hakon invest’sinvestors.icagruppen.se/afw/files/press/hakon/hakon_ar2007_eng.pdf · helsingborg...

Hakon Invest’s holding, 50%

0

100

200

300

400

20072006

–5

0

5

10

15

Revenues Operating pro� t

Kjell & Company at a glance

kjell & company is one of sweden’s leading retailers of home elec-tronics accessories. all 29 stores carry a full range of approximately 7,000 products. the company employs 188 ftes.

2007 in � gures, sek m

revenues 345

operating profi t –4

contribution toHakon invest’s earnings –2


0

300

600

900

200720062005

0

20

40

60


Forma Publishing Group at a glance

forma Publishing group is one of sweden’s larg-est publishing houses with a focus on consumer magazines, trade maga-zines, books and contract communication. the dom-inant subjects are food, the home, recreation and retailing. the company employs 432 ftes.


revenues 795

operating profi t 30

contribution toHakon invest’s earnings 17


0

20,000

40,000

60,000

80,000

200720062005

0

800

1,600

2,400

3,200

Revenues and earnings, sek m




ICA AB at a glance

ica ab is one of the nordic region’s leading retail companies with a focus on food. the ica group has 2,250 wholly owned and retailer-owned stores in sweden, norway and the baltic countries. the company employs 20,081 ftes.


revenues 82,326

operating profi t 2,602



0

100

200

300

400

2007

–6

–4

–2

0

2


Cervera at a glance

cervera is a nationwide, well-established retail chain within glassware, porcelain, household utensils, gifts and home furnishings. cervera has a total of 48 wholly owned and partly-owned stores throughout sweden. the company employs 183 ftes.


revenues 377



Hakon Invest’s holding, 50 %

0

100

200

300

400

20072006

20

30

40

50

60


inkClub at a glance

inkclub is a market leader in europe in online sales of ink cartridges and other printer accesso-ries. all sales take place via the internet and ink-club has approximately 1.1 million orders/cus-tomers in 14 european countries. the company employs 48 ftes.


revenues 364

operating profi t 45



0

100

200

300

400

2007

–40

–30

–20

–10

0


Hemma at a glance

Hemma is one of sweden’s largest white goods retail-ers. the chain has a total of 105 wholly owned and retailer-owned stores and the product range com-prises products with well-known brands for home, kitchen and laundry. the company employs 175 ftes.


revenues 368






inkClub knows about online retailIn July 2007, Hakon Invest became a part owner of inkClub – a company that knows how to succeed with internet-based sales. This valuable expertise can greatly bene� t the other port-folio companies. Read more on pages 52–53.

President’s comments

Forma gaining strength

Successful retailing is based on winning and retaining consumer con� dence. This requires credible concepts that provide high customer bene� t. Read more on pages 2–5 about how Hakon Invest’s President Claes-Göran Sylvén sees the retail business.

The 2007 acquisitions of Damm Förlag and OTW strengthen Forma Publishing Group’s position in the mar-ket for books and editorial communi-cation. Read more on pages 44–45.

ICA deliversWith ICA Sverige as the prime mover, the ICA Group continued to deliver in 2007. ICA Baltic showed strong growth and ICA Norge made further progress with its action program. ICA Banken was named Bank of the Year. Read more on pages 32, 34–43.

SEK 6Hakon Invest’s Board of Directors proposes the dividend be raised to SEK 6.00 (5.50) per common share. This is in line with the target to distrib-ute at least 50% of the Parent Company’s earnings. Read more about Hakon Invest’s development and governance in 2007 in the Board of Directors’ report on pages 55–58 and the Corporate gover-nance report on pages 90–97.

Rapid expansion for Kjell & CompanyA solid platform enabled Kjell & Company to double the number of stores in 2007. Read about the 29th new store on page 15.

Kjell & CompanyA solid platform enabled Kjell & Company to double the number of stores in 2007. Read about the 29th new store on page 15.

100 %

A portfolio of companies with growth platformsOver the past two years Hakon Invest has built up a balanced portfolio of retail companies. So far, active ownership has focused on building stable platforms for future growth on the top and bottom lines. Read more on pages 33, 44–53.

90-year-old with sights set on the futureThe ICA concept – which forms the basis of ICA’s operations – celebrated its 90th anniversary. But the ICA Group is not a tired pensioner. Read about the new highly automated distribution center in Helsingborg on page 13.

1H a k o n I n v e s t – a n n u a l r e p o r t 2 0 0 7

the group at a glance

the remaining 60% is held by the Dutch corpo-rate group royal ahold. In the shareholder agree-ment between Hakon Invest and ahold, both owners have joint control of ICa aB, as a result of a contractual requirement for unanimity for all decisions at General Meetings of shareholders and in the Board of Directors.

ICa-handlarnas Förbund(67 %)

other shareholders12,720 (33 %)

H a k o n I n v e s t

Forma publishing Group (100 %)

portFolIo CoMpanIesICa aB (40 %)

kjell & Company (50 %)

Hemma (60 %)

Cervera (45 %)

inkClub (50 %)

the group at a glance

hakon Invest makes long-term investments in retail-oriented companies with a geo-graphic focus on the nordic and Baltic regions. our vision, with ownership in Ica aB as a base, is to be the nordic region’s leading development partner for companies in the retail sector. the 40% holding in Ica aB forms the basis of our ownership philosophy and operations. through active and responsible ownership we contribute to the creation of value growth in Ica and develop our portfolio companies, all of which are indepen-dent companies responsible for their own earnings and profitability. added value is created for hakon Invest’s shareholders through value growth in the investments com-bined with a good dividend yield.

2007 figures

◾ revenues SeK 1,075 M (660)◾ profit for the year SeK 1,326 M (1,054)◾ earnings per share SeK 8.30 (6.55)◾ equity/assets ratio 94.4% (95.2)◾ the Board proposes a dividend of SeK 6.00 per common share (5.50)◾ acquisition of 50% of online retailer inkclub◾ Forma publishing group acquires Damm Förlag

and the remaining almost 88% in otW ◾ holding in hemma increases from 49% to 60%

hakon Invest was listed on December 8, 2005, and is quoted on the oMX nordic exchange, large cap. Ica-handlarnas Förbund is the majority shareholder with 67% of the shares. other shareholders number 12,720, in the form of Swedish and foreign institutions as well as private individuals. the head office is in Solna, outside Stockholm.

Contents

2 president’s comments

6 vision, mission, business concept, goals and strategies

8 operations

14 Market and business environment

22 responsible ownership

25 Business environment and risk management

28 Hakon Invest’s shares

30 Five-year financial summary Hakon Invest, definitions

31 Hakon Invest’s holdings

34 ICa

44 Forma publishing Group

46 kjell & Company

48 Hemma

50 Cervera

52 inkClub

55 Board of Directors’ report

59 Consolidated income statement

60 Consolidated balance sheet

62 Consolidated statement of changes in equity

63 Consolidated cash flow statement

64 notes to the consolidated accounts

79 parent Company income statement

80 parent Company balance sheet

82 parent Company statement of changes in equity

83 parent Company cash flow statement

84 parent Company’s notes

88 proposed disposition of profits

89 audit report

90 Corporate governance report 2007

98 Board of Directors and executive Management

100 Financial calendar and contacts

this annual report is a translation of the swedish version.

2 H a k o n I n v e s t – a n n u a l r e p o r t 2 0 0 7

preSIDent’S coMMentS

Ica dominates our asset base, accounting for almost 90%, and hakon Invest’s share of profits from Ica still exceeds our revenues. It is therefore crucial for hakon Invest that Ica delivers.

the whole of ICa delivers

Ica continued to deliver in 2007 – not just a good result, but also by meeting almost all its commitments.

Ica Sverige is the stable prime mover in the business, with the high-est operating margin in the sector. the fully automated distribution center now in place in helsingborg gives Ica an infrastructure that will provide considerable competitive advantages in the years ahead. this creates conditions for long-term, sustainable profitability and the first clear effi-ciency enhancements could already be seen in 2007.

the operations in norway are still underperforming but despite this have delivered in accordance with the take-off program, which is designed to establish genuine customer orientation. the most important confirmation of success in 2007 is the positive sales trend in comparable stores in all store formats. the parallel restructuring program with closure of 60 stores led, however, to lower market shares and negative earnings for Ica norge as a whole.

the operations in the Baltic countries also delivered. rimi Baltic has shifted from a start-up business to a profitable growth engine in record time. growth in store sales during 2007 was almost 20%.

Finally, Ica Banken, a venture about which many were initially skeptical, continued to deliver. the Bank of the Year award is added confirmation that this enterprise is correct. Ica Banken delivers the cus-tomer value that was the intention right from the start.

encouraging the customer-driven company



Portfolio companies with strong growth platforms

as an owner hakon Invest’s work is far-sighted and long-term. among other things this means that we encourage Ica and our portfolio companies to invest in the development of busi-ness models and infrastructures that will provide sustained growth and profitability.

Kjell & company is a textbook example of a retail chain that has a very clear concept today. as an active owner we allowed the company to be in the red so it could work hard and chisel out a strong concept and then be able to double the number of new stores. today, Kjell & company is one of Sweden’s fastest-growing retail companies with 12 new store openings during the year.

So, did our portfolio companies also deliver during 2007? Both yes and no. they did not deliver financially but in all portfolio companies we have created conditions that will allow them to do this in the future.

Forma publishing was reorganized into three business units: Forma Magazines, Forma contract and Forma Books. Within Magazines, Icakuriren was totally redesigned and relaunched successfully. contract is the largest business unit and here Forma made strategic acquisitions which also make the company a key player within television production. Books was organized into non -fiction, fiction, and literature for chil-dren and young people. the fact is that Forma is the third-larg-est general book publisher in Sweden today and the largest within contract production.

at hemma, we worked intensively with both organization and management structure as well as concept and product range during the year. this has transformed the company from a retailer federation into “one hemma” in terms of struc-ture and approach to product range. We are now entering an implementation phase that will take the new hemma from the drawing board to reality.

In cervera, our work focused on increasing customer ori-entation and making the supply chain more efficient. Based on extensive customer surveys, we revised the concept and built up a product range clearly linked to customer require-ments and preferences. We believe in competitiveness based on reliable statistics.

the customer-driven company

I would like to point to the work with cervera as our general model for creating “the customer-driven company”. retail has traditionally lived from the perspective of suppliers who saw the retail sector as a distribution channel, which retailers were far too ready to accept. Ica was something of a pioneer in changing this perspective by moving the emphasis closer to the customer. this includes everything from private labels to customer-driven store concepts, well grounded in surveys that indicate customer preferences.

here too there is much to learn from the Ica example. Working primarily from a customer perspective is a methodol-ogy that can be applied to almost all areas of the retail trade.

«all successful retail operations are based on having the confidence of consumers.

Consumer confidence is won through relevant and credible concepts, that deliver a high

customer benefit.»



Steadily building up and refining the toolbox in order to create customer-driven companies is one of the cornerstones of hakon Invest’s business model. another is to create optimal conditions for entrepreneurship.

inkclub is perhaps the portfolio company that has made the greatest progress in both these areas. inkclub has suc-ceeded with both volume and profitability due to a highly methodical process and the company will now provide the entire group with expertise and experience from online trad-ing. We are currently making an inventory of what other types of products can be sold on the same retail platform. ink-club has also been highly successful in building up the loyalty of individual customers, and here too there is a lot to learn.

Consumer confidence essential for success

all successful retail operations are based on having the confi-dence of consumers. consumer confidence is won through relevant and credible concepts that deliver high customer benefit at an attractive price. and by representing values with which target consumer groups can identify.

this will be even more decisive in a weaker economy. there are many winners during periods of high prosperity. now it will be clearer who has a sustainable concept and who does not. even if the economy remains strong in the early part of 2008, we expect consumption will be under more pressure in the future. this is when it is important to know your customer, to have chiseled out a niche in the market and to have a clear

offering. and to clearly stand on the side of the customer. after many years of stable prices, inflation has started to gather pace again and this is felt in the consumer’s wallet in many ways. It is not only prices that will rise, borrowing costs will also increase. We have had a long period of rising loan-backed consumption and there will be less scope for this in the future. In both Ica and the other portfolio companies we are making intense efforts to improve the entire supply chain making it more effi-cient and to allow these efficiency gains to benefit consumers in the form of favorable prices. this is not necessarily the same as price reductions, but being able to maintain existing price levels while the underlying raw material prices rise.

