food organization Måltidsakademin, a prestigious “We read the recipes looking for well-prepared food with good ingre- cover traditional Swedish cooking. ICA and LRF also agree that chief Tony Wallin also serving as editor of the cookbook. After testing honor that refl ects the fact that it also chronicles Swedes’ passion for dients. They didn’t have to be fast. Traditional recipes usually take a little greater cooperation to promote foods will benefi t the open land- more than 400 recipes, Buffé’s editors and the ICA Kitchen last fall pre- good food. “A historical record refl ective of the foods Swedes eat today, time. But they still have to be fairly easy to prepare, with less fat and scape and biological diversity in the long run. sented the 100 best, plus 30 classic recipes, in the cookbook, “Hela Sver- where 10,000 recipes dug up from the drawers of Swedish kitchens more vegetables,” explains Helen Rundqvist. iges husman.” Frequent customers were able to get the book, which is were reviewed, tested and compiled without sacrifi cing the all-important Of course, a cookbook has to be more than just a collection of reci- available widely, at a discount in ICA stores using their reward points. taste factor,” Måltidsakademin wrote in its motivation. pes. It must be inspiring and inviting, too. That’s why the book has been “It was great fun to read all the recipes and try them. We prepared Recipes from every part of the country show that Swedish food fi lled with everything from culinary history to beverage suggestions.

14 15 ICA ANNUAL REPORT 2008

17 (30 %) (30 157 (n.a.) 1) 2008 2007 2006 2005 Due to incomplete data, the number of organic products sold by ICA Norway is not available for 2006. ICA Sweden 660 (54%)ICA Norway %) (28 370 500 (21%)%) (10 370 %) 350 (20 %) 400 (12 n.a. Rimi Baltic 232 (n.a.) (n.a.) 190 52 (n.a.) 7 (n.a.) The success of ICA I love eco was immediate. In Sweden, sales ICA’s Read more about work with ICA’s organic products on pages 80–83. Number and sales development sales and Number 2005–2008 products organic of 1) organic alternatives and to offer good prices. Another goal is to better inform customers what the products contain. People who buy organic expect their food to be as natural as possible. But organic doesn’t always mean thatfood contains no additives. Some may still be needed, example,for to guarantee food safety, and are permitted according to rules. production organic of organic products rose by more than 50 percent. When it was time for a launch in Norway in autumn 2008, the new products were received with open arms by customers there, and organic sales rose by 20 per- cent. With their consistently modern, playful packaging, these products stand out on store shelves. In fact, ICA won the Swedish Design Award 2008 best for packaging design and was awarded bronze in Pentawards 2008, a design competition companies for from around the world. gure gure ts of of ts cantly. The initial The product range was broad- ICA I love eco has several thatavor, organic alternatives nding products they feel com- Norway in 2008 – ICA I love eco. signifi ened launch alone comprised over 60 products, including everything from pasta sauce to limes and instant coffee. the At end of 2008, there were around 180 ICA I love eco products. objectives: to inspire customers, to highlight the benefi As customer demand organic for products has risen, ICA has Everyday organics Demand organic for products has never been greater. This was evident during the year when ICA introduced its new product line, ICA eco. In I love Sweden, ICA increased its sales of organic products more by than 50percent. There are many aspects to buying organically. Many people see organic foods as a solution to the problem of fi fortable with health-wise. Others see them as an opportunity to show in a practical way how they feel about the environment. And then there are those who think it is a question of fl simply taste better. expanded its offering. A driving in force these efforts has been to fi out how ICA can contribute to modern organic thinking. Do organic alternatives really have to be just “believers,” for and do they have to be so expensive that those of limited means can’t afford them? Those were among the thoughts that led to the decision to rebrand existing ICA’s organic product line as a new line, which was launched in Sweden and t by working In 2008, it was decided that ICA Bank and Read more about community ICA’s engage- Interest in eating local is prevalent among customers in every country Read more about product safety on pages 87–88. Bank added 50,000 new customers. Kuponginlösen, a clearing organization for discount coupons, will jointly introduce a new payment service households for in rural com- munities, as well as older for and functionally impaired residents. This was the result of a contract with the Swedish state after Svensk Kassaservice dissolved its operations. 91–92. pages on ment ICA Sweden’s “Local tastes” initiative is another important part of the effort to increase the range of local products. The initiative is designed to make it easier the for country’s local food producers and individual ICA stores to come into contact with each other, including through a web-based marketplace, Both “Torget”. parties benefi together; the supplier reaches a wider audience, while ICA can increase its range of local, seasonal products. ICA was also active in the develop- ment of a quality standard small-scale for food production in Sweden. where the Group operates. Norwegians prefer Norwegian meat and Esto- nians want products labeled with a barn swallow, which guarantees that the ingredients mainly come from Estonia. Latvia uses a label with a green spoon, guaranteeing that at least 75 percent of the ingredients are local. ed banking ed

“GOOD BUSINESS” FOR CUSTOMERS FOR BUSINESS” “GOOD The is the key cooperation with various organizations. In Sweden, ICA

In just years, a few ICA Bank has become a stand-out in the banking world, guided vision by ICA’s to make every day a little easier. Cost con- sciousness is also important ICA for Bank. Competitive interest rates, clear terms, low risks and low fees are its hallmark. The bank has over three million customers in its database if you count all those who have an ICA Card, which is administered by the bank. Over 400,000 of them use the bank’s services and today, that number is growing. In 2008, ICA Current accounts with good interest rates, mortgages or pension customers savings? ICA’s don’t to do with- have out of them any longer. any Eat local Eat partners with the Federation of Swedish Farmers the (LRF), Rural Economy and Agricultural Societies Together the with and goal LivsTek. LRF, is that 75 percent of all the meat sold in Swedish ICA stores should come from Swedish producers by 2012. Another goal is to give customers ICA’s more to choose from in terms of local dairy products, fruit and vegetables. Interest in local foods has grown substantially in recent years. Small- scale, locally produced products have a natural place at ICA, which is workingin several ways to meet customer demand.

More and more customers discovered have the clean taste and special feeling that local products bring to their cooking.ICA is now working on several fronts to meet the growing demand. Simplifi 16

ICA ANNUAL REPORT 2008 “GOOD BUSINESS” FOR CUSTOMERS

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Discounts on favorites “Finally, discounts that suit us!” That’s how many customers reacted when ICA introduced personalized offerings, called “Mina varor”, in Sweden. The offers are sent to frequent customers, who receive discounts on a number of products they usually buy. The idea came up after many customers told the company that the offers they receive in the mail do not fi t their needs. Wasn’t there a way to receive discounts on the products they usually buy instead? There certainly was – at least for customers who usually use their ICA Cards. A major test was conducted initially in the province of Östergötland, where 75,000 households with ICA Cards received individual discounts on frequently purchased products, both ICA’s private labels and prod- ucts from other suppliers. An overwhelmingly majority of test households were extremely positive to the customized offerings. The next step, in autumn 2008, was to test “Mina varor” on frequent customers around the country. Each month, up to 20 million unique discount offerings are sent out, and they have proved to be just as popular. ICA’s surveys show that the test groups have gone from using three percent of the discounts they receive to 20–30 percent. Although the program has started well, challenges remain. Personal have access to a well-stocked produce department, for example. Rimi The future discount store offerings are still new and need further refi nement. has worked hard to make its stores airy and easy to get around in, but A key issue for ICA has always been protecting customers’ privacy. Low prices go hand in hand with an appreciation of good to reestablish Rimi’s image as a discounter, which has weakened in recent at the same time calm and warm, exuding a passion for good food at Purchasing information is handled in a secure manner. Customers years. Two concept stores with a hard discount profi le and a totally new reasonable prices. To underscore the new concept for customers, the food. That is the basic idea behind the redesign of the are also clearly informed that the offering is voluntary and that they décor opened in September, one in Finstadstorget, Lörenskog and one in logo on the new stores has also been replaced with a more modern, Rimi stores in Norway. can change their minds. Proof that ICA has acted appropriately Manglerudsenteret in Oslo. By year-end, 14 stores with the new concept dynamic design. regarding customer privacy is that the Swedish Data Inspection It is no secret that the competition for customers has stiffened among had opened in the Oslo area. The new Rimi has been received by customers with open arms. Sales Board, which reviewed “Mina varor”, did not have any objections to discounters in recent years. When times are tough, customers tend to be The concept’s hallmarks are “easier, cheaper and better.” Customers and customer traffi c have both risen signifi cantly since the rebranding. how information was handled. more price conscious. But today’s customers are demanding as well and should not have to sacrifi ce low cost and good taste to eat healthy. A In surveys conducted in the fi rst concept stores, customers felt that ICA ANNUAL REPORT 2008 ICA ANNUAL REPORT 2008 want more than low prices. The products they buy still have to maintain great deal of energy has been devoted to communicating the new con- Rimi had become more pleasant and that it was easier to shop and fi nd good quality, and they want more alternatives to choose from. To satisfy cept to the target audience and thereby carving out a unique position in things in the new stores. today’s discount customers you have to think along new lines. the discount market. “This shows we are headed in the right direction. Customers are the Throughout 2008, ICA Norway worked on a major restructuring process The main target audience for the new Rimi concept is price-con- ones who decide whether the new image works or not,” says Thor that will help it rebound to profi tability in the tough Norwegian grocery scious families. Its redesigned stores are proof that discount does not Linge, head of Rimi in Norway. market. In September, an important step was taken through the launch have to be boring and mean a limited selection. It is easy for today’s Now all that remains is to launch the new Rimi concept gradually in of a rebranded Rimi discount concept. The purpose of the rebranding is health-conscious customer on a budget to shop here for dinner, yet still the rest of the country.

18 19 CUSTOMERS

ICA GROUP

STORES

“Good Business” for stores

“I live and work in a farming community, so it is obvious that I would want to work with our local producers. It’s not just about giving customers a variety of unique products. It’s a question of principles, too. If we support each other locally, everyone benefi ts. I can make a living in my store and my suppliers can support themselves from their businesses. The supplier I am most impressed by here on Öland delivers onions, Aldor Andersson. All these years he has made sure that my store is stocked with local onions. This year was no exception, even though he is now 91.”

Richard Teern, retailer at ICA Supermarket Borgholm, Öland, Sweden.

The stores are where it all happens. It’s where ICA meets its customers, and it’s where customers de- cide what to buy. Despite its large size, ICA has always had a strong local connection. This is true of all ICA stores, regardless of whether they are wholly owned, franchises or operated by independent retail- ers. A store with local ties knows what its customers want, and customers know that such a store lis- tens to them. Those who listen to their customers know how important it is to stay a step ahead. ICA’s store net- work is constantly being refi ned, in several different ways. In Norway, the new Rimi is promoting a low- price image, and in the Baltics the store network has grown heavily during the year. In Sweden, ICA is further developing its store network in close cooperation with individual retailers. On average, Swedish ICA retailers buy around 70 percent of their products through ICA. By making the lion’s share of their purchases from ICA, they contribute to higher effi ciency and lower unit costs. ICA also supports marketing communications, logistics and staff training. Retailers can also buy their products from other suppliers to put their own stamp on their stores. Many have chosen to work more and more with local producers and sell everything from meat to crispbread from small purveyors. ICA ANNUAL REPORT 2008 ICA ANNUAL REPORT 2008

20 21 “GOOD BUSINESS” FOR STORES Store of the future designed for food lovers ④

Those who visit ICA Kvantum Norremark in Växjö have a specialists at the Group level. We wanted to showcase ICA Kvantum’s posi- chance to see the supermarket of the future. The store is tion in the format and strengthen its role as a food specialist in the Swed- based on a totally new concept designed for food lovers. ish market,” says Joakim Bengtsson, business development manager for the ICA Kvantum format at ICA. Opened in June 2008, ICA Kvantum Norremark is a test store for ICA HEB Central Market is well known for its ability to inspire customers. Kvantum’s development project, “The Big Supermarket.” Work has been Inspiration is also one of the keys to ICA’s supermarket redesign. The oth- under way for two years utilizing an American model, HEB Central Mar- ers are a love of food and imparting knowledge. The idea is that customers ket in Texas. will fi nd surprises around every corner. The concept and store layout have “The project was initiated by ICA Kvantum retailers and supermarket been adapted to Swedish conditions.

Dairy Frozen Dinner ③

① Prepared meals: The big supermarket project includes a wide range of prepared meals, both prepackaged and by weight. Here, customers can buy tasty meals compa- On the front line: Store managers Jan Magnus- Organic Packaged rable to what they would fi nd at take away restaurants, picking and choosing from son and Thomas Dahl welcome customers to ⑤ among a selection ranging from quiches and casseroles to Mediterranean specialties ICA Kvantum in Växjö. Seasonal ⑥ Kitchen and oven-baked pizza. ① ⑤

④Prepared meals ② Fresh produce

Bread Confectionery Well-being ICA’s responsibility in practice Checkouts When Rimi Baltic in Lithuania decided in 2007 to Entrance launch an integration project over a two-year period Tasting room: Spices, salts, vinegars, oils, foods from around the world – everything Organic room: Here customers can fi nd plenty customers need to tingle their taste buds is here. Such a variety of premium oils and by hiring physically challenged persons in its stores, it of products in bulk or pre-packaged. vinegars used to be available only in specialist shops. The oils can be tested in a spe- had two main goals: to give a vulnerable group the cial tasting bar. chance to work and earn an income, and to change ② ③ ⑥ society’s view of them. For many of these individuals, it was their fi rst job. Quickly, man- agement realized the project was going to be a success. The self- confi dence of the new employees grew, and working for Rimi marked the start of a new life for many of them. Some became inspired enough to start studying, some were promoted to other positions within Rimi. The majority of those hired were hearing impaired, and for employees with normal hearing abilities the project has provided an opportunity to learn the basics of sign language, according to ˇ ICA ANNUAL REPORT 2008 Renata Gibaviciu¯t˙e, HR manager of Rimi Lithuania. ICA ANNUAL REPORT 2008 “We have been even more surprised by our customers,” she says. “We are used to hearing their complaints, but suddenly peo- ple began calling simply to thank us for this initiative, that it had Fresh produce: This department, the fi rst to greet customers, has been gener- Dining room: Here is where a trip to the supermarket becomes more than just Kitchen: Even in this room, customers passionate about food get a fi rst-hand look at made them more positive about their community and more thank- ously dimensioned. Vegetables come fi rst, then fruit. There is a big selection to another day of shopping. This is a foodie’s paradise, where they will fi nd the right how ICA Kvantum has earned its place as a food specialist. Here they will fi nd an ful for their health. We were also surprised that so many thought choose from, including many organic products and pre-chopped alternatives, ingredients for the perfect weekday or weekend meal. Meat, seafood, poultry, wild unusual assortment of products for cooking and table settings, everything from in addition to a wide range of bulk nuts and dried fruit. game, cold cuts –everything there, is already packaged or served up manually. deluxe napkins to accessories for espresso machines. They won’t feel stressed, either. our hearing-impaired employees were more communicative than The idea is to stick around, browse and take a good look at the products. other employees.”

22 23 “GOOD BUSINESS” FOR STORES Food safety is the highest priority

Twenty-seven new quality coaches and an industry-wide The idea is that once the authorities give their approval, stores through- standard for food handling in stores. Those are only two out the industry will be able to get certifi ed according to this standard. In of the results of last year’s focus on food quality. The addition, the industry’s current guidelines for quality improvements have been updated to better refl ect the work actually being done in the stores. quality coaches have now begun helping and inspiring The most important job of the quality coaches going forward will be stores in their quality work. to help ICA stores to introduce the new standard, which will essentially serve as a template that the coaches can follow in their work, according Swedish ICA retailers are committed to food quality and safety. That to quality coach Håkan Telander. was obvious to the 27 quality coaches and their two teamleaders as “Our fi rst contact with the stores is usually by phone,” he says. “Then soon as they began working in September 2008. Their role is to sup- we meet to introduce ourselves and the food quality project, and the port, inspire and help the stores improve their quality. The immediate stores have the chance to explain how they work with food safety. The response has been tremendous. As of year-end, nearly 1,000 stores had next step is to do an analysis of the store. How well is the quality work held or scheduled an initial meeting with their coach. being done? Is the self-inspection program working? Based on the anal- “We have received a fantastic response from the stores. The employ- ysis, an action plan is presented to the retailer, and we work together ees are really happy to have support and help in their quality work. And with the staff on any improvements that are needed so the store will having been an inspector, I can clearly see the difference between meet the requirements of the standard.” inspecting and coaching. We are seeing committed employees and In 2008, ICA and ICA-handlarnas Förbund also introduced a new disci- retailers who put a lot of energy into their quality work,” says Lena Berg- plinary board with representatives from both parties. The board will be man Bokvist, one of the coaches. able to take action against retailers that do not live up to quality expecta- Food quality is one of ICA’s most important issues, and the work to tions with a notice, a warning or by removing them. develop safe food handling processes in stores is under way on several Another measure taken jointly by ICA and the retailers during the fronts. Among the most important measures in 2008 was the draft of a year was an extensive program of audits of Swedish stores. Every store new Swedish standard for food handling produced collaboratively by underwent a prescheduled audit, followed by two unannounced ICA and the ICA retailers. The idea came about after many ICA retailers audits, to ensure that the quality work is being done right over time expressed concern that the existing rules were confusing and were and to identify any defi ciencies. Nothing serious was found. In fact, the interpreted differently within the industry. What exactly does the law follow-ups showed that the stores have become even better at han- require of those who handle food? dling quality issues. The trade group Svensk dagligvaruhandel refi ned ICA’s proposal, Read more about food quality on pages 87–88 in the Corporate which was then adopted by its members as a new common standard. Responsibility Report.

From ingredients to solutions Salad mixes, seasoned hamburgers and pre-chopped salad. Customers get an exciting mix of greens without having to buy melon salads are three examples of how ICA can offer more than one product. The selection has grown tremendously. Today customers solutions instead of just ingredients, while at customers can fi nd everything from crispy iceberg salad to colorful Tuscan salad; they are good right out of the box, but are also perfect as a base the same time improving its offerings and margins. for more fi lling salads. The trend is clear – customers want simple, convenient meal solutions. ICA’s seasoned hamburgers are another example of a convenient They prefer foods that can be eaten right away, or at least soon after everyday solution. They’re just as easy to toss on a frying pan at home arriving home. And they should be fresh, nutritious and fairly priced. as to take along for a barbecue. And the chopped melon salad is practi- It is not so strange then that ICA’s pre-chopped salads have been cal as a quick dessert after lunch or to serve with sliced ham as an appe- such a sales success. They are simple, fresh and totally practical for peo- tizer when the family shows up on Sunday. ple on the go or who simply don’t want to spend their time chopping These prepared solutions are also a winning concept for ICA. By ICA ANNUAL REPORT 2008 making products out of ingredients, it can apply a higher price, generat- ICA ANNUAL REPORT 2008 ing better margins for both the retailer and the Group. The solutions vary, of course, by season and store – from a year- round product like grated cheese to marinated pork loin for the out- door grilling season and prepackaged root vegetables for winter stews.

24 25 CUSTOMERS

ICA GROUP

STORES

“Good Business” for the ICA Group

“Profi tability and competitiveness are created by people. We who work at ICA School know that; people are our business. We can see clearly that things really start happening when employees from the Group level, the stores and logistics interact in the same environment. ICA School helps them develop their abilities, unleash their potential and share their skills with colleagues. We hope this will be noticed even by the customers, who in turn will be so pleased that they decide to shop in the ICA stores again.”

Ulla Thunberg, leadership and team trainer; Fredrik Bjurhult, process and project leader, trainer; Ann Hennicks, head of ICA School Sweden.

When you serve more than 15 million customers a week, you are bound to learn a thing or two. For example, the importance of service and committed personnel. ICA’s long-term success lies in the hands of the employees. They have to treat customers the way they expect day in and day out, handle foods in a safe manner, and make important decisions that affect ICA’s future. ICA therefore devotes great energy to skills management and employee training. Many courses are offered by the Group’s own training organization, ICA School, in Sweden and Norway. ICA has also learned the importance of effi ciency. Coordinated purchasing and logistics can lead to big gains simply by using smart ways to buy and transport goods. In the end, this also benefi ts the cus- tomers in the form of competitive prices and shorter transport distances. Another lesson is that good business is generated by spreading good ideas within the Group. If something works well in one place, it might work in another too. There are many examples of this with ICA’s private label products. The ICA I love eco line was initially launched in Sweden, but worked just as well when introduced in Norway. Being big also means having a big responsibility for people and the community. Looking ahead, ICA have to be sure that “Good business” still applies to everyone. That is why ICA always reinvests a portion of its profi ts in the long-term sustainable development of the stores, the product selection ICA ANNUAL REPORT 2008 ICA ANNUAL REPORT 2008 and the products.

26 27 “GOOD BUSINESS” FOR THE ICA GROUP Why ICA’s private labels are a success Launches of private labels through the years ICA profi ts when customers get to decide. Nowhere is this more evident than its pri- 1987 ICA Handlarnas. An 1991 Skona. Eco-friendly 1993 ICA Handlarnas Sunda. 1998 Rico. A series of high- 2005 ICA Gott liv. Healthy 2006 ICA Selection. A pre- assortment line of low price detergents etc. Renamed to ICA’s fi rst organic line. quality produce. products with less fat, sugar mium line made out of cho- vate labels. Customers can fi nd smart, inexpensively priced products, and ICA gains sat- canned goods. ICA Skona in 2007. Became ICA Ekologiskt in and salt and more fi ber. sen primary products. isfi ed customers who want to return to the stores. 2001.

Private labels are nothing new to ICA. Its fi rst was Luxus Kaffe, which All retailers know that satisfi ed customers come back, and private label was introduced in 1922. It has almost been 90 years and Luxus, now products are a good way to build loyal customers. Offering a wide, called simply ICA Kaffe, has been joined by a long list of other products. thoughtfully selected product range is the key. With ICA’s private label The common denominator is that they all are designed around cus- products, customers have an alternative to the established brands on tomer needs. With as many customers as ICA has, it goes without say- the store shelves – at signifi cantly lower prices than the market leaders. ing that those needs differ. That’s why ICA offers such a wide range of Yet they are getting products from a strong, recognized brand that private label products. The discount alternative Euro Shopper for cus- instills a sense of security – ICA. The ICA name, in turn, follows custom- tomers who are most concerned about price, and ICA Gott liv for ers home to their kitchens, rather than staying at the grocery store. those seeking a healthier alternative. If they want a little something To meet safety guidelines, ICA places stringent requirements on special for the kitchen, ICA Selection, ICA’s premium line, can whom it chooses to supply its private labels. Extensive specifi cations, offer inspiration. Not to mention the successful ICA I love eco tests and price levels are the deciding factors. line, which achieved a major breakthrough in 2008. Another benefi t of working with private labels is that ICA stays During the year, ICA also launched ICA Cook & Eat, a line of informed of what it costs to develop and manufacture various prod- cleverly designed kitchen utensils, and ICA Home, where ucts. This knowledge can also be utilized in negotiations with other sup- customers can fi nd the fi nishing touches to their pliers, and in the long run reduce the prices of other brand-name prod- table settings as well as fabrics for the home. ucts in its stores. That’s a benefi t for both the customer and ICA. The lines for the kitchen and home will be the Read more about ICA’s work with organic foods and product safety fi rst to reach all of ICA’s markets when they on pages 80–84 and 87–88. are introduced in Norway and the Baltics in spring 2009. ICA ANNUAL REPORT 2008 ICA ANNUAL REPORT 2008

28 29 “GOOD BUSINESS” FOR THE ICA GROUP

Being able to discuss various is- The best thing about the network sues with intelligent and friendly colleagues is getting to meet all these talented in the network is truly inspiring. I have colleagues from different business areas gotten many good ideas, including from and the chance to discuss various topics the Baltics, on ways to handle perishable directly with management. This provides foods.” “ “deeper insight into the company and Lisa Manske, ICA Sweden, project leader business processes. Our network meetings Supply Chain Management. always give me new ideas and ways of look- ing at my job” Edgars Se−tin,sˇ, Rimi Baltic, category director Non-foods Central Purchasing.

The network gives me a better un- derstanding of ICA and the challenges we face. The contact with my colleagues helps When we meet, we have the me to learn about internal processes in the chance to see the same questions from at Group and is a real energy boost!” least twenty different angles, depending on “Niklas Sundier, ICA AB, department our backgrounds, cultures and functions. manager IT Center Operations. For me, the network has also made ICA “more personal. Now I associate different messages, structures and functions with people instead.” Renata Gibavicˇiu−t˙e, Rimi Baltic, The network serves two purposes. HR manager Lithuania. Those of us who participate learn more about ICA, at the same time that we in turn can hopefully provide executive manage- ment with ideas and ways of looking at the Being part of the leadership net- business“ we have picked up through the work is not only a fantastic opportunity to network.” expand my personal network, but also gives Katarina Olsson, ICA AB, me greater perspective and an understand- corporate counsel. ing of ICA’s strategic work. The network “has challenged me and my way of thinking, which is already refl ected in the decisions I have made on a daily basis.” Simon Harmark, ICA Sweden, head of Taking a break from my usual business control Fresh Produce. obligations to discuss the big picture with people from different countries and posi- tions gives me new perspective and insight, which I enjoy bringing back to my job.” It is very interesting to see ICA’s “Christian Erge, ICA Norway, strategic decisions from a different angle. head of marketing. Through the network, I have also gotten lots of suggestions on stores to visit. This in turn has given me plenty of good ideas and motivation“ in my day-to-day work.” Christine Schie, district manager ICA Norway. I have benefi ted a lot, including through a better understanding of how communication between countries in the Group is impacted by cultural differences. Now I am more aware of these differences and“ the decision-making processes when I communicate with my Swedish colleagues.” Terje Støylehommen, ICA Norway, head of replenishment.

For the fourth consecutive year, ICA has supported a network for young them along. Leaders can also serve as ambassadors internally on impor- opportunities. For one thing, the Group stretches from Oslo to Hong Future talents leaders. The idea for a leadership network came to CEO Kenneth tant issues. Kong. For another, it has a number of different types of operations. ICA ANNUAL REPORT 2008

Bengtsson during a meeting on future leadership of the international The group includes 20 participants between the ages of 30 and 40. They can work with food, non-foods, banking or real estate. In total, ICA ANNUAL REPORT 2008 retail network CIES. The aim of bringing together a group of young lead- All have previous leadership experience and come from various parts of there are around 150 different positions within ICA. Competitors can copy strategies, but they can’t copy ers under the direction of the CEO was to help them develop into the Group and different countries. They are selected by ICA’s Group ICA works systematically with talent management and, in addition talent. Talent renewal is one of the driving forces behind stronger leaders and better understand the Group as a whole, as well as Management and usually meet every second month over a one-year to the leadership network, offers programs for trainees in stores and at ICA’s network of young leaders. In 2008, the fourth to give Group Management a better handle on day-to-day issues. The period. In total, around 80 people have participated in the network. the Group level as well as a Swedish network for female retailers. While group of candidates began the program. input these leaders contribute is very valuable. The network serves as For ICA, the leadership network is also an important signal to the there are local variations in leadership, the fundamental policies and Group Management’s eyes and ears in the organization, picking up on world that it offers a workplace with a range of possibilities. Young aca- processes are always the same for the entire Group. opinions and ideas, identifying potential improvements and passing demics looking for a job with an international presence have good

30 31 ICA Sweden Growing in a mature market ICA is the industry leader in the mature Swedish food retail market, and the unique interaction between independent retailers and ICA Sweden is a strong reason for its success. In 2009, ICA is striving to continue to gain market share through a greater emphasis on price and further improvements to the product range.

This is ICA Sweden lights was ICA’s personalized offerings, “Mina varor” (see article on page The food retailer ICA Sweden operates around the country in coopera- 19). The launch of ICA I love eco (see page 17) was another notable suc- tion with independent retailers, who own and manage their stores but cess. ICA also continued its big initiative to improve quality work in have agreements with ICA Sweden, which makes joint purchases, sup- stores (see page 25). During the fourth quarter, ICA Sweden’s COO, ports the retailers on issues concerning sales and effi ciency improve- Peder Larsson, stepped down and CEO Kenneth Bengtsson took over as ments, and is responsible for logistics and joint marketing communica- acting COO. Twelve new stores were opened during the year and three tions. ICA Sweden also identifi es new store locations and helps to stores were largely modifi ed and switched formats. In total, about enhance existing stores through renovations or expansion. 45,000 square metres of sales space was added. ICA Sweden has four store formats to cover customer needs in dif- In January 2009, the new Group organization that management had ferent situations: ICA Nära, ICA Supermarket, ICA Kvantum and Maxi decided on in late 2008 took effect. The new structure gives ICA Swe- ICA Hypermarket. At year-end, there were 1,369 ICA stores. den more responsibility and more employees after several functions were transferred from ICA AB to ICA Sweden. Market ICA is on the front line when it Sweden is a mature grocery market with relatively slow growth. In 2008, Plans for 2009 comes to corporate responsibility work with the growth rate was 5.7 1) percent. Revenues amounted to SEK 253.3 1) bil- ICA Sweden had a successful year in 2008 in terms of revenue and suppliers to ensure acceptable wage levels and avoid child labor. Our work in this area lion. Though there are not many players, the competition for the income. Its strong fi nances are the result of a healthy, effi cient retail is becoming a sign of quality in the market,” disposable income of the 9.2 million Swedes can still be tough. ICA, network with strategically placed, modern stores. The focus in 2009 to “says Raoson Cheung. Quality inspector Raoson a large extent will be on maintaining a consistently high level of per- Cheung and purchasing manager Panny Ho are Axfood, Coop and Bergendahls have a combined market share of two of ICA’s new employees in Hong Kong. around 70 1) percent. Among other players are the German discount formance. This will be achieved by remaining true to the Swedish model chain Lidl and Denmark’s Netto. with independent retailers, keeping shrinkage from rising and retaining In recent years, Swedish customers have placed a premium on a wide a satisfactory purchasing level from retailers. selection, high quality and environmentally friendly alternatives rather Work with prices will be a central concern throughout the year. It will than low prices. Interest in prepared foods and simple, convenient meal be even more important that the stores offer value for the money and solutions has also continued to grow. Awareness of climate change and have offerings that suit every customer group for example with private environmental issues is high among Swedish customers, and demand labels. At a detailed level, there are several priorities. One is to raise effi - continues to rise for organic and local products. The recession that ciency and sell more in existing space by expanding the product range began in 2008 again drew more attention to discount alternatives and and through innovations such as “Mina varor”. Another area is to sup- several surveys refl ected the consumers’ worries about their private port local food producers through new initiatives and cooperations economies. Discounters and hypermarkets attracted the most new cus- with outside players (see page 16). An additional priority will be the con- tomers during the year. tinued efforts to raise volumes in the new, modern central warehouse in Helsingborg, which opened in 2006. Important events in 2008 ICA Sweden’s sales increased by 10.6 percent in 2008. The increase was due to, among other things, strong customer offerings. One of the high-

On site in sourcing markets Mission To be the leading retail company with a focus Sales: SEK 56,885 million (51,438) Market share: 36.3%1) It makes it easier to cut out middlemen, but also provides better opportunities to on food and meals. Operating income: SEK 2,644 million (2,372) Number of employees: 5,208 (5,107) verify that suppliers are living up to their social responsibilities. These were the main reasons why ICA opened sourcing offi ces in China and Vietnam in 2008. Store formats

For a company like ICA, which imports around SEK 700 million worth of The sourcing offi ces have a special department to deal with quality, the ICA Nära: Small, convenient stores ICA Supermarket: Wide assort- ICA Kvantum: Designed to be the Maxi ICA Hypermarket: Everything goods from Asia each year, there are plenty of good reasons to be rep- environment and social responsibility and to monitor suppliers’ work with good service, a narrow prod- ment for everyday meals or special leading local supermarket, with at good prices under one roof. resented on site. If its buyers can work more closely with suppliers, they with these issues in the region. The focus during the year was on moni- uct range and quality fresh foods. occasions. Personal service is high, foods for everyday, weekends and Wide variety of foods and non- can cut out the middlemen and secure better prices. It also gives ICA toring suppliers that manufacture for ICA in China. With fewer agents and Many serve as pick-up sites for and the stores carry a wide range special occasions. Offer a variety foods such as house wares, sport- ICA ANNUAL REPORT 2008 ICA ANNUAL REPORT 2008 better control over the quality of the products and allows it to better middlemen, it is easier to fi nd suppliers that live up to ICA’s demands. Apoteket and Systembolaget, the of fresh foods. of fresh foods, alternatives for ing goods and garden supplies. monitor the route they take from producer to consumer. Last but not ICA encourages its suppliers to be audited by a third party, in addi- state-run pharmacy and alcohol allergy sufferers, healthy and Extended opening hours, conven- least, it affords better opportunities to verify that suppliers are taking tion to which it conducts its own audit. In this way, ICA is able to create monopolies, and handle sales for organic choices, and local products. ient for drivers. responsibility for social and environmental issues. relationships with the suppliers and support them in their efforts to ATG, the Swedish off-track betting A new offi ce was opened in Hong Kong in April 2008, and two more reach the level ICA wants them to maintain. service. 1) Preliminary fi gure, February 2009. are now operating in Shanghai and Ho Chi Minh City. In total, ICA has Read more about how ICA works with its suppliers and product around 30 employees on site. safety on pages 85–88.

32 33 ICA Norway Rimi Baltic The foundation of a turnaround Continued growth in the Baltic countries

ICA Norway continued its turnaround efforts in 2008. During the fall, a new management and a new The Baltic food retail market has grown rapidly in recent years. The focus for Rimi Baltic organizational platform were put in place. In the year ahead, the focus will be on implementing the in 2009 will be on increasing sales in existing stores. Due to current economic conditions strategies. An important aspect will be to continue to reposition Rimi in the discount segment. in the region, Rimi Baltic has decided to slow down its store expansion program.

