The ICA Group's Annual Report 2006

The ICA Group’s Annual Report 2006 Contents

This is ICA 1 President’s statement 6 Goals and strategies 9 Market and trends 12 ICA’s organization – Group functions 16 ICA Sverige 22 ICA Norge 24 Rimi Baltic 26 ICA Banken 28 Etos 29 Netto 29

Corporate Responsibility Report 32 Governance of the Group’s CR work 34 Ethics 36 Employees 40 Environment 42 Health 48 Quality 51 GRI Index 54

Annual Report 56 Directors’ report 57 Definitions of Key Financial Ratios 61 Consolidated Income Statement 63 Consolidated Balance Sheet 64 Changes in Consolidated Shareholders’ Equity 66 Consolidated Statement of Cash Flows 67 Supplementary Information, the Group 68 Parent Company Income Statement 83 Parent Company Balance Sheet 83 Changes in Parent Company’s Shareholders’ Equity 85 Parent Company Statement of Cash Flows 85 Supplementary Information, Parent Company 86 Audit report 90

Board of Directors 92 Group Management 2007 94 Corporate governance 96 Glossary and abbreviations 98 Addresses 99 This is ICA

The ICA Group (ICA AB) is one of the Nordic region’s leading retail companies, with around 2,300 of its own and retailer-owned stores in Sweden, Norway and the Baltic countries. The Group includes the sales companies ICA Sverige, ICA Norge, Rimi Baltic and Etos. ICA also offers financial services to Swedish customers through ICA Banken. In addition, ICA owns a 5-percent interest in the company Netto Marknad.

Vision We make every day a little easier.

Mission To be the leading retailer with a focus on food and meals.

ICA’s companies

In 2006 the ICA Group had sales of SEK 67,395 million and operating income of SEK 2,297 million. The Group had a total of 11,698 employees.

Share of consolidated sales Wholly owned companies

ICA Sverige is one of Sweden’s leading food retailers. It is the principal Sales excl. VAT: SEK 48,301 million " supplier to ICA retailers, who own and manage their stores indepen- (incl. Etos) " dently. Employees: 4,752

ICA Norge is one of Norway’s leading food retailers, with its own stores Sales excl. VAT: SEK 18,361 million as well as franchises. Employees: 4,043 " Rimi Baltic is one of the leading and most modern food retail chains in Sales excl. VAT: SEK 8,993 million the Baltic region. Sales are not consolidated in the ICA Group 2006. ICA Sverige 72 % Employees: 9,132

ICA Norge 27 % ICA Banken makes it easier for customers of ICA’s Swedish stores to Business volume excl. VAT: ICA Banken 0.7 % manage their finances and in the process strengthens their ties to ICA. SEK 13,480 million Others 0.3 % Employees: 174

Etos operates a chain of wholly owned stores that combine health and Sales excl. VAT: SEK 34 million* beauty products under one roof. A process has been initiated to wind up Etos’ stores in Sweden. Employees: 16

Partly owned company

Netto operates a hard discount chain. In early 2007 ICA reduced its Sales excl. VAT: SEK 2,444 million interest in Netto from 50 percent to 5 percent. The concept comes from Denmark, where Dansk Supermarked manages the chain. Sales Employees: 861 are not consolidated in the ICA Group.

* Included in ICA Sverige’s net sales. Organization 2007 Ownership structure

ICA AB is 40 percent owned by Hakon Invest AB (publ) and 60 percent by

President and CEO Royal Ahold N.V. of the Netherlands. Kenneth Bengtsson Through a shareholder agreement, Royal Ahold and Hakon Invest jointly share decisive influence over ICA AB. Royal Ahold is a Dutch retail group listed on the stock exchanges in Marketing Finance Amsterdam and New York. Ingrid Jonasson Blank Sonat Burman-Olsson Hakon Invest, which is listed on the Nordic Exchange, is an investment company specializing in the Nordic retail sector. It is 67 percent owned by ICA-handlarnas Förbund, the mem- Assortment & ber organization for Sweden’s ICA ICA Sverige ICA Norge Rimi Baltic Real Estate ICA Banken buying Peder Larsson Trond Kongrød Antonio Soares Bo Liffner Jörgen Wennberg retailers. The remaining 33 percent is Anders Nyberg owned by individual shareholders.

ICA’s corporate responsibility In seven position statements, the ICA Group has Global Compact’s ten principles for corporate responsibility. summarized its stance on ethics and corporate ICA is a participant in the United Nations business initiative Global Compact and supports responsibility, a philosophy it calls “ICA’s good the following ten international principles. business.” The aim is to be a sustainable company Businesses should: driven by the following values: 1. Support and respect the protection of internationally proclaimed human rights ICA will be driven by profitability and high ethi- in areas they can impact. cal standards. 2. Make sure that they are not complicit in human rights abuses.

ICA will listen to customers and always base 3. Uphold the freedom of association and the effective recognition of the right decisions on their needs. to collective bargaining.

4. Eliminate all forms of forced and compulsory labor. ICA will nurture diversity and growth among its employees. 5. Effectively abolish child labor.

6. Eliminate discrimination in respect of employment and occupation. ICA will maintain an open dialogue internally 7. Support a precautionary approach to environmental challenges. and with the community. 8. Undertake initiatives to promote greater environmental responsibility. ICA will guarantee product safety and quality. 9. Encourage the development and diffusion of environmentally friendly technologies.

ICA will promote a healthy lifestyle. 10. Work against all forms of corruption, including extortion and bribery.

ICA will adopt sound environment practices to promote sustainable development. 2006 in brief

The ICA Group’s net sales amounted to SEK 67,395 million (66,096), an increase of 2.0 percent compared with 2005. Operating income amounted to SEK 2,297 million, an increase of 18.4 percent compared with 2005. The operating margin was 3.4 percent, an increase from 2.9 percent 2005.

Net sales, SEK million Operating income, SEK million

! ! * 2004–2006 according to IFRS. * 2004–2006 according to IFRS.

The year in numbers

2006 2005

Net sales 67,395 66,096

Operating income 2,297 1,940

Operating margin 3.4 2.9

Income after net financial items 2,046 1,667

Average number of employees during the year 11,698 11,556

ICA AB will publish the following financial reports in 2007 Financial information

Madelene Gummesson, May 15, 2007 Interim report January–March [email protected] telephone +46-8-561 505 83. August 21, 2007 Interim report April–June

November 13, 2007 Interim report July–September Financial information is also available at www.ica.se > About ICA. modern

ICA celebrates 90 years in 2007. The company was founded by independent retailers who joined together to coordinate purchases and take advantage of economies of scale. The ICA “good business” philosophy was thought by many to be impossible. In the end, however, combining the desire of the retailers to manage on their own with their willingness to cooperate proved to be a winning concept. The ICA of today is not the same company it was 90 years ago, but the idea of local management and central cooperation makes just as much sense now as it did then. The business is built on five core values; simple, personal, safe, inspiring and modern. ICA is quite a spry 90 year old, don’t you think? modern Dynamic structure is the recipe for success

Operationally, 2006 was a successful year for ICA AB with a generally positive sales trend. Many new stores were established and a number of major structural deals were completed. As a whole, ICA has created a stable platform to maintain market leadership in the markets that the company serves.

For ICA stores in Sweden, 2006 was a strong sales taken a shortcut to market leadership in the Baltic year, particularly for our small stores, which we countries, an expansive region where we are very are very pleased about. This success is the result optimistic about the future. of our strategy to reduce prices to meet custom- We made another strategic decision in 2006 ers’ wishes. – to wind up Etos stores in Sweden. We will instead In Norway, where we underwent a major put Etos’ expertise in health and beauty to use in restructuring of the store network during the year, ICA stores. There is great potential here for higher sales declined. ICA Norge is building a completely sales. new platform, and a large number of stores have During the year ICA Banken reported its first been sold, resulting in lower volume. The major operating profit, reaffirming the bank’s positive investments we are now making in new stores trend for the year. and modernizations will cost us in the short term but pay off in time. Continuous change The original ICA idea – to have individual retailers Streamlining and coordination work together – is still the basis of ICA’s opera- ICA is not the same company it was four years tions. Within the framework of our Group struc- ago, organizationally or operationally. Our journey ture, we are seeking a balance between coordi- has taken us down three paths. We have focused nation and local accommodation. We constantly on our core business, set our sights on market reevaluate what should be done centrally or leadership in the markets we serve, and more locally. The dynamic nature of the business is the clearly coordinated activities within the Group. key to ICA’s success. As part of the focus on our core business and In 2006 considerable emphasis was placed on market leadership, several major structural deals coordination to improve efficiencies and keep were completed in 2006. We divested ICA Meny pressure on costs. In 2007 we will further simplify and reduced our interest in Netto, instead acquir- the organization and strengthen international pur- ing Kesko’s 50-percent share of our joint venture, chasing work in particular. At the same time subsid- Rimi Baltic. Through the joint venture, we have iaries are being given greater responsibility for local

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ICA ranks first on Nordic Brand ICA AB presents strong results for An Amnesty study gives ICA a good ICA’s annual report is Academy’s list of Swedish companies 2005. rating for its management of risks published. with the best reputation. associated with human rights. ICA is the first retailer in Norway to introduce the keyhole symbol of All Maxi ICA Stormarknad in Sweden healthy foods. are certified for the Nordic Swan eco-label.

ICA GROUP adjustments in every market where we operate. The old saying “all business is local” still rings true, and listening to customers is crucial to success.

Price pressure is here to stay The price-cutting campaign we started in 2005 was by no means a temporary measure but a necessity to remain competitive. We continued to reduce prices in 2006, although the emphasis was on significant cuts on specific products rather than cuts across the board. Still, Swedish food prices rose slightly during the year, mainly due to more expensive imports of fruits, vegetables and fish. The total price increase would have been significantly higher, however, if we had not worked so diligently to keep prices in check. Our position with regard to major suppliers is clear. We trust them to take their share of responsibility and improve efficiency in their part of the value chain. We will only accept price increases warranted by higher commodity or energy prices.

Our strategy is firm We begin 2007 with a focus on four areas: ICA Norge, product selection, human resource development and store renovations. We are working intensely with improvements in all four areas.

ICA Norge ICA Norge will be our top priority in 2007. Major changes are under way, and further efforts are needed to finish the job. Quality is our highest priority, and we will be the best in the market in terms of stores, product range and service. First we have to be the best; then we can grow and gain market shares.

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ICA signs two agreements to sell real ICA AB signs an agreement to sell The Swedish ICA stores post a ICA reports strong results for the first estate holdings. One is a distribution ICA Meny to Nordic Capital. record volume increase in July. half year. property in Helsingborg and the other 25 store properties in the south and www.ica.no is launched in Norway. ICA takes part in a dialogue with the west of Sweden. EU Commission on the problem of overweight.

ICA GROUP Human resource development ICA already ranks high as an employer in many surveys. By offering the right development programs, incentives and career opportunities, we will further strengthen our position as an employer. Retailing is looking up, and we have taken advantage of that to gain a position as the most popular retail company in Sweden, which we intend to achieve in Norway as well.

Store renovations We have had a very ambitious program of new store openings in Sweden, Norway and the Baltic countries with grand openings practically every week. We have a well-formulated plan for more new stores in the years ahead, while also working to enhance our existing store network. The average life of a store is becoming shorter, and renovations are usually needed after only four or five years in order to live up to customers’ expectations.

In conclusion, I would note that the great progress we have made is the result of hard work, higher Product selection store sales and major efficiencies which have Developing the right product range is critical for been possible thanks to the efforts of our employ- ICA. I am convinced that the company that can ees. The organizational change we plan to imple- offer the best products and is the quickest to put ment at the beginning of 2007 will make us even new items on the shelf will win the battle for cus- more efficient, and we will turn our attention to tomers. The health trend is obvious, and we are further cost cuts during the year. continuing to improve our “ICA Gott liv” line. We I am confident that the ICA idea, to combine also know that customers are becoming more local management with central cooperation, demanding with regard to price and product which will celebrate 90 years in 2007, is still a win- selection, and we will therefore continue to cut ning concept. We will continue to challenge our- prices and improve our range to include more pre- selves whether we face success or setbacks. pared meals and organic products.

Kenneth Bengtsson, President and CEO

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ICA’s new warehouse in Helsingborg ICA Banken tops the customer satisfac- ICA sells Christmas bread to benefit The EU Commission approves ICA’s is opened. tion ranking by the Swedish Quality the World Childhood Foundation. acquisition of Kesko’s interest in Rimi Index. Baltic. ICA Banken reports its first All ICA Kvantum stores in Sweden operating profit. ICA receives a prestigious logistics award. are certified for the Nordic Swan ICA signs an agreement with Dansk eco-label. Supermarked to reduce its holding in The EU Commission approves the ICA signs an agreement with Kesko Livs Netto Marknad. sale of ICA Meny. to acquire Kesko’s interest in Rimi Baltic. ICA AB decides to dissolve the Etos ICA and the Swedish Cancer Society stores in Sweden. sponsor a campaign called “Buddy with your Body” in Swedish schools.

ICA GROUP Goals and strategies Operating margin, %

ICA’s vision is to make every day a little easier. Its mission is to be the leading retailer with a focus on food and meals.

Financial goals Price and assortment ICA’s long-term goal is to increase sales faster than ICA will focus on cutting prices while enhancing ! the total market is growing in each sector. its product range and improving efficiencies to ICA’s long-term objective is an operat- The profitability goal is an operating margin give customers what they want. ing margin of 3.5–4 percent. The oper- (EBIT) of 3.5–4.0 percent. The return on equity ating margin rose in 2006 compared over a business cycle should be at least 14–16 per- Common format strategy with 2005 on the strength of a sales increase by ICA Sverige and higher cent and the long-term equity/assets ratio 30–35 The ICA Group has adopted a strategy for opera- capital gains from property sales. percent. tions in Sweden and Norway consisting of four formats: hypermarkets, supermarkets, conve- Strategies nience stores and discount stores. ICA will be a far-sighted, dynamic company with Return on equity, % solid finances and a commitment to the environ- New stores and renovations ment and social issues. The watchwords for ICA’s ICA will open new stores and renovate existing way of working are prioritization, coordination, units. By improving the store network and its simplification and cost cutting. In concrete terms, offerings, ICA will meet a variety of customer the Group has formulated the following strategies needs. for its operations: Offer an attractive product range focused on Utilize economies of scales by coordinating private labels, fresh foods and non-foods central functions and concepts ICA will continue to emphasize fresh foods, ! ICA will coordinate central functions and con- non-food items and private label products. The cepts at the Nordic level to take advantage of Group’s range of private label products gives The Group’s objective is an average synergies between companies. The efficiencies customers greater choice, high quality and lower return on equity of at least 14–16 percent over a business cycle. The return that are gained will be largely reinvested in lower prices. These measures will increase sales and on equity increased in 2006 to 25.7 prices. profitability for retailers and the Group. percent.

Locally adapted concepts Corporate responsibility While utilizing its scale to coordinate and take ICA will maintain a strong local presence wher- advantage of synergies, ICA will continue to ever it operates. The Group will contribute to a adapt its local offerings to customer demand. sustainable society by minimizing the impact of Equity/assets ratio, % These local adjustments can be made by the its operations on the environment and taking individual retailer or through concepts designed responsibility for the conditions under which its

for different geographic markets. own products are produced. Moreover, ICA promotes the health of its customers and employ- Cost efficiency ees by offering safe and nutritious products and The ICA Group is working to improve the effi- continuously improving its work environments. ciency and reduce costs. Efficiency improvements in the organization and methodologies lead to significant savings each year. !

The long-term objective for the Group’s equity/assets ratio is 30–35 percent. The equity/assets ratio rose in 2006 to 28.8 percent.

ICA GROUP personal

What are we going to eat tonight? It’s a question we all know too well. Convenient stores, inspiring recipes and a broad range of attractive products are ICA’s way to help customers find an answer. Taste and needs are personal, but ICA’s job is to listen to all its customers and try to meet their various needs. Everyone should feel that we have something just for them – whether it be a family, a young student or a senior citizen. personal Market trends

A number of trends are impacting spending patterns and demands on the retail sector. Stressful lifestyles, higher disposable income and a growing interest in health are affecting what consumers buy. Retailers constantly have to adapt their offerings to meet these trends and needs.

Efficiency and simplicity Eating out is increasing Time is in short supply for most working people, As disposable income rises and people feel pres- especially families with young children. At the sured by a lack of time, the number of restaurant same time that more of us are working, we expect visits is growing. a meaningful life outside our jobs and a chance for Fast-food chains and traditional restaurants self-realization. To find time for everything, many have experienced rapid growth in recent years. people look for simple, time-saving solutions. Many people regard prepared meals as a good The search to save time is evident in every alternative to cooking themselves. The biggest aspect of the meal process – from planning and difference between young families and people shopping to actually sitting down to eat. We without children is that the latter prefer to eat out, expect to quickly find something in the store and while families often buy take-out. to quickly get in and out. We are also spending less Restaurants, which account for 27 percent time preparing meals, and there are even those of meal purchases in Sweden, are regarded as a who want to eat quickly. strong competitor to retailers. Yet this also pres- Demand for food that is quick and easy to cook ents an opportunity for retailers, which in fact is steadily growing, and retailers are meeting it already have nearly half the market for frozen, with a wide range of prepared and semi-prepared refrigerated and fresh prepared food. foods. The need for speed is also forcing retailers to make it easier for customers through clearer Experience and entertainment signage, shorter traffic patterns, faster payments Disposable household income is rising at the same with the help of self-service check-outs, and easy- time that the increase in food prices has slowed in to-find recipes in stores and on the website. recent years. People are choosing to spend more of their additional money on travel, culture and Health and well-being leisure activities. According to Statistics Sweden, According to the World Health Organization food purchases decreased by 1.7 percent between (WHO), overweight and weight-related diseases 1996 and 2005, while leisure and culture increased are one of the greatest epidemics of our time. by 1.2 percent and furniture and decorating rose Around 25 percent of Swedish children are over- by 1.7 percent. More than ever, Swedes and Nor- weight and some 40,000 are obese. Against this wegians want to be entertained. backdrop, the health trend is becoming stron- Internationalization and growth in foreign travel ger year after year, and warnings and debates on have led many to want to try exciting new foods sugar, fat and various diets bombard us practically at home. We are devoting more time to sophisti- on a daily basis. cated cooking on weekends and want to find the Retailers expected to take their share of respon- same ingredients in our neighborhood store that sibility and offer foods that inspire and are good to we eat on vacation in Tuscany. eat, but also help us live a healthy life. The health Many people are trying to change the bulk trend will be an increasingly important factor shopping they generally do on weekends from a in the stores and products customers choose. “necessary evil” to an activity for the whole fam- Health-conscious customers carefully plan what ily. We want it to be fun to go shopping. One way they buy to make sure the food they eat not only stores usually try to satisfy this demand is to offer tastes good but is nutritious as well. More con- demonstrations of new products and inspiring sumers also want help finding healthy alternatives recipes in stores. Creating a more appealing envi- in stores as well as answers to their questions on ronment is a future challenge for many stores. healthy cooking and diets.

12 ICA GROUP More seniors and single-member households The older share of the population is growing as the large generation born in the 1940s begins ICA meets the health trend head on to retire. Forecasts indicate that the number of Demand for healthy products is growing stron- and sodium. ICA Gott liv also offers healthy ver- Swedes ages 55–75 will increase from 20 to 24 per- ger, and retailers and suppliers have realized sions of less nutritious foods such as ketchup, cent between 2000 and 2020. Many in this genera- this trend is here to stay. To make it easier for juice and jam. tion have financial resources – around 70 percent customers to find healthy alternatives on store ICA is continuously launching new products of their wealth is in disposable assets they are shelves, ICA has developed the ICA Gott liv line. in its healthy line. For example, it was the first in the market to introduce a keyhole-labeled fresh happy to spend. They are active and fit and often “Customers are informed and expect to be pasta – a high-fiber fettuccine. have sophisticated habits. The difference in pref- inspired by products and find what they are look- “Through a contest on ICA.se, we learned that erences between older generations and younger ing for. With ICA Gott liv, we want to show we this was the product customers wanted most. ones is shrinking. offer products that are good to eat and good for It is tasty, nutritious and easy to prepare, which your health,” says Christina Karlsson, dietitian at people appreciate,” says Christina Karlsson. There is a connection between the growing ICA AB. During the year ICA Gott liv products were population of seniors and the rising number of The line, which was launched in 2005, includes added at stores in Norway. single-member households, since so many older around 70 products in various categories. Most people live alone meet the tough new keyhole criteria for sugar The increase in single-member households is placing growing demands on stores to provide smaller package sizes and offerings based not only in large quantities. Many people who live alone also lack storage space and in essence use stores as a cupboard, so retailers have to adapt accordingly.

New competence demanded of store personnel As the education level of the population rises, consumers become more conscious of, and informed about, products, services and companies. They also place higher demands on supermarkets and their staff, expecting them to be able to answer questions where products come from, how they were purchased and their impact on the environment and health. Food retailers therefore have to continuously provide training and competence development for the entire value chain, covering ethics and the environment as well as food safety and health. This also means making retail a more attractive career alternative for new, qualified employees.

ICA GROUP 13 inspiring

All of us want to be inspired in our daily lives. To do a good job, you need an inspiring and enriching work environment. When it comes to a good meal, it takes exciting recipes, modern products and attractive stores. ICA’s corporate culture gives every employee clear goals and insight into how they can contribute to the company’s success. If ICA offers a fun and inspiring workplace, it will impact our entire business, and be felt by customers in our stores. inspiring The ICA Group streamlines operations

The ICA Group has a simple organization to facilitate coordination and speed up decision-making. In 2006 ICA completed a number of structural deals to further streamline operations. The goal is to be a leader in every market where ICA operates.

To handle the growing competition in the Nordic Work with private label products also gives ICA retail market, ICA constantly tries to create and insight into what it costs to develop and produce maximize synergies between Group compa- various products, which is another way to help it nies. The ICA Group’s organization is designed to reduce prices. increase opportunities for coordination and quick Around 40 analysts work on preparing nego- decision-making. tiation documentation and studying the produc- The organization frees up resources for subsid- tion chain for various product groups to identify iaries to devote to local customer offerings. potential cost savings and efficiency improve- ICA’s focus on its core business and market ments. leadership in all the markets where it operates is More and more suppliers now admit that the the reason for the structural deals during the year. rapid growth in private labels is inspiring them to The sale of ICA Meny, liquidation of the Etos stores be more efficient and innovative in their product and reduced interest in the discount chain Netto development, which also benefits customers. helped to streamline operations during the year. Moreover, ICA acquired Kesko’s 50-percent inter- Purchasing cooperations lower prices est in the joint venture Rimi Baltic and is now the ICA’s Nordic purchasing organization was created sole owner of the Baltic operations. in 2004 to coordinate the Group’s purchasing. The In 2007 ICA will focus on the Norwegian opera- goal is to continue to offer customers good prices. tions, product selection, human resource develop- One way is by being a stronger negotiating part- ment and store renovations. ner. ICA has been working for years to coordinate purchases between its companies and through Product focus close cooperation with Ahold. ICA tries to offer customers a better, more attrac- The purchasing cooperation with Ahold has tive product range adapted to what they want advanced the furthest in fresh foods and private rather than what suppliers have to offer. Category label products, where an organization has been management, i.e., defining the product range in developed for international purchases. The coop- the various countries and various store formats, eration is continuously expanded to new catego- has therefore increased in importance. ries such as exotic produce. The benefits in terms An important element is to learn more about of improved terms and lower costs are increas- customers’ needs, desires and buying habits. ingly evident. With this knowledge, ICA can develop a range One of ICA’s most important strategies is to with breadth and depth – in other words, a large enter into long-term partnerships with selected selection of popular products in a variety of price suppliers. Together, they can analyze the value classes. Fresh foods, non-foods, prepared meals, chain and identify possible cost savings. Most of and healthy and organic products are all part of the cooperations in these areas are with suppliers this work. of fresh foods and private label products. Another important aspect of the ICA Group’s strategy is private label products, where customer Logistics demand steers the offering. ICA’s private label ICA is constantly working to improve efficien- range offers customers quality products at lower cies and reduce costs, which will benefit custom- prices than the market leaders, at the same time ers through further price cuts. In logistics, this is that they strengthen customer loyalty. evident in the new Nordic distribution network

16 ICA GROUP Prestigious logistics award which will be able to handle larger volumes and and three in Norway, all reporting successful sales. high-quality fresh foods with long shelf lives. In Additional stores in this concept will be launched ICA was awarded first prize when logistics specialist Schenker and Silf, the process, ICA is taking responsibility for ship- in 2007. The format has been developed by ICA in a Swedish supply chain manage- ments from suppliers so that it can optimize trans- close cooperation with Rimi Baltic and is a good ment association, presented their ports to stores. Total exhaust emissions are being example of how companies in the Group work 24th annual logistics awards. ICA was reduced by about 20 percent compared with together and inspire each other. praised for its packaged meat solution today’s level for the same amount of goods. ICA is also developing new formats for the which, according to the jury, “successfully combines logistics and business During the year ICA opened a new warehouse Kvantum and Supermarket profiles. One is the “big strategy with product quality with in Helsingborg. The ultramodern, 63,000 sq. m. supermarket,” which takes a traditional store and a clear focus on the end customer, facility marks the first major link in ICA’s new dis- adds a wider range of foods and meals but fewer a daring and innovative effort that tribution network. The highly automated ware- specialty products. In addition to developing new serves as an inspiration for others.” The award brings attention to logis- house will stock every product group except non- formats, ICA is improving store efficiency through tics and highlights innovative thinking foods and have 400 employees when fully ramped better displays, cash register solutions and pricing and bold initiatives. up. Daily deliveries will be shipped to around 370 information. This is vital to continue to provide stores in southern Sweden, with frozen food deliv- customers good prices. eries ranging farther north, to nearly 700 stores. To complement the Helsingborg warehouse, Focus on non-foods ICA is looking at the possibility of adding a new Non-foods are a strategically important area for warehouse in Mälardalen. ICA and growth opportunities are considered very good. This line will help ICA consolidate its hyper- Business and format development markets’ position as the one-stop shopping loca- ICA is continuously improving its store formats in tion customers want. Sweden and Norway. The latest example is a new During the year all employees in non-foods concept in the ICA Nära profile designed for urban – from product development and purchasing to customers. The central theme of the concept is operations and sales – were consolidated in a convenience and accessibility. Customers will single unit to coordinate work throughout the find it quick and easy to drop in for a few things, value chain and thereby improve the offering for though the stores will offer a wider selection than customers and raise efficiency. traditional convenience stores. One such store was successfully opened in Oslo in 2006 and Central customer database another will open in Stockholm in 2007. It is strategically important that ICA understands Another store format now under develop- its customers and their needs and desires. During ment is designed for ICA Nära stores in residential the year it therefore established a special depart- areas. The first opened in Norway in fall 2006 and ment to manage the customer database that will the first store in Sweden is scheduled to open in serve as the backbone of this work. Data will be spring 2007. These stores emphasize bread, pro- used to continuously improve the product range duce and other fresh foods. based on customer demand, and in doing so The trend toward one-stop shopping, where strengthen customer loyalty to ICA. customers find everything they need in one place, ICA’s market analysis department has is strong. This is clearly evident in the growth of researched market trends and customer behav- the Maxi ICA hypermarket profile. The roll-out of a iors in the Nordic market that affect the retail sec- health and beauty department has been success- tor. Among the most prominent are the growing ful and will continue in 2007. During the year ICA interest in health and wellness, the stressfulness also developed and began testing a new pet food of daily life and an aging population. Read more department with an expanded product range. about current trends on pages 12–13. Moreover, Maxi ICA has developed a compact hypermarket designed for small communities. It Branding and marketing communications offers the convenience of a hypermarket with less ICA’s brand has a very strong position, and it is space but with a carefully selected range of prod- the market leader in Sweden. The price-cutting ucts. Thus far six have been opened in Sweden campaign was the focus of marketing communi-

ICA GROUP 17 cations in 2005. In 2006 there was a shift to other ICA’s Corporate Responsibility areas such as health and diversity, e.g., in theme ICA’s corporate responsibility covers the areas issues in ICA’s customer magazine, Buffé, and of quality, health, the environment and social on www.ica.se. In December the website had a responsibility. Also included here is the ICA record 974,538 unique visitors. Kitchen, which is responsible for the Group’s In the Norwegian market, ICA markets the ICA extensive recipe service, and the Nordic customer and Rimi brands. ICA stands for the same values in contact, which handled over 100,000 queries and Sweden and Norway, although the brand does not opinions from Swedish and Norwegian customers have the same strong position in the latter coun- in 2006. Read more about ICA’s corporate respon- try. Rimi, which celebrates 30 years in Norway in sibility on pages 32–57. 2007, is a discount concept people trust. ICA represents quality. The launch of private labels and Focus on ICA’s employees focus on health are two ways to convince custom- ICA’s new Group organization with Nordic areas ers of the advantages of shopping at ICA’s stores. of responsibility required extensive work with competence development during the year. In connection with the change, a competence audit was conducted, which identified five priority areas: communication, financial acumen, operational leadership, awareness about ICA and store operations. During the year ICA’s HR department ICA’s private labels worked intensely with internal training in all these areas. Read more about ICA’s employees on pages When ICA puts its name on a product, it takes full responsibility. It guarantees that the product has been 40–41. quality tested and is acceptable from an environmental and ethical perspective. ICA’s private label products also help to strengthen the profitability of stores and the Group as well as the ICA brand. ICA’s corporate communications department launched a new Group-wide intranet for Brand Description all employees in Sweden and Norway, including ICA ICA is the umbrella brand associated with the Group’s core values: simple, office, logistics and store personnel. The new tar- personal, safe, inspiring and modern. The products are sold in ICA stores in get group-focused intranet replaced seven sepa- Sweden and Norway. rate intranets with the aim of increasing solidarity ICA Gott liv Launched in 2005, this line of healthy products is designed to make it easy for within the Group and facilitating day-to-day work. customers to find items that taste good and are good for them. The line spans a number of product categories. Financial control and development

ICA Ekologiskt The ICA Group’s line of organic products, most of which are Krav-certified. ICA is working continuously to improve efficiency Several products are labeled EU-organic and available in Swedish and some in financial control. Shared Services is the clearest Norwegian stores example, having created uniform routines and systems for the Swedish and Norwegian operations Skona The ICA Group’s eco-label for detergents and dishwashing liquids, paper products and cleaners. Available in all Swedish and Norwegian stores. in accounting, payroll management, real estate management and security, among other areas. Euro Shopper The ICA Group’s discount product line, Euroshopper was developed coop- To implement the Swedish Code of Corpo- eratively by nine European companies in 15 countries, including Kesko, Albert Heijn, Dansk Supermarked and the ICA Group. Euroshopper is available in rate Governance in 2007, an internal control unit Sweden, Norway and the Baltic countries. has been created within Shared Services. In 2006 Shared Services identified and documented the Novaline* Lightbulbs and batteries. key financial controls in the Group. Prima Cookery* Housewares. The aim of the ICA Group’s real estate operations is to provide suitable facilities and strategic Deco Design* Candles, napkins, paper goods and linens. locations for the Group and ICA retailers by devel- Mywear* Apparel. oping and actively managing properties.

Further coordination with new organization *Sold in ICA and Rimi stores in Sweden, Norway and the Baltic countries. In February 2007 ICA approved a new, simplified organization with three Group functions: Assort- ment & buying, Marketing and Finance. Coordina- tion at the Group level has been further strengthened, particularly in international purchasing.

18 ICA GROUP Subsidiaries now have greater profit responsibility ICA’s brand ranks high and responsibility for local offerings. The compa- On “Brand Day 2006” ICA received the Signum Together with Nokia, ICA received the fewest neg- nies take over portions of purchasing and product award, presented for the best example of brand ative responses, according to the survey, which is development, particularly for fresh foods, as well management by a Nordic company. The jury gives conducted in 25 countries, including Sweden and as certain aspects of marketing communications. more weight to long-term branding than individual Norway, and measures public sentiment about They also assume responsibility for logistical oper- campaigns. The Signum award was established companies and their brands. In Norway, however, by Groth & Co, a patent and branding agency, and ICA did not place among the 22 most visible com- ations in their country. was presented for the twelfth time. panies in the survey The Assortment & buying Group Function ICA was also the biggest gainer in last year’s sur- assumes responsibility for developing syner- vey of well-known brands by Reputation Institute. gies and coordination in purchasing and product ICA took a big jump from fifth to second place. development. The priorities are the Nordic/Bal- tic purchasing work and international purchasing cooperation as well as Group logistics. The Marketing Group Function, which is respon- Organization 2007 sible for strategic changes, comprises business development, strategic marketing communications and Corporate Responsibility. The Finance President and CEO Group Function has retained its previous struc- Kenneth Bengtsson ture, although ICA Real Estate reports directly to ICA’s President and CEO.