Retail trade as prime mover

We are also convinced that the retail trade is inherently a key driving force for the entire economy. Sweden has industrial thinking at its base, which is understandable given our strong industrial tradition. By contrast, in the u.S. for example, con-sumption has long been seen as the prime mover of the entire economy and now when various stimulation packages are being introduced, the focus is on consumption. china is the best example of a major economy that has moved from a focus on production as the primary driving force to consump-tion. It is not until a strong home market has emerged that the real growth take-off will occur in the chinese economy.

as a leading development partner to the retail trade, per-haps our approach to this matter is rather obvious and further



accentuated by our focus on the end-consumer. We believe in the ability of the retail trade, consumption and consumers to contribute to economic development – and we also see this as a responsibility.

sustainable entrepreneurship

consumer confidence is totally decisive for long-term success. Building up confidence is an arduous process and naturally it is important not to betray consumers’ confidence. at the end of 2007 such a betrayal occurred within Ica when a number of individual Ica retailers manipulated the date labeling on ground meat. as chairman of the Board of Ica aB, I immedi-ately made it very clear that this was totally unacceptable and that we cannot tolerate such behavior in our processes. one of the retailers has already left Ica, others will have their mem-bership reviewed once all the facts are available. We have not only made the rules of the game extremely clear but also established control procedures that will minimize the risk of anything similar happening again. I do not rule out the fact that confidence in Ica has been hurt, although so far there are no clear signs of this. In any case, this must not happen again.

We applaud the entrepreneurial spirit and the driving force to make money – and this always starts in the individual store where you meet the customer. But sustainable entrepre-neurship never puts personal gain before the interests of the customer. Just as hakon Invest does not place the results from a single quarter before long-term competitiveness and sustain-

able earnings, the individual retailer must understand the bal-ance between short and long term and always prioritize the interests of the consumer.

During 2007 we worked intensively with the acquisitions we have made and, apart from inkclub and the deals made by Forma, we did not make any new acquisitions. We ana-lyzed several companies but price expectations were gener-ally too high in an intensive boom period.

at the beginning of 2008, hakon Invest acquired a large shareholding in the listed company hemtex, the nordic region’s leading home textiles chain with a total of 207 stores in January 2008 – 144 in Sweden, 39 in Finland, 9 in Denmark, 12 in norway, 1 in estonia and 2 in poland. this is a retail segment where we believe we can provide exper-tise and therefore value to this investment. the intention is that in time we will take an active role and provide expertise for the company’s further development.

a weakened economy poses threats but at the same time there are a number of bright spots. one such bright spot is that we can enter a more active acquisition phase.

Solna, February 2008

claes-göran SylvénPresident and CEO

«successfully building up and refining the toolbox in order to create customer-driven

companies is one of the cornerstones of Hakon Invest’s business model. another is to create optimal conditions for entrepreneurship.»


VISIon, MISSIon, BuSIneSS concept, goalS anD StrategIeS

long-term values of retail entrepreneurs

vision

With its ownership in ICa aB as a base, Hakon Invest will be the leading development partner for retail companies in the nordic and Baltic regions.

Mission

From its origins and inspiration in the ICa concept, Hakon Invest will create opportunities for entrepreneurship, growth and profitability in retail operations through its financial capacity and extensive retail expertise.

Business concept

Hakon Invest makes long-term investments in the retail sector in the nordic region with good risk diversification and thus helps to ensure the long-term success of the ICa concept. shareholder value will be created through value growth in the portfolio companies combined with a good dividend yield, which will be achieved through active and responsible ownership.

Goals for the Hakon Invest Group Operating objectives for Hakon Invest Read more on page

◾ to establish and consolidate the position as a leading development partner for companies in the retail sector in Sweden, as a first step towards the vision of becoming a leading development partner in the nordic and Baltic regions ................................8–12

◾ to gradually build a portfolio of holdings with a balanced risk .......................................... 33

Operating objectives for ICA AB Read more on page

◾ to be the market leader in the countries in which Ica aB is represented .......................40–43

◾ to increase revenues in the long term in each submarket at a faster rate than total market growth ................................40–43

Financial targets for Hakon Invest Result 2007

◾ to provide a dividend of at least 50% of the parent company’s profit ......................... 50.4 %

◾ to seek an equity/assets ratio for the group of not less than 70% over time ............... 94.4 %

◾ In each individual holding, the average total return on hakon Invest’s invested capital to exceed 15% during the ownership period. ............................................n/a

◾ annual return from internal financial management of at least 5% .................................4 %

Financial targets for ICA AB Result 2007

◾ operating margin (eBIt) of 3.5–4.0%................. 3.2 %

◾ return on equity of at least 14–16% over a business cycle .....................................19.1 %

◾ an equity/assets ratio of 30–35% over time ........ 32.4 %

◾ In the shareholder agreement, hakon Invest and ahold have undertaken to work to ensure a dividend of at least 40% of the Ica group’s profit for the period. ........................50 %


VISIon, MISSIon, BuSIneSS concept, goalS anD StrategIeS

strategiesBalanced portfolio build-uphakon Invest works with a long-term approach to expand the investment portfolio, both with new investments and with add-on acquisitions to existing holdings.

Good risk diversificationto ensure that the total portfolio, in addition to Ica aB, has a balanced risk, hakon Invest invests in different types of business, of varying size, within the retail sector. risk diversification over time is also created through successive investments. We invest in companies with clear concepts and established operations, which keeps down the level of risk.

Active and responsible ownershiphakon Invest will be an active owner and support the development and expansion of its portfolio companies. We feel very involved in the companies in which we invest. We want to have shared interests with the entrepreneurs in our portfolio companies and consider it an advantage if the previous owners remain in the company in some form.

Long-term ownershipthe aim is a long-term approach to both port-folio build-up and the individual investments. Ica aB is a “permanent” investment but other-wise hakon Invest’s investments do not have a set timescale.

From words to deedsInvestment in inkClub – a growth-oriented and profitable online retailer – has diversified and broadened our retail-oriented portfolio. Read more on pages 52–53.

Forma Publishing Group made two acquisitions which strengthen its market position within books and contract communication. Read more on pages 44–45.

Kjell & Company doubled its new store openings – 12 new stores were added in 2007. Read more on pages 46–47.

Hemma’s organization is in place and ready to build profitable growth. We increased our holding in the chain from 49% to 60%. Read more on pages 48–49.

Cervera strengthened its management group and stream-lined its customer offering. Read more on pages 50–51.

ICA Sverige started up the new distribution center in helsingborg – an investment that provides sustained competitiveness. Read more on pages 13 and 40.

ICA Norge is starting to see effects on sales from the ongoing “take-off” program. a new norwegian retailer association was formed to promote a greater customer focus and efficiency in the stores. Read more on page 41.

Rimi Baltic has expanded fast and shows a strong sales growth. Read more on page 42.

Work on sustainable development resulted in a sustain-ability policy and related guidelines. these clarify what responsible ownership and sustainable value creation mean for hakon Invest. Read more on pages 22–24.


operatIonS

hakon Invest has a long history within retailing. We are now using the knowledge and experience built up over the years to ensure the long-term success of our portfolio companies through active, responsible and long-term ownership. our geographic focus is the nordic and Baltic regions. the aim over time is to build up a portfolio of about ten companies.

Investment strategy

our investment focus today is on established retail compa-nies with clear concepts, strong entrepreneurship and posi-tive cash flows that are looking to take the next step in their development. these include:◾ chains with wholly owned stores that need expertise and

capital in order to expand or make add-on acquisitions, such as Kjell & company

◾ chains with retailer-owned stores or franchise stores facing new stages in their development, such as hemma and cervera

◾ companies with successful concepts that are ready to expand in new geographic markets and/or market segments, such as inkclub

hakon Invest’s strategy is to own a majority holding in the portfolio companies. Since the entrepreneurial spirit is a key factor for success, we are happy if the company’s founder and former owners stay on. In this way we acquire a shared agenda with those who run the company, which in turn cre-ates a strong commitment and good opportunities to earn money for all owners, including hakon Invest.

Development partner with entrepreneurial spirit

hakon Invest owns and develops companies in the retail sector. through active and responsible ownership with a clear entrepreneurial spirit we help our portfolio companies to become winners over time.

Identification and selectionCompanies that meet Hakon Invest’s investment criteria and which are judged to be attractive investment candidates are selected for an initial, general analysis.

assessmentthe initial assessment stage includes visits to the company, interviews with management, discussions about the business plan, market analysis and an appraisal of the company’s present financial and business situation and opportunities.

negotiationsDiscussions with the company’s owners on the terms of Hakon Invest’s possi-ble ownership are tangible and take place in stages so that the parties can assess the likelihood of a deal as early as possible. these discussions are formalized in legal documents such as a declaration of intent, shareholder agreement, new issue agreement and purchase agreement.

Due diligence Following the initial assessment stage a legal and financial examination (due diligence) is performed by well-reputed consultants. When required, in-depth analyses are conducted by people in Hakon Invest’s network.

InvestmentIf the Board decides to complete the investment, a financing structure and business structure are prepared which are tailor-made for the specific situation. this then forms the base of Hakon Invest’s active ownership.

Investment process

Identification and selection Final due diligence Investment

assessment

negotiations


operatIonS

«our investment focus today is on established retail companies with clear concepts, strong entrepreneurship and positive cash flows

that are looking to take the next step in their development.»

anders Hallgren, Charlotte Hjorth and Charles Wade

In order to achieve a balanced risk profile in the portfolio outside the Ica holding we seek investments in different seg-ments of the retail sector and of varying size.

ICa as a platform

Ica’s business model is based on professionalism at every level and close contact with consumers. the model rests on the idea that clear owner incentives at every level lead over time to increased value creation and profitability throughout the entire business chain.

the Ica group has a common capital base and deci-sions on new store openings are made centrally. Many Ica retailers have another Ica retailer as their biggest competitor which creates healthy competitive pressure.

purchasing and logistics functions must always be the best in the market to ensure that they are the individual Ica retailer’s natural first choice. Ica retailers are self-employed and there is no contractual requirement to buy all products from Ica. each individual Ica retailer has an average of some 50 dif-ferent suppliers, many of whom are local, for bread, vegeta-bles and fresh products. this healthy pressure on Ica’s pur-chasing and logistics functions ensures that competitiveness is

constantly in focus, something that everyone gains from. In this way both the Ica group and the individual stores maxi-mize their efficiency and profitability in the long term.

Food retail background provides strength

Its background in food retail is one of hakon Invest’s strengths. competition in this market has been very intense for a long time. this is an important explanation for why the food retail sector has made such progress when it comes to developing

Johan Junehed


operatIonS

customer relations and making flows more efficient. other parts of the retail sector still have a lot to do in these areas, although some industry leaders are well out in front. Most retail companies started with sales and have not had oppor-tunities to invest in efficiency improvements for purchasing, warehousing and logistics.

the food retail business has been working for many years to increase its throughput, which is essential with a growing proportion of fresh products. now other sectors are also start-ing to shift from a seasonal approach to the product range to continuous renewal and adjustment of their assortment.

skills and entrepreneurship

hakon Invest possesses broad skills within finance, company management and structural planning. one key difference from other investors is our unique range of retail-oriented skills.

capital strength, retail expertise and a strong entrepre-neurial spirit, in both its own organization and in hakon Invest’s network, are our foremost competitive advantages. We contribute with knowledge of logistics throughout the chain and an understanding of concepts, product range, categories, supply chain, and store network planning as well as how changing consumer behavior should be met.

hakon Invest’s network of competent and experienced people, who can be involved in the partner companies in

different ways, is a tremendous support when the portfolio companies need to sharpen and hone their concepts for the future. the base of the network is the over 1,500 Ica retail-ers throughout Sweden. they can assist with store openings in new locations and provide support after establishment as good neighbors and colleagues.

active ownership every day

our business concept includes contributing to growth in value and a good yield in the portfolio companies through active and responsible ownership. this means that we contribute to the companies’ development process throughout the entire investment period.

our ownership is exercised through active work on com-pany boards, with board representatives from hakon Invest or our network. We normally seek to be entrusted with the chairmanship. the network ensures board representation with business critical expertise in all portfolio companies.

We have close contact with the managements of the port-folio companies and function as a sounding-board, instigator and arranger of contacts.

tools for value creation

our aim is to contribute to sales growth, increased competitive-ness and improved profitability. long-term success in the retail

knowing the product

range and suppliers

knowing the customer

knowing the competition

right employees

Competitive advantages

sales growth

profitability

tools for value creation◾ purchasing the right goods

at the right price

◾ price and quality levels

◾ Choice of suppliers

◾ private labels

◾ own imports

◾ efficient management of distribution centers and logistics

◾ location of distribution centers

◾ stock and on-demand items

◾ low tied-up capital in stock

◾ Business location

◾ store environment

◾ Displays

◾ placement of goods

◾ Marketing in different media

◾ loyalty programs

◾ Complaints management

◾ Installation service

◾ exceeding expectations

◾ on-time deliveries

◾ effective staffing

◾ skilled and service-minded employees

value creation in practice

attractive customer offering

shareholder value


operatIonS

«Capital strength, retail expertise and a strong

entrepreneurial spirit, in both its own organization and Hakon

Invest’s network, are our foremost competitive advantages.»