This is ICA Norway Important events in 2008 This is Rimi Baltic Important events in 2008 During the year, ICA Norway generated revenue equivalent to SEK ICA Norway’s sales increased by 6.3 percent, white operating income Rimi Baltic is a wholly owned subsidiary of ICA AB operating a chain of Rimi Baltic’s sales increased by 17.9 percent during the year. The increase 20,293 million. In Norway, there are 636 ICA and Rimi stores. Half of the decreased. Several measures were taken to facilitate a turnaround. A 233 wholly owned grocery stores in Estonia, Latvia and Lithuania. In was due to, among other things, Rimi’s pricing discounts as well as reno- stores are operated by ICA Norway and half are franchises. This is in new CEO, Antonio Soares, the former CEO of Rimi Baltic, took over in 2008, company sales corresponded to SEK 12,661 million. Rimi Baltic has vations and modernizations of its stores. 2008 was overshadowed by the addition to associated stores. ICA Norway has four store formats: ICA August, and a new CFO and new head of store operations were three formats to meet customer needs depending on location and cus- fi nancial crisis in Estonia, Latvia and Lithuania. The construction of 13 new Nær, ICA Supermarked, ICA Maxi and Rimi. appointed. The organizations for ICA Nær and ICA Supermarked were tomer category. Rimi Hypermarket and Rimi Supermarket, which focus stores continues as planned and 18 new stores opened in total. Rimi Baltic merged. A review was conducted of ICA’s pricing structure and a new on high-quality fresh foods and good service, operate in all three mar- already had plans on the table to add 37 stores, but decided to postpone Market concept was developed for Rimi (see pages 18—19). The launch of ICA I kets. In the discount segment, SuperNetto operates in Latvia and Lithua- any more new construction in 2008 due to the fi nancial turbulence in The Norwegian grocery market is relatively unconsolidated, with a mul- love eco in the fall was a success (see article on page 17). ICA Norway nia, while Estonia has the discount chain Säästumarket. the region. Edgar Sesemann succeeded Antonio Soares as CEO. titude of small stores. The growth rate for the market as a whole was 7.71) received an award for its sustainability work (see page 76). Eleven new percent in 2008, and revenues amounted to NOK 125.9 1) billion. Dis- stores were opened during the year and three stores were largely modi- Market Plans for 2009 count chains accounted for about half of sales. fi ed and switched formats. In total, about 11,500 square metres of sales Rimi Baltic is active in essentially three very different markets. The dif- Rimi Baltic’s goal is to continue to grow and gain market share. Growth There are a limited number of players in the market. NorgesGrup- space was added. ferences in customer behavior and competitive conditions, for exam- will be achieved by raising sales in existing stores. The plan is to pursue a pen, which operates in every segment from hypermarkets to discount- ple, are considerable between countries, and even within countries. The comprehensive expansion program once economic conditions in the ers, has the highest market share. Second is Coop. Rema 1000 is the Plans for 2009 Baltics are a growing market, although the economic slowdown in the region stabilize. The renovations and product upgrades that have been third largest retailer and ICA is the fourth. The German discounter Lidl The main strategy going forward will be to strengthen the relationship fall and winter of 2008 has made the fi ght for customers that much so appreciated by customers will also continue. The discounters Super- also operates in Norway. with customers by improving offerings and expanding the product tougher. The biggest gains have been in the discount segment. Netto and Säästumarket are continuing their modernization programs The 4.7 million Norwegians have twice as many stores at their dis- range. Price will remain an important factor in 2009, since the general The overall Baltic market for food products grew by 14.2 1) percent in by adding new refrigeration equipment, refurbishing and expanding posal per capita as the Swedes. The large number of smaller stores is opinion among Norwegian customers is that ICA and Rimi stores are 2008, to a total value of EUR 801.8 1) billion. With a population of 3.4 mil- their range of perishable foods. The emphasis will also be on training due to local buying habits; Norwegians shop on average four times a expensive. Of special importance will be their price positioning in fresh lion, Lithuania is the largest individual market, followed by Latvia with personnel and meeting recruitment needs. Due to strong growth in week. produce, where ICA Norway hopes to be a leader. ICA will strengthen 2.3 million and Estonia with 1.3 million. The Baltic market is served by an recent years, Rimi Baltic has maximized its logistics capacity. Another Interest in healthy and organic products, fresh foods, fruit and vege- its position in the fresh food segment, while Rimi will continue to stand array of companies, such as Maxima, ETK, IKI, Selver, Elvi, Mego and important point will therefore be to review the logistical structure and tables continues to rise. At the same time, customers are very price for discount prices. As part of Rimi’s renewal, its new concept stores Norfa. ensure distribution capacity. conscious and want larger stores and a wider selection of prepared have been placed in Oslo owing to the region’s strategic importance. In the overall market, Maxima is the leader and largest competitor to foods. Rimi already has a strong position there. The idea is to gain market Rimi Baltic, which ranks second. On a national basis, Rimi Baltic is the share regionally in Oslo and then gradually renovate all Rimi stores market leader in Latvia and Estonia, and number four in Lithuania. around the country. Baltic customers still have a great deal in common, including their ICA Norway also plans to adopt better controls, and it will work with attention to price and interest in local products. Interest in the environ- direct coaching for store managers. Regional managers will work ment and organic alternatives is also rising. Another growing segment is directly with ten store managers each to implement the company’s prepared foods. strategies.

Mission Mission

To be the leading retail company in Norway with a Sales: SEK 20,293 million (19,095) Market share: 16.5%1) Rimi Baltic’s stores will be its customers fi rst choice in the Sales: SEK 12,661 million (10,736) Market share: 16.4%1) focus on food and meals. Operating income: SEK –520 million (144) Number of employees: 4,826 (4,348) fast growing markets in Estonia, Latvia and Lithuania. Operating income: SEK 182 million (92) Number of employees: 9,870 (8,221)

Store formats Store formats

ICA Nær: Small convenience stores ICA Supermarked: A passion for ICA Maxi: Everything in one loca- Rimi: Discount stores that make it SuperNetto (Latvia, Lithuania), Sääs- Rimi Supermarket: Rimi Hypermarket and Rimi Compact Hypermarket: offering good service, a specially good food and diversity, personal tion. A wide selection of foods easy and convenient for customers tumarket (Estonia): Discounters that Wide selection for food lovers with an Every thing under one roof at good prices. Wide selection of fairly designed product selection and service and a wide selection. combined with non-foods. Con- to do their daily shopping. Modern, emphasize price and a wide selection of emphasis on fresh foods and good priced foods, combined with non-foods such as house wares and local choices. venient for drivers and transports. airy stores designed for families. everyday items. service for everyday needs. Located sporting goods. Rimi Compact Hypermarket emphasizes atmos- ICA ANNUAL REPORT 2008 Number of stores: Estonia 56, Latvia 54 close to where customers live or work. phere, comfort and effi cient use of space. Accessible by car with ICA ANNUAL REPORT 2008 and Lithuania 23. Number of stores: Estonia 8, Latvia 30 generous store hours. 1) Preliminary fi gure, February 2009. and Lithuania 28. Number of stores: Estonia 10, Latvia 13 and Lithuania 11.

1) Preliminary fi gure, February 2009.

34 35 ICA Bank Stable performance in a volatile market

2008 was a turbulent year for the fi nancial industry, but ICA Bank continued to attract new customers and strengthen relationships with current ones. ICA Bank now has a full-service offering where customers can choose from a number of services, from current accounts to pension savings.

This is ICA Bank Important events in 2008 ICA Bank operates in Sweden and has agency agreements with practi- ICA Bank’s business volume increased by 11.1 percent in 2008. During cally all ICA stores. Its mission, like that of the Group’s other subsidiar- the year, an agreement was signed with the Swedish Post and Telecom ies, is to make life a little easier for ICA’s customers. By helping them to Agency to provide basic banking services to people living in rural areas manage their personal fi nances, the bank increases their loyalty to ICA. (see page 92). New smart chip cards have been provided to all bank card ICA Bank also handles administration for the ICA Card. Since 2007, the customers to improve security. Online banking security was improved bank has a full-service offering comprising current accounts, various as well. In Norway, the cash register system is being prepared to handle types of bank cards, unsecured loans, mortgages in cooperation with banking services. During the year, the bank improved its public recogni- SBAB, accident, life and disability insurance in cooperation with Gen- tion through a major advertising campaign and successfully attracted worth Financial, and investment products such as equities, mutual new customers. In total, 50,000 new customers signed up for at least funds and individual pension savings in cooperation with Nordnet Bank. one of its services. One reason for the heightened interest could be that The bank operates with low risk, low fees and simple-to-understand the turbulence in the fi nancial markets has made customers more will- terms. ing to re-examine their fi nances and that ICA Bank stood up well to the competition. Market overview The Swedish fi nancial sector is being exposed to major changes. On the Plans for 2009 one hand, there are a number of large players that are expanding by ICA Bank expects to continue to attract new customers in 2009, as adding new operations in Sweden and other countries. On the other more ICA Card customers begin using other services the bank offers hand, the overlap between banking and insurance has led to a number and by signing up totally new customers. During 2009, terminals for of new niche players, both Swedish and international. Another factor smart chip card payments will be installed in all stores in Norway and a that has driven change in the sector is the reduced importance of bank roll-out will start in Sweden. In addition, extensive plans are in place to branches to dispense services. Online contacts with customers have broaden the bank’s offering, including by adding more insurance prod- increased instead. Opportunities to offer services in other ways have ucts. In spring 2009, for example, it plans to introduce homeowners grown as well, e.g., cash withdrawals and credit applications in stores. insurance in cooperation with Moderna Försäkringar. ICA Bank has a unique position in the industry through its association with a major grocery chain and attracts ICA’s existing customers as well as new banking customers. Through ICA’s extensive retail network, the bank is accessible for customers all over the country.

Mission

To make life a little easier for ICA’s customers through its fi nancial services Sales: SEK 582 million (517) and increase their loyalty to ICA. It also reduces transaction costs for ICA Operating income: SEK 111 million (83) stores and ICA AB from customers who use other bank and credit cards. Average number of employees: 234 (196)

Business volume (deposits + lending incl. mortgages): Business volume (SEKm) SEK 16,363 million (14,728) 16,363 Deposits: SEK 8,683 million (7,509) 14,728 Number of ATMs: 136 (105) 13,480 Number of payment terminals: Sweden 6,300 (6,000), Norway 2,000 (0) 12,316 ICA ANNUAL REPORT 2008 Number of bank customer: 400,000 (350,000) Number of card holders: 305,000 (260,000) 9,672

04 05 06 07 08

36 Corporate Governance Report and Annual Report

Corporate Governance report 38 ICA will be a far-sighted, dynamic company with solid Directors’ report 44 Defi nitions of key fi nancial ratios 46 fi nances and a commitment to environmental and Consolidated income statement 49 Consolidated balance sheet 50 social issues. On the following pages you will fi nd ICA’s Changes in consolidated shareholders’ equity 52 Consolidated statement of cash fl ows 53 Corporate Responsibility Report, Directors’ report and Supplementary information, the Group 54 Parent Company income statement 67 all the fi gures for 2008. Parent Company balance sheet 67 Changes in Parent Company’s shareholders’ equity 69 Parent Company statement of cash fl ows 69 Supplementary information, Parent Company 70 Audit report 74 ICA ANNUAL REPORT 2008

37 CORPORATE GOVERNANCE CORPORATE GOVERNANCE

Corporate governance

The Management and the Board of Directors are entrusted to ensure that the demands of ICA’s owners and other stakeholders for effi cient operational control are met.

Ownership structure Board of Directors and its work and General Counsel (Secretary to the Board) are not members of the Internal control over fi nancial reporting ICA AB is a joint venture 40 percent owned by Hakon Invest AB and 60 The Board’s work follows special rules of procedure adopted at the stat- Board but participate in its work. No fees have been paid to the Board ICA works with a structure to monitor and safeguard internal control of percent by Royal Ahold N.V. Through a shareholder agreement, Royal utory Board meeting following the election on April 28, 2008. In addi- members elected by the Annual General Meeting. The employee repre- fi nancial reporting. Financial fl ows are documented and control points Ahold and Hakon Invest jointly control ICA AB. tion to the items treated in accordance with the Companies Act, the sentatives have received a fee of SEK 4,000 per meeting. During fi scal are tested annually. The results of the tests are reported to the compa- rules of procedure include committee directives and rules on quorums. year 2008 the Board held 13 meetings. Among other things, it treated ny’s management. Annual General Meeting During the main part of 2008, the Board of ICA AB consisted of eight issues regarding fi nancial reporting, business conditions, the reorganiza- The rules on the Annual General Meeting can be found in the Compa- members and three deputies elected by the Annual General Meeting as tion of operations to underscore profi t responsibility in each country, Approval of fi nancial reports nies Act and the articles of association. The meeting elects the Board of well as two members with two deputies appointed by the unions. legal issues and the usual investment concerns involving the store net- The fi nancial reports in this annual report were approved by the Audit Directors and auditors and adopts the income statement, balance sheet The Extraordinary General Meeting on February 15, 2008 elected work. Special attention was given to the Norwegian operations and non- Committee on February 10 and by the Board of Directors on February 13, and proposed appropriation of earnings. Besides the Annual General Göran Hesseborn as a member of the Board and Fredrik Hägglund as food operations. 2009. Meeting, two Extraordinary General Meetings were held in 2008. The a deputy. Göran Hesseborn stepped down as a Board member at the Annual General Meeting on April 28, 2008 resolved, among other things, Extraordinary General Meeting in November, and the number of Board Nomination Committee Auditors to adopt the income statement and balance sheet for 2007 and to pay a members elected by the Annual General Meeting was seven. All mem- ICA does not have a Nomination Committee since the shareholder The accounting fi rm of Deloitte has been ICA’s auditor since September total dividend of SEK 1,084 million to the shareholders. The Extraordi- bers appointed by the Annual General Meeting are affi liated with the agreement between its owners gives each the right to nominate their 2000 and was reelected most recently at the Annual General Meeting nary General Meetings treated changes on the Board during the year. owners of ICA AB. The Chief Executive Offi cer, Chief Financial Offi cer own representatives to the Board. on April 28, 2008 for a mandate period of three years. The company’s chief auditor, Jan Berntsson, participated in one (1) Board meeting dur- Board committees ing the year. The Board is able to establish committees to complement its work. The committees are subordinate to the Board and report to it on an ongo- President and other senior executives ing basis. The Board of Directors appoints the President and CEO. According to the Swedish Companies Act, the Board’s rules of procedure and the Audit Committee President’s instruction, the President is responsible for day-to-day man- The Board of Directors has appointed an Audit Committee to monitor agement of the company. The President keeps the Board continuously accounting and reporting of fi nancial information. The Audit Committee informed on the operations and development of the company and the is also responsible for evaluating the Group’s systems for internal over- Group. Together with the EVP/CFO, CEO and HR Director of ICA AB, Owners sight and control. Among the Committee’s other duties are to handle CEO’s of the subsidiaries and EVP of ICA Sweden, the President is a Royal Ahold N.V. auditing questions from the external and internal audit. The Audit Com- member of Group Management, which meets regularly to discuss the Hakon Invest AB mittee’s work is governed in its rules of procedure, which are laid down company’s development and make decisions affecting operations. by the Board of Directors. Group Management is presented on pages 42–43. Executive Committee The Audit Committee consists of two members: John Rishton (Chair- Audit Committee Board of Directors man) and Claes-Göran Sylvén. In addition, assistants to the members, ICA’s policies and the Business Ethics Management Team Compensation Committee the external auditors, internal auditors and ICA AB’s President, CFO and ICA’s Group Management has adopted seven position statemens that General Counsel normally attend all or part of the Committee’s meet- govern operations. They are called “ICA’s Good Business” and contains ings. In 2008, the Audit Committee held fi ve meetings. positions on ethics and social responsibility. Policies and guidelines ex- ICA AB Business Ethics plain how each of these positions are put into practise. Read more Kenneth Bengtsson Management Team Executive Committee about ICA’s corporate responsibility activities and policies on page 77– The Board has appointed Claes-Göran Sylvén, John Rishton and Kenneth 79 in the CR Report. The cross-functional management team for busi- CFO COO Bengtsson to an Executive Committee responsible for continuous mon- ness ethics has responsibility under Group Management for continu- Sonat Burman-Olsson Mats Holgerson itoring of the Group’s development. The Committee also prepares issues ously monitoring compliance with ICA’s policies. In addition, there is a that will be discussed by the Board and supports the CEO’s and other number of fi nancially related policies, that govern the fi nancial expo- senior executives of the subsidiaries in the implementation and execu- sure of the Group. tion of the decisions taken by the Board. The Committee has a mandate ICA Sweden ICA Norway Rimi Baltic ICA Bank ICA Non-food HR & ICA ICA ANNUAL REPORT 2008 to decide on investments that do not require discussion by the Board. ICA ANNUAL REPORT 2008 Kenneth Bengtsson Antonio Soares Edgar Sesemann Jörgen Wennberg Real Estate Björn Abild School Åsa Gabriel (Act.) Bo Liffner Compensation Committee Ingrid The Board has given the Executive Committee a mandate to act as a Jonasson Blank Compensation Committee to decide on compensation principles for (Vice) senior executives in Group Management. The President’s salary is deter- mined by the Board, however.

38 39 ①

Board of Directors

① ④ ⑧ Claes-Göran Sylvén Dick Boer Peter Wakkie ② ③ ④ Chairman Board member Board member President and CEO, Hakon Invest, EVP and COO Europe, Royal Ahold EVP and Chief Corporate Governance CEO, ICA-handlarnas Förbund President and CEO, Albert Heijn Counsel, Royal Ahold Born: 1959 Born: 1957 Born: 1948 Elected: 1999 Elected: 2006 Elected: 2007 (previously as a deputy) Other assignments: Chairman of Forma Other assignments: Co-Chairman of ECR Other assignments: Board member of Publishing Group and Svensk Handels Europe. Deputy Chairman of CBL. Member Albert Heijn Vaste Klanten Fonds, Schu- Försäkringar. Board member of the Swed- of the Executive Board of VNO-NCW, the itema N.V. and Wolters Kluwer N.V. ish Federation of Trade and UGAL Supervisory Board of the Red Cross Hos- pital Beverwijk and the European Retail Per Jansson ⑨ Round Table Dirk Anbeek ② Board member Board member Employee representative, Swedish Fredrik Hägglund ⑤ EVP Franchise & Real Estate, Albert Heijn, Commercial Employees’ Union Board member Etos, Gall & Gall Logistics worker, ICA Sweden General Counsel, Hakon Invest Born: 1963 Born: 1950 Born: 1967 Elected: 2003 Elected: 2002 Other assignments: Board member of JMR Elected: 2004–2008 (Feb), reelected 2009 (Jan) Magnus Rehn ⑩ ⑤ ⑥ ⑦ Other assignments: Board member of Peter Berlin ③ Board member Eurocommerce and Anti Corruption Institute Board member Employee representative, Unionen labor ICA retailer federation Per-Anders Olofsson ⑥ Born: 1960 Board member Team Leader Administration Non-food Elected: 2005 Born: 1966 ICA retailer Other assignments: Chairman of the ICA Elected: 2007 (previously as a deputy) Born: 1949 Sweden Advisory Board. Vice Chairman of ICA-handlarnas Förbund and ICA’s district Elected: 1997 board in Malmö Other assignments: Vice Chairman of Deputies ICA-handlarnas Förbund Elected by the Annual General Meeting John Rishton ⑦ Stig -Åke Lundström President and CEO, Royal Ahold Guy Thomson Born: 1958 Fredrik Hägglund (feb-dec 2008) Elected: 2006 Other assignments: Board member of Rolls Royce Group Plc Employee representatives Håkan Jönsson ⑧ ⑨ ⑩ Jarand Thomassen ICA ANNUAL REPORT 2008 ICA ANNUAL REPORT 2008

40 41 Group Management

① ④ ⑦ Kenneth Bengtsson Ingrid Jonasson Blank Jörgen Wennberg ① ② ③ President and CEO, ICA AB, EVP, ICA Sweden CEO, ICA Bank act. CEO, ICA Sweden Born: 1962 Born: 1952 Born: 1961 Employed: 1986 Employed: 1979 Employed: 1999 Other assignments: Board member of Other assignments: Board member of Other assignments: Chairman of the Forma Publishing Group, the Association the Swedish Bankers Association Swedish Federation of Trade. Board of Swedish Advertisers, Bilia and the CIES member of theConfederation of Swedish Summit and Marketing Committee Bo Liffner ⑧ Enterprise, CIES and the World Childhood Foundation CEO, ICA Real Estate Antonio Soares ⑤ Born: 1948 CEO, ICA Norway Sonat Burman-Olsson ② Employed: 1991 Born: 1949 EVP and CFO, ICA AB Employed: 2002 Born: 1958 Åsa Gabriel ⑨ Employed: 2007 SVP HR and ICA School, ICA AB Edgar Sesemann ⑥ Born: 1959 Other assignments: Board member of the CEO, Rimi Baltic Third Swedish National Pension Fund Employed: 2004 Born: 1961

③ Employed: 1999 Mats Holgerson Björn Abild was recruited during the year as ④ ⑤ ⑥ COO, ICA AB CEO for Non-foods effective spring 2009. Born: 1953 Employed: 2008 Other assignments: Board member of Hemtex and Bilia

⑦ ⑧ ⑨ ICA ANNUAL REPORT 2008 ICA ANNUAL REPORT 2008

42 43 BOARD OF DIRECTORS

team last fall to implement a fi nancial turnaround of ICA Norway. A new business plan gross margin, mainly due to various pricing measures during the year, increased costs has been adopted with a focus on driving sales, reducing costs, creating a strong base from unprofi table franchises taken over by ICA and higher staff costs. with an optimal operating structure and an intense customer focus. The fi rst step was to develop a new discount concept for the Rimi chain, which has progressed in line Rimi Baltic with our expectations during the fall, and will be introduced gradually in more Rimi Net sales increased by 17.9 percent. At constant exchange rates net sales increased 13.3 stores during 2009. percent. Throughout 2008, we worked hard to ensure that our stores maintain the highest Operating income was SEK 182 million (92) including capital gains on real estate food quality standards in Sweden. We were particularly pleased in December when sales and impairment losses on fi xed assets of SEK –80 million (–3). Operating income, the trade association Svensk Dagligvaruhandel approved the quality standard that we excluding capital gains on real estate sales and impairment losses on fi xed assets, was have developed, effectively making it the standard for the entire industry in Sweden. SEK 262 million (95).The majority of the impairments for the full year related to unde- The ICA Group’s main focus for 2009 will be to further improve the customer offer veloped land in Latvia and Lithuania. Higher sales and improved gross margin in- with the right prices and assortment. The initiatives we will take during 2009 will be creased operating income. funded by different cost saving programs in all markets. Naturally the turnaround in ICA Norway remains a priority. Furthermore our priorities will be to modernize our ICA Bank stores in all countries to maintain an attractive retail network, develop the store quali- Revenue increased by 12.7 percent. Business volume increased by 11.1 percent from the Directors’ report ty further, focus on HR development, as well as improve our non-food offering. beginning of the year. There have not been any large structural deals. A large reorganization of the Group Operating income improved to SEK 111 million (83) due to higher commission in- was initiated during the second half year of 2008. The purpose is to give the opera- come and better net interest income. The year also included a one-time gain of SEK 17 tional businesses a larger freedom to adapt to its local market conditions. Focus dur- million on the sale of shares in MasterCard. Operating income was negatively affected ICA AB Important events during the year ing 2008 has also been on price and effi ciency. There have been several campaigns in by higher IT expenses and the cost to produce and replace new debit cards. Corporate identity number 556582-1559 • ICA launched its new organic line, “ICA I love eco”, in Sweden in March, initially com- order to underline ICA’s competitive prices. ICA opened a purchasing offi ce in Asia prising around 60 products. The products in the line are organically labeled accord- during the year. Working closer to the suppliers simplifi es both the purchasing as well ICA Group Functions The Board of Directors and the President of ICA AB hereby present the annual report ing to EU, Swedish (KRAV) standards or Debio (in Norway). as the controlling that ICA’s ethical guidelines are being followed. The operating loss was SEK –300 million (–89) mainly due to a change in the way costs for the fi nancial year January 1, 2008 – December 31, 2008. All amounts are in millions Sales increased by 10.6 percent in 2008. The increase was due to, among other are allocated within the Group, a one-time bonus paid to employees in Sweden and of Swedish kronor (SEK million) unless indicated otherwise. • In April, ICA opened a sourcing offi ce in Hongkong to monitor orders and non-food things, strong customer offerings. One of the highlights was ICA’s personalized offer- higher pension costs. The change in allocation methodology had a positive effect on product quality in Asia. ings, “My shopping list”. The launch of ICA I love eco was another notable success. ICA the operating results for ICA Norway and ICA Sweden and a negative effect on ICA Financial Review also continued to improve quality work in stores. 12 new stores were opened during the Group Functions. Operations • In May the annual meeting of ICA-Handlarnas Förbund (the membership organiza- year. In January 2009, the new Group organization that management had decided on in ICA AB is the parent company of the ICA Group, which operates around 2,230 of its tion of ICA retailers in Sweden) voted unanimously to establish a disciplinary board late 2008 took effect. The new structure gives ICA Sverige more responsibility and more Net fi nancial items and taxes own and retailer-owned stores in Sweden, Norway and the Baltic countries. ICA AB in Sweden together with ICA AB to handle cases involving ICA retailers’ commit- employees after several functions were transferred from ICA AB to ICA Sverige AB. The ICA Group’s net fi nancial items were SEK –323 (–320). The tax expense for the year maintains its registered offi ce in Stockholm at Svetsarvägen 16, SE-171 93 Solna. The ments and obligations. This was later confi rmed in October, thus executing the Sales increased by 4.9 percent to NOK 17,346 million. Several measures were taken was SEK –66 (–116), a decrease of SEK 30 million compared to 2007 was due to a recal- subsidiaries ICA Sverige AB, ICA Norge AS and Rimi Baltic AB are retail companies change in the statutes which requires two consecutive resolutions. to facilitate a turnaround. The organizations for ICA Nær and ICA Supermarked were culation of deferred tax in Sweden to the new tax rate of 26.3 percent. This rate ap- within various geographical areas. ICA Bank AB offers fi nancial services to Swedish merged. A review was conducted of ICA’s pricing structure and a new concept was de- plies as of January 1, 2009. customers. ICA AB includes three Group-wide functions for Finance, Marketing and • The property sales in 2007 to EPGF, Standard Life Investments European Property veloped for Rimi. The launch of ICA I love eco in the fall was a success. ICA Norge re- Effective 1 January 2009, the tax legislation concerning intra group loans have been Supply Chain. From January 2009 has the majority of the business within Marketing Growth Fund, were fi nalized in May. The two transactions positively affected ICA’s op- ceived an award for its sustainability work. 11 new stores were opened during the year. changed. In our assessment, the change will mean a higher tax cost for the ICA Group and Supply Chain been moved to the subsidiaries. erating income by a total of approximately SEK 105 million during the second quarter. Rimi Baltic’s sales increased by 13.3 percent in local currency during the year. The in- of around SEK 300 million annually. crease was due to, among other things, Rimi’s pricing discounts as well as renovations Financial summary • In May and June, extensive price cuts were implemented by ICA Norge as an element and modernizations of its stores. 2008 was overshadowed by the fi nancial crisis in Es- Financial position January – December in the introduction of a price repositioning. tonia, Latvia and Lithuania. The construction of 13 new stores continued as planned. The ICA Group’s total assets have increased by SEK 2,650 million to SEK 39,969 million Rimi Baltic already had plans on the table to add 37 stores, but decided to postpone compared to December 31, 2007. Fifty percent of this increase is attributable to an in- Key fi nancial ratios , SEK million 2008 2007 • In August, Antonio Soares was named the new CEO of ICA Norge. He was most re- any more new construction in 2008 due to the fi nancial turbulence in the region. crease in the total amount of deposits made at ICA Bank. Capital employed increased Net sales 90,963 82,326 cently CEO of Rimi Baltic. At the same time, Edgar Sesemann was appointed Deputy ICA Bank’s business volume increased by 11.1 percent in 2008. During the year, an by SEK 1 409 million to SEK 27,957 million. The equity/assets ratio was 32.0 percent CEO of Rimi Baltic and Acting CEO. Operating income 2,117 2,602 agreement was signed with the Swedish Post and Telecom Agency to provide basic (32.4 percent). ICA Group’s net debt, excluding ICA Bank, was SEK 2,132 million on De- Operating income excluding capital gains and impair- banking services in 15 locations in Sweden. New smart chip cards have been provided cember 31, 2008 (SEK 2,344 million). • The ICA Group implemented a series of organizational changes in the fourth quarter. ment losses1) 1,905 2,006 to all bank card customers to improve security. Online banking security was improved Kenneth Bengtsson, in addition to his role as President and CEO of ICA AB, assumed a as well. In Norway, the cash register system is being prepared to handle banking servic- Statement of cash fl ows Operating margin, % 2.3 3.2 day-to-day responsibility as acting CEO of ICA Sweden. At the same time, Mats es. During the year, the bank improved its public recognition through a major advertis- Cash fl ow from operating activities increased to SEK 4,577 million (4,086). This was Operating margin excluding capital gains and impairment Holgerson was appointed COO of ICA AB. ing campaign and successfully attracted new customers. One reason for the height- due to improved working capital, primarily lower current receivables and improved losses, % 2.1 2.4 ened interest could be that the turbulence in the fi nancial markets has made customers working capital in ICA Bank. Cash fl ow from investing activities was SEK –2,312 million Net income for the year 1,728 2,166 • In December, the Swedish County Administrative Court ruled in favor of an earlier de- more willing to re-examine their fi nances and that ICA Bank stood up well to the com- (–66) with the year-over-year change due to fewer property sales in 2008 compared cision by the Swedish Tax Agency in 2007 to disallow interest deductions during 2001– petition. with 2007. As a result, cash fl ow from fi nancing activities was SEK –1,461 million (–3,372). Total assets 39,969 37,319 2003 of SEK 1,795 million by ICA Finans AB. The Swedish Tax Agency’s claim is SEK 742 Liquid assets totaled SEK 5,102 million on December 31, 2008 (SEK 4,360 million). The Cash fl ow from operating activities 4,577 4,086 million, including penalties and interest. ICA believes the ruling is without foundation Income summary majority of these liquid assets, SEK 4,193 million, relate to ICA Bank. and has appealed this latest ruling to the Swedish Administrative Court of Appeal. Equity/assets ratio, % 32.0 32.4 Group Tax disputes Return on equity excluding ICA Bank, %2) 13.5 19.1 Consolidated net sales for the year were SEK 90,963 million (82,326), up 10.5 percent • The Swedish Tax Agency announced in December that it has decided to disallow in- on 2007. At constant exchange rates net sales increased 9.6 percent. The Swedish Tax Agency has decided in 2007 to disallow interest deductions by ICA Return on capital employed excluding ICA Bank, %3) 11.4 13.8 terest deductions of SEK 3,158 million made in 2004–2007 for a Dutch Group compa- Operating income was SEK 2,117 million (2,602), including capital gains on real es- Finans AB, of SEK 1,795 million between 2001–2003. ICA appealed the decision to the 1) Excluding capital gains from real estate sales and impairment losses on fi xed assets. ny, ICA International Services BV. The Swedish Tax Agency’s claim is SEK 1,077 million tate sales and impairment losses on fi xed assets of SEK 212 million (596). Operating in- County Administrative Court, which in December 2008 ruled in favor of the Swedish 2) Return on equity = Income after tax as a percentage of average equity. The operations of ICA Bank are exclud- including penalties and interest. ICA believes the ruling is without foundation and has ed from both the income statement and balance sheet in the calculation of return on equity. come excluding these items was SEK 1,905 million (2,006). During the year, operating Tax Agency. The Swedish Tax Agency’s claim amounts to SEK 742 million (including 3) Return on capital employed = Income after fi nancial income as a percentage of average capital employed. appealed the Swedish County Administrative Court. income improved for ICA Sweden, Rimi Baltic and ICA Bank, but decreased for ICA penalties and interest). ICA’s opinion is that the deductions made by ICA Finans AB The operations of ICA Bank are excluded from both the income statement and balance sheet in the calcula- Norway and ICA Group Functions. complied with tax laws and has appealed the decision by the County Administrative tion of return on capital employed. Important events after year-end Court’s decision to the Swedish Administrative Court of Appeal. The claim is reported • In January 2009 the Swedish Tax Agency announced that it would not allow ICA to ICA Sverige as a contingent liability. In January 2009 the Swedish Tax Agency announced that it delay of the payment of SEK 742 million for disputed interest deductions during 2001– Net sales increased by 10.6 percent. would not allow ICA to delay the payment of SEK 742 million. ICA has appealed the 2003. ICA believes the decision is without foundation and has appealed to the Coun- Operating income was SEK 2,644 million (2,372) including capital gains on real es- verdict but paid the disputed amount in February 2009. This amount is reported as a ty Administrative Court, but has paid the disputed amount in February 2009. The tate sales and impairment losses on fi xed assets of SEK 270 million (290). Operating in- receivable from the Swedish Tax Agency. amount is reported as a receivable from the Swedish Tax Agency. come, excluding capital gains on real estate sales and impairment losses on fi xed as- In a separate case, the Swedish Tax Agency also decided in 2008 to disallow inter- sets increased to SEK 2,374 million (2,082). Operating income increased as a result of est deductions of SEK 3,158 million made in 2004–2007 to a Dutch Group company. Financial year 2008 higher sales at both the retail and wholesale level, but decreased due to poor earnings The Swedish Tax Agency’s claim amounts to SEK 1,077 million (including penalties and 2008 was a challenging year for the ICA Group. Sales increased but operating income for non food and due to as well as some other costs, among others severance pay. interest). ICA’s opinion is that the deductions it made complied with tax laws and has decreased slightly. The performance of ICA Sweden was robust, we were pleased with appealed the Swedish Tax Agency’s decision to the County Administrative Court. The ICA ANNUAL REPORT 2008 ICA ANNUAL REPORT 2008 the development of Rimi Baltic and ICA Bank, but there is still a lot of hard work re- ICA Norge claim is reported as a contingent liability. quired to turn around ICA Norway. ICA has a strong balance sheet and is well placed Net sales increased by 6.3 percent. At constant exchange rates net sales increased 4.9 to face the turbulent economic environment. percent. The increase was mainly due to ICA Norway taking ownership of former fran- Investments The ICA Group’s net sales for the full-year 2008 increased by 10.5 percent. Operat- chise stores. Investments during the year amounted to SEK 2,631 million (2,805) and were distribut- ing income excluding capital gains on property sales was SEK 1,905 million, down 5 The operating loss was SEK –520 million (144), including capital gains on real estate ed according to the table below. Three investments exceeded SEK 50 million: Maxi percent. This decrease was primarily due to the larger operating loss at ICA Norway. sales and impairment losses on fi xed assets of SEK 22 million (308). The operating loss Kristiansand in Norway, Rimi Hypermarket Kurzemes and Rimi Supermarket Milgravis The main reasons for the losses in ICA Norway were a lower gross margin, due to pric- excluding capital gains on real estate sales and impairment losses on fi xed assets in- in Latvia. ing initiatives during the year, increased costs associated with unprofi table franchises creased to SEK –542 million (–164). The increased operating loss was due to a lower taken over by ICA Norway and higher staff costs. We appointed a new management