Marketing Finance Ingrid Jonasson Blank Sonat Burman-Olsson

Assortment & ICA Sverige ICA Norge Rimi Baltic Real Estate ICA Banken buying Peder Larsson Trond Kongrød Antonio Soares Bo Liffner Jörgen Wennberg Anders Nyberg

ICA GROUP 19 It is obvious to us at ICA that there can be no question about food safety. In fact, the customer shouldn’t have to give it a thought. We are constantly working to guarantee high quality and product safety through the entire value chain, from the supplier all the way to store shelf. A good logistics system is the key to this work, and during the year ICA opened a new warehouse in Helsingborg, an ultramodern facility covering 63,000 square meters. secure ICA Sverige

ICA Sverige is one of Sweden’s leading food retail companies. It is the principal supplier to ICA retailers, who own and manage their stores as independent businesses. In 2006 ICA Sverige AB posted revenue of SEK 48,301 million. Sales in the 1,397 stores amounted to approximately SEK 87 billion, including VAT.

About ICA Sverige The food retailer ICA Sverige operates through- ICA continued to upgrade its distribution net- out the country in cooperation with independent work, opening a new, ultramodern warehouse in Mission: To be the leading retail com- retailers, who own and manage their stores. ICA Helsingborg. pany with a focus on food and meals. Sverige promotes sales to consumers and assists Sales 2006: SEK 48,301 million (46,752), stores with advice and concrete measures to be The “in-store logistics” project in Sweden and incl. Etos more efficient. ICA Sverige also identifies and Norway is designed to improve efficiency Operating income 2006: SEK 2,557 develops new locations and helps to enhance cur- throughout stores and make them more com- million (1,607) rent stores through renovation or expansion, for petitive. Number of annual employees*: 4,752 example. (4,917) ICA retailers in Sweden make an average of Store profiles Number of stores: 1,397 (1,417) 70 percent of their total purchases through ICA To meet customer needs, ICA Sverige has devel- Sverige. The remaining 30 percent mainly consists oped four store profiles in the hypermarket, * Excluding employees hired by individual ICA stores of fresh foods, beverages, exotic produce and supermarket and convenience store formats. All bread, which in many cases come directly from the profiles developed positively during the year. suppliers or local producers. It is in the interests of Hypermarkets developed strongly, with new Sales, SEK million individual retailers to make their purchases from Maxi ICA stores opened at a rapid rate. Total store

ICA Sverige and help ICA AB to achieve high effi- revenue rose by 13.9 percent. ciency and lower costs. Stores in the small and medium-sized profiles, ICA Nära and ICA Supermarket, performed espe- Highlights in 2006 cially well, posting sales increases of 3.9 and 4.3 Sales in Swedish ICA stores rose by 7 percent. percent, respectively. ICA’s own customer survey The smaller store profiles, ICA Nära and ICA showed that ICA Kvantum had the most satisfied Supermarket, had the highest sales increases. customers of all the profiles during the year. The investments made in small rural stores ! New stores were opened at a fast pace in all store have proven successful, and the rate of store clos- * Adjusted according to IFRS. profiles. In total, 13 stores were opened in 2006: ings has slowed significantly. Only 33 stores, three four Maxi ICA Stormarknad, one ICA Kvantum, of which were in rural communities, were closed Market share two ICA Supermarkets and six ICA Nära stores. during the year, compared with around 120 stores Most notable was the opening of hypermarkets a year in recent years. in metropolitan Malmö, Göteborg and Stock- holm. A total of 45,000 square meters of new Market

! sales space was added during the year. A large The Swedish food retail market (excluding gas number of stores in every profile were reno- stations) continued to face strong price pressure vated. during the year and grew by 5.1 percent (2.3) to SEK 222 billion. For the year, food prices rose 1.7 The price-cutting campaign ICA Sverige began in percent. 2005 has continued with further price reductions The Swedish food retail market is dominated by in selected product categories. three companies – ICA, Coop and Axfood – while a fourth, BergendahlsGruppen, is mainly active in Great effort was devoted to maximizing efficien- southern Sweden. In 2006, however, Bergendahls- cies in the product range, and a large number of Gruppen opened new stores in Stockholm and popular, value-added products were launched. Mälardalen.

22 ICA’S COMPANIES ICA has continued to cut prices. Sales for ICA Focus in 2007 ICA Sverige’s standard agreements stores rose by 7 percent during the year, giving ICA ICA Sverige will work aggressively with various ICA Sverige serves an overall support 36.5 percent of the Swedish market. The average measures to better adapt its product range to cus- function for ICA stores, in accordance purchase increased as well. tomer demand. Fierce competition in the Swedish with the so-called ICA agreement. Growth for discounters has stagnated, and price food retail market makes it likely that price pres- This is complemented by agreements for each profile, through which the cuts by traditional players have strengthened their sures will continue in 2007. stores join forces under the ICA name competitive position. Typically, discounters carry The need for cost efficiencies to meet the grow- to secure better purchasing terms a limited product range and manage their busi- ing competition continues unabated. The in-store and carve out a clearer image in the nesses with very low costs. logistics project that will carry on in 2007 is an marketplace. Axfood’s chain, Willys, currently has around example of how ICA is trying to work more simply ICA agreements 100 stores. In the discount segment, Axfood has and efficiently. A large number of the 1,397 Swedish also developed another concept, Willys Hemma, The rate of new store openings remains high, ICA stores have an ICA agreement – a with 43 stores. The German chain Lidl operates 117 with a concentration in metropolitan areas. ICA shareholder and financing agreement stores in the Swedish market that carry a narrow sees major potential to grow, especially in these whereby ICA Sverige AB retains the rights to the store location while the range of about a thousand items at low prices. regions, where its market share is below average. retailer owns and runs the store, usu- In 2006 ICA AB signed an agreement with Dansk The transformation of the existing store network ally as a limited company. Supermarked to reduce its holding in the discount will continue. New stores are usually opened by concept Netto from 50 to 5 percent. Netto had ICA Sverige, which then offers attractive financing terms to retailers to previously been jointly owned by ICA and Dansk run them. Supermarked. Depending on the store’s size and annual sales, the retailer then pays a royalty and in some cases a profit share to ICA Sverige. ICA Fastigheter ICA Sverige’s store profiles as per December 31, 2006 Sverige AB owns most of the store properties or holds the leases on them. To be convenient for customers and cover a variety of needs, ICA Sverige has developed four different store profiles. Maxi agreements No. of Sales No. of Maxi ICA hypermarkets have dedi- Store profile Description stores incl. VAT products cated home and leisure departments, which are operated as branches by ICA Nära are small, convenient stores with good ICA Sverige’s subsidiary Maxi Special service, a narrow product range and quality fresh AB. Maxi Special is responsible for foods. Many serve as pick-up sites for Apoteket and purchases and sales to these depart- 746 SEK 13,408 m 3,000–5,000 Systembolaget, the state-run pharmacy and alcohol ments in Maxi stores. The properties monopolies, and handle sales for ATG, the Swedish are usually owned by ICA Fastigheter off-track betting service. Sverige AB, which leases them to the retailer’s company or to Maxi Special.

At ICA Supermarket, customers can find most of what they need on a daily basis or for special occa- 477 SEK 30,539 m 6,000–10,000 sions. Personal service is high, and the stores carry a wide range of fresh foods.

ICA Kvantum stores are larger and offer everyday food items, anti-allergy foods, eco-labeled products and specialty items from near and far. ICA Kvantum 122 SEK 23,202 m 10,000–30,000 also offers many health and beauty items as well as books, magazines, CDs and DVDs.

At Maxi ICA Stormarknad, customers will find everything they need at good prices under one roof. In addition to a wide variety of foods, these stores carry books, apparel, housewares, sporting goods and 52 SEK 19,443 m 30,000–45,000 everything for the garden. They have extended opening hours and are conveniently located for customers who drive to the store.

ICA’S COMPANIES 23 ICA Norge

ICA Norge is one of Norway’s leading food retailers, with 693 stores operated by the company or as franchises. In 2006 ICA Norge posted revenue of NOK 15,966 million, corresponding to SEK 18,361 million. Store sales amounted to approximately NOK 20 billion, excluding VAT.

About ICA Norge The food retailer ICA Norge operates through A development program was offered during the its own stores and franchises. There are associ- year for store staff and salaried employees to Mission: We will be the leading food ated stores as well. ICA Norge promotes sales to provide information on priority areas and cre- retail chain in Norway with a focus on food and meals. customers and assists stores with advice and con- ate better motivation among employees. Nearly crete measures to improve efficiency. ICA Norge 20,000 people participated in the web-based Sales 2006: NOK 15,966 million (16,418) also identifies and develops new locations and training. Operating income 2006: NOK 89 helps to enhance current stores through modern- million (454) ization or expansion, for example. Franchise ’08 is a development program for 20 Number of annual employees: 4,043 selected store managers who entered a two- (4,052) (excluding employees of fran- Highlights of 2006 year training to take over a store and become a chise stores) Sales in Norwegian ICA stores decreased by 1 franchisee. Number of stores: 693 (747) percent. The best sales performance was posted by ICA Maxi and ICA Supermarket. A new business model has been developed to increase the focus on store operations and sales. Sales, NOK million New stores were opened at a fast pace and over Implementation will begin in 2007. 18,000 square meters of sales space was added in every store profile during the year. A large Store profiles number of stores were renovated in every pro- ICA Norge has four store profiles in the hypermar- file as well. ket, supermarket, convenience store and discount formats. At the same time that Norwegian con-

Two new concepts for ICA Nær have been sumers are becoming more price conscious, they developed, one for urban stores and one for want larger stores with a wider selection of pre- suburban areas. The urban concept focuses on pared and fresh foods. With its four store profiles, ! prepared foods, and both concepts have been ICA Norge tries to meet these needs and cover well received. every position in the market. Market share The ICA Maxi hypermarket profile developed The range of private label products in ICA strongly with sales rising by 11.7 percent in 2006. Norge’s stores continues to grow, accounting The share of ICA Norge’s total sales from hyper- $ for 9 percent of sales in 2006, against 7 percent markets rose to 13.5 percent, against 12 percent in the year before. The range of non-foods also 2005. The Rimi discount concept accounted for improved, particularly for ICA Maxi. 42 percent of sales, compared with 45 percent a year earlier. To make it easier for customers to eat a healthy Of ICA Norge’s 693 stores, 415 are operated as diet, ICA Norge introduced keyhole labeling in franchises, while 278 are wholly owned. its stores. Sales of keyhole products rose by between 10 and 20 percent. Candy-free cashier Market zones tested in one store have garnered a very The Norwegian food retail market (excluding con- positive response. venience stores and gas stations) increased by 5.1 percent during the year, with sales of NOK 110 bil- The “in-store logistics” project in Sweden and lion (excluding VAT). Food prices increased by 1.5 Norway is designed to improve efficiency percent. throughout the supply chain and make stores Coop Norge, NorgesGruppen and Rema more competitive. together account for a large share of sales in the

24 ICA’S COMPANIES Norwegian market and therefore are ICA Norge’s Focus in 2007 ICA Norge’s standard agreements largest competitors. Discount chains account for At the beginning of 2007 ICA Norge will launch Ownership and operation of ICA about half of sales. “Take off,” a program to accelerate develop- Norge’s stores is divided into two ICA and Rimi stores in Norway saw their mar- ment in a number of areas and create Norway’s main models: wholly owned branch ket share decline to 19 percent (20,2). The main best stores. ICA Norge will continue to open new stores and franchises. All stores are reason for the decrease is that ICA Norge, in order stores while modernizing its existing store net- supported by an integrated system for purchasing, product selection, to streamline its store structure, sold a number of work. New stores will be opened at a fast pace supply chain, administration and stores in 2006. with a focus on large formats. In total, slightly over marketing. The hypermarket profiles ICA Maxi, OBS Stor- 25,000 square meters of new sales space will be marknad (Coop) and Smart Club are continuously added. In addition, around 130 stores, mainly in Branch stores Branch stores are owned by ICA opening new stores. NorgesGruppen has focused the Rimi and ICA Nær profiles, will be renovated. Norge. They represent a small share on its convenience store concept, at the same At the same time that it enhances its store net- of the Rimi stores and nearly all ICA time that ICA discontinued its operations as a work, ICA Norge will further strengthen the com- Supermarked and ICA Maxi stores. wholesale distributor to convenience stores after petence of its employees through various training divesting ICA Meny during the year. programs. ICA Norge continues to focus on its pri- Franchise agreements Retailers operate their stores as inde- The German discount chain Lidl, which entered vate labels, non-foods and fresh foods. Moreover, pendent franchises and pay a fee to Norway in 2004, continues to open new stores ICA is trying to position itself as the leading food ICA Norge based on a percentage and at year-end had around 50. The chain has retailer in terms of special offers, product range of their sales. ICA Norge provides a expanded its range of Norwegian products to and competence in the health area. number of central services including marketing and administration. ICA meet customer demand. Norge owns or holds leases on most of the franchise properties. ICA Nær is a franchise chain, and slightly over 70 percent of Rimi stores are operated as franchises.

ICA Norge’s store profiles as per December 31, 2006 Associated stores ICA Norge primarily assists so-called To be convenient for customers and cover a variety of needs, ICA Norge has developed four different store profiles. associated chains with purchasing and distribution. Examples include No. of Sales No. of Livi and Servicemat. Store profile Description stores excl. VAT products

ICA Nær convenience stores offer good service and a specially designed product selection from local 306 NOK 2,700 m 3,000–6,000 suppliers.

ICA Supermarked stores are designed for customers who appreciate good food and a wide variety. Personal service is high and there is a wide selec- 76 NOK 4,246 m approx. 10,000 tion of fresh foods, including a deli counter where customers can find the latest food trends.

ICA Maxi stores carry everything in one location at good prices. In addition to a wide selection of foods, these stores sell books, apparel, house- 23 NOK 4,522 m 15,000–24,000 wares, music and DVDs. They are conveniently located for customers who travel by car.

Rimi discount stores make it easy and convenient for customers to do their daily shopping. With 288 NOK 8,474 m approx. 3,000 modern, airy stores, Rimi offers customers the everyday products they need at good prices.

There are also 125 associated stores such as Livi and Servicemat, which had a turnover of NOK 475.5 million (excl. VAT) in 2006. Fokus Vest was converted during the year to ICA Nær.

*Sales refer to aggregate sales for both company-owned and franchised stores.

ICA’S COMPANIES 25 Rimi Baltic

Rimi Baltic is one of the leading and most modern food retail chains in the Baltic region. The company was established as a joint venture between ICA and Kesko Livs in January 2005. In October 2006 ICA and Kesko concluded an agreement whereby ICA acquired Kesko’s 50-percent stake in Rimi Baltic, which thereby became a wholly owned subsidiary of ICA AB.

About Rimi Baltic ICA’s acquisition of Kesko’s 50-percent interest in To serve small communities and lower income Rimi Baltic is in line with ICA’s goal to be the leader brackets, Rimi Baltic Livs offers two hard discount Mission: Rimi Baltic’s stores will be in every market where it operates. By integrating chains: Säästumarket, Estonia’s largest discount its customers’ first choice in the fast- Rimi Baltic as a wholly owned entity, ICA creates chain, and SuperNetto, which operates in Latvia growing markets of Estonia, Latvia and Lithuania. an even stronger Nordic-Baltic organization. In and Lithuania. this way, it improves opportunities for synergies Sales 2006: EUR 972 million (809) in administration, IT and purchasing, especially in Market Operating income: EUR 2.2 million (1.4) private label and non-food products. A total of around 7.5 million people live in the three Number of annual employees: 9,132 Baltic countries: Estonia, Latvia and Lithuania. With (8,375) Highlights of 2006 a population of nearly 3.5 million, Lithuania is the Sales rose by 20.1 percent to EUR 972 million (809). largest market, followed by Latvia with 2.5 million Number of stores: 205 (178) and Estonia with 1.5 million. Rimi Baltic has a market share in the region of The Baltic market for food products grew by Sales, EUR million approximately 16 percent. above 15 percent (16) in 2006, to approximately EUR 6 billion, SEK 55.5 billion (48), excluding VAT. A large number of new stores have been The discount market continues to grow, and # opened, mainly hypermarkets, in all three coun- Rimi Baltic has a very strong position in this seg-

! tries. The number of hypermarkets is now 30, ment. The German discount chain Lidl had been against 24 at year-end 2005. expected to establish operations in the Baltics in 2006, but decided not to enter the market. Implementation of an SAP enterprise system In Estonia, Rimi Baltic’s market share was was completed, an important step in the efforts approximately 24 percent and it shares market ! to improve efficiencies in business processes. leadership with cooperatively owned ETK. The Selver chain had a market share of 11 percent and Store profiles Finland’s Prisma had a share of about 6 percent. Market share Rimi Baltic owns all its stores and coordinates their In Latvia, Rimi Baltic’s market share was approxi- supply chain. It operates four profiles in the Baltic mately 22 percent (21). The biggest competitor ! countries. Rimi Hypermarket and Rimi Supermar- was Maxima (formerly Vilniaus Prekyba) of Lithu- ket focus on fresh foods and good service. They ania, with 20 percent, followed by Elvi and Mego, have counters for hot and cold foods, deli, fish and with 5 and 4 percent, respectively. During the year cheese. Rimi Baltic has also developed a compact Finland’s Prisma opened its first store in Latvia. hypermarket format with an emphasis on atmo- sphere, comfort and efficient use of space.

26 ICA’S COMPANIES In Lithuania, Rimi Baltic is the fourth largest com- Focus in 2007 pany, with approximately a 7 percent market The tendency of Baltic consumers to shop less share. However, Rimi Baltic increased its sales in frequently and purchase more each time they do Lithuania by as much as 40 percent during the is gradually growing. This benefits Rimi Baltic with year. Maxima clearly dominated with a market its strong position in the hypermarket format. share of 41 percent, followed by the domestic Lithuania is the largest market in the Baltics, chain IKI with 16 percent and Norfa with approxi- but is also the one where Rimi Baltic has its small- mately a 13 percent market share. est market share. Rimi Baltic is therefore priori- In 2006 Maxima was the overall market leader tizing growth in Lithuania. It will also continue to in the region followed by Rimi Baltic. improve internal efficiency. Rimi Baltic plans to open a new warehouse in Lithuania in 2007 and expand the warehouses in Latvia and Estonia.

Number of store by country and formats as per December 31, 2006

Hypermarket Supermarket Discount Total

Estonia 8 6 49 63

Latvia 13 30 47 90

Lithuania 9 22 21 52

Total 30 58 117 205

ICA’S COMPANIES 27 ICA Banken

ICA Banken offers financial services that make life a little easier for customers and in the process strengthens their loyalty to ICA. During the year the bank again reported a strong influx of new customers and raised business volume by 9 percent.

About ICA Banken A fair interest rate on current accounts, simple- ICA Banken administers ICA’s 3.1 million card to-understand terms and low fees are the phi- customers. Among active customers, 1.6 million Mission: To make life a little easier for losophy at ICA Banken, which was established in pay with their cards when they shop at ICA, while ICA’s customers through its financial services and increase their loyalty 2001. In reality, ICA Banken offers its own branded the rest use their cards to accumulate bonus to ICA. It also reduces transaction products in the financial sector. When ICA’s card points. The number of banking customers – i.e., costs for ICA stores and ICA AB from is used, it also reduces processing fees for ICA those who utilize ICA Banken’s banking services customers who use other bank and retailers. – increased to 285,000 during the year. credit cards. In 2006 ICA Banken increased its number of Business volume (deposits + lending Highlights of 2006 bank cards in issue by 40,000 to 213,000. incl. mortgages) 2006: SEK 13,480 mil- ICA Banken’s goal was to earn a profit in 2006. Through an agreement with the Swedish Migra- lion (12,316) Operating income amounted to SEK 11 million. tion Board, the bank issues compensation pay- Deposits 2006: SEK 6,394 million ments to asylum seekers through a card solution. (5,930) ICA Banken has the most satisfied customers of Sales 2006: SEK 459 million (316) any Swedish bank, according to a survey of the Market industry by the Swedish Quality Index. Product Competition in the market has increased for both Operating income 2005: SEK 11 million (–82*) range and quality were the most important fac- deposits and loans, and interest rate hikes have tors behind its top ranking. slowed growth. Number of annual employees: 174 (154) Swedish customers tend to stick with the same Number of ATMs: 69 ICA Banken entered into a cooperative agree- bank. The four major banks – SEB, Handelsbanken, Number of payment terminals: 6,000 ment with Nordnet that allows customers to Swedbank and Nordea – account for about 80 trade mutual funds, equities and warrants, and percent of the market. Smaller niche banks such * Operating income for 2005 is restated due to changes in accounting principles to save for retirement through individual pen- as ICA Banken, Skandiabanken and Länsförsäkrin- for the accrual of card fees. sion savings schemes. These services will be gar Bank continue to slowly but surely capture launched in the second half 2007. market share from the big four. Business volume, SEK million ICA Banken took over responsibility for payment Focus in 2007 terminals in Norwegian ICA and Rimi stores, During the second half of 2007 ICA Banken’s

which lowers their processing fees. The bank agreement with Nordnet will allow customers to was already responsible for payment terminals trade mutual funds, equities and warrants, and to $ in Swedish ICA stores. save for retirement. As a result, ICA Banken will be ! able to provide a complete range of banking ser- Customers of Nordea and Swedbank can with- vices to retail customers draw up to SEK 2,000 at cash registers in ICA The EU’s SEPA project – Single Payment Area stores. This offer is now being extended to cus- – will facilitate payments and make costs transpar- ! tomers of Länsförsäkringar Bank. ICA Banken ent between countries. One part of the process also launched family accident insurance. is to convert to chip technology in combina- tion with a magnetic strip on cards. ICA Banken Concept is working to ensure that payment terminals in ICA Banken offers the simplified services cus- stores, and the cards it issues, are adapted to the tomers want. This includes current accounts and new technology. various forms of bank cards. ICA Banken offers customers unsecured loans on competitive terms. Mortgage loans are offered in cooperation with SBAB. Moreover, the bank is continuously adding ATMs in ICA stores.

28 ICA’S COMPANIES Etos

The specialty retail chain Etos was launched in Sweden in 2002 with an offering of health and beauty products. ICA has decided to transfer the health and beauty concept to ICA stores and has begun liquidating Etos stores in Sweden.

Within the ICA Group, Etos has contributed exper- Sales, SEK million Fakta Etos tise in the health and beauty sector. It has tested new ideas, created a product range and built rela- Sales 2006: SEK 34 million (35) tionships in the field that have been put to use in Operating income 2006: SEK –24 mil- other parts of the Group. lion (–20)

A pilot test to transfer the Etos concept to Maxi Number of annual employees: 16 (24) ICA Stormarknad stores has proven successful Number of stores: 7 (8) and continued in 2006. Another 19 Maxi stores opened health and beauty departments during the year. !

Netto Marknad

Netto was established in Sweden in 2001 as a joint venture between ICA AB and Dansk Supermarked AS. In December 2006 ICA signed an agreement with Dansk Supermarked to reduce its holding in Netto from 50 percent to 5 percent.

The discounter Netto operates 84 stores in Sales, SEK million About Netto Sweden and has 861 employees. As part of the agreement with Dansk Supermarked, ICA Sales 2006: SEK 2,444 million (2,052) is taking over 21 Netto stores in the Mälardal Operating income 2005: SEK –138 mil- region and converting them to ICA stores. lion (–164)

Number of annual employees: 861 (777)

Number of stores: 84 (74)

2002 refers to August 30, 2001-August 31, 2002. 2003 refers to September 1, 2002-December 13, 2003.

ICA’S COMPANIES 29 simple

ICA’s vision is to make every day a little easier. Many people find there simply aren’t enough hours in the day. We want to make easier for them to swing into a supermarket after work, to prepare a homemade meal in the evening or to eat as healthy as they would like. We try to simplify our customers’ lives in several ways: by offering a large selection of products, easily accessible banking services, convenient opening hours and access to tasty, nutritious recipes.

Corporate Responsibility Report Our dialogue with the community x inspires and guides us inde

ICA is one of the most visible companies in the Nordic region, and the uality expectations of our customers and communities are a constant source of inspiration. We are pleased that our work with the environment,

health, quality and social responsibility has received such a positive q health response in various surveys, but we will not let ourselves be satisfied and are constantly working to improve in these areas.

We at ICA have defined a number of positions that Diversity a higher priority environment describe what we do to contribute to society’s In our annual survey of employees to see whether development. We call them “ICA’s good busi- we are living up to ICA’s good business philoso- ness” and they are the foundation of the efforts phy, they feel we have made the most progress in to strengthen our brands and achieve ICA’s vision guaranteeing food safety and quality, promoting and mission. healthy eating habits and managing the com- mployees Through ICA’s good business and the policies pany with profitability and high ethical standards. linked to them, we also cover the ten international However, they also feel more can be done to pro- principles in the United Nations Global Compact, mote diversity and personal development among which ICA is a signatory to. Learn more about employees. Group Management has put this issue E ehtics

ICA’s good business and the Global Compact on on its agenda and it is one of the four priorities in Kenneth Bengtsson pages 34–35. our long-term business plan that will be followed President and CEO up in 2007. Focus on global issues The global issues dominating 2006 included sus- Further work with environment

tainable fishing, climate problems and social con- and social responsibility introduction ditions in high-risk countries. In these and other The contacts we have had with representatives areas, ICA is working concretely to improve. of our communities show that ICA has much to ICA’s work with sustainable development is not gain by providing clearer information on our envi- done in isolation. Customers, employees, non- ronmental work. This will be a priority for Group profits and opinion makers are a major source of Management in 2007, when the focus will be on inspiration to us, and we maintain an active dia- shaping our product range to meet environmental logue with our communities to identify problem concerns and on the Group’s climate impact. areas and potential improvements in our work In addition, Group Management will in 2007 with quality, the environment and social issues. especially be keeping an eye on socially respon- For example, in how we open new stores and how sible sourcing from high-risk countries. our products are manufactured and distributed. Even though price is still a central issue and Lisbeth Kohls we are trying to cut costs at the purchasing level, Senior Vice President, Positive feedback on health issues we never forget our fundamental values. We are Corporate Responsibility Surveys in 2006 show that customers trust ICA therefore pleased that our smaller stores and rural more than ever. Of the parameters that measure stores have strengthened their position and are corporate responsibility, we received the highest more and more appreciated by customers. ratings in the industry for how we make it easy for We are committed to doing what we can to customers and inspire them to eat a healthy diet. contribute to a better society locally and globally Health issues are a major priority for ICA and an and be a positive force in society. Your opinions area where the Nordic governments, the EU and on our work are always welcome. WHO place high expectations on retailers. This year our work with health issues was manifested in our Norwegian stores through the introduction of keyhole labeling, which makes it easier for customers to find nutritious products.

CORPORATE RESPONSIBILITY 33 ICA’s corporate responsibility x inde ICA has a major responsibility for how its operations affect society. ICA wants to contribute to the positive development of its communi-

uality ties and has established values, policies and guidelines to support this.

q health Work with ethics and corporate responsibility is To ensure that ICA’s employees are familiar with ICA’s corporate responsibility strategy important to the ICA group’s vision to make every the values that serve as the basis for the work with day a little easier and its mission to be the leading ethics and corporate responsibility, ICA during the ICA acts responsibly in attracting retailer in the Nordic region with a focus on food year developed an interactive training program on customers and employees and maintaining a successful business. and meals. With good profitability as a basis, ICA the good business philosophy that will be intro- wants to live up to the expectations of customers duced in early 2007. The training will be part of and society with regard to accessibility, value for ICA’s introductory program for new employees, environment the money, quality, health, the environment and and all employees, retailers and store managers ICA’s good business describes ICA’s view on ethics and ethical issues. Work with sustainable development will participate. Around 70 percent of the mem- social responsibility. is critical to the company’s long-term development. bers of the Group’s management teams have participated in a dialogue on ICA’s values and policies

mployees ICA’s good business and in discussions on ethical issues. The good business philosophy One of the cornerstones of ICA’s strategy is to is put into practice through contribute to society’s sustainable development. Management and organization ICA’s policies and guidelines. This strategy is spelled out in seven position state- Group Management has ultimate responsibility for

E ehtics ments on ethics and corporate responsibility, a the ICA’s CR goals and strategies. The Code of Pro-

philosophy called “ICA’s good business.” The aim fessional Conduct and Ethics team is responsible ICA helps managers and is to be a sustainable company driven by the fol- for ICA’s policies and their implementation, as well employees develop an ethical lowing values: as suggesting priorities and monitoring ethical “compass”. issues, risks and ICA’s reputation in society. ICA will be driven by profitability and high This cross-functional team is led by the head ethical standards.

introduction of the Corporate Responsibility department. It ICA clearly sets priorities for ethics, includes managers for Legal Affairs, Assortment & the environment, health and ICA will listen to customers and always base quality, as well as for its employees. buying (food products), Human Resources, Corpo- decisions on their needs. rate Communications, ICA Sverige and ICA Norge. During 2006 the team held six meetings and pro- ICA will nurture diversity and growth among duced a summary of work in the area for Group its employees. Management. Day-to-day work on many of the issues is han- ICA will maintain an open dialogue internally dled by the Corporate Responsibility department, and with the community. which organizationally falls under the Group marketing function at ICA AB. The Corporate Respon- ICA will guarantee product safety and quality. sibility department has managers responsible for health, quality, customer contacts, recipe develop- ICA will promote a healthy lifestyle. ment, the environment and social responsibility. In 2006 Group Management decided to update ICA will adopt sound environment practices the information policy, modify the guidelines in to promote sustainable development. the quality and environmental policy, and to adapt the business ethics policy guidelines to both Nor- Policies and guidelines are in place to convert way and Sweden. Managers responsible for CR these points into practice in day-to-day activities. issues within the Ahold group met during the year This is done through a systematic management to identify shared priorities. Ahold has held ICA up system in Group companies, cooperation with as a model in this work. other organizations and ongoing contact with key stakeholders. Concrete goals and activities are included in each company’s business plan.

34 CORPORATE RESPONSIBILITY x inde The Global Compact’s ten principles for corporate responsibility Points 1–6: ICA has a monitoring system Businesses should: Read more on page for private label products. For other suppliers, it sets requirements in its poli- 1. Support and respect the protection of internationally proclaimed 36–39 cies. ICA systematically monitors sup- uality human rights in areas they can impact pliers in high-risk nations through BSCI audits. During the year a new model was 2. Make sure that they are not complicit in human rights abuses 36–39 developed for audits in primary production, e.g., farming and fishing. Visits 3. Uphold the freedom of association and the effective recognition 36–39 have been made to suppliers to discuss q health of the right to collective bargaining potential improvements. ICA takes a structured approach to gender equality 4. Eliminate all forms of forced and compulsory labor 36–39 and diversity. It participates in the EU’s “unconscious prejudice” project. Learn 5. Effectively abolish child labor 36–39 more on page 40.

6. Eliminate discrimination in respect of employment and occupation 36–41 Points 7–9: ICA has increased sales of

organic products, improved its system environment 7. Support a precautionary approach to environmental challenges 42–47 to monitor eco-labeled sales in Norway, 8. Undertake initiatives to promote greater environmental responsibility 42–47 improved waste management, raised logistics efficiency and monitored its 9. Encourage the development and diffusion of environmentally friendly technologies 42–47 own and its haulers’ management systems.

10. Work against all forms of corruption, including extortion and bribery. 34, 36 mployees Point 10: ICA monitors in accordance with the guidelines in the business ethics policy, including an inspection Monitoring and reporting International guidelines and standards program for competitive practices.

For many years ICA has provided information on In 2005 ICA became a member of BSCI, Business Internal dialogues on business ethics E ehtics its work in the areas of quality, the environment, Social Compliance Initiative, through one of its are maintained by the Group’s management teams. health, ethics and social concerns. The aim is to owners, Ahold. BSCI is a European initiative cre- establish common goals and key performance ated to establish uniform criteria and a system- indicators for the Group in the sustainability area, atic approach to improving working conditions in though much still needs to be done before a com- high-risk countries.

mon structure is in place between companies to Since 2004 ICA is also a signatory of the UN introduction compile and monitor the necessary data. Global Compact and supports its ten international ICA has used the Global Reporting Initiative principles on human rights, fair labor, environmen- model (GRI) as a basis for its reporting and is devel- tal safety and countering corruption. ICA annually oping an IT tool to support fact gathering in accor- reports on activities and results associated with dance with the model. The IT support will be put the ten principles of the UN initiative. to practical use at the earliest in fall 2007, and ICA’s Two of the Group’s employees took part in the aim is to meet the GRI reporting requirements Global Compact’s Nordic network meeting in Hel- within two years. sinki in May at which climate issues were discussed.

Talking to stakeholders Based on its good business philosophy, ICA wants its customers, owners, employees and other stakeholders to feel that it practices what it preaches. ICA continuously receives feedback on its work and progress through a dialogue with customers, opinion makers and employees as well as through surveys. In this way, it identifies priority areas and opportunities for improvement.