Marie-louise Genschou, pernilla linger, stein petter ski and Fredrik Hägglund

Britt-Marie olsson and Bertil tell Birgitta Wahlberg

sector requires a solid platform with an attractive customer offering, a strong concept and an efficient supply chain. the components in our governance model are the same for all portfolio companies. the starting point is a clear holding plan where we have identified value-creating strategies, return targets and resource requirements. We also make sure that the portfolio companies work with a well thought-out business plan which turns key strategic objectives into reality thus creating lasting values. We follow up strategic choices and activities continuously.

our activities and efforts that create value in practice vary between the different portfolio companies. they include streamlining a customer offering and concept by ensuring


operatIonS

purchase of the right products, the right store environment, the right loyalty program and service-minded employees. We provide knowledge of both customers and competitors in order to strengthen market position. By improving the effi-ciency of purchases, stock and logistics we contribute to sustained competitiveness and profitability.

Components in portfolio companies’ business plans

◾ corporate culture◾ Strategic and business development◾ Financial matters◾ operational and financial targets◾ reporting and control systems

our exit philosophy

With the exception of the holding in Ica aB, the portfolio com-panies will eventually be sold. exit alternatives are analyzed even before the investment is made when we draw up the hold-ing plan. unlike other companies with investment activities, hakon Invest has no fixed time horizon. We have a long-term approach to ownership; sometimes it takes time for retail opera-tions to be truly successful. the time to sell a portfolio company will be chosen carefully and this will be done in a manner that creates the best possible return for hakon Invest’s shareholders.

Claes-Göran sylvén and susanne eriksson

Johan Örengård and Göran Hesseborn

«With ownership of ICa aB as a base, we will be the nordic region’s leading development partner for retail companies.»


VerKSaMheten

ICa aB

63,000 square meters, about the same size as ten soccer fields. ICa’s

ultramodern and highly automated distribution center in långeberga,

east of Helsingborg, is the most advanced

food distribution center in northern europe.

The distribution center, which has 600 employees, supplies goods to 390 ICA stores in southern Sweden every day. Frozen food deliveries extend

all the way up to Värmland and cover some 700 stores.“ICA’s sales are rising and we must prepare for large

volumes. This new center ensures an efficient structure that will suffice for ten years or more. In this way we can be one step ahead of our competitors,” says Anders Torell, VP Logistics at ICA, and adds that the location in Helsingborg is optimal.

“Strategically it is totally correct. We are close to the motorway, port and railway and right in the center of the flow of imported goods from the continent.”

The distribution center has fresh products, frozen goods, non-perishables, fruit and vegetables. Handling of non-perishables, such as dried and canned food, is in prin-ciple wholly automated which allows very good control of order management and picking. Errors, breakages and shrinkage can be minimized. The food retail trade has experienced changed consumption patterns in recent years. Demand for fresh and frozen food has risen.

“The stores must carry a broader range and we must make sure we can supply these goods. This means having sufficient warehouse space but also a secure cold chain that guarantees high quality and a long shelf life,” says Anders Torell.

ICA has invested approximately SEK 1.1 billion in the Helsingborg facility which was opened in 2006. This is a lot of money but Anders Torell is convinced that the investment will pay off over time.

“We can coordinate transport more efficiently. In total this will lead to less runs, which will also provide environ-mental gains.”

Environmental aspects are central to these operations. Among other things, energy will be saved by waste heat from the freezers being used to heat the rest of the build-ing. The light bulbs are low-energy, the electricity is eco-labeled and 97% of the packaging and other surplus material is recycled.

The center in Helsingborg is a major and important part of ICA’s focus on a new, Nordic distribution network and more efficient logistics.

“In line we this there are also plans for a new fresh products distribution center in the Mälar Valley, closer to Stockholm,” says Anders Torell. ◾


MarKet anD BuSIneSS enVIronMent

aware consumer seizes power

Hakon Invest's main geographic markets

the positive trend within european retail continued in 2007. the nordic and Baltic regions – hakon Invest’s main markets – performed very well helped along by an economic boom and households’ increasingly strong private incomes.

In Sweden, retail noted a new record year. the good growth was also noted in norway and Finland, while the Danish market grew at a slightly slower rate.

In estonia, latvia and lithuania, the double-digit growth rate continued. growth slowed at the end of 2007, however, in pace with rising interest rates and more restrictive lending.

Driving forces within european retail

consumer purchasing power is the basic driving force for sales development within the retail sector. purchasing power depends in turn on the prevailing economic and interest rate situation, the labor market and the tax burden. how consum-ers allocate their purchasing power – to their homes, con-sumption and savings – depends among other things on expectations about the future.

the first signs of weaknesses in the american economy appeared in mid-2007. the u.S. housing market burst and the subsequent mortgage crisis also rocked the international credit markets. Despite this, the european economies devel-oped better than for many years. the growth rate exceeded the rate in the u.S. in 2007, something that has seldom occurred in modern times.

the positive trend during the year for the european econo-mies is attributable to an increasingly strong labor market which put unemployment at historically low levels. a strong contributory factor to the brightening in europe is the german economy where optimism is rising steadily.

Despite an increasingly strong economy and rising opti-

mism, consumption and growth within the retail sector for the major west european countries, such as germany and France, did not really gain momentum. Mediocre real wage develop-ment is the main restriction on household spending. Instead it is the former eastern bloc countries which, with strong domestic demand spurred on by rising incomes and easily accessible loans, continued to show very high growth rates.

nordic retailing also reached new record levels but with-out the Baltic countries’ high inflation and tendency to overheat.

societies and markets in perpetual motion

the changes occurring in the retail sector and the trends that are forming in the market are very much consumer-driven. consumers’ values and behavior are affected in turn by demographic changes which often occur slowly. Behind rapid changes there is often an external catalyst that makes a certain trend take off or change direction.

the increasingly high proportion of elderly people is a demographic change of major significance for today’s con-sumption patterns. the elderly today are far better off than pre-vious generations and considerably more focused on experi-ences. they therefore choose to a greater extent to consume services rather than products. older consumers are also more demanding. they have purchased a wide variety of products and services throughout their lives. they attach great impor-tance to brands, a high level of service and good information while the advertising message is less important.

another example of demographic changes is the trend towards smaller households. Sweden, for example, is the european country with the highest number of single-person households. this places different demands on store format, product packaging and services compared with countries and cities with a larger proportion of nuclear families.

2007 was another strong retail year in the nordic and Baltic regions. aware con-sumers with money to spend continued to drive the development of new offerings and retail channels. a good knowledge of customers’ values, driving forces and needs is possibly becoming even more important for successful retailing.

kjell & Company

a new kjell & Company store opens in täby, the 29th store so far.

Mikael Dahnelius, who is responsible for sales

and new stores, is in stockholm for a few days to take part in

the opening.

Idon’t like to miss the opening of a new store. It’s one of the most enjoyable things I know, says Mikael Dahnelius.

There’s a lot that has to fit and Kjell & Company has acquired invaluable routines over the years. Particularly with regard to stock and logistics. The product range comprises 7,000 items and about 2,000 of them will be out in the store. The remaining 5,000 go to the backroom.

“We started at lunchtime yesterday. We will be ready the day after tomorrow, when everything will be in place. We have learnt some tricks. For example, the items are packed in our big new distribution center in Malmö in the same order in which we then unpack them in the store.”

His father Kjell founded the chain and the first store opened in 1990 in the Triangeln shopping center in Malmö. Mikael, then only 17, joined the company together with his older brothers Fredrik and Markus.

Not so long ago, Kjell & Company’s target was 40 stores by 2011. 12 stores were opened in 2007, one a month. This rate will continue in 2008.

“Then we will have already reached 41 stores. So the target now is 60 stores by 2010 at the latest.”

Kjell & Company’s business concept is to offer the most sought-after products within electronics accessories.

“We don’t just carry accessories to popular new prod-ucts, but also to older and more unusual ones. Things that other stores ran out of a long time ago.”

The bulging catalogue is a dream for the home elec-tronics enthusiast. It really does have everything – and that little bit more. Kjell & Company is also keen that more people than male technology enthusiasts in the 25–45 age group should discover the company.

“We want everyone to feel at home with us. In Skåne, everyone comes here – children, young people, women and men in all age groups. So far it’s not like that in the Stockholm area and our challenge is to broaden the target group here as well.”

At Kjell & Company no customer is made to look fool-ish. Knowledge for everyone is the starting point. This is why there are “Kjell facts” brief texts in the catalog and on the website that describe basic technical terms for people who need to know more. Service-minded staff with the right attitude are an even more important asset.

“Good employees are essential for success. Since fall 2007 all new employees attend a two-week study course at the Kjell & Company school,” says Mikael Dahnelius. ◾


greater ethnic diversity is also a trend that creates new opportunities for retailers. In many countries immigrant house-holds account for the greatest population growth and it is within this group that purchasing power is increasing most.

the major technological breakthroughs over the last decade are among the key driving forces within retail both for consumers and companies. In addition to the internet becom-ing a natural outlet, retail companies are increasingly using business support systems. geopolitical events and changed social attitudes, such as terrorism and global warming, are other examples of external factors that act as catalysts and can radically change consumer behavior and accelerate development in a certain direction.

Consumers show the way

consumer behavior and demand do not differ to any great extent between the nordic countries. the Baltic retail markets, particularly estonia, have also moved fast in the same direc-tion as the rest of Western europe in recent years. today, more or less the same trends characterize retailing through-out the nordic region and, lagging slightly behind, the Baltic countries.

one of the clearest examples of general consumer-driven trends is the polarization of the retail market in recent years where the middle segment is fading fast. the previously so easily identified average consumer no longer exists. one and the same customer can in certain situations look for luxury and quality and in others prioritize low prices. this has not

only led to an increased need for specialization, where play-ers choose a premium or low-price focus, but has also driven the development of value-focused products.

today many products and services are designed to offer an experience and not merely a function. consumers’ demands are increasingly shifting from goods to services, from volume to individualization, from gadgets to solutions, from products to experiences, and so on. this trend is very much driven by younger generations and will therefore become increasingly important in the future.

Proximity and simplicity

the time aspect has become increasingly important for today’s consumer and is at the same time something of a paradox. Despite the fact that many people spend less time at work and more people are using household services, many people are experiencing a growing “shortage of time”. one explana-tion is the changed way leisure is planned to include more and more activities. this has made proximity, simplicity and total solutions key criteria for today’s consumer.

the retail trade meets these needs among other ways by greater personalization, investments in convenience stores and increased flexibility by offering sales in many channels.

the aware and responsible consumer is a general desig-nation for some of the most recent and clearest trends within retail. Increased consumer awareness of both environmental and climate issues as well as of health and ecology really gained momentum in 2007. the same applied to interest in




a wider social responsibility and demands for the unique and genuine.

What these trends will mean for the retail trade remains to be seen. It is clear, however, that consumer behavior is driv-ing a growing part of retail development and that this behav-ior is constantly changing, which places high demands on retail players.

Multi-channel retailing

Interest in multi-channel retailing increased in 2007. the importance of the internet as a channel for purchasing, infor-mation and marketing is now having a growing influence on consumer behavior, which places new demands on tradi-tional stores and on trade as a whole.

retail players are beginning, regardless of sector, to examine the advantages of offering online shopping as one of several sales channels. today’s consumer wants to choose through which channel a product or service is purchased, preferences that can vary with each purchase.

Multi-channel retailing has matured as a phenomenon and today focuses to a greater extent on offering the customer a bigger perceived “value”. this may take the form of a different product range, price level or just an opportunity to choose how and where a purchase in made and the item is delivered. Shopping via the internet and picking up in the store are becoming increasingly popular since the consumer avoids delivery charges and does not have to wait for the product to be delivered. For the retailer, multi-channel sales provide opportunities for both significant upselling, since the customer

is offered and accepts a product in a higher price category, as well as add-on sales as a result of the customer’s purchase being complemented with accessories. Market surveys in the u.S. show that 40% of customers who collect a product in a store make a complementary purchase. they also show that consumers who shop in several channels spend on average 14% more than those who only shop via one channel.

the sales growth rate within online retailing remains high compared with traditional retailing although the rate of increase slowed recently. a downward trend is a natural con-sequence of a maturing industry. the maturity level of online shopping is illustrated, among other things, by the fact that american online clothes sales have overtaken sales of comput-ers and home electronics. Development in Sweden shows sim-ilar tendencies. according to the Swedish retail Institute, huI, in its barometer for the third quarter of 2007 clothes were the third most sold category of goods after books and cDs/DVDs.