44 45 BOARD OF DIRECTORS BOARD OF DIRECTORS

different risk profi le compared with an ordinary retail company. The Board of Direc- largest mountain bike race) and Blodomloppet (road races to recruit blood donors ICA and Rimi store sales in Norway Investments 2008 2007 tors is responsible for establishing the fi nancial policy, which governs the Group’s fi - and encourage exercise). In workplaces with high absenteeism, ICA conducts an anal- January - December 2008 Retail locations 2,187 2,152 nancial risk management. Within the ICA Group, fi nancial risks are managed centrally ysis and takes special measures to review the organization, draft an action plan and, Distribution 159 394 through the Group’s fi nance function. when necessary, obtain support from outside specialists. Change, Change, all comparable Investment properties 100 119 For more information on ICA’s risk management, see the notes to the consolidated accounts – Note 22 for Principles of fi nancial risk management and Note 23 for Finan- ICA’s corporate responsibility work Store sales excl. VAT NOK million stores stores Intangibles 120 77 cial instruments. ICA’s CR work is built on a foundation of seven position statements we call ICA’s Good ICA Maxi 3,001 5.9% –0.3% Other 65 63 Business. ICA is a signatory of the UN’s Global Compact, and these position state- ICA Supermarked 4,748 4.2% 0.1% TOTAL 2,631 2,805 Five-year summary ments are in line with the Global Compact’s ten principles on human rights, labor ICA Nær 4,550 3.2% 2.9% Defi nitions of key fi nancial ratios: standards, the environment and anti-corruption. With ICA’s Good Business as a basis, Changes in accounting principles CR issues are integrated into day-to-day operations. Policies and guidelines explain Rimi 7,698 -2.7% 4.1% Capital employed = Total assets less non-interest-bearing liabilities and provisions. The amendment to IAS 39 and IFRS 7 allowing reclassifi cations of fi nancial instru- how each of these positions is put into practice. TOTAL 19,996 1.5% 2.3% Operating margin ments under certain circumstances has not had any impact on the fi nancial reports. = Operating income as a percentage of net sales. “ICA’s Good Business” describes the Group’s stance on ethics and corporate re- In 2008 private label sales in Norway decreased from 10.0 percent to 9.5 percent. None of the interpretations effective from 2008 impacts ICAs fi nancial reports. sponsibility and, together with ICA’s core values, is essential achieving the Group’s vi- Return on capital employed = Income after fi nancial income as a percentage of aver- The interpretations are IFRIC 11: IFRS 2 Group and Treasury Share Transactions, IFRIC 12 sion and mission. age capital employed. The operations of ICA Bank are excluded from both the income Rimi Baltic’s sales in the Baltic countries Service Concession Arrangements, and IFRIC 14: IAS 19- The Limit on a Defi ned Benefi t • ICA will be driven by profi tability and high ethical standards. statement and balance sheet in the calculation of return on capital employed. January – December 2008 Asset, Minimum Funding Requirements and Their Interaction. • ICA will listen to customers and always base its decisions on their needs. Return on equity = Income after tax as a percentage of average equity. The operations • ICA will nurture diversity and growth among employees. Change, Financial risk management of ICA Bank are excluded from both the income statement and balance sheet in the • ICA will maintain an open dialogue internally and with the community. Change, all comparable The fi nancial strategy of the ICA Group is conservative and focuses on defi ning and calculation of return on equity. • ICA will ensure product safety and quality. Store sales excl. VAT EUR million stores stores managing fi nancial risks. As the ICA Group includes bank operations the Group has a • ICA will promote a healthy lifestyle. Equity/assets ratio = Shareholders’ equity as a percentage of total assets. Estonia 391 7.6% 4.4% • ICA will adopt sound environment practices to promote sustainable development. Latvia 642 18.0% 15.0% In just a few years, environmental issues, especially climate change, have grown tre- Lithuania 276 11.1% 5.2% Five-year summary for the ICA Group 2004 2005 2006 2007 2008 mendously in importance for both ICA and its customers. ICA’s overriding goal is to TOTAL 1,310 13.2% 9.6% Condensed income statement reduce environmental impacts at every level of the Group: product selection, ware- In 2008 private label sales in the Baltics increased from 5.2 percent to 6.7 percent. Net sales 73,334 71,663 67,395 82,326 90,963 houses, offi ces, transports, business travel and stores. Energy consumption is a priori- ty. ICA is also working to reduce the impact of the products sold in the Group’s stores Operating income before depreciation/amortization 3,514 3,248 3,545 4,080 3,753 Number of stores and to improve the range of organic products. ICA stores in Sweden, including retailer-owned stores Depreciation/amortization –1,280 –1,275 –1,248 –1,478 –1,636 ICA tries to maintain a large share of eco-labeled products and continuously ex- Operating income before goodwill impairment 2,234 1,973 2,297 2,602 2,117 pand its organic line. It also works in various ways to convince customers to buy local, December December Store profi le 2007 New Converted Closed 2008 Goodwill impairment –257 –15 – – – seasonal and organic products, which many are happy to do to reduce their own car- Operating income 1,977 1,958 2,297 2,602 2,117 bon footprint. Maxi ICA Stormarknad 60 4 2 66 ICA has no factories of its own, instead selling products manufactured by suppliers Net fi nancial items –236 –287 –251 –320 –323 ICA Kvantum 119 1 –1 –2 117 from around the world. It is committed, therefore, to monitoring its suppliers’ social ICA Supermarket 460 3 –3 –6 454 Income after net fi nancial items 1,741 1,671 2,046 2,282 1,794 policies and workers’ rights. The requirements ICA places on its suppliers are based on Tax –226 –148 –12 –116 –66 the UN’s declaration on human rights, children’s rights and the International Labour ICA Nära 743 4 2 –17 732 Result from discontinued operations – – 367 – – Organisation’s core conventions. These requirements are included in the guidelines TOTAL 1,382 12 0 –25 1,369 Net income for the year 1,515 1,523 2,401 2,166 1,728 for responsible sourcing in ICA’s quality and environmental policy. Furthermore, ICA requires its suppliers to comply with the laws in each country. The business ethics pol- ICA and Rimi stores in Norway, including franchised stores icy contains guidelines on relationships with suppliers and partners with regard to Condensed balance sheet bribery and gifts, fair competition and shareholdings. December December Intangible fi xed assets 2,064 1,914 3,447 3,599 3,742 ICA participates in the Global Food Safety Initiative, GFSI, which creates a bench- Store profi le 2007 New Converted Closed 2008 Tangible fi xed assets 12,675 12,441 13,232 14,959 15,544 marking process for food safety management schemes for suppliers. All of ICA’s sup- ICA Maxi 25 1 25 pliers must comply with current laws and have approved self-inspection programs. Financial fi xed assets 3,185 4,914 3,959 3,368 3,772 ICA Supermarked 79 3 –3 79 With the help of audits and questionnaires, ICA ensures that the requirements are Other fi xed assets 186 49 181 276 424 met. With local suppliers, ICA performs separate inspections to ensure that they are ICA Nær 275 4 10 –11 278 Other current assets 9,780 10,493 10,938 10,757 11,385 compliant with the requirements. Rimi 263 3 –7 –6 253 Liquid assets 3,198 2,920 3,749 4,360 5,102 TOTAL 642 11 0 –17 636 Total assets 31,088 32,731 35,506 37,319 39,969 ICA- and Rimi-stores sales during the year The following tables refer to store sales. In Sweden, this includes Swedish retailer- Number of stores in Baltic countries owned ICA store sales. In Norway, franchise store sales are included. Sales for retailer- Shareholders’ equity 7,094 8,386 10,216 12,073 12,796 owned and franchised stores are not consolidated in the Group. December December Interest-bearing liabilities and provisions 15,150 15,774 15,563 14,475 15,161 Country 2007 New Converted Closed 2008 Non-interest-bearing liabilities and provisions 8,844 8,571 9,727 10,771 12,012 ICA store sales in Sweden Estonia 65 9 74 Total shareholders’ equity and liabilities 31,088 32,731 35,506 37,319 39,969 January – December 2008 Latvia 94 3 97

Change, Lithuania 56 6 62 Key fi nancial ratios Change, all comparable TOTAL 215 18 233 Operating margin, % 2.7 2.7 3.4 3.2 2.3 Store sales excl. VAT SEK million stores stores Return on capital employed, % 12.9 12.2 12.9 13.8 11.4 Maxi ICA Stormarknad 22,707 14.3% 6.4% ICA AB Return on equity, % 16.9 20.4 25.7 19.1 13.5 ICA AB includes three Group-wide functions for Finance, Marketing and Supply Chain. ICA Kvantum 21,365 4.0% 4.7% Equity/assets ratio, % 22.8 25.6 28.8 32.4 32.0 From January 2009 has the majority of the business within Marketing and Supply ICA Supermarket 28,809 4.6% 5.3% Chain been moved to the subsidiaries. ICA AB’s net sales during the year amounted to ICA Nära 13,547 5.9% 6.1% SEK 888 million (888) with income after net fi nancial items of SEK 610 million (725). TOTAL 86,428 7.0% 5.6% Board of Directors and Management/Board’s rules of procedure In 2008 the share of private label sales in Sweden rose from 17.4 percent to 18.2 percent. Human resources broadens the Group’s skill base and provides employees with opportunities, thereby The Board’s work follows special rules of procedure adopted at the statutory Board The ICA Group employed an average of 22,023 employees (20,081) during the year. retaining competence internally. meeting following the election on April 28, 2008. In addition to the items treated in ac- ICA’s long-term success is greatly dependent on its employees and their skills. Only Talent management is a priority for the Group. ICA has several training programs to cordance with the Companies Act, the rules of procedure include committee directives with their help can ICA directly and indirectly create unique store experiences for cus- strengthen internal leadership. and rules on quorums. In 2008, the Board of ICA AB consisted of seven-eight members ICA ANNUAL REPORT 2008 ICA ANNUAL REPORT 2008 tomers and remain profi table as a group. Questions regarding skills, training and en- ICA tries to maintain a staff with a diverse educational, gender, age and ethnic and three deputies elected by the Annual General Meeting as well as two members with hancing ICA as an employer brand therefore have a high priority. Four priority areas background. Diversity is also an important issue when ICA trains new managers. The two deputies appointed by the unions. The Extraordinary General Meeting on February are skills management, leadership, diversity and health and wellness. goal is to fi ll managerial positions with half men and half women. For ICA, it is impor- 15, 2008 elected Göran Hesseborn as a member of the Board and Fredrik Hägglund as a Skills management is necessary to strengthen the ICA brand. ICA is an international tant to work continuously to prevent discrimination. If any cases should arise, despite deputy. Göran Hesseborn stepped down as a Board member at the Extraordinary Gen- company whose employees have opportunities for personal development by trans- ICA’s best efforts, action plans are in place. eral Meeting in November. All members appointed by the Annual General Meeting are ferring within and between departments, business areas, companies and countries. ICA tries to maintain a positive work environment physically and mentally to pro- affi liated with the owners of ICA AB. The Chief Executive Offi cer, Chief Financial Offi cer ICA has more than a hundred different positions, including regional manager, opera- mote healthy habits in both the short and long term. ICA works closely with occupa- and Chief Counsel (Secretary of the Board) are not members of the Board but partici- tions manager, marketer, store manager, stock worker, economist and banking spe- tional health providers to conduct health exams and through various activities, such pate in its work. During fi scal year 2008 the Board held thirteen meetings. cialist. The goal is that at least 70 percent of available positions are fi lled internally. This as Kortvasan (a family-oriented cross country ski race), Birkebeinerittet (the world’s

46 47 BOARD OF DIRECTORS CONSOLIDATED INCOME STATEMENT

Board committees The Board is able to establish committees to complement its work. The committees are subordinate to the Board and report to it on an ongoing basis.

Audit Committee The Board of Directors has appointed an Audit Committee to monitor accounting and reporting of fi nancial information. The Audit Committee is also responsible for evalu- ating the Group’s systems for internal oversight and control. Among the Committee’s other duties are to handle auditing questions from the external and internal audit. The Consolidated Income Statement Audit Committee’s work is governed in its rules of procedure, which are laid down by the Board of Directors. The Audit Committee consists of two members: John Rishton (Chairman) and (SEK million) Note 2008 2007 Claes-Göran Sylvén. In addition, assistants to the members, the external auditors, in- ■ Net sales 2, 3 90,963 82,326 ternal auditors and ICA AB’s President, CFO and Chief Counsel (Secretary of the Audit Committee) normally attend all or part of the Committee’s meetings. In 2008, the Au- ■ Cost of sales dit Committee held fi ve meetings. 4–78,825–70,685 Gross profi t 12,138 11,641 Executive Committee The Board has appointed Claes-Göran Sylvén, John Rishton and Kenneth Bengtsson to ■ Selling expenses 4 –7,206 –6,276 an Executive Committee responsible for continuous monitoring of the Group’s devel- opment. The Committee also prepares issues that will be discussed by the Board and ■ Administrative expenses 4, 6 –3,268 –3,536 supports the COO’s and other senior executives of the subsidiaries in the implemen- ■ Other operating revenue 7 461 753 tation and execution of the decisions taken by the Board. The Committee has a man- ■ Share of net income of associated companies 14 –8 20 date to decide on investments that do not require discussion by the Board. Operating income 2, 5, 8, 9 2,117 2,602 Compensation Committee The Board has given the Executive Committee a mandate to act as a Compensation ■ Financial income 95 115 Committee to decide on compensation principles for senior executives in Group Man- ■ Financial expenses –418 –435 agement. The President’s salary is determined by the Board, however. Net fi nancial items 10 –323 –320 Internal control over fi nancial reporting ICA works with a structure to monitor and safeguard internal control of fi nancial re- Income after net fi nancial items 1,794 2,282 porting. Financial fl ows are documented and control points are tested annually. The results of the tests are reported to the company’s management. ■ Tax 11 –66 –116 Approval of fi nancial reports The fi nancial reports in this annual report were approved by the Audit Committee on NET INCOME FOR THE YEAR 1,728 2,166 February 10 and by the Board of Directors on February 13, 2009.

Proposed appropriation of earnings Attributable to: The following funds are at the disposal Parent Company’s shareholders 1,735 2,167 of the Annual General Meeting (SEK): Minority interest –7 –1 Retained earnings 8,401,241,792 Net income for the year 757,051,724 Total 9,158,293,516

The Board of Directors and the President propose that the earnings be distributed as follows: To the shareholders, a dividend of 868,000,000 Carried forward 8,290,293,516 Consolidated Income Statement 2008, SEK million Consolidated Income Statement 2007, SEK million Total 9,158,293,516 The proposed dividend conforms to the agreement between the shareholders, which states that the annual dividend will amount to at least 40 percent of net income for EXPENSES REVENUE EXPENSES REVENUE the year. The Group’s equity/assets ratio following the dividend is 29.8 percent. Cost of sales Net sales Cost of sales Net sales 78,825 90,963 70,685 82,326

Selling expenses Other operating revenue Selling expenses Other operating revenue 7, 20 6 461 6,276 753

Administrative expenses Financial income Administrative expenses Financial income 3,268 95 3,536 115

Financial expenses Associated companies Associated companies 418 435 20

Tax Tax 66 116

Associated companies 8 ICA ANNUAL REPORT 2008 ICA ANNUAL REPORT 2008

Total revenue +91,519 Total revenue +83,214 Total expenses –89,791 Total expenses –81,048 Net income for the year +1,728 Net income for the year +2,166

Graphics: Bonanza

48 49 CONSOLIDATED BALANCE SHEET CONSOLIDATED BALANCE SHEET

Consolidated Balance Sheet (SEK million) Note Dec. 31, 2008 Dec. 31, 2007

SHAREHOLDERS’ EQUITY, PROVISIONS AND LIABILITIES Shareholders’ equity 18 (SEK million) Note Dec. 31, 2008 Dec. 31, 2007 ■ Share capital 500 500 ASSETS ■ Other paid-in capital 12,557 12,557 Fixed assets ■ Reserves 1,239 1,160 ■ Retained earnings –1,506 -2,157 Intangible fi xed assets 12 ■ Shareholders’ equity related to Parent Company’s shareholders 12,790 12,060 ■ Goodwill 2,723 2,673 ■ Minority interest 613 ■ Trademarks 812 702 Total shareholders’ equity 12,796 12,073 ■ IT systems 104 114 ■ Other 103 110 Long-term liabilities 23 3,742 3,599 ■ Provisions for pensions 19 937 845 ■ Deferred tax liability 11 597 626 Tangible fi xed assets 13 ■ Liabilities to credit institutions 1,143 1,352 ■ Buildings and land 9,519 9,321 ■ Other provisions 59 64 ■ Investment properties 1,113 1,188 ■ Other liabilities 2,296 2,650 ■ Leasehold improvements 801 679 Total long-term liabilities 5,032 5,537 ■ Equipment 3,193 3,191 ■ Construction in progress 918 580 Current liabilities 23 15,544 14,959 ■ Liabilities to credit institutions 977 570 ■ Accounts payable 7,541 6,480 Financial fi xed assets 23 ■ Deposits, ICA Bank 16 8,683 7,509 ■ Shares in associated companies and joint ventures 14 37 29 ■ Liabilities to related parties 21 21 14 ■ Receivables from related parties 21 10 11 ■ Tax liabilities 27 7 ■ Other fi nancial fi xed assets 665 359 ■ Other liabilities 2,283 2,669 ■ ICA Bank receivables 16 2,697 2,689 ■ Provisions 59 30 ■ Other receivables 363 280 ■ Accrued expenses and deferred income 2,550 2,430 3,772 3,368 Total current liabilities 22,141 19,709

■ Deferred tax assets 11 424 276 TOTAL SHAREHOLDERS’ EQUITY AND LIABILITIES 39,969 37,319

Total fi xed assets 23,482 22,202

Current assets 23 Consolidated Balance Sheet Dec. 31, 2008, SEK million Consolidated Balance Sheet Dec. 31, 2007, SEK million ■ Inventory 15 4,461 3,934

SHAREHOLDERS’ EQUITY SHAREHOLDERS’ EQUITY Current receivables ASSETS +LIABILITIES ASSETS +LIABILITIES ■ Accounts receivable 2,965 2,916 Intangible fixed assets Shareholders’ equity Intangible fixed assets Shareholders’ equity ■ Tax assets 934 3,742 12,796 3,599 12,073

■ ICA Bank receivables 16 2,138 1,762 Tangible fixed assets Long-term liabilities Tangible fixed assets Long-term liabilities ■ Receivables from related parties 21 32 20 15,544 5,032 14,959 5,537

■ Other receivables 103 8 Financial fixed assets* Current liabilities Financial fixed assets Current liabilities ■ Prepaid expenses and accrued income 1,674 1,980 4,196 22,141 3,644 19,709 Inventory Inventory 4,461 3,934 ■ Liquid assets 24 5,102 4,360 Receivables Receivables 6,921 6,720 ■ Assets held for sale 17 3 103 Liquid assets Assets held for sale 5,102 103 Total current assets 16,487 15,117 ICA ANNUAL REPORT 2008 ICA ANNUAL REPORT 2008 Assets held for sale Liquid assets 3 4,360 TOTAL ASSETS 39,969 37,319

Total Total Total Total 39,969 39,969 37,319 37,319

* Incl. Deferred tax assets Graphics: Bonanza

50 51 CHANGES IN CONSOLIDATED SHAREHOLDERS’ EQUITY CONSOLIDATED STATEMENT OF CASH FLOWS

Changes in Consolidated Shareholders’ Equity Consolidated Statement of Cash Flows

Shareholders’ equity related to Parent Company’s shareholders (SEK million) Note 24 2008 2007 Other Retained Minority Total share- Operating activities (SEK million) Share capital paid-in capital Reserves earnings Total interest holders’ equity Operating income 2,117 2,602 Opening balance, January 1, 2007 500 12,557 354 –3,208 10,203 13 10,216 Adjustments for non-cash items 1,181 582 Dividends from associated companies 11 2 Change in translation reserve for the year 768 –158 610 610 Income tax paid –245 –114 Change in hedging reserve for the year 38 38 38 Cash fl ow from operating activities before change in working capital 3,064 3,072 Acquisition of minority 11 Changes in working capital Change in net worth recognized directly through equity 806 –158 648 1 649 Inventory (increase - / decrease +) –506 –274 Deposits ICA Bank (increase + / decrease -) 1,174 1,115 Net income for the year 2,167 2,167 –1 2,166 Short-term lending ICA Bank (increase - / decrease +) –376 –83 Total change in net worth before transactions Current receivables (increase - / decrease +) 191 –618 with company’s owners 806 2,009 2,815 0 2,815 Current liabilities (increase + / decrease -) 1,030 874 Cash fl ow from operating activities 4,577 4,086 Dividend –958 –958 –958 Investing activities Total change in net worth after transactions with company’s owners 806 1,051 1,857 0 1,857 Purchase of tangible and intangible fi xed assets –2,533 –2,858 Proceeds from sale of tangible and intangible fi xed assets 526 1,868

Closing balance, December 31, 2007 500 12,557 1,160 –2,157 12,060 13 12,073 Issuance of loans –73 –17 Loan repayments 19 735 Long-term lending ICA Bank (increase - / decrease +) –8 121

Opening balance, January 1, 2008 500 12,557 1,160 –2,157 12,060 13 12,073 Other fi nancial fi xed assets –289 0 Interest received 75 80 Purchase of operations Note 25 –4 2 Change in translation reserve for the year 34 34 34 Proceeds from sale of operations 4 0 Change in fair value reserve 40 40 40 Investment in associated companies –30 –2 Change in hedging reserve for the year 5 5 5 Change in net worth recognized directly Proceeds from sale of associated companies 15 through equity 79 79 79 Cash fl ow from investing activities –2,312 –66

Financing activities Net income for the year 1,735 1,735 –7 1,728 Proceeds from borrowings 507 859 Total change in net worth before transactions Repayment of borrowings –643 –3,066 with company’s owners Interest paid –241 –207 79 1,735 1,814 –7 1,807 Dividend paid –1,084 –958 Cash fl ow from fi nancing activities –1,461 –3,372 Dividend –1,084 –1,084 –1,084 Total change in net worth after transactions Cash fl ow of the year 804 648 with company’s owners 79 651 730 –7 723 Liquid assets at beginning of year 4,360 3,749 Exchange rate differences in liquid assets –62 –37 Closing balance, December 31, 2008 500 12,557 1,239 –1,506 12,790 6 12,796 Liquid assets at end of year 5,102 4,360

Consolidated Statement of Cash Flows, SEK million

2008 2007 –+ –+ From the income statement +3,064 +3,072 Inventory –506 –274 Short-term receivables, incl. deposits ICA Banken +989 +414 Short-term liabilities +1,030 +874

ICA ANNUAL REPORT 2008 Cash fl ow from operating activities +4,577 +4,086 ICA ANNUAL REPORT 2008

Sales of fi xed assets +531 +2,809 Investment in fi xed assets –2,856 –2,875 Long-term liabilities –364 –2,414 Dividend paid –1,084 –958 Cash fl ow of the year +804 +648 Graphics: Bonanza

52 53 SUPPLEMENTARY INFORMATION, THE GROUP SUPPLEMENTARY INFORMATION, THE GROUP

• Assets and liabilities including goodwill and consolidated surpluses and defi cits are Investment properties translated from the foreign operations’ functional currency to the Group’s reporting Properties used by the Group or leased to ICA retailers are reported as operating prop- currency, Swedish kronor, at the balance sheet date exchange rate. erties. Other properties, which are leased to third parties, are reported as investment • Revenue and expenses in foreign operations are translated to Swedish kronor at the properties. Investment properties are recognized at acquisition cost less accumulated average exchange rate for the period which in normal cases is a good approximation depreciation and any impairment. Depreciation is booked on a straight-line basis over of the transaction day rate. the estimated economic life of the assets to estimated residual value. Residual value and • All exchange rate differences that arise through translation are recognized directly in economic lives are reassessed at the close of each year and adjusted when necessary. shareholders’ equity as a translation reserve. Supplementary information, the Group Non-current assets held for sale When foreign operations are divested, the cumulative exchange rate differences are Assets are classifi ed as non-current assets held for sale if they are available for imme- recognized through profi t or loss together with the gain or loss on the sale. diate sale, a decision has been made to sell them and it is likely that a sale will be made Note 1 Accounting principles circumstances, the results of which form the basis of making the judgments about within 12 months. Non-current assets held for sale are valued when the reclassifi ca- carrying amounts of assets and liabilities that are not readily apparent from other Revenue tion is made, in accordance with IFRS 5, at the lower of book value and estimated sales sources. Actual results may differ from these estimates and judgments. Revenue is recognized when the signifi cant risks and benefi ts associated with owner- value less selling expenses. These consolidated accounts are prepared in accordance with the International Finan- ship of the goods have been transferred to the buyer and it is likely that the economic Discontinued operations are part of a company that has either been disposed of or cial Reporting Standards (IFRS) as adopted by the EU Commission and the interpreta- Consolidated accounts benefi ts will be accrued by the Group. Moreover, the revenue must be reliably estimat- is classifi ed as held for sale and: tions of the International Financial Reporting Interpretation Committee (IFRIC). RFR 1.1 The consolidated accounts comprise the Parent Company, ICA AB, and its subsidiar- ed. Wholesale sales meet these requirements upon delivery of the goods and retail • Represents a separate line of business or geographical area of operations; Supplementary Accounting Rules for Groups, issued by the Swedish Financial Report- ies. A subsidiary is included in the consolidated accounts as of the date the Parent sales when the customer pays at the store. Sales of alcoholic beverages are recog- • Is part of a coordinated plan to dispose of separate line of business or geographical ing Board, is applied as well. The recommendation contains supplementary standardi- Company secures a controlling infl uence over the company and is no longer included nized exclusive of selective purchase taxes. Revenue from franchise sales is recog- area of operations; zations based on the provisions of the Annual Accounts Act. as of the date the Parent Company’s controlling infl uence over the company ceases. nized upon delivery for goods and other franchise revenue. Rental revenue is recog- • Is a subsidiary acquired exclusively with a view to resale. The following standards and interpretations had been published but not yet en- The minority interest initially consists of the minority share of the fair value of the nized in the period to which it relates. tered into force at the time this annual report was approved: net assets and is recognized in shareholders’ equity separately from the Parent Com- Revenue from the sale of services includes royalties, franchise fees and revenue The classifi cation as discontinued operations is made upon a sale or an earlier date pany’s equity. The income or loss from the minority interest is recognized in the in- from various forms of consulting services. The revenue is recognized through profi t or when the operations meet the criteria to be classifi ed as held for sale. IFRS 1 First Time adoption of IFRS (revised 2008). (Not yet adopted by EU.) come statement separately from the Parent Company’s results as a portion of results loss as it is earned. As long as a non-current asset is classifi ed as held for sale, there is no depreciation. IFRS 3 Business Combinations (Revised 2008). (Not yet adopted by EU.) for the period. Revenue from property sales is recognized when the signifi cant risks and benefi ts IFRS 8 Operating Segments. (Adopted by EU.) The purchase accounting method is applied to the acquisition of subsidiaries. The associated with the property are transferred to the buyer. Depending on the terms of Depreciation and amortization IAS 1 (Revised), Presentation of Financial Statements. (Adopted by EU.) cost of an acquisition consists of the fair value on the acquisition date of the assets of- the sales contract and the requirements on its fulfi llment, the risks and benefi ts can Depreciation and amortization are calculated on the acquisition cost of the assets. IAS 23 Borrowing Costs. (Adopted by EU.) fered as consideration as well as new and assumed liabilities and direct purchase costs. be transferred to the buyer when the contract is signed, on the closing date or at any Depreciation and amortization schedules are based on estimated economic lives. An IAS 27 Consolidated and Separate Financial Statements. (Revised 2008). (Not yet Acquired identifi able assets, liabilities and contingent liabilities are valued at fair value. point in between. Normally these risks and benefi ts are transferred to the buyer on asset’s residual value and economic life are estimated annually. adopted by EU.) The difference between acquisition cost and fair value is recognized as goodwill. If the the closing date and the result of the sale is recognized at that point. The determina- Amendment to IAS 39 Financial Instruments: Recognition and Measurement: Eligible acquisition cost is less than the fair value of acquired identifi able assets, liabilities and tion whether the risks and benefi ts were transferred to the buyer takes into consider- Buildings 20–40 years Hedged Items. (Not yet adopted by EU.) contingent liabilities, the difference is recognized directly through profi t or loss. ation the further management of the property. If there is still an obligation on the Investment properties 20–40 years Amendment to IFRS 1 First time adoption of IFRS and IAS 27 Cost of an Investment in In incremental acquisitions, each transaction is treated individually. Goodwill is de- Group’s part, no result from the sale is recognized until the obligation has ceased. Leasehold improvements 6–20 years a Subsidiary, jointly controlled entity or associate. (Adopted by EU.) termined for each acquisition based on fair value on the transaction date and the con- Dividends are recognized through profi t or loss when the right to receive payment Store equipment and trucks 7–10 years Amendments to IAS 32 and IAS 1 Puttable Financial Instruments and Obligations Aris- sideration paid for the acquisition. Changes in the fair value of shares that had already has been determined. IT systems 3–5 years ing on Liquidation. (Adopted by EU.) been owned are recognized as a revaluation in shareholders’ equity. Other equipment 3–10 years Improvements to IFRSs. (Adopted by EU.) For all units included in the consolidated accounts, uniform accounting principles Sale and leaseback are applied. This also applies to companies reported according to the equity method. In cases where a property has been sold and then leased back, an overall assessment is Impairment Amendment to IFRS 2 Share-Based Payment: Vesting Conditions and Cancellations. All intra-Group transactions are eliminated. made of who controls the signifi cant risks and benefi ts associated with the property and The carrying amount of fi xed assets is tested for impairment when events or other cir- (Adopted by EU.) whether the Group has retained a controlling interest in the property. A controlling inter- cumstances indicate that the carrying amount may not be recovered. In the test, the IFRIC 13 Customer Loyalty Programmes. (Adopted by EU.) Investments in associated companies est exists, for example, if a leaseback property is leased to an independent ICA retailer. carrying amount is compared with the higher of the asset’s fair value less selling ex- IFRIC 15 Agreements for the Construction of Real Estate. (Not yet adopted by EU.) Holdings in associated companies are reported according to the equity method. An as- If the assessment shows that the signifi cant risks and benefi ts as a whole remain in penses and its value in use. Value in use consists of the present value of the future net IFRIC 16 Hedges of a Net Investment in a Foreign Operation. (Not yet adopted by EU.) sociated company is a unit in which the Group has a signifi cant but not controlling infl u- the Group, revenue from the sale is not recognized on the transaction date, but rather cash fl ow the asset generates. If a single asset does not generate a cash fl ow inde- IFRIC 17 Distributions of Non-cash Assets to Owners. (Not yet adopted by EU.) ence. Application of the equity method means that investments in associated compa- when the interest ceases and the risks and benefi ts are transferred to the buyer. pendent of other assets, cash fl ow is calculated for the group of assets, i.e., a cash-gen- nies are recognized in the balance sheet at cost plus any changes in the Group’s share If the risks and benefi ts are retained by the Group, or it retains an interest in the erating unit. The value in use calculation of future net cash fl ows uses a discounting IFRS 8 replaces IAS 14 Segment Reporting and will be applied as of 2009. The real es- of the associated company’s net assets less any impairments and dividends. The in- property, the Group continues to recognize the property in the balance sheet as if no factor before tax that refl ects the market’s current estimate of the time value of mon- tate operations in Sweden and Norway, which are now reported in the segments ICA come statement refl ects the Group’s share of associated companies’ income after tax. sale had taken place and it is still depreciated based on its estimated useful life. The ey and the risks associated with the asset. If the carrying amount exceeds the higher Sverige and ICA Norge, will be reported as a separate segment in 2009. If the Group’s share of recognized losses in the associated company exceeds the proceeds received from the sale are treated as a loan and recognized as a liability. of the asset’s net realizable value and value in use, the asset is written down to the Of the interpretations, only IFRIC 13 and IFRIC 15 affect ICA’s operations. carrying amount of the shares in the Group, the value of the shares is reduced to zero. Leasing fees are split between interest expenses and amortization of the liability. The higher of its net realizable value and value in use. The bonuses ICA offer its customers based on qualifying purchases are impacted Additional losses are not recognized, provided the Group has not issued any guaran- property and the liability are removed from the balance sheet when the interest ceas- Goodwill, assets with an indefi nite economic life and intangible assets that are not by IFRIC 13. The application of IFRIC 13 will not affect the fi nancial reports to a signifi - tees to cover losses in the associated company. es, e.g., when the operations of an independent ICA retailer are acquired by ICA or the yet taken in use are tested annually for impairment. Testing for impairment can take cant degree. IFRIC 13 is effective from 2009. The difference between the acquisition cost of the acquired shares and the fair val- store closes. place more often when events or other circumstances indicate a decrease in value As regards IFRIC 15, ICA’s application, when an agreement is signed to build a prop- ue of the Group’s share of the identifi able assets and liabilities in the associate is ac- In cases where ICA has retained a commitment as only part of a property is leased to during the year. erty for sale, has corresponded to the application according to IFRIC 15. This means counted as goodwill (surplus) or in case of a negative difference (defi cit) is recognized an independent ICA retailer, only this portion continues to be reported on the balance Impairment losses are recognized through profi t or loss if the recoverable amount that ICA has determined the property’s principal shape and design. Revenue from the directly through profi t or loss. The Group’s investments in associated companies com- sheet. The portion of the property that is not sublet is considered to have been sold. is lower than the asset’s book value. Impairment losses can be reversed if the assump- sale has been recognized the fi rst day that the buyer assumed the risk for the property prise goodwill, which is dealt with in accordance with the accounting principles for tions used in the calculation that led to the original impairment have changed. Impair- and ICA received payment. goodwill described below. Impairment testing is conducted on reported shares in as- Goodwill and trademarks ment reversal is limited to the depreciated amount that would have been recognized sociated companies when there are indications of diminished value. Accounting principles applied Goodwill represents the portion of the acquisition cost exceeding the fair value of the had the original impairment not occurred. Reversal of impairment is recognized In transactions between Group companies and associated companies, the portion acquired share of the subsidiary’s net assets on the acquisition date. Net assets refer through profi t or loss. Impairment of goodwill is not reversed. Changes in accounting principles of unrealized gains corresponding to the Group’s share of the associated company is to the difference between identifi able assets, liabilities and any contingent liabilities in The amendment to IAS 39 and IFRS 7 allowing reclassifi cations of fi nancial instru- eliminated. Unrealized losses are eliminated correspondingly as long as there is no in- an acquired subsidiary, associated company or joint venture. In accordance with IFRS Inventory ments under certain circumstances has not had any impact on the fi nancial reports. dication of impairment. 3, it is assumed that the goodwill has an indefi nite useful life. Intangible assets with an Inventory is valued at the lower of acquisition cost and net realizable value. Acquisi- None of the interpretations effective from 2008 impacts ICAs fi nancial reports. indefi nite economic life are not amortized. Goodwill is recognized at acquisition cost tion cost is determined using the fi rst-in, fi rst-out (FIFO) method. Acquisition cost con- The interpretations are IFRIC 11: IFRS 2 Group and Treasury Share Transactions, IFRIC 12 Investments in joint ventures less any accumulated impairment. sists of all purchase costs after deducting supplier allowances related to products in Service Concession Arrangements, and IFRIC 14: IAS 19- The Limit on a Defi ned Benefi t A joint venture is a contractual arrangement whereby two or more parties undertake The goodwill arising from business acquisitions is attributed at the time of the ac- stock. Asset, Minimum Funding Requirements and Their Interaction. an economic activity subject to joint control. ICA reports joint ventures according to quisition to the cash-generating units that benefi t from the acquisition. Net realizable value corresponds to the estimated sales price under normal condi- the equity method. Trademarks have an indefi nite useful life. Impairment testing is conducted annually tions less estimated costs to fi nish the product and the costs required to make the sale. Basis of accounting In transactions between Group companies and joint ventures, the portion of unre- or when there is an indication of diminished value. ICA receives supplier allowances in form of discounts and other types of payments The consolidated accounts are based on historical acquisition costs, with the excep- alized gains corresponding to the Group’s share of the jointly controlled company is that effectively reduce the company’s purchase cost from suppliers or costs for sales- tion of fi nancial derivatives and certain fi nancial assets, which are recognized at fair eliminated. Unrealized losses are eliminated correspondingly as long as there is no in- Other intangible assets promotion activities performed by ICA to the benefi t of the supplier. value. The Parent Company’s functional currency is Swedish kronor, which is also the dication of impairment. Other intangible assets are recognized in the balance sheet at acquisition cost less ac- ICA ANNUAL REPORT 2008 reporting currency for the Parent Company and the Group. All amounts in the fi nan- ICA ANNUAL REPORT 2008 cumulated amortization and impairment losses. Amortization is booked on a straight- Financial instruments cial statements are in millions of Swedish kronor (SEK) unless indicated otherwise. Transactions in foreign currency line basis over the estimated economic life of the assets. Financial instruments are initially recognized at cost. This corresponds to fair value in- Non-current assets and disposal groups held for sale are recognized at the lower of Transactions in foreign currency are translated to the functional currency at the ex- cluding transaction costs for all fi nancial instruments, except in the case of the cate- their previous carrying amount and fair value after deducting selling expenses. change rate on the transaction date. Monetary assets and liabilities expressed in for- Tangible fi xed assets gory fi nancial assets at fair value through profi t or loss, which are recognized exclud- The preparation of the fi nancial statements in conformity with IFRS requires that eign currency are translated to the functional currency at the exchange rate on the Tangible fi xed assets are recognized at acquisition cost less accumulated depreciation ing transaction costs. The subsequent recognition depends on the categorization management make use of judgments, estimates and assumptions that affect the ap- balance sheet date. Exchange rate differences are recognized through profi t or loss. and any impairment. Acquisition cost includes the acquisition price and direct expens- according to IAS 39. plication of the accounting principles and the carrying amounts in the income state- Non-monetary assets and liabilities are recognized at historical acquisition costs es. The cost of tangible fi xed assets is depreciated to estimated residual value. Depreci- A fi nancial asset or fi nancial liability is recognized in the balance sheet when the ment and the balance sheet. Estimates and assumptions are based on historical expe- translated at the exchange rate on the transaction date. All Group companies with a ation is booked on a straight-line basis over the estimated economic life of the assets. company becomes a party to the instrument’s contractual conditions. A fi nancial rience and various other factors that are believed to be reasonable under the functional currency other than the reporting currency are restated as follows:

54 55 SUPPLEMENTARY INFORMATION, THE GROUP SUPPLEMENTARY INFORMATION, THE GROUP

Note 1, cont. Netting of fi nancial assets and liabilities ICA as lessee Important assumptions and estimates Financial assets and liabilities are offset and recognized net in the balance sheet when Leasing fees for operating leases are recognized through profi t or loss and divided on The consolidated accounts are based on various assumptions and estimates made by asset is removed from the balance sheet when the rights in the agreement are real- there is a legal right of set-off and when the intent is to settle the items with a net a straight-line basis over the life of the lease. Signifi cant fi nance leases are recognized the Board of Directors. These assumptions affect the carrying amounts of assets and ized, expire or the company loses control over them. In cases where a fi nancial asset is amount or to realize the asset and settle the liability at the same time. as fi xed assets and liabilities in the balance sheet, while in the income statement the liabilities, of income and expenses, and of pledged assets and contingent liabilities. Es- sold but ICA retains the risks associated with the asset, the asset is still recognized on depreciation is recognized as an operating expense. Assets are depreciated over their timates may deviate from future results. The assumptions and estimates that the the balance sheet. A fi nancial liability is removed from the balance sheet when the ob- Interest lease term or estimated useful life, whichever is shorter. Leasing fees are split between Board of Directors feels are most important and where there is the greatest risk of fu- ligation in the agreement is fulfi lled or otherwise relieved. Interest income is recognized as it is earned. Interest income is calculated on the basis interest and amortization. ture changes in the values of assets and liabilities are as follows: Purchases and sales of fi nancial assets are recognized on the trade date, i.e., the of the underlying asset’s yield according to the effective interest rate. Loan expenses date on which ICA commits to buy or sell the asset. However, in cases where ICA pur- and interest are recognized in profi t or loss in the period to which they are attributa- ICA as lessor Sale and leasebacks chases or sells listed securities, settlement date accounting is applied. ble. Interest expenses associated with new construction or major renovations or addi- Assets subject to a fi nance lease are recognized in the balance sheet as a receivable at The Group sells store properties, which in some cases are leased back and sublet to Offi cial market quotes on the balance sheet date are used to determine the fair val- tions are capitalized as part of the production cost of the fi xed asset. an amount equal to the net investment as per the lease. Lease payments received are the ICA retailer. ICA has determined that the signifi cant risks and benefi ts in such sale ue of listed fi nancial assets. Unlisted fi nancial assets are valued using generally accept- recognized as amortization of the receivable or fi nancial income. This income is allo- and leaseback arrangements are retained by the Group. The combined transaction is ed methods such as the discounting of future cash fl ows to the listed market interest Liquid assets cated based on a pattern refl ecting a constant periodic return over the lease term. therefore treated as fi nancing and as such, the properties continue to be recognized in rate for each maturity. Listed exchange rates on the balance sheet date are used in the Liquid assets comprise cash, bank balances and other short-term investments, includ- Assets subject to an operating lease are presented according to the nature of the the consolidated balance sheet and depreciation continues over their estimated use- translation to Swedish kronor. ing ICA Banken’s short-term investments. In the balance sheet, overdraft facilities are asset. Lease revenue from operating leases is recognized in income on a straight-line ful life. In cases where only a portion of a property is sublet, this proportion alone con- On each balance sheet date ICA assesses whether there are objective indications recognized as borrowings among current liabilities. basis over the lease term. Direct costs incurred at the start of the lease are expensed tinues to be reported in the Group. The remainder is considered sold. that a fi nancial asset is impaired. Accounts receivable are recognized at the amount on a straight-line basis over the lease term. Proceeds received are accounted as a long-term liability, while the lease fee is split that is expected to be received after deducting impaired loans, which are evaluated in- Classifi cation between interest expenses and amortization of the liability. Various later events, such dividually. Non-current assets and long-term liabilities are expected to be realized or paid more Income tax as the assumption of the external lease by ICA or the termination of the lease, means than twelve months after the balance sheet date. Current assets and current liabilities Income taxes consist of current and deferred tax. Income taxes are recognized that the signifi cant risks and benefi ts be considered to have left ICA. At that point, the Financial assets at fair value through profi t or loss are expected to be realized or paid within twelve months of the balance sheet date. through profi t or loss except when the underlying transaction is recognized directly properties and liability are removed from the consolidated balance sheet and the net This category has two sub-categories: fi nancial assets held for trading and other fi nan- against shareholders’ equity, while the associated tax is recognized in shareholders’ effect is recognized through profi t or loss. cial assets the company has designated to this category. A fi nancial asset is classifi ed Provisions equity. as held for trading if the purpose is to sell the asset in the short term. Derivatives fall Provisions are recognized in the balance sheet when the Group has a legal or informal Current tax is tax that will be paid or received in the current year. This includes ad- Impairment of fi xed assets into this category, unless used for hedge accounting. Assets in this category are car- obligation resulting from an event that has occurred and it is likely that an outfl ow of justments in current tax attributable to previous periods. The determination whether a fi xed asset has been impaired or not requires an assess- ried at fair value with changes in value recognized through profi t or loss. resources associated with the economic benefi ts will be required to fulfi ll the obliga- Deferred tax is recognized in accordance with the balance sheet method, which is ment of its recoverable value. Recoverable value is the higher of the asset’s value in tion and the amount can be reliably estimated. If the effect of the time value of the fu- based on temporary differences between the recognized and taxable values of assets use and fair value less selling expenses. The calculation of value in use requires esti- Held-to-maturity investments ture payment is considered signifi cant, the value of the provision is determined by es- and liabilities. The following temporary differences are not taken into account: tem- mates of future cash fl ows and discount rates. Such estimates always entail a certain This category comprises fi nancial assets with fi xed or determinable payments and timating the present value of the expected future cash fl ow with a discounting factor porary differences that arise in the fi rst-time reporting of goodwill, the fi rst-time re- degree of uncertainty. In the current market, with large, rapid changes in interest rates, fi xed maturities which ICA intends and is able to hold to maturity. They are valued at (before tax) that refl ects the market’s current valuation of the time value. The gradual porting of assets and liabilities from a transaction other than a business acquisition exchange rates and commodity prices, forward-looking estimates carry an even great- amortized cost based on the effective interest rate calculated on the acquisition date. increase in the allocated amount necessitated by the present value calculation is rec- and which, at the time of the transaction, affects neither the recognized nor taxable er degree of uncertainty than under normal conditions. In cases where the risk is con- Premiums and discounts as well as transaction costs are accrued over the maturity of ognized as an interest expense through profi t or loss. Provisions are tested at the close gain or loss, and temporary differences attributable to shares in subsidiaries, associat- sidered to be higher than normal for a tested fi xed asset or group of fi xed assets, an the instrument. of each year. ed companies and joint ventures not expected to be reversed in the foreseeable fu- additional risk component has been added to the impairment test. Should the actual Provisions for restructuring are recognized when the Group has established a de- ture. The valuation of deferred tax is based on how the carrying amounts of assets outcome in the year ahead deviate from the anticipated outcome for the period ac- Loans and receivables tailed, formal restructuring plan and the restructuring has either begun or been public- and liabilities are expected to be realized or settled. Deferred tax is calculated applying cording to the test, anticipated future cash fl ows may have to be retested, which could This category comprises assets with fi xed or determinable payments that are not ly announced. the tax laws and tax rates in effect or essentially in effect on the balance sheet date. lead to an impairment. quoted on an active market and are not derivatives. Assets in this category are valued A provision for contract losses is recognized when the benefi ts the Group expects Deferred tax assets are recognized for all deductible temporary differences and un- at amortized cost, which is determined based on the effective interest rate calculated to receive from a contract are lower than the unavoidable costs to fulfi ll the contract’s utilized tax loss carryforwards to the extent it is likely that future taxable gains will be Pensions on the acquisition date. Receivables with short maturities, such as accounts receiva- obligations. available. The carrying amounts for deferred tax assets are tested on each balance The calculation of defi ned-benefi t pensions requires assumptions with regard to fu- ble, are valued at nominal amounts. Provisions for disputes are made if the general assessment is that it is more than 50 sheet date and reduced to the extent it is no longer likely that they can be utilized. ture payroll and interest rates. Because of the long maturity of the pensions in these percent likely that ICA will lose the dispute. A provision is allocated in the amount con- plans, the uncertainty of these assumptions is high and may necessitate corrections in Available-for-sale fi nancial assets sidered to be the most likely outcome. Segment reporting the future that affect future liabilities and expenses. This category comprises assets that not classifi ed in any of the other categories or A segment is a distinguishable component of the Group that provides goods and serv- those that ICA has designated to this category. Assets are carried at fair value with Contingent liabilities ices (operating area) within a particular economic environment (geographical area) and Damages and provisions changes in value recognized through equity. When the asset is removed from the bal- A contingent liability is recognized when there is a possible obligation attributable to that is subject to the risks and returns that differ from other segments. For ICA, business If ICA AB or its subsidiaries are involved in a dispute, an assessment is made of the ance sheet, the previously recognized result is transferred from equity to profi t or loss. past events and whose existence is confi rmed only by one or more uncertain future areas are considered its primary segments and countries its secondary segments. most likely outcome. The assessment is based on known facts and statements from events, or when there is an obligation but it is not probable that payment will be re- internal and external experts. The assessment of the outcome of the dispute can Financial liabilities at fair value through profi t or loss quired. change over time and consequently affect the fi nancial reports. This category includes two sub-categories: fi nancial liabilities held for trading and oth- er fi nancial liabilities the company has designated to this category. Derivatives fall into Pensions and other post-employment benefi ts this category, unless used for hedge accounting. Assets in this category are carried at The Group has both defi ned-contribution and defi ned-benefi t pension plans. In the Note 2 Segment reporting fair value with changes in value recognized through profi t or loss. latter, the company bears the risk for the benefi ts as agreed to. In a defi ned-contribu- tion plan, the company does not have any obligation beyond paying the contractual The Group’s operations are divided into the following business areas: ICA Sweden, ICA All internal transactions are based on market prices. Shared Group Other fi nancial liabilities fees to the plan. Norway, Rimi Baltic and ICA Bank. ICA Sweden, ICA Norway and Rimi Baltic relate to expenses are distributed based on store sales in the varions segments. This category comprises all other fi nancial liabilities. They are valued at amortized Fees for defi ned-contribution plans are recognized as a cost through profi t or loss retail and wholesale operations in each geographical region. ICA Bank conducts bank- cost based on the effective interest rate calculated when the liability was recognized. as the right is vested. ing operations. Liabilities with short maturities, such as accounts payable, are valued at nominal The Group’s obligation with respect to defi ned-benefi t pension plans is calculated amounts. Premiums and discounts as well as direct issue costs are accrued over the separately for each plan annually. The calculation is an estimate of the present value ICA Sweden ICA Norway Rimi Baltic ICA Bank maturity of the liability. of future entitlements that employees have earned through service to the company. The fair value of plan assets is deducted from the present value of the pension obliga- 2008 2007 2008 2007 2008 2007 2008 2007 Derivatives tion. The calculation is based on a number of assumptions. The discount rate is the in- External net sales 56,706 51,243 20,293 19,095 12,661 10,736 582 517 All derivatives are recognized at fair value in the balance sheet. For derivatives not re- terest rate on the balance sheet date for government bonds with a maturity corre- Internal net sales 179195–––––– ported as hedges and those included in a fair value hedge, changes in value are recog- sponding to that of the obligation. The calculation is performed by a qualifi ed actuary nized through profi t or loss. For derivatives that meet the requirements for cash fl ow using the so-called projected unit credit method. Share of associated companies’ net profi t00–820–––– hedges, the effective share of changes in value is recognized in equity until the hedged Actuarial gains and losses arise either as a result of a difference between an as- Operating income 2,644 2,372 –520 144 182 92 111 83 item is recognized through profi t or loss or as an initial cost in the balance sheet. For sumption and the actual outcome or because an assumption has changed. For actuar- derivatives that do not meet the requirements for cash fl ow hedges and for the inef- ial gains and losses arising after the transition date for IFRS, January 1, 2004, the so- Assets 16,722 15,516 8,717 9,148 7,749 6,158 9,727 8,408 fective share of derivatives that meets the requirements for cash fl ow hedges, chang- called corridor rule is applied. This means that when the cumulative actuarial gain or Liabilities incl. provisions 13,653 12,912 5,105 4,763 6,345 5,339 9,022 7,777 es in value are recognized through profi t or loss as a fi nancial result. The amount in the loss exceeds a limit corresponding to 10% of the greater of the present value of the hedging reserve related to interest risk is recognized through profi t or loss as the de- commitment and the fair value of plan assets, the net gain or loss is recognized over rivative’s value declines toward zero. the employees’ expected remaining working lives. Investments in fi xed assets 1,010 821 929 823 774 24 31 ICA ANNUAL REPORT 2008 ICA ANNUAL REPORT 2008 When there is a difference between how the pension cost is determined in a legal Depreciation/amortization 461 418 632 608 301 276 18 32 ICA Banken’s receivables and liabilities entity and the Group, a provision or receivable is recognized for the special employer’s Impairment losses 0 1 40 14 80 8 – – ICA Banken’s lending in the form of unsecured and card credits to consumers is in- contribution based on this difference. No present value calculation is made for the Other non-cash items –373 –387 –66 –343 –2 –5 – – cluded in the category loans and receivables. It is recognized at amortized cost on the provision or receivable. Average number of employees 5,208 5,107 4,826 4,348 9,870 8,221 234 196 settlement date and subsequently after taking into account established and anticipat- ed credit losses. Leasing ICA Banken’s deposits are included in the category other fi nancial liabilities. Invest- Leases are classifi ed in the Group as either operating or fi nance. In a fi nance lease, es- ments of ICA Banken’s surplus liquidity are included in the category available-for-sale sentially all economic risks and benefi ts associated with ownership are transferred fi nancial assets. from the lessor to the lessee. All other leases are operating.

56 57 SUPPLEMENTARY INFORMATION, THE GROUP SUPPLEMENTARY INFORMATION, THE GROUP

Note 2, cont. Note 6 Audit expenses Contractual leasing expenses under existing agreements fall due for payment as follows: Corporate Eliminations Tot a l 2008 2007 2008 2007 2008 2007 2008 2007 2008 2007 The year’s leasing expense 2,934 2,703 Audit fees: External net sales 721 735 90,963 82,326 Of which minimum leasing fees 2,748 2,545 Deloitte 17 19 Internal net sales 500 451 –679 –646 0 0 Of which variable fees 185 158 Other audit fi rms 4 4 Share of associated companies’ net profi t00 –820 Total 21 23 Operating income –300 –89 2,117 2,602 The year’s leasing revenue from sublet assets –1,371 –991

Consulting fees: Assets 21,344 20,083 –24,290 –21,994 39,969 37,319 Future contractual minimum leasing fees: Deloitte 1 0 Liabilities incl. provisions 9,368 8,542 –16,320 –14,087 27,173 25,246 Maturity date within 1 year 3,272 2,557 Other audit fi rms 7 3 Between 1–5 years 10,119 7,920

Investments in fi xed assets 52 114 2,533 2,858 Later than 5 years 7,864 6,195 Total 21,255 16,672 Depreciation/amortization 104 121 1,516 1,455 Impairment losses – – 120 23 Note 7 Other operating revenue Other non-cash items 17 –5 –424 –740 Future minimum leasing fees for contracts on sublet assets 4,732 5,038 Average number of employees 1,885 2,209 22,023 20,081 2008 2007 ICA as lessor Profi t shares and share dividends 136 150 The Group leases out buildings and equipment. Rents are fi xed, although variable Net sales Operating income Assets Investments in fi xed assets Capital gains 325 603 rents based on revenues do occur. Leasing fees are contracted over an average lease Country 2008 2007 2008 2007 2008 2007 2008 2007 Total 461 753 period of 10 years. Rents change in accordance with index clauses. Contractual leasing expenses under existing agreements fall due for payment as Sweden 58,009 52,495 2,466 2,353 23,268 21,666 890 1,145 follows: Norway 20,293 19,095 -531 157 8,952 9,495 820 939 Baltic countries 12,661 10,736 182 92 7,749 6,158 823 774 Note 8 Leases Future contractual minimum leasing fees: 2008 2007 Total 90,963 82,326 2,117 2,602 39,969 37,319 2,533 2,858 Maturity date within 1 year 526 466 Finance leases Between 1-5 years 1,877 1,477 ICA as lessor Later than 5 years 1,009 728 Present value of mini- Total 3,412 2,671 Note 3 , Minimum leasing fees mum leasing fees Net sales by revenue source Salaries and other remuneration to Board, Receivables related to fi nance leases Variable fees included in results 447 470 President and EVP 2008 2007 with ICA as lessor. 2008 2007 2008 2007 2008 2007 Salaries and similar remuneration 72 42 Maturity date within 1 year 71 100 68 95 Wholesale sales 46,701 43,775 Cost of pensions and similar remuneration 20 12 Maturity date later than 1 year but Retail sales 38,127 32,891 within 5 years 107 152 98 129 Of the salaries and other remuneration, 7 (9) relates to bonuses. Rental revenue 1,973 1,758 Maturity date later than 5 years – 1 – 1 Note 9 Exchange rate differences in The group is comprised of 18 (17) persons who make up the Group’s Management Net interest income and commissions, ICA Bank 582 517 Total 178 253 166 225 and Board. operating income Other services for ICA retailers and franchisees 3,580 3,385 Salaries and other remuneration include severance of 27. Pensions and similar re- Less: Unearned interest –12 –28 Net sales 90,963 82,326 muneration include severance of six. Severance relates to three persons. Present value of minimum Purchases of goods and services in foreign currency have produced exchange rate dif- leasing fees 166 225 ferences on the following levels of operating income. Gender distribution of Board of Directors and Management 2008 2007 2008 2007 Board of Directors Receivables are recognized in the Net sales –2 1 Note 4 Expenses by type of expense Men 31 28 following items: Cost of sales 5 –13 Women 15 13 Long-term receivables 98 130 2008 2007 Total 46 41 Other current receivables 68 95 Administrative expenses –2 2 Cost of sales 69,242 62,772 Total 1 –10 Personnel expenses 8,099 7,236 Management ICA has previously entered into fi nance leases on store equipment. No new leases are signed as of 2007. The average lease period is 2.0 years (2.5). Interest is variable with an Administration charges 2,547 2,008 Men 62 70 average rate of 3.8 percent (5.8). Variable fees included in income for the period Cost of premises 3,261 2,885 Women 22 29 amount to SEK 0 million (0). Note 10 Net fi nancial items Depreciation/amortization 1,636 1,478 Total 84 99 The non-guaranteed carrying amount of assets under fi nance leases as of Decem- Other expenses 4,514 4,118 ber 31, 2008 is estimated at SEK 0 million (0). 2008 2007 Total expenses 89,299 80,497 Benefi ts to Senior Executives The fair value of receivables with respect to fi nance leases as of December 31, 2008 Financial income No fees were paid to the Board members elected by the Annual General Meeting. Em- is estimated at SEK 166 million (225), based on the estimated present value of anticipat- ployee representatives received a fee of SEK 4,000 per meeting, prior to which Board ed cash fl ows. Interest income 79 107 Note 5 members received background material with decision points on the agenda. Market valuation of fi nancial derivatives – 4 Personnel expenses, pensions, etc. Operating leases The salary paid to the company’s President amounted to SEK 9 million (11) during Exchange rate differences 16 4 the year, including a bonus of SEK 3 million (5). The employment contract of the Presi- ICA as lessee Average number of employees Financial income 95 115 dent of the Parent Company stipulates a 12-month term and severance pay for two The Group leases buildings and equipment. Lease fees are agreed to over an average The number of employees is calculated on the basis of the Group’s measure of normal years if terminated by the company. If the President resigns, the term of notice is six period of 10 years. Rents change in accordance with index clauses. Options are availa- working hours (1,800 hours). months. The President is entitled to receive pension benefi ts from age 60. The compa- ble to extend the leases beyond the current term. Financial expenses ny covers the obligation by annually paying pension premiums to insurance compa- Interest expenses –402 –435 2008 2007 nies corresponding to 35 percent of the President’s salary. The Group does not have Market valuation of fi nancial derivatives –16 – Women Men Total Women Men Total other post-employment obligations to the President. Financial expenses –418 –435 ICA ANNUAL REPORT 2008 Sweden 2,836 4,093 6,929 2,823 4,194 7,017 ICA ANNUAL REPORT 2008 Norway 2,829 2,351 5,180 2,551 2,292 4,843 ICA Bank’s interest income and interest expenses are recognized in the ICA Group’s Baltic countries 8,406 1,464 9,870 7,167 1,054 8,221 operating income. HongKong251944––– Total 14,096 7,927 22,023 12,541 7,540 20,081

58 59 SUPPLEMENTARY INFORMATION, THE GROUP SUPPLEMENTARY INFORMATION, THE GROUP

Note 11 The Group has no unreported deferred tax liabilities or tax assets on temporary differ- Goodwill is distributed among the cash-generating units that are expected to benefi t an indication of impairment loss. The recoverable amount for each trademark is deter- Taxes ences. Capitalized tax assets primarily refer to the Norwegian operations and are ex- from the acquisition. The lowest level it is distributed to is the one monitored in internal mined based on calculations of value in use. The calculations are based on the estimated pected to be offset against future earnings. This assumption is based on the current controls in the Group, and the highest level is segments. Goodwill impairment tests are future cash fl ow in budgets and forecasts for the upcoming three years. Cash fl ows be- Current tax 2008 2007 business plan and the activities that have been implemented and will be implemented conducted annually and when there is an indication of impairment loss. The recoverable yond this period are extrapolated based on anticipated infl ation. In no case does real Current tax on net income for the year –310 –257 to restore profi tability to the Norwegian operations. amount for a cash-generating unit is determined based on calculations of value in use. growth exceed 3 percent. The need for working capital is expected to remain at the same The calculations are based on the estimated future cash fl ow in budgets and forecasts relative level as in year 3. The discount rate is 10.2–11.2 percent before tax depending on Deferred tax on temporary differences 244 141 Change in deferred tax in temporary differences and tax loss carryforwards for the upcoming two to fi ve years. Cash fl ows beyond this period are extrapolated at an the country the trademark is attributable to. Reported tax expense –66 –116 Recog- Business exchange rate based on infl ation. Real growth in no case exceeds 3 percent. The need for Impairment testing of other intangible assets The tax rate for companies in Sweden will be reduced from 28.0% to 26.3% in 2009. nized Recog- acquisi- working capital is expected to remain at the same relative level as in at the end of the Balance, through nized tion/ Balance, forecastperiod. The discount rate is 9.5 percent before tax for ICA Norway and 11.2 per- For intangible assets other than goodwill and trademarks, a recoverable amount is deter- Reconciliation between current tax rate and effective tax (%) 2008 2007 Jan. 1, profi t or through divest- Dec. 31, cent before tax for Rimi Baltic. mined when there is an indication that the asset has decreased in value. During the year, no circumstances occurred that would motivate impairment testing. Current tax rate, % 28.0 28.0 2007 loss equity ment 2007 Impairment testing of trademarks Non-deductible expenses and tax-exempt income –22.8 –17.0 Fixed assets –79 –18 –97 Trademarks attributable to the acquisition of Rimi Baltic are distributed by country and Result from associated companies’ net income 0.1 –0.2 Inventory 6 1 7 store format. Impairment testing of trademarks is conducted annually and when there is Effect of changed tax rate on reported deferred tax –1.7 – Provisions –66 64 –2 Other 0.1 –5.7 Tax loss carryforwards 96 65 161 Effective tax rate 3.7 5.1 Untaxed reserves –413 2 –411 Note 13 Tangible fi xed assets Financial derivatives –11 3 –8 Reported deferred tax assets and tax liabilities 2008 2007 Total –467 114 3 – –350 Investment Leasehold Construction Total tangible Fixed assets –133 –97 Buildings and land properties improvements Equipment in progress fi xed assets Recog- Business Inventory 16 7 2008 2007 2008 2007 2008 2007 2008 2007 2008 2007 2008 2007 nized Recog- acquisi- Provisions –10 –2 Balance, through nized tion/ Balance, Accumulated acquisition cost 12,126 11,592 1,495 1,584 1,544 1,275 8,300 8,384 922 581 24,387 23,416 Tax loss carryforwards 341 161 Jan. 1, profi t or through divest- Dec. 31, Accumulated depreciation –2,492 –2,217 –285 –288 –730 –584 –5,038 –5,170 – – –8,545 –8,259 Untaxed reserves –381 –411 2008 loss equity ment 2008 Accumulated impairment losses –115 –54 –97 –108 –13 –12 –69 –23 –4 –1 –298 –198 Financial derivatives –6 –8 Fixed assets –97 10 –46 –133 Book value 9,519 9,321 1,113 1,188 801 679 3,193 3,191 918 580 15,544 14,959 Total deferred tax assets (+)/deferred tax liabilities (–), net –173 –350 Inventory 7 9 16 As reported in balance sheet: Provisions –2 –8 –10 Opening balance 9,321 8,148 1,188 997 679 564 3,191 2,833 580 690 14,959 13,232 Deferred tax assets 424 276 Tax loss carryforwards 161 198 –18 341 Investments 728 1,334 88 142 292 163 1,086 1,233 299 201 2,493 3,073 Deferred tax liabilities –597 –626 Untaxed reserves –411 32 –2 –381 Company acquisitions 000000356––356 Financial derivatives –8 3 –1 –6 Sales/disposals –513 –225 –77 –66 –16 –8 –130 –66 –1 –101 –737 –466 Total –350 244 –65 –2 –173 Reclassifi cations 191 150 25 69 34 46 –34 –89 –4 –230 212 –54 Depreciation for the year –332 –311 –34 –37 –164 –124 –873 –851 – – –1,403 –1,323 Tax assets are denoted by (+) and tax liabilities by (–) in the table above. Impairment losses for the year –62 –4 0 0 –2 –1 –52 –15 –4 –1 –120 –21 Note 12 Intangible fi xed assets Exchange rate difference for the year 186 229 –77 83 –22 39 –30 140 48 21 105 512 Book value 9,519 9,321 1,113 1,188 801 679 3,193 3,191 918 580 15,544 14,959 Total Goodwill Trademarks IT systems Other intangible fi xed assets

2008 2007 2008 2007 2008 2007 2008 2007 2008 2007 Accumulated acquisition cost 2,738 2,688 812 702 672 575 321 268 4,543 4,233 Buildings and land Investment properties Note 14 Accumulated amortization –568 –460 –218 –157 –786 –617 Tax assessment value of Shares in joint ventures, associated Accumulated impairment losses –15 –15 – – 0 –1 0 –1 –15 –17 Swedish properties 2008 2007 2008 2007 companies and subsidiaries Book value 2,723 2,673 812 702 104 114 103 110 3,742 3,599 Land 640 682 8 10 Buildings 3,210 3,128 16 6 Joint ventures Opening balance 2,673 2,499 702 672 114 143 110 133 3,599 3,447 Total 3,850 3,810 24 16 Carrying amount, joint ventures 2008 2007 Investments 5 0 2 0 34 50 47 25 88 75 Carrying amount, opening balance 0 46 Company acquisitions 000000150150 Impairment losses: Reclassifi cation – –46 The global economic slowdown has reduced demand for real estate, including land Sales/disposals 000000–20–20 Carrying amount, closing balance 0 0 Amortization for the year – – – – –48 –80 –65 –52 –113 –132 for new construction. As a result of lower market values, property and equipment have been written down to their recoverable amount. Impairment losses for the year 0 0 0 0 0 –1 0 –1 0 –2 Of the impairment losses for tangible fi xed assets, 120 (0) is reported on the line for Associated companies Exchange rate difference for the year 45 174 108 30 4 2 –2 5 155 211 selling expenses and 0 (21) in cost of sales. Carrying amount, associated companies 2008 2007 Book value 2,723 2,673 812 702 104 114 103 110 3,742 3,599 Investment properties Acquisition cost, opening balance 29 17 An internal appraisal has been made of the fair value of all investment properties Purchases 30 2 based on current rents and the real yields in each market. It shows that the fair value Profi t share –8 20 Amortization of intangible fi xed assets is included in the following income statement IT systems relate to capitalized development expenditures for IT systems. The useful exceeds book value by SEK 448 million (429). Dividends –11 –2 items. life is calculated for each system and amounts to between three and fi ve years. Amor- Disposals –1 –9 tization is booked on a straight-line basis over the useful life of the assets. The remain- The following amounts have been recognized through profi t or loss for investment Exchange rate difference –2 1 2008 2007 ing amortization schedule for IT systems is approximately 2 years. properties: Accumulated acquisition cost, closing balance 37 29 Other intangible assets consist of tenancy rights and other intangible surplus val- Selling expenses –65 –52 2008 2007 ues in connection with the acquisition of store operations. Amortization is booked Administrative expenses –48 –80 Rental income 120 121 over the estimated useful life of the assets. Total –113 –132 Direct costs for properties that generated rental income 10 24 ICA ANNUAL REPORT 2008 Impairment testing of goodwill Direct costs for properties that did not ICA ANNUAL REPORT 2008 Impairment losses on intangible fi xed assets are included in line item selling expenses Goodwill is distributed among the following segments: generate rental income – 0 in the income statement. 2008 2007 Construction in progress Useful life of intangible assets ICA Norway 1,517 1,628 Expenses capitalized during the year include SEK 6 million (14) in capitalized interest Trademarks were acquired in connection with the acquisition of Rimi Baltic AB. Since based on an interest rate of 4.8 percent (4.3). Rimi Baltic 1,206 1,045 there is no predictable period during which these trademarks are expected to benefi t Total 2,723 2,673 the Group, their useful life is considered indefi nite.