CORPORATE RESPONSIBILITY 35 Ethics x inde ICA’s products are produced under socially responsible conditions. Through a continuous dialogue with customers and other stake

uality holders, ICA learns their views and ideas, which help the company in its work with ethics and social responsibility. q health As a basis for this work, ICA has adopted policies, criteria and a systematic approach to corporate Business ethics policy supplemented by guidelines, to provide guidance social responsibility audits at the production level. – adopted December 2003 on certain issues. BSCI requires suppliers in high-risk countries ICA’s business ethics policy includes guidelines on relationships with sup- to undergo audits by an accredited third party. pliers and partners with regard to Socially responsible sourcing Audits cover working conditions such as wages, bribery and gifts, fair competition and For years ICA has placed requirements on socially child labor, working hours, discrimination, safety environment shareholdings. responsible sourcing based on the UN declaration and medical care. If a supplier does not meet the

Quality and environmental policy on human rights and the core conventions of the criteria, an action plan is drafted and followed up – revised and adopted January 2006 International Labour Organization (ILO). These within one year. Suppliers that meet all the require- ICA’s quality and environmental policy, requirements are monitored through self-audits ments are not audited again for three years.

mployees which has been repeatedly updated by suppliers, visits by ICA staff and recommenda- The advantage of the network is that suppli- since 1989, covers operations, sourc- tions on third-party audits according to the Busi- ers do not have to undergo, and incur costs for, E ing, information and competence, as well as guidelines on ethical sourcing ness Social Compliance Initiative (BSCI) or similar repeated audits, since BSCI’s members use the and corporate social responsibilities certification. same requirements. ICA has access to the audit

ehtics for suppliers. It also includes rules on Through Ahold, ICA is a member of BSCI, a results, which can assist further discussions with animal welfare. European network created to establish uniform the supplier on improvements.

Sponsorship policy – adopted February 2005 ICA follows the guidelines on sponsorships and events in the ICC Inter- Work with social responsibility in 2006 national Code on Sponsorship and introduction the guidelines of the Swedish spon- Company Initiative sorship and event association. ICA Group ICA’s quality and environmental policies were revised. Customer policy – adopted February 2005 Visits focusing on social responsibility at suppliers in Vietnam, China and India. ICA’s customer policy has guidelines on interacting with customers, mar- Active participation in creating criteria for BSCI audits in primary production. keting, customer privacy and how certain products are sold. The “Global Kitchen” category was expanded to include 89 new products in the multi cultural range.

ICA’s almanac for 2007 was updated with several multicultural holidays.

Around 70 percent of the Group’s management teams received training in ICA’s good business philosophy.

ICA Sverige Training for security coordinators from large-store formats.

Interactive safety training for store employees in cooperation with ICA Academy.

Web-based risk assessment tool developed to analyze the risk of threats and violence in stores.

Over a one-week period customers received information on how to find out where their package of ICA coffee came from using the website. Because ICA’s coffee is Utz Kapeh certified, customers can trace every package back to where the beans were grown and read about the working conditions on that plantation.

ICA Norge Implementation of an automatic cash handling system to increase security at Maxi stores.

A complete program was developed to reduce loss. The work will continue until 2008, when it will be fully integrated in day-to-day operations.

Utz Kapeh was also launched on ICA coffee in Norway.

Rimi Baltic New security routine introduced for reporting incidents.

36 CORPORATE RESPONSIBILITY x

Alliances and networks BSCI’s aims are: inde

To improve suppliers’ social Partner/Network Aim performance

Amnesty Business Group Forum for companies that want to encourage human rights in their operations. To coordinate socially responsible Business Forum Discussions are held several times a year on human rights and corporate social standards uality responsibility. The meetings are based on ABG’s recommendations on human To offer a standardized and predict- rights and may, for example, involve country- or industry-specific risk analyses, able monitoring system human rights training and independent audits. To reduce costs for customers and suppliers to control and monitor

Business Social Compliance European platform for retail, industrial and import companies that encourages q health Initiative (BSCI) audits and improvements in the social conditions for suppliers in high-risk countries. social issues To create a network to share Ethical Trading Initiative A multi-stakeholder initiative involving Norwegian companies, employers’ organi- experiences. – Norway (ETI-N) zations, trade unions and NGOs that encourages ethical trading (socially respon- Members include Kesko, Jysk, Lindex, sible sourcing). ETI-N identifies and develops good practices for its members. It Kapp Ahl, Dansk Supermarked, Lidl, also assists them with training and advice how they can contribute to long-lasting Metro, Migros and Puma. improvements in safety and environmental conditions in their supply chains. ICA

Norge is a member. environment

Etikakademin Organization that encourages training on ethical issues in the business community. High-risk countries Global Compact UN initiative to encourage international companies to support human rights, labor and the environment. Risk countries according to BSCI

include: Bangladesh, Bulgaria, Cambo- mployees Swedish Partnership for Initiative by the Swedish government to encourage companies to abide by funda- dia, India, Indonesia, China, Malaysia,

Global Responsibility mental principles of human rights, labor standards, environmental safety and anti- Myanmar, Pakistan, the Philippines, E corruption as spelled out in the Global Compact. Romania, South Korean, Taiwan, Thai- land, Turkey, Vietnam and countries in

Ziedot.lv Rimi Baltic works with the charity Ziedot.lv, which operates a portal where individu- ehtics Africa and Latin America. als and companies can donate money to specific charitable projects.

During the year the number of ICA’s suppliers that where every package of ICA coffee originates Utz Kapeh* certified coffee means: have undergone BSCI audits increased. The target from, including where and how the coffee was Chemicals are used as little

for BSCI audits in 2006 was not reached, however. grown, what environmental measures were taken as possible introduction This was due to the time needed to disseminate and the working conditions on the plantations. Consideration is given to information on BSCI internally and among suppli- employees’ health and safety ers, the need for a better overview of ICA’s total Fairtrade-labeled products Schools and healthcare are available supplier base, and a delay in implementation of a The Swedish Fairtrade-labeled product selection for workers and their families BSCI tool for primary production. includes coffee, tea, cocoa, sugar, juice, bananas Records are kept on acreage, crop The audits of ICA’s suppliers in 2006 found and, on a seasonable basis, citrus fruits and grapes. histories, soil and chemical use deficiencies in management work (delegation of Sales of Fairtrade-labeled products by ICA Sverige Coffee is fully traceable. responsibility, risk analysis, monitoring systems), increased by 20 percent in 2006. ICA Norge raised documentation (payroll data, personnel informa- its sales of Fairtrade-labeled products by 8 percent. *Utz Kapeh means “good coffee” in Mayan. tion) and occupational safety (safety equipment, ICA’s fresh cut roses are grown by farmers in fire extinguishers, fire safety training). Deviations Kenya who take a progressive approach to their were also found in working hours. employees and environmental concerns. In December, ICA’s roses were Fairtrade certified. Socially responsible products After oil, coffee is the world’s largest commodity. Stakeholder dialogue Working conditions and social aspects on coffee ICA maintains an positive dialogue with stakehold- plantations are therefore closely monitored by ers – especially with customers, though also sup- unions and human rights organizations. ICA’s own pliers, stakeholder groups, national and municipal coffee is certified by Utz Kapeh, an independent authorities, and unions. ICA has built up an exten- organization that sets and monitors environmen- sive network of contacts and regularly meets tal, food safety and labor practice requirements with consumer, environmental and human rights for workers and their families on coffee plantations. organizations. Through ICA’s website, customers can find out

CORPORATE RESPONSIBILITY 37 Complaints, e-mail and telephone calls received by the Customer Call Center ICA conducts periodic surveys of opinions on its corporate responsibility work in and outside the x 2006 2005 company. Learn more on page 33. Product complaints 16,660* 14,784 inde During the fall of 2006 ICA halted all purchases E-mail 39,189 26,121 from an Indian vendor after accusations were made against the company on Swedish Televi- Telephone calls 70,407 69,137 sion’s news magazine, “Uppdrag granskning.” The uality *Sales of private label products rose by 27 percent, while the number of complaints rose by 11 percent. company, which supplied area rugs, was accused of poor working conditions, among other things. Earlier in the spring ICA was contacted by a Danish Sponsorships news crew seeking comment on the accusations.

q health ICA conducted its own visits as well as two inde- Company Aim Activity pendent audits, but the information on improper ICA Group World Childhood Campaign where five kronor from every loaf of conditions in the television programs could not be Foundation Christmas bread sold is donated to the World Child- confirmed. hood Foundation, which is working to improve living conditions for children in need. SEK 2.5 million was Contact with customers collected in December in cooperation with the baking ICA maintains an active dialogue directly with environment company Pågens. customers in stores and through the Customer Red Cross ICA has been working with the Red Cross for over 20 Call Center, as well as through various surveys at a years, contributing editorial space in Buffé magazine and on ICA.se. Over SEK 19 million has been collected local and national level. The Customer Call Center through 475 bottle and can recycling machines in processes suggestions from Swedish and Norwe-

mployees Swedish ICA stores. gian customers as well as any complaints concern-

Pink ribbon campaign ICA, its employees, stores and customers donated ing private label products. E against breast cancer SEK 5.85 million to the campaign in cooperation with the Swedish Cancer Society. Sponsorships and cooperations ehtics

“Buddy with Your Body” For the sixth consecutive year valuable lessons on the Sponsorships are designed to support ICA’s long- importance of eating at least five fruits and vegetables term business plan. The emphasis is on health, a day were offered in ICA stores and schools around social responsibility, the environment and healthy Sweden. 125,000 children participated in the activity in lifestyles. Accordingly, ICA’s management has 2006. In cooperation with the Swedish Cancer Society. decided to actively support the Childhood Foun- ICA Sverige “Blodomloppet” Series of runs around Sweden to recruit blood donors dation, the Red Cross and the World Wildlife Fund. and encourage exercise. A total of 36,000 runners

introduction In its athletic sponsorships, ICA works with took part, an increase of 8 percent compared with clubs that offer extensive children’s and youth the previous year. This year’s campaign resulted in over 4,000 new blood donors. activities. It also sponsors organizations committed to young people. Pastureland project Over 25,000 hectares of pastureland have been restored. Through a number of local cooperations, ICA has marketed free range beef since 1999. In coop- Customer privacy eration with the World Wildlife Fund (WWF). Personal information on Swedish customers is obtained through the ICA customer card. With this Rimi Baltic Youth sponsorships Rimi Baltic in Estonia, Latvia and Lithuania sponsored a number of charities in 2006, with an emphasis on chil- information, ICA can customize offerings while dren and young people. For example, it has contrib- managing the commitments that the card’s bank- uted to hospitals, libraries, schools and orphanages. ing services entail. Safeguarding customer privacy is a high priority, and in addition to current laws ICA has drafted its own guidelines on personal Projects designed to strengthen small stores information. In 2006 the Swedish Data Inspection Board Project/Partner Aim cited one ICA store for using the calculator func-

Association for Promotion Identify effective supply chain solutions and help develop tion on its cash register to calculate the age of cus- of Village Stores commercial and public services. tomers who buy beer and tobacco. ICA appealed to the county administrative court, which decided Arena for Growth / Swedbank, Stimulate growth in a number of municipalities through it is permissible to enter a birthday only, since it is Sweden’s municipalities, county development and renewal in the private and public sectors. councils and ICA not considered personal information and manual entries do not fall under the Personal Data Protec- County administrative board Food retail outlets and municipal services provided in the tion Act. On the other hand, employees cannot in Västerbotten villages of Bygdsiljum and Rusksele. scan in personal information unless they suspect Multiservice project/ Identify service needs and promote additional commercial and the customer is not 18 years old. Swedish Consumer Agency public service points. A test is under way in four communities, three of which involve ICA stores.

38 CORPORATE RESPONSIBILITY ICA receives good ratings in Amnesty study High x ICA In January 2006 Amnesty Business Group sur- parency did ICA receive a lower rating, 3.67. This inde veyed 110 large Swedish companies on how they is because ICA’s work with human rights is not manage risks associated with human rights. The independently audited, which is true of practically study showed that ICA is working actively in the all the companies in the study.

area and compares well to other companies. “The study did not look at how far we have risk uality to

come in our implementation, but it does confirm e “We have goals for our work, measurements to that we have good procedures in place and it will monitor our progress and thorough reporting spur us moving forward. We still have a lot left to Exposur procedures,” says Lisbeth Kohls, Senior Vice Presi- do before we can be satisfied,” says Lisbeth Kohls. dent, Corporate Responsibility at ICA AB. Amnesty Business Group is part of the Swed-

The study stated that ICA runs a high risk of ish section of Amnesty International. Its aim is q health violating human rights due to its operations and to influence and educate Swedish companies on geographic presence. ICA received its highest human rights issues. ICA is a member of Amnesty Low rating – 5 of 5 – for how it analyzes and manages Business Forum, a group of companies that main- 1 2 3 4 5 these risks. tains an open dialogue with Amnesty Business Fulfillment of ABG’s recommendations ICA also received the highest rating for its key Group. performance indicators for policies, training and In January 2007 Amnesty followed up with a Consumer goods companies management systems. Only with regard to trans- new study where ICA achieved similar results. Median for all companies in the study environment

* The recommendations cover five areas: policies, risk analysis, training, management systems and transparency. mployees E

ICA has an ombudsman for privacy issues to Service issues are a priority Number of robberies ehtics

whom customers can turn if they believe ICA has In Sweden’s rural communities with only one not protected their information satisfactorily. No grocery store, around 50 percent are operated 2006 2005 complaints were submitted during the year. by ICA. Just a couple of years ago ICA was closing ICA Sverige 34 51 around a hundred stores a year due to shrinking Measures to improve security populations, greater competition and changes in ICA Norge 8 5 The overall objective of ICA’s security work is consumers’ buying habits. Rimi Baltic 0 0

to protect employees, customers, property and Investments in computerization and expanded introduction the businesses against all types of threats. ICA’s services, including for Systembolaget and Apo- Etos 0 0 systematic security work comprises security stan- teket, the state-run alcohol and pharmacy Netto Marknad 5 2 dards, routines, monitoring and evaluations. monopolies, as well as postal and banking ser- The number of robberies in Swedish ICA stores vices, have helped a number of stores to survive. decreased compared with the previous year. The Lower prices, skills training and store moderniza- robberies that occurred affected smaller stores, tions have also helped to strengthen the position but no employees were physically harmed. Psy- of smaller stores. In 2006, 33 stores were closed, chological counseling for robbery victims has three of which were in rural communities. been improved, resulting in fewer and shorter sick Poor access to service isn’t only a problem in leave absences. rural areas, but suburbs as well. During the year Several of the robberies occurred after the a project was started together with Göteborg stores closed. The offenders mainly targeted municipality to enhance services in the Hjällbo tobacco. One bomb threat was made directly area and contribute to a lively central shopping against an ICA store during the year; no bomb was district. found. The number of robberies in Norwegian ICA and Rimi stores rose slightly. Security work during 2006 was aimed at limiting the number of armed robberies and reducing loss. The long-term goal at ICA Norge is to make ICA the safest store in the market for customers, employees and suppliers. ICA Fastigheter Sverige AB has developed a systematic fire safety program.

CORPORATE RESPONSIBILITY 39 Employees x inde ICA’s new Group organization with Nordic areas of responsibility has necessitated extensive changes. The shift toward more

uality specialized work areas has made competence development a key issue.

q health Strategies for ICA’s HR work HR strategies and objectives Diversity is a success factor The main strategy in the HR area is to strengthen ICA’s success is dependent on having employ- the ICA brand and its position as an employer. ees with different educations, ages, genders and C p om i p Four areas are priorities: diversity, competence, ethnic and national backgrounds. Diversity has sh e r t e e d n wellness and leadership. In each area, ICA has become an integral aspect of ICA’s extensive intro- a c e e established objectives and concrete activities. ductory program for new managers. environment L

ICA as an Everyone should have an equal chance to be employer Five competence priorities recruited and develop on the job. Factors such as With the new Nordic organization, a large number knowledge and personal qualities should deter- D s iv s of services were changed from general to more mine hirings and promotions. One of ICA’s chal- e e r n mployees s l it el specialized. A competence audit was conducted lenges is to utilize gender equality and diversity E y W in late 2005 to identify current strengths and areas work to capitalize on differences and thereby that needed improvement in order to reach ICA’s improve its financial results and attractiveness as business objectives. Since then, ICA has focused an employer.

ehtics Strategic leadership: Strong Nordic on five priority areas: financial acumen, opera- ICA is participating in an EU project called leadership to handle new challenges tional leadership, store operations, communica- “unconscious prejudice,” a collaborative effort in a fast-changing industry. tions and familiarity with ICA as a company. between the cities of Solna and Sundbyberg, the Gender equality and diversity strategy: Karolinska Institute, the Royal Institute of Technol- A structured approach to gender Leadership with a focus on ogy, the National Labor Market Board and ICA. equality and diversity issues. human resource development The aim is to encourage awareness and encour-

introduction Since many managers have become responsi- age a discussion on prejudice, and in the long run Competence strategy: Ensure that competence is in place in strategic ble for employees in both Sweden and Norway, to change attitudes and behaviors. Around 20 areas to facilitate ICA’s long-term the need for a regional system for performance employees from ICA are taking part. planning. reviews and evaluations has become obvious. Late in the year a new model was launched for Health and wellness Wellness strategy: Position ICA as employee development called MAP, a Swedish ICA’s occupational health and safety policy a health-conscious employer. acronym for goals, responsibility and personal states that work environments are an important development. competitive advantage and a strategic issue. ICA The idea behind MAP is to underscore the con- wants to maintain safe environments physically ICA’s policy on employeeship nection between each employee’s performance and mentally to promote the development of and leadership and the Group’s results. All employees of ICA its employees and the business. The same high

ICA wants to ensure that all its AB, ICA Sverige, ICA Norge and ICA Banken are quality demands that apply to other areas also employees have the opportunity to encompassed by the new system. distinguish ICA’s work with occupational health perform their best. Everyone should ICA’s employee survey (Cross) was conducted and safety. be put in a position to do a good job. for the first time in both Sweden and Norway. A close cooperation with occupational health The primary duty of a leader is to cre- Over 4,000 employees responded. Of note was service providers is important to these efforts. ate such opportunities together with their employees. an increase in loyalty compared with the previ- Health concerns are prevented through a system- The goal is employees with a ous year. atic approach and continuous reviews of tools sense of ownership who can, and are Cross will serve as a basis for a dialogue on and methods. expected to, take responsibility for working conditions and operational development. their jobs and career development. ICA’s leadership policy encourages Local results are being given special attention, Training managers to promote independence and managers and their employees are working ICA has a long tradition with regard to training. and excellence. together to draft an action plan to improve each In 2005 a Nordic training organization called ICA workplace. Academy was established, comprising two departments, one in Sweden and one in Norway.

40 CORPORATE RESPONSIBILITY x

Key performance indicators ICA Academy has 35 employees who follow the inde entire process, from needs audits and strategies 2006 2005 to implementation of various training programs. The aim is to strengthen the profitability and Total number of annual employees in ICA Group 11,698* 11,556 competitiveness of ICA’s stores as well as the uality Sick leave (short- + long-term) 6.13 % 6.4 % Group through training, guidance and as a partner in developing operations. In all, around 35,000 Employee turnover* 9.5 % 5.4 % employees received training in Sweden and Nor- *The definition of employee turnover changed compared with 2005, when ICA Norge was not included. way, a large part through web-based programs. The figure for 2006 includes Norway, store employees excluded. q health

Future recruitment ICA has a long-term program to maintain its reputation as an attractive employer and recruit the Number of annual employees, employees and sick leave absences employees it needs both short- and long-term. Universum’s Career Barometer, which ranks No. of annual employees No. of employees Sick leave, % environment companies by their attractiveness as an employer, 2006 2005 2006 2005 2006 2005 ranked ICA in 19th in Sweden and 52nd in Norway. ICA Group 2,041 1,417 2,083 1,445 3.23 3.21 Employer brand ICA Sverige* 4,752 4,917 6,025 5,769 7.32 7.11 ICA has a number of cooperations with schools mployees E to call attention to the skills retailers need. One ICA Norge 4,043 4,052 6,752 6,734 6.53 6.35 important alliance is with the Nordic Retail Trade ICA Banken 174 154 179 158 6.87 6.92 Program in Norrtälje, which ICA helped to establish together with Coop, the local municipality, Rimi Baltic 9,132 8,375 10,165 9,313 5.98 n/a ehtics Statoil and the Roslagen Savings Bank. ICA con- * Including Etos. tributes its retail expertise, guest lecturers and a scholarship for best retail-related thesis. In Norway, familiarity with ICA is not as great and activities in the Norwegian market were Number of men and women in management positions

therefore a priority during the year. The focus introduction was on attracting store managers. In 2006 ICA Men % Women % Total expanded its cooperation with the Stockholm ICA AB 60 40 302 School of Economics on its retail curriculum and established an alliance with Treider College on ICA Sverige 79 21 278 training for store managers. ICA Norge 65 35 939

New Nordic trainee program ICA Banken 60 40 20 ICA’s trainee program, which had been suspended Rimi Baltic* 25 75 4 for a year, will be restarted in spring 2007. The program is offered to ten participants from Sweden *Refers to only one employee per country. and Norway, each of whom is tied to a specific function in ICA during the 14-month program.

Praktica An important area is future recruitment to ICA stores. Approximately 90 percent of the country’s ICA retailers regularly accept trainees and interns. ICA Sverige has developed a program, “Praktica: A store in practice,” with accompanying materials, to make it easy for stores to provide students with interesting and educational internship opportunities.

CORPORATE RESPONSIBILITY 41 Environment x inde ICA works extensively to reduce the impact of its operations on the environment, i.e., from its products, warehouses, transports and

uality stores. Through long-term prevention, ICA contributes to sustainable development. q health

Quality and environmental policy As a basis for its environmental work, ICA has directive took effect, prohibiting certain sub-

– revised and adopted January 2006 adopted policies together with guidelines for each stances in electrical products such as lead, mer- The ICA Group’s quality and envi- company. cury, hexavalent chromium and cadmium. ronmental policy, which has been The new EU chemicals legislation, REACH, was continuously updated since 1989, covers operations, product selection, ICA and the climate adopted at the end of the year and will enter into information and competence issues. ICA has worked for years to reduce its climate force on June 1, 2007. ICA has monitored the leg- environment Ethical guidelines for purchasing and impact. Reducing carbon dioxide emissions from islative process and in 2007 will evaluate how the corporate social responsibility for transports is one of the most important environ- law affects operations. suppliers are included as well, as are mental issues. ICA has participated for several rules on animal welfare. years in the insurance company Folksam’s climate Alliances and networks

mployees New store policy index to evaluate this work. In 2006 ICA Sverige Together with organizations, government agen- – revised and adopted January 2006 came in fourth place. During the year ICA decided cies and businesses, ICA is participating in a num- ICA’s new store policy contains guide- to appoint a cross-functional project team that ber of environmental alliances and projects. See lines on environmental consider- ations for new stores in Sweden and will draft a climate strategy in 2007. This will serve the table below. One example is Framtida Handel

E ehtics Norway. as a basis for Group Management’s decisions how (Future Retail), a collaborative effort between to address climate issues. Swedish companies, municipalities, regions and the national government to promote sustainable Environmental law development in the retail sector. ICA has partici- ICA’s environmental work is affected by a number pated in projects and on the steering committee of laws and regulations. On July 1, 2006 the RoHs of Future Retail. introduction

Alliances and networks

Partner/Network Aim

World Wildlife Fund (WWF) Over 25,000 hectares of pastureland have been restored. Through a number of local cooperations, ICA has marketed free range beef since 1999.

Future Retail The effects of distribution after business hours are being measured.

A method is being developed to prioritize and identify hazardous substances in products, including chemical products.

Consumers have been provided with better information how products affect the environment. The project has produced the environmental sales receipt, which explains the environmental impact of organic foods.

Review of experience with e-commerce and its effect on the environment.

Swedish Road Administration and five other Roundtable discussion that resulted in a declaration of intent on traffic and environmental safety requirements for companies from various industries heavy transports.

WWF – Sweden Forest & Trade Network ICA is participating in the Swedish Forest and Trade network organized by the WWF. The network consists of a number of companies that encourage sustainable forest management.

Dagligvarehandelens Miljø- og emballasje- Forum on environmental and packaging issues for Norwegian retailers. forum

42 CORPORATE RESPONSIBILITY x

Environmental work in 2006 Environmentally friendly product range inde By placing environmental demands on suppliers and increasing the range of eco-labeled products, Company Initiative

ICA can help to reduce society’s total impact on ICA Group ICA’s quality and environmental policy was revised. the environment. uality ICA participated in an industry initiative to protect threatened cod stocks from the Barents Sea in the Swedish and Norwegian markets. Organic products Sales of organic products increased by 10 percent ICA decided to stop selling frozen cod from the Baltic Sea. It now carries only fresh Baltic cod. in Swedish ICA stores in 2006. In Norwegian stores q health sales rose by 30 percent. The number of available ICA participated in a Swedish project to increase the availability and sale of organic products decreased slightly. organic meat together with Ekokött and Swedish Meats, among others. Dur- ing theme weeks sales rose by 74 percent. Integrated production ICA Sverige Nordic Swan-labeled stores: All Maxi ICA hypermarkets, all ICA Kvantum, To reduce the environmental impact from food 15 ICA Supermarkets and 4 ICA Nära stores have been certified. products not produced according to the rules for environment organic production, ICA supports so-called inte- “Safe driving” weeks at all warehouses. The Swedish Road Administration and driving schools discussed driving techniques that can reduce fuel con- grated production (IP), where artificial fertilizers sumption by 10 to 15 percent. and herbicides are documented and used in a controlled setting. Pilot project at around 40 stores where vehicles that deliver mail to ICA

Growers of fruit and vegetables that are not stores also remove old packaging. As a result, packaging does not have to be mployees returned in refrigerated trucks, which instead can be used to reship refriger- certified organic and supply ICA Sverige must ated foods to ICA’s warehouses. be certified according to EurepGap or other system of integrated production. In Norway, similar ICA Norge Participated with government agencies and other retail chains in a campaign to market and highlight organic foods, sales of which rose substantially dur- requirements are placed on Norwegian growers E ehtics ing theme weeks. using KvalitetsSystem i Lantbruket (KSL). The “IP Seal” is a quality seal that guarantees The CoolICA system to control the temperature of refrigerated display cases that a producer lives up to stringent demands with and freezers was introduced in all new and rebranded stores. regard to food safety, animal welfare and environ- Rimi Baltic Rimi Lithuania participated in a campaign to collect used batteries. Recep- mental responsibility. ICA supports certified pro- tacles were placed in all Rimi stores.

duction and promotes its use. introduction Rimi Latvia continued to market locally produced foods, especially vegetables.

Eco-labeling ICA regards eco-labeling as a form of value-added that creates a sense of security and is easy for buy- ers and customers to understand. It has therefore decided to prioritize product groups where criteria for eco-labeling are in place. ICA carries a wide range of eco-labeled cleaning products. All laundry detergents and dishwashing products in the shared product range are eco- labeled by Nordic Swan or Good Environmental Choice. Skona, ICA’s brand of environmentally friendly cleaning products, is sold in Sweden and Norway. Most of the products in the Skona line are labeled with Nordic Swan or Good Environ- mental Choice. If a product cannot be eco-labeled because criteria are not in place, it must still have less of an environmental impact than other products in its category.

CORPORATE RESPONSIBILITY 43 Sustainable primary production The vision of the logistics department is to set the ICA encourages conservation of natural resources standard in environmental work in retail logistics in x and sells only fish that has been legally caught in the Nordic region. The guidelines in the quality and inde terms of quotas, origin, fishing method and size. environmental policy state that ICA will reduce the As part of its effort to promote sustainable fishing, impact from its transports, the area where it has ICA Sverige sells MSC-labeled fish gratins under its the greatest effect on the environment. This can private label. The Marine Stewardship Council guar- be done by maximizing load factors, coordinating uality antees the fish has been caught in compliance with transports and return transports from suppliers, sustainable practices to protect stocks and their and using double-deck trucks, railroads, ships and environments while permitting responsible use. alternative fuel vehicles. The greatest progress in reducing the negative

q health Transports and the environment impact on the environment has been achieved in In the area of logistics, ICA has identified five prin- Sweden. ICA is trying to establish a common envi-

cipal ways in which its operations impact the environmental management system for the Swedish ronment: transports, waste management, energy and Norwegian operations. The aim is to transfer consumption, sourcing of products and services, knowledge and routines between the two countries. and use of coolants. environment

Eco sales receipt mployees ------To all customers who purchased ORGANIC MILK in Swedish ICA E ehtics stores in 2006 * Eco sales receipt ------AMOUNT OF CHEMICAL PE STICIDE S ------SAVED, APP ROX.: 3,800 kg To all customers who purchased This promotes biological diversity – more ICA’s organic bananas in insects, birds and other fauna around the Swedish ICA stores in 2006 farms – and reduces the risk of pesticide * introduction contamination in groundwater and waterways. ------AMOUNT OF CHEMICAL PE STICIDE AMOUNT OF FERTILIZE R S SAVED, APP ROX.: (N+P) SAVED, APP ROX.: 300,000 kg 4,900 kg This promotes biological diversity – more This can help to reduce eutrophication. insects, birds and other f auna around the ------farms – and reduces the risk of pesticide ICALLY AND COWS THAT EAT ORGAN contamination in groundwater and waterways. ROX.: 2,800 GRAZE NATURALLY, APP ------AMOUNT OF FERTILIZE R NO. OF FARMS WITH ORGANIC PRODUCTI ON, (N+P) SAVED, APP ROX.: APPROX.: 111 38,000 kg ------This can help to reduce eutrophication. LAND WITH ORGANIC ------PRODUCTI ON: 4,400 hectares LAND WITH ORGANIC PRODUCTI ON: 100 hectares ------This means more land is cultivated and less GMO: none is developed. ------ENERGY CONSUMPTI ON GMO: none : reduced ------(no fertilizer production) ENERGY CONSUMPTI ON: reduced ------Biological diversity: (no fertilizer production) increased approx. 11,600 000 MJ ------Amount of cadmium polluti on * * * avoided, approx.: 70 g ------Biological diversity: increased This can lead to: up to 125% more plant species * The basis of calculation and sources can up to 60% more bird species be found at www.framtidahandel.se and up to 20% more species of beni f icial insects www.konsumentverket.se and spiders

up to twice as many individual species The eco sales receipt project is f inanced by the Swedish Board of Agri- culture and the Swedish Consumer Agency. * * *

44 CORPORATE RESPONSIBILITY New logistics structure protects the environment An important step to reach the vision is the new New warehouses designed with environment in mind x logistics structure, which will be fully introduced in 2010. Many products, including dairy products inde and beverages, are currently distributed directly to stores by suppliers. With the new structure, more product groups will be distributed through ICA’s warehouse. An environmental analysis shows that uality this will cut total exhaust emissions from transports to ICA stores in Sweden. This leads to a 20 percent lower diesel consumption per delivered

cubic meter. q health

Carbon dioxide emissions Carbon dioxide emissions from transports and other types of combustion contribute to the greenhouse effect. Cutting fuel consumption by conservative driving techniques and utilizing

ICA’s new warehouse in Helsingborg was inau- back up. Electrical outlets have been set up so environment ICA Sverige’s new distribution network will help gurated during the year. The environmental that they do not have to leave their refrigera- reduce emissions. impact of the facility was discussed in the early tion units running while waiting to be loaded or planning stages. What resulted is an ultramod- unloaded. All storm drains in the area connect In Sweden, ICA has outsourced all transports to ern warehouse not only from a logistics stand- to a treatment system. independent haulers. ICA requires that they have point but also environmentally. a plan how to reduce emissions of carbon dioxide Intelligent lighting saves electricity mployees and carcinogens in relation to the mileage they ICA places tough environmental demands on all From the very beginning ICA chose to have its drive. All drivers must receive training on conser- new warehouse construction, renovation and freezers facing north, since it is naturally colder additions in Sweden. The new Helsingborg facil- and waste heat can be recovered to heat the vative driving techniques, which can reduce fuel ity is no exception. facility’s offices. consumption by 10 to 15 percent. ICA also requires “We have also utilized skylights to let in natu- E ehtics its haulers to ensure that their drivers operate Municipal contribution ral light and installed shatterproof glass in them. vehicles drug- and alcohol-free, that they follow “We have kept the environment in mind Lighting systems are connected to motion throughout the entire process, from the choice detectors, so that lights can be shut off in areas speed restrictions and that they wear seat belts. of suppliers and materials to how we can reduce where no one is working,” says Marie Winslow- Opportunities to increase train transports are noise for our neighbors,” says Marie Winslow- Andersson. constantly evaluated. In 2006 this work intensi- Andersson, the environmental coordinator for Like all of ICA’s new and renovated ware- logistics at ICA AB. “We have even received help houses, Helsingborg uses only coolants that fied. Wherever possible, shipments are sent by sea introduction between Hamburg and Västerås. from municipal authorities to place a bus stop do not harm the climate, in its case ammonia. next to the warehouse so that our employees Good Environmental Choice-labeled electric- can take mass transit to work.” ity is already standard at ICA’s warehouses in Business travel, company cars and the environment ICA installed extra seals in delivery bays to Sweden. Personal travel to and from work as well as travel avoid the loss of hot or cold air when trucks on the job also affect the environment. ICA has guidelines for meetings that clearly encourage employees, whenever possible, to use telephone and video conferencing. In 2006 the number of video conferences tripled compared with the previous year. Diesel consumption and carbon dioxide emissions from transports between ICA’s warehouses and stores ICA monitors its air travel from a financial and Diesel consumption, liters CO emissions, tons environmental perspective. Despite intentions to 2 reduce emissions from business and air travel, they 2006 2005 2006 2005 increased in 2006. The main reason was an increase ICA Sverige 19,051,283* 17,996,700 49,231 46,530 in the number of trips between Stockholm, Oslo, Helsingborg and Amsterdam as a result of ICA’s ICA Norge 2,502,200** 2,578,000*** 6,506 6,703*** organization with Nordic areas of responsibility. * The volume of goods transported increased in 2006, which led to higher diesel consumption. The number of work-related train trips rose in In relation to the volume of goods delivered, diesel consumption per cubic meter decreased. 2006. Traveling by train instead of car reduced car- ** ICA Meny was sold during the year. bon dioxide emissions by 329 tons. *** Including ICA Meny Norge. The share of environmentally friendly cars in ICA’s fleet increased from 4.5 to 14 percent in 2006. During the fourth quarter one of every four new cars delivered was environmentally friendly.