Price trends

For the retail sector as a whole 2007 was a year with nega-tive price development, primarily due to substantial price reductions within consumer electronics. In most industries prices were raised, however with the sharpest upturns within gold, building materials and clothes.

the food retail sector also noted rising prices which represents a trend reversal. rising demand from china, bad harvests and increased production of biofuel contributed to rising commodity prices which in turn affected food prices to a growing extent during the year. overall, food prices rose

–3

5

15

25

35

0

latvia

Bulga

ria

cyprus

eston

iau.K.

lithua

nia

Denm

ark

roman

ia

Belgi

um

hunga

ry

czech

repu

blic

Slove

niaau

stria

turke

yMalt

aSp

ain

Slova

kia

polan

d

euroz

one

Swed

en

greece Ita

ly

Finlan

d

luxem

bourg

Icelan

dFra

nce

german

y

netherl

ands

portu

gal

norway

Price trend for food in the eU

■ Food price increases 2005–2007

■ price level for food in December 2007 compared with December 2006



by 5.1% during the year which represents a faster rate than inflation in 2007 which amounted to 3.5%. price increases mainly applied to dairy products, fruit and vegetables as well as bread and other grain products. prices of chemical techni-cal products and tobacco also rose.

the development of the u.S. dollar in relation to the Swedish krona and other european currencies is interesting from a price development aspect. today, the retail trade imports large parts of its product range from countries whose currencies are linked to the dollar, and a weakening of the u.S. dollar should in theory lead to lower consumer prices. the trend, however, does not clearly point in that direction. historical comparisons between changes in exchange rates and consumer prices indicate instead that exchange rate differences are more inclined to directly hit retailers’ margins.

Despite recent price increases, Sweden is among the european countries that has seen the lowest increases in food prices over the last two years. countries in eastern europe and the Baltic area have had the biggest price increases and at the same time shown a very strong sales trend. For example, food prices in latvia have risen by almost 35% since 2005.

Challenges facing retail

the importance of the internet for retailing is increasing fast. It will therefore be even more important for companies to understand how consumers wish to shop in the future, in order to identify an overall strategy for how they can be met in all sales channels. exactly where the customer chooses to shop is less important than finding a smooth interplay between store and internet.

During 2007 the retail trade launched a number of initia-tives related to the environment and “responsible consumption” in response to consumers’ growing interest in these matters. to avoid losing the confidence of increasingly knowledgeable and aware consumers, it is very important to deliver in accor-dance with all commitments made relating to environmental and social responsibility. this places even greater demands on control mechanisms throughout the business.

Within some retail segments price pressure has gone so far that it is no longer a competitive advantage, it is a matter of survival. For players in these segments it will therefore be increasingly important to add other values to their brand in order to attract the consumer. employees and the service they provide, how customers are treated, and sales skills will thus become even more important competitive factors in future.

the homogenous average consumer does not exist. Instead consumers are very much looking for the individual and unique. Despite increased customer segmentation and customization it is becoming more difficult to meet all unique

needs. one of the major future challenges for retail will there-fore be to try to create unique experiences for every customer. Success will depend on the ability to think along new lines and develop new cross-border concepts.

Retail markets in the nordic and Baltic regions in 2007

economic conditions in the nordic and Baltic regions were favorable from a retail perspective. all countries were at the top, or close to the top, of an economic boom, which was reflected in optimistic households, strong private economies and new record levels for the retail trade.

From a more long-term perspective the nordic retail mar-ket as a whole showed very strong development compared with the rest of europe, apart from the powerful growth in the former eastern bloc. Development in each individual country was relatively similar. Sweden, however, has shown the stron-gest growth since the beginning of 2004, while the Danish retail trade has weakened and developed at a slower rate.

Development in the individual industry segments is similar in the nordic countries. the exception is food retail in Denmark, which showed lower growth than in the other countries. Within consumer durables, the nordic consumers’ increased interest in the home led to strong growth figures for segments within homeware, hardware and building materials.

In the Baltic countries, the strong growth in homeware and electronics was only exceeded by textile and clothes sales. the growth rate in these segments was 30–40% which was considerably higher than the nordic countries.

Development in SwedenDespite a very strong 2006, growth continued in the retail sector during 2007 although at a slightly slower rate.

Retail trade development in the nordic region, excluding Iceland

Source: eurostat

110

120

130

140

150

160

2004 2005 2006 2007Sweden Norway Finland Denmark

TrE buTIKSKoNCEPT• Rimi Supermarket finns där kunderna bor och arbetar,

här gör man sina vardagsinköp.• Rimi Hypermarket och Rimi Compact Hypermarket är

stormarknader där man kan handla allt på ett ställe, både livsmedel och andra specialvaror. rimi Compact Hypermarket är något mindre till formatet.

• Supernetto och Säästumarket är lågprisbutiker. Säästumarket finns endast i Estland, Supernetto finns i Lettland och Litauen.

Baltic region

the smell of freshly baked bread greets us when we enter one of rimi Baltic’s

hypermarkets in riga. the store is light, spacious and

very well organized. the goods are placed in care-

fully designed “islands” and the orderliness on the

shelves is impressive.

The fruit and vegetable counters are an explosion of color where every apple and tomato is placed exactly right. The product range at rimi Hyper-

markets is broad. In addition to food there is also a wide selection of other goods such as clothes, books, house-hold utensils and makeup. The signs say LAbA CENA which means special offers.

The smell comes from the store’s own bakery. A woman in a checked apron is busy baking cinnamon buns. The bakery is part of the 30-meter long service counter. Here there is meat, cheese, fish, shellfish and ready-made meals prepared in the store’s own kitchen. Live carp are swim-ming in a large tank. Carp is extremely popular, particu-larly around Christmas and New Years.

Shopping in a food store and not in “the open market” is a relatively new phenomenon in riga. This store opened two years ago and is popular. Approximately 50,000 cus-tomers shop here every week. The reason for frequent shopping is simple. In riga the apartments are often small with limited space to store food.

rimi Hypermarkets is one of the three store concepts built up by rimi baltic during its almost ten years in the region. Today there are a total of 215 stores and the brand is strong.

The President of rimi baltic, which is the parent com-pany for rimi Latvia, rimi Lietuva and rimi Eeesti, is the Portuguese Antonio Soares. He has every reason to be pleased with rimi baltic’s development. During 2007, store sales rose 19% to approximately Eur 1,156 M.

“When I became president in 2002, I realized that the potential in this market was enormous. but I could never have dreamt that it would be so successful,” he says.

Part of this success is due to a determination to ensure that the stores comply with the different basic concepts. Adapting product range to location, customer base and specific wishes also played their part. but rimi baltic’s good results are not only about thoroughness, planning and good marketing.

“My aim is to create ‘the perfect store’. This means that the store must be well-arranged, neat and have clear price information. but also that it should convey enjoy-ment and warmth purely visually, through light, color and design. The store must be the opposite of grey, flat and boring. You have to add some flavor!” ◾



In total, the retail trade increased its sales by 6.5% in current prices, making 2007 the second-best year since the Swedish retail Institute, huI, started its measurements in 1990. consumer durables rose by 7.4% and food retail was up 5.2%, measured in current prices. price pressure, primarily within electronics means, however, that volume growth for consumer durables was considerably higher and amounted to 10.2%. the trend in the food retail sector was the opposite

– excluding price increases growth was 2.7%.at sector level the book and paper trade and the jewelry

trade were the major losers. these two segments were the only ones to lose volume compared with 2006. the contin-ued keen interest in home electronics, including flat screen televisions, put this sector at the top of the growth league with a volume growth of a full 24.2%. considerable price pressure, however, limited growth in current prices to 5.4%.

the forecast for 2008 is generally positive. Interest rate trends and the situation in the housing market will certainly remain uncertain factors, but households’ disposable income

is still expected to rise, something that benefits both the retail and service sectors. huI forecasts, among other things, that the total retail trade will grow by 5.0% in current prices, of which consumer durables by 5.5% and food retail by a con-tinued strong 4.5%1).

Development for interest rates and the housing market will probably affect consumption choices in the future. capital-intensive sectors, such as furniture, building materials and home electronics, can expect tougher times ahead while wage-based consumption of clothes, shoes and food is expected to continue to show good development.

Development in Norwaythe norwegian economy and retail sector have shown strong development for very many years. this trend continued in 2007 when the total retail trade increased by over 8% in current prices. the strongest volume growth was noted in the It and home electronics, clothes, recreation and books segments.

Consumer trends

Polarizationgoods and services that are neither luxury nor low-price do not attract and the average con-sumer is a dying breed. one and the same consumer can in one instant look for low-price and in the next buy goods in the premium and luxury segment.

Timea growing number of people are finding that time is not sufficient and whether this is due to less leisure time or more activities is irrelevant. It is clear that consumers are seeking solutions and concepts that offer greater flexibility and effi-ciency in their everyday lives.

Controlconsumers are seeking greater control over their purchasing situation. thanks to the internet it is possible to be well familiar with the functionality and price of a product which strengthens the bar-gaining position against the seller. customers are increasingly controlling when and how they buy – the store is not always the obvious channel.

Well-beingthe search for increased well-being in all forms is spreading in today’s society. the older the consumer becomes, the greater the demand for products and services that increase well-being.

Awarenessenvironmental and health aspects combined with greater awareness and responsible consumption are placing new demands on retailers. the extent to which the aware consumer will reduce his consumption and/or choose quality and durabil-ity before “use and throw” items remains to be seen.

Individualizationconsumers are demanding increasingly indi-vidualized goods and service and always looking for the unique. Interest in being involved in the design of clothes or shoes or finding that unique accessory in a secondhand store is growing.

1) huI’s economic Forecast 2007:4



Development was highly positive in the first half while towards year-end, as in the Swedish market, it was slightly weaker than expected. lower sales primarily of clothes, electronics and building materials in December contributed to this pattern.

prices in the norwegian market are higher than in the other nordic countries. this applies in particular to groceries, clothes and homeware. Food prices are a full 50% higher than the average among eu countries while prices of clothes and shoes are 47% higher.

Distance selling’s share of total retail trading is increasing. During December growth in this sale channel rose by almost 18%, which was slightly less than in Sweden.

cross-border shopping between Sweden and norway appears to have stabilized. During 2007, norwegians pur-chased goods in Sweden for noK 9.3 billion, which was on a par with 2006. this can be compared with a growth rate of between 10 and 15% in recent years.

Development in Denmarkthroughout 2007 the Danish retail sector showed very low, even negative, monthly growth figures measured in volume. the end of the year was less favorable than in the other nordic countries. In the fourth quarter sales volumes decreased by about 1.5% in the Danish retail market.

Development for the Danish clothes market, on the other hand, was considerably better and outperformed growth in clothes sales in the rest of the region.

prices in Denmark, particularly for food, are relatively high compared with levels in Sweden and Finland. Since 2005, food prices have risen by almost 12% which can be compared with just under 6% in Sweden and 5% in Finland. the opposite applies to development in the clothes trade where Danish prices have fallen since 2005 while prices in Sweden have risen by over 10%.

the Danish online retail market showed strong develop-ment in 2007 with an increase of a full 35%.

Development in FinlandDuring 2007 Finnish retail sales rose by approximately 7% in current prices. the increase was approximately 6% for food retail and approximately 8% for consumer durables.

the total volume growth for the retail trade was lower in Finland than in Sweden while the Finnish food retail sector showed a higher growth rate.

prices of food in Finland rose during the year and were just below the development in Sweden. on the other hand, the price trend for clothes, as in Denmark, was far more mod-est than in Sweden.

Development in the Baltic regionIn recent years and until the first quarter of 2007 retail trade growth in estonia, latvia and lithuania was extremely high. During the second quarter growth started to slow in latvia and later in the year this weaker trend was also noted in the lithuanian market. In estonia as well the weaker trend was clear and following monthly growth figures of about 20% at the beginning of the year, growth at year-end was around 5%.

Despite this weaker trend compared with previous years, growth figures in the Baltic region remained very high com-pared with other european countries. according to prelimi-nary figures, volume growth in the estonian retail market was about 14% while the levels in latvia and lithuania were approximately 19% and 17% respectively.

the strong growth was mainly driven by sales of consumer durables. until the end of november 2007, growth in the home appliances, clothes and shoes segments was 36% in lithuania and 44% in latvia. the increase was also high in estonia compared with other sectors, but lower in comparison with its Baltic neighbors.

a reduction in the overheating trends in the past year means that imbalances in the economies will slowly decrease and that growth is heading down towards more sustainable levels.

Retail market for the Nordic and Baltic Countries 2006

euro Sweden Denmark Finland norway estonia latvia lithuania

private consumption (bn) 144 106 86 104 7 10 16 per capita 15,855 19,587 16,278 22,185 5,261 4,602 4,606Food retail market (bn) 22.6 13.6 13.6 16.3 1.4 1.7 2.6consumer durables (bn) 31.4 21.2 16.1 19.9 1.4 2.2 2.1total retail market (bn) 54.0 34.8 29.7 36.2 2.9 3.9 4.7 per capita 5,926 6,409 5,636 7,725 2,124 1,705 1,385 change (%) 7.5 6.7 5.7 4.9 23.3 28.3 9.2

Source: Mintel, european retail handbook 2007/2008


reSponSIBle oWnerShIp

an increasing number of countries worldwide are realizing the value of moving their business in a sustainable direction. By supporting and contributing to reduced environmental impact, better working conditions and clear ethical guide-lines, companies strengthen both their brand and their control over business risks. this also leads to greater pride among employees, who are the companies’ real ambassadors.

hakon Invest’s perception is that sound sustainability work is essential for a retail company to win and retain consumer confidence. We also believe that strategic sus-tainability initiatives create new business opportunities and new product areas.