60 61 SUPPLEMENTARY INFORMATION, THE GROUP SUPPLEMENTARY INFORMATION, THE GROUP

Note 14, cont. Note 16 Note 18 Dividend ICA Bank Shareholders’ equity Shareholders received a total dividend of SEK 1,084 million (958), or SEK 216.80 (191.60) Shares in associated companies per share. The following table summarizes the most signifi cant holdings of shares in associated ICA Bank conducts banking operations, including card operations as well as savings For a summary of shareholders’ equity, refer to the report, Changes in shareholders’ The Board of Directors has proposed a total dividend of SEK 868 million, or SEK companies: and lending. Lending consists of checking accounts, credit cards, unsecured loans and equity. 173,5 per share. The dividend proposal will be presented to the Annual General Meet- second mortgages. In addition, the bank offers mortgages through SBAB. All deposits ing in May 2009 for resolution. Ownership % Profi t share Profi t share are demand deposits. Savings products are provided in cooperation with Nordnet. Specifi cation of the equity item reserves 2008 2007 Fixed assets Dec. 31, 2008 Dec. 31, 2007 Dec. 31, 2008 Dec. 31, 2007 Since ICA Bank’s lending is almost exclusively to a large number of private persons, Asset management there is no concentration of credit risks. Savings and lending both carry variable inter- Translation reserve Capital refers to shareholders’ equity and debt. The asset management objective is to Borgenveien 50 AS, (981 est rates with the exception of a small portion of lending with a fi xed 3-month rate. Translation reserve, opening balance 647 –121 safeguard the Group’s survival and freedom of action and guarantee that the owners 025 008), Oslo, Norway 50 50 –7 19 This means that the total interest rate risk is marginal. The surplus liquidity generated Translation differences for the year 34 768 continue to receive a return on their investment. The ratio of debt to equity should TakeCargo AS, (983 543 by ICA Bank because deposits exceed lending is invested in short-term low-risk invest- Translation reserve, closing balance 681 647 ensure a balance between risk and return. The capital structure is modifi ed, if neces- 707), Oslo, Norway 32 – –1 – ments. The bank carries very small amounts in foreign currency, due to which its cur- sary, to changes in economic conditions and other market factors. To maintain or ad- Landbu Eiendom AS, rency risk is also marginal. The fair value of fi nancial assets and liabilities corresponds just the capital structure, the Group can distribute funds, increase shareholders’ equi- (981 919 106), Molde, to their carrying amount. Fair value reserve ty through the issuance of new shares or capital contributions, or increase or Norway 41 41 0 1 Fair value reserve, opening balance 0 0 decrease borrowings. The balance sheet shows the Group’s liabilities and equity. The ICA Bank’s lending to private persons matures as follows: Other associated Revaluations 40 0 statement of changes in shareholders’ equity shows the various components of equi- ty, and this note provides a specifi cation of the various components included in re- companies 0 0 2008 2007 Derecognitions 0 0 serves. See also Note 23 Financial instruments. Total –8 20 Fair value reserve, closing balance 40 0 No longer than 3 months 1,686 1,323 The Group’s long-term equity/assets objective is 30-35 percent. The objective for Longer than 3 months but not more than 1 year 452 439 return on equity is at least 14-16 percent on average over a business cycle. The ownership percentages above refer to votes, which in every case is the identical Longer than 1 year but not more than 5 years 1,815 1,786 Hedging reserve ICA Bank, part of the ICA Group, faces the same capital adequacy requirements as to the share of capital. other banks. Capital adequacy requirements are a guarantee that ICA Bank is able to Longer than 5 years 882 903 Hedging reserve, opening balance 15 –23 meet its obligations to customers. The requirements stipulate that ICA Bank must Shares in subsidiaries Total lending 4,835 4,451 Increase 20 15 maintain a specifi c amount of equity in relation to its lending and revenue. Compli- Recognized through profi t or loss –15 23 Holdings in subsidiaries directly and indirectly owned by ICA AB. The list is limited to ance with capital adequacy requirements is monitored by the Swedish Financial Su- operating companies. Bad debts Hedging reserve, closing balance 20 15 pervisory Authority. These requirements were fully met during the year.

Ownership % 2008 2007 Revaluation reserve Dec. 31, Dec. 31, Bad debts 63 59 Revaluation reserve, opening balance 498 498 Note 19 Pensions Corp. ID no. Reg. offi ce 2008 2007 Less: Reserve for credit losses –39 –36 Change in revaluation reserve – – Direct holdings Bad debts net 24 23 Revaluation reserve, closing balance 498 498 Employees in Sweden receive pension benefi ts in accordance with collective agree- ICA AS 988 351 032 Oslo, Norge 100 100 ments. Salaried employees receive defi ned-benefi t pensions according to the ITP plan. ICA Ahold Trading AB 556615-4620 Stockholm – 100 ICA Bank has as a principle to classify a receivable as bad debt when payments of in- Pension obligations are secured through provisions in the balance sheet and insur- Total reserves 2008 2007 ance premiums. Unionized employees receive defi ned-contribution pensions accord- ICA Baltic AB 556042-7410 Stockholm 100 100 terest or principal are overdue by more than 60 days. Bad debts, net, amounted to 0.5 ing to the STP plan through AMF pension. ICA Banken AB 516401-0190 Stockholm 100 100 percent (0.5) of lending. The provision ratio is a reserve for credit losses in relation to Reserves, opening balance 1,160 354 All employees in Norway are covered by occupational pension agreements. Al- total bad debts. The provision ratio for bad debts amounted to 62.0 percent (61.3). Net Changes in reserves for the year: ICA Detalj AB 556604-5448 Stockholm 100 100 though defi ned-benefi t pensions are used, the majority of employees in Norway re- credit losses amounted to 45 (60) which is 1.0 percent (1.3) of average lending to the Translation reserve 34 768 ICA Fastigheter AB 556604-5471 Stockholm 100 100 public. ceive defi ned-contribution pensions. The defi ned-benefi t plans are secured through ICA International Services BV 34177382 Nederländerna 100 100 Fair value reserve 40 0 both the payment of fees to insurance companies and provisions in the balance sheet. In addition to occupational pensions, unionized employees have the opportunity to ICA Reinsurance S.A 915/93 Luxemburg 99 99 Loans overdue, not classifi ed as bad debt Hedging reserve 5 38 Revaluation reserve – – retire at age 62. This is secured in part through the payment of fees and in part through 2008 2007 provisions in the balance sheet. Reserves, closing balance 1,239 1,160 Indirect holdings In the Baltic countries contractual pensions are rarely used. Where they do exist, Overdue between 5-30 days 37 40 ICA Eiendom Norge AS 968 930 451 Oslo,Norge 100 100 they are defi ned-contribution. Overdue between 31-60 days 24 30 ICA Fastigheter Sverige AB 556033-8518 Västerås 100 100 As of December 31, 2008, the share capital consists of 5,000,000 shares (5,000,000) There are no healthcare costs in the Group’s plans that signifi cantly affect the re- Overdue for longer than 61 days 2 4 with a quota value of SEK 100. ported obligation for defi ned-benefi t plans. ICA Global Sourcing Ltd 1 150 322 Hong Kong 100 100 Total 63 74 Obligations for retirement pensions and family pensions for white-collar employ- ICA Norge AS 931 186 744 Oslo,Norge 100 100 Other paid-in capital ees in Sweden are secured by insurance through Alecta. In accordance with a pro- ICA Sourcing and Services BV 35 025 260 Nederländerna 100 100 Relates to shareholders’ equity contributed by the owners. The principal contribution The majority of loans are unsecured. nouncement from the Swedish Financial Reporting Board, UFR 3, this a multi-employer from the owners took place in connection with the implementation of ICA’s structure defi ned-benefi t plan. For the fi scal year the company did not have access to informa- ICA Sverige AB 556021-0261 Stockholm 100 100 in 2000. tion that would make it possible to recognize it as a defi ned-benefi t plan. The ITP pen- Rimi Baltic AB 556609-6268 Stockholm 100 100 Note 17 Non-current assets held for sale sion plan secured through insurance from Alecta is therefore recognized as a defi ned- Reserves contribution plan. Translation reserve Annual pension premiums covered by Alecta amount to SEK 12 million (23). Alecta’s In addition to the companies listed above, the ICA Group comprises 210 operating and The translation reserve comprises all exchange rate differences that arise through the surplus can be divided between policy-holders and/or insureds. As of September 30, Assets held for sale 2008 2007 dormant companies. A coplete list of all Group companies can be obtained from ICA’s translation of fi nancial reports from foreign operations that have prepared their re- 2008, Alecta’s surplus in the form of its consolidation funding ratio was 126 percent Corporate Communications departement. Tangible fi xed assets 3 103 ports in a currency other than one in which the Group’s fi nancial reports are present- (161 percent as of September 30, 2007 and 152 percent as of December 31, 2007). The ed. The Parent Company’s and Group’s reports are presented in Swedish kronor. funding ratio is based on the market value of Alecta’s assets as a percentage of insur- The item consists of properties held for sale. The sales are a result of a continuous re- ance obligations calculated using Alecta’s actuarial assumptions, which do not conform Note 15 Inventory Fair value reserve view of properties the Group should own to achieve an effi cient capital structure and to IAS 19. Alecta’s collective solvency is normally allowed to vary between 125 and 155 The fair value reserve comprises the cumulative net change after tax in the fair value operations. percent. In December 2007, Alecta decided to reduce the fee for existing customers by 2008 2007 of available-for-sale fi nancial assets until the asset is removed from the balance sheet. Impairment losses of SEK 0 million (0) were reported during the year when these 40 percent for the year 2008. In October 2008, Alecta decided to charge a premium for 2009 to ensure that the collective solvency stays within the target interval. Inventory of goods for resale 4,556 4,033 assets were classifi ed as held for sale. Hedging reserve Deduction for obsolescence in inventory –95 –99 The hedging reserve comprises the effective share of the cumulative net change in the Cost of defi ned-benefi t pensions 2008 2007 Inventory 4,461 3,934 fair value of a cash fl ow hedging instrument attributable to hedging transactions that Cost of vested benefi ts during the period 80 70 have not yet occurred. Interest expense 54 44 Revaluation reserve Expected rate of return on plan assets –5 –4

ICA ANNUAL REPORT 2008 In incremental acquisitions, the revaluation of the previously owned interest in the as- Reported actuarial gains (-) losses (+) 13 16 ICA ANNUAL REPORT 2008 sets is recognized in the revaluation reserve. Pension cost for defi ned-benefi t pensions 142 126

Retained earnings including net income for the year Retained earnings including net income for the year include earnings in the Parent Pension cost for defi ned-contribution pensions 277 277 Company and its subsidiaries and associated companies. Earlier provisions to the stat- Total pension costs 419 403 utory reserve, excluding transferred share premium reserves, are included in this shareholders’ equity item. Of the total pension cost, SEK 291 million (285) is included in the cost of sales and SEK 128 million (118) in administrative expenses.

62 63 SUPPLEMENTARY INFORMATION, THE GROUP SUPPLEMENTARY INFORMATION, THE GROUP

Note 19, cont. Note 20 Note 22 Foreign currency risk Pledged assets and contingent liabilities Principles of fi nancial risk management The Group hedges all major currency exposures from operations-related transactions Disclosures below relate only to defi ned benefi t plans. using forward exchange contracts. The currency exposures that are not hedged repre- 2008 2007 The Group has a central function for fi nancial management whose primary purpose is sent less than 2 percent of total currency exposures. As a result, there are no signifi - Carrying amount in balance sheet 2008 2007 Pledged assets to ensure that the Group has secured fi nancing through loans and lines of credit, to cant exposures in foreign currencies as of December 31, 2008 outside the Group’s handle cash management and to actively manage and control fi nancial exposure in functional currencies. A change in the exchange rate for any of the transaction curren- Present value of funded obligations 143 156 Property mortgages 206 222 line with the Group’s fi nancial policy. cies therefore has a marginal effect on ICA’s income and shareholders’ equity. Fair value of plan assets –85 –84 Restricted cash 365 233 The fi nancial instruments managed by the fi nance department consist of bank Net funded obligations 58 72 Total 571 455 credits, short- and long-term loans, short-term investments and derivatives. The Credit risk Present value of unfunded obligations 1,284 1,069 Group also has other fi nancial instruments such as accounts receivable and payable, Analysis of overdue receivables that have not been written down. (For ICA Bank Contingent liabilities which are directly tied to the ICA Group’s operations.ICA’s principal risk exposure re- Unrecognized actuarial losses (–) gains (+) –405 –296 non-performing loans, see the note 16 on ICA Bank.) Guarantees and contingent liabilities 230 270 lates to interest rates, liquidity, foreign currencies and credits. Carrying amount 937 845 2008 2007 Tax disputes 1,819 716 The amount is recognized in its entirety on the provisions for pensions line in the Interest rate risk Total 2,049 986 Due within 40 days 124 191 balance sheet. Interest rate risk is defi ned as the risk that changes in market interest rates will affect Due later than 40 days 27 90 cash fl ow or the fair value of fi nancial assets and liabilities. The fi nancial policy states The Swedish Tax Agency has decided to disallow interest deductions by ICA Finans AB, Total 151 281 Change in pension obligations 2008 2007 that the Group will tie up its interest rates for 18 months with a mandate to deviate a company in the ICA Group, for interest on borrowings from the Irish subsidiary ICA from this norm by +/- 6 months. Interest rate swaps are used to adjust interest rate ex- Opening balance, present value pension obligations 1,225 1,089 Ahold Export Unltd of SEK 1,795 million for the period 2001-2003. ICA appealed the de- posure. Overdue receivables refer to account overdrafts by independent ICA retailers. An indi- Cost of vested benefi ts during the period 80 70 cision to the County Administrative Court, which in December 2008 ruled in favor of vidual assessment is made of each receivable based on the likelihood that it will be the Swedish Tax Agency. The Swedish Tax Agency’s claim amounts to SEK 742 million Interest expense 54 44 Liquidity risk paid. If it is believed that the receivable will not be paid wholly or in part, it is written (716) including penalties and interest. ICAs judgement is that the deductions it made Actuarial gains (-) losses (+) 117 52 Liquidity risk is defi ned as the risk that the Group cannot meet its short-term payment down to the amount that is expected to be paid. During the year receivables were complied with applicable tax laws. Outside parties who have examined the legal posi- Pension disbursements –34 –33 obligations. ICA’s fi nancial policy states that the liquidity reserve must amount to a written down by SEK 89 million (26). Collateral for the credits primarily consists of tion, the Swedish Tax Agency’s argument and the County Administrative Court ruling level where the reserve can handle the fl uctuations that can be expected in day-to-day chattel mortgages. Changes in exchange rates –11 11 side with ICA. ICA has appealed the County Administrative Court’s decision to the liquidity in a 12-month period. To ensure this, the Group has bank overdraft facilities ICA’s maximum credit risk corresponds to the book value of the fi nancial instru- Effects of disposals and business combinations –4 –8 Swedish Administrative Court of Appeal. In January 2009 the Swedish Tax Agency de- and unutilized credit facilities. The Group’s strong cash fl ow and unutilized loan facili- ments plus any fi nancial guarantees that have been issued. The maximum credit risk Closing balance, present value pension obligations 1,427 1,225 cided not to grant ICA a delay of payment of SEK 742 million. ICA has appealed the de- ties enabled the Group to meet its liquidity needs without diffi culty in 2008. At year- for fi nancial guarantees amounts to SEK 224 million (219). cision but paid the amount in February 2009. The amount is booked as a receivable on end 2008, borrowings amounted to SEK 3,040 million (3,036) and the liquidity reserve, Change in plan assets 2008 2007 the Swedish Tax Agency. in addition to liquid assets, to SEK 8,165 million (9,042). The surplus liquidity in ICA Classifi cation of fi nancial assets and liabilities 2008 2007 Moreover, the Swedish Tax Agency has decided to disallow interest deductions of Opening balance, plan assets 84 68 Bank is not available to the Group according to banking laws. SEK 3,158 million made in 2004-2007 to a Dutch Group company. The Swedish Tax At fair value through profi t or loss for trading 28 8 Expected return on plan assets 5 4 Agency’s claim amounts to SEK 1,077 million (including penalties and interest). ICA is Derivatives used as hedges 76 32 Foreign currency risk Actuarial gains (+) losses (-) –8 4 convinced that the deductions it made complied with tax laws. Outside parties who Foreign currency risk is defi ned as the risk that changes in exchange rates will affect Loans and accounts receivable 12,244 10,702 Pension disbursements from plan assets –34 –33 have examined the legal position and the Swedish Tax Agency’s argument side with cash fl ow. The primary foreign currency risk in the ICA Group is the transaction expo- Available-for-sale fi nancial assets 3,401 3,643 Contributions 47 43 ICA. ICA has appealed the Swedish Tax Agency’s decision to the County Administra- sure that arises due to the import of goods paid in foreign currency. The risk norm in Non-fi nancial assets 24,220 22,934 Changes in exchange rates –6 6 tive Court. the fi nancial policy is that 100 percent of the outstanding transaction exposure is Total assets 39,969 37,319 Effects of disposals and business combinations –3 –8 hedged. This exposure is hedged for the next 3-6 months. Currency hedges are ar- Closing balance, plan assets 85 84 Note 21 Related-party transactions ranged on the order date. For non-foods, the currency hedge is based on projected volumes. According to the fi nancial policy, borrowings in foreign currency are hedged. Valued at fair value in the income statement for trading 35 - Actual return on plan assets –3 8 The foreign currency risk that arises because the Group has invested in foreign subsid- Derivatives used as hedges 48 10 Transactions between ICA AB and subsidiaries affi liated with the company have been iaries is not actively hedged in the fi nancial market. Liabilities valued at amortized cost 25,411 23,664 eliminated in the consolidated accounts and are not indicated in this note. Transac- Plan assets distributed by asset class 2008 2007 Non-fi nancial liabilities 1,679 1,572 tions between the Group and other related parties are indicated below. Credit risk Total liabilities 27,173 25,246 Bonds and other interest-bearing securities 43 48 ICA has signed a number of commercial agreements with its owners and associat- Credit risk is defi ned as the risk that a counterparty in a fi nancial transaction cannot Equities 4 23 ed companies. The agreements were signed on market terms with regard to price and fulfi ll its obligations according to the contract and that any security does not cover the Real estate 14 10 payment terms. The scope of these transactions is indicated in the tables below: company’s claim. The banks and fi nancial institutions the Group works with must Net result by category 2008 2007 Other assets 24 3 have a creditworthiness corresponding to at least “A” from Standard & Poor’s or “A2” Net profi t/loss: Purchases Receivables Liabilities from Moody’s Investor Service. For commercial counterparties with which the com- Total plan assets 85 84 Sales to from related from related to related Financial assets and liabilities at fair value through pany has a large exposure, individual assessments are made. The maximum credit 1) 2008 related parties parties parties parties profi t or loss –16 4 The expected return on plan assets is based on long-term expectations regarding the exposure corresponds to the book value of fi nancial assets. The credit risk that arises Available-for-sale fi nancial assets: return for each asset class. This return is based on an infl ation assumption and histori- Owners: through ICA Bank’s lending to the public is managed by performing credit checks on Recognized through equity 40 –1 cal data on returns for various asset classes. The expected return for each asset class, Royal Ahold 62 72 29 8 all loan applicants. Transferred from equity to profi t or loss 0 0 together with the mix of assets expected to be held long-term, produces a total ex- Hakon Invest AB (publ) 5 93 0 9 pected return on plan assets. Interest from fi nancial liabilities and assets not valued at Associated companies 0 18 13 4 fair value through profi t or loss: Total 67 183 42 21 Important actuarial assumptions (%) 2008 2007 Note 23 Financial instruments

Discount rate 4.0 4.6 Interest income from fi nancial assets 533 509 Purchases Receivables Liabilities Interest rate risk Infl ation 2.0 1.9 Interest expenses from fi nancial liabilities –651 –604 Sales to from related from related to related If interest rates increase or decrease by 1 percentage point, the income statement is Rate of salary increase 3.6 3.6 2007 related parties parties parties parties affected by SEK 43 million (39) and shareholders’ equity by SEK 43 million (39). The Loans and accounts receivable have been written down by SEK 134 million (86). 1) Refers to holdings held for sale Expected return on plan assets 6.0 6.0 Owners: change is calculated based on an assumption of a parallel shift in the yield curve of 1 percentage point and the debt position on the balance sheet date. Royal Ahold 48 0 12 4 Hedge accounting Amounts for current year and Hakon Invest AB (publ) 3 75 2 0 ICA applies hedge accounting for the currency risk that arises through the import of comparative years 2008 2007 2006 2005 2004 Liquidity risk Associated companies 0 4 17 10 Due dates for payment of fi nancial liabilities (calculated from the balance sheet date). goods. This is a cash fl ow hedge. The fi nancial instruments used as hedges are forward Present value defi ned-benefi t obligations –1,427 –1,225 –1,089 –1,108 –966 Total 51 79 31 14 exchange contracts. Their fair value is indicated in a separate table. Plan assets 85 84 68 72 76 2008 2007 ICA also applies hedge accounting for the risk of changes in interest rates. This is a cash fl ow hedge. The fi nancial instruments used as hedges are interest rate swaps. Defi cit (–) surplus (+) –1,342 –1,141 –1,021 –1,036 –890 The ICA Group has had daily transactions with the board members who are ICA retail- Due within 1 year 13,253 11,908 Their fair value is indicated in a separate table. Experience adjustments for obligations –29 –8 –68 ers. This is a natural part of their role as ICA retailers. All transactions were made on Due longer than 1 year up to 3 years 1,029 807 Cash fl ow from cash fl ow hedges arises over the course of the year. Experience adjustments for plan assets –8 4 13 market terms and refer to the sale of goods, consulting services and rent for premises. Due longer than 3 years up to 5 years 200 3 The ineffi ciency in cash fl ow hedges is immaterial. ICA ANNUAL REPORT 2008 The management of the ICA Group and the Board of Directors of ICA AB have re- ICA ANNUAL REPORT 2008 Fees expected to be paid to defi ned benefi t plans for 2009 amount to SEK 50 million. ceived the following compensation: Due longer than 5 years 26 573 Fair value of fi nancial assets and liabilities Total 14,508 13,291 2008 2007 The Group’s interest-bearing assets and liabilities, excluding derivatives, have a fi xed term of not more than three months, which means that their carrying amount is a Salaries and similar remuneration 72 42 The table above excludes ICA Bank’s deposits. It also excludes the liabilities that arise good approximation of fair value. The exception is ICA Bank bond investments, where Cost of pensions and similar remuneration 20 12 when ICA sells properties which are then leased back fully or in part and subsequently sublet to ICA retailers. For these properties, ICA has received sales proceeds, which fair value deviates from acquisition cost by 51 (–2). The book value of the bonds corre- Total 92 54 are recognized as a liability until the lease with the ICA retailer expires. There is no sponds to their fair value. In total, this group has been granted loans and credits from ICA Banken of SEK 0 effect on liquidity when the obligation ceases. million (1).

64 65 SUPPLEMENTARY INFORMATION, THE GROUP PARENT COMPANY INCOME STATEMENT

Note 23, cont. The net assets of the acquired companies on their acquisition dates were as follows: Parent Company Income Statement Value accord- 2008 2007 ing to acquisi- Fair value of fi nancial derivatives Asset Liability Asset Liability Store operations tion analysis (SEK,million) Note 2008 2007 Included in hedge accounting Tangible fi xed assets 35 Net sales 2 888 888 Interest rate swaps2) –48321Intangible fi xed assets 15 Cost of sales –465 –458 Forward exchange contracts2) 76 – 7 17 Inventory 34 Gross profi t 423 430 Not included in hedge accounting Accounts receivable and other receivables 12 Interest rate swaps – 35 – – Liquid assets 44 Administrative expenses 3, 4, 5, 6 –661 –519 Forward exchange contracts 28 0 9 1 Long-term liabilities 0 Operating income –238 –89 2) The entire item refers to cash fl ow hedges which, in their entirety, will affect the acquisition cost of the Accounts payable and other current liabilities –92 hedged investment in the following year. Net identifi able assets and liabilities 48 Result from fi nancial investments: 7 Liabilities attributable to sale and leasebacks Result from shares in Group companies 1,166 1,156 Purchase price paid1) –48 When ICA has sold a property which is then leased back and in turn sublet to an inde- Interest income and similar profi t/loss items 55 35 pendent ICA retailer, the purchase price received is reported as a liability. The total lia- Cash (acquired) 44 Interest expenses and similar profi t/loss items –373 –377 bility for these transactions amounts to SEK 2,303 million (2,864), of which the portion Net cash –4 848 814 reported among other long-term liabilities is SEK 2,184 million (2,582) and the portion 1) The amount includes fees for legal services of SEK 0 million. reported among other current liabilities is SEK 119 million (281). For a further descrip- tion, see the accounting principles under the heading sale and leasebacks. Income after net fi nancial items 610 725 The value according to the acquisition analysis is the book value, which essentially Sale of loan portfolio related to store fi nancing corresponds to fair value. Appropriations 18 3 174 In November 2005, Nordea took over ICA’s Swedish portfolio of operating loans to ICA Acquisitions 2007 retailers. According to the agreement, ICA will compensate Nordea for future credit In 2007 the Group acquired three store operations in Sweden and 15 in Norway. The losses. As of December 31, 2008, the outstanding credit for operating loans amounts Income before tax 613 899 operations in Sweden were acquired from ICA retailers, who managed them under to SEK 56 million (128) and the maximum compensation from ICA for credit losses is the ICA agreement, which stipulates how valuations are made in connection with SEK 5 million (12). The outstanding credit is reported in other long-term receivables such sales. The acquired stores will be sold to ICA retailers. The Group will own and Income taxes 8 144 48 with a corresponding amount reported as other liabilities. run the stores for only a short period. The store operations in Norway were acquired from franchisees. These have been acquired at the market value of the assets and lia- NET INCOME FOR THE YEAR 757 947 bilities. The total purchase price for the store operations was SEK 22 million. The con- Note 24 Statement of cash fl ows and liquid assets tribution to consolidated income after tax for 2007 was SEK –7 million. If all store acquisitions had taken place as of January 1, 2007, consolidated net sales would have increased by SEK 671 million and income after tax would have changed by Adjustments for non-cash items 2008 2007 SEK –10 million. Parent Company Balance Sheet Depreciation/amortization 1,516 1,455 The net assets of the acquired companies on their acquisition dates were as follows: Impairment losses 120 23 Profi t share from associated companies 8 –20 Value accord- (SEK million) Note 08-12-31 07-12-31 Capital gains/losses –325 –603 ing to acquisi- ASSETS Store operations tion analysis Provisions 130 –6 Fixed assets 21 Sale and leaseback transactions –268 –267 Tangible fi xed assets 29 Total non-cash items 1,181 582 Inventory 6 Intangible fi xed assets 9721 Accounts receivable and other receivables 41

Composition of liquid assets 2008 2007 Liquid assets 24 Tangible fi xed assets 10 153 187 Cash and bank balances1) 2,332 1,006 Long-term liabilities 0 Short-term investments1) 2,770 3,354 Accounts payable and other current liabilities –78 Financial fi xed assets Net identifi able assets and liabilities 22 Total liquid assets 5,102 4,360 Shares in subsidiaries 11, 12 33,851 33,832 Shares in associated companies 11, 13 2 2 Purchase price paid1) –22 1)Of which ICA Bank Other fi nancial fi xed assets 14 7 52 Cash (acquired) 24 Cash and bank balances 1,427 290 Deferred tax assets 8 7 6 Net cash 2 Short-term investments 2,406 3,121 1) The amount includes fees for legal services of SEK 0 million. Restricted assets 360 228 Total fi xed assets 34,027 34,100 Total liquid assets ICA Bank 4,193 3,639 The value according to the acquisition analysis is the book value, which essentially corresponds to fair value. Current assets 21 Current receivables Note 25 Business combinations Accounts receivable 18 47 Note 26 Investment commitments Receivables from Group companies 3,807 3,119 Receivables from associated companies 28 14 Acquisitions 2008 In 2008, the Group acquired seven store operations in Sweden and eleven in Norway. In 2008, the Group entered into agreements to acquire tangible fi xed assets for SEK Other receivables 94 78 The operations in Sweden were acquired from ICA retailers, who managed them un- 340 million (1,479). Prepaid expenses and accrued income 16 200 178 der the ICA agreement, which stipulates how valuations are made in connection with such sales. The acquired stores will be sold to ICA retailers. The Group will own and Cash and bank balances 510 run the stores for only a short period. The store operations in Norway were acquired from franchisees. These have been acquired at the market value of the assets and lia- ICA ANNUAL REPORT 2008 ICA ANNUAL REPORT 2008 bilities. The total purchase price for the store operations was SEK 48 million. The con- Total current assets 4,152 3,446 tribution to consolidated income after tax for 2008 was SEK –19 million. If all store acquisitions had taken place as of January 1, 2008, consolidated net sales TOTAL ASSETS 38,179 37,546 would have increased by SEK 764 million and income after tax would have changed by SEK –28 million.