CORPORATE RESPONSIBILITY 45 Sales of organic products Environmental work in warehouses and stores ICA is continuously working to minimize the x No. of organic products Sales trend, % environmental impact from its warehouses and inde 2006 2005 2006 2005 stores. Waste management and energy consumption are two important areas. ICA Sverige 370 400 10 12 During the year all Swedish Maxi ICA hypermar- ICA Norge n/a 157 30 n/a kets and ICA Kvantum stores were Nordic Swan uality certified. Due to incomplete data, the number of organic products sold by ICA Norge cannot be provided for 2006. The Swan, the official Nordic eco label, requires that stores and the products they sell are adapted to environmental concerns, that employees have Energy consumption in warehouses and stores (kWh/sq. m.)

q health received training, and the staff and management actively work to reduce the store’s environmental

Warehouses Stores impact. 2006 2005 2006 2005

ICA Sverige 249 242 522* – Waste management The goal of ICA’s waste management work is to ICA Norge 249 n/a 568 580 reduce the amount of waste that ends up in land- environment

Rimi Baltic 254 223 412 394 fills. This is done by sorting and recycling materials and reusing plastic crates. Corrugated cardboard ICA Sverige and Rimi Baltic mainly rose due to higher sales and a higher share of refrigerated and frozen foods. and shrink wrap are the two materials recycled The use of CoolICA in Norway has had a positive effect on energy consumption in Norwegian stores. the most. All of ICA Sverige’s warehouses sort

mployees * The figure for the year is an estimation of the store average. compostable waste, which is converted into soil or biogas. In 2006 ICA Sverige managed to reuse or recycle 97 percent of its waste, compared with Amount of corrugated board and soft plastics sorted and recycled from stores and warehouses (tons) 93 percent in 2005. Technical advances in recy-

E ehtics cling stations and municipal facilities are the main Corrugated board Soft plastics reason for the improvement. 2006 2005 2006 2005 ICA’s warehousing units in Norway have envi-

ICA Sverige 1,380* 1,431* 1,444 1,385 ronmental stations where corrugated board, plastic and aluminum cans from stores are processed ICA Norge 10,396 9,635 465 612 before being sent to recycling.

introduction Rimi Baltic 5,768 3,363** 586 190** ICA has drafted guidelines for minimum sorting levels in stores, primarily in Sweden. To ensure * Only from warehousing operations. compliance, a waste consultant has been brought ** Some data gaps occurred due to system changes. in to work with new construction and renovations. All corrugated board and plastic from Rimi stores in the Baltic countries is recycled. Emissions of carbon dioxide and nitrogen oxides from ICA employees’ air travel Energy savings

Emissions of CO2 Emissions of NOX ICA is working to reduce energy consumption in from air travel from air travel its stores and warehouses at the same time that 2006 2005 2006 2005 they handle larger volumes and a higher share of Total no. of reserved flights energy-consuming refrigerated and frozen prod- 3,250 2,703 11.3 9.4 by ICA employees ucts. Certain warehouses in Sweden have taken energy-conservation measures. This includes Source: Carlson Wagonlit. reusing waste energy from cooling systems and tying into the district heating network. All of ICA Sverige’s warehouses use only Good Environmental Choice-labeled electricity. This has helped to reduce carbon dioxide emissions from energy production by approximately 4,797 tons, or about 8 percent of emissions from ICA’s distribution transports. A portion of the money from

46 CORPORATE RESPONSIBILITY Frozen Baltic cod halted x

ICA is conscious of the problem of depleted cod Contributions from stakeholders stocks in the Baltic Sea and since 2002 has placed “We have gathered data and advice on illegal fishing inde requirements on the size and origin of the cod it and cod stocks in the Baltic Sea from several sources sells, and that it falls within current quotas. After a to make an informed decision that will benefit all the discussion with experts and environmental organi- parties concerned in the long term: customers, the

zations, ICA decided during the year to stop selling environment and the fishing industry,” says Kerstin uality frozen cod caught in the Baltic Sea. Lindvall, head of environmental and social responsibility issues at ICA AB. Since 2002 ICA has offered only one type of frozen Two opposing opinions stood out from the infor- Baltic cod in its central product line, correspond- mation that was gathered. On the one hand, there ing to 1.2 percent of the total volume of frozen cod. were those who recommended that ICA stop selling Cod sold under ICA’s private label comes from the cod from eastern Baltic stocks, which could help the q health

Barents Sea. long-term survival of the Swedish fishing industry. Oth- During the year ICA was criticized by Greenpeace, ers felt, however, that a halt to sales is not an effective which demanded an immediate stop to the sale of means to safeguards stocks and that it punishes fisher- Baltic cod. The organization’s studies show that at men who legally fish within the Swedish quota. least one of every three cod from the Baltic Sea is illegally caught and that eastern cod stocks have Only fresh Baltic cod

fallen below sustainable limits. After its decision, ICA will limit the Baltic cod sold in environment

the shared product range to fresh fish from Swedish ships, docked in Swedish ports and inspected by Swedish authorities.

mployees purchases of Good Environmental Choice-labeled electricity is donated to environmental projects involving Sweden’s waterways. In 2006 ICA E ehtics thereby indirectly contributed SEK 118,000. The CoolICA system, which is used in around 290 Norwegian ICA stores, carefully monitors energy consumption and temperatures in all refrigerated display cases and freezers. CoolICA

has resulted in better food quality through more introduction accurate monitoring of temperatures as well as a reduction in energy and service costs.

Environmental requirements in new construction ICA has issued a number of environmental requirements in Sweden for the new warehouses it is building, including in terms of energy conservation and transport planning. In connection with new construction, renovation or additions, only climate-safe refrigerants such as ammonia are used, and heat recovery is standard on all new refrigeration systems.

CORPORATE RESPONSIBILITY 47 Health x inde Health and food are closely associated, which is why health is one of the ICA Group’s highest priorities. ICA wants to inspire customers to

uality eat a healthy diet and make it easier for them to shop, prepare and eat

q nutritious food. health

Dialogue and debate on health in Kostforum’s working group on healthy food Health policy ICA has an open dialogue with politicians, govern- labeling and through a trade group that is drafting ICA’s health policy states that it will ment authorities and representatives of the food guidelines for marketing of fatty, sweet and salty encourage customers and employees to eat a balanced diet of tasty industry on what retailers can do to reduce health products to children. ICA has also participated in and nutritious foods. Healthy think- problems. WHO and the EU expect a great deal seminars to spread awareness of keyhole labeling ing should be evident in an inspiring from companies, and ICA has concrete results to and provided input to the Norwegian action plan to environment product selection, marketing and show for its work in this area. promote healthier eating. communication. The policy is supported by the Nordic nutritional rec- ICA has played a prominent role in the devel- ICA has an active role on the food and health ommendations of the Nordic Council opment of the Ahold Healthy Living Programme, council of the food retail trade organization of Ministers. ICA is also working to where companies within Ahold help each other to Svensk Dagligvaruhandel. The health experts

mployees reduce the harm caused by tobacco develop offerings that meet WHO’s guidelines. working together on the council serve as a consul- and alcohol. Extensive discussions are under way in the EU tation body for authorities and arrange training. to implement an action plan against overweight Dietitians employed by retailers often communi- and obesity. Several leading retailers in Europe, cate the same message regarding food and health

E ehtics including ICA, met during the year with the head to help consumers. of the EU directorate in charge of this issue to discuss how retailers can help alleviate the problem. Trans fats and GI ICA has been active in Norway’s effort to Trans fats and the glycemic index (GI) were last improve eating habits through its participation year’s major topic of discussion in the food indus- introduction

Overview of the ICA Group’s healthy products 2006

No. of products Change in sales 2006 2005 compared with 2005

Keyhole-labeled products Sweden 1,174* (excl. fruit and vegetables) approx. 800 +23 %

Norway approx. 750* (excl. fruit and vegetables) approx. 700 +17 %

ICA Gott liv Sweden 72 49 +47 %

Norway 6 2 Cannot be measured

Products for food allergies Sweden 365 320 –7.5 %

Norway 98 97 Cannot be measured

Fruit and vegetables Sweden 450 n/a +9 %

Norway 310 290 +5 %

Functional foods ** Sweden 23 8 Has not been measured

Norway (has no program) – – –

* Figures are not comparable year-to-year since the keyhole criteria changed in 2006. ** As per Swedish Nutrition Foundation guidelines, see www.hp-info.nu

48 CORPORATE RESPONSIBILITY x

try. Trans fats are formed when liquid vegetable New keyhole criteria inde oils are heated in the presence of hydrogen, in a The new Swedish criteria for keyhole-labeling, process known as hydrogenation. ICA has been which have been expanded to include naturally working for some time to eliminate trans fats healthy products, fully took effect on November from its private label products. After ICA was criti- 30, 2006. The criteria now include limits on sodium uality cized during the year of trans fat in its microwave and sugar as well as fats. Labeling also covers new q popcorn, it substituted this for another fat. product groups such as meat, fish, fruit and veg- The popularity of diets based on the GI method etables. As a result, the number of keyhole-labeled

has led to higher sales of whole grain products, products in the range rose. In December 2006 there health nuts, beans, peas and lentils. This is positive, but were 1,174 keyhole-labeled products in ICA’s Swed- ICA has reservations about the GI method and ish stores, excluding fruit and vegetables. instead recommends that customers follow the Nordic nutritional guidelines, which also call for a low glycemic diet. environment Lower sodium Work with health issues in 2006 After debating sugar, the public has turned its attention to the sodium content in foods. ICA Company Initiative Partner has gradually begun reducing sodium in its private label products, mainly in the ICA Gott liv ICA Group 23 new products were launched in the ICA Gott liv line. The mployees products are designed to meet Nordic nutritional recom- line. Awareness among consumers of the risks mendations and most are keyhole-labeled. associated with salt also has to increase. ICA is therefore working together with other retailers to ICA compiled facts and questions on health topics for the brochure, “We want to make it easier for our customers to encourage suppliers to reduce the sodium con- E ehtics have a healthy diet.” tent in foods and improve labeling to clearly show sodium. ICA Sverige “Buddy with Your Body” is a program that encourages Swedish Cancer schoolchildren to eat more fruit and vegetables; 63 percent Society of children in the second and fifth grades took part in the Healthier product selection school activity, conducted for the sixth consecutive year. ICA tries to offer a wide range of foods that inspire “Blodomloppet” runs were held around Sweden to recruit Sweden’s customers to eat a healthy diet. By setting sales introduction targets for categories such as keyhole-labeled new blood donors and encourage people to exercise. In total, blood banks 36,000 runners participated, an increase of 8 percent com- products and foods for special nutritional needs pared with the previous year. This year’s campaigns recruited (Särnär/Fri for), ICA stores are motivated to display 4,000 new blood donors. and market these products. Interest in eating a healthy diet increased Kortvasan – ICA’s family ski race held during the week of Vasa- Vasaloppet loppet, the world’s biggest cross country ski race; 7,000 skiers dramatically in 2006. In Eurobarometer surveys started, including 850 ICA employees. Another 8,500 skiers conducted by the EU Commission, 43 percent of took part in the “Girls’ Vasa” race, also sponsored by ICA. Swedes said they had changed their eating habits Publication of a cookbook with 60 recipes for customers Swedish Asthma during the year, which ICA can confirm through its with multiple allergies. and Allergy sales figures. Association The range – and sales – of whole grain products, nuts and dried fruit, fresh fruit and vegetables, New page on ICA.se with information, advice and recipes for allergy sufferers and their families. peas, beans and lentils increased significantly during the year. Interest in functional foods, with sci- ICA Norge Launch of keyhole labeling in Norwegian stores to encourage entifically proven health effects, is also high. ICA is customers to eat a healthier diet. positive to this type of cutting-edge product and ICA’s brochure called “Crib sheet for good eating habits” was offers a number of them. translated to Norwegian and printed in 650,000 copies for Improvements in produce departments were ICA’s customers. It is also used by health care providers to a priority during the year. ICA is broadening the teach patients about food labels and nutritional information. product range, and many stores have expanded 250 retailers and employees of ICA Norge took part in a 90 their sales space. In its future product develop- km bicycle race to benefit the Norwegian Cancer Society. ment, ICA will focus on a healthier and/or organic Rimi Baltic Sponsorship of a number of sporting events, including the product range and on the ICA Gott liv line. Solidarity Run and Olympic Runners’ Day.

CORPORATE RESPONSIBILITY 49 x inde Health focus in Norway

In Norway, ICA is working to become the country’s about the labels, and other companies have shown

uality leading retailer of healthy foods. In February 2006 an interest in using it in their stores,” says Merete

q ICA Norge introduced the keyhole label in its stores Simonsen, marketing manager for ICA Norge. to encourage customers to eat a healthier diet. To make it easier for retailers, suppliers and consumers, ICA is promoting the use of a common Nor- Prior to launching the keyhole, ICA actively informed dic label for healthy foods. public interest groups, government authorities and The ICA Gott liv line of healthy products has been health suppliers. successful in Swedish ICA stores, and a number of “The introduction of the keyhole has been appre- products have been introduced in Norway as well. ciated by customers, and on average we have seen 17 In 2007 additional products will reach Norwegian percent sales increases. Suppliers have been positive stores. environment

In 2005 ICA Norge reviewed the Norwegian prod- Tobacco and health uct line to better track sales of various product To reduce the risk of selling tobacco and beer to groups. ICA Norge had 750 keyhole-labeled prod- underage customers, the cash registers in all ICA

mployees ucts at year-end. stores automatically remind cashiers to check IDs. ICA conducts “undercover” purchases in Swed- Products and services for allergy sufferers ish and Norwegian stores to monitor the problem The number of people with various types of food of tobacco and beer sales to minors. In Sweden,

E ehtics allergies is increasing in the Nordic region. ICA is undercover purchases were made by an indepen- therefore improving its range of foods for special dent company, Projektbolaget, which has done nutritional needs, Särnär and Fri for. The range the same thing for Systembolaget, the state- was modernized during the year and now includes owned alcohol retail monopoly. To avoid being 365 items in Swedish ICA stores and 98 in Norway. accused of entrapment, Projektbolaget uses only ICA will increase the number in Norwegian stores people over the age of 18 who look younger.

introduction in 2007. Undercover purchases in 2006 showed that ICA always labels all the ingredients in its private the Swedish stores have not gotten any better at label products so that customers with food aller- checking identifications in connection with the gies can be certain of what they are eating. ICA sale of tobacco, lottery and beer. Between 55 and Sverige had previously taken the initiative to for- 70 percent of stores handled ID checks satisfac- mulate an industry-wide agreement on the use of torily. They were poorest at checking IDs for ciga- the phrase, “May contain traces of...” The industry rettes, but were better at checking for beer. The would prefer not to have to use warning labels on results are unsatisfactory, and ICA will provide products that do not contain allergic ingredients. training and information to stores and conduct Similar work began in Norway during the year, and further undercover purchases in 2007. It will also ICA is playing an active role. review the technical alternatives available to In Norway, many ICA Supermarked and ICA improve ID checks. Maxi stores have a concept called “Fri for,” where products free from gluten, lactose, egg and soy are displayed in the same section, together with help- ful information on the shelves where it is easily accessible for consumers. Rimi Baltic requires all its suppliers to label product contents, nutritional information and allergy- causing ingredients on their packaging. Information for allergy sufferers and their families has been made more accessible in Sweden through ICA.se. The same information will be published on ICA’s Norwegian website.

50 CORPORATE RESPONSIBILITY Quality x inde

It is vital that customers have confidence in ICA and the products sold in the Group’s stores. ICA wants to be associated with high quality and uality

is constantly working to improve quality in every area. q

The focus of ICA’s quality work is on guarantee- Quality assurance of non-foods health ing product safety throughout the supply chain, For a number of years ICA has required its sup- Quality and environmental policy from primary producer to consumer. This includes pliers of private label non-foods to be certified – revised and adopted in January 2006 inspections and monitoring of production, prod- according to ISO 9000 or other relevant industry The ICA Group’s quality and environ- uct quality, warehousing, transports and handling standard. To determine how many of the about mental policy, which has been continuously updated since 1989, provides in stores – and covers products from local as well 200 private label suppliers meet this requirement, covers operations, product selection, as global suppliers. ICA started to send out a questionnaire during information and competence issues. environment the year on quality, the environment and social Ethical guidelines for purchasing and Food safety measures by suppliers responsibility. Private label suppliers and other corporate social responsibility for suppliers are included as well. They ICA participates in the Global Food Safety Initia- suppliers outside Europe were asked to respond. cover working hours, salaries and ani- tive (GFSI), an international collaboration that ICA also conducted quality audits at four non- mal welfare, among other areas. The sets standards for evaluating food safety among food suppliers in 2006. policy is complemented by practical mployees suppliers. ICA’s suppliers of private label prod- guidelines for day-to-day work within ucts must be certified by GFSI, which requires Quality assurance of private label products the group and in stores. monitoring systems, inspection programs for criti- Quality work in connection with private label cal points, Hazard Analysis and Critical Control development is done in several stages. ICA’s quality E ehtics Points (HACCP), and traceability. A similar system, laboratory tests appearance, smell, taste, consis- EurepGap, is used for fruit and vegetables. As of tency and nutritional content. Detailed specifica- year-end 2006 the majority of suppliers of ICA’s tions describe each approved product’s micro- private label products had received certification. biological limits, nutritional value, the supplier’s Suppliers that cannot provide GFSI certification traceability system and packaging information.

are audited by ICA to determine whether they will New and existing products are tested based on introduction meet the standard within one year. these specifications. Production facilities must ICA requires that its other suppliers have self- meet ICA’s requirements on environmental and inspection programs based on HACCP. This is con- product safety. firmed through audits and questionnaires. Produce is inspected to ensure that it meets The local connection of each ICA store is often requirements in terms of weight, size, acidity, reinforced by locally produced foods, mainly fresh sweetness and shelf life. As a complement to the foods. Audits ensure that local suppliers operate National Food Administration’s tests, ICA ran- approved facilities, that self-inspections are based domly inspects for pesticides. If any traces are on HAACP and that the company has a system for found, measures are immediately discussed with recalling and tracing products. In 2006 around 240 the National Food Administration. In the fall of local suppliers were audited. 2006 a shipment of apples was recalled due to Rimi Baltic has harmonized the quality require- excess pesticide residue. ments used in its sourcing agreements in the three Baltic countries. The requirements are based on Traceability and recalls national and EU laws. The company has a quality An important part of the work with product qual- organization responsible for quality assurance of ity is being able to trace a product or ingredient private label products. backward and forward in the food chain. Accord- Rimi Baltic has an extensive quality assurance ing to EU regulations, every level that handles a system to raise quality levels for fresh produce. In product must be able to trace it one step back- addition, quality managers are employed at ware- ward and forward in the chain. houses in each country to ensure the quality of In 2006 ICA improved its systems for tracing fresh foods. and recalling products. It has also coordinated

CORPORATE RESPONSIBILITY 51 Quality work in 2006 routines between Sweden and Norway. Improved tracing has made recalls more efficient, limit- x Company Initiative ing the number of stores that have to inspect or inde remove products from their shelves. One example ICA Group ICA has developed a web-based training program designed to give store employees basic information on food safety. occurred in fall 2006 when ICA had to issue a

recall due after discovering salmonella in ground ICA’s quality and environmental policy was revised. beef. Using the tracing system, ICA was able to uality A pilot project in logistics was launched to evaluate a web-based self-inspection pro- determine that the beef had reached only 49 of its q gram for handheld computers designed to simplify monitoring and reporting. The 1,397 stores in Sweden. goal is to introduce the program in both the Swedish and Norwegian operations.

ICA Sverige A handheld computer linked to a program for self-inspections in stores was intro- Animal welfare

health duced during the fall. Communication is wireless, which facilitates inspections and ICA applies strict rules on animal welfare compa- monitoring of refrigerated products. rable to Swedish and Norwegian laws. The rules cover private label products, eggs and fresh and ICA has begun formulating a standard for self-inspections by retailers to improve food safety. The work has been done in cooperation with the National Food frozen meat. For the Euroshopper private label Administration, Coop, Axfood and Bergendahls. and other products containing meat, ICA requires its suppliers to follow EU rules. A HACCP plan has been drafted for all warehouses, along with a handbook on environment logistics and quality work. In-store quality assurance In cooperation with an auditing firm, around 240 local suppliers were inspected. ICA aspires to live up to customer demand that The aim is to support local suppliers and safeguard food quality from them when its stores maintain high hygienic standards and they supply ICA stores. that its food products, especially fresh foods, are

mployees A review of rules for freshness dating was initiated to increase the number of days safely handled. According to current EU laws, products remain fresh in stores rather than in warehouses. every store must have its own inspection program

ICA has joined the Swedish Frozen Food Institute’s efforts to develop industry- for hygienic practices and food safety. In Norway, wide temperature guidelines for refrigerated and frozen foods. The work has been similar laws apply. The program covers routines,

E ehtics done in cooperation with other retailers. staff training, labeling, food handling, mainte- nance of equipment and properties, and inspec- ICA participated in revising the rules for country of origin labeling. tions of temperatures in refrigerated display cases A new quality laboratory was built in Helsingborg. and freezers. In its Swedish stores, ICA has introduced a web- ICA Norge Work was begun on developing routines and rules for handling fruit and vegetables in Norwegian warehouses. based self-inspection program to monitor quality

introduction work. Store employees record temperatures and Food safety training was held for all ICA Maxi and ICA Supermarked stores. other inspection points with the help of a hand- In a cooperative partnership with others in the industry, ICA has led the develop- held terminal. This allows data to be monitored by ment of new industry guidelines for hygiene and food safety in the retail sector. the stores as well as ICA centrally. Over 900 stores The work has been done on behalf of Norway’s Food Control Authority and will began implementing the program during the year. continue in 2007. In Norway, outside consultants are brought in A new quality laboratory was built in Oslo. to ensure proper inspections at ICA Maxi and ICA Supermarked stores. ICA Nær and Rimi have an electronic self-inspection system created by ICA. In 2007 the web-based program will reach the Norwegian stores as well. All ICA and Rimi stores will be affected by the program. Rimi Baltic maintains a dialogue with authorities on its quality efforts. In Latvia, it is participating in a process together with authorities and the trade association to draft guidelines for food safety in the retail sector.

52 CORPORATE RESPONSIBILITY Quality assurance for warehouses and transports Product recalls from stores All of ICA’s warehouses and distribution units work x in compliance with HACCP. ICA has the following Of which private Total no. of recalls label products three critical control points: temperature, date inde labeling and salmonella in imported animal prod- 2006 2005 2006 2005 ucts. It is crucial that the refrigerated chain remains ICA Sverige 99 92 43 44 unbroken and that goods are stored and transported at the right temperature to ensure quality. ICA Norge 59 51 12 13 uality q New EU regulations on hygiene and food safety Rimi Baltic 406 472 19 13 introduced during the year place higher demands on self-inspections. Temperature limits have been No genetically modified foods tightened on animal products. ICA has worked to health adapt its operations in Sweden and Norway to the A genetically modified organism (GMO) has had ingredients with a genetically modified origin. No new rules. its genetic code altered by technological means such products have been or currently are included In Sweden, follow-up inspections are made to give it special characteristics. In general, ICA is in ICA’s range. when products are delivered to stores at incor- positive to new technology that leads to better U.S. rice plantations were contaminated in rect temperatures. In 2006 only one product was products for consumers. For ethical and environ- 2006 by genetically modified rice, known as LL601. mental reasons, however, it questions the produc- This led to recalls from warehouses and stores. delivered at an incorrect temperature, a significant tion and cultivation of genetically modified foods After ICA detected LL601 in its self-inspections, environment improvement. and seeds that are not contained*. all U.S.-imported rice was analyzed. Authorities in ICA Norge continued to work on improving For ICA to sell a product that has been pro- Sweden and Norway were of different opinions suppliers’ routines to ensure proper handling of duced with the help of genetic technology, it must how recalls should be conducted. In Sweden, be ethically acceptable, safe for humans and the authorities decided to stop the rice at the ware- refrigerated products. On occasion certain prod- environment, and clearly beneficial for consum- house, whereas Norwegian authorities chose to ucts have not been sufficiently cooled after pro- ers. Decisions whether to add such products to inform the media and request recalls from stores. mployees duction, due to which their temperatures end up ICA’s range are made by the company’s manage- being too high when transported to and stored at ment, though no cases have arisen as yet. ICA’s * Contained means controlled production in an indus- position that consumers should have the right to trial or laboratory setting without the risk of spreading ICA’s warehouses. genetically modified organisms to the surrounding all available information on a product naturally

eco system. E ehtics applies to products that consist of or contain Country of origin labeling During the year Sweden’s then Minister of Agricul- ture Ann-Christine Nyqvist reviewed the voluntary rules the industry adopted in 2003 for country of origin labeling of meat and deli products. ICA’s

policy is to always provide information on where introduction its private label products come from, in accordance with the voluntary rules. Work was done in 2006 to revise the rules and increase their use. ICA knows that customers want country of origin labeling and is therefore pushing for greater information on where products come from.

CORPORATE RESPONSIBILITY 53 GRI content index x inde – Global Reporting Initiative

uality ICA is adapting its reporting according to the GRI. In 2007 IT support will be developed for this purpose with the goal of meeting GRI reporting requirements within two years. Below is a summary of

q health ICA’s compliance.

Profile Pages

Strategy and analysis environment 1.1 Statement from most senior decision maker 33

Organizational profile

mployees 2.1 Name of the organization 1–2

2.2 Primary brands, products and/or services 18, 23, 25, 27–29

2.3 Operational structure of the organization 16 E ehtics 2.4 Location of organization’s headquarters 99

2.5 Countries 1, 37

2.6 Nature of ownership and legal form 22

2.7 Markets served 1 introduction 2.8 Scale of the reporting organization 41, 57–58, 61

2.9 Significant changes 57–67

2.10 Awards received 17

Report profile

3.1 Reporting period 3, 57

3.2 Date of most recent previous report 3

3.3 Reporting cycle 3

3.4 Contact point for questions 3, 99

Report scope and boundary

3.5 Process for defining report content No data, see 35

3.6 Boundary of the report 1

3.7 Specific limitations No data

3.8 Basis for reporting 1, 6–8, 57, 68

3.10 Restatements of information No changes

3.11 Significant changes 60, 68

54 CORPORATE RESPONSIBILITY x inde

uality q health

GRI Pages

3.12 Table identifying location of standard disclosures 54–55 environment Governance

4.1 Governance structure of the organization 92–97

4.2 Chair 92

4.3 Independent members 92 mployees

4.4 Mechanisms for shareholders and employees 96

4.14 List of stakeholder groups 37–38, 43, 49 E ehtics 4.15 Selection of stakeholders 35, 37–38

Performances indicators

Economic performance introduction EC1 Economic value generated and distributed 63–67

EC3 Coverage of the organization’s defined benefit plan obligations 38

EC8 Development and impact of infrastructure investments and services 38–39

Environmental performance

EN3 Direct energy consumption 46

EN5 Energy saved due to conservation and efficiency improvments 46

EN16 Total direct and indirect greenhouse gas emissions 46–47

EN18 Initiatives to reduce greenhouse gas emissions and reductions 43–45 achieved

EN20 NOx , SOx and other significant air emissions 46

EN22 Total weight of waste 46

Social performance

SO3 Percentage of employees trained in organization’s anti-corruption 36 policies and procedures.

CORPORATE RESPONSIBILITY 55 Annual Report

ICA AB Corporate identity number 556582–1559 Financial review

The Board of Directors and the President of ICA AB hereby present A new organizational unit for non-foods was established during the the annual report for the financial year January 1, 2006 – December third quarter to consolidate the company’s resources in the area. The 31, 2006. All amounts are in millions of Swedish kronor (SEK million) new unit now has total responsibility for product selection, purchasing, unless indicated otherwise. operations and sales of non-food products. report

Operations Fourth-quarter income includes a capital gain of SEK 341 million on audit ICA AB is the parent company of the ICA Group, which operates the sale of the warehouse property in Helsingborg. ICA Fastigheter around 2,300 of its own and retailer-owned stores in Sweden, Norway Sverige AB sold the property to Kundvagnen Holding AB on May 22 and the Baltic countries. ICA AB maintains its registered office in Stock- for SEK 946 million, and the deal was finalized in October. ICA has holm at Svetsarvägen 16, SE-171 93 Solna. The subsidiaries ICA Sverige signed a long-term lease with the buyer.