We want to contribute to a sustainable society through responsible ownership and responsible investments. During 2007 we clarified what responsible ownership means to hakon Invest in practice. this included a sustainability policy (read more at www.hakoninvest.se). additional policies and guidelines have been linked to this in order to further clarify how hakon Invest’s sustainability work will be conducted.

sustainability policy as a platform

Work on hakon Invest’s sustainability policy started within an internal inventory of sustainability risks which included inter-views with key people at both hakon Invest and the portfolio companies. We also examined existing policies. Some policy documents were restructured to make them consistent in character and scope and therefore easier to apply.

Stakeholder dialog has a key role for credible, responsi-ble business. During the year we interviewed some of our owners and an SrI institute (Socially responsible Investments), in order to obtain their expectations and possible demands on hakon Invest.

the sustainability policy was formulated on the basis of an inventory of risks and other internal and external material. the policy was discussed at an internal workshop in autumn 2007 and adopted by the Board at the beginning of 2008.

hakon Invest’s policies for investments and finance and investment policy were also revised in light of the new sustain-ability policy. In 2008 we will focus on developing sustain-ability work at hakon Invest, the portfolio companies and in the investment operations. our long-term aim is to manage and follow-up all sustainability aspects – economic, social and environmental – throughout our operations.

our investment philosophy

hakon Invest’s contribution to sustainable development is mainly exercised through investments in and development of the port-folio companies. how we choose to manage our liquid assets is another example of where we can exercise an influence.

early in the investment process we like to analyze the com-pany’s profile as regards sustainability aspects, as a tool for even better evaluation of the company’s prospects, opportuni-ties and potential for sustained future value creation. a general review of the company’s position regarding environment, con-trol of the supply chain, personnel issues, business ethics and other non-financial aspects that can affect the value of the brand and the company is also performed prior to examina-tion in the Board’s investment committee.

For us it is positive if potential portfolio companies have basic policies, activities and documentation relating to sus-tainability right from the start. But a lack of structured sustain-ability initiatives does not mean that we automatically reject an investment. on the other hand, we do want to be sure that the company has the potential and the will to start robust

contributing to long-term values

responsible ownership is the platform for hakon Invest’s work as a devel-opment partner with a focus on long-term growth in value. It is also in the role of owner that we have the greatest opportunities to work to achieve environmentally and socially sustainable strategies and working routines.



sustainability work within two years, for example by introduc-ing relevant policies and working methods that encompass the most important company-specific sustainability aspects. compliance with current legislation and regulations, how-ever, must always be in place from the outset.

hakon Invest renounces areas within the retail sector that relate to arms sales and pornography. If we are to invest in a retail company that has operations within or sells tobacco, gambling or alcohol, the company in question must have poli-cies, guidelines and monitoring systems in place.

our revised finance and investment management policy clarifies how our unrestricted equity should be managed. as part of the work with the sustainability policy, the policy was complemented with sustainability requirements. at least 80% of assets managed externally are invested in companies that

guarantee compliance with the un’s global compact and the oecD guidelines for multinationals.

Responsible throughout the development process

Most of our holdings are relatively young, small companies and have naturally devoted much of their energy to increas-ing sales. as an active owner hakon Invest has an important responsibility to contribute to business development that safe-guards people and environment. In this way we also act to minimize the risk that value creation is jeopardized.

our schedule of the portfolio companies’ situation, needs and opportunities, that we prepared in 2007, shows varia-tions in the scope and resources of sustainability efforts. the smaller companies have not had the same opportunities as Ica and Forma to focus on sustainability and are therefore

Carin Wahlén and Mårten Beck-Friis



in greater need of an internal inventory, knowledge and introduction of policies. there is, however, considerable awareness, willingness and commitment. all companies have carried out or are carrying out employee initiatives to form the basis for successful sustainability work.

During 2008 we will continue the process of responsible ownership. this will include providing a common sustainabil-ity forum for the portfolio companies, developing shared envi-ronmental and working conditions, and devising KpIs that act as a driving force and control.

environmental and social responsibility at ICa

the Ica group has been conducting extensive and structured sustainability work for many years and has had an environ-mental policy since the 1980s. Since then, Ica has continu-ally developed the environmental work of both the group and the individual stores.

Despite many years of environmental and safety work, Ica suffered a considerable setback when in December 2007 it emerged that five retailers in four Ica Maxi stores had relabeled ground meat with new dates. this is unacceptable and contra-venes both Swedish law and hakon Invest’s sustainability pol-icy. Immediately following this exposure Ica aB, together with Ica-handlarnas Förbund, decided on extensive action to mini-mize the risk of anything similar happening again. all Ica retail-ers in Sweden were invited to a meeting where they were given clear information about both legislation and Ica’s health and safety guidelines. By the end of January 2008 at the latest, all retailers will have received internal training in food safety. at the beginning of 2008 a group was formed with representatives from Ica and Ica-handlarnas Förbund to examine the demands made on retailers and the need for additional sanctions.

During 2007, Ica made a new and comprehensive effort designed to reduce the climate effects of operations to an even greater extent. During 2007, Ica adopted 25 mea-sures to reduce emissions of greenhouse gases as a first step towards the target of reducing Ica’s known climate impacting emissions by 30% by 2020 compared with 2006 (read more at www.ica.se).

overweight and obesity are a growing health problem in Sweden and norway as in many other Western countries. For many years Ica’s expressed aim has been to make it easy for customers to vary their diet and eat more healthily. In 2007, Ica among other things continued its health focus in norway where one example is consumer guidance through keyhole labeling. Ica norge has also been a driving force in discus-sions with authorities and government departments about offi-cial health labeling in the country.

Ica works constantly to ensure that its products are pro-

duced in an ethically acceptable manner, something that is clear from Ica’s Quality and environmental policy. purchasing and pre-purchasing negotiations are carried out in accordance with set routines but in order to further guarantee knowledge of how goods in other countries are produced, Ica is a member of the Business Social compliance Initiative (BScI). the work-ing environment and respect for human rights are examined through third party audits and the network compiles information about suppliers’ status. During 2007, BScI audits were con-ducted of Ica’s suppliers, including several in china.

In 2007, Ica implemented an extensive web-based fol-low-up system in order to facilitate control and monitoring of sustainability issues within the group. the goal includes further improvements in the transparency of Ica’s own reporting.

sustainability in the portfolio companies

In recent years Forma has featured twice in alecta’s “Sweden’s best workplace” competition. For several years Forma has had a determined focus on training, and diet and exercise advice in order to improve the well-being of its employees, something that is also reflected in an improved Satisfied employee Index.

environmental issues have been high on the agenda since the mid-1990s and Forma was among the first publishing houses to be certified according to the environmental standard ISo 14001. Forma places high demands on paper and print-ing processes.

all hakon Invest’s smaller portfolio companies focused on employee issues in 2007. Kjell & company started internal training for existing and new employees.

the portfolio companies in general have a high risk awareness which creates a good basis for future activities and routines. ethical issues will gradually be integrated into the purchasing processes.

Hakon Invest’s internal sustainability focus

hakon Invest’s responsibility for its own operations must also be continually improved. employees are our most important resource and this makes personnel welfare a prioritized area. For example, all employees can participate in a wellness pro-gram and are able to exercise during working hours.

our own operations are conducted in an office environ-ment which leads to little environmental impact. Despite this we try to minimize our environmental impact. Key environ-mental aspects are energy consumption in the office and our journeys to and from work and on business. We have chosen renewable energy sources and district heating for the office and try to make greater use of telephone and video confer-ences. We also assess environmental considerations when purchasing new company cars and other purchases.


hakon Invest does not have its own separate risk manage-ment function since assessment and management of risks is part of the core business. Identification of risks in hakon Invest rests initially with the investment organization. assessment and aggregation of risks take place in executive Management from the basic principles established in the formal work plan for the Board and the president. executive Management con-tinually evaluates hakon Invest’s exposure to various risks, their probability and financial impact and the correlation between different risks. executive Management is also responsible for ensuring that implemented governance and control systems contribute to a reasonable balance between risk and business opportunities. this includes functions/responsibility, processes and systems support.

the starting point for risk management at hakon Invest is to minimize total risk exposure through ongoing identification of possible threats to value creation in the portfolio compa-nies and preparing action programs in the event a possible threat becomes reality. the basis of this work is prepared in conjunction with the analyses and evaluations made ahead of each acquisition.

the most comprehensive risk in hakon Invest is the finan-cial development of the individual portfolio companies where the worst case scenario is that we lose our entire investment in a company.

Risks associated with the ICa holding

the holding in Ica is “permanent” and comprises a signifi-cant portion of hakon Invest’s assets. For this reason risks and opportunities in Ica are totally decisive for the total risk expo-sure in hakon Invest.

Major exposure to food retail

Via Ica aB, hakon Invest also has a significant exposure to nordic and Baltic food retail. Development within the food

retail sector is closely linked to gDp trends and real wages. political decisions related to taxes (Vat) are also key factors. an economic downturn and raised taxes (Vat) can have a negative impact on Ica aB’s sales and earnings. historically, the food retail sector has been less cyclically sensitive than the consumer durables segment. this means that the Ica holding can be regarded as risk-reducing in this respect.

Ica retailers in Sweden are free to choose their suppliers. If Ica aB does not offer competitive products and prices, the company risks losing customers to its competitors. at present, Ica retailers in Sweden make an average of 70% of their purchases directly or indirectly via Ica aB. the remaining 30% mainly comprises fresh products, fruit and vegetables, non-perishables and bread, in many cases from local produc-ers and suppliers.

speedy action decisive

Individual Ica retailers who act in a matter that is incompati-ble with Ica’s and hakon Invest’s values and rules can have a negative impact on sales and confidence, in both the short and long term. the fact that a number of Ica retailers are guilty of erroneous date labeling of ground meat, which attracted considerable attention in Sweden at the end of 2007, is one such case. as a result of this Ica decided through a training program to ensure that all Ica stores in Sweden have attended the internal training in food safety by the end of January 2008. Ica also decided to perform a third party audit of the stores’ own control programs. a review of the Ica system's regula-tory framework in relation to the retailers, including the conse-quence of nonconformance, was initiated and the results will be presented in 2008.

Careful preparatory work reduces investment risk

all investments have an inherent uncertainty. ahead of each investment, hakon Invest conducts a thorough evaluation

risk management – part of our core business

hakon Invest’s overall strategy is designed to balance business opportunities and risks – through a portfolio build-up with good risk diversification as well as active, responsible and long-term ownership.

BuSIneSS enVIronMent anD rISK ManageMent



designed to identify and if possible reduce the risks that might be associated with the investment. We carefully analyze the company’s development with regard to employees, business concept, brands, customer relations and administrative, legal and ethical aspects (read more about the investment process on page 8). at the same time, an evaluation prior to an investment can never totally guarantee success.

Portfolio with broad exposure and risk diversification over time

hakon Invest’s focus is on investments in retail-related opera-tions where the general economic development and other macroeconomic factors are the basic driving forces. the retail sector contains, however, a wide diversity of business directions with varying sensitivity to macroeconomic changes and consumer behavior as well as differences between the countries in our nordic-Baltic home market.

the build-up of hakon Invest’s holding portfolio continued in 2007 in order to achieve a good diversification within the retail sector which can help to balance exposure to food retail via Ica. the investment in inkclub brings, among other things, exposure to the fast-growing online retail segment. at the same time the mature Ica operations balance the in many cases young portfolio companies that are on the thresh-old of a focus on strong growth. Successive investments also create risk diversification over time.

active owner role ensures governance and control

through active and responsible ownership hakon Invest ensures that the targets and strategies set up ahead of the acquisition are followed up and secured. Board and control-ling work are key tools for achieving effective corporate gov-ernance, work that is facilitated by our experience of business plans, budgeting and report routines within retail operations.

Risks

◾ Dependent on key people in investment operations

◾ portfolio’s exposure to market segments and geo-graphic areas

◾ Financing of investments

◾ Counterparty and other transaction risks

◾ risk in internal routines and systems

Risk management

◾ Board’s investment policy

◾ established process

◾ standardized documents

◾ Investment Committee

◾ normal due diligence

Risks

◾ results of external and internal management are affected by share price, interest rate and exchange rate development

Risk management

◾ Financial policy and invest-ment management policy

◾ reporting

◾ Follow-up

◾ risk profile

Risks

◾ negative development for holding companies’ sales and earnings affect Hakon Invest’s earnings

◾ portfolio companies’ development affected by:

– overall macroeconomic factors

– Conditions in specific parts of the retail market such as competition, price pressure and political decisions

– strategic and operational risks in each company

Risk management

◾ active corporate governance

◾ shareholder agreement

◾ Board representation

◾ owner policy

◾ Business plan

◾ Budget

◾ reporting

◾ Crisis management

Risks

◾ stock market climate (prices of listed companies affect prices of both unlisted and listed companies)

◾ Counterparty and other transaction risks

Risk management

◾ agreement with other owners on exit date

◾ long-term time perspective

◾ Broad range of divestment alternatives

InvestMent oPeRatIons

FInanCIal ManaGeMent DIvestMent/exIt

PoRtFolIo CoMPanIes

risk management in operations



professional risk management is one expertise to which the portfolio companies have access with hakon Invest as owner.