66 67 SHAREHOLDERS’ EQUITY, PROVISIONS AND LIABILITIES CHANGES IN PARENT COMPANY’S SHAREHOLDERS’ EQUITY AND PARENT COMPANY STATEMENT OF CASH FLOWS

Shareholders’ equity, provisions and liabilities Changes in Parent Company’s Shareholders’ Equity

(SEK million) Note Dec. 31, 2008 Dec. 31, 2007 Restricted equity Non-restricted equity SHAREHOLDERS’ EQUITY, PROVISIONS AND LIABILITIES Statutory Revaluation Retained Net income Total share- Shareholders’ equity 17 (SEK million) Share capital reserve reserve earnings for the year holders’ equity Restricted equity Opening balance, January 1, 2007 500 8,788 8,532 7,194 657 25,671 Share capital (5,000,000 shares) 500 500 Group contributions received 919 919 Statutory reserve 8,788 8,788 Tax on Group contributions –257 –257 Revaluation reserve 8,532 8,532 Dividend –301 –657 –958 Non-restricted equity Net income for the year 947 947 Retained earnings 8,401 7,555 Closing balance, December 31, 2007 500 8,788 8,532 7,555 947 26,322 Net income for the year 757 947 Total shareholders’ equity 26,978 26,322 Opening balance, January 1, 2008 500 8,788 8,532 7,555 947 26,322 Group contributions received 1,365 1,365 Untaxed reserves 18 1,289 1,292 Tax on Group contributions –382 , –382 Dividend –137 –947 –1,084 Provisions 21 Net income for the year 757 757 Provisions for pensions 19 221 323 Closing balance, December 31, 2008 500 8,788 8,532 8,401 757 26,978 Provisions for structural costs 20 11 Total provisions 241 334

Long-term liabilities 21 Parent Company Statement of Cash Flows Liabilities to Group companies 15 8,000 8,000 Total long-term liabilities 8,000 8,000

(SEK million) Note 2008 2007 Current liabilities 21 Operating activities Accounts payable 152 243 Operating income –238 –89 Liabilities to Group companies 1,226 1,112 Dividends received 1,166 1,156 Liabilities to associated companies 13 14 Adjustments for non-cash items 22 –1 142 Tax liabilities 34 1 Income tax paid –206 –129 Other liabilities 36 21 Cash fl ow from operating activities before change in working capital 721 1,080 Accrued expenses and deferred income 16 210 207 Total current liabilities 1,671 1,598 Change in working capital Current receivables (increase - / decrease +) 1,445 1,165 TOTAL SHAREHOLDERS’ EQUITY, PROVISIONS AND LIABILITIES 38,179 37,546 Current liabilities (increase + / decrease -) –747 –842 Cash fl ow from operating activities 1,419 1,403 Pledged assets 20 55 Contingent liabilities 20 8,716 9,239 Investing activities Purchase of tangible and intangible fi xed assets –48 –97 Proceeds from sale of operations 010 Investment in fi nancial fi xed assets –20 –4 Proceeds from sale of fi nancial fi xed assets 46 0 Investment in associated companies 0–2 Interest received 55 35 Cash fl ow from investing activities 33 –58

Financing activities Dividend paid –1,084 –958 Interest paid –373 –377

Cash fl ow from fi nancing activities –1,457 –1,335

Cash fl ow for the year –5 10 Liquid assets at beginning of year 10 0 Liquid assets at end of year 510 ICA ANNUAL REPORT 2008 ICA ANNUAL REPORT 2008

68 69 SUPPLEMENTARY INFORMATION, PARENT COMPANY SUPPLEMENTARY INFORMATION, PARENT COMPANY

Supplementary Information, Social security expenses 2008 2007 Note 7 Result from fi nancial investments Note 9 Intangible fi xed assets Social security expenses 351 373 Parent Company Of which pensions 1) 111 119 2008 2007 IT-systems 1) Of the pension costs, 9 (9) relates to the Board, President and EVP. Results from shares in Group companies 2008 2007 Dividends 1,166 1,156 Note 1 The group comprising the Board, President and EVP, whose salaries and remuneration Accumulated acquisition cost 109 113 Accounting principles are paid by ICA AB, is made up of 13 (14) persons. Other interest income and similar profi t/loss items Accumulated amortization –102 –92 Book value 7 21 Interest income, Group companies 55 33 The Parent Company has prepared its annual report according to the Annual Accounts Act (1995:1554) and the Swedish Financial Reporting Board’s recommendation RFR 2.1 2008 2007 Other interest income and similar profi t/loss items 0 2 Opening balance 21 42 Reporting for Legal Entities. RFR 2.1 means that the Parent Company, in the annual re- Total 55 35 Of which Of which Investments 0 4 port for the legal entity, will apply all IFRS/IAS, including interpretations, approved by Absenteeism, Parent Company Sick leave long-term Sick leave long-term Other interest expenses and similar profi t/loss items Amortization for the year –14 –25 the EU as far as possible within the framework of the Annual Accounts Act and with As % of normal working hours absences sick leave absences sick leave Book value 7 21 consideration to the connection between reporting and taxation. RFR 2.1 specifi es the Interest expenses, subsidiaries –360 –361 exemptions from and supplements to IFRS. As a whole, this results in the following Younger than 29 years 1.9 0.3 2.1 0.3 Other interest expenses and similar profi t/loss items –13 –16 differences between the Group’s and the Parent Company’s accounting principles. 30–49 years 2.3 1.0 2.7 1.2 Total –373 –377 All amounts are in millions of Swedish kronor (SEK) unless indicated otherwise. 50 years and older 2.5 1.2 3.9 2.5 Note 10 Total 2.3 0.9 2.8 1.3 Tangible fi xed assets Subsidiaries, associated companies and joint ventures Total result from fi nancial investments 848 814 Men 1.5 0.6 1.7 0.5 Shares in subsidiaries, associated companies and joint ventures are reported in the Fixed assets Parent Company according to the purchase method. Reported revenue is limited to Women 3.0 1.3 3.8 2.0 dividends received, provided that they are attributable to profi ts earned after acquisition. 2008 2007 Gender distribution of Board of Directors and Management 2008 2007 Note 8 Taxes Accumulated acquisition cost 490 650 Taxes Board of Directors Accumulated depreciation –337 –463 In the Parent Company, untaxed reserves include deferred tax liabilities. In the consoli- 2008 2007 Book value 153 187 dated accounts, on the other hand, untaxed reserves are divided between deferred Men 10 10 tax liabilities and shareholders’ equity. Women – – Current income tax Total 10 10 Current tax on net income for the year 143 48 Opening balance 187 173 Leases Deferred tax on temporary differences 1 0 Investments 45 93 In the Parent Company, all leases are reported according to the rules for operating leases. Management Reported tax expense 144 48 Sales/disposals –1 0 Men 2 5 Depreciation for the year –78 –79 Defi ned-benefi t pension plans 2008 2007 Book value 153 187 The Parent Company uses a different basis to calculate defi ned-benefi t pension plans Women 3 2 Reconciliation between current tax rate and effective tax (%) than in IAS 19. The calculations by the Parent Company comply with the Act on Safe- Total 5 7 guarding Pension Benefi ts and the Financial Supervisory Authority’s regulations, Current tax rate 28.0 28.0 Accelerated depreciation, opening balance 10 0 which are a prerequisite for tax deductibility. The biggest differences compared with Tax-exempt income –54.2 –36.0 Change for the year 13 10 IAS 19 are how the discount rate is determined, that the calculation is based on current Note 4 Audit expenses Other non-deductible expenses 2.7 2.7 Accelerated depreciation, closing balance 23 10 salary levels and does not take into account future salary increases, and that all actu- Effective tax rate –23.5 –5.3 arial gains and losses are recognized as soon as they arise. Audit fees: 2008 2007 The tax rate for companies in Sweden will be reduced from 28% to 26.3% from 2009. Tax value, closing balance 176 197 Group contributions and shareholders’ contributions for legal entities Deloitte 3 3 The effect of change on deferred taxes recognized through profi t or loss is less than The Parent Company reports Group contributions and shareholders’ contributions in 0.1%. accordance with statement UFR 2 Group Contributions and Shareholders’ Contribu- tions from the Swedish Financial Reporting Board. Shareholders’ contributions are 2008 2007 Note 11 Financial fi xed assets recognized directly against the shareholders’ equity of the recipient and are capital- Note 5 Reported in balance sheet: ized in the shares and participations of the contributor, to the extent impairment is Depreciation and amortization Deferred tax assets 7 6 2008 2007 not required. Group contributions are reported according to their fi nancial impact. This means that Group contributions paid to minimize the Group’s tax are recognized Depreciation and amortization of tangible and intangible fi xed assets are included in No deferred tax is recognized directly against shareholders’ equity. The Group has no Shares in subsidiaries directly against retained earnings after deducting their tax effect. line item administrative expenses in the income statement. unrecognized deferred tax liabilities or tax assets on temporary differences. Acquisition cost, opening balance 34,347 34,357 Shareholders contributions 20 0 Change in deferred tax in temporary differences and tax loss carryforwards Group change – –10 Note 2 Intra-Group purchases and sales Note 6 Operating leases Balance, Reported through Balance, Sales –1 – Jan. 1, 2007 profi t or loss Dec. 31, 2007 Accumulated acquisition cost, closing balance 34,366 34,347

Of the year’s total net sales, 19 percent (17) relates to sales to subsidiaries. The company leases buildings and equipment. Contractual lease expenses under ex- Fixed assets 3 0 3 isting leases fall due for payment as follows: Provisions 3 0 3 Impairment losses, opening balance –515 –515 Accumulated impairment losses, closing balance –515 –515 2008 2007 Total 6 0 6 Note 3 The year’s leasing fees 88 79 Personnel expenses, pensions, etc. Balance, Reported through Balance, Residual value according to plan, closing balance 33,851 33,832 Jan. 1, 2008 profi t or loss Dec. 31, 2008 Average number of employees Future contractual minimum lease fees: Fixed assets 3 –1 2 Shares in associated companies The number of employees has been calculated on the basis of the Group’s measure of Maturity date year 1 41 32 Provisions 3 2 5 normal working hours (1,800 hours). Acquisition cost, opening balance 2 361 Maturity date year 2 40 31 Total 6 1 7 Acquisitions 0 2 Maturity date year 3 31 27 2008 2007 (Tax assets are denoted by (+) and tax liabilities by (–) in the table above.) Reclassifi cations – –361 Maturity date year 4 25 21 Women 794 890 Accumulated acquisition cost, closing balance 2 2 Maturity date year 5 or later 93 91 Men 679 811 Total 230 202 Total 1,473 1,701 Impairment losses, opening balance 0 –315 ICA ANNUAL REPORT 2008 Reclassifi cations – 315 ICA ANNUAL REPORT 2008 Salaries and other remuneration 2008 2007 Accumulated impairment losses, closing balance 0 0 Board, President and EVP 29 22 Other employees 648 684 Residual value according to plan, closing balance 2 2 Total, Parent Company 677 706 Salaries and remuneration to Board, President and EVP include severance of 6.

70 71 SUPPLEMENTARY INFORMATION, PARENT COMPANY SUPPLEMENTARY INFORMATION, PARENT COMPANY

Note 12 Note 19 Shares in subsidiaries Provisions for pensions Note 20 Pledged assets and contingent liabilities

Specifi cation of ICA AB’s direct holdings of shares in subsidiaries. All employees receive pension benefi ts according to collective agreements. Salaried 2008 2007 employees receive defi ned-benefi t pensions according to the ITP plan. Pension obliga- Capital and Book value Book value tions are secured through provisions in the balance sheet and through insurance pre- Pledged assets Corp. ID no. Reg. offi ce Number votes,% Quota value Dec. 31, 2008 Dec. 31, 2007 miums. Restricted cash 5 5 ICA AS 988 351 032 Norway 1,000 100 NOK 1,000 1 1 Total 5 5 Reconciliation of carrying amount for self-managed pensions 2008 2007 ICA Ahold Trading AB 556615-4620 Stockholm 1,000 100 SEK 100 – 1 Opening balance, principal on pension obligations 323 286 ICA Baltic AB 556042-7410 Stockholm 30,000 100 SEK 500 184 184 Contingent liabilities Cost charged against this result 20 25 ICA Banken AB 516401-0190 Stockholm 1,000,000 100 SEK 100 648 628 Guarantees for subsidiaries 8,716 9,239 Interest expense 12 13 ICA Detalj AB 556604-5448 Stockholm 1,000 100 SEK 100 16,717 16,717 Total 8,716 9,239 Pension disbursements –8 –6 ICA Fastigheter AB 556604-5471 Stockholm 1,000 100 SEK 100 2,425 2,425 Transferred pensions, Group –126 5 ICA International Services BV 34177382 Netherlands 1,000 100 EUR 10 13,864 13,864 Closing balance, principal on pension obligations 221 323 ICA Reinsurance SA 915/93 Luxembourg 119 99 SEK 100,000 12 12 Note 21 Total 33,851 33,832 Financial instruments Of the total pension obligation, FPG/PRI pensions account for SEK 181 million (287). A complete list of fi rst- and second-tier subsidiaries can be obtained free of charge from The entire amount is covered by the Act on Safeguarding Pension Benefi ts. Classifi cation of fi nancial assets and liabilities 2008 2007 the company’s corporate communications department. Held-to-maturity investments 0 2 Specifi cation of recognized pension costs 2008 2007 Loans and accounts receivable 4,152 3,447 Self-managed pensions: Available-for-sale fi nancial assets 7 49 Note 13 Shares in associated companies Note 17 Shareholders’ equity Cost excluding interest expense 20 25 Non-fi nancial assets 34,020 34,048 Interest expense 12 13 Total assets 38,179 37,546 Specifi cation of ICA AB’s direct holdings in associated companies For a list of shareholders’ equity, see the report, Changes in shareholders’ equity. Total cost of self-managed pensions 32 38 Insured pensions: Book Book Restricted equity Liabilities valued at amortized cost 9,637 9,598 Insurance premiums 87 93 value value Restricted equity may not be reduced through profi t distributions. Non-fi nancial liabilities 275 334 Owner- Dec. 31, Dec. 31, Tax on pension returns 1 1 Total liabilities 9,912 9,932 Associated companies Corp. ID no. Number ship, % 2008 2007 Share capital Special employer’s contribution on pension returns 21 23 As of December 31, 2008, the share capital consists of 5,000,000 shares (5,000,000) HB Luntmakaren, Cost of credit insurance 2 2 with a quota value of SEK 100. Stockholm969658-3419–5000 Recognized pension cost 111 119 F-train AB, Östersund 556677-2231 30,000 30 2 2 Statutory reserve Note 22 Statement of cash fl ows Total 2 2 Share premium reserves that arose before January 1, 2006 have been transferred to the Important actuarial assumptions 2008 2007 statutory reserve in accordance with the transitional rules in the Annual Accounts Act. Adjustments for non-cash items 2008 2007 The share of votes and share of capital are identical. Discount rate 5.7% 3.6% Depreciation/amortization 92 104 Revaluation reserve Pension calculations are based on salary levels on the balance sheet date. When a tangible or fi nancial fi xed asset is revaluated, the revalued amount is allocated Provisions for pensions –102 37 Note 14 Other fi nancial fi xed assets to a revaluation reserve. Other provisions 9 1 Total –1 142 Non-restricted equity 2008 2007 Retained earnings Shares in tenant-owner associations 2 2 Consists of previous year’s earnings less paid dividends. Together with net income for Other long-term securities holdings 5 49 the year, retained earnings comprise the capital available for distribution to the share- Other long-term receivables 0 1 holders. Stockholm, February 13, 2009 Total 7 52 A dividend of SEK 1,084 million (958) has been paid to shareholders.

Claes-Göran Sylvén John Rishton Note 18 Appropriations and untaxed reserves Chairman Note 15 Long-term liabilities to Group companies 2008 2007 2008 2007 Appropriations Dirk Anbeek Peter Berlin Dick Boer ICA Finans AB1) 8 000 8 000 Change in tax allocation reserve –10 164 1) Of which 0 (0) falls due for payment more than fi ve years after the balance sheet date. Change in accelerated depreciation 13 10 Total 3 174 Fredrik Hägglund Per Jansson Per-Anders Olofsson

Note 16 Accruals Untaxed reserves Accelerated depreciation –23 –10 Magnus Rehn Peter Wakkie Kenneth Bengtsson 2008 2007 Tax allocation reserve, fi nancial year 2003 0 275 President Prepaid expenses and accrued income Tax allocation reserve, fi nancial year 2004 275 275 Tax allocation reserve, fi nancial year 2005 238 238 Our audit report was submitted on February 16, 2009 Deloitte AB Other prepaid expenses 61 40 Tax allocation reserve, fi nancial year 2006 118 118 Supplier bonuses 117 102 Tax allocation reserve, fi nancial year 2007 153 153 Jan Berntsson Other accrued revenue 22 36 Tax allocation reserve, fi nancial year 2008 242 243 Authorized Public Accountant ICA ANNUAL REPORT 2008 Total 200 178 Tax allocation reserve, fi nancial year 2009 286 – ICA ANNUAL REPORT 2008 Total 1,289 1,292

Accrued expenses and deferred income

Accrued salaries, vacation pay and social security expenses 154 174 Accrued interest expenses 6 6 Other accrued expenses 50 27 Total 210 207

72 73 AUDIT REPORT

Audit Report

To the annual meeting of the shareholders of ICA AB Corporate identity number 556582-1559

We have audited the annual accounts, the consolidated accounts, the ing director . We also examined whether any board member or the accounting records and the administration of the board of directors managing director has, in any other way, acted in contravention of the and the managing director of ICA AB for the fi nancial year 2007. The Companies Act, the Annual Accounts Act or the Articles of Association. board of directors and the managing director are responsible for these We believe that our audit provides a reasonable basis for our opinion accounts and the administration of the company as well as for the ap- set out below. plication of the Annual Accounts Act when preparing the annual ac- The annual accounts have been prepared in accordance with the An- counts and the application of international fi nancial reporting standards nual Accounts Act and give a true and fair view of the company’s fi nan- IFRSs as adopted by the EU and the Annual Accounts Act when prepar- cial position and results of operations in accordance with generally ac- ing the consolidated accounts. Our responsibility is to express an opin- cepted accounting principles in Sweden. The consolidated accounts ion on the annual accounts, the consolidated accounts and the admin- have been prepared in accordance with international fi nancial reporting istration based on our audit. standards IFRSs as adopted by the EU and the Annual Accounts Act and We conducted our audit in accordance with generally accepted au- give a true and fair view of the group’s fi nancial position and results of diting standards in Sweden. Those standards require that we plan and operations. The statutory administration report is consistent with the perform the audit to obtain reasonable assurance that the annual ac- other parts of the annual accounts and the consolidated accounts. counts and the consolidated accounts are free of material misstate- We recommend to the annual meeting of shareholders that the in- ment. An audit includes examining, on a test basis, evidence supporting come statements and balance sheets of the parent company and the the amounts and disclosures in the accounts. An audit also includes as- group be adopted, that the profi t of the parent company be dealt with sessing the accounting principles used and their application by the in accordance with the proposal in the administration report and that board of directors and the managing director and signifi cant estimates the members of the board of directors and the managing director be made by the board of directors and the managing director when pre- discharged from liability for the fi nancial year. paring the annual accounts and consolidated accounts as well as evalu- ating the overall presentation of information in the annual accounts Stockholm, February 16, 2009 and the consolidated accounts. As a basis for our opinion concerning Deloitte AB discharge from liability, we examined signifi cant decisions, actions tak- en and circumstances of the company in order to be able to determine Jan Berntsson the liability, if any, to the company of any board member or the manag- Authorized Public Accountant ICA ANNUAL REPORT 2008

74 CORPORATE RESPONSIBILITY REPORT

Corporate Responsibility Report

The launch of ICA I love eco, support for sustainable Contents Overview 76 fi shing, work with food safety in stores and develop- Management approach 77 Environment 80 Society 85 ment of more energy-effi cient stores were among the Human rights 85 Product safety 87 key areas in ICA’s corporate responsibility work in 2008. Healthy living 89 Employees 90 On the following pages, ICA describe how the Group Community engagement 91 Economic development 93 works with these issues. GRI content index 94 Limited assurance report 95 Glossery and abbreviations ICA ANNUAL REPORT 2008

75 CORPORATE RESPONSIBILITY REPORT CORPORATE RESPONSIBILITY REPORT

Overview Management approach Corporate responsibility – a cornerstone With Good Business as a basis of ICA’s business philosophy

Customer confi dence is one of the keys to ICA’s success. Contributing to sustainable development therefore has a Having access to climate-smart, healthy and socially responsible choices is becoming high strategic priority. Sustainability issues have been integrated in ICA’s various operations for several years. increasingly important to ICA’s customers. ICA manages its CR work based on the view that every link in the chain is important, from supplier to employee and customer. Basis of our corporate responsibility work Report were selected based on the impact of ICA’s operations from a What follows is a description of the key systems and routines ICA uses in its work. The ability to gain and retain the confi dence of customers is critical to sustainability perspective, specifi cally on people and the environment, any successful retailer. Thorough, consistent corporate responsibility (CR) as well as their strategic importance to the Group as a whole. work is therefore a cornerstone of ICA’s business philosophy. The goal is Corporate responsibility management suggests priorities and monitors ethical dilemmas, risks and public opin- to contribute positively to society’s sustainable development while re- Limitations ICA’s CR work is built on a foundation of seven position statements ion. This cross-organizational team is led by the head of the Corporate maining profi table. The basis of ICA’s CR work is summarized in seven po- The CR Report includes the Group’s operations in transport, offi ces and called ICA’s Good Business. ICA is a signatory of the UN’s Global Com- Responsibility department. sition statements under the name ICA’s Good Business (see page 77). the stores wholly owned by ICA. Through agreements in Sweden and pact, and these position statements are in line with the Global Com- In 2007, ICA Sweden and ICA Norway began using the same IT tool Norway, ICA cooperates with independent retailers and franchisees. The pact’s ten principles on human rights, labor standards, the environment to collect data on CR issues. The new tool supports continuous reporting How to read the report information on stores managed by individual retailers or franchisees is and anti-corruption. With ICA’s Good Business as a basis, CR issues are and monitoring to ensure the long-term quality of the indicators used in ICA’s Corporate Responsibility Report is prepared according to the presented in cases where it is important to provide a comprehensive integrated into day-to-day operations. Policies and guidelines explain ICA’s CR reporting. In 2008, Rimi Baltic began to use the IT tool as well. third-generation guidelines (G3) of the Global Reporting Initiative (GRI). picture of ICA’s CR work. Operations outside ICA’s control, such as those how each of these positions is put into practice (see illustration). ICA’s CR work is coordinated with its two owners, Royal Ahold and The CR Report for 2008 is partly integrated into the Group’s annual re- of its suppliers, are not included in the report, although information on ICA periodically evaluates and revises its policies so that they stay ef- Hakon Invest. Ahold has established four pillars for its CR activities: cli- port and description of operations. For example, strategic sustainability suppliers of ICA’s private label products is given where appropriate. fective and relevant at the operating level. Policy revisions are made by mate action, healthy living, sustainable trade and community engage- issues are mentioned in the President’s statement on pages 2–5 and ICA’s Group Management, while updates of policy guidelines are issued ment. Ahold and ICA apply similar philosophies in their CR work, report questions regarding responsibilities and management are covered in the Important events in 2008 by ICA’s Business Ethics Management Team. The team, which serves as using the same guidelines and approach the development of this work corporate governance section. Other CR areas are brought up in the On pages 10–11 of the annual report is an overview describing ICA’s prin- a committee to Group Management, is responsible for following up CR along much the same lines. Hakon Invest actively supports ICA’s CR work sections on good business for customers, the stores and the Group on cipal goals and achievements in 2008 related to economic, environmen- goals and strategies and implementing the policies in operations. It also and encourages its portfolio companies to share ideas and information. pages 12–36. An overview on page 94 shows where in the annual report tal and social responsibilities. Some of the most important aspects of the various GRI indicators can be found. ICA’s CR work were: The foundation for ICA’s corporate responsibilty work This year’s report has been reviewed by ICA’s external auditors. See 1. Major commitment to measures and activities to improve quality in the limited assurance report on page 95. stores (see pages 25, 87–88). 2. Launch of ICA I love eco (see pages 17, 80–81). 3. Opening of sourcing offi ces in Hong Kong, Shanghai and Ho Chi Minh What ICA reports The ten principles of the UN ICA’s Good Business ICA’s CR policies, City (see pages 32, 85–86). The report covers the Group’s work in the areas of the environment, Global Compact with guidelines for 4. Further improvements in efforts to achieve ICA’s goal of reducing its community engagement and economic development. In the chapter on ICA’s Good Business describes the daily operations known greenhouse gas emissions by 30 percent by 2020 (see pages society, ICA discusses its work with human rights, product safety, ICA is a participant in the United Nations Group’s stance on corporate respon- 80–84). Global Compact and supports the healthy living, employees and its community engagement. This is ICA’s sibility. Together with ICA’s core val- Business ethics policy fourteenth corporate responsibility report. 5. Support for sustainable fi shing (see pages 78, 81). following ten international principles. (incl. the Competition and Law ues they are essential to achieve the Compliance) Group’s vision and mission. Reporting principles New store policy Basis of measurement and calculation Businesses should: ICA will: Fore more details, see www.ICA.se > About ICA. The information and key performance indicators presented in the CR 1. Support and respect the protection of internationally be driven by profi tability and high Health policy proclaimed human rights in areas they can impact. ethical standards Information policy 2. Make sure that they are not complicit in human listen to customers and always (incl. guidelines for fi nancial information) rights abuses. base its decisions on their needs Customer policy 3. Uphold the freedom of association and the effective nurture diversity and growth Quality and environmental Important corporate responsibility awards 2008 recognition of the right to collective bargaining. 1. ICA Norway received an award for the best CR work among Norwegian companies by the among employees policy 4. Eliminate all forms of forced and compulsory labor. communications fi rm 2veis. maintain an open dialogue inter- Personnel policy 2. ICA won the Swedish Design Prize 2008 for best packaging design with ICA I love eco, and 5. Effectively abolish child labor. nally and with the community came in third in a global design competition, Pentawards 2008, also for ICA I love eco. 6. Eliminate discrimination in respect of employment ensure quality and safe products Sponsorship policy 3. ICA Sweden received an award from the Swedish Celiac Youth Society (SCUF) for its work and occupation. promote a healthy lifestyle with a good assortment for allergy sufferers. 7. Support a precautionary approach to 4. One of ICA’s owners, Hakon Invest, shared sixth place among Nordic companies in the in- adopt sound environment practices environmental challenges. ternational Carbon Disclosure Project, CDP. ICA’s efforts to reduce its climate impact were to promote sustainable develop- Lisbeth Kohls the main reason for its placement. 8. Undertake initiatives to promote greater ment ICA ANNUAL REPORT 2008 Senior Vice President ICA ANNUAL REPORT 2008 5. ICA’s cookbook, “Hela Sveriges husman”, received a cultural achievement award from the environmental responsibility. Corporate Responsibility food organization Måltidsakademin in Sweden. 9. Encourage the development and diffusion of 6. The Swedish non-profi t Stiftelsen Kultur och Näringsliv presented the Glada Hudik Theater Phone + 46 8 561 502 12 environmentally friendly technologies. [email protected] that engage a large group of handicapped people, a major cultural award. Together with Ericsson, ICA is one of the chief sponsors of the theater. 10. Work against all forms of corruption, including 7. For the fourth consecutive year, Rimi Latvia was recognized as the company with the best extortion and bribery. reputation in the retail sector by the newspaper Diena and the PR-agency Nords Porter Novelli.

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Similarities and differences ICA’s impact along the value chain in ICA’s CR work between countries ICA’s ability to manage, take re- ICA’s CR work is governed by sponsibility and impact how goods ICA owned stores the same basic principles and are handled differs depending on and central policies regardless of country. where in the value chain a product assortment In general, the Swedish opera- happens to be. ICA does not have Transports and • New store program tions have come the furthest • Choice of energy sources any factories of its own, so its im- warehouses with their CR activities. Many • Choice of products pact is indirect at the production Great opportunity • Choice of shippers ideas and methods initiated in • Self-assessments level, e.g., in choosing suppliers, • Choice of transport roads Sweden are transferred to the • Internal training and HR maintaining a dialogue and con- Production • Choice of transport Norwegian and Baltic markets. development ducting audits. In logistics and at • Choice of suppliers modes Although the foundation for the retail level, the opportunities to • Choice of products • Choice of warehousing this work is the same, there are impact goods handling are much • Social audits facilities variations between countries. greater. For owned stores the • Product quality and • Choice of energy Following are a few reasons environment audits opportunity to impact is higher sources Independent retail- Customers why: • Dialogue and coopera- • Self-inspections • Product offerings than for the stores that are owned ers and franchisees Different positions in the tion with suppliers and • Agreements and • Loyalty programs by independent retailers or fran- market: In Sweden, ICA is a stakeholders cooperations • Dialogue and coopera- chisees. When the customer • Information and well-established player in a ma- Organic cod • Information and tion with suppliers and leaves the store with the product, lobbying stakeholders ture market. In Norway, on the In 2008, ICA was the fi rst Swedish food retailer to introduce fresh and frozen organic cod with the Swedish lobbying ICA’s ability to directly impact • Information and other hand, ICA is implement- KRAV label. Part of the ICA I love eco line, this wild cod is caught from sustainable stocks outside Lofoten, Nor- decreases again, and dialogue, lobbying way by a fl eet of no more than 15 boats. It is caught by hook and line, reducing the bi-catch and protecting

ing a turnaround in the compa- Limited opportunity information and lobbying grow ny, while in the Baltic countries smaller cod. Moreover, fi shing is limited to January–April. in importance. Supply chain the Group have been operating During the year, ICA also launched KRAV-labeled fresh salmon. Since 2007 KRAV-labeled frozen salmon fi llets in an expansive market. As a re- have been available as well. sult, the practical aspects of CR activities may differ as well. Organizations and networks and defend human rights. (From 2009 Amnesty offers a new form of Differences in customer be- ICA cooperates with a number of organizations and participates in sev- cooperation through seminars and educations). havior: Customer preferences differ a great deal. In the Baltic countries, Dialogue with ICA’s stakeholders eral networks focused on corporate responsibility, the environment, • Business Social Compliance Initiative (BSCI): European platform for re- the average consumers spends more than a third of their disposable in- ICA Group’s most important stakeholders are customers, employees, public health and food safety. By working with them, ICA has the oppor- tail, industrial and import companies to improve work conditions at come on food. The corresponding fi gure in Sweden is about one sixth, owners, independent ICA retailers in Sweden, franchisees in Norway, tunity to compare and improve the ways it works. Among the most im- consumer goods suppliers in risk countries. ICA participates through so Swedish customers have more freedom to try less price-focused al- suppliers, government authorities and a number of NGOs. portant organizations and networks are: its owner Ahold, which is a member. ternatives, such as organic products. These stakeholders have different expectations and place different • Ethical Trading Initiative Norway. Multi-stakeholder initiative to pro- Different opinions: Local opinions in the countries are important. demands on the Group’s CR work. Maintaining a continuous dialogue • Global Compact: The UN initiative to promote corporate citizenship in- mote fair trade practices. ICA Norway is a member. Different issues can trigger different responses depending on local pri- with these groups is an important part of this work. By doing so, ICA ternationally. ICA is one of around 150 global companies to have • CIES Global Social Compliance Program: Global partnership to build a orities. In Sweden, greenhouse gas emissions are a hot topic, whereas also receives help in setting new priorities and fi nding ways to improve signed the Global Compact’s Caring for Climate action platform. ICA is consensus on evacuating fair labor conditions in the supply chain. ICA Baltic customers are more interested in littering and unnecessary pack- its work. The aim, using various methods, is to better structure the dia- also a member of a Swedish government initiative, the Swedish Part- is a member of CIES. aging. One area Norwegians feel strongly about is healthy eating habits. logue. ICA held several discussions with stakeholders in 2008. In June, nership for Global Responsibility (Globalt Ansvar), which encourages • WWF: ICA has worked with WWF Sweden and WWF Norway to Of course, there are similarities, too: One example is the interest in for example, it met with around ten Swedish representatives of major Swedish companies to be ambassadors for human rights, fair labor promote sustainable fi shing and free range meats. local foods, which is true regardless of the market (see article on page 16). stakeholders to discuss the CR report. The results served as the basis for practices, a better environment and anti-corruption practices in ac- • World Childhood Foundation, Red Cross and Pink Ribbon/Swedish the design of this year’s report. ICA also arranged stakeholder discus- cordance with the principles of the Global Compact. Cancer Society: ICA works actively to collect donations and maintains sions about food and climate change during the year see page 80. • Amnesty Business Forum: Forum to encourage companies to respect long-standing cooperations with these organizations.

Stakeholder expectations Main GRI indicators for each Other key dialogue partners ICA’s CR work over the years Main stakeholder Expectations on ICA stakeholder group (see page 94) Customers Organic and climate-smart alternatives, Fairtrade-labeled products, product safety, human rights, integrity, PR1-6, EN3-29 Animal Welfare Platform Roundtable for Sustainable Palmoil 1987: Board of Directors de- 1995: ICA’s fi rst external envi- 2005: ICA’s healthy product health. Consumer organizations (through ICA’s owner Royal Ahold) cides to adopt an environmen- ronmental report. line, ICA Gott liv, is launched. 2000: 2006: Owners Consistent return, effective corporate governance, integrity. EC1, EC8-9 Dagligvareleverandorenes Forening Sports clubs tal plan. Phase-out of chlorine- ICA’s fi rst health policy. All Maxi ICA Hypermar- (DLF), (the Norwegian grocers’ trade Svensk Dagligvaruhandel and bleached paper products and 2001: ICA launches its rebrand- kets and ICA Kvantum stores association) Handels- og Servicenæringens environmentally hazardous ed organic product line, ICA in Sweden are labeled accord- Authorities Compliance with laws and regulations on the environment, product safety, product liability, product labeling. PR1-6, EN3-29 Forest Stewardship Council Hovedorganisasjon, (the retail trade batteries. Ekologiskt. ing to the offi cial Swan eco- associations of Sweden and Norway) 1988: ICA starts with health la- 2003: ICA’s truck drivers re- label. Global Compact Nordic Network Suppliers Transparency, fair cooperation, freedom of competition, integrity. SO1, SO3, EC6 Sweden Forest & Trade Network bels on store shelfs as a prepa- ceive eco-driving training. In- 2007: ICA introduces a new cli- ICA ANNUAL REPORT 2008 Government authorities ICA ANNUAL REPORT 2008 Swedish Association of ration for the offi cial Keyhole ternal criteria and inspection mate strategy and climate goals. Greenpeace label. system for animal welfare. 2008: ICA rebrands its organic Employees Skills management, training, diversity, gender equality, career development, work environments. EC3, LA1-13, HR4 Environmental Managers 1989: ICA’s fi rst quality and en- 2004: ICA adopts seven posi- product line as ICA I love eco. Kostforum in Norway Swedish Food Federation vironmental policy. tion statements on profession- ICA opens sourcing offi ces in KRAV Swedish Society for Nature NGO’s Overall responsibility for health, environmental and social issues, managing climate change, open communi- EC1, EC8, EN3-29, HR2-4 1991: The eco-friendly product al ethics and corporate re- Asia. ICA launches a food safe- LRF/Swedish Seal of Quality Conservation cation and integrity. line, Skona, is launched. sponsibility – ICA’s Good ty initiative in stores and de- Marine Stewardship Council Ziedot. Lv (Baltic charity) 1993: ICA ships goods and Business. Joins the UN’s Global velops a Swedish standard for Stores Customized, competitive product selection, product safety, integrity, social responsibility. PR1-6, HR2 Roundtable on Responsible Soy trucks by train. ICA launches its Compact. All of ICA’s private in-store food safety that is (through ICA’s owner Royal Ahold) fi rst organic product line, Sunda. label coffees are Utz certifi ed. adopted by the entire industry.