AB and ICA Norge AS are sales companies responsible for operations, company sales and new store openings. ICA Banken offers financial services to In October ICA Baltic AB signed an agreement with Kesko Livs Ab Swedish customers. ICA owned half of the companies Rimi Baltic, with to acquire its 50 percent interest in Rimi Baltic AB. ICA AB paid EUR parent stores in the Baltic countries, and Netto Marknad, with discount stores 190 million in cash for the shares in December 2006 and EUR 50 mil- in Sweden, for the large part of 2006. Rimi Baltic is a subsidiary as of lion for four properties in Estonia in February 2007. The acquisition December 31, 2006, and in February 2007 the holding in Netto was was approved by the EU Commission in December, and Rimi Baltic is reduced to 5 percent. reported as of January 1, 2007 as a wholly owned subsidiary of ICA AB. group the

Financial summary In December ICA began the process of shutting its Etos stores in Swe- Key financial ratios den, which sell health and beauty products, to instead focus on the health and beauty concept at ICA stores. The expenses associated

with the process are marginal. report s

SEK million January – December ’ 2006 2005 ICA AB signed an agreement with Dansk Supermarked in December Net sales 67,395 66,096 to change the ownership structure of Netto, with ICA reducing its Operating income 2,297 1,940 interest from 50 percent to 5 percent. As part of the transaction, ICA director Operating income excluding capital gains from real estate sales and impairment losses on fixed assets 1,709 1,865 is taking over 21 Netto stores in the Mälardal area, some of which will Income after tax 2,034 1,520 be converted to ICA stores while others will be shut down. The trans- Total assets 35,506 32,731 action was finalized on February 15, 2007 after approval was received Cash flow from operating activities 3,044 2,339 from the Swedish Competition Authority. Operating margin, % 3.4 2.9 Financial year 2006 Operating margin excluding capital gains from real estate sales and impairment losses on fixed assets, % 2.5 2.8 For 2006 ICA noted a significant increase in net income, slightly over 58 Equity/assets ratio, % 28.8 25.6 percent, to SEK 2,401 million. Store sales in Sweden have been strong, Return on equity excluding ICA Banken, % 25.7 20.3 and ICA Banken for the first time reported positive operating income Return on capital employed excluding ICA Banken, % 12.9 12.2 for the full year. Moreover, capital gains on property sales, including impairment losses on fixed assets and the sale of ICA Meny, affected income positively. On the other hand, income was affected by weak Highlights during the year development in the fourth quarter. In ICA Norge’s case, it was mainly In February ICA AB announced that the subsidiary ICA Meny was for due to lower sales volume and a lower gross margin. ICA Sverige’s sale. On June 16 it signed an agreement with Nordic Capital to sell ICA income was charged with start-up costs for the new warehouse in Hel- Meny. The sale produced a capital gain for ICA AB of approximately singborg and additional expenses. However, the year was distinguished SEK 367 million. first and foremost by a number of structural deals that have given ICA a new starting point for the future. On May 2 ICA Fastigheter Sverige AB sold a portfolio containing 25 During the year ICA Meny and the holding in Netto were sold at the store properties in western and southern Sweden to ING Real Estate. same time that Kesko’s 50 percent interest in the former joint venture The purchase price was SEK 870 million. The purchase raised ICA Rimi Baltic was acquired. A decision was made to shut the Etos stores AB’s operating income by SEK 89 million during the second quarter in Sweden and instead focus on the health and beauty concept in ICA of 2006. stores. These structural changes were the result of a conscious strategy to streamline operations and concentrate on what ICA is best at – During the year ICA Banken for the first time reported positive oper- retailing in general and consumer goods in particular. In this way, ICA can ating income, underscoring its positive development during the year. continue to improve and be the leader in the markets where it is active. Income in Norway declined significantly in 2006. This is mainly due The inauguration of our new, fully automated warehouse in Helsing- to lower sales volume and a lower gross margin, higher operating borg took place in September. The warehouse is an important part of expenses in stores due to a fast pace of new store openings, and struc- ICA’s distribution network and is Sweden’s largest distribution center tural costs to shut and modernize stores. While necessary, the major for consumer goods. changes under way in Norway in recent years have resulted in lower

annual report 57 income and the loss of market share. In 2007 ICA therefore launched sidiary of ICA AB. Net sales rose by 19.6 percent to SEK 8,993 million a program called “Take-off 2007” to accelerate the Norwegian busi- (7,517). A large number of stores have been opened, mainly hypermar- ness in a number of key areas: the ICA Maxi concept will be refined to kets and discount stores, in all three countries. The number of hyper- better meet customer needs; greater emphasis will be placed on non- markets has increased to 30, compared with 24 at year-end 2005. report food products; and product lines will be improved with regard to both ICA Banken offers services that make it easier for ICA’s customers to private labels and fresh foods. ICA is continuing to strengthen its store manage their finances and in the process strengthens their ties to ICA. audit network by opening new stores and modernizing existing ones at the During the year the bank again reported a strong increase in new cus- same time that it broadens its product range, increases the emphasis tomers and raised its business volume by 9.5 percent. ICA Banken has on price and continues to put effort into the area of health products. the most satisfied banking customers in Sweden, according to a survey With these changes, ICA expects to gradually improve its customer of the industry by the Swedish Quality Index. Its product range and

company offering in Norwegian stores. product quality were strong contributing factors. ICA Banken took over The fast pace of new store openings continued in 2006. ICA man- responsibility for payment terminals in Norwegian ICA and Rimi stores, aged to open a number of new units and rebrand many others. In Nor- which has reduced their credit card processing costs. It had already parent way and Sweden, a total of 23 new stores were opened and nearly 350 been responsible for payment terminals in Swedish ICA stores. existing stores were modernized. Many stores saw a pickup in sales, The Etos retail chain was launched in Sweden in 2002 and has main- even smaller ICA Supermarket and ICA Nära stores in Sweden. ICA will tained an offering of health and beauty products as part of a unified

group maintain the same fast pace of store openings in 2007 and focus on the concept. ICA has decided to focus on the health and beauty concept in development and upgrade of the existing store network. Today the aver- ICA stores and has begun the process of liquidating Etos. the age life of a store is shorter than ever before, and upgrades are needed Netto was established in August 2001 as a joint venture between

after just four or five years to meet customer needs and expectations. ICA AB and Dansk Supermarked AS. In December 2006 ICA signed an ICA Sverige is one of the country’s leading retail companies, with a agreement with Dansk Supermarked to reduce its interest in Netto report focus on food and consumables. It is the main supplier to ICA retailers, from 50 percent to 5 percent. The Netto discount chain manages 84 s ’ who own and manage their stores independently. In 2006 ICA Sverige stores in Sweden. As part of the agreement with Dansk Supermarked, had net sales of SEK 48,267 million. Sales in the 1,397 stores amounted ICA is taking over 21 Netto stores in the Mälardal region and converting to approximately SEK 87 billion including VAT. Sales in Swedish ICA some of them to ICA stores. ICA will retain its 5 percent interest in the director stores rose by 7.0 percent. The smaller store profiles, ICA Nära and ICA company until further notice. Supermarket, reported especially positive sales trends. New stores were opened at a rapid rate and comprised all store profiles. In total, Income summary 13 stores were opened in 2006: 4 Maxi ICA Stormarknader stores, 1 Consolidated net sales in 2006 amounted to SEK 67,395 million ICA Kvantum store, 2 ICA Supermarkets and 6 ICA Nära stores. Most (66,096), an increase of 2.0 percent. ICA Sverige’s sales rose by 3.3 per- notable was the opening of hypermarkets in the metropolitan regions cent. Sales for ICA Norge decreased by 3.6 percent; in local currency of Malmö, Göteborg and Stockholm. In all, 45,000 square meters of sales decreased by 2.7 percent. ICA Banken’s sales rose by 44.9 percent, retail space was added during the year. ICA’s major investment in an while business volume climbed 9.5 percent. improved distribution network continued, and a new, ultramodern Consolidated operating income for 2006 rose by SEK 357 million or warehouse was opened in Helsingborg. 18.4 percent to SEK 2,297 million (1,940) thanks to a continued strong ICA Norge is one of Norway’s leading retail companies, with a focus sales trend for ICA Sverige and capital gains on real estate sales, which on food and consumables. ICA Norge has 693 stores operated by the amounted to SEK 588 million (75) during the year, including impairment company or as franchises. In 2006 ICA Norge reported net sales of NOK losses on fixed assets. At the same time operating income was affected 15,966 million. Store sales amounted slightly over NOK 20 billion exclud- by substantially lower income for ICA Norge. Underlying income for ing VAT. Sales for Norwegian ICA stores decreased by 1.0 percent. The ICA Sverige is very strong, nearly SEK 700 million better than the previ- best sales trends were posted by ICA Maxi and ICA Supermarket. New ous year, while ICA Norge reported underlying income that is approxi- stores were opened at a rapid rate, and slightly over 18,000 square mately SEK 300 million lower than the previous year. The year included meters of retail space was added in every store profile during the year. investments of SEK 330 million in a new logistics structure in Sweden, a A large number of stores in every profile were renovated as well. Two new store structure in Norway and new projects and security solutions new concepts were developed for ICA Nær: one for urban areas and in IT. An income-based premium and staff bonus of nearly SEK 100 mil- one for suburbs. The urban concept emphasizes prepared meals, and lion have been allocated due to ICA Sverige’s high income. both concepts have been very well received. To make it easier for Nor- Operating income for ICA Sverige amounted to SEK 2,557 million wegian customers to eat a healthy diet, ICA Norge began using keyhole (1,607). The increase is due to improved market positions and the fact labeling in its stores. Sales of keyhole products have risen by between that year-earlier operating income was charged with expenses for the 10 and 20 percent. Sugar-free zones have been tested around the regis- price-cutting campaign launched in March 2005. Capital gains on real ters in one store, and reactions have been very positive. estate sales in Sweden also contributed to the income improvement Rimi Baltic is one of the leading, most modern food retail chains in and rose by SEK 454 million to SEK 465 million (11), including impairment the Baltic countries. The company was established as a joint venture losses on fixed assets. between ICA and Kesko Livs in January 2005. In October 2006 ICA and Operating income for ICA Norge decreased substantially to SEK 114 Kesko concluded an agreement whereby ICA would acquire Kesko’s million (534). The decrease is mainly due to structural costs to shut and 50% interest in Rimi Baltic. Rimi thereby became a wholly owned sub- modernize stores, a lower gross margin and lower sales, and higher

58 annual report operating expenses resulting from the fast pace of new store open- ICA store sales in Sweden ings. The decline in income was partly offset by capital gains on real estate sales, which, after deducting impairment losses on fixed assets, January–December 2006 amounted to SEK 124 million (-36). The large part is attributable to the

Change, report sale of a Norwegian shopping center in February 2006. Change, comparable ICA Banken reported positive operating income for the first time in Store sales incl. VAT SEK M all stores stores audit 2006 – SEK 11 million (–82) for the full-year. The income improvement is Maxi ICA Stormarknad 19,443 13.9 % 5.2 % the result of higher business volumes. ICA Kvantum 23,202 7.3 % 6.0 % The ICA Group Functions segment (formerly ICA AB) reported an ICA Supermarket 30,539 4.3 % 5.0 % operating loss of SEK –373 million (–161). The lower result was due to ICA Nära 13,408 3.9 % 5.2 % changes in the principles for distributing expenses within the Group, Total 86,593 7.0 % 5.4 % company which is an element in the effort to create a uniform organization. The deficit was also due to higher IT expenses for warehousing and logistics In 2006 private label sales in Sweden rose from 15 percent to 17 percent parent operations, IT security and IT consultants, higher expenses for financial year-to-year. administration in stores and in the Group, and expenses for an income- based premium and staff bonus. ICA and Rimi store sales in Norway

Net sales for Rimi Baltic during the period amounted to SEK 8,993 group million (7,517), an increase of 19.6 percent. ICA’s share of Rimi Baltic’s January–December 2006 the

loss amounted to SEK –12 million, slightly higher than the year-earlier Change, loss of SEK –8 million. The result includes expenses for the fast pace of Change, comparable new store openings. Store sales excl. VAT NOK M all stores stores

Net sales for Netto Marknad during the year amounted to SEK ICA Maxi 2,700 11.7 % 0.5 % report s ’ 2,444 million (2,052), an increase of 19.1 percent. ICA’s share of Netto ICA Supermarked 4,246 8.6 % 2.3 % Marknad’s loss for the year improved to SEK –86 million (–100) com- ICA Nær 4,522 –4.4 % 0.8 % pared with the same period last year. The result includes structural Rimi 8,474 –6.7 % –0.5 % director costs of SEK 26 million in the fourth quarter due to write-down of Totalt 19,942 –1.0 % 0.5 % stores. ICA Meny was sold as of September 19 and consolidated in the ICA In 2006 private label sales in Norway rose from 7 percent to 9 percent Group through August. Net sales for ICA Meny for the period Janu- year-to-year. ary – August amounted to SEK 4,383 million. For the period January – December 2005 net sales were SEK 5,775 million. The capital gain on Number of stores the company sale and ICA Meny’s income after tax amounted to SEK 367 million (–2). ICA stores in Sweden, including retailer-owned stores After-tax income from continuing operations rose by 33.8 percent to SEK 2,034 million (1,520). The tax expense for the year amounted to Dec. Con- Dec. SEK 12 million (147). The lower tax expense compared with the previous Store profile 2005 New verted Closed 2006 year is due in part to the sale of properties through companies and in Maxi ICA Stormarknad 45 4 3 0 52 part to lower results from operating units, especially in Norway. Net ICA Kvantum 126 1 –4 –1 122 income including results from discontinued operations rose by 58.2 ICA Supermarket 488 2 –4 –9 477 percent to SEK 2,401 million (1,518). ICA Nära 758 6 5 –23 746 Total 1,417 13 0 –33 1,397 ICA store sales during the year The following tables refer to store sales to consumers. In Sweden, this includes Swedish retailer-owned ICA store sales. In Norway, franchise ICA and Rimi stores in Norway, including franchised stores store sales are included. Sales for retailer-owned and franchised stores are not consolidated in the Group. Dec. Con- Dec. The information is based on accepted practices in each country. This Store profile 2005 New verted Closed 2006 means that the Swedish sales figures include VAT, while the Norwegian ICA Maxi 20 4 –1 0 23 sales figures do not. ICA Supermarked 69 5 5 –3 76 ICA Nær 334 0 8 –36 306 Rimi 324 1 –12 –25 288 Total 747 10 0 –64 693

annual report 59 Financial position priority areas: financial understanding, operational leadership, store The Group’s total assets rose by SEK 2,775 million to SEK 35,506 million operations, communication and awareness of ICA as a company. (32,731). Total assets have increased as a result of the acquisition of all One of ICA’s challenges is to utilize its gender equality and diversity the shares in Rimi Baltic AB and the consolidation of its operations, and work to capitalize on differences and thereby positively impact the report decreased as a result of the sale of ICA Meny. The increase in intangible company’s earnings and attractiveness as an employer. ICA’s occupa- fixed assets is due to the acquisition of Rimi Baltic. Capital employed tional health and safety policy states that working environments are audit increased by SEK 1,619 million to SEK 25,780 million. The equity/assets an important competitive advantage and strategic issue. ICA strives to ratio was 28.8 percent (25.6). The Group’s net debt excluding ICA maintain positive physical and mental work environments to promote Banken was SEK 4,539 million (6,096). employee health short- and long-term as well as contribute to the The Group’s finance company is being audited by the Swedish tax development of its staff and the business as a whole. The same high

company authorities. An exchange of correspondence with the tax authorities quality demands apply to environmental health and safety as to other has recently begun. operations. parent Statement of cash flows ICA’s corporate responsibility Cash flow from operating activities amounted to SEK 3,044 million Based on sound profitability, ICA shall meet the expectations of its (2,339) during the period. Cash flow from investing activities amounted customers and society at large in terms of stores that provide accessi-

group to SEK –389 million (–1,076), of which sales by ICA Meny amount to bility and value for the money, quality, health, environment and ethical SEK 883 million and the investment in Rimi Baltic to SEK 1,410 million. concerns. We see sustainable development as an integral factor in the the Cash flow from financing activities amounted to –1,872 million (–1,410), long-term development of the company. ICA has reported on initiatives

which largely relates to amortization of loans. The Group’s liquid assets in these areas for several years. The ICA Group has taken an important totaled SEK 3,749 million (2,920) as of December 31. step in this field by introducing the GRI model (Global Reporting Initia- report tive) as a basis for such information. s ’ Investments Investments in 2006 amounted to SEK 2,423 million (2,547). Organization for social responsibility in at-risk countries Through Ahold, ICA became a member of the BSCI (Business Social director Change in accounting principles Compliance Initiative) network in 2005. This organization is a European Financial guarantees are initially recognized at fair value according to an initiative founded to develop common criteria and systematic efforts amendment to IAS 39 Financial Instruments: Recognition and Measure- to improve working conditions at supplier companies in at-risk coun- ment. ICA Banken’s card fees, which were previously recognized as rev- tries. enue when charged to the customer, are now divided evenly over the year. Net interest income and net commission income in ICA Banken Global Compact are recognized in net sales, whereas net interest income was previ- The ICA Group is also a signatory to the UN Global Compact. This com- ously included in other operating income. For more information on the mits ICA to ten international principles covering human rights, working amendment, see Note 1. conditions, the environment and countering corruption.

Financial risk management ICA’s good business The financial strategy of the ICA Group is conservative and focuses on In seven position statements, the ICA Group has summarized its stance defining and managing financial risks. ICA Banken accounts for part of the on ethics and corporate responsibility, a philosophy it calls “ICA’s good Group’s total assets, which means that the financial risk taking account of business.” The aim is to be a sustainable company driven by the follow- the bank’s operations is higher than normal for a retail company. ing values: The Board of Directors is responsible for establishing the financial policy, which governs the Group’s financial risk management. Within ICA will be driven by profitability and high ethical standards. the ICA Group, financial risks are managed centrally through the ICA will listen to the customers and always base decisions Group’s finance function. on their needs. For more information on ICA’s risk management, see the notes to ICA will nurture diversity and growth among its employees. the consolidated accounts – Note 22 for Principles of financial risk man- ICA will maintain an open dialogue internally and with the community. agement and Note 23 for Financial instruments. ICA will guarantee product safety and quality. ICA will promote a healthy lifestyle. Human resources ICA will adopt sound environment practices to promote sustainable The Group had an average of 11,698 employees (11,556). development. The principal HR strategy is to strengthen ICA’s brand and position as an employer. Its four priority areas are diversity, competence, health Policies and guidelines are in place to convert these points into practice and wellness, and leadership. Goals and concrete activities are linked to in day-to-day activities. This is done through a systematic management each area. A competence audit was conducted in late 2005 to identify system in the subsidiaries, cooperation with other organizations and existing competencies and areas that need strengthening in order to regular contact with key stakeholders. reach ICA’s business objectives ICA. As a result, ICA has worked on five

60 annual report Five-year summary for the ICA Group

2002 2003 2004 IFRS 2005 IFRS1 2006 IFRS

Condensed income statement report Net sales 70,908 71,980 73,334 71,663 67,395 Operating income before depreciation/amortization 4,103 4,437 3,514 3,248 3,545 audit Depreciation/amortization –1,276 –1,695 –1,280 –1,275 –1,248 Operating income before goodwill amortization and impairment 2,827 2,742 2,234 1,973 2,297 Goodwill amortization and impairment –292 –622 –257 –15 – Operating income 2,535 2,120 1,977 1,958 ,2,297 company Net financial items –451 –312 –236 –287 –251 Income after net financial items 2,084 1,808 1,741 1,671 2,046

Tax –350 –32 –226 –148 –12 parent Minority share –24 1 Result from discontinued operations 367 Net income for the year 1,710 1,777 1,515 1,523 2,401 group

Condensed balance sheet the

Intangible fixed assets 2,762 2,288 2,064 1,914 3,447 Tangible fixed assets 14,469 11,639 12,675 12,441 13,232

Financial fixed assets 4,047 3,936 3,185 4,914 3,959 report s Other fixed assets – – 186 49 181 ’ Other current assets 8,826 9,245 9,780 10,493 10,938 Liquid assets and short-term investments 3,967 4,446 3,198 2,920 3,749

Total assets 34,071 31,554 31,088 32,731 35,506 director

Shareholders’ equity 11,939 12,169 7,094 8,386 10,216 Minority interests 258 34 Interest-bearing liabilities and provisions 12,032 9,527 15,150 15,774 15,563 Non-interest-bearing liabilities and provisions 9,842 9,824 8,844 8,571 9,727 Total shareholders’ equity and liabilities 34,071 31,554 31,088 32,731 35,506

Key financial ratios Operating margin, % 3.6 2.9 2.7 2.7 3.4 Return on capital employed, % 15.6 13.1 12.9 12.2 12.9 Return on equity, % 16.5 15.7 16.9 20.4 25.7 Equity/assets ratio, % 35.8 38.7 22.8 25.6 28.8

1 Including the discontinued operations of ICA Meny in accordance with the annual report for 2005.

Five-year summary Return on equity = Income after tax as a percentage of average equity. Information on the years 2002 – 2003 is based on previously released The operations of ICA Banken are excluded from both the income information from annual reports prepared in accordance with the statement and balance sheet in the calculation of return on equity. provisions of the Annual Accounts Act and the general advice of the Swedish Accounting Standards Board. As of 2004 information is Equity/assets ratio = Shareholders’ equity as a percentage of total assets. provided according to IFRS. ICA AB Definitions of key financial ratios: The Parent Company comprises four overall functions for Retail, Capital employed = Total assets less non-interest-bearing liabilities and Finance, Marketing and Supply Chain. The Parent Company’s net sales provisions. amounted to SEK 783 million (480) with income after financial items of SEK 400 million (446). Operating margin = Operating income as a percentage of net sales. Board of Directors and Management/Board’s rules of procedure Return on capital employed = Income after financial income as a per- During the year the Board of Directors of ICA AB consisted of eight centage of average capital employed. The operations of ICA Banken members elected by the Annual General Meeting with four deputies, are excluded from both the income statement and balance sheet in the as well as two members with two deputies appointed by the unions. calculation of return on capital employed. All members appointed by the Annual General Meeting are connected

annual report 61 with the owners of ICA AB. The CEO, CFO and Chief Counsel (Board Important events after conclusion of the financial year Secretary) participate in the Board’s work, which follows special rules In February 2007 ICA decided to simplify the Group’s organizational of procedure that ensure that the Board receives the information it structure. Four Group functions have been reduced to three, at the needs to monitor and develop business operations. The Board con- same time that the subsidiaries now have clearer responsibility for report vened on nine occasions in the financial year 2006. local customer offerings and coordination in certain areas at the Group level. The changes are also being implemented to facilitate audit Board committees future cost cuts. In connection with the new organizational structure, The Board is able to establish committees to complement its work. the composition of ICA’s Group Management will change as well. The committees are subordinate to the Board and report to it on an ongoing basis. In January ICA Eiendom AS sold a real estate portfolio mainly com-

company prised of retail properties to ERIV. The sales price amounted to NOK Audit Committee 516 million with a capital gain of approximately NOK 100 million that The Board of Directors has appointed an Audit Committee to oversee will positively affect ICA’s operating income in the first quarter of 2007. parent accounting and reporting of financial information. The Audit Commit- tee is also responsible for evaluating the Group’s systems for internal Trond Kongrød was appointed the new President and COO of ICA oversight and control. Among the Committee’s other duties are to Norge in January. He was most recently format director for the Nor-

group handle auditing issues from the external and internal audit. The Audit wegian ICA formats. Committee’s work is governed in its rules of procedure, which are laid the down by the Board of Directors. In January ICA Norge launched “Take off 2007,” a program designed to

The Audit Committee consists of two members: John Rishton (Chair- boost business in a number of areas and create Norway’s best stores. man) and Claes-Göran Sylvén. In addition, assistants to the members, ICA Norge will strengthen its store network by opening new stores report the external auditors, internal auditors and ICA AB’s President and CFO and modernizing existing stores. This is being done at the same time s ’ normally attend all or part of the committee’s meetings. In 2006 the that the product range is being broadened, greater focus is placed on Audit Committee held six meetings. prices and further efforts are devoted to health products. director Executive Committee ICA Eiendom AS has sold a property in Norway to Klaveness Eien- The Board has appointed the Chairman, Deputy Chairman and Presi- dom AS for NOK 330 million. The capital gain of approximately NOK dent to an Executive Committee responsible for continuous monitor- 90 million affects ICA’s operating income in 2007. ing of the Group’s operations. The committee also prepares issues that will be discussed by the Board and supports the presidents and ICA’s ownership changes in Netto were approved by the Swedish other senior executives of the subsidiaries in the implementation and Competition Authority on February 5, 2007 and finalized on February execution of the decisions taken by the Board. The committee also has 15, which means that ICA subsequently owns 5 percent of Netto. a mandate to decide on investments that do not require treatment by the Board. Proposed appropriation of earnings

Compensation Committee The following funds are at the disposal of the Annual General Meeting (SEK): The Board has given the Executive Committee a mandate to act as a

Compensation Committee for the purpose of deciding on compensa- Retained earnings 7,194,463,033 tion principles for senior executives in Group Management, though not Net income for the year 657,348,438 for the President, whose salary is determined by the Board. Total 7,851,811,471

Internal control over financial reporting The Board of Directors and the President propose The Board has decided that the company will voluntarily meet the that the earnings be distributed as follows: requirements for internal control over financial reporting according to the Swedish Code of Corporate Governance. ICA will also apply the To the shareholders, a dividend of 958,000,000 methods for testing key controls. Initial documentation for processes Carried forward 6,893,811,471 and key controls as well as evaluations were completed in 2006, and Total 7,851,811,471 the internal routine will take effect in 2007.

The proposed dividend conforms to the agreement between the share- Approval of financial reports holders, which states that the annual dividend will amount to at least The financial reports included in this annual report were approved by 40 percent of net income for the year. The Group’s equity/assets ratio the Audit Committee on February 16 and by the Board of Directors on following the dividend is 26.1 percent. February 19, 2007.

Ownership structure Royal Ahold owns 60 percent and Hakon Invest AB (publ) 40 percent of the shares in ICA AB. Through a shareholder agreement, neither party has control of the company and the two share equal voting power in the Board and at the Annual General Meeting.

62 annual report Consolidated Income Statement

(SEK million) Note 2006 2005 Net sales 2, 3 67,395 66,096 Cost of sales 4 –57,640 –56,933 Gross profit 9,755 9,163 report

Selling expenses 4 –4,521 –4,573 audit Administrative expenses 4 –3,658 –2,869 Other operating revenue 7 805 303 Share of associated companies’ net income 14 –84 –84 Operating income 2, 5, 6, 8, 9 2,297 1,940 company

Financial income 107 103

Financial expenses –358 –376 parent Net financial items 10 –251 –273

Income before tax 2,046 1,667 group

Tax 11 –12 –147 the

Income after tax before result from discontinued operations 2,034 1,520 report s Result from discontinued operations 17 367 –2 ’

NET INCOME FOR THE YEAR 2,401 1,518 director

Attributable to: Parent Company’s shareholders 2,393 1,531 Minority interest 8 –13

Consolidated Income Statement 2006, SEK million Consolidated Income Statement 2005, SEK million

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annual report 63 Consolidated Balance Sheet

(SEK million) Note Dec. 31 2006 2005-12-31 ASSETS Fixed assets report Intangible fixed assets 12 3,447 1,914 audit Tangible fixed assets 13 Buildings and land 8,148 6,944 Investment properties 997 1,541 Leasehold improvements 564 552 company Equipment 2,833 2,336 Construction in progress 690 1,068

parent 13,232 12,441

Financial fixed assets 23 Shares in associated companies and joint ventures 14 63 687 group Receivables from related parties 21 320 583 the

Other financial fixed assets 108 138 ICA Banken’s receivables 16 2,810 2,558 Long-term receivables 658 948

report 3,959 4,914 s ’

Deferred tax assets 11 181 49

director Total fixed assets 20,819 19,318

Current assets 23 Inventory 15 3,550 3,228

Current receivables Accounts receivable 2,554 2,931 Tax assets 132 215 ICA Banken’s receivables 16 1,679 1,553 Receivables from related parties 21 10 26 Other receivables 18 113 Prepaid expenses and accrued income 1,849 1,753

Liquid assets 3,749 2,920

Assets held for sale 17 1,146 674

Total current assets 14,687 13,413

TOTAL ASSETS 35,506 32,731

64 annual report (SEK million) Note Dec. 31 2006 2005-12-31 Shareholders’ equity, provisions and liabilities Shareholders’ equity 18 Share capital 500 500 report Other paid-in capital 12,557 12,557 Reserves 354 273 audit Retained earnings –3,208 –4,978 Shareholders’ equity related to Parent Company’s shareholders 10,203 8,352 Minority interest 13 19 Total shareholders’ equity 10,216 8,371 company

Long-term liabilities 23

Provisions for pensions 19 760 783 parent Deferred tax liability 11 648 519

Liabilities to credit institutions 3,366 5,068 Other provisions 104 105 group Other liabilities 2,764 2,430

Total long-term liabilities 7,642 8,905 the

Current liabilities 23

Liabilities to credit institutions 941 368 report s Accounts payable 5,690 4,914 ’ Deposits, ICA Banken 16 6,394 5,930 Liabilities to related parties 21 20 32

Tax liabilities 6 91 director Other liabilities 2,452 2,054 Provisions 72 43 Accrued expenses and deferred income 2,073 2,023 Total current liabilities 17,648 15,455

TOTAL SHAREHOLDERS’ EQUITY AND LIABILITIES 35,506 32,731

Consolidated Balance Sheet 2006-12-31, SEK million Consolidated Balance Sheet 2005-12-31, SEK million

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annual report 65 Changes in Consolidated Shareholders’ Equity

Shareholders’ equity related to Parent Company’s shareholders Other paid Retained Minority Total share- (SEK million) Share capital -in capital Reserves earnings Total interest holders’ equity Opening balance, January 1, 2005 500 12,557 –104 –5,892 7,061 33 7,094 report Change in accounting principle –10 –10 –10 Opening balance, shareholders’ equity, after audit change in principle 500 12,557 –104 –5,902 7,051 33 7,084 The year’s change in translation reserve 395 395 395 The year’s change in hedging reserve –18 –18 –18 Acquisition of minority –1 –1

company Net income for the year 1,531 1,531 –13 1,518 Total change in net worth excluding transactions with company’s owners 500 12,557 273 –4,371 8,959 19 8,978 parent Dividend –607 –607 –607

Closing balance, December 31, 2005 500 12,557 273 –4,978 8,352 19 8,371

group Opening balance, January 1, 2006 500 12,557 273 –4,978 8,352 19 8,371 Change in accounting principle –13 –13 –13 the Opening balance, shareholders’ equity, after change in principle 500 12,557 273 –4,991 8,339 19 8,358 The year’s change in translation reserve –455 –455 –455

report The year’s change in hedging reserve 38 38 38 s ’ The year’s change in revaluation reserve 498 498 498 Acquisition of minority –14 –14 Net income for the year 2,393 2,393 8 2,401 director Total change in net worth excluding transactions with company’s owners 500 12,557 354 –2,598 10,813 13 10,826 Dividend –610 –610 –610 Closing balance, December 31, 2006 500 12,557 354 –3,208 10,203 13 10,216

66 annual report Consolidated Statement of Cash Flows

(SEK million) Note 24 2006 2005 Operating activities Income after financial items 2,046 1,667 Adjustments for non-cash items 679 1,368 report Income tax paid –220 –348 Cash flow from operating activities before change in working capital 2,505 2,687 audit

Changes in working capital Inventory (increase - / decrease +) –165 105 Loan portfolio ICA Banken (increase + / decrease -) –378 –1,084 Short-term receivables (increase - / decrease +) –146 –250 company Short-term liabilities (increase + / decrease -) 1,228 881

Cash flow from operating activities 3,044 2,339 parent

Investing activities Purchase of fixed assets –2,423 –2,547 group Proceeds from sale of fixed assets 2,196 489

Proceeds from borrowings –131 –162 the Repayment of borrowings 465 575 Purchase of operations Note 25 –1,420 –

Proceeds from sale of operations 924 523 report s Investment in financial fixed assets –29 –110 ’ Proceeds from sale of financial fixed assets 130 83 Investment in associated companies 24 –76

Divestment of associated companies –125 149 director Cash flow from investing activities –389 –1,076

Financing activities Change in minority share in equity –13 0 Repayment of borrowings –2,046 –5,933 Proceeds from borrowings 797 5,130 Dividend paid –610 –607 Cash flow from financing activities –1,872 –1,410

Cash flow of the year 783 –147 Liquid assets at beginning of year 2,920 3,198 Exchange rate differences 46 –131 Liquid assets at end of year 2006 3,7420059 2,920

Consolidated Statement of Cash Flows, SEK million

2006 2005 – + – + From the income statement +2,505 +2,687 Inventory –165 +105 Short-term receivables, incl. loan portfolio ICA Banken –524 –1,334 Short-term liabilities +1,228 +881 Cash flow from operating activities +3,044 +2,339

Sale of fixed assets +3,125 +1,244 Investment in fixed assets –3,514 –2,320 Long-term liabilities –1,262 –803 Dividend paid –610 –607 Cash flow of the year +783 –147

Grafik Bonanza

annual report 67 Supplementary information, the Group

Note 1 Accounting principles Consolidated accounts The consolidated accounts comprise the Parent Company, ICA AB, and its sub- These consolidated accounts are prepared in accordance with the Interna- sidiaries. A subsidiary is included in the consolidated accounts as of the date tional Financial Reporting Standards (IFRS) as adopted by the EU Commission the Parent Company secures a controlling influence over the company and is and the interpretations of the International Financial Reporting Interpretation no longer included as of the date the Parent Company’s controlling influence report Committee (IFRIC). The company also follows the Swedish Accounting Stan- over the company ceases. dards Board’s recommendation RR 30:05 Supplementary accounting rules for The minority interest initially consists of the minority’s share of the fair audit groups, which specifies additional disclosure requirements in accordance with value of the net assets and is recognized in shareholders’ equity separately the Annual Accounts Act. from the Parent Company’s equity. The income or loss from the minority The following standards and interpretations had been published but not yet interest is recognized in the income statement separately from the Parent entered into force at the time this annual report was approved: Company’s results as a portion of results for the period. The purchase accounting method is applied to the acquisition of subsidiar- IFRS 7 Financial instruments: Disclosures and amendments to IAS 1 Presenta- ies. The acquisition cost of an acquisition consists of the fair value on the company tion of Financial Statements acquisition day of the assets and new and contingent liabilities plus direct purchase costs. Acquired identifiable assets, liabilities and obligations are rec- IFRIC 7 Applying the Restatement Approach under IAS 29 Financial Reporting ognized at fair value. The difference between acquisition cost and fair value

parent in Hyperinflationary Economies is recognized as goodwill. If the acquisition cost is less than the fair value of

IFRIC 8 Scope of IFRS 2 acquired identifiable assets, liabilities and contingent liabilities, the difference is recognized directly through profit or loss. IFRIC 9 Reassessment of Embedded Derivatives In incremental acquisitions, each transaction is treated individually. Good- group IFRIC 10 Interim Financial Reporting and Impairment will is determined for each acquisition based on fair value on the transaction date and the compensation paid for the acquisition. Changes in the fair value the

IFRS 7 does not necessitate any changes in the recognition and valuation of shares that had already been owned are recognized as a revaluation in of financial instruments, although disclosure requirements have changed shareholders’ equity. compared with IAS 32 and IAS 30. IFRS 7 changes the disclosure requirements For all units included in the consolidated accounts, uniform accounting in IAS 1. IFRS 7 will be applied in 2007 in accordance with the standard. IFRS 7 is principles are applied. This also applies to companies reported according to report the equity method. All intra-Group transactions are eliminated. s

’ expected to have little effect on the financial reports when it is applied. None of the pronouncements that have been issued have an effect on the financial reports. Investments in associated companies Holdings in associated companies are reported according to the equity method. An associated company is a unit in which the Group has a significant director Accounting principles applied Changes in accounting principles but not controlling influence. Application of the equity method means that According to an amendment to IAS 39 published in August 2005, financial investments in associated companies are recognized in the balance sheet at guarantees are initially recognized at fair value, subsequent to which they are cost plus any changes in the Group’s share of the associated company’s net recognized at the higher of the amount according to IAS 37 Provisions, Con- assets less any impairments and dividends. The income statement reflects the tingent Liabilities and Contingent Assets and the amount according to IAS 39. Group’s share of associated companies’ income after tax. The new principle has applied since January 1, 2006, in accordance with IAS 39. The difference between the acquisition cost of the acquired shares and the The effect on shareholders’ equity as of January 1, 2006 is SEK –13 million. fair value of the Group’s share of the identifiable assets and liabilities in the The annual fee that ICA Banken charges for its bank cards was previously associate is accounted as goodwill (excess value) or in case of a negative dif- recognized as revenue when the customer was charged. According to the ference is recognized directly through profit or loss. The Group’s investments amended principle, the annual fee is divided evenly over the course of the in associated companies comprise goodwill, which is dealt with in accordance year. Although the previous principle has in many cases been a practice for with the accounting principles for goodwill described below. Impairment test- banks, ICA believes that the amended accounting principle better shows how ing is conducted on reported shares in associated companies when there are card revenues were earned. The amended principle affects the Group’s share- indications of diminished value. holders’ equity by SEK –10 million as of January 1, 2005. In transactions between Group companies and associated companies, the ICA Banken’s net interest income is now recognized in net sales together portion of unrealized gains corresponding to the Group’s share of the associ- with its net commission income. Net interest income had previously been ated company is eliminated. Unrealized losses are eliminated correspondingly recognized as other operating income. Net interest income amounts to SEK as long as there is no indication of impairment. 278 million (215). The comparative year is restated. Investments in joint ventures Basis of accounting A joint venture is a contractual arrangement whereby two or more parties The consolidated accounts are based on historical acquisition costs, with undertake an economic activity subject to joint control. ICA reports joint the exception of financial derivatives and certain financial assets, which are ventures according to the equity method. recognized at fair value. The Parent Company’s functional currency is Swedish In transactions between Group companies and joint ventures, the portion kronor, which is also the reporting currency for the Parent Company and the of unrealized gains corresponding to the Group’s share of the jointly con- Group. Consequently, the financial reports are presented in Swedish kronor. trolled company is eliminated. Unrealized losses are eliminated correspond- Non-current assets and disposal groups held for sale are recognized at the ingly as long as there is no indication of impairment. lower of their previous carrying amount and fair value after deducting selling expenses. Transactions in foreign currency The preparation of the financial statements in conformity with IFRS Transactions in foreign currency are translated to the functional currency requires that management make use of judgments, estimates and assump- at the exchange rate on the transaction day. Monetary assets and liabilities tions that affect the application of the accounting principles and the carrying expressed in foreign currency are translated to the functional currency at the amounts in the income statement and the balance sheet. Estimates and exchange rate on the closing day. Exchange rate differences are recognized assumptions are based on historical experience and various other factors that through profit or loss. Non-monetary assets and liabilities are recognized at are believed to be reasonable under the circumstances, the results of which historical acquisition costs translated at the exchange rate on the transaction form the basis of making the judgments about carrying amounts of assets and day. All Group companies with a functional currency other than the reporting liabilities that are not readily apparent from other sources. Actual results may current are restated as follows: differ from these estimates and judgments. Assets and liabilities including goodwill and consolidated surpluses and defi- cits are translated from the foreign operations’ functional currency to the Group’s reporting currency, Swedish kronor, at the closing day exchange rate.