During the year work started on updating our policies which marks a clearer difference between policies and guide-lines. We will add guidelines for the portfolio companies that summarize the demands we make on our companies as owner. During autumn 2007, work also started on a stricter sustainability policy. here a number of tangible risks within the environment and social area were identified (read more on page 22). the sustainability policy was adopted by the Board at the beginning of 2008.

long-term ownership

hakon Invest has an investment horizon that is longer than traditional private equity companies. this increases oppor-tunities to create a positive balance between opportunities and risk and to establish good risk management routines. our investment horizon allows us to carry out actions and investments with a major potential to create long-term added value in the portfolio companies, although in the shorter term these give rise to a negative impact on earnings. this may lead to short-term fluctuations in hakon Invest’s share price.

Competence – a critical factor

hakon Invest’s future development depends on the know-ledge, experience and commitment of management and

other key people. our operations could be negatively affected if one or more of these key people leave the group. Should we not succeed in recruiting new, qualified employees this could have a negative impact on hakon Invest’s opportunities. By building our brand as an employer and having effective recruitment routines we reduce the risk of negative effects of this type. the broad network with retail-specific expertise is also important for securing access to experience and know-ledge of retail business.

Financial risks

Most of our present investments and holdings are unleveraged and hakon Invest currently has substantial cash funds. In future, however, external funding may be required to finance invest-ments. our financial strength creates considerable scope for raising loans from credit institutions. We can also choose to carry out cash new issues or use treasury shares to partly or wholly finance operations and new investments.

our financial and investment management policy stipu-lates how financial risks should be managed and limited. It also provides a framework for management of financial assets, which is conducted both internally and outside the company (read more about our financial and investment management policy on page 23).

Most of the funds under external management are avail-able to hakon Invest within a maximum of five days.


haKon InVeSt’S ShareS

share price trend 2007

the closing price paid in 2007 for hakon Invest’s shares was SeK 132.50, corresponding to a market capitalization of SeK 21,321 M. During 2007, the share price fell 15.6% compared with the oMX nordic 40 Index which rose 4.7%.

the share price fall and the weak performance compared with the index can be viewed in the light of the substantial rise in hakon Invest’s share price at the end of 2006, in conjunction with notification that the shares would be included in the MScI Small cap Index and moved to the large cap segment on the oMX nordic exchange. on January 17, 2007, the share price reached its highest level so far of SeK 173.50 to then note the lowest price for the year of SeK 109.50 on november 5.

Since the Ipo on December 8, 2005, when 13 million common shares were sold for SeK 77 each, hakon Invest’s share price has risen 72% compared with the 26% rise in the oMX nordic 40 Index.

During 2007 the total return on the shares, i.e. hakon Invest’s share price development including invested dividend was –12%. During the same period the SIX return Index fell –2.6%. corresponding figures for 2006 were 71.4% and 28.1% respectively.

Share information

Stock exchange oMX nordic exchange, large cap segmentticker haKnID SSe32443ISIn code Se0000652216trading lot 100Market cap at December 31, 2007, SeK M 21,321price at December 31, 2007, SeK 132.50change during the year, % –15.6highest price during the year, SeK 173.50lowest price during the year, SeK 109.50

Dividend

one of the targets set by the Board for hakon Invest is that the dividend ratio should normally amount to at least 50% of the parent company’s profit for the year. only common shares carry entitlement to a cash dividend, which means that the total cash dividend is distributed among 49% of the shares.

as of 2011, owners of c shares are entitled to request conversion of c shares to common shares. Such a conversion may occur no earlier than five years after the request is made, i.e. not before January 2016.

For the 2007 fiscal year, the Board will propose to the annual general Meeting a dividend of SeK 6.00 (5.50) per common share, or a total of SeK 472 M (433). this corre-sponds to a dividend ratio of 50.4% (129.5).

the settlement date for the dividend is expected to be april 25 and the shares will be traded excluding dividend with effect from Wednesday, april 23, 2008, if the annual general Meeting decides in accordance with the Board’s proposal. Dividend payments are expected to be made in the Vpc system on april 30.

Buybacks

During 2007, hakon Invest repurchased 128,200 common shares over the oMX nordic exchange in order to cover allo-cation in the option program. the repurchased shares corre-spond to 0.1% of capital and voting rights. More information about the incentive program and remuneration to senior exec-utives is provided in the Board of Directors’ report, page 57, and in note 7 on page 70.

Shares and shareholdersIn 2007, hakon Invest’s share price fell 16% and was quoted at year-end at SeK 132.50 per share. For the period from the Ipo on December 8, 2005, until year-end 2007 the share price rose 72%.

share price trend and trading December 8, 2005–December 31, 2007

2006 2007

nuMBer

4,000

3,500

3,000

2,500

2,000

1,500

1,000

500

0

SeK

180

165

150

135

120

105

90

75

60

© SIX hakon Invest oMX consumer Staples

oMX nordic 40

◾ number of shares traded, 000s


haKon InVeSt’S ShareS

Share data1) 2006 2007

earnings per common share, SeK 6.55 8.30earnings per c share, SeK 6.55 8.30cash flow per share, SeK –1.28 –0.43equity per share, SeK 53.75 60.92Dividend per common share, SeK 5.50 6.00Dividend ratio, % 129.5 50.4Market price at year-end, SeK 157.00 132.50Dividend yield, % 3.5 4.5p/e ratio, times 24.0 16.0Share price/equity, times 2.9 2.2number of common shares at year-end 78,849,544 78,721,344number of c shares at year-end 82,067,892 82,067,892total number of shares at year-end 160,917,436 160,789,236average number of shares 160,917,436 160,813,095

1) For definitions, see page 30 2) proposed dividend

share capital

hakon Invest’s share capital at December 31, 2007, amounted to SeK 402,293,590 distributed among 160,917,436 shares, each with a par value of SeK 2.50. all shares carry equal voting rights.

share structure

In connection with the Ipo in 2005 a share structure was established for hakon Invest with two share classes: common shares and c shares. c shares, which are not listed and do not carry entitlement to a cash dividend, comprise 51% of the total number of shares. the remaining 49% comprise listed common shares. all c shares are owned by Ica-handlarnas Förbund.

shareholders

Ica-handlarnas Förbund’s shareholding in hakon Invest amounts to 67.4% of the capital and voting rights, of which 51 percentage points consist of c shares and 16.4 percent-age points listed common shares.

hakon Invest had a total of 12,721 shareholders at December 28, 2007.

number capital and Ten largest shareholders of shares voting rights, %

Ica-handlarnas Förbund – Solna 108,385,227 67.41handelsbanken funds incl. Xact 2,273,384 1.41SeB Investment Management 1,805,840 1.12Swedbank robur Funds 1,658,313 1.03ap4 1,451,650 0.90nordea funds, incl. luxembourg 877,783 0.55SeB-trygg Försäkring 800,600 0.50Jönsson, leif 790,000 0.49ottosson, David 515,432 0.32håkan olofssons Förvaltning 515,300 0.32

ten largest shareholders total: 119,073,529 74.06other shareholders 41,715,707 25.94

total 160,789,236 100.00

holding, number of proportion of capital and number of shares shareholders shareholders, % voting rights, %

1 – 500 8,273 65.03 0.93501 – 1,000 1,291 10.15 0.681,001 – 5,000 1,772 13.93 2.745,001 – 10,000 557 4.38 2.6010,001 – 15,000 219 1.72 1.7015,001 – 20,000 127 1.00 1.4020,001 – 482 3.79 89.95

total 12,721 100 100 %

option program – incentive program

In December 2005 after the Ipo, Ica-handlarnas Förbund provided an incentive program aimed at all employees in the parent company hakon Invest aB.

the president, other members of executive Management and some key employees at hakon Invest are included in an annual performance-based incentive program, comprising bonus and options. More information about these incentive programs is provided in note 7 on page 71 in the audited annual report.

Press releases 2007

nov. 22, 2007 payment of SeK 122 M received from class action against ahold

nov. 13, 2007 hakon Invest interim report January – September 2007

oct. 5, 2007 nomination committee appointed for hakon Investaug. 21, 2007 hakon Invest interim report January – June 2007July 11, 2007 hakon Invest completes investment in inkclubJune 27, 2007 Ica sells store properties in SwedenJune 27, 2007 hakon Invest strengthens managementJune 19, 2007 hakon Invest to become part-owner of inkclubMay 24, 2007 Forma acquires otWMay 15, 2007 hakon Invest interim report January – March 2007april 26, 2007 report from hakon Invest’s annual general Meetingapril 4, 2007 hakon Invest becomes majority shareholder

in hemmaMarch 27, 2007 notice of annual general Meeting of hakon InvestMarch 16, 2007 hakon Invest publishes annual reportMarch 8, 2007 Forma acquires Damm FörlagMarch 6, 2007 Swedish tax agency allows hakon Invest loss carry

forward for shares in ahold 2002–2005Feb. 21, 2007 Year-end report January – December 2006Feb. 20, 2007 Share buybackFeb. 1, 2007 Ica sells property in norway

2)


F IVe -Year F InancIal SuMMarY haKon InVeSt, DeFInIt IonS

Five-year financial summary, hakon Invest

SeK M 2003 2004 2005 2006 2007

Income statementsrevenues 631 622 611 660 1,075operating profit before goodwill amortization 534 485 568 885 768operating profit (eBIt) 528 485 568 885 768profit after financial items 367 594 940 1,104 982profit for the year 353 579 854 1,054 1,326

Balance sheetstotal non-current assets 3,842 4,728 5,142 6,172 7,636other current assets 123 108 151 198 451cash and cash equivalents and short-term investments 3,331 2,729 3,046 2,717 2,292

total assets 7,296 7,565 8,339 9,087 10,379

equity incl. minority interests 6,948 7,244 7,925 8,650 9,796

Cash flowfrom operating activities 38 244 281 166 633from investing activities –13 –121 94 –17 –204from financing activities 5 –141 –325 –355 –498

Cash flow for the year 30 –18 50 –206 –69

key ratiosoperating margin, % 83.7 78.0 92.8 134.0 71.4return on capital employed, % 17.7 9.4 12.4 13.2 10.6return on equity, % 5.0 8.2 11.3 12.7 14.5equity/assets ratio, % 95.2 95.7 95.0 95.2 94.4

IFrS was not applied in 2003.

DefinitionsCapital employed Balance sheet total less non-interest bear-ing liabilities and provisions.

Cash flow per share cash flow for the period divided by the total number of shares.

Dividend ratio Dividend as a percentage of the profit for the period in the parent company.

earnings per C share Same definition as earnings per common share, since common shares and c shares provide entitlement to equal participation in earnings and equity. c shares do not carry entitlement to a cash dividend, which is the case for common shares.

earnings per common share profit for the period excluding minority divided by the average number of shares.

equity/assets ratio equity including minority as a percen-tage of balance sheet total.

equity per share equity excluding minority divided by the total number of shares.

Gross margin gross profit as a percentage of revenues.

net margin profit for the period as a percentage of revenues.

operating margin operating profit as a percentage of revenues.

return on capital employed profit after financial items plus financial expenses, calculated on the basis of a rolling 12-month period, as a percentage of average capital employed during the same period.

return on equity profit for the period excluding minority, calculated on the basis of a rolling 12-month period, as a percentage of average equity excluding minority during the same period.

32 Hakon Invest’s holdings

34 ICA

44 Forma Publishing Group

46 Kjell & Company

48 Hemma

50 Cervera

52 inkClub

Holdings

32 H A K o n I n v e s t – A n n u A l r e P o r t 2 0 0 7

Holdings

from from interest- Contribution to operating investing bearing Hakon invest’s Key figures, sEK M Revenues operating profit activities activities Assets Equity net debt earnings Holding (%) investment

2007 2006 2007 2006 2007 2007 2007 2007 2007 2007

ICA AB 82,326 67,395 2,602 2,297 4,169 –149 37,319 12,073 2,344 830 40 % – ICA AB

Portfolio comPanies Portfolio comPanies

Forma Publishing Group 795 660 30 37 –17 –79 600 138 171 17 100 % 200 Forma Publishing Group

Kjell & Company 345 254 –4 11 –9 –10 118 37 –1 –2 50 % 102 Kjell & Company

Hemma 368 n.a. –30 n.a. –15 11 350 143 77 –13 60 % 105 Hemma

Cervera 377 n.a. –1 n.a. –51 –5 248 90 4 –1 45 % 85 Cervera

inkClub 364 342 45 41 36 0 203 157 –147 4 50 % 431 inkClub

Development in the holdings

InCome stAtements CAsH Flow

«Ahold and we have a shared view of iCA. But naturally we have a deeper understanding of how the iCA model functions.»