EC = Economic Performance, EN = Environmental Performance, SO = Social Performance, LA = Labor Practices and Decent Work, HR = Human Rights, PR = Product Responsibility

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Environment How the assortment infl uences the climate

Focus on climate action and organics Climate impact When ICA developed its climate strategy in the spring of 2007, it became evident that it needed more information on the impact of its products. Non-foods (lighting, Organic products and sustainable fi shing were a focus of ICA’s environmental work in Together with the Swedish Institute for Food and refrigeration, vehicles, etc.) 2008, as was climate action. ICA’s biggest climate impact comes from the stores, and sev- Biotechnology (SIK), ICA therefore conducted life- eral projects were conducted to reduce energy consumption. The increse of ICA’s known cycle analyses of a hundred of its private label products. Foods have the greatest climate impact greenhouse gas emissions leveled out during the year. early in their lifecycle, which decreases at the retail and consumer level. At the end of the product’s life, ICA’s stance on environmental work goal, and an assesment was done to better understand the climate im- its impact increases again, since a great deal of food In just a few years, environmental issues, especially climate change, pact also there. In the case of Rimi Baltic as well, its stores have the is thrown out rather than eaten. The cycle differs have grown tremendously in importance for both ICA and its custom- greatest impact. from non-foods such as light bulbs and cars, whose ers. ICA’s overriding goal is to reduce environmental impacts at every greatest impact is at the consumer level, where level of the Group: assortment, warehouses, offi ces, transports, busi- How ICA’s environmental responsibility they are used. Based on the analysis, ICA was able ness travel and stores. Energy consumption is a priority. ICA is also is refl ected in its assortment to calculate the climate impact of another 600 pri- working to reduce the impact of the products sold in the Group’s stores Efforts to expand the range of climate and environmentally friendly Foods vate label products. The conclusion was ICA’s great- and to improve the range of organic products. products and add more regional and local alternatives are ongoing. In est impact was in its product selection. ICA will use ICA tries to maintain a large share of eco-labeled products and con- 2007, ICA analyzed 100 private label food products to better understand Stages in the life cycle the study to dialogue with suppliers and over time analyze other products. tinuously expands its organic line. It also works in various ways to con- their climate impact and how it can be reduced. The aim is to use the Raw material production Merchandising1) Consumption Waste management vince customers to buy local, seasonal and organic products, which study as a platform for further discussions on climate work in the indus- 1) For ICA transports, warehouseing and sales are included in merchandizing. Source: SIK many are happy to do to reduce their own carbon footprint. (See arti- try. The results have signifi cantly improved the understanding of cli- cles on eating local on page 16, ICA’s cookbook success on pages 14–15, mate change. Among the conclusions, several of which were already everyday ecology on page 17 as well as www.ICA.se/klimat.) known, were: A choice of priorities in 2008 ICA’s response to inspections of the assortment in 2008 ICA has a direct impact on climate change through energy consump- • A diet based more on vegetables has less impact than one based on Organic products: The launch of ICA I love eco in Sweden and Norway Well-traveled food: The fact that retailers sell foods that are transported tion in stores and warehouses as well as transports and business travel. meats. was the biggest single measure taken to expand the range of organic long distances when alternatives are available from closer sources, es- The biggest impact is not goods transports, as many people believe, but • In the food chain, primary production (agriculture and fi shing) has the products in 2008 (see article on page 17). pecially fruit and vegetables, was a much-discussed topic during the energy use in stores. biggest impact. In terms of individual products, beef has the biggest ICA’s private label organic products are certifi ed against accepted year. ICA’s position generally is to buy produce as close to its stores as In 2008, ICA’s network for young leaders (see article on pages 30–31) impact. Big differences can arise within a product category, such as to- standards. Vegetable products are approved if they meet the EU’s re- possible and to buy seasonal products. When carrots are in season in focused on the Group’s climate strategy. matoes and beef products. quirements for organic production, KRAV in Sweden or Debio in Nor- Sweden, for example, ICA buys as much of them as it can for the Swed- • The 16 offi cial Swedish national environmental goals sometimes confl ict. way. The ingredients in animal-based organic foods must be approved ish stores. But it also has to make sure that the stores receive enough ICA’s climate strategy • Swedish greenhouse tomatoes can be both the best and worst from a according to KRAV in Sweden or Debio in Norway, which are more deliveries. When Swedish carrots are harder to fi nd, it turns to the next In April 2007, ICA’s Group Management adopted a new climate strategy climate perspective, depending on the type of energy used in the stringent than the EU’s rules on animal welfare. supplier in season. with the goal of reducing direct and known greenhouse gas emissions greenhouse. In terms of the non-organic fruits and vegetables it buys, ICA re- Red-listed fi sh: ICA’s basic position is to support sustainable fi shing. Dur- by 30 percent by 2020 compared with 2006. Emissions are measured in • Organic does not automatically mean more climate-smart than con- quires that they are grown according to GlobalGAP, the leading stand- ing the year, ICA was criticized for selling fi sh that WWF had red listed. CO equivalents. An analysis of operations in Sweden and Norway was ventionally produced. 2 ard for certifi cation of agricultural products. ICA Sweden’s product range includes two red-listed products, fl ounder then done from a climate perspective. Though it has not yet assessed Sustainable fi shing: Together with WWF and Greenpeace, ICA is work- and prawns. ICA evaluates each species individually. It listens to WWF, the impact of its product assortment, international transports and mar- In spring 2008, ICA discussed the results of the study with key stake- ing on the issue of sustainable fi shing. In 2008, ICA tightened its central its long-term partner, as well as other important sources such as the In- keting, ICA is working continuously to better evaluate its assortment. In holders. purchasing requirements and established closer cooperations with sup- ternational Council for the Exploration of the Seas (ICES), Greenpeace 2008, the Baltic operations were incorporated into the Groups emission pliers to offer sustainable fi sh and improve traceability. Since 2004, all and the Swedish Fishermen’s Federations. With regard to prawns, ICA cod in ICA’s main assortment is caught in the Barents Sea, which is clas- held meetings with WWF during the year on a new standard for prawn sifi ed as biologically safe. None come from endangered stocks in the farming. For fl ounder, the only red-listed species sold under its private Baltic and North Seas. ICA now offers KRAV-labeled cod as well (see ar- label, ICA expects to have an MSC label ready in spring 2009. MSC (Ma- ticle on page 78). In May, ICA Norway decided as a direct result of its rine Stewardship Council) is an international label for sustainable fi sh. Total emission of GHG in Share of Swan-labeled stores No. of Swan-labeled ICA partnership with WWF to stop selling a number of endangered species: (Read more about sustainable fi sh above and about KRAV-labeled cod Sweden, Norway and Baltics of all ICA stores in Sweden stores in Sweden bluefi n tuna, blue marlin, swordfi sh, skate, porbeagle and eel. At the on page 78.) same time, ICA began offering guides at its seafood counters explaining

24 which species are threatened. Environmental responsibility in logistics and transports 326 5. Climate smart packaging: In 2008, ICA introduced packaging for its or- ICA already maintains a high level in its work with logistics and trans- 1. 20 ganic fruit and vegetables where petroleum-based plastics have been ports. Ensuring that trucks are well-fi lled, make as few starts and stops 4. 269 replaced by starch-based alternatives. They are biodegradable and meet as possible, and have carefully planned routes is obvious. ICA is also try- the EU’s composting requirements. ing to take over more transports from suppliers to make transports 14 194 New chemical routines: The EU’s Registration Evaluation Authorisation even more effi cient with more fi lled trucks, even though this leads to an ICA ANNUAL REPORT 2008 3. ICA ANNUAL REPORT 2008 and restriction of Chemicals (REACH) requires producers and importers increase in ICA’s direct climate impact from transports. To reduce total 2. of packaging or products to document whether the chemicals they use mileage, it is working continuously to raise effi ciencies in infrastructure are safe for humans and the environment. In 2008, ICA worked on new and distribution. See table on page 84 for more detailed information. 1. Energy stores 58.6% routines as well as training and information for buyers and store em- 2. Energy warehouses 2.7% ployees on what is required to comply with the EU legislation. 3. Cooling agents 10.9% 4. Transports 26.7% 5. Business travels 1.2% 06 07 08 06 07 08

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Among the key projects in ICA’s activities in 2008 to achieve its climate change goals the transport area: Flexiwagon: ICA participates in the Flexiwagon rail project ICA will: ApprovedOngoingCompleted ApprovedOngoingCompleted to move transports on road ‰‰‰ Lobby offi cials on issues important to ICA’s climate change ‰‰‰ Introduce environmental certifi cation at stores in Norway. to train by loading trucks strategy. onto railcars. Specially de- ‰‰‰ Reduce energy consumption in existing stores, for example by ‰‰‰ Increase the number of climate analyses from 100 to 200 prod- test of systems that monitor energy consumption in Swedish signed railcars have been built ucts (in cooperation with SIK – the Swedish Biotech Research In- stores. and are now being tested. If stitute). plans hold, they will be in ‰‰‰ Substantially lower energy consumption in new stores in service in 2010. ‰‰‰ Repeat the 100 climate analyses made during 2007 to see ef- relation to current stores. Demands on drivers and fects of change. ‰‰‰ Introduce pilot projects to test solar panels on store roofs as freight forwarders: During ‰‰‰ Create tools for the buying organization to facilitate adding the a complementary energy source. several years, ICA has re- climate issue to other demands in the sourcing process. ‰‰‰ quired its truckers to receive Continue to introduce the CoolICA system in Norwegian stores ‰‰‰ Offer regular Swedish customers a discount on energy-effi cient to monitor and analyze electricity consumption. eco-driver training. By using light bulbs in autumn 2008. the latest engine technology ‰‰‰ Provide eco-driving training to all drivers who deliver for ICA in in the vehicles and alternative Solar power on the roof ‰‰‰ Launch an organic campaign in Norway in autumn 2008. Norway. fuels, emissions as well as cli- To achieve its climate-change objectives, ICA is working actively on several projects involving renewable energy. ‰‰‰ Offer renewable electricity contracts to Swedish ICA stores. ‰‰‰ Introduce green carpools, to better control mileage and possibly mate impact from transports One of the projects is installed on the roof of the Maxi ICA Hypermarket Erikslund in Västerås, where 300 m2 reduce the need for department cars. decrease even more. ICA re- ‰‰‰ Ship more goods by rail and sea to reduce truck transports. solar panels have been mounted. They generate an estimated 25–50 MWh per year, enough to meet the elec- ‰‰‰ Provide employees who drives on the job training in eco-driving. quires freight forwarders to tricity needs of 30 homes for a whole year. ‰‰‰ Assist in the development of a new rail solution to transport report this. Though the panels do not meet all the store’s energy needs, they do offset a share. ICA’s real estate man- trucks onboard rail cars. ‰‰‰ Introduce climate-neutral business travel by air beginning in 2008. Environmental and traffi c agement unit is responsible for the project. ‰‰‰ Plan to introduce ISO 14001 certifi cation at ICA’s warehouses ‰‰‰ Begin climate change discussions in Rimi Baltic and audit the safety: In 2008, ICA revised its “We have access to a 1,000,000 m2 roof, and this is one way to test alternative energy. The Maxi ICA has in Norway (the Swedish warehouses are already certifi ed). company’s greenhouse gas emissions. environmental and traffi c become one of Sweden’s largest test sites for rooftop solar panels,” says Bo Liffner, managing director of the safety requirements. Diesel real estate unit, ICA Fastigheter. fuel with at least a fi ve percent Solar panels have a useful life of about 25 years, are basically maintenance-free and do not produce any alternative fuel content must disruptive noise or emissions. The project will be evaluated at the end of 2009. be used. In addition, refrigerat- ed vehicles are required to use in all its warehouses. As a result, about 4,600 fewer tons of CO2 are re- The offsets are purchased at the conclusion of the fi scal year so that all carbon dioxide gas refrigera- leased than if the warehouses had used electricity generated from the travel is included. The money paid for the offsets is used to build wind tion equipment, a better environmental alternative than traditional Carbon emissions from stores and warehouses also decreased because average mix of Sweden’s energy sources. Since 2008, ICA offers all power turbines in China. equipment. As of 2009, all vehicles that drive for ICA must also have alco- more stores are using renewable electricity, which has less impact than Swedish ICA retailers renewable electricity for their stores. hol locks. the average energy mix consumed in the Nordic region. Lids and doors on refrigerators and freezers: Swedish, Norwegian and ICA makes it easier for customers to take environmental ICA uses several methods to reduce its energy use and environmen- Baltic stores are in the process of placing lids on their freezers, doors on responsibility Environmental responsibility in the supply chain tal impact: refrigerated cases or air curtains on refrigerators and freezers. An inde- Climate smart: ICA’s website has a section with advice and suggestions Turn off lights: and store operations In ICAs warehouse in Umeå, Sweden, sectional lighting pendent test at ICA Supermarket Floda, Sweden, showed that adding how customers can minimize the food they end up throwing out and Reducing energy consumption is an important priority for ICA. Ware- fi xtures were installed in 2008. This means that lights can be turned off locks and doors reduced energy consumption by 26 percent. The tem- thereby also reduce their environmental impact (www.ICA.se/klimat). houses and stores account for a large share of the environmental impact in any part of the facility that is not being used. ICA expects the Umeå perature in refrigerated display cases was more consistent and safer, Energy campaigns for frequent customers: ICA in Sweden ran a cam- because of the energy they use. In total, energy use in warehouses de- unit to reduce its energy consumption by 146,000 kWh annually. and the staff found the work environment more comfortable. paign in 2008, as it did in 2007, to offer regular customers better prices Transition to renewable electricity: creased with nine percent during the year. The Swedish stores, and By using renewable electricity (pri- Develop control systems: In Norwegian stores, ICA uses the CoolICA on energy-saving light bulbs. The bulbs that where sold are estimated mainly the large ones, decreased their energy consumption with two marily wind, hydroelectric and solar), ICA can reduce its climate impact system, which monitors energy consumption and temperatures. In Bal- to reduce CO2 emissions by around 20,000 tonnes or 330 GWh based percent. See page 84 for more details. dramatically. ICA Sweden uses eco-labeled electricity or district heating tic stores it uses an Automatic Monitoring System (AMS); 402 stores on the average mix of Sweden’s energy sources. have now installed it. In Sweden, tests are being conducted on a new Product analysis: ICA is working continuously to offer customers more system that monitors energy consumption. eco- and climate-friendly alternatives. Three examples are the launch of Replace lighting: In 2008, ICA worked on a project to replace older light- ICA I love eco, KRAV-labeled cod and the discussion with Swedish grow- Balancing consumption and wastes ing in stores with more modern, effi cient alternatives that consume less Greenhouse gas emissions ers of vegetables on energy conversions based on ICA’s experience with • From transports between warehouses energy. The project is under way in Sweden and Norway. climate audits. ICA consumes fuel and energy in its operations. Energy consumption Swan-labeled stores: and stores, tons of CO2 equivalents: 85,222 In Sweden, all new ICA stores that are opened are Green shopping bags: Rimi Baltic was the fi rst of the big retail chains in This in turn results in waste products and green- • Total energy consumption in warehouses: 127 million kWh • Energy in stores, tons of CO2 labeled according to the Nordic Swan eco-label. The number of Swan house gas emissions. The illustration below pro- • Total energy consumption in stores: 1,549 million kWh the Baltic countries to introduce cloth shopping bags into its perma- equivalents: 187,162 vides a basic overview of the balance in 2008 be- labels for existing stores in Sweden increased during the year, mainly in nent assortment. • Energy in warehouses, tons of CO tween ICA’s electricity and fuel consumption on 2 the ICA Supermarket format where there were 117 labeled stores by equivalents: 8,699 the one hand and its climate and environmental • Coolant consumption in warehouses, year-end 2008, in comparison to 64 in 2007. impacts in the form of greenhouse gases and tonnes of CO equivalents: 510 wastes on the other. For detailed information, see 2 • Coolant consumption in stores, Rimi Baltic, the tables on page 84. ICA’s stance on business travel ICA ANNUAL REPORT 2008 ICA ANNUAL REPORT 2008 tonnes of CO2 equivalents: 34,238 Fuel consumption ICA has guidelines on the choice of company cars and during 2008 the • Total fuel consumption by external and internal TotalT wastes amount of eco-friendly cars in ICA’s fl eet increased from 14 to 31 per- shippers, millions of liters: 33 • Total wastes from warehouses and par- cent. In 2008, ICA Sweden joined a green car pool that offers employ- • Business travel in Sweden, millions of liters: 0.5 tially from stores, tonnes: 172,261 ees an environmentally adopted alternative to using their own cars. In • Percent recovered or recycled: Sweden and Norway, the number of video conferences increased with ICA Sverige, warehouse 98 eight percent and phone conferences with 16 percent, while the air trav- ICA Norge, warehouses and stores 98 Rimi Baltic, warehouses and stores 27 els decreased. ICA began buying carbon offsets for its air travel in 2008.

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Distribution of energy sources, electricity consumption Business travel 2008 2007 2006 Society in warehouses and stores. 1) 3) CO2, emissions from business travel by air 2,585 3,071 3,250 1) CO2 emissions from buiness travels by car 1,121 1,300 1,399 1) CO2 emissions from buiness travels by train 0.01 0.01 0.01 3. Strong commitment at every level business travel by train (saved tonnes CO2 in comparison with the same travel made by car) 1) 2) 330 314 329 1. Share of renewable energy 57% business travel by car in ICA Sweden, litres 467,875 542,622 584,256 New sourcing offi ces in Asia, further skills development opportunities for employees and the 2. Share of energy from nuclear power 20% introduction of a new quality standard for Swedish stores. ICA worked on many fronts in 1. 3. Share of fossil fuels 23% 1) CO2 emissions reported in CO2 equivalents Business travels by air includes ICA Sweden and ICA Norway. 2. Business travel by train and car includes ICA Sweden. 2008 to take its share of responsibility. 2) In comparison to the same travel made by car. 3) Revised since reported data for 2007 partly contained emissions from another company. Every day millions of people come into contact with ICA and its suppli- 1. Human rights: ers in some way. Customers, employees, owners and other stakehold- Sweden Norway Baltics ers expect ICA to maintain high ethical standards and act properly at On site to monitor suppliers Energy consumption 08 07 06 08 07 06 08 07 066) every level of operations. This is a great responsibility ICA treats with Energy consumption in warehouses, TWh (TJ) 86 99 96 24 25 25 17 17 17 the utmost seriousness. Being on site to monitor suppliers in Asia is an important Energy consumption kWh/m2 in warehouses 2674) 2514) 2164) 222 234 249 217 251 251 In 2008, ICA worked intensely on two areas in particular: the estab- Energy consumption in stores, TWh (TJ) 997 1,018 956 369 348 347 184 183 183 step in ICA’s human rights work. It makes it much easier lishment of sourcing offi ces in Asia, which makes it easier to maintain a Energy consumption kWh/m2 in stores 466 4945) 522 587 556 568 441 443 443 to monitor and help suppliers in their efforts to achieve close dialogue with suppliers (see article on page 32), and the creation of food safety standards for stores (see the article on quality coaches the requirements ICA has set. Sweden Norway Baltics and new Swedish food standards on page 25). 6) How ICA works with labor conditions in connection with CO2 emissions, tons of CO2 equivalents 08 07 06 08 07 06 08 07 06 ICA’s social responsibility guidelines can be found in the quality and From shipments between warehouses product sourcing and stores7) 57,671 53,934 49,533 15,009 13,454 11,010 12,542 9,993 9,993 environmental policy, which describes the Group’s overall position with ICA has no factories of its own, instead it is selling products manufac- From energy in stores 97,328 101,805 95,567 36,876 34,756 34,716 52,958 55,643 55,643 regard to self-assessments by suppliers, producer responsibility, local tured by suppliers from around the world. It is committed, therefore, to From energy in warehouses 1,011 1,344 1,429 2,445 2,477 2,523 5,243 5,470 5,470 production, product traceability, animal welfare, eco-labeled products, monitoring its suppliers’ social policies and workers’ rights. The require- From cooling agents, warehouses 141 141 141 369 369 369 0 0 0 pesticides, packaging and additives. ments ICA places on its suppliers are based on the UN’s declaration on From cooling agents, stores n/a n/a n/a n/a n/a n/a 34,238 34,238 34,238 ICA’s guidelines for interactions with suppliers and partners can be human rights, children’s rights and the International Labour Organisation’s found in the business ethics policy. The personnel policy describes ICA’s core conventions. These requirements are included in the guidelines for 8) 9) 9) Sweden Norway Baltics position on employees. ICA’s guidelines on health issues are in the responsible sourcing in ICA’s quality and environmental policy. Further- Wastes, tons 08 07 06 08 07 06 08 07 06 health policy. more, ICA requires its suppliers to comply with the laws in each country. Corrugated cardboard 1,657 1,480 1,415 10,818 n/a n/a n/a n/a n/a The following pages describe in more detail how ICA works in fi ve The business ethics policy contains guidelines on relationships with Compostable waste 4,078 4,000 4,208 86,148 n/a n/a n/a n/a n/a key areas: human rights, product safety, healthy living, employees and suppliers and partners with regard to bribery and gifts, fair competition 10) Electronic waste 24 20 22 1 n/a n/a n/a n/a n/a community engagement. and shareholdings. Hazardous waste 20 14 21 2 n/a n/a n/a n/a n/a In addition to its commitment to the Global Compact, ICA supports Combustible waste 2,572 2,664 2,465 14,990 n/a n/a n/a n/a n/a and complies with other human rights initiatives, such as the OECD Landfi ll waste 240 327 304 2,470 n/a n/a n/a n/a n/a Guidelines for Multinational Enterprises, the ICC Business Charter for Recycled waste 860 790 780 1,630 n/a n/a n/a n/a n/a Sustainable Development and the ICC’s principles on countering cor- 1,720 Soft plastics 1,524 1,478 609 n/a n/a n/a n/a n/a ruption and bribery. Total waste volume 11,172 10,820 10,69310) 116,668n/an/a44,421n/an/a % recovered or recycled waste 98 97 97 98 n/a n/a 27 n/a n/a ICA’s work with suppliers To assist its suppliers in their development, ICA has worked for several 4) Revised due to updated data regarding warehouse area, corresponding recalculation has not been done for 2006. 7) Data 2006–2007 is updated with a revised emission factor for calculation of CO emissions from diesel. Unlike 2 years with product quality and social responsibility audits. When its In the end of 2006 one warehouse unit was opened and during 2008 ICAs operation at one warehouse unit previous years both owned and external transports are reported. was closed down. This gives a lower average consumption in 2006 and a higher average consumption in 8) Includes waste from warehouses and partly soft plastic from stores. Asian sourcing offi ces were opened in 2008, the organization added 2008 since the calculation is based on warehouse area at year-end. 9) Includes waste from warehouses and stores. Due to not verifi able data 2006–2007 these is not reported. 5) Average consumption is based on store area at year-end; differences may exist in relation to 2007 reporting. 10) Revised due to additional data regarding waste quantity. quality and corporate responsibility teams in Hong Kong, Shanghai and 6) Since data from 2006 cannot be obtained they have been estimated to be the same as for 2007. From 2007 Ho Chi Minh City. Rimi Baltic is a wholly owned subsidiary of the ICA Group.

Fuel consumption Sweden, Fuel consumption Norway, Fuel consumption Rimi Baltic, No. of production units audited Sales of millions of liters millions of liters millions of liters during 2008 according to Fairtrade products ICA Social Audit ICA-stores in Sweden, SEK m 22 BSCI ICA-stores in Norway, NOK m 21 Fairtrade 19

85 6 100 5 5 4 4 4 ICA ANNUAL REPORT 2008 62 ICA ANNUAL REPORT 2008

15 12 11 14

06 07 08 06 07 08 06 07 08 07 08 07 08 Since 2007 ICA has taken over shipping from transport providers which have led to an increase in diesel consumption for ICA. Reported diesel consumption 2006-2008 includes both owned and external trucks for transports between ICA’s warehouses and stores in contrary to previous years repoorts.

84 85 CORPORATE RESPONSIBILITY REPORT CORPORATE RESPONSIBILITY REPORT

ICA’s goal is that all its private label suppliers in risk countries undergo 2. Product safety: Quality assurance of private labels second- or third-party audits by 2010. The audits will focus on the fol- ICA requires its private label suppliers to meet one of the standards rec- lowing key elements: Safer food handling ognized by GFSI. These standards cover management systems, critical • Prohibition against hazardous working conditions where children are point inspection programs and accepted manufacturing practices. ICA exploited economically, prevented from receiving an education, or Food and product safety initiatives distinguished ICA’s also accepts suppliers that meet ISO 22000, a new standard for food suffer in terms of their health and social development. operations in 2008. In Sweden, ICA grabbed the attention safety management systems. For small-scale food production, ICA ac- • Prohibition against forced labor. of the grocery industry for its efforts to develop and in- cepts IP Livsmedelsförädling (IP Food Processing). • Prohibition against discrimination. From January 2008, ICA requires its private label suppliers of cosmet- • Healthy, safe workplaces with access to drinking water and sanitary troduce new food safety standards in stores. ics and hygiene products to be certifi ed by BRC Global Standard Con- facilities. ICA’s stance on product safety sumer Products or similar standards. Other private label suppliers of • Freedom of association and the right to collective bargaining. ICA monitors product safety the whole way from primary producer to near-foods and non-foods must be certifi ed according to ISO 9001 or simi- • Acceptable working conditions in terms of wages, working hours and end customer and feel that safety and quality are critical to the entire lar standards. free time. industry. As a result, this work is often done together with industry as- Private label products are quality tested on several levels. ICA’s prod- sociations and other grocery chains. (See the article on quality coaches uct quality departments test new and existing products based on their Through one of its owner Royal Ahold, ICA is a member of the Business and new quality standards in Swedish stores on page 25, and on the appearance, odor, taste, consistency and nutritional content. During Social Compliance Initiative, BSCI, a European non-profi t organization opening of sourcing offi ces on page 32.) 2008, about 12 000 tests were conducted, whereof about 2 600 sensori- that offers a system to audit and improve working conditions among ICA participates in the Global Food Safety Initiative, GFSI, which has cal tests. Ingredients, microbiological limits and nutritional values are suppliers. ICA encourages its suppliers to be audited by a third party, in created a benchmarking process for food safety management schemes specifi ed in detail. The supplier’s traceability system and packaging in- addition to its own, so-called second-party audits. ICA has also devised for suppliers. All of ICA’s suppliers must comply with current laws and formation are verifi ed as well. its own method to audit suppliers, ICA Social Audit, with requirements Variety in the meat section have approved self-assessment programs. With the help of audits and The number of private label products sold by Rimi Baltic has grown For the last ten years, ICA Sweden has been working with WWF to on par with those of BSCI. It is a strength for ICA to be able to use its questionnaires, ICA is working to ensure that the requirements are met. substantially in recent years, and a special quality organization works with promote free range beef. The project began as a way to preserve bio- own social audits in combination with third-party audits to help its With local suppliers, ICA performs separate inspections to ensure that quality assurance of these products. This work includes supplier audits. logical diversity in Swedish pastureland. That requires farmers and Asian suppliers more quickly reach the level it demands. Through they are compliant with the requirements. Ahold, ICA’s suppliers in Africa receive support with BSCI audits. grazing cattle, which led to the idea of selling the value-added meat Routines for tracing and recalling products from these animals. ICA and WWF have a long-standing cooperation The most common defi ciencies ICA identifi ed in its audits in Asia in Quality assurance in ICA’s logistics By law, every level in the food chain leading to the store must be able to on the production and local sale of grass-fed beef. In early 2008, ICA 2008 were unacceptable safety and hygiene standards, substandard Maintaining an unbroken refrigerated chain and a thorough inspection trace its products one step backward and one step forward in the chain. also launched its own free range beef. 35 animals a week are avai- wages and a failure to report employees’ ages. plan for food hazards, a so-called Hazard Analysis and Critical Control ICA’s traceability routines are coordinated between countries. Thanks lable to ICA centrally. The meat is packaged at ICA’s facility in Väs- Point (HACCP) plan, are ICA’s two main goals in its efforts to quality as- to better control systems and routines, even small goods shipments can terås and can be ordered by any ICA retailer in the country. Since the Important events in 2008 sure foods in the supply chain. The HACCP plan, which is required by be recalled when necessary. start, about 32,100 hectares of pastureland have been restored. Three sourcing offi ces in Asia: ICA opened sourcing offi ces in Hong- law, describes how to identify, assess and control food risks. (Read more When ICA suspects that a product may pose a health risk to custom- Read more about ICA’s environmental work on pages 80–84. kong, Shanghai and Ho Chi Minh City (see article on page 32). under Important events in 2008.) ers, it contacts the responsible supervisory authority and issues a press Supplier audits: ICA improved the process to audit its suppliers’ most release. In 2008, releases were issued on recalls of the three following common defi ciencies relative to the requirements ICA has set. Quality assurance in stores products in Sweden: Fairtrade: Audits: In ICA Sweden’s assortment, the number of Fairtrade prod- In 2008, ICA Social Audits were conducted at tuna plants that ICA’s stores have an effi cient self-inspection program for hygiene and • A shipment of bike racks for cars. ICA had sold the racks for several ucts reached 51 and sales increased with 61 percent during the year. In were named in Fair Trade Center’s inspection in 2007. Some measures food safety. To further simplify this work, a web-based program that op- years without incident, but decided to recall them after receiving three ICA Norway, sales increased with 27 percent and the number of prod- still had to be taken, but in several areas there had been improvements. erates with the store’s handheld computers, called ICA’s Digital Self-In- returns in a short time span. ucts in the assortment were 36. For example, legal information were available in both Burmese and Thai, spections, was developed in 2008. ICA also devoted great energy to im- • ICA’s wine-marinated pork loin was recalled after an internal inspection Grower premium: Part of the cost of Fairtrade and Utz certifi ed prod- so that factory workers can understand their rights and have access to proving food safety in Swedish stores. The three biggest measures were showed traces of listeria. ucts consists of a premium which is paid to the grower to invest in so- safety information. hiring 27 new quality coaches and two team-leaders, conducting an ex- • ICA’s Italian-style grilled and roasted vegetables were recalled after cial projects, such as life insurance and preschools. In 2008, sales of tensive food quality roadshow to 24 locations and devising a new stand- evidence of salmonella was found in a self-inspection. ICA’s Utz certifi ed coffee and Fairtrade bananas, coffee and ICA’s private ard for food handling in stores. (Read more on page 25.) label roses from Kenya generated approximately SEK 2.1 million.

Representation in all Percentage of women in each company 20081) 2007 2006 ICA Sweden: Food safety numbers companies, % Percentage of women among all employees, ICA AB 54 53 n/a ICA’s activities in Sweden ICA’s activities in Norway Percentage of women at managerial level, ICA AB 34 44 40 66 53 35 52 34 Percentage of women among all employees, ICA Sweden 32 25 n/a Number of quality audits in stores 4 200 Number of quality-certifi ed stores in Norway 637 Percentage of women at managerial level, ICA Sweden 32 21 21 Number of quality-trained employees in stores 5 000 Number of hygiene inspections in Norway 308 Percentage of women among all employees, ICA Norway 57 57 n/a Number of quality-trained employees in logistics 3 000 65 66 Percentage of women at managerial level, ICA Norway 26 36 35 Number of employees with leadership training 1 000 ICA ANNUAL REPORT 2008 ICA ANNUAL REPORT 2008 Number of in-depth analyses prior to new standard in stores 1) 47 48 Percentage of women among all employees, Rimi Baltic 87 87 n/a 500 Percentage of women at managerial level, Rimi Baltic 77 80 75 Number of visitors on ICA’s quality roadshow 2 000 2) 34 Managerial level, women2) Managerial level, men Percentage of women among all employees, ICA Bank 68 71 n/a Number of quality-trained employees in Sweden 1 900 Employees, women Percentage of women at managerial level, ICA Bank 47 42 40 1) Another 500 in-depth analyses were scheduled in the fi rst quarter of 2009. 2) The roadshow continued in the fi rst quarter of 2009. n/a Employees, men 1) In 2008 through a reorganization, wich may have affected the outcome. 06 07 08 2) Covering all levels of management within the group, which may differ from the classifi cation reported in the annual report.