68 annual report Revenue and expenses in foreign operations are translated to Swedish kro- Investment properties nor at the average exchange rate for the period. Properties used by the Group or leased to ICA retailers are reported as operating properties. Other properties, which are leased to third parties, are All exchange rate differences that arise through translation are recognized reported as investment properties. Investment properties are recognized at directly in shareholders’ equity as a translation reserve. acquisition cost less accumulated depreciation and any impairment. Deprecia- report tion is booked on a straight-line basis over the estimated economic life of the When foreign operations are divested, the cumulative exchange rate differences assets to estimated residual value. Residual value and economic lives are reas- are recognized through profit or loss together with the gain or loss on the sale.

sessed at the close of each year and adjusted when necessary. audit

Revenue Non-current assets held for sale Revenue is recognized to the extent it is likely that the economic benefits will Assets are classified as non-current assets held for sale if they are available be accrued by the Group and the revenue can be reliably estimated. Revenue for immediate sale, a decision has been made to sell them and it is likely that from retail sales is recognized when the customer pays at the store. Wholesale a sale will be made within 12 months. Non-current assets held for sale are val- revenue is recognized upon delivery of the goods. Sales of alcoholic beverages company ued when the reclassification is made, in accordance with IFRS 5, at the lower are recognized exclusive of selective purchase taxes. Revenue from franchise of book value and estimated sales value less selling expenses. sales is recognized upon delivery for goods and other franchise revenue. Discontinued operations are part of a company that has either been dis-

Rental revenue is recognized in the period to which it relates. parent posed of or is classified as held for sale and: Revenue from the sale of services includes royalties, franchise fees and revenue from various forms of consulting services. The revenue is recognized represents a separate line of business or geographical area of operations, through profit or loss as it is earned. is part of a coordinated plan to dispose of separate line of business or geo-

Dividends are recognized through profit or loss when the right to receive group graphical area of operations or payment has been determined. the Revenue from property sales is normally recognized on the closing day is a subsidiary acquired exclusively with a view to resale. unless the risks and benefits were transferred to the buyer on an earlier day. The determination whether the risks and benefits were transferred to the The classification as discontinued operations is made upon a sale or an earlier buyer takes into consideration what the parties have agreed to regarding the date when the operations meet the criteria to be classified as held for sale. risks and benefits and any arrangement as to the further management of the As long as a non-current asset is classified as held for sale, there is no report s property. depreciation. ’

Sale and leaseback Depreciation and amortization In cases where a property has been sold and then leased back, an overall as- Depreciation and amortization are calculated on the acquisition cost of the director sessment is made of who controls the significant risks and benefits associated assets. Depreciation and amortization schedules are based on estimated eco- with the property and whether the Group has retained a controlling interest in nomic lives. An asset’s residual value and economic life is estimated annually. the property. A controlling interest exists, for example, if a leaseback property is leased to an independent ICA retailer. If the assessment shows that the significant risks and benefits as a whole re- Buildings 20 – 40 years main in the Group, revenue from the sale is not recognized on the transaction Investment properties 20 – 40 years day, but rather when these risks and benefits are later transferred to the buyer. Leasehold improvements 6 – 20 years If the Group has retained a controlling interest, no revenue is recognized until Store equipment and trucks 7 – 10 years this interest ceases. If the risks and benefits are retained by the Group, or the Group retains an IT systems 3 – 5 years interest in the property, the Group continues to recognize the property in the Other equipment 3 – 10 years balance sheet as if no sale had taken place, and it is still depreciated based on its estimated useful life. The proceeds received from the sale are treated as a loan and recognized as a liability. Leasing fees are split between interest Impairment expenses and amortization of the liability. The carrying amount of tangible fixed assets is tested for impairment when events or other circumstances indicate that the carrying amount cannot be Goodwill and trademarks recovered. In the test, the carrying amount is compared with the higher of Goodwill represents the portion of the acquisition cost exceeding the fair value the asset’s fair value less selling expenses and the value in use. Value in use of the acquired share of the subsidiary’s net assets on the acquisition day. Net consists of the present value of the future net cash flow the asset generates. If assets refer to the difference between identifiable assets, liabilities and contin- a single asset does not generate a cash flow independent of other assets, cash gent liabilities in an acquired subsidiary, associated company or joint venture. flow is calculated for the group of assets, i.e., a cash-generating unit. The value In accordance with IFRS 3, it is assumed that the goodwill has an indefinite in use calculation of future net cash flows uses a discounting factor before tax useful life. Intangible assets with an indefinite economic life are not amortized. that reflects the market’s current estimate of the time value of money and the Goodwill is recognized at acquisition cost less any accumulated impairment. risks associated with the asset. If the carrying amount exceeds the higher of The goodwill arising from business acquisitions is attributed at the time of the asset’s net realizable value and value in use, the asset is written down to the acquisition to the cash-generating units that benefit from the acquisition. the higher of its net realizable value and value in use. Trademarks have an indefinite useful life. Impairment testing is conducted Goodwill, assets with an indefinite economic life and intangible assets that annually or when there is an indication of diminished value. are not yet taken in use are tested annually for impairment. Testing for impairment can take place more often when events or other circumstances indicate Other intangible assets a decrease in value during the year. Other intangible assets are recognized in the balance sheet at acquisition cost Impairment losses are recognized through profit or loss if the recover- less accumulated amortization and impairment losses. Depreciation is booked able amount is lower than the asset’s book value. Impairment losses can be on a straight-line basis over the estimated economic life of the assets. reversed if the assumptions used in the calculation that led to the original impairment have changed. Impairment reversal is limited to the depreciated Tangible fixed assets amount that would have been recognized had the original impairment not Tangible fixed assets are recognized at acquisition cost less accumulated occurred. Reversal of impairment is recognized through profit or loss. Impair- depreciation and any impairment. Acquisition cost includes the acquisition ment of goodwill is not reversed. price and direct expenses. The cost of tangible fixed assets is depreciated to estimated residual value. Depreciation is booked on a straight-line basis over the estimated economic life of the assets.

annual report 69 Inventory receivable with short anticipated maturities, usually due for payment after Inventory is valued at the lower of acquisition cost and net realizable value. 10-45 days, are initially reported at the invoiced amount without discounting Acquisition cost is determined using the first-in, first-out (FIFO) method. Acqui- according to the amortized cost method. An estimation of impaired loans is sition cost consists of all purchase costs after deducting supplier allowances made when it is no longer likely that the full amount will be obtained. related to products in stock. Net realizable value corresponds to the estimated sales price under normal Interest-bearing receivables conditions less estimated costs to finish the product and the costs required to Interest-bearing receivables mainly consist of ICA Banken’s lending in the form make the sale. of unsecured credits and card credits to customers. The amount outstand-

report ICA receives supplier allowances in form of discounts and other types of ing is carried at amortized cost on the payment date and subsequently after payments that effectively reduce the company’s purchase cost from suppliers taking into account established and anticipated credit losses. Loans are recog- or costs for sales-promoting activities performed by ICA to the benefit of the nized in the balance sheet after deducting anticipated credit losses. audit supplier. Liquid assets Financial instruments Liquid assets comprise cash, bank balances and other short-term invest- A financial asset or financial liability is recognized in the balance sheet when ments with an original maturity of no more than three months as well as bank the company becomes party to the instrument’s contractual conditions. A overdraft facilities. In the balance sheet, overdraft facilities are recognized as

company financial asset is removed from the balance sheet when the rights in the agree- borrowings among current liabilities. Cash and bank balances are recognized ment are realized, expire or the company loses control over them. A financial at nominal amounts and other short-term investments at their fair value with liability is removed from the balance sheet when the obligation in the agree- changes in value recognized through profit or loss.

parent ment is fulfilled or otherwise relieved. For spot purchases and spot sales of financial assets, settlement date ac- Liabilities to credit institutions, other liabilities and borrowings ICA Banken

counting is applied. Liabilities to credit institutions, deposits in ICA Banken and other liabilities are Financial instruments are recognized at amortized cost or fair value de- carried at amortized cost. Any gain or loss that arises when the loan is repaid pending on the initial categorization according to IAS 39. is recognized through profit or loss. Long-term liabilities have been anticipated group maturity of more than one year, while short-term liabilities have a maturity of

the Calculation of fair value of financial instruments less than one year.

The fair value of derivatives is determined using the official market quotes on the balance sheet day. If such quotes are unavailable, generally accepted Accounts payable methods are used such as discounting of future cash flows to listed market Accounts payable are categorized as “Other liabilities,” which means they are interest rates for each maturity. Translation to Swedish kronor is made at the recognized at amortized cost. The anticipated maturity of accounts payable report s

’ quoted rate on the balance sheet day. is short, due to which the liability is recognized at nominal amount without All derivatives are recognized at fair value in the balance sheet and are discounting. included in other short-term receivables or other short-term or long-term liabilities depending on maturity. For derivatives not reported as hedges and Provisions

director those included in a fair value hedge, changes in value are recognized through Provisions are recognized in the balance sheet when the Group has a legal or profit or loss. For derivatives that meet the requirements for cash flow hedges, informal obligation resulting from an event that has occurred and it is likely changes in value are recognized in equity until the hedged item is recognized that an outflow of resources associated with the economic benefits will be through profit or loss. The Group applies hedging accounting for interest risk. required to fulfill the obligation and the amount can be reliably estimated. If The amount in the hedging reserve is recognized through profit or loss as the the effect of the time value of the future payment is considered significant, derivative’s value declines toward zero. the value of the provision is determined by estimating the present value of the expected future cash flow with a discounting factor (before tax) that reflects Amortized cost the market’s current valuation of the time value. The gradual increase in the Amortized cost is calculated with the help of the effective interest method, allocated amount necessitated by the present value calculation is recognized which means that any premiums and discounts as well as directly attributable as in interest expense through profit or loss. Provisions are tested at the close expenses and revenue are accrued over the maturity of the contract with the of each year. help of estimated effective interest rate. The effective interest rate is the rate Provisions for restructuring are recognized when the Group has established that produces the instrument’s acquisition cost as a result of the present value a detailed, formal restructuring plan and the restructuring has either begun or calculation of future cash flows. been publicly announced. A provision for contract losses is recognized when the benefits the Group Netting of financial assets and liabilities expects to receive from a contract are lower than the unavoidable costs to Financial assets and liabilities are offset and recognized net in the balance fulfill the contract’s obligations. sheet when there is a legal right of set-off and when the intent is to settle the items with a net amount or to realize the asset and settle the liability at the Pensions and other post-employment benefits same time. The Group has both defined-contribution and defined-benefit pension plans. In the latter, the company bears the risk for the benefits as agreed to. In a Interest defined-contribution plan, the company does not have any obligation beyond Interest income is recognized as it is earned. Interest income is calculated on paying the contractual fees to the plan. the basis of the underlying asset’s yield according to the effective interest rate. Fees for defined-contribution plans are recognized as a cost through profit Loan expenses and interest are recognized in profit or loss in the period to or loss as the right is earned. which they are attributable. The Group’s obligation with respect to defined-benefit pension plans is Interest expenses associated with new construction or major renovations calculated separately for each plan annually. The calculation is an estimate of or additions are capitalized as part of the production cost of the fixed asset. the present value of future entitlements that employees have earned through service to the company. The fair value of plan assets is deducted from the Other long-term receivables present value of the pension obligation. The calculation is based on a number Other long-term receivables mainly consist of loans recognized at amortized of assumptions. The discount rate is the rate on the closing day for govern- cost. If the expected holding period is more than one year, they are consid- ment bonds with a maturity corresponding to that of the obligation. The ered long-term receivables, and if it is less they are considered other receiv- calculation is performed by a qualified actuary using the so-called projected ables. These receivables are categorized in accordance with IAS 39 as “Loans unit credit method. and receivables.” Assets in this category are carried at amortized cost. Actuarial gains and losses arise either as a result of a difference between an assumption and the actual outcome or because an assumption has changed. Short-term receivables For actuarial gains and losses arising after the transition date for IFRS, Janu- Accounts receivable and other receivables are categorized as “Loans and re- ary 1, 2004, the so-called corridor rule is applied. This means that when the ceivables,” which means that they are recognized at amortized cost. Accounts cumulative actuarial gain or loss exceeds a limit corresponding to 10 percent

70 annual report of the greater of the present value of the commitment and the fair value of Sale and leasebacks plan assets, the net gain or loss is recognized over the employees’ expected Each year ICA AB builds a number of stores in attractive locations. At the same remaining working lives. time it sells older properties, which are leased back by ICA AB and sublet to When there is a difference between how the pension cost is determined the ICA retailer on identical leasing terms. ICA has determined that in such in a legal entity and the Group, a provision or receivable is recognized for the sale and leaseback arrangements the significant risks and benefits are retained special employer’s contribution based on this difference. No present value within the Group. The combined transaction is therefore treated as a financing calculation is made for the provision or receivable. and as such, the properties continue to be recognized in the consolidated balance sheet and depreciation continues over their estimated useful life. The

Leasing proceeds received are accounted as a long-term liability, while the lease fee is report Leases are classified in the Group as either operating or finance. In a finance split between interest expenses and amortization of the liability. lease, essentially all economic risks and benefits associated with ownership are transferred from the lessor to the lessee. All other leases are operating. Sale of loan portfolio and ending of store financing by ICA audit In November ICA signed a cooperation agreement with Nordea on store ICA as lessee financing. At the same time Nordea took over the Swedish portfolio of operat- Leasing fees for operating leases are recognized through profit or loss and ing loans to ICA retailers. In accordance with the agreement, ICA will compen- divided on a straight-line basis over the life of the lease. sate Nordea for future credit losses. The sale is part of ICA’s focus on its core

Significant finance leases are recognized as fixed assets and liabilities in the business. As of December 31, 2006 outstanding operating loans amount to SEK company balance sheet, while in the income statement the cost is recognized among 230 million (410) and the maximum compensation from ICA for credit losses operating expenses and interest. amounts to SEK 22 million (39). According to IAS 39, an asset shall continue to be recognized in the balance parent ICA as lessor sheet if the majority of the risks associated with the asset are retained by Assets subject to a finance lease are recognized in the balance sheet as a the seller. As ICA essentially retains the risk of future credit losses after the receivable at an amount equal to the net investment in accordance with the sale, the loans continue to be recognized in the balance sheet. The nominal lease. Lease payments received are recognized as amortization of the receiv- value of the loan portfolio is included in other long-term loans and the selling group able or financial income. This income is allocated based on a pattern reflecting proceeds received as other financing.

a constant periodic return over the lease term. the Assets subject to an operating lease are presented according to the nature Consolidation according to IFRS of the asset. Lease revenue from operating leases is recognized in income on a In accordance with IAS 27, ICA AB consolidates companies in which it exer- straight-line basis over the lease term. Direct costs incurred at the start of the cises a controlling influence. All store companies in which ICA has more than lease are expensed on a straight-line basis over the lease term. 50 percent of the votes have been consolidated. ICA has analyzed other store report s

companies to determine whether it exercises a controlling influence even if ’ Income tax ICA owns less than 50 percent of the votes. In accordance with IAS 27 and Income taxes consist of current and deferred tax. Income taxes are recognized SIC 12, one indication that ICA could be considered to exercise a controlling through profit or loss except when the underlying transaction is recognized influence over a store company is if ICA has retained a majority of the risks

directly against shareholders’ equity, while the associated tax is recognized in and economic benefits. Before selling the loan portfolio, as described above, director shareholders’ equity. ICA was the principal financial backer for around 100 stores and therefore re- Current tax is tax that will be paid or received in the current year. This tained certain risks related to these store companies. This relationship ceased, includes adjustments in current tax attributable to previous periods. however, when the loan portfolio was sold to Nordea. Based on a review of Deferred tax is recognized in accordance with the balance sheet method, agreements and financial information, it has been determined that ICA retail- which is based on temporary differences between the recognized and taxable ers and franchisees exercise a controlling influence over each store company. values of assets and liabilities. The following temporary differences are not Consequently, ICA AB has not consolidated these store companies. taken into account: temporary differences that arise in the first-time reporting of goodwill, the first-time reporting of assets and liabilities from a transaction Impairment of fixed assets other than a business acquisition and which, at the time of the transaction, The determination whether a fixed asset has been impaired or not requires affects neither the recognized nor taxable gain or loss, and temporary differ- an assessment of its recoverable value. Recoverable value is the higher of ences attributable to shares in subsidiaries, associated companies and joint the asset’s value in use and fair value less selling expenses. The calculation of ventures not expected to be reversed in the foreseeable future. The valuation value in use requires an assessment of future cash flows and discount rates. A of deferred tax is based on how the carrying amounts of assets and liabilities change in assumptions regarding, among other things, future cash flows and are expected to be realized or settled. Deferred tax is calculated applying the discount rates could change the carrying amount of fixed assets. tax laws and tax rates in effect or essentially in effect on the closing day. Deferred tax assets are recognized for all deductible temporary differences Pensions and unutilized tax loss carryforwards to the extent it is likely that future tax- The calculation of defined-benefit pensions requires assumptions with regard able gains will be available. The carrying amounts for deferred tax assets are to future payroll and interest rates. Because of the long maturity of the pen- tested on each closing day and reduced to the extent it is no longer likely that sions in these plans, the uncertainty of these assumptions is high and may they can be utilized. necessitate corrections in the future that affect future liabilities and expenses.

Segment reporting Damages and provisions A segment is a distinguishable component of the Group that provides goods ICA AB and its subsidiaries are involved in a number of disputes related to the and services (operating area) within a particular economic environment Group’s operations. These disputes have a built-in uncertainty. The Board of (geographical area) and that is subject to the risks and returns that differ from Directors’ assessments of the outcome of these disputes are based on assess- other segments. ments made by external and internal attorneys. If there is thought to be more For ICA, business areas are considered its primary segments and countries than a 50 percent likelihood that ICA will lose, a provision has been allocated its secondary segments. accordingly.

Important assumptions and estimates Supplier allowances The consolidated accounts are based on various assumptions and estimates There are a number of different types of contracts governing supplier allow- made by the Board of Directors. These assumptions affect the carrying ances. To calculate allowances, certain types of contracts require assumptions amounts of assets and liabilities, of income and expenses, and of pledged about future sales and purchasing volumes. If these assumptions change, it assets and contingent liabilities. Estimates may deviate from future results. could lead to a different calculation of the allowances. The assumptions and estimates that the Board of Directors feels are most important and where there is the greatest risk of future changes in the values of assets and liabilities are as follows.

annual report 71 Credit losses ICA Banken Taxes ICA Banken’s credit losses consist of allocations for anticipated and estab- One of the duties of the Swedish tax authority is to review the company’s op- lished credit losses. If the financial situation of ICA Banken’s customers erations to determine whether it has managed its taxes according to current changes, it could affect the level of credit losses. law. If the tax authority were to determine that the company has not done so, it could lead to a different tax expense.

Note 2 Segment reporting report

The Group’s operations are divided into the following business areas: ICA operation. See also Note 17. ICA Baltic operated as joint venture in 2005 and Sverige, ICA Norge, ICA Baltic and ICA Banken. ICA Sverige, ICA Norge and ICA 2006, but as of December 18, 2006 is a wholly owned subsidiary. audit Baltic relate to retail operations in each respective geographical region. ICA All internal transactions are based on market prices Banken conducts banking operations. ICA Meny is reported as a discontinued

ICA Sverige ICA Norge ICA Baltic ICA Banken

company 2006 2005 2006 2005 2006 2005 2006 2005 External net sales 47,927 46,325 18,359 19,036 0 15 458 316 Internal net sales 374 427 2 3 – – – – parent Share of associated companies’ net profit 8 1 5 24 –12 –8 – –

Operating income 2,557 1,607 114 534 –12 42 11 –82 group Assets 14,187 13,532 9,252 10,754 5,182 1,020 7,365 6,660

the Liabilities incl. provisions 12,094 12,114 5,346 6,589 4,538 800 6,733 6,047

Investments in fixed assets 1,260 1,064 1,003 1,221 – – 7 15 Depreciation 379 412 614 587 – – 71 69 report s

’ Impairment losses 1 22 68 95 – – – – Other non-cash items –536 71 –175 21 12 – – – Average number of employees 4,752 4,917 4,043 4,052 – – 174 154 director

Total continuing Discontinued operations, operations Corporate Eliminations ICA Group (ICA Meny) Total 2006 2005 2006 2005 2006 2005 2006 2005 2006 2005 External net sales 651 404 67,395 66,096 4,383 5,775 71,778 71,871 Internal net sales 463 443 –839 –873 0 0 Share of associated companies’ net profit –85 –101 –84 –84 –84 –84 Operating income –373 –161 2,297 1,940 38 11 2,335 1,951

Assets 19,180 19,023 –19,660 –19,485 35,506 31,504 – 1,227 35,506 32,731 Liabilities incl. provisions 10,194 11,186 –13,615 –13,549 25,290 23,187 – 1,173 25,290 24,360

Investments in fixed assets 101 182 2,371 2,482 52 65 2,423 2,547 Depreciation 115 80 1,179 1,148 17 25 1,196 1,173 Impairment losses – 4 69 121 – – 69 121 Other non-cash items –2 32 –701 124 – – –701 124 Average number of employees 2,041 1,417 11,010 10,540 688 1,016 11,698 11,556

Continuing operations Discontinued operations Total Net sales Operating income Net sales Operating income Net sales Operating income Country 2006 2005 2006 2005 2006 2005 2006 2005 2006 2005 2006 2005 Sweden 49,036 47,045 2,206 1,404 3,044 4,294 26 10 52,080 51,339 2,232 1,414 Norway 18,359 19,036 91 534 1,339 1,481 12 1 19,698 20,517 103 535 Denmark 2 2 Estonia Latvia 15 15 Lithuania Total 67,395 66,096 2,297 1,940 4,383 5,775 38 11 71,778 71,871 2,335 1,951

72 annual report Note 2 Cont. Salaries and other remuneration to Board, President and EVP 2006 2005 According to balance sheet: Salaries and similar remuneration 52 41 Investments Cost of pensions and similar remuneration 18 11 Assets in fixed assets Country 2006 2005 2006 2005 Of the salaries and other remuneration, SEK 12 million (8) relates to bonuses. Sweden 22,616 20,990 1,357 1,299

Norway 9,771 11,716 1,014 1,248 Gender distribution of Board of Directors report and Management 2006 2005 Denmark 24 25 – – Board of Directors Estonia 860 – – – audit Men 39 40 Latvia 1,177 – – – Women 8 9 Lithuania 1,059 – – – Total 47 49 Total 35,506 32,731 2,371 2,547 company Management Men 68 57 Note 3 Net sales by revenue source Women 29 23 parent

Total 97 80 2006 2005 Wholesale sales 43,427 41,377 Benefits to Senior Executives group Retail sales 18,803 18,424 No fees were paid to the Board members appointed by the Annual General Rental revenue 1,648 1,623 Meeting. Employee representatives received a fee of SEK 4,000 per meeting, to the Net interest income and commissions ICA Banken 459 316 which Board members received background material, with decision points on the agenda, prior to the meetings. Other services for ICA retailers and franchisees 3,058 4,356 The salary paid to the company’s President amounted to SEK 11 million (9)

Net sales 67,395 66,096 during the year, including a bonus of SEK 5 million (4). The employment con- report s tract of the President of the Parent Company stipulates a 12-month term and ’ Net interest income and commissions in ICA Banken are recognized as of severance pay for two years if terminated by the company. If the President 2006 as net sales. In the annual report for 2005, net interest income for ICA resigns, the term of notice is six months. The President is entitled to receive Banken was included on the line other operating revenue. pension benefits from age 60. The company covers the obligation by annually paying pension premiums to insurance companies corresponding to 35 director percent of the President’s salary. The Group does not have other post-employment obligations to the President. Note 4 Expenses by type of expense

2006 2005 Note 6 Audit expenses Cost of sales 51,275 51,107 Personnel expenses 5,877 5,514 2006 2005 Administrative expenses 1,703 1,486 Audit fees Cost of premises 2,164 2,084 Deloitte 12 15 Depreciation/amortization 1,248 1,270 Other audit firms 2 2 Other expenses 3,552 2,914 Total 14 17 Total expenses 65,819 64,375

Consulting fees Deloitte 5 1 Note 5 Personnel expenses, pensions, etc.

Average number of employees The number of employees is calculated on the basis of the Group’s measure of Note 7 Other operating revenue normal working hours (1,800 hours).

20061 20051 2006 2005 Women Men Total Women Men Total Profit shares and share dividends 148 128 Sweden 2,659 4,401 7,060 2,381 4,486 6,867 Capital gains 657 175 Norway 2,344 2,294 4,638 2,322 2,367 4,689 Total 805 303 Total, Group 5,003 6,695 11,698 4,703 6,853 11,556

1 Figures include the discontinued operations of ICA Meny.

annual report 73 Note 8 Leases Note 9 Exchange rate differences in operating income

Finance leases Purchases of goods and services in foreign currency have produced exchange rate differences on the following levels of operating income. Receivables related Minimum Present value of to finance leases leasing fees minimum leasing fees 2006 2005 with ICA as lessor. 2006 2005 2006 2005 Net sales 0 0 Maturity date within 1 year 97 80 92 76 Cost of sales –22 –24 report Maturity date later than within Administrative expenses – –1 1 year but within 5 years 204 372 169 302 Total –22 –25

audit Maturity date later than 5 years 7 13 5 9 Total 308 465 266 387 Less: Unearned interest –42 –78 Note 10 Net financial items Present value of minimum leasing fees 266 387 company 2006 2005 Receivables are recognized in the following items: Financial income

parent Long-term receivables 174 311 Interest income 107 78

Other current receivables 92 76 Market valuation of financial derivatives – 18 Exchange rate differences – 7 ICA enters into finance leases on store equipment. The average lease period is Financial income 107 103 group seven years. Interest is variable with an average rate of 3.95 persent (3.65). Vari- able fees included in income for the period amount to SEK 6 million (4). the

The non-guaranteed carrying amount of assets under finance leases as of Financial expenses December 31, 2006 is estimated at SEK 0 million (0). Interest expenses –338 –376 The fair value of receivables with respect to finance leases as of December Market valuation of financial derivatives –6 – 31, 2006 are estimated at SEK 266 million (387), based on the estimated present

report value of anticipated cash flows at current market interest rates, i.e., the pres- Exchange rate differences –14 – s ’ ent value rate. Financial expenses –358 –376

Operating leases ICA as lessee director The Group leases buildings and equipment. Lease fees are agreed to over an Note 11 Taxes average period of 10 years. Rents change in accordance with index clauses in the agreements. Contractual leasing expenses under existing agreements fall due for pay- Current tax 2006 2005 ment as follows: Current tax on net income for the year –266 –172 Deferred tax on temporary differences 254 25 2006 2005 Deferred tax on temporary differences –12 –147 The year’s leasing expense 2,200 2,202 Of which minimum leasing fees 2,088 2,183 Reconciliation between current tax rate and effective tax Of which variable fees 112 19 Current tax rate, % 28.0 28.0 Tax-exempt income –29.4 –21.5 The year’s leasing revenue from sublet assets –1,146 –1,096 Result from associated companies’ net income 1.1 1.4 Other non-deductible expenses and tax-exempt income 0.9 1.0 Future contractual minimum leasing fees: Effective tax rate 0.6 8.9 Maturity date within 1 year 2,317 2,466 Between 1-5 years 7,143 6,166 Later than 5 years 6,127 8,439 Reported deferred tax assets and tax liabilities 2006 2005 Total 15,587 17,071 Fixed assets –79 61 Inventory 6 3 Future minimum leasing fees Provisions –66 79 for contracts on sublet assets 4,502 7,586 Tax loss carryforwards 96 41 Untaxed reserves –413 –644 ICA as lessor The Group leases out buildings and equipment. Rents are fixed, although Financial derivatives –11 –10 variable rents based on revenues do occur. Leasing fees are contracted over Total deferred tax assets (+) deferred tax an average lease period of 10 years. Rents change in accordance with index liabilities (-), net –467 –470 clauses in the agreements. As reported in balance sheet: Contractual leasing expenses under existing agreements fall due for pay- Deferred tax assets 181 49 ment as follows: Deferred tax liabilities –648 –519 Future contractual minimum leasing fees: 2006 2005 Maturity date within 1 year 36 17 The Group has no unreported deferred tax liabilities or tax assets on tempo- Between 1-5 years 241 205 rary differences. Capitalized tax assets from tax loss carryforwards are likely to be offset against future profits, since taxable surpluses have been generated Later than 5 years 222 210 historically and taxable surpluses are very likely to arise in the future. Total 499 432

Variable fees included in results 495 477

74 annual report Note 11 Cont.