“Far-sightedness and a long-term approach are what charac-terizes us as an owner,” says göran Hesseborn, CFo of Hakon invest and responsible for the holding in iCA AB.

“As an owner we focus on sustained competitiveness and this resulted, among other things, in our board decision for substantial investments in infrastructure, which over time will improve profitability, both for iCA and the retailers. one example is the major investment in the fully automated distri-bution center in Helsingborg, which will very much help to strengthen iCA’s leading position and competitiveness in sweden, despite the negative impact on profitability caused by this investment for a while. The facility in Helsingborg will over time give iCA considerable competitive advantages.”

owner influence is exercised in iCA through our repre-sentation on the board. our shared network also offers many natural contacts in day-to-day work.

“in our assignment and our corporate governance we must always remember the iCA concept. By ensuring good profitability both in iCA AB and for the retailers, the iCA group’s profitability will be guaranteed in both the short and long term. safeguarding this balance is perhaps our key task as owner. during the year, iCA examined its business model; how the dynamics can be strengthened to create increased competitiveness and profitability at every level. it all begins with profitability in the store,” Hesseborn continues.

“our main focus is to identify what is critical for competitive-ness in the store. This means that we have encouraged and created opportunities to realize iCA’s initiative in this direction. The investment in a central meat packaging unit in Västerås is one example, which has changed the entire market.”

Hakon invest has also been an active instigator as regards creating a business model in norway with retailer-owned instead of wholly owned stores. A norwegian retailer association was formed during the year and contractual and concept issues are now being discussed between iCA norge and the new association.

“Following the focus on major restructuring of the store network over the last two years, iCA norge is now focusing intensely on customer concepts, offerings and product range. We have a long way to go before we achieve an accept-able result but this is one example of allowing things to take a little time provided they are done right.”

Hakon invest’s active ownership also involves participa-tion in the iCA companies’ acquisitions. We also make sure that synergies between iCA and the other portfolio companies are exploited. one example of this is that the portfolio com-panies have already benefited from the shared skills base and network. This includes logistics and iT matters as well as store establishments. “owner initiatives are one thing, but we never do management’s job,” says Hesseborn.

Holding in ICA AB

Göran Hesseborn

33H A K o n I n v e s t – A n n u A l r e P o r t 2 0 0 7

Holdings

«Value creation in the retail trade means tightening the right screws in the right order.»

“one of our key assignments as owner is to review and strengthen the portfolio companies’ customer offerings, concepts and supply chains,” says stein Petter ski, senior investment Manager and responsible for Hakon invest’s port-folio companies. “This is the actual platform for profitable growth. Without these key components in place it is almost impossible to be truly successful in retail. our portfolio com-panies have been good at learning along the way and have therefore managed to grow well. But taking the next step in this expansion, requires a solid platform.”

For two years Hakon invest has worked to put together a well-diversified retail-oriented portfolio of companies. The original holdings of just iCA and Forma Publishing group have successively been added to with four companies from different areas of the retail business. during 2007 Hakon invest’s corporate governance was about measures designed primarily to strengthen the customer offering, concepts and organizations. These efforts affected earnings in Hemma and Cervera.

“And we knew this would happen. Before we even make a new investment we are clear about what action we regard as essential in order to realize the company’s value potential. our thoughts are also expressed by the business plan, which contains both a tangible action plan and anticipated financial development.”

Kjell & Company already had large parts of the platform in place at the start of 2007. This allowed the rate of new store openings to double during the year.

“Establishment of new stores led to a loss but Kjell & Company’s underlying earnings are positive. They have the concept and supply chain in place but need to further stream-line their customer offering,” ski explains.

With its most recent acquisition, inkClub, Hakon invest is stepping into pure-play online retailing.

“We wanted to further diversify the portfolio and were looking for a sound online retailer with good growth. This description fitted inkClub well. We see major opportunities for a mutual exchange of knowledge and experience between inkClub and the other portfolio companies, includ-ing iCA.”

For the wholly owned subsidiary Forma, 2007 was characterized among other things by expansive add-on acquisitions.

“Forma operates in the media market where conditions are rather different from the other portfolio companies. But here too it’s about creating a solid platform of products, particularly after the completed acquisitions.”

Portfolio companies

stein Petter ski

from from interest- Contribution to operating investing bearing Hakon invest’s Key figures, sEK M Revenues operating profit activities activities Assets Equity net debt earnings Holding (%) investment

2007 2006 2007 2006 2007 2007 2007 2007 2007 2007

ICA AB 82,326 67,395 2,602 2,297 4,169 –149 37,319 12,073 2,344 830 40 % – ICA AB

Portfolio comPanies Portfolio comPanies

Forma Publishing Group 795 660 30 37 –17 –79 600 138 171 17 100 % 200 Forma Publishing Group

Kjell & Company 345 254 –4 11 –9 –10 118 37 –1 –2 50 % 102 Kjell & Company

Hemma 368 n.a. –30 n.a. –15 11 350 143 77 –13 60 % 105 Hemma

Cervera 377 n.a. –1 n.a. –51 –5 248 90 4 –1 45 % 85 Cervera

inkClub 364 342 45 41 36 0 203 157 –147 4 50 % 431 inkClub

BAlAnCe sHeets HAKon Invest’s ownersHIP


leading nordic retailer

The iCA group is one of the nordic region’s leading retail companies with approximately 2,250 of its own and retailer-owned stores in sweden, norway and the Baltic countries. The group includes iCA sverige, iCA norge and Rimi Baltic. iCA also offers financial services to swedish customers through iCA Banken.

iCA AB seeks to be a fair-sighted, dynamic company with sound finances, a commitment to the environment and strong social responsibility.

Permanent ownership

Hakon invest owns 40% of iCA AB and regards the holding as permanent. The remaining 60% is owned by the dutch group Royal Ahold n.V., which is listed on the Amsterdam stock exchange. According to agreement the owners have equal voting rights in iCA AB and therefore joint control. The agreement requires unanimity for all decisions at general meetings and in the board.

ica celebrates 90 years

during 2007 iCA celebrated its 90th anniversary. Hakon-bolaget, the origin of today’s iCA, was formed by Hakon swenson in 1917. The core of the iCA concept is that indi-

vidual retailers with their own stores can join forces in a central purchasing organization to attain the same economies of scale as a chain through joint purchasing, store establishments and marketing. since then iCA has steadily developed to its present organizational and ownership structure.

2007 in brief

The iCA group’s revenues amounted to sEK 82,326 M (67,395), an increase of 22% compared with 2006.

operating profit amounted to sEK 2,602 M, an increase of 13.3% compared with 2006. operating margin was 3.2%, down from 3.4% in 2006. Profit for the year was sEK 2,166 M.

iCA had four areas in focus and worked with improve-ments within these: iCA norge, product range development, human resource development and store renovations.

a dynamic business model

iCA AB’s earnings come from four main sources: store opera-tions, the sale of products and services, real estate, and bank-ing services. The business model is based on creating an optimal dynamic between sources of earnings so that the whole and long-term business objectives benefit.

90 successful years of consumer service

By making every day a little easier, iCA wants to be the leading retail company in the nordic region with a focus on food and meals.

I C A A B

«2007 was a year without structural deals where we focused on improving our existing operations.»

Kenneth Bengtsson, President and CEO ICA AB

2005 2006 2007

revenues (sEK M) 71,663 67,395 82,326

operating profit (sEK M) 1,973 2,297 2,602

Profit for the year (sEK M) 1,523 2,401 2,166

number of stores 2,164 2,295 * 2,239

number of Ftes 11,556 11,698 20,081

*including Baltic countries.

Hakon Invest’s holding:40 %

(control 50%)


stores

supply chain

real estate

Banking

ICA sverige

Royalties and profit shares from stores.

sales in stores where iCA sverige owns more than 90% of the shares.

non-food sales in Maxi stores.

Product sales to iCA stores.

service sales to iCA stores.

Rental income and property sales.

ICA norge

sales in wholly owned stores.

Franchise fees.

Product sales to franchise stores.

service sales franchise stores.


rimi Baltic

sales in wholly owned stores.


ICA Banken

sale of financial services.

iCA AB

Store operationsiCA receives revenue through royalties and/or profit shares from the swedish stores as well as through franchise fees from the norwegian franchisees. Retail sales are an impor-tance source of earnings in norway where iCA owns 48% of the stores, and within Rimi Baltic in Estonia, latvia and lithuania, where all stores are wholly owned. in sweden, iCA also receives revenues from the end-consumer by operating Maxi special, a com-pany that sells non-food items within Maxi iCA stormarknad. iCA also receives revenues from the stores where iCA sverige owns more than 90% of the shares, approximately 60 stores. As part of the iCA idea, iCA provides new retailers with startup capital through group contributions during a subsidiary phase. since the subsidiaries are consolidated during this period, their sales and expenses are reported in iCA’s income statement.

Sale of products and servicesiCA buys products and sells them, with a markup, to the stores in sweden and norway. The supply chain includes developing and accepting ongoing producer responsibility for private labels. iCA also generates revenue through the sale of services to the stores such as marketing communications, logistics, training and store technology.

Real estatein many cases, iCA owns the store properties or holds leases on the properties. in the first case, this generates revenue to iCA in the form of market rent from retailers. iCA often owns the land and property in conjunction with new store openings. in the event of a sale, the property has usually appreciated in value which generates substantial gains for iCA.

Banking operationsThrough iCA Banken, iCA sells financial services. net interest income and commissions from the bank contribute to earnings.

earnings sources

iCA sverige 62 %

Rimi Baltic 13 %

iCA norge 23 %

iCA Banken 1%

share of the ica Group’s revenues 2007

other 1%


iCA AB

Goals and strateGies

ica Group’s financial targets and performance

iCA’s long-term goal is to increase revenues faster than the increase in the total market in each sub-market. in 2007, iCA’s revenues increased by 22.2% to sEK 82,326 M. Excluding Rimi Baltic, which was consolidated during the year, the increase was 6.2%. in the swedish market, iCA increased its market share to 36.8% (36.5). As a result of restructuring in the norwegian store network, iCA lost market shares in norway which currently amount to 17.5% (19). in the Baltic market, Rimi Baltic increased its market share to 17.3% (16).

iCA’s long-term goal is an operating margin (EBiT) of 3.5–4%. in 2007, iCA’s operating margin was 3.2%.

Return on equity should average at least 14–16% over a business cycle. in 2007, iCA’s return on equity was 19.1%.

The long-term goal for the consolidated equity/assets ratio is 30–35%. iCA’s equity/assets ratio was 32.4% at year-end 2007.

strategies

Keywords for the way iCA works are prioritization, coordi-nation, simplification and cost reduction.

iCA will exploit economies of scale by coordinating central functions and concepts in order to take advantage of

synergies between the companies. gains from efficiency enhancements will be largely reinvested in order to offset price increases.

Locally adapted conceptsWhile iCA coordinates and exploits synergies through econo-mies of scale, its local offering is adapted to meet customer preferences.

Price and product rangeiCA will focus on keeping prices down while developing and improving the efficiency of the product range in order to meet customer preferences.

Format strategyThe iCA group has a format strategy for its operations that comprises four formats: hypermarkets, supermarkets, neighbor-hood stores and discount stores.

Store network and remodelingiCA will set up new stores and remodel the existing store network. By developing the store network and its offering, iCA will meet the different needs of its customers.

the ICA Group introduced a new, simplified organization with three group

functions during the year: Assortment & sourcing, marketing, and Finance.

the new organization strengthens coordination at Group level and shortens

decision-making paths while the companies in the Group have a clear profit

responsibility and greater responsibility for the local customer offering.

In the new organization, the companies handle parts of purchasing and

product range responsibility primarily for fresh products, as well as parts of

marketing communication. the companies have also taken over responsibil-

ity for logistics in each country.

the Group function Assortment & sourcing is responsible for developing

synergies and coordination between the companies within purchasing and

product range. the focus is on nordic/Baltic purchasing and international

purchasing cooperation, as well as on the Group’s supply chain.

the marketing function is responsible for ICA’s strategic change pro-

gram and includes business development, strategic market communication

and work within the Customers & Quality department.

the Finance function is responsible for financial, legal and economic

governance of the Group.

ICA Fastigheter’s operations are included in ICA sverige and ICA norge

respectively.

Clear profit responsibility in ICA with new organization

ICA ABPresident and Ceo

Financemarketing

ICA sverige AB ICA norge As ICAFastigheter ICA Bankenrimi Baltic AB Assortment &

sourcing


iCA AB

Offer an attractive product range with the focus on private labels, fresh products and non-food iCA will continue to focus on private labels, fresh products and non-food. The iCA group’s range of private labels offer customers greater choice, high quality products and lower prices. This focus will contribute to increased sales and profitability for the individual retailers and the group.

Social responsibilityiCA seeks a strong local presence. The iCA group will also contribute to a long-term sus-tainable society. The company makes every effort to minimize the negative environmental impact of its operations and accepts responsibility for the conditions under which its own products are produced. iCA also safeguards the health of its customers and em ployees by offering safe and nutritious products that are handled correctly at every stage and by continual improvements in the work environment.

commercial control

Based on customers’ needs, preferences and buying habits, iCA develops an attractive and inspiring product range with a wide selection of preferred products in different price classes. Work with category management – defining the assortment within the different countries and store formats – is central.

iCA’s nordic purchasing organization is responsible for coordinating the group’s purchasing. By being a strong negotiating party, iCA can obtain better purchasing terms and continue to offer its customers attractive prices.

iCA tries to make the supply chain from supplier to consumer as efficient as possible in order to reduce costs and decrease environmental impact. iCA is developing a new nordic distribution network designed to handle bigger volumes and fresh products of high quality and with a long shelf life. This means that iCA is taking over transport responsibility for the products from the suppliers and deliveries to the store can thus be optimized. The goal is to reduce total emissions from transport by 20% compared with before.

iCA works continuously to develop the store formats. Within the hypermarket profile the “third generation hypermarket” is under development where iCA takes up the fight with the specialty store chains through a broader product range within a number of cate-gories, such as pet food, books and media, bed and bath. The launch of these new departments started in 2007.

financial control

As a result of the changed group structure, iCA’s Finance function underwent major changes during the year. The intention is to adapt working methods and structure to meet the demands placed on an international company with two listed owners. The new organization implemented at the beginning of 2007 gave the companies clearer profit responsibility. iCA has also developed a uniform reporting structure for all companies within the group.

ica’s social responsibility

iCA’s social responsibility includes the efforts of both the group and the retailer-owned stores within environment, human resources, product quality and health as well as work with social responsibility in sourcing. Climate issues have been a priority, and the work

Board of directors

Claes-Göran sylvénPresident and CEO, Hakon Invest AB (Chairman)

John rishtonPresident and CEO, Royal Ahold (Vice Chairman)

Dirk AnbeekEVP Franchise & Real Estate,Albert Heijn, Etos, Gall & Gall

Peter BerlinICA retailer

Dick BoerEVP and COO Europe, Royal Ahold President and CEO, Albert Heijn

Fredrik HägglundGeneral Counsel, Hakon Invest AB

Per JanssonEmployee representative

Per Anders olofssonICA retailer

magnus rehnEmployee representative

Peter wakkieEVP and Chief Corporate Governance Counsel, Royal Ahold

executive management

Kenneth BengtssonPresident and CEO, ICA AB

sonat Burman-olssonEVP, Finance, CFO ICA AB

Ingrid Jonasson BlankEVP Marketing, ICA AB

Anders nybergEVP Assortment & Sourcing, Deputy President ICA AB

trond KongrødCOO, ICA Norge AS

Peder larssonCOO, ICA Sverige AB

Antonio soaresCOO, Rimi Baltic

President and Ceo:Kenneth Bengtsson


iCA AB

involved in drafting a climate strategy was among the high-lights of the year. iCA signed the Business Climate Call in sweden and the Climate Promise in norway and formulated a goal to reduce the group’s known carbon dioxide emis-sions by 30% by 2020. iCA also expanded and developed a new platform for its organic line.

in human resources, the first half of the year was distin-guished by organizational changes. iCA has tried to set clear objectives for every employee and promotes employee devel-opment.

in seven position statements iCA has summarized its approach to ethics and social responsibility, known as iCA’s good Business. To be a long-term sustainable company iCA has the following values:◾ iCA will be driven by profitability and high ethical standards.◾ iCA will listen to customers and always base its decisions

on their needs.◾ iCA will nurture diversity and growth among employees.◾ iCA will maintain an open dialogue internally and with the

community.◾ iCA will ensure product safety and quality.◾ iCA will promote a healthy lifestyle.◾ iCA will adopt sound environment practices to promote

sustainable development.

Branding and marketing communications

iCA’s brand has a very strong position in the swedish market. in Reputation institute’s survey of sweden’s most widely recog-nized brands, iCA placed third.

Climate issues have been important to marketing com-munications in sweden, including a successful campaign with energy-efficient light bulbs and a climate website at www.ica.se.

iCA’s 90th anniversary was celebrated with a number of activ-ities for customers. Among other things, stores celebrated by treating customers to cake. The stores and customers together set a world record in blowing up balloons. during the year iCA also made the guinness Book of World Records for the longest serial commercial.

in norway, iCA markets the iCA and Rimi brands. iCA stands for the same values in norway as in sweden. Although its position is not as strong in norway, familiarity with what iCA stands for increased during the year.

Rimi celebrated its 30th anniversary. Brand communica-tions are aimed at strengthening Rimi’s image as a trustworthy discount concept.

Knowledge about customers and their needs and wishes is central to efforts to improve iCA’s offerings and communication. iCA sees its stores as the primary channel to reach customers.

iCA’s swedish website www.ica.se will have an increas-ingly prominent role in communication with customers. Here iCA constantly develops new services with a focus on food and inspiration. Visitors to www.ica.se increased sharply and in 2007 the website had an average of 2.1 million visits per month, compared with 1.8 million in 2006.


iCA AB

Five-year financial overview, ICA Group

sEK M 2003 2004 2005 1) 2006 2007summary income statementsRevenues 71,980 73,334 71,663 67,395 82,326operating profit before impairments and goodwill amortization 2,742 2,234 1,973 2,297 2,602operating profit 2,120 1,977 1,958 2,297 2,602Profit after financial items 1,808 1,741 1,671 2,046 2,282Profit from discontinued operations 367 Profit for the year 1,777 1,515 1,523 2,401 2,166

summary balance sheetsintangible assets 2,288 2,064 1,914 3,447 3,599Property, plant and equipment 11,639 12,675 12,441 13,232 14,959Financial assets 3,936 3,185 4,914 3,959 3,368other non-current assets – 186 49 181 276other current assets 9,245 9,780 10,493 10,938 10,757Cash and cash equivalents 4,446 3,198 2,920 3,749 4,360total assets 31,554 31,088 32,731 35,506 37,319

Equity 12,169 7,094 8,386 10,216 12,073Minority interests 34interest-bearing liabilities and provisions 9,527 15,150 15,774 15,563 14,475non-interest bearing liabilities and provisions 9,824 8,844 8,571 9,727 10,771total equity and liabilities 31,554 31,088 32,731 35,506 37,319

Key ratiosoperating margin, % 2.9 2.7 2.7 3.4 3.2Return on capital employed, % 13.1 12.9 12.2 12.9 13.8Return on equity, % 15.7 16.9 20.4 25.7 19.1Equity/assets ratio, % 38.7 22.8 25.6 28.8 32.4

1) in accordance with the 2005 annual accounts, includes the discontinued operation iCA Meny.

iFRs was not applied in 2003.


iCA AB

ICA Sverige captured market shares. iCA sverige is one of sweden’s leading retail companies with a focus on food and meals. The company is the principal supplier to iCA retailers who own and manage their stores as independent businesses.

s v e r I G e

market share in sweden 2007,

36.8%

four effective store profiles that meet customer needs

iCA sverige conducts food retail operations throughout the country in cooperation with independent retailers who own and manage their stores. To meet customer needs, iCA sverige has four store formats: Maxi iCA stormarknad in the hypermarket format, iCA Kvantum and iCA supermarket in the supermarket format, and the convenience store format iCA nära.

continued high rate of new

store openings and renovations

sales in the swedish iCA stores increased by 5.7%. All for-mats had a good sales trend and contributed to the increase. The rate of new store openings and renovations remained high within all store formats. 16 new stores were opened dur-ing the year. A total of 52,000 square meters of new sales space was added.

Product assortments were given priority, with an emphasis on fresh prepared foods and organic products. To meet cus-tomer demand for local products, a new project called “local Tastes” was created. The aim is to identify local producers and find new ways for them to reach customers through iCA stores in sweden.

A number of iCA stores were discovered to have repack-aged meat and changed the date. The story was widely cov-ered in the media, and led iCA sverige to take a series of measures.

revenues and earnings

in 2007, revenues in iCA sverige rose 6.5% to sEK 51,438 M (48,301). operating profit amounted to sEK 2,372 M (2,557). operating profit includes capital gains from property sales and impairment losses on non-current assets of sEK 290 M (464).

Price no longer decisive

The swedish food retail market (excluding gas stations) grew by 4.5% (5.1) and sales totaled sEK 223 billion. increased global prices of raw materials affected food prices which rose 2.7%.

iCA, Coop and Axfood together account for 64% of the swedish food retail market. The swedish iCA stores increased their sales by 5.7% and iCA’s share of the swedish food retail market climbed to 36.8% (36.5).

Price is no longer as decisive to which stores consumers choose and many consumers are more interested in other considerations such as a wide selection, high quality and green alternatives. discounters were quickly gaining ground a few years ago. Price cuts by traditional players have since strengthened their position, however.

focus in 2008

growth in the food retail sector is expected to continue and market prospects are considered good. new store openings in all formats continue at a fast pace.

iCA sverige continues to improve logistics efficiency by utilizing the new, highly automated distribution center in Helsingborg.

number of stores sales excl. VAT no. of articles dec. 31, 2007 2007, sEK M per store

60 19,714 30–45,000

119 20,596 10–30,000

460 27,695 6–10,000

743 12,732 3–5,000

everything under one roof at good prices. Conveniently located hypermarkets for customers who drive to the store.

large supermarkets with a broad and deep product range.

Food enjoyment and diversity with a focus on fresh products and personal service.

small and convenient stores with easy access and a high level of service.

0

15,000

30,000

45,000

60,000

20072006200520042003 *

revenues, sEK M

* iFRs-adjusted


iCA AB

four formats to cover all positions

iCA norge conducts food retailing through companies oper-ated by the company or franchise. There are also associated stores. With its four store profiles in the hypermarket, super-market, convenience store and discount formats, iCA norge tries to meet all needs and cover every position in the market.

restructured store profile and continued expansion in 2007

sales in the norwegian iCA stores decreased by 0.9%. despite this, all profiles increased their sales in comparable stores. new stores were opened at a fast pace and nine new stores were opened during the year corresponding to a sales space of 14,000 square meters. At the same time the store profile was restructured with the sale or closure of 60 stores.

The “Take-off” program was started to create norway’s best stores while raising sales and profitability. iCA norge supported the establishment of an association for franchisees that will give them a greater role and insight into key decisions and processes. A revision of the contractual terms between iCA norge and its franchisees was initiated and will continue in 2008. The aim is to increase the focus on store operations and sales.


in 2007, revenues in iCA norge rose 3.6% to noK 16,534 M (15,966). operating profit amounted to noK 127 M (89). Capital gains from property sales, including impairment

losses on non-current assets, are included in operating profit with noK 269 M (107).

discount chains account for half the market

Preliminary figures show that the norwegian food retail mar-ket (excluding convenience stores and gas stations) grew by 5.9% (5.1) during the year with sales of approximately noK 116 billion, excluding VAT. Food prices increased by approx-imately 2.5% during the year.

norgesgruppen, Coop norge and Rema together account for a large share of sales in the norwegian market making them iCA norge’s largest competitor. discount chains account for about half of sales. iCA norge’s market share decreased during the year due to restructuring of the store portfolio and amounted to 17.5% (19).

While norwegian consumers are price conscious they are demanding larger stores and a wide range of ready prepared and fresh products. Many chains, like iCA norge, are therefore working to develop hypermarket concepts.

focus in 2008

Efforts to increase sales and develop norway’s best stores continue. iCA norge will open new stores and continue to modernize its existing store network. significantly fewer stores are expected to be closed than in 2007. Product assortments remain a priority, with an emphasis on the range of fresh foods, healthy and organic products, and non-food items.

n o r G e

market share in norway 2007,

17.5%

number of stores sales excl. VAT no. of articles dec. 31, 2007 2007, sEK M per store

25 2,833 15–24,000

79 4,558 approx. 10,000

275 4,407 3–6,000

263 7,910 approx. 3,000

everything under one roof at good prices. Conveniently located hypermarkets for customers who travel by car.

Food enjoyment and diversity with a focus on fresh products and personal service.

smaller neighborhood stores with easy access and a high level of service.

Discount stores for customers’ daily shopping.

0

5,000

10,000

15,000

20,000

20072006200520042003

revenues, noK M

Continued restructuring. iCA norge is a norwegian retailer with a focus on food and meals. iCA norge has 642 stores operated by the company or as franchises


iCA AB

r I m I B A l t I C

market share in Baltic countries

2007, 17.3%

chain of wholly owned stores in customized profiles

Rim Baltic’s aim is to be the customer’s first choice in the fast-growing markets in Estonia, latvia and lithuania. The company was established as a joint venture between iCA and Kesko livs in 2005 and has been a wholly owned subsidiary of iCA AB since 2007. By integrating Rimi Baltic as a wholly owned entity, iCA has created a stronger nordic-Baltic alliance with oppor-tunities for synergies