86 87 CORPORATE RESPONSIBILITY REPORT CORPORATE RESPONSIBILITY REPORT

Important events in 2008 3. Healthy living: fi gures, that customers are paying attention and changing their habits. Focus on quality in Swedish One example is that demand for butter rose signifi cantly in 2008, while stores: Proposal for an industry- Inspiring a healthy lifestyle margarine, with more additives, sales fell. ICA’s position is that additives wide food safety standard in should be used sparingly and only if they add value for customers in the stores, recruitment of 27 quality Inspiring people to eat a healthier diet is one of ICA’s form of nutritional value, safety, etc. Additives are always clearly stated coaches and a nationwide food most important challenges. Important events in 2008 in- on the ingredients list so that customers can choose sensibly. Read more about ICA’s work with additives on page 88. safety roadshow to stores (see cluded the acceptance of the Keyhole as the offi cial label article on page 25). Trans fats Improvements to food safety in for healthy foods in Norway and Denmark, an award for ICA has been working intensely for several years to remove industrial logistics: ICA Sweden upgraded ICA’s work with food allergy sufferers and continued trans fats that can be found in partly saturated fat. Since 2008 there is temperature controls in its food efforts to ensure that no unnecessary additives are used no industrial trans fat in ICA private label products. transports, in addition to conduct- in ICA’s private labels. ing a comprehensive review and Tobacco and alcohol making improvements to its ICA’s stance on health issues ICA is not permitted to sell tobacco, alcohol or lottery or gaming tickets HACCP plan to ensure food safety. Making it enjoyable to shop for and prepare tasty and nutritious meals to underage customers. ICA inspects retailers to ensure that they com- Norwegian quality work in logis- is one of ICA’s most important responsibilities. The goal is to be a leader ply with the law by using undercover purchases. ICA Sweden’s goal is tics: ICA Norway created a sys- in inspiring people to eat healthy and in offering a range of products for that stores properly check IDs at least 85 percent of the time. In 2008, tem with employees responsible food allergy sufferers. Together with Swedish retailers, ICA is helping in- IDs were checked satisfactorily in 97 percent of cases with lottery and for food safety. These employees dividual stores to improve their health image by cooperating with local gaming tickets and in 79 percent with tobacco and alcohol. Through interact through a meeting forum health planners, dietitians and health coaches. ICA maintains an open continous information and training of store employees, ICA wants to and utilize the same, intranet- dialogue with politicians, authorities, industry colleagues and other reach a high level of ID checks. based quality handbook. stakeholders on how retailers can help to reduce public health problems. In-house training in Baltic coun- Important events in 2008 Norwegian Keyhole: tries: As of 2008, all food han- Healthy products In 2008, the authorities in Norway and Denmark dling and safety training in the ICA is committed to developing and marketing a line of healthy products decided to adopt the Keyhole as their offi cial label for healthy foods. Buddy with Your Body such as fruit, vegetables and whole grains. For several years, ICA has had ICA has worked actively for years to make the label the Nordic stand- three Baltic countries is provided For the seventh consecutive year, elementary students in Sweden received an invitation to attend a lesson on its own healthy line, ICA Gott liv, in Sweden and Norway. In Norway, it ard. Efforts together with Nordic authorities to establish common rules internally by ICA. fruit and vegetables in their local ICA store. Around 94,000 students took part in 2008, or 50 percent of all chil- New product safety standard: successfully launched keyhole-labeled products a number of years ago. for labeling healthy products are now continuing. dren in the two grades in question. The invitation came from ICA and the Swedish Cancer Society, which togeth- Many customers regard organic products as a healthier alternative, and Swedish allergy award: During the year, ICA Sweden received an award ICA participated in the creation er sponsor a campaign called “Buddy with Your Body – 5 a day” to encourage children to eat a healthier diet. in that sense the launch of ICA I love eco can be seen as part of ICA’s from the Swedish Celiac Youth Society (SCUF) for helping those who of the IP Livsmedelsförädling cer- “Good eating habits are formed early in life, so it is important to reach out to the children. If we can get them health focus. are gluten, lactose and soy protein intolerant. The motive was as fol- tifi cation system, which was to eat more fruit and vegetables, we will have taken an important step toward promoting good health,” says lows: “In an accessible and positive way, ICA has taken an allergy-friend- launched in autumn 2008. Certi- Christina Karlsson, dietitian at ICA Sweden. Food allergies ly approach on its website and in weekly fl yers and stores.” fi cation is designed for small- In addition to the store visit, teachers receive a brochure for the students and an information folder for their The number of food allergy sufferers in the Nordic region is on the rise. Award for not selling cigarettes: See article on page 90. scale food production. The aim parents to support further lessons on healthy eating. Read more about ICA’s health work on page 89. ICA always declares all the ingredients in its private label products so that Norwegian health supervisor: ICA Norway strengthened its health image was to develop a simpler, less de- customers can make informed choices. It also tries to maintain a wide by hiring a supervisor of health-related issues. tailed standard that works for range of products for food allergy sufferers in stores, such as gluten- and Healthy living in Norway: All Norwegian ICA Supermarked stores con- small producers. lactose-free alternatives. All the recipes ICA develops are adapted for tinued to design sugar-free checkout areas, which were introduced in late Review of additives: ICA conducted a major review of the additives in food intolerances. For example, every recipe in the ICA cookbook, “Hela 2007 and where fruit, nuts and water have replaced candy and soft drinks. its private label products and formulated new action plans. Much of the Sveriges husman” (see page 14–15), offers variations for those who are Also some Norwegian Rimi stores has suger-free checkout-areas. In new focus was on removing glutamates from ICA private label products. gluten or lactose intolerant. During the year, ICA also tightened the guidelines for additives in the Rimi stores candy is placed in the other end of the store. Norwegian allergy sufferers: quality and environmental policy. Additives During the year, the ICA Supermarked for- The issue of food additives received great attention in Sweden in 2008. mat in Norway started a work in order to offer more products for allergy ICA is closely following the debate and sees evidence, through its sales sufferers.

No. of keyhole-labeled products4) Sales of keyhole-labeled No. of products for food allergy Sales of products for food allergy Recalls and withdrawals in 2008 products4) sufferers4) sufferers3)4)

ICA Sweden ICA stores in Sweden, SEK million ICA Sweden ICA Sweden, SEK million Numbers of recalls and withdrawals products 20081) 2007 2006 ICA Norway ICA stores in Norway, NOK million ICA Norway 1,121 1) 493 1,610 1,048 ICA Sweden 112 101 99 9,909 9,340 420 929 Within private label products ICA Sweden 38 42 43 1,174 365 ICA Norway 66 68 59 1,050 900 ICA ANNUAL REPORT 2008 Within private label products ICA Norway 14 22 12 750 ICA ANNUAL REPORT 2008 700 Rimi Baltic 581 646 406 2,655 2,730 133 140 Within private label products Rimi Baltic 45 682) 19 98 1) During 2008 three recalls of private label products were made. Recalls concerns measures that are communicated publicly in order to eliminate risk for health or the environment. 2) The number of private label products within Rimi Baltic was tripled in 2007. 06 072) 08 07 08 06 07 08 06 07 08

1) For 2008, 285 keyhole labeled products within fruits and vegetables 2) During 2006 the keyhole criteria changed, which also had an impact 3) In 2008, sales of productsfor food allergy sufferers in Norwegian ICA are included. on the number of products during 2007. and Rimi stores totaled approximately 5 million NOK. No data availa- 4) Data not available for Rimi Baltic. ble for 2006-2007. 88 89 CORPORATE RESPONSIBILITY REPORT CORPORATE RESPONSIBILITY REPORT

4. Employees: Strong commitment teeism, ICA conducts an analysis and takes special measures to review 5. Community engagement: the organization, draft an action plan and, when necessary, obtain sup- to internal training port from outside specialists. A positive force in society

In 2008, further work was done to bolster ICA as an em- Important events in 2008 In 2008, ICA Bank won an important contract together ployer brand. The adoption of a more results-oriented Dialogue tool: Since 2006, ICA conducts an annual employee survey, with Kuponginlösen to provide payment services in rural organization continue through improvements to per- the results of which serve as the basis for a dialogue between employer communities after Svensk Kassaservice was dissolved. and employee on working conditions and potential improvements to formance reviews. ICA School strengthened its focus on operations. The survey is closely aligned with ICA’s stance on leadership ICA also continued its projects to assist unemployed quality work in stores through various courses on food and human resources and focuses on each employee’s view of his or young people in Norway and Sweden. safety. her working conditions and ability to perform. In Sweden a total of 3,911 employees participated during the year, or 75 percent of all annual ICA’s commitment to its communities ICA’s stance on its employees employees. ICA’s aim is to be a positive force in society. It participates in debates Reorganization: The attention to employee development and skills was ICA’s long-term success is greatly dependent on its employees and their and outside initiatives, in addition to sponsoring and supporting various reinforced when Human Resources and ICA School became a new skills. Only with their help can ICA directly and indirectly create unique projects in local communities. ICA’s business ethics policy contains Group function. HR has retained a member in Group Management. store experiences for customers and remain profi table as a group. guidelines for relationships with suppliers and partners. Improvements to performance reviews: ICA continued to improve the Questions regarding skills, training and enhancing ICA as an employer No more smoking in Umeå platform for performance reviews in Norway, Sweden and the Baltics. brand therefore have a high priority. Since 2007, Group companies Selling cigarettes is unhealthy, outdated and sends the wrong mes- ICA and sponsorships In 2008, performance reviews were introduced for employees in logis- share the same policy and guidelines for human relations. sage when we at the same time sponsor local youth sports organi- ICA’s position is that sponsorships should support the Group’s long- tics and stores as well. The goal is that all employees will receive a re- zations. That’s how Mats Calla, retailer at ICA Supermarket Teg in term business plan and emphasize healthy living, social responsibility, view once a year. The fi rst measurable follow-up will be in 2009. Four cornerstones of HR work Umeå, explains his decision to stop selling smoking tobacco. Ciga- environmental protection and sustainable development. Priority is giv- Retailer network: In Sweden, a special network was started during the Skills management: Continuous development and training for employ- rettes were removed from his store for good on June 30, 2008. Smok- en to projects that benefi t children and young adults. ICA’s sponsorship year: “Women who want to be ICA retailers.” ees are necessary in order to provide the level of service ICA’s custom- ers are instead encouraged to stop with the help of nicotine gum sold policy and guidelines comply with the principles of the International Value-based leadership. ICA introduced leadership training comprising a ers expect on a daily basis. ICA therefore offers extensive internal train- in the store. The decision attracted considerable media attention and Code on Sponsorship and the guidelines of the Swedish sponsorship number of modules. One was an introductory program for new leaders, ing through an in-house organization, ICA School, which is the main the response from frequent customers was overwhelmingly positive, and event association. 200 of whom attended in Sweden and Norway. training partner for the Group and the stores in Sweden and Norway. according to Mats. For his efforts he was presented an award by A Introduction for new employees: ICA launched an introductory pro- The organization provides a wide range of training on fresh foods, pre- Non Smoking Generation. ICA and local responsibility gram for new employees. The aim is to give all employees the same im- pared meals, store operations, leadership and sales. Greater focus has Every ICA retailer is free to make his or her own decision regarding ICA takes local responsibility in several ways. In Sweden, there is a con- age of the company and inform them how ICA develops new products, also been placed on increasing employees’ understanding of human tobacco, but ICA clearly welcomes initiatives like those by Mats Calla. nection through local ICA retailers, who own their stores and live and how it takes social responsibility through ICA’s Good Business philoso- rights issues and ICA’s corporate responsibility. “Eliminating tobacco is totally in line with ICA’s health policy,” says ICA work in the local area. By increasing the supply of products from local phy and what it is like to work for ICA. ICA expects around 1,500–2,500 Skills management is also necessary to strengthen the ICA brand. CEO Kenneth Bengtsson. suppliers, ICA can assist the local business community. (Read more people a year to attend the introductory program. The introduction is ICA is an international company whose employees have opportunities Read more about ICA’s health work on page 89. about the “Local tastes” initiative on page 16.) Moreover, ICA works with designed for the Group’s offi ce and warehouse employees, although for personal development by transferring within and between depart- municipalities, regions and authorities to support local communities in the plan is to adapt it for new store employees as well. ments, business areas, companies and countries. ICA has around 150 connection with new store openings. Training in ICA’s Good Business: Preparations began to provide Rimi Bal- different positions, for example regional manager, operations manager, with half men and half women. For ICA, it is important to work continu- Services in rural communities are an important area for ICA. In Swe- tic’s employees training in ICA’s Good Business. In Sweden and Norway, marketer, store manager, stock worker, economist and banking special- ously to prevent discrimination. If any cases should arise, despite ICA’s den, ICA acts as an agent for Apoteket, Posten and Systembolaget, the this web training has been available for a number of years. In 2008 it ist. The goal is that at least 70 percent of available positions are fi lled in- best efforts, action plans are in place. state-run pharmacy, postal and alcohol monopolies, in addition to of- was completed by nine percent of the employees. A web-based envi- ternally. This broadens the Group’s skill base and provides employees Health and wellness: ICA tries to maintain a positive work environment fering banking services. It is also an active partner in “Arena for Growth,” ronmental program was also introduced for ICA Sweden’s logistics em- with opportunities, thereby retaining competence internally. physically and mentally to promote healthy habits in both the short and a public-private partnership to promote local and regional growth ployees, with about 1,500 participants during the year. Leadership: Talent management is a priority for the Group. ICA has several long term. ICA works closely with occupational health providers to con- through collaboration and growth-promoting processes. In urban areas, Cases of discrimination and actions: No cases of discrimination were training programs to strengthen internal leadership (see pages 30–31). duct health exams and through various activities, such as Kortvasan (a ICA supports projects that are helping young people to fi nd jobs in reported in 2008. In February 2009, ICA was acquited in the Swedish Diversity: ICA tries to maintain a staff with a diverse educational, gen- family-oriented cross country ski race), Birkebeinerrittet (the world’s Oslo, trainees in the Göteborg suburb of Bergsjön (see below) and Labor Court in a discrimination case from 2007. der, age and ethnic background. Diversity is also an important issue largest mountain bike race) and Blodomloppet (road races to recruit handicapped store employees in Rimi Baltic (see page 23). when ICA trains new managers. The goal is to fi ll managerial positions blood donors and encourage exercise). In workplaces with high absen-

No. of annual employees, no. of employees, absenteeism and employee turnover1) Share of employees by Education in ICA Skolan age group Parent Company ICA Sweden ICA Norway ICA Bank Rimi Baltic Total ICA Group 2008 2007 08 07 06 08 07 06 08 07 06 08 07 06 08 07 06 08 07 06 Participants in ICA inhouse educations, ICA Sweden 5,000 5,000 Participants in ICA inhouse educations, ICA Norway 4,665 6,450 No. of annual employees 1,885 2,209 2,041 5,208 5,107 4,752 4,826 4,348 4,043 234 196 172 9,870 8,221 9,132 22,023 20,081 20,142 5. No. of employees 2,009 2,242 2,083 6,581 6,477 6,025 8,940 7,493 6,752 258 223 179 12,173 10,871 10,165 29,961 27,306 25,204 1. Days of education in ICA inhouse educations, ICA 4. Sweden 800 850 Absenteeism, % 233 677 857 567 62) 96 6 7 6 Days of education in ICA inhouse educations, ICA 4) 3) Employee turnover % 8 10 n/a 8 8 n/a 24 26 n/a 8 4 n/a 52 81 n/a 33 45 n/a Norway 421 450 1) The segmentation of employee data partly differentiate with what is reported in the annual report. Number of web based educations, ICA Sweden 4,000 2,400 ICA ANNUAL REPORT 2008 2) Decrease in sick-leave by focused efforts from the management and measures in order to improve the working 2. ICA ANNUAL REPORT 2008 3. environment and conditions. Number of web based educations, ICA Norway 30,623 16,660 3) Employee turnover decreased primarily during the last quarter, which should be compared with the unemploy- ment fi gures for the countries, which increased signifi cantly. A relatively high level of employee turnover is in general not unusual within the trade for these countries. 4) ICA applies the notice periods that are statutory. 1. 1. up to 25 21% 2. 26–35 29% 3. 36–45 26% 4. 45–55 17% 5. over 55 7%

90 91 CORPORATE RESPONSIBILITY REPORT CORPORATE RESPONSIBILITY REPORT

Safe workplaces Economic development ICA’s aim is to keep employees safe on the job and to protect custom- ers, property and its businesses from threats and violence. It therefore works systematically with security issues, standards, routines, follow-ups and training. In Sweden and Norway, employees receive training in fi re Creating value on several levels prevention and fi rst aid as well as how they can prevent robberies and avoid threatening situations. Every year ICA Sweden conducts around Stable profi tability and growth benefi t not only the Group and its owners. Other stakehold- 200 store inspections to assess the risk of fi re, break-ins and other dam- ers also share in the value created, for example, through the strong partnerships with vari- age. Since 2007, ICA Norway has been working on the implementation ous associations and charities. of uniform safety standards in all the stores. In the end of 2008 the number of store robberies increased in Sweden and Norway. See table below for more details. ICA’s economic development Gifts and donations to charities Customer satisfaction surveys For ICA, fi nancial strength and sustainable development are closely ICA maintains extensive, longstanding partnerships with a number of linked. ICA tries to achieve profi table long-term growth based on profes- organizations such as the Swedish Cancer Society/Pink Ribbon, the Red Maintaining the confi dence of customers in the company and its products sional ethics and sustainable development and to deliver value to its Cross, the World Childhood Foundation and WWF. In 2008, ICA promoted is critical. ICA therefore utilizes both internal and external customer sur- owners. ICA’s economic development is discussed in the fi nancial review several activities and campaigns to collect donations on their behalf: veys. In 2008, it topped the Swedish Quality Index, which measures cus- and fi nancial reports. Its economic responsibility is covered in several “A good deed”: Held during a three-week period in December 2008, this tomer satisfaction for all major Swedish food retail chains. ICA’s customer Group policies. According to the business ethics policy, ICA will be man- holiday campaign collected money for the World Childhood Founda- satisfaction increased from 70.3 percent in 2007 to 72.3 percent in 2008. aged profi tably while maintaining high ethical standards. The new store tion’s projects. ICA and Childhood have been allied since 2003, and the ICA’s biggest customer survey, the Customer Satisfaction Index, CSI, policy mentions the importance of a local presence in ICA’s markets. The holiday campaign raised about SEK 7 million for Childhood through the is conducted annually among Swedish and Norwegian customers. In Trainees join the work force sponsorship policy describes how ICA conducts its activities as an active, sale of a selection of ICA’s private label products, including the product Sweden, ICA Kvantum placed second overall in the industry after City Helping unemployed young people who have felt excluded was the long-term partner and sponsor. The internal fi nancial policy places limits lines ICA, ICA I love eco, ICA Gott liv, ICA Selection, ICA Skona and ICA Gross. Compared with 2007, ICA dropped a total of two percentage main motive for the trainee project ICA started in Bergsjön, Gothen- on the Group’s fi nancial risk-taking. Cook & Eat. points in the CSI. The same trend was evident in Norway, where the loss burg, in 2007. A number of unemployed candidates received the opp- An overview on pages 10–11 in the annual report describes ICA’s Pink Ribbon: For the sixth consecutive year, ICA was the principal sponsor was also two percentage points compared with 2007. ortunity to join a six-month retail trainee program. The results were so positive that the project has been continued. ICA has trained four most important goals and accomplishments with regard to economics, of the Pink Ribbon campaign to increase awareness of breast cancer and the environment and society in 2008. collect money for Swedish cancer research. In 2008, ICA stores sold the Important social projects in 2008 groups totaling 24 young people, 90 percent of whom are currently Pink Ribbon and special campaign products such as organic carrots and Handicapped employees in Lithuanian stores: See article on page 23. employees of the Group, the partner Svenska Storesupport, or another Long-term investments apples as well as a pink Filofax organizer. ICA contributed just over SEK Jobbsjansen in Oslo: ICA Norway’s partnership with the football club company. On the one hand, CR work is resource-intensive. Investments are needed 6.8 million collected through the sale of pink products in ICA stores and Vålerenga – Jobbsjansen – continued in 2008. The purpose of the project The project, managed together with property managers Göte- to improve work environments, expand the product range, add new con- through donation inserts in the customer magazine Buffé. is to help young minorities between the ages of 17 and 23 fi nd their fi rst job borgslokaler and Familjebostäder, the organization Young & Safe and trol systems, improve waste management and train employees. On the Food deliveries: In Sweden, ICA distributes food to the Stockholm City in a store. The initial group of youths began the project in October 2007. Svenska Storesupport, helps young people ages 18-24 from the suburbs other hand, these investments not only help the environment and local Mission and the Salvation Army in Gothenburg to help the homeless. In Trainees in Bergsjön: See sidebar. of Kortedala and Bergsjön to enter the job market. The training has community but also reduce costs and improve ICA’s business in the long Latvia, Rimi Baltic distributes food to a SOS Children’s Village. ICA Bank in rural communities: Together with Kuponginlösen, a clearing been developed and provided by ICA School. Two stores in particular term. For example, environmental investments are designed to reduce Deposit lottery: A lottery using the deposit on recyclables. For every organization for discount coupons, ICA Bank won a contract from the – in Bergsjön and Hjällbo – are involved, although other ICA stores in ICA’s resource consumption and environmental impact. But an invest- krone added to the lottery, the Norwegian Red Cross receives 32.5 per- Swedish Post and Telecom Agency (PTS) to take over payment services in the area also provide guidance and traineeships. ment in energy-effi cient refrigeration equipment also lowers energy cent. The lottery is a collaborative effort between the Red Cross, ICA rural communities that no longer have access to banking services since The project has also been very positive for ICA. Since it started, costs. In the same way, it takes investments to develop an organic line Norway and Olav Thon Group. Svensk Kassaservice was dissolved during the year. A number of ICA fi nancial conditions at the two main stores have improved. such as ICA I love eco, but the products also generate additional revenue. Charity boxes: Since 2006 charity boxes have been installed in all Rimi stores in these areas have become fi xed service points. In some locations, ICA’s investment in sourcing offi ces and its CR work in Asia is another ex- Latvia stores. Projects to be supported are carefully selected with the ICA Bank will work with partners such as Coop and Axfood stores to of- ICA Bank and Kuponginlösen were jointly awarded a contract by PTS. ample. Supporting suppliers requires expenditures, but at the same time assistance of the charity foundation Ziedot.Lv. During 2008 almost EUR fer banking services, since it does not have its own stores in all 15 com- ICA Bank assists asylum seekers: In 2008, ICA Bank extended its agree- the direct contact means that ICA can eliminate intermediaries and 120,000 was donated to eight projects, all of them with a focus on sup- munities included in the PTS contract. Through local mail carriers, house- ment with the Swedish Migration Board to handle payments for asylum thereby cut costs. porting children. holds along 73 rural routes will be able to pay their bills and cash checks. seekers. Individuals receive a debit card from ICA Bank with which they The same service will also be available to older and functionally impaired can withdraw cash or make purchases at any ICA store. residents of rural communities throughout Sweden. In this case as well, “Local tastes”: Initiative for local food producers. Read more on page 16.

No. of e-mails to ICA’s No. of telephone calls to ICA’s Number of shop robberies Economic value generated and distributed 2006–2008 Donations from ICA and customers, suppliers and employees through ICA in customer contacts, thousands customer contacts, thousands Sweden

70 51 67 2008 2007 2006 65 SEK m 2008 2007 2006 2008 2007 ICA Sweden 35 25 34 45 Revenues 90,963 82,326 67,395 Donations from ICA, SEK thousands 13,720 12,500 ICA Norway 9 1 8 Cost of goods and services –81,323 –73,012 –59,677 39 Donations from customers, suppliers and Economic value Rimi Baltic 0 1 0 employees through ICA, SEK thousands1) 12,873 n/a (revenues – cost of goods and services) 9,640 9,314 7,718 In spite of a systematic work with security issues, the number of robberies in ICA’s Swedish and Norwegian Salaries and other cash compensation –6,034 –5,374 –4,329 1) Started in 2008 measured. stores increased during 2008, which also is the trend within the trade as a whole. The robberies in the Swedish ICA stores are on a lower level than the general statistics of the society and retail industry shows. Taxes and social insurance –1,555 –1,453 –1,104 ICA ANNUAL REPORT 2008 Net interest expense –323 –321 –251 ICA ANNUAL REPORT 2008 Dividend –1,084 –958 –610 Retained earnings 644 1,208 1,4241)

1) This amount includes the gain on the sale of ICA Meny

06 07 08 06 07 08 ICA maintains an active dialogue with its customers and is always trying to be better at meeting their wishes and needs. During 2008, the number of E-mail to ICA’s customer call centre increased, while the number of phone calls some what decreased.

92 93 GRI content index Limited assurance report

GC GC To the readers of ICA AB:s 2008 sustainability report: ability report, and specifi c measurement and reporting principles devel- Profi le princ Pages Performance indicators princ Pages oped by ICA AB and disclosed on ICA AB’s website (www.ica.se). We Strategy and analysis Economic performance consider those criteria to be suitable for our engagement. z 1.1 Statement from most senior decision maker 2–5 EC1 Economic value generated and distributed 93 z œ Introduction Our limited review has been based on an assessment of materiality and 1.2 Description of key impacts, risks, and -opportunities 2–5, 10–11, 80 EC3 Defi ned benefi t plan obligations 63–64 z EC6 Locally-based suppliers 16, 91 œ We have performed a review of ICA AB’s 2008 sustainability report. Our risk, among other things included the following review procedures: Organizational profi le EC8 Infrastructure investments and services 93 œ z review is limited to the information related to 2008 and does not cover 2.1 Name of the organization Introduction EC9 Indirect -economic impacts 91–92 œ 2.2 Primary brands, products and/or services 8–9,28–29 z previous periods. Our review covers the sustainability report included a. an update of our knowledge and understanding for ICA AB’s organi- 2.3 Operational structure Introduction z Environmental performance in this document on pages 75-95 as well as the reporting principles dis- zation and activities 2.4 Location of organization’s headquarters Cover back z z EN3 Direct energy consumption by primary energy source 84 closed on ICA AB’s website (www.ica.se). It is the executive team that is b. assessment of suitability and application of criteria in respect to 2.5 Countries where the organization operates Introduction z EN4 Indirect energy consumption by primary source 82, 84 z 2.6 Nature of ownership and legal form 38 z EN5 Energy saved due to conservation and effi ciency improvements 8, 9 82–83 z responsible for the continuous activities regarding environment, health stakeholders need of information 2.7 Markets served Introduction z EN6 Energy-effi cient products and services 8, 9 83 z & safety, quality, social responsibility and for the preparation and pres- c. assessment of the result of the company’s stakeholder dialogue 2.8 Scale of the reporting organization Introduction, 33–35 z EN7 Initiatives to reduce indirect energy consumption and 83–84 z 2.9 Signifi cant changes 44–45 z -reductions achieved entation of the sustainability report in accordance with applicable crite- d. interviews with responsible management, at group level, subsidiary 2.10 Awards received 76 z EN13 Habitats protected or restored 8 86 z ria. Our responsibility is to express a conclusion on the sustainability re- level and at selected business units with the aim to assess if the quali œ EN14 Managing impacts on biodiversity 8 78, 81, 86 port based on our review. tative and quantitative information stated in the sustainability report Report profi le EN15 Red List species affected by operations 81 z 3.1 Reporting period Reporting principles www.ICA.se z EN16 Total direct and indirect greenhouse gas emissions 84 z is complete, correct and suffi cient 3.2 Most recent report 76, Reporting principles www.ICA.se z EN17 Other relevant indirect greenhouse gas emissions 84 œ The scope of the limited reviews e. read internal and external documents to assess if the information EN18 Initiatives to reduce greenhouse gas emissions and reductions achieved 8, 9 80–84 z 3.3 Reporting cycle Reporting principles www.ICA.se z Our review has been performed in accordance with FAR SRS (the in- stated in the sustainability report is complete, correct and suffi c i e n t 3.4 Contact point 76 z EN22 Total weight of waste 84 œ EN29 Environmental impact through transports 81–84 œ stitute for the accountancy profession in Sweden) draft recommenda- f. analytical review of reported information Report scope and boundary Social performance tion “RevR 6 Assurance of sustainability reports”. A limited review con- g. assessment of the company’s stated application level according to 3.5 Process for defi ning report content Reporting principles www.ICA.se z SO1 Evaluation and management of operations impact on communities 91–92 œ sists of making inquiries, primarily of persons responsible for GRI’s guidelines 3.6 Boundary of the report 76, Reporting principles www.ICA.se z SO3 Percentage of employees trained in anti-corruption 10 91 z 3.7 Specifi c limitations 76, Reporting principles www.ICA.se z sustainability matters and for preparing the sustainability report, and h. overall impression of the sustainability report, and its format, consid 3.8 Basis for reporting Reporting principles www.ICA.se z Labor practices and decent work applying analytical and other review procedures. A review is substantial- ering the information’s mutual correctness with applicable criteria 3.9 Data measurement techniques Reporting principles www.ICA.se z LA1 Total workforce 58, 90 œ ly less in scope than an audit conducted in accordance with the Stand- i. reconciliation of the reviewed information against the sustainability 3.10 Restatements of information Reporting principles www.ICA.se z LA2 Employee turnover 6 90 œ 3.11 Signifi cant changes Reporting principles www.ICA.se z ards on Auditing in Sweden RS and other generally accepted auditing in formation in the company’s annual report for 2008. LA5 Minimum notice period(s) 3 59, 90 z 3.12 GRI content index 94 z standards The procedures performed in a limited review do not enable LA10 Hours of training 90–91 œ 3.13 External assurance of the report 39, 74 z LA13 Composition of governance bodies and employees 6 23, 59, 85, 91 z us to obtain an assurance that would make us aware of all signifi cant Conclusion Governance Human rights matters that might be identifi ed in an audit. Accordingly, we do not ex- Based on our review procedures, nothing has come to our attention 4.1 Governance structure of the organization 38–39 z HR2 Suppliers that have undergone screening on human rights. 1, 2 11, 85–86 œ press an audit opinion. that causes us to believe that ICA AB’s sustainability report 2008 has 4.2 Chair of the board 40 z HR3 Total hours of training of human rights issues 1 91 œ The criteria used in the course of performing review procedures are not, in all material aspects, been prepared in accordance with the above 4.3 Independent members 40 z HR4 Total number of incidents of discrimination and actions taken 1, 6 91 z 4.4 Mechanisms for shareholders and employees 38–39 z based on applicable parts of the “Sustainability Reporting Guidelines, stated criteria. 4.6 The board’s routines to avoid confl icts of interest 38–39, 77 z Product responsibility G3 issued by the Global Reporting Initiative (GRI) suitable for the sustain- 4.8 Internally developed princples 39, 77 z PR 1 Assessment of product’s impact on health and the environment 25, 87 œ 4.9 The board’s routines for evaluation. 38–39, 77 z PR2 Incidents where products may result in health risk 88 z 4.11 Precautionary approach 7 77 œ PR3 Required product information 88–89 œ 4.12 Supported externally developed principles 77, 85 z PR4 Incidents concerning product information and labeling 88 œ 4.13 Memberships in associations 40, 42, 77, 79, 93 z PR5 Customer satisfaction, including results of surveys 92 z 4.14 Organisation’s stakeholders 78–79 z PR6 Adherence to laws related to marketing communications 89 œ Stockholm, March 6, 2009 4.15 Identifi cation and selection of stakeholders 78–79 z 4.16 Approaches to stakeholder engagement 78–79 z Deloitte AB 4.17 Key topics and concerns by stakeholders 78–79 z Jan Berntsson Authorized Public Accountant

Torbjörn Westman Expert member FAR SRS ICA ANNUAL REPORT 2008 ICA ANNUAL REPORT 2008

z The indicator is reported or an explanation has been provided why it is not reported. œ The indicator is partly reported.

94 95 Production: ICA AB och Intellecta Corporate Photos: Martin Löf, Jann Lipka, Tomas Gidén, Scanpix, Shutterstock.com Print: EkotryckRedners AB Glossary and abbreviations

Average number of employees – Based on the Group’s ISO 9000/ISO 14001/ISO 22000 – International stan- measure of normal working hours, 1,800 per year. dards for quality and environmental and food safety.

BRC – British Retail Consortium. Joint venture – Partnership jointly managed by two or more companies that share the risks and profi ts. BSCI – Business Social Compliance Initiative. European platform for social compliance in supplier countries. Keyhole – Swedish National Food Administration’s symbol for lean foods containing less sugar and salt, CFO – Chief Financial Offi cer. but more fi ber than similar products. Offi cial label in Sweden, Norway and Denmark. CIES – Acronym in French for Comité International d’Entreprises à succursales, a member organization KRAV – Swedish labelling system for organic food. for food retail chains. LCA – Life Cycle Analysis. Method used to evaluate Climate neutralization – Process to compensate for the environmental impact of a product from cradle greenhouse gas emissions through offsetting reduc- to grave. tions. LivsTek – Center for practical food technology.

CO2 – Carbon dioxide. Near-food – Toiletries, cleaning products and

CO2-equivalents/Carbon dioxide equivalents – Me- hygiene products. asure of greenhouse gases that allows comparisons of different sources of emissions. NGO – Non-Governmental Organization.

COO – Chief Operating Offi cer. Non-food – Products excluding food, e.g. clothes and house wares. CR – Corporate Responsibility. Organic – Grown and produced according to KRAV’s, Debio – Certifi cation body for organic production. Debio’s or EU organic, i.e., essentially without pesti- Norwegian equivalent to Sweden’s KRAV. cides or fertilizer.

EU organic – EU’s rules for organic production. Primary production – Farming and fi shing, for ex- ample. Euro Shopper – The ICA Group’s discount product range. REACH – Registration Evaluation Authorisation and restriction of Chemicals. Fairtrade – Independent labelling system that pro- motes better working and living conditions for gro- Swan – Offi cial Nordic ecolabel of the Nordic wers and their employees in developing countries. Council of Ministers.

FTC – Fair Trade Center. UTZ certifi ed – Certifi cation and labeling program for responsible coffee growing. Global Compact – UN initiative to encourage companies to support human rights, labor and Value-added – The difference between the cost of the environment. materials and the sales price, i.e., the enhancement to a product added by a company. In ICA’s case, is Greenhouse gas – Gas that contributes to the green- calculated as revenue less the cost of goods and ser- house effect, e.g., carbon dioxide, nitrous oxide, me- vices. thane and the fl uorinated gases HFC, FC and SF6. WHO – World Health Organization. GRI – Global Reporting Initiative. WWF – The World Wide Fund for Nature is an inter- HACCP – Hazard Analysis and Critical Control Point. national organization for the conservation and Risk analysis and management program. restoration of the environment.

IFRS – International Financial Reporting Standards. For defi nitions of key fi nancial ratios, see page 62. ICA’s Annual Report including the Corporate Responsibility Report for 2008

ICA AB ICA Sverige AB ICA Norge AS Rimi Baltic AB ICA Banken AB ICA Fastigheter AB SE-171 93 Solna, SE-171 93 Solna, Postboks 6500 A. Deglava Str 161 SE-171 93 Solna, SE-721 84 Västerås, Sweden Sweden Rodeløkka Sweden Sweden Lv 1021 Riga, Latvia N-0501 Oslo, Norway Visiting address: Visiting address: Tel: +371 704 55 50 Visiting address: Visiting address: Svetsarvägen 16 Svetsarvägen 16 Visiting address: Svetsarvägen 16 Ingenjör Bååths gata 11, T2 www.rimibaltic.com Tel: +46 8 561 500 00 Tel: +46 8 561 500 00 Sinsenveien 45 Tel: +46 8 561 590 00 Tel: +46 21 19 30 00 Tel: +47 23 05 50 00 www.ICA.se www.ICA.se www.ICAbanken.se www.ICAfastigheter.se www.ICA.no