Change in deferred tax in temporary differences an tax loss carryforwards

Balance, Recognized through Recognized through Business acqui- Balance, Jan. 1, 2005 profit or loss shareholders’ equity sition/divestment Dec. 31, 2005 Fixed assets 48 –14 27 61

Inventory 2 1 3 report Provisions 88 –9 79

Tax loss carryforwards 67 –26 41 audit Untaxed reserves –720 76 –644 Financial derivatives 0 –3 –7 –10 Total –515 25 –7 27 –470 company

Balance, Recognized through Recognized through Business acqui- Balance, Jan. 1, 2006 profit or loss shareholders’ equity sition/divestment Dec. 31, 2006 parent Fixed assets 61 110 –250 –79

Inventory 3 3 6 Provisions 79 –145 –66

Tax loss carryforwards 41 55 96 group

Untaxed reserves –644 231 –413 the Financial derivatives –10 0 –1 –11 Total –470 254 –1 –250 –467

Tax assets are denoted by (+) and tax liabilities by (-) in the table above. report s ’

Note 12 Intangible fixed assets director

Trade- IT sys- Trade- IT sys- Accumulated acquisition cost Goodwill marks tems Other Accumulated impairment losses Goodwill marks tems Other Opening balance, Jan. 1, 2005 1,665 – 412 203 Opening balance, Jan. 1, 2005 0 – – – Purchases 67 – 74 21 Impairment losses for the year –15 – – – Sales/disposals –195 – –12 –23 Closing balance, accumulated Exchange rate difference 68 – 1 – impairment losses, Dec. 31, 2005 –15 – – – Closing balance, accumulated acquisition cost, Dec. 31, 2005 1,605 – 475 201 Opening balance, Jan. 1, 2006 –15 – – – Impairment losses for the year – – – 0 Opening balance, Jan. 1, 2006 1,605 – 475 201 Closing balance, accumulated Purchases 998 673 75 99 impairment losses, Dec. 31, 2006 –15 – – 0 Sales/disposals –37 – –25 –29 Exchange rate difference –52 –1 –2 –2 Net carrying amount Closing balance, accumulated As of Dec. 31, 2005 1,590 – 204 120 acquisition cost, Dec. 31, 2006 2,514 672 523 269 As of Dec. 31, 2006 2,499 672 143 133

Trade- IT sys- Accumulated amortization Goodwill marks tems Other Amortization of intangible fixed assets is included in the following income statement items. Opening balance, Jan. 1, 2005 –176 –40 2006 2005 Amortization for the year –95 –42 Selling expenses –55 –137 Exchange rate difference – 1 Administrative expenses –109 – Closing balance, accumulated amortization, Dec. 31, 2005 –271 –81 Total –164 –137

Impairment losses for intangible fixed assets are included in the following Opening balance, Jan. 1, 2006 –271 –81 income statement items. Amortization for the year –109 –55 2006 2005 Closing balance, accumulated Selling expenses – 15 amortization, Dec. 31, 2006 –380 –136 Total – 15

annual report 75 Note 12 Cont. 2006 2005 Investment properties Useful life of intangible assets Trademarks refer to what was acquired in connection with the acquisition of Acquisition cost, opening balance 1,987 2,667 Rimi Baltic AB. The useful life is indefinite and impairment testing is conducted Purchases 156 59 annually or when there is an indication of diminished value. Sales/disposals –327 –228 IT systems relate to capitalized development expenditures for IT systems. Reclassifications –547 –660 The useful life is calculated for each system and amounts to between three report and five years. Amortization is booked on a straight-line basis over the useful Exchange rate difference –105 149 life of the assets. The remaining amortization schedule for IT systems is ap- Accumulated acquisition cost, closing balance 1,164 1,987 proximately 2 years. audit Other intangible assets consist of tenancy rights and other intangible sur- Depreciation, opening balance –446 –580 plus values in connection with the acquisition of store operations. Amortiza- tion is booked over the estimated useful life of the assets. Sales/disposals 312 203 Impairment losses for the year –8 –16 Impairment testing of goodwill Depreciation for the year –40 –53

company In the consolidated balance sheet, goodwill is distributed among the Group’s Exchange rate difference 15 – cash-generating units identified by segment as follows: Accumulated depreciation, closing balance –167 –446 Dec. 31, 2006 Dec. 31, 2005 parent ICA Norge 1,501 1,556

Residual value according to plan, closing balance 997 1,541 ICA Baltic 998 – ICA Meny – 34 Tax assessment value of Swedish properties group Total 2,499 1,590 Land 12 12 the

Goodwill is distributed among cash-generating units. Goodwill impairment Buildings 23 25 tests are conducted annually and when there is an indication of impairment Total 35 37 loss. The recoverable amount for a cash-generating unit is determined based on calculations of value in use. The calculations are based on the estimated An internal valuation of all investment properties shows that their fair value report future cash flow in budgets and forecasts for the upcoming three years. Cash exceeds book value by SEK 286 million (322). s ’ flows beyond this period are extrapolated based on inflation, which in no The following amounts have been recognized through profit or loss for case exceeds 3 percent. The need for working capital is expected to remain at investment properties: the same level as in year 3. The discount rate is 7.1 percent before tax. ICA has 2006 2005 elected not to allocate goodwill to a level lower than segments, but for impair- director ment testing groups of cash-generating units are analyzed as well. Rental income 140 186 Direct costs for properties that generated Other impairment testing rental income 21 26 For intangible assets other than goodwill, a recoverable amount is determined Direct costs for properties that did when there is an indication that the asset has decreased in value. During the not generate rental income 0 0 year no circumstances have occurred that would motivate impairment testing.

Leasehold improvements 2006 2005 Acquisition cost, opening balance 861 565 Note 13 Tangible fixed assets Purchases 222 193 Sales/disposals –67 –69 2006 2005 Reclassifications –32 149 Buildings and land Exchange rate difference –28 23 Acquisition cost, opening balance 8,741 8,882 Accumulated acquisition cost, closing balance 956 861 Purchases 1,642 129 Sales/disposals –30 –,1,056 Depreciation, opening balance –309 –222 Reclassifications 138 632 Sales/disposals 19 – Exchange rate difference –140 154 Reclassifications – –8 Accumulated acquisition cost, closing balance 10,351 8,741 Impairment losses for the year – –10 Depreciation for the year –99 –67 Depreciation, opening balance –1,797 –1,933 Exchange rate difference –3 –2 Sales/disposals 0 405 Accumulated depreciation, closing balance –392 –309 Reclassifications –173 – Impairment losses for the year –9 –38 Residual value according to plan, closing balance 564 552 Depreciation for the year –224 –218 Exchange rate difference 0 –13 Equipment 2006 2005 Accumulated depreciation, closing balance –2,203 –1,797 Acquisition cost, opening balance 6,602 6,987 Purchases 1,239 849 Residual value according to plan, closing balance 8,148 6,944 Reclassifications 98 –121 Sales/disposals –185 –1,253 Tax assessment value of Swedish properties Land 480 476 Buildings 2,590 2,551 Total 3,070 3,027

76 annual report Note 13 Cont. changed from that of a subsidiary to a joint venture with a 50% interest for ICA. Operations were financed jointly by the two owners and with external loans. Both owners provided equal guarantees for the operations. On Decem- Exchange rate difference –112 140 ber 18, 2006 ICA AB acquired the remaining 50% of Rimi Baltic AB from Kesko Accumulated acquisition cost, closing balance 7,642 6,602 Livs Ab, and Rimi Baltic has since been a wholly owned subsidiary of the ICA Group. In the income statement Rimi Baltic AB is recognized as a joint venture for the full-year 2006, but in the balance sheet Rimi Baltic AB is consolidated as Depreciation, opening balance –4,266 –4,404 of December 31, 2006.

Sales/disposals 128 888 ICA AB and Dansk Supermarket each own 50% of Netto Marknad AB, which report Impairment losses for the year –6 –36 operates the Netto discount concept in Sweden. Both companies have contributed a share of the capital. Furthermore, the owners finance operations

Depreciation for the year –669 –699 audit with loans. ICA has not provided any guarantees for the company. In Decem- Exchange rate difference 4 –15 ber 2006 an agreement was reached by the owners whereby ICA reduced its Accumulated depreciation, closing balance –4,809 –4,266 interest to 5%. The transaction was approved by competition authorities on February 5, 2007 and finalized on February 15, 2007. As part of the agreement, ICA is taking over 21 stores in the Mälardal area, which will be converted to ICA Residual value according to plan, closing balance 2,833 2,336

stores or shut down. company The following table summarizes ICA’s share of the revenue, expenses, as- Construction in progress sets and liabilities of its joint ventures. The table includes income statement and balance sheet information for Rimi Baltic and Netto for both 2005 and Opening balance 1,068 713 parent 2006. Since Rimi Baltic was recognized as a joint venture until December 31,

Expenses capitalized during the year 1,130 1,175 2006, this provides a fair picture of the income statement and balance sheet Reallocations during the year –755 –838 for both years.

Reclassifications –717 –7 2006 2005 group Impairment loss for the year – –1 Revenue 5,622 4,785 the Exchange rate difference –36 26 Expenses –5,719 –4,882 Closing balance 690 1,068 Income –98 –97

Expenses capitalized during the year include SEK 32 million (20) in capitalized Fixed assets 1,355 1,387 report interest based on an interest rate of 2.9 percent (2.3). s ’ Impairment losses for tangible fixed assets are included in the following Current assets 821 680 income statement items: Total assets 2,176 2,067 2006 2005 director Cost of sales –23 –25 Shareholders’ equity 661 675 Selling expenses – –72 Long-term liabilities 713 727 Administrative expenses – –4 Current liabilities 802 665 Total –23 –101 Shareholders’ equity and liabilities 2,176 2,067

Associated companies Note 14 Shares in joint ventures, associated companies and subsidiaries Carrying amount, associated companies 2006 2005 Joint ventures Acquisition cost, opening balance 49 166 Purchases 0 3 Carrying amount, joint ventures 2006 2005 Undistributed share of associated Carrying amount, opening balance 657 31 companies’ net income 13 19 New share issues and shareholders’ contribution 125 76 Disposals –44 –149 Group change –613 639 Exchange rate difference –1 10 Share of profit –98 –109 Accumulated acquisition cost, closing balance 17 49 Exchange rate difference –25 20 Disposals – – Impairment losses, opening balance –19 –19 Carrying amount, closing balance 46 657 Impairment losses disposed companies +19 Write downs for the year – – Goodwill and other consolidated surplus values 0 0 Accumulated impairment losses, closing balance 0 –19 Share of shareholders’ equity 46 657 Total 46 657 Residual value according to plan, closing balance 17 30

Shares in joint ventures, interest % Dec. 31, 2006 Dec. 31, 2005 Netto Marknad, ICA & DSG AB 50 50 Rimi Baltic AB 100 50

In 2005 ICA AB and Kesko Livs Ab formed a jointly owned food retail business in the Baltic countries. ICA’s food retail operations in the Baltic region thereby

annual report 77 Note 14 Cont. Note 16 ICA Banken

ICA Banken conducts banking operations, including card operations as well Shares in associated companies as savings and lending. Lending consists of customer loans (loans without The following table summarizes the most significant holdings of shares in security) and second mortgages. In addition, the bank offers mortgages associated companies: through SBAB. Ownership, % Profit share Since ICA Banken’s lending is almost exclusively to a large number of private persons, there is no concentration of credit risks. Savings and lending Dec. 31, Dec. 31, Dec. 31, Dec. 31, report carry variable interest rates with the exception of a small portion of lending 2006 2005 2006 2005 with a fixed 3-month rate. This means that the total interest risk is marginal. HB Luntmakaren 50 50 0 0 The bank’s surplus liquidity is invested in short-term government securities audit HB Näringshuset – 50 7 1 and other low-risk investments. The bank carries very small amounts in for- Berg Senteret AS – 49 – 7 eign currency, due to which its currency risk is also marginal. The fair value of financial assets and liabilities corresponds to their carrying amount. KS Oti-Senteret AS – – – 23

Myra Senter AS 34 34 0 2 ICA Banken’s lending to private persons matures as follows:

company Kremmergården ANS – – – –8 2006 2005 Rensvik Sentrum AS – 50 0 –6 No longer than 3 months 1,237 913, Other associated companies 7 6

parent Longer than 3 months but no longer than 1 year 442 640 Total 14 25

Longer than 1 year but no longer than 5 years 2,131 2,558

The ownership percentages above refer to votes, which in every case is the Longer than 5 years 679 – identical to the share of capital. Total lending 4,489 4,111 group

ICA Banken has as a principle to classify a receivable as impaired when pay- the Shares in subsidiaries Holdings in subsidiaries directly and indirectly owned by ICA AB. The list is ments of interest or principal are overdue by more than 60 days. Impaired limited to operating companies loans, net, amounted to 1.19 percent (1.09) of lending. The provision ratio is a reserve for credit losses in relation to total impaired loans. The provision ratio Ownership, % for impaired loans amounted to 62 percent (59). report Dec. 31, Dec. 31, s ’ Direct holdings Reg. office 2006 2005 ICA AS Oslo 100 100 ICA Baltic AB Stockholm 100 100 Note 17 Non-current assets held for sale and discontinued operations director ICA Banken AB Stockholm 100 100

ICA Danmark A/S Copenhagen 100 100 Result from discontinued operations 2006 2005 ICA Detalj AB Stockholm 100 100 Net sales 4,383 5,775 ICA Fastigheter AB Stockholm 100 100 Cost of sales –4,063 –5,472 ICA International Services BV Zaandam, Holland 100 100 Selling expenses –204 –197 ICA Reinsurance S.A Luxembourg 99 99 Administrative expenses –78 –95 ICA Ahold Trading AB Stockholm 100 100 Financial items –11 –14 Income before tax 27 –3 Indirect holdings Tax –9 1 ETOS AB Nacka 100 100 Result after tax but before result from disposal 18 –2 ICA Norge AS Oslo, Norway 100 100

ICA Sverige AB Stockholm 100 100 Result from disposal of discontinued operations before tax 349 ICA Eiendom Norge AS Oslo, Norway 100 100 Tax attributable to result from disposal ICA Fastigheter Sverige AB Västerås 100 100 of discontinued operations 0 ICA Sourcing and Services BV Zaandam, Holland 100 100 Result from disposal of discontinued operations after tax 349 Rimi Baltic AB Stockholm 100 100 Result from discontinued operations, net after tax 367 –2

In addition to the companies listed above, the ICA Group comprises 216 operat- In September 2006 the holding in ICA Meny was sold. ICA Meny is a supplier ing and dormant companies. A complete list of all Group companies can be to restaurants, the foodservice sector and convenience stores. ICA Meny obtained from ICA’s corporate communications department. constituted a separate line of business and is recognized as a discontinued operation as of June 2006. At the time Meny was classified as a discontinued operation, no gain or loss arose in connection with its valuation at fair value less selling expenses. Note 15 Inventory In 2006 ICA Meny reported cash flow from operating activities of SEK 14 million (47), with cash flow from investing activities of SEK -15 million (-46) and cash flow from investing activities of SEK 0 million (0). 2006 2005 Inventory of goods for resale 3,598 3,258 Deduction for obsolescence in inventory –48 –30 Inventory 3,550 3,228

78 annual report The effect on individual assets and liabilities in the group attributable to the Reserves disposal is as follows: Translation reserve 2006 The translation reserve comprises all exchange rate differences that arise through the translation of financial reports from foreign operations that have Tangible fixed assets 144 prepared their reports in a currency other than one in which the Group’s Inventory 335 financial reports are presented. The Parent Company’s and Group’s reports Accounts receivable 819 are presented in Swedish kronor. Other receivables 57

Hedging reserve report Liquid assets 0 The hedging reserve comprises the effective share of the cumulative net Provisions –102 change in the fair value of a cash flow hedging instrument attributable to Accounts payable –399 hedging transactions that have not yet occurred. audit Other liabilities –797 Revaluation reserve Disposed assets and liabilities, net 57 The revaluation reserve comprises changes in value attributable to tangible and intangible fixed assets. In incremental acquisitions, the revaluation of

the previously owned interest in the assets is recognized in the revaluation company Assets held for sale: 2006 2005 reserve. Tangible fixed assets 1,146 674 Retained earnings including net income for the year parent A process is under way in the Group to ensure an efficient capital structure. Retained earnings including net income for the year include earnings in the

As an element in this process, the Group is selling buildings and land that in Parent Company and its subsidiaries and associated companies. Earlier provi- certain cases are leased back. Fixed assets held for sale relate to buildings and sions to the statutory reserve, excluding transferred share premium reserves, are included in this shareholders’ equity item. land in Norway and Sweden that in certain cases are sold and in other cases group are sold and leased back through operating leases.

Impairment losses of SEK 46 million (45) were reported during the year Dividend the when these assets were classified as held for sale. Shareholders received a total dividend of SEK 610 million (607), or SEK 122 (121) per share. The Board of Directors has proposed a total dividend of SEK 958 million, or SEK 192 per share. The dividend proposal will be presented to the Annual report s

General Meeting in May 2007 for resolution. ’ Note 18 Shareholders’ equity

For a summary of shareholders’ equity, refer to the report, “Changes in shareholders’ equity.” Note 19 Pensions director Specification of the shareholders’ equity item reserves 2006 2005 Practically all employees in Sweden receive pension benefits in accordance with Translation reserve collective agreements. Salaried employees receive defined-benefit pensions Translation reserve, opening balance 334 –61 according to the ITP plan. Pension obligations are secured through provisions Translation differences for the year –455 395 in the balance sheet and insurance premiums. Unionized employees receive defined-contribution pensions according to the STP plan through AMF pension. Translation reserve, closing balance –121 334 All employees in Norway are covered by occupational pension agreements. Although defined-benefit pensions are used, the majority of employees in Hedging reserve Norway receive defined-contribution pensions. The defined-benefit plans are Hedging reserve, opening balance –61 –43 secured through both the payment of fees to insurance companies and provisions in the balance sheet. In addition to occupational pensions, unionized em- Change in hedging reserve 38 –18 ployees have the opportunity to retire at age 62. This is secured in part through Hedging reserve, closing balance –23 –61 the payment of fees and in part through provisions in the balance sheet. There are no healthcare costs in the Group’s plans that significantly affect Revaluation reserve the reported obligation for defined-benefit plans. Commitments for retirement pensions and family pensions for white-collar Revaluation reserve, opening balance – – employees in Sweden are secured by insurance through Alecta. In accordance Change in revaluation reserve 498 – with a pronouncement from the Swedish Accounting Standards Board’s Revaluation reserve, closing balance 498 – Emerging Issues Task Force, URA 42, this a defined-benefit plan covering multiple employers. For the fiscal year the company did not have access to information that would make it possible to recognize it as a defined-benefit plan. The ITP pension plan secured through insurance from Alecta is therefore Total reserves 2006 2005 recognized as a defined-contribution plan. Annual pension premiums covered Reserves, opening balance 273 –104 by Alecta amount to SEK 31 million (32). Alecta’s surplus can be divided Changes in reserves for the year between policy-holders and/or insureds. As of September 30, 2006 Alecta’s Translation reserve –455 395 surplus in the consolidation level was 141 percent (128 percent as of December 31, 2005), based on a fair value calculation of Alecta’s assets as a percentage of Hedging reserve 38 –18 insurance obligations calculated using Alecta’s actuarial assumptions, which Revaluation reserve 498 – does not agree with IFRS 19. Reserves, closing balance 354 273

As of December 31, 2006 the share capital consists of 5,000,000 shares (5,000,000) with a nominal value of SEK 100.

Other paid-in capital Relates to shareholders’ equity contributed by the owners. The principal contribution from the owners took place in connection with the implementation of ICA’s new structure in 2000.

annual report 79 Note 19 Cont. The assumed return on plan assets is based on long-term expectations regarding the return for each asset class. This return is based on an inflation assumption and historical data on returns for various asset classes. The assumed Cost of defined-benefit pensions 2006 2005 return for each asset class, together with the mix of assets expected to be held Cost of vested benefits during the period 57 65 long-term, produces a total assumed return on plan assets. Interest expense 38 48 Important actuarial assumptions (%) 2006 2005 Assumed rate of return on plan assets –3 –4 Discount rate 4.0 4.0 report Reported actuarial gains (-) losses (+) 10 6 Inflation 1.5 1.5 Pension cost for defined-benefit pensions 102 115 Rate of salary increase 3.0 3.0 audit Assumed return on plan assets 5.5 5.5 Pension cost for defined-contribution pensions 119 95

Total pension costs 221 210

Of the total pension cost, SEK 154 million (138) is included in the cost of sales Amounts for current year and comparative year 2006 2005 2004

company and SEK 67 million (72) in administrative expenses. Present value defined-benefit obligations –1,089 –1,108 –966 Carrying amount in balance sheet 2006 2005 Plan assets 68 72 76 parent Present value of funded obligations 134 84 Deficit (-) surplus (+) –1,021 –1,036 –890 Fair value of plan assets –68 –72 Experience-based adjustments for obligations –68 66 12 Experience-based adjustments for plan assets 13

group Present value of unfunded obligations 955 1,024 In accordance with the transitional rules for IAS 19 Employee Benefits, com- Unrecognized actuarial losses (-) gains (+) –261 –253 the parative information is not provided for all items in the table above. Carrying amount 760 783

The amount is recognized in its entirety on the provisions for pensions line in report Note 20 Pledged assets and contingent liabilities

s the balance sheet. ’

Change in pension obligations 2006 2005 Pledged assets 2006 2005 Opening balance, present value pension obligations 1,108 969 Chattel mortgages – – director Cost of vested benefits during the period 57 65 Real estate mortgages 585 360 Interest expense 38 48 Restricted cash 5 5 Actuarial gains (-) losses (+) 63 93 Total 590 365 Pension disbursements –28 –32 Changes in exchange rates –6 – Contingent liabilities Effects of disposals and business acquisitions –143 –35 Guarantees for subsidiaries – – Closing balance, present value pension obligations 1,089 1,108 Liability associated with partnerships 1 1 Guarantees and contingent liabilities 173 900 Total 174 901 Change in plan assets 2006 2005 In connection with an extensive reorganization that took effect in January Opening balance, plan assets 72 76 1990, shareholders in the three regional companies ICA Eol AB, ICA Essve AB Assumed return on plan assets 3 5 and ICA Hakon AB were offered the opportunity to tender their shares in the Actuarial gains (+) losses (-) 13 – regional companies in exchange for shares in ICA AB (publ) or cash. ICA AB Pension disbursements from plan assets –28 –31 (publ) subsequently called for a compulsory redemption and obtained preferential possession of the regional companies. A protracted arbitration process Contributions 31 44 relating to the three cases concluded in June 1997, when ICA’s claim regarding Changes in exchange rates –4 – the redemption amount gained full approval. However, the administrators Effects of disposals and business acquisitions –19 –22 chose to appeal the arbitration ruling to the district court, which in April 2004 Closing balance, plan assets 68 72 came down on the side of the arbitration ruling. The administrators appealed to the court of appeal, which in 2006 affirmed the district court’s judgment. The administrators have petitioned the Supreme Court. ICA has recognized a Actual return on plan assets 16 5 liability in accordance with the court of appeal’s ruling. If the final ruling falls in favor of the administrators, the company will have to pay approximately SEK 150 million more than it has recognized as a liability. The company and its Plan assets distributed by asset class 2006 2005 legal advisers are of the opinion that there is no reason to recognize a liability Bonds and other interest-bearing securities 40 50 exceeding the court of appeal’s ruling. Equities 18 14 Real estate 8 5 Other assets 2 3 Total plan assets 68 72

80 annual report Note 21 Related-party transactions policy states that the Group will tie up its interest rates for 18 months with a mandate to deviate from this norm by +/- 6 months. Interest rate swaps are Transactions between ICA AB and subsidiaries affiliated with the company used to adjust interest rate exposure. have been eliminated in the consolidated accounts and are not indicated in this note. Transactions between the Group and other related parties are Liquidity risk indicated below. Liquidity risk is defined as the risk that the Group cannot fulfill its short-term ICA has signed a number of commercial agreements with its owners, joint payment obligations. ICA’s financial policy states that the liquidity reserve venture partners and associated companies. The scope of these transactions must amount to a level where the reserve can handle the fluctuations that can

is indicated in the tables below be expected in day-to-day liquidity within a 12-month period. To ensure this, report the Group has bank overdraft facilities and unutilized credit facilities. Its strong Sales Purchases Receivables Liabilities cash flow and unutilized loan facilities enabled the Group to meet its liquidity

to related from related from related to related audit needs without difficulty in 2006. At year-end 2006 borrowings amounted to 2006 parties parties parties parties SEK 5,715 million (6,474) and the liquidity reserve to SEK 7,353 million (5,416). Owners Royal Ahold 52 25 8 7 Foreign currency risk Hakon Invest AB (publ) 20 87 3 9 Foreign currency risk is defined as the risk that changes in exchange rates will

affect cash flow. The primary foreign currency risk in the ICA Group is the company Joint ventures: transaction exposure that arises due to the import of goods paid in foreign RIMI Baltic AB – – – – currency. The risk norm in the financial policy is that 100% of the outstanding transaction exposure will be hedged. This exposure is hedged for the next Netto Marknad AB 1 – 293 3 parent 3-6 months. Currency hedges are arranged on the order date. For non-foods, Associated companies 1 8 26 1 the currency hedge is based on projected volumes. According to the financial Total 74 120 330 20 policy, borrowings in foreign currency are hedged. The foreign currency risk that arises because the Group has invested in foreign subsidiaries is not group Sales Purchases Receivables Liabilities actively hedged in the financial market.

to related from related from related to related the 2005 parties parties parties parties Credit risk Owners Credit risk is defined as the risk that a counterparty in a financial transaction cannot fulfill its obligations according to a contract and that any security Royal Ahold 4 20 23 12 does not cover the company’s claim. The banks and financial institutions Hakon Invest AB (publ) 1 45 1 19 report s

that the Group works with must have a creditworthiness corresponding to at ’ Joint ventures: least “A” from Standard & Poor’s or “A2” from Moody’s Investor Service. For RIMI Baltic AB 15 – 255 – commercial counterparties with which the company has a large exposure, individual assessments are made. The maximum credit exposure corresponds Netto Marknad AB 0 – 288 –

to the book value of financial assets. The credit risk that arises through ICA director Associated companies – – 42 1 Banken’s lending to the public is managed by performing credit checks on all Total 20 65 609 32 loan applicants.

The ICA Group has had daily transactions with the board members who are ICA retailers. This is a natural part of their role as ICA retailers. All transactions were made on market terms and refer to the sale of goods, consulting services Note 23 Financial instruments and rent for premises. The management of the ICA Group and the Board of Directors of ICA AB Interest rate risks have received the following amounts: Following is a summary of the Group’s interest-bearing assets and liabilities 2006 2005 together with their effective interest rates. Long-term financial liabilities Short-term compensation 52 41 include the effect of interest rate swaps that convert the liability to a fixed interest rate. Post-employment compensation 18 11 2006 2005 Total 70 52 Effective Effective In total, this group has been granted loans and credits from ICA Banken of interest Total SEK interest Total SEK SEK 1 million (0). rate, % million rate, % million Financial assets Long-term interest-bearing 6.6 3,558 5.7 3,600 Short-term interest-bearing 2.4 5,353 1.4 4,643 Note 22 Principles of financial risk management

The Group has a central function for financial management whose primary Financial liabilities purpose is to ensure that the Group has secured financing through loans and Long-term interest-bearing 4.3 6,993 4.0 8,386 lines of credit, to handle cash management and to actively manage and con- Short-term interest-bearing 1.6 8,570 1.3 7,388 trol financial exposure in line with the Group’s financial policy. The financial instruments managed by the finance department consist of bank credits, short- and long-term loans, short-term investments and deriva- Foreign currency risks tives. The Group also has other financial instruments such as accounts receiv- One hundred percent of the Group’s major foreign currency exposures from able and payable, which are directly tied to the ICA Group’s operations. operations-related transactions is hedged with forward exchange contracts. ICA’s principal risk exposure relates to interest rates, liquidity, foreign cur- As a result, there are no significant exposures in foreign currencies as of Decem- rencies and credits. ber 31, 2006 over and above the Group’s functional currencies (SEK and NOK).

Interest rate risk Fair value of financial assets and liabilities Interest rate risk is defined as the risk that changes in market interest rates will The Group’s interest-bearing assets and liabilities, excluding derivatives, affect cash flow or the fair value of financial assets and liabilities. The financial carry a fixed interest rate of up to 3 months, which means that their carrying amount essentially corresponds to their fair value.

annual report 81 Note 23 Cont. The net assets of the acquired companies on their acquisition dates were as follows: The fair value of financial instruments classified as financial assets held for sale Value according is as follows: Carrying to acquisition report 2006 2005 amount before analysis for Rimi Baltic acquisition acquired 50% Financial derivatives Asset Liability Asset Liability Tangible fixed assets 1,470 1,026 audit Interest rate swaps 28 – 13 38 Intangible fixed assets 629 194 Forward exchange contracts 8 17 10 0 Inventory 576 288 Short-term investments in ICA Banken have a short maturity, which means Accounts receivable and other receivables 483 243 that their fair value corresponds to their carrying amount. Liquid assets 346 173 company Long-term liabilities –849 –468 Accounts payable and other current liabilities –1,403 –698 parent Note 24 Statement of cash flows Net identifiable assets and liabilities 1,252 758

Group goodwill 998 Adjustments for non-cash items 2006 2005 Purchase price paid1 1,756

group Depreciation/amortization 1,196 1,175 Cash (acquired) –346 Impairment losses 69 119 the Net cash outlay 1,410

Undistributed earnings from associated companies 85 90 Interest received –90 –104 Interest paid 205 392 Value according to report Capitol gains/losses –613 –175 Store operations acquisition analysis s ’ Provisions 5 16 Tangible fixed assets 7 Sale and leaseback effects –178 –145 Inventory 5 Total non-cash items 679 1,368 Accounts receivable and other receivables 11 director Liquid assets 2 Values in the statement of cash flows for 2005 include discontinued opera- Long-term liabilities 0 tions. For a disclosure of cash flows for discontinued operations, see the Note 17 Non-current assets held for sale and discontinued operations. Accounts payable and other current liabilities –13 Interest paid is recognized under financing activities and interest received Net identifiable assets and liabilities 12 under investing activities. Adjustments for this are made in the item Adjust- Purchase price paid1 12 ments for non-cash items. Cash (acquired) –2 Net cash outlay 10

1 The amount includes fees for legal services of SEK 1 million related to Rimi Baltic and Note 25 Business combinations SEK 0 million related to store operations.

On December 18 the Group acquired the remaining 50% of Rimi Baltic AB Goodwill from the acquisition of Rimi Baltic relates to the value of being rep- from Kesko Livs AB. In the income statement Rimi Baltic AB is recognized as a resented in a geographical market with strong economic growth and for an joint venture for the full-year 2006, but in the balance sheet Rimi Baltic AB is established, efficient logistics organization. consolidated as of December 31, 2006. Rimi Baltic is engaged food retail operations through 205 stores in Estonia, Latvia and Lithuania. The purchase price was SEK 1,756 million. The contribution to consolidated income after tax for 2006 for the acquired 50 percent was SEK –12 million. Note 26 Investment commitments During the year the Group acquired two store operations in Sweden. The operations were acquired from ICA retailers, who managed them under the In 2006 the Group entered into agreements to acquire tangible fixed assets for ICA agreement, which stipulates how valuations are made in connection with SEK 2,004 million (1,077). such sales. The acquired stores will be sold to new ICA retailers. The Group will only own and run the stores for a short period. The total purchase price for the store operations was SEK 12 million. The contribution to consolidated income after tax for 2006 was SEK 2 million. If all store acquisitions had taken place as of January 1, 2006, consolidated Note 27 Other information net sales would have increased by SEK 9,073 million and income after tax In 2000 ICA Ahold AB issued an offer to the shareholders in ICA AB (publ) to would have decreased by SEK –8 million. tender their class B and C shares in the company for SEK 821.31 per share. The offer was accepted by more than 99 percent of the shareholders. The former ICA Ahold AB subsequently called for the compulsory redemption of the outstanding shares and obtained preferential possession of the shares. ICA Ahold AB and ICA AB (publ) were merged in 2002. The purchase of outstanding shares will not impact ICA’s financial position as Ahold, in accordance with the shareholder agreement, finances this through shareholders’ contributions.

82 annual report Parent Company Income Statement

(SEK million) Note 2006 2005 Net sales 2 783 480 Cost of sales –411 –199 Gross profit 372 281 report

Administrative expenses –602 –363 audit Operating income 3, 4, 5, 6 –230 –82

Result from financial investments: 7 Result from shares in Group companies 1,146 1,057 Interest income and similar profit/loss items 12 8 company Impairment on associated companies –150 –165

Interest expenses and similar profit/loss items –378 –372 parent

Income after net financial items 400 446

Appropriations 18 153 52 group

Income before tax 553 498 the

Income taxes 8 104 93

NET INCOME FOR THE YEAR 657 591 report s ’

Parent Company Balance Sheet director

(SEK million) Note Dec. 31, 2006 Dec. 31, 2005 ASSETS FIXED ASSETS

Intangible fixed assets 9 42 48

Tangible fixed assets 10 173 178

Financial fixed assets 11 Shares in subsidiaries 12 33,842 33,844 Shares in associated companies and joint ventures 13 46 70 Other financial fixed assets 15 4 4 Deferred tax assets 8 6 10

Total fixed assets 34,113 34,154

Current assets Current receivables Accounts receivable 63 166 Receivables from Group companies 2,545 1,915 Receivables from associated companies 81 0 Tax assets 75 129 Other receivables 24 19 Prepaid expenses and accrued income 16 178 148

Cash and bank balances 0 0

Total current assets 2,966 2,377

TOTAL ASSETS 37,079 36,531

annual report 83 Parent Company Balance Sheet

(SEK million) Note Dec. 31, 2006 Dec. 31, 2005 Shareholders’ equity, provisions and liabilities Shareholders’ equity 17 Restricted equity report Share capital (5,000,000 shares) 500 500 Statutory reserve 8,788 8,788 audit

Revaluation reserve 8,532 8,532 Non-restricted equity Retained earnings 7,194 6,604 Net income for the year 657 591 company Total shareholders’ equity 25,671 25,015

parent Untaxed reserves 18 1,466 1,620

Provisions Provisions for pensions 19 286 243 group Provisions for structural costs 10 19 the Total provisions 296 262

Long-term liabilities

report Liabilities to Group companies 14 8,000 8,000 s ’ Total long-term liabilities 8,000 8,000

Current liabilities director Accounts payable 265 192 Liabilities to Group companies 1,094 1,171 Liabilities to associated companies 42 – Other liabilities 20 73 Accrued expenses and deferred income 16 225 198 Total current liabilities 1,646 1,634

TOTAL SHAREHOLDERS’ EQUITY, PROVISIONS AND LIABILITIES 37,079 36,531

Pledged assets 20 5 5 Contingent liabilities 20 9,945 10,160

84 annual report Changes in Parent Company’s Shareholders’ Equity

Restricted equity Non-restricted equity Statutory Revaluation Retained Net income Total share- (SEK million) Share capital reserve reserve earnings for the year holders’ equity Opening balance, January 1, 2005 500 8,788 8,532 7,278 –227 24,871 Group contributions received 348 348 report Tax on Group contributions –188 –188

Dividend –834 227 –607 audit Net income for the year 591 591 Closing balance, December 31, 2005 500 8,788 8,532 6,604 591 25,015

Opening balance, January 1, 2006 500 8,788 8,532 6,604 591 25,015 company Group contributions received 846 846 Tax on Group contributions –237 –237 parent Dividend –19 –591 –610 Net income for the year 657 657 Closing balance, December 31, 2006 500 8,788 8,532 7,194 657 25,671 group the

Parent Company Statement of Cash Flows report s ’

(SEK million) Note 21 2006 2005 Operating activities

Income after net financial items 400 446 director Adjustments for non-cash items 649 756 Income tax paid –99 –205 Cash flow from operating activities before change in working capital 950 997

Change in working capital Short-term receivables (increase - / decrease +) 1,008 1,022 Short-term liabilities (increase + / decrease -) –794 –764 Cash flow from operating activities 1,164 1,255

Investing activities Purchase of tangible fixed assets –64 –176 Purchase of operations – –26 Investment in financial fixed assets – –7 Proceeds from sale of financial fixed assets 1 – Investment in associated companies –125 –75 Interest received 12 8 Cash flow from investing activities –176 –276

Financing activities Dividend paid –610 –607 Interest paid –378 –372 Cash flow from financing activities –988 –979

Cash flow for the year 0 0 Liquid assets at beginning of year 0 0 Liquid assets at end of year 0 0

annual report 85 Supplementary Information, Parent Company

Note 1 Accounting principles Salaries and other remuneration 2006 2005 Board and President 13 10 The Parent Company has prepared its annual report according to the Annual Accounts Act (1995:1554) and the Swedish Accounting Standards Board’s Other employees 626 381 recommendation RR 32:05 Reporting by a legal entity. RR 32:05 means that Total, Parent Company 639 391 report the Parent Company, in the annual report for the legal entity, will apply all IFRS and pronouncements approved by the EU as far as possible within the audit framework of the Annual Accounts Act and with consideration to the connec- Social security expenses 2006 2005

tion between reporting and taxation. RR 32:05 specifies the exemptions from Social security expenses 357 204 and supplements to IFRS. As a whole, this results in the following differences 1 between the Group’s and the Parent Company’s accounting principles. Of which pensions 121 62

1 Of the pension costs, 6 (2) relates to the Board and President. Subsidiaries, associated companies and joint ventures company Shares in subsidiaries, associated companies and joint ventures are reported Absenteeism, Parent Company in the Parent Company according to the purchase method. Reported revenue As % of normal working hours is limited to dividends received, provided that they are attributable to profits parent earned after acquisition. 2006 2005 Sick leave Of which long- Sick leave Of which long- Taxes absences term sick leave absences term sick leave In the Parent Company, untaxed reserves include deferred tax liabilities. In

group Younger than 29 the consolidated accounts, on the other hand, untaxed reserves are divided years 1.9 0.3 1.5 0.3

the between deferred tax liabilities and shareholders’ equity. 30 – 49 years 2.5 1.1 3.1 1.9 Leases 50 years and In the Parent Company, all leases are reported according to the rules for older 4.3 3.1 4.3 3.1 operating leases. Total 2.8 1.4 3.1 1.9 report s ’ Men 1.6 0.7 2.0 1.2 Defined-benefit pension plans Women 3.7 2.0 4.0 2.5 The Parent Company uses a different basis to calculate defined-benefit pension plans than in IAS 19. The calculations by the Parent Company comply

director with the Act on Safeguarding Pension Benefits and the Financial Supervisory Authority’s regulations, which are a prerequisite for tax deductibility. The Gender distribution of biggest differences compared with IAS 19 are how the discount rate is deter- Board of Directors and Management 2006 2005 mined, that the calculation is based on current salary levels and does not take Board of Directors into account future salary increases, and that all actuarial gains and losses are Men 10 10 recognized as soon as they arise. Women – – Group contributions and shareholders’ contributions for legal entities Total 10 10 The Parent Company reports Group contributions and shareholders’ contributions in accordance with the pronouncements of the Swedish Accounting Management Standards Board’s Emerging Issues Task Force. Shareholders’ contributions are recognized directly against the shareholders’ equity of the recipient and are Men 6 6 capitalized in the shares and participations of the contributor, to the extent Women 2 2 impairment is not required. Group contributions are reported according to Total 8 8 their financial impact. This means that Group contributions paid to minimize the Group’s tax are recognized directly against retained earnings after deducting their tax effect.

Note 4 Audit expenses

Note 2 Intra-Group purchases and sales 2006 2005 Audit fees Of the year’s total net sales, 17 percent (16) relates to sales to subsidiaries. Deloitte 4 3 Total 4 3

No audit fees were paid to accounting firms during the year. Note 3 Personnel expenses, pensions, etc.

Average number of employees The number of employees has been calculated on the basis of the Group’s measure of normal working hours (1,800 hours). Note 5 Depreciation and amortization

2006 2005 Depreciation and amortization of tangible and intangible fixed assets are Women 811 440 included in the following income statement. Men 725 472 2006 2005 Total 1,536 912 Administrative expenses 99 77 Total 99 77

86 annual report Note 6 Operating leases Note 8 Taxes

The company leases buildings and equipment. There are no significant rental agreements in the Parent Company. Contractual lease expenses under existing 2006 2005 leases fall due for payment as follows:

Current income tax report 2006 2005 Current tax on net income for the year –129 –99 The year’s leasing fees 19 15 Deferred tax on temporary differences –4 7 audit Tax on Group contributions 237 188

Future contractual minimum lease fees: Restatement of final tax 0 –3 Maturity date year 1 7 11 Reported tax expense 104 93 Maturity date year 2 5 3 company Maturity date year 3 2 2 Reconciliation between current tax rate and effective tax Maturity date year 4 0 1 Current tax rate, % 28 28

Tax-exempt income –58 –60 parent

Maturity date year 5 or later 0 0 Total 14 17 Other non-deductible expenses 11 13 Effective tax rate –19 –19 group Deferred tax assets related to Note 7 Result from financial investments Assets the Fixed assets 3 5 2006 2005 Provisions 3 5 Results from shares in Group companies

Total 6 10 report

Dividends 1,146 1,057 s ’ Total 1,146 1,057 No deferred tax is recognized directly against shareholders’ equity. The Group has no unrecognized deferred tax liabilities or tax assets on temporary differences. Other interest income and similar profit/loss items director Interest income, Group companies 10 5 Change in deferred tax in temporary differences and tax loss carryforwards Exchange rate differences 0 2 Other interest income 2 1 Reported Total 12 8 Balance, through Balance, Dec. Jan. 1, 2005 profit or loss 31, 2005 Fixed assets 0 5 5 Write-down of associated companies –150 –165 Provisions 3 2 5 Total 3 7 10 Other interest expenses and similar profit/loss items Interest expenses, subsidiaries –365 –363

Other interest expenses –13 –9 Reported Total –378 –372 Balance, through Balance, Dec. Jan. 1, 2005 profit or loss 31, 2005 Total result from financial investments 630 528 Fixed assets 5 –2 3 Provisions 5 –2 3 Write-down of associated companies is included in operating income. Total 10 –4 6

(Tax assets are denoted by (+) and tax liabilities by (-) in the table above.)

Note 9 Intangible fixed assets

Dec. 31, 2006 Dec. 31, 2005 Acquisition cost, opening balance 85 67 Purchases 24 18 Accumulated acquisition cost, closing balance 109 85

Amortization, opening balance –37 –14 Amortization for the year –30 –23 Accumulated amortization, closing balance –67 –37

Residual value according to plan, closing balance 42 48

annual report 87 Note 10 Tangible fixed assets Note 11 Financial fixed assets

Equipment Dec. 31, 2006 Dec. 31, 2005 Dec. 31, 2006 Dec. 31, 2005 Acquisition cost, opening balance 540 363 Shares in subsidiaries Purchases 64 157 Acquisition cost, opening balance 34,359 34,333 Group change – 20 Purchases – 26

report Sales/disposals –11 0 Sales –2 – Accumulated acquisition cost, closing balance 593 540 Accumulated acquisition cost, closing balance 34,357 34,359 audit

Depreciation, opening balance –362 –293 Impairment losses, opening balance –515 –515 Group change – –15 Impairment losses for the year – – Sales/disposals 11 0 Accumulated impairment losses, closing balance –515 –515 Depreciation for the year –69 –54 company Accumulated depreciation, closing balance –420 –362 Residual value according to plan, closing balance 33,842 33,844 parent

Residual value according to plan, closing balance 173 178 Shares in associated companies and joint ventures Acquisition cost, opening balance 235 160 Accelerated depreciation, opening balance –6 0 Shareholders’ contributions 126 75

group Change for the year 6 –6 Accumulated acquisition cost, closing balance 361 235 Accelerated depreciation, closing balance 0 –6 the Impairment losses, opening balance –165 – Book value, closing balance 173 172 Impairment losses for the year –150 –165 Accumulated impairment losses, closing balance –315 –165 report s ’ Residual value according to plan, closing balance 46 70

director Note 12 Shares in subsidiaries

Specification of ICA AB’s direct holdings of shares in subsidiaries.

Capital and Nominal Book value Corp. ID no. Reg. office Number votes,% value Dec. 31, 2006 Dec. 31, 2005 ICA AS 988 351 032 Norway 100 100 NOK 1.0 1 1 ICA Ahold Export Unltd 318221 Irland 11,301 100 11,300.0 – 1 ICA Ahold Trading AB 556615–4620 Stockholm 1,000 100 100.0 1 1 ICA Baltic AB 556042–7410 Stockholm 30,000 100 15.0 184 184 ICA Banken AB 516401–0190 Stockholm 1,000,000 100 100.0 628 628 ICA Danmark A/S 25610024 Denmark 51,000 100 DKK 51.0 10 10 ICA Detalj AB 556604–5448 Stockholm 1,000 100 0.1 16,717 16,717 ICA Ekonomibyrå AB 556054–0675 Västerås 10,000 100 1.0 – 1 ICA Fastigheter AB 556604–5471 Stockholm 1,000 100 0.1 2,425 2,425 ICA International Services BV 34177382 Netherlands 10,000 100 EUR 0.1 13,864 13,864 ICA Reinsurance SA 915/93 Luxembourg 99 99 11.9 12 12 33,842 33,844

A complete list of first- and second-tier subsidiaries can be obtained free of charge from the company’s corporate communications department.

Note 13 Shares in associated companies and joint ventures

Specification of ICA AB’s direct holdings in associated companies and joint ventures Book value Corp. ID no. Number Interest % Dec. 31, 2006 Dec. 31, 2005 Associated companies HB Luntmakaren, Stockholm 969658–3419 – 50 0 0

Joint ventures Netto Marknad, ICA & DSG AB, Halmstad 556615–2269 50 000 50 46 70 Total 46 70

The share of votes and share of capital are identical.

88 annual report Note 14 Long-term liabilities to Group companies Note 18 Appropriations and untaxed reserves

Dec. 31, 2006 Dec. 31, 2005 Dec. 31, 2006 Dec. 31, 2006 ICA Finans AB1 8,000 8,000 Appropriations Change in tax allocation reserve 147 58 1 Of which 0 (0) falls due for payment more than five years after the closing day. Change in accelerated depreciation 6 –6

153 52 report Untaxed reserves Note 15 Other financial fixed assets Accelerated depreciation 0 6 audit

Tax allocation reserve, financial year 2001 – 301 Dec. 31, 2006 Dec. 31, 2005 Tax allocation reserve, financial year 2002 407 407 Shares in tenant-owner associations 2 2 Tax allocation reserve, financial year 2003 275 275 Other long-term securities holdings 1 1 Tax allocation reserve, financial year 2004 275 275 company Other long-term receivables 1 1 Tax allocation reserve, financial year 2005 238 238 Total 4 4 Tax allocation reserve, financial year 2006 118 118 parent

Tax allocation reserve, financial year 2007 153 – 1,466 1,620

Note 16 Accruals group

Dec. 31, 2006 Dec. 31, 2005 Note 19 Provisions for pensions the Prepaid expenses and accrued income All employees receive pension benefits according to collective agreements. Other prepaid expenses 56 42 Salaried employees receive defined-benefit pensions according to the ITP Supplier bonuses 94 80 plan. Pension obligations are secured through provisions in the balance sheet report

and through insurance premiums. s

Other accrued revenue 28 26 ’ Total 178 148 Reconciliation of carrying amount for self-managed pensions 2006 2005

Accrued expenses and deferred income director Opening balance, principal on pension obligations 243 112 Accrued salary, vacation pay and Cost charged against this result 25 14 social security expenses 165 141 Interest expense 11 7 Accrued interest expenses 6 5 Pension disbursements –5 –5 Other accrued expenses 54 52 Transferred pensions, Group 12 115 Total 225 198 Closing balance, principal on pension obligations 286 243

Of the total pension obligation, FPG/PRI pensions account for SEK 252 million (218). The entire amount is covered by the Act on Safeguarding Pension Benefits. Note 17 Shareholders’ equity

For a list of shareholders’ equity, see the report, “Changes in shareholders’ Specification of recognized pension costs 2006 2005 equity.” Self-managed pensions: Cost excluding interest expense 25 14 Restricted equity Restricted equity may not be reduced through profit distributions. Interest expense 11 7 Total cost of self-managed pensions 36 21 Share capital Insured pensions: As of December 31, 2006 the share capital consists of 5,000,000 shares Insurance premiums 95 49 (5,000,000) with a nominal value of SEK 100. Tax on pension returns 1 1 Statutory reserve Special employer’s contribution on pension returns 23 11 Share premium reserves that arose before January 1, 2006 have been trans- Cost of credit insurance 1 1 ferred to the statutory reserve in accordance with the transitional rules in the Recognized pension cost 120 62 Annual Accounts Act.

Revaluation reserve When a tangible or financial fixed asset is revaluated, the revalued amount is Important actuarial assumptions 2006 2005 allocated to a revaluation reserve. Discount rate 3.6 % 3.6 %

Non-restricted equity Pension calculations are based on salary levels on the closing day. Retained earnings Consists of previous year’s earnings less paid dividends. Together with net income for the year, retained earnings comprise the capital available for distribution to the shareholders. A dividend of SEK 610 million has been paid to the shareholders (607).

annual report 89 Note 20 Pledged assets and contingent liabilities Audit Report

Dec. 31, 2006 Dec. 31, 2005 Pledged assets To the annual meeting of the shareholders of ICA AB Restricted cash 5 5 Corporate identity number 556582–1559 Total 5 5 We have audited the annual accounts, the consolidated accounts, the report accounting records and the administration of the board of directors Contingent liabilities and the managing director of ICA AB for the financial year 2006. The

audit Guarantees for subsidiaries 9,945 10,155 board of directors and the managing director are responsible for these Guarantees and contingent liabilities – 5 accounts and the administration of the company as well as for the Total 9,945 10,160 application of the Annual Accounts Act when preparing the annual accounts and the application of international financial reporting stan-

company dards IFRSs as adopted by the EU and the Annual Accounts Act when Note 21 Statement of cash flows preparing the consolidated accounts. Our responsibility is to express an opinion on the annual accounts, the consolidated accounts and the parent Adjustments for non-cash items 2006 2005 administration based on our audit. Depreciation/amortization 99 77 We conducted our audit in accordance with generally accepted Impairment losses 150 165 auditing standards in Sweden. Those standards require that we plan group Provisions for pensions 43 131 and perform the audit to obtain reasonable assurance that the annual accounts and the consolidated accounts are free of material misstate- the Other provisions –9 19 Interest received –12 –8 ment. An audit includes examining, on a test basis, evidence support- Interest paid 378 372 ing the amounts and disclosures in the accounts. An audit also includes Total 649 756 assessing the accounting principles used and their application by the report board of directors and the managing director and significant estimates s ’ Paid and received interest is recognized under financing activities and invest- made by the board of directors and the managing director when pre- ing activities, respectively. The transfer of interest items is included in adjust- paring the annual accounts and consolidated accounts as well as evalu- ments according to the table. ating the overall presentation of information in the annual accounts director and the consolidated accounts. As a basis for our opinion concern- ing discharge from liability, we examined significant decisions, actions

Stockholm, February 19, 2007 taken and circumstances of the company in order to be able to determine the liability, if any, to the company of any board member or the managing director. We also examined whether any board member or Claes-Göran Sylvén Anders Moberg the managing director has, in any other way, acted in contravention of Chairman Vice Chairman the Companies Act, the Annual Accounts Act or the Articles of Asso- ciation. We believe that our audit provides a reasonable basis for our

Dirk Anbeek Peter Berlin Dick Boer opinion set out below. The annual accounts have been prepared in accordance with the Annual Accounts Act and give a true and fair view of the company’s Fredrik Hägglund Per Jansson Kenneth Ljungberg financial position and results of operations in accordance with generally accepted accounting principles in Sweden. The consolidated Per-Anders Olofsson John Rishton Kenneth Bengtsson accounts have been prepared in accordance with international finan- President cial reporting standards IFRSs as adopted by the EU and the Annual Accounts Act and give a true and fair view of the group’s financial position and results of operations. The statutory administration report is consistent with the other parts of the annual accounts and the consolidated accounts. We recommend to the annual meeting of shareholders that the income statements and balance sheets of the parent company and the group be adopted, that the profit of the parent company be dealt with in accordance with the proposal in the administration report and that the members of the board of directors and the managing director be discharged from liability for the financial year.

Stockholm, February 21, 2007

Deloitte AB

Jan Berntsson Authorized Public Accountant

90 annual report Graphics used in the annual report

Graphics and color codes have been added to the annual report this year to make the financial information easier to understand. A few basic financial terms and how they are connected are explained below. report

Income statement Balance sheet audit The income statement shows the revenue generated by the business The balance sheet explains the company’s financial position. On one and the expenses incurred over a specific period. Revenue is an indica- side are its assets – what it has spent its money on. The other side tion of how the company performed, based on what customers were shows its liabilities and shareholders’ equity – in other words, how prepared to pay for its products or services. Expenses represent what the assets have been financed or where the money on the asset side the company consumed during the period. The difference between comes from. company revenue and expenses is the company’s profit. The balance sheet provides a snapshot. As soon as something occurs to affect the company’s finances, the balance sheet will change as well. parent

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The graphics and color codes have been developed by Bonanza.

annual report 91 Board of Directors

Claes-Göran Sylvén Anders Moberg CEO, Hakon Invest AB President and CEO, Royal Ahold Born: 1959 Born: 1950 Elected: 1999 Elected: 2004 Other assignments: Other assignments: Chairman of Forma Publishing Board member Velux A/S, DFDS Group. Board member of the A/S and Husqvarna AB, Chair- Swedish Federation of Trade, man Clas Ohlson. Cervera and UGAL.

Chairman Vice Chairman

Dick Boer* John Rishton COO Europe, Royal Ahold, CFO, Royal Ahold President and CEO, Albert Heijn Born: 1958 Born: 1957 Elected: 2006 Elected: 2006 Other assignments: Board member of Raad Neder- landse Detailhandel, CBL, Plat- form Detailhandel, DuVo and VGL, Shared chairman ECR Nederland, Vice chairman CBL, Member of the Supervisory Board SVM-pact, Kobalt and Rode Kruis Ziekenhuis.

Per-Anders Olofsson Dirk Anbeek ICA retailer SVP Franchises & Real Estate, Born: 1949 Arena NL, Royal Ahold Elected: 1997 Born: 1963 Other assignments: Elected: 2003 Vice Chairman of ICA-handlar- Other assignments: nas Förbund and Chairman of Board member JMR. the ICA Sverige Advisory Board.

92 ICA GROUP Fredrik Hägglund Peter Berlin General Counsel, Hakon Invest AB ICA retailer Born: 1967 Born: 1960 Elected: 2004 Elected: 2005 Other assignments: Other assignments: Director of EuroCommerce Vice Chairman of ICA’s district and Anti Corruption Institute. board in Malmö. Board member of ICA-handlarnas Förbund.

Kenneth Ljungberg Per Jansson Risk Manager, ICA AB Logistics worker, ICA Sverige AB Employee representative, Employee representative, Swedish Salaried Employees’ Union, HTF Commercial Employees’ Union. Born: 1942 Born: 1950 Elected: 1985 Elected: 2002 Other assignments: Employee representative on the board of ICA Sverige AB. Board member of the HTF local at ICA Stockholm. Safety delegate at ICA HQ Solna.

Deputies

Elected by the Annual Employee representatives General Meeting Magnus Rehn Göran Hesseborn Pontus Bergman Peter Wakkie Stig-Åke Lundström Joost Sliepenbeek

* Dick Boer, COO Europe, Royal Ahold, was elected to the board in October 2006. Arthur Brouwer resigned his position at Ahold and his board position in October 2006.

ICA GROUP 93 Group Management 2007

Kenneth Bengtsson Ingrid Jonasson Blank President and CEO, ICA AB EVP Marketing, ICA AB Born: 1961 Born: 1962 Employed: 1999 Employed: 1986 Other assignments: Other assignments: Chairman of the Swedish Fed- Director of Forma Publishing eration of Trade. Director of the Group, the Association of Swed- World Childhood Foundation, ish Advertisers, the Swedish the Confederation of Swedish Cancer Society, Bilia and the Enterprise and CIES. Mem- CIES Marketing Council. ber of the Coca-Cola Retailing Research Council Europe.

Anders Nyberg Sonat Burman-Olsson* EVP Assortment & Buying, CFO ICA AB Born: 1958 Born: 1956 Employed: 2007 Employed: 2006 Other assignments: Director of GS 1 AB.

* Sonat Burman-Olsson succeeded Karl Wistrand as CFO of ICA AB in February 2007.

94 ICA GROUP Peder Larsson Trond Kongrød* COO, ICA Sverige AB COO, ICA Norge AS Born: 1957 Born: 1961 Employed: 1999 Employed: 2004 Other assignments: Other assignments: Director of the Swedish Grocers’ Director of Netidentitet AS. Federation.

* Trond Kongrød succeeded Erland Björn as CEO of ICA Norge in January 2007.

Antonio Soares COO, Rimi Baltic Born 1949 Employed 2002

ICA GROUP 95 Corporate governance

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

Ownership structure ment, nominated Dick Boer, President and CEO of ICA AB is a joint venture 40 percent owned by Ahold’s subsidiary Albert Heijn. Dick Boer joined Hakon Invest AB and 60 percent by Royal Ahold the Board in October. All members appointed by N.V. Through a shareholder agreement, Royal the Annual General Meeting are affiliated with the Ahold and Hakon Invest jointly share decisive owners of ICA AB. The Chief Executive Officer, influence over ICA AB. Chief Financial Officer and Chief Counsel (Secre- tary of the Board) are not members of the Board Annual General Meeting but participate in the Board’s work. The rules on the Annual General Meeting can No fees have been paid to the Board members be found in the Companies Act and the articles elected by the Annual General Meeting. of association. The meeting elects the Board of The employee representatives have received a Directors and auditors and adopts the income fee of SEK 4,000 per meeting. statement, balance sheet and proposed appropri- During fiscal year 2006 the Board held nine ation of earnings. meetings. Among other things, it decided during Besides the Annual General Meeting, four the year on: Extraordinary General Meetings were held in 2006. The Annual General Meeting on May 4, 2006 The sale of the warehouse property in Helsing- resolved, among other things, to adopt the income borg; statement and balance sheet for 2005 and to pay a total dividend of SEK 610 million to the shareholders. The sale of certain property holdings in Sweden Extraordinary General Meetings treated and Norway; changes on the Board during the year. New to the Board are John Rishton (member), Dick Boer The sale of the subsidiary ICA Meny; (member), Peter Wakkie (deputy), Magnus Rehn (deputy) and Pontus Bergman (deputy). The acquisition of the remaining 50 percent in Rimi Baltic AB; Board of Directors and its work The Board’s work follows special rules of pro- An agreement on ownership changes in Netto cedure that ensure that the Board receives the and the acquisition of 21 Netto stores in the information it needs to monitor and improve the Mälardal region. company’s operations. The Board adopted the rules of procedure for the period ending at the Moreover, the Board took up the customary Annual General Meeting in 2007 at its meeting investment issues regarding the store network. on December 15, 2006. In addition to the items treated in accordance with the Companies Act, Nomination Committee the rules of procedure include committee direc- ICA does not have a Nomination Committee since tives and rules on quorums. the shareholder agreement between its owners In 2006 the Board of ICA AB consisted of eight gives each of them the right to nominate their members and four deputies elected by the Annual own representatives to the Board. General Meeting as well as two members with two deputies appointed by the unions. Arthur Board committees Brouwer stepped down from his position at Ahold The Board is able to establish committees to and his membership on ICA’s Board in Octo- complement its work. The committees are subor- ber. Ahold, which has the right to nominate his dinate to the Board and report to it on an ongoing replacement according to the shareholder agree- basis.

96 ICA GROUP Audit Committee Auditors The Board of Directors has appointed an Audit The accounting firm of Deloitte has been ICA’s Committee to monitor accounting and report- auditors since September 2000 and was reelected ing of financial information. The Audit Commit- most recently at the Annual General Meeting on tee is also responsible for evaluating the Group’s May 4, 2006 for a mandate period of four years. systems for internal oversight and control. Among The company’s chief auditor, Jan Berntsson, par- the Committee’s other duties are to handle audit- ticipated in one Board meeting during the year. ing questions from the external and internal audit. The Audit Committee’s work is governed in its President and other senior executives rules of procedure, which are laid down by the The Board of Directors appoints the President and Board of Directors. CEO. According to the Swedish Companies Act, The Audit Committee consists of two mem- the Board’s rules of procedure and the President’s bers: John Rishton (Chairman) and Claes-Göran instruction, the President is responsible for day-to- Sylvén. In addition, assistants to the members, day management of the company. The President the external auditors, internal auditors and ICA keeps the Board continuously informed on the AB’s President and CFO normally attend all or part operations and development of the company and of the Committee’s meetings. In 2006 the Audit the Group. Together with the other senior execu- Committee held six meetings. tives, the President is a member of Group Manage- ment, which meets regularly to discuss the com- Executive Committee pany’s development and make decisions affecting The Board has appointed the Chairman, Deputy operations. Group Management is presented on Chairman and CEO to an Executive Committee pages 94–95. responsible for continuous monitoring of the Group’s development. The Committee also pre- ICA’s policies pares issues that will be discussed by the Board ICA’s Group Management has adopted a number and supports the presidents and other senior of policies that govern operations. They are sum- executives of the subsidiaries in the implementa- marized in a document called “ICA’s good busi- tion and execution of the decisions taken by the ness,” which contains seven positions on ethics Board. The Committee has a mandate to decide and corporate responsibility, which are further on investments that do not require discussion by developed in the following policies. Each policy the Board. includes guidelines that support day-to-day operations. Compensation Committee The Board has given the Executive Committee a Business ethics policy, including the Competi- mandate to act as a Compensation Committee to tion Law Compliance program decide on compensation principles for senior executives in Group Management, though not for the Occupational health and safety President, whose salary is determined by the Board. (for each subsidiary)

Internal control over financial reporting New store policy The Board has decided that the company will voluntarily meet the requirements on internal Health policy control over financial reporting according to the Swedish Code of Corporate Governance. ICA will Information policy, including guidelines for also apply methods to test key controls. Initial financial information documentation on processes and key controls, as well as evaluations, were completed in 2006, and Customer policy the internal routine will take effect in 2007. Quality and environmental policy Approval of financial reports The financial reports in this annual report were Sponsorship policy approved by the Audit Committee on February 16 and by the Board of Directors on February 19, 2007. The cross-functional management team for business ethics has responsibility under Group Man- agement for continuously monitoring compliance with these policies.

ICA GROUP 97 Glossary and abbreviations

Glossary Abbreviations

Compact hypermarket – Smaller version of a BCSI – Business Social Compliance Initiative hypermarket. CR – Corporate Responsibility Ecological – Grown and produced according to GRI – Global Reporting Initiative, KRAV’s or the EU’s rules, i.e., essentially without www.globalreporting.org pesticides or fertilizer. IFRS – International Financial Reporting Standards EurepGap – International quality assurance system for horticultural products, www.eurep.org MSC – Marine Stewardship Council, www.msc.org

EuroShopper – The ICA Group’s discount REACH – Registration Evaluation Authorisation product range. and restriction of Chemicals

Fairtrade-label – Ethical label for sustainable RoHs – Restriction of the use of certain Hazardous products, grown and produced according to spe- Substances in Electrical and Electronic Equipment cial criteria with a focus on working conditions, www.rattvisemarkt.se

Global Compact – UN initiative to encourage companies to support human rights, labor and the environment, www.unglobalcompact.org

Good Environmental Choice – www.snf.se

Hard discount – Discount stores with limited product range.

ICA Ekologiskt – The ICA Group’s line of ecological products, www.ica.se

Joint venture – Partnership jointly managed by two or more companies that share the risks and profits.

Keyhole – Swedish National Food Administra- tion’s symbol for foods that are leaner and contain less sugar and sodium but more fiber than other foods of the same type, www.slv.se

Non food – Products excluding food, e.g. apparel and housewares.

Number of employees – Number of hours worked in each company of the ICA AB Group divided by 1,800.

Primary production – Farming and fishing, for example.

Swan – Official Nordic ecolabel of the Nordic Council of Ministers, www.svanen.nu

Utz-Kapeh – Foundation that certifies coffee growers that take social and ecological responsibility for their coffee production, www.utzkapeh.org

For definitions of key financial ratios, see page 61.

98 ICA GROUP Addresses

ICA AB ICA Banken AB President and CEO Kenneth Bengtsson President Jörgen Wennberg SE-171 93 Solna, Sweden SE-171 93 Solna, Sweden Visiting address: Svetsarvägen 16 Visiting address: Svetsarvägen 16 Tel: +46 8 561 500 00 Tel: +46 8 561 505 00 www.ica.se www.ica.se

ICA Sverige AB Rimi Baltic AB President Peder Larsson President Antonio Menezes Soares SE-171 93 Solna, Sweden A. Deglava Str 161 Visiting address: Svetsarvägen 16 Lv 1021 Riga, Latvia Tel: +46 8 561 500 00 Tel: +371 704 55 50 www.ica.se www.rimibaltic.com

ICA Norge AS ICA Fastigheter AB President Trond Kongrød President Bo Liffner Postboks 6500 Rodeløkka SE-721 84 Västerås, Sweden N-0501 Oslo, Norway Visiting address: Stenborgsgatan 4 Visiting address: Sinsenveien 45 Tel. +46 21 19 30 00 Tel: +47 23 05 50 00 www.ica.se/fastigheter www.ica.no

citigatestockholm.com PHoto: martin löf PRINT: alfa print item number: 850095

ICA GROUP 99 The ICA Group’s Annual Report 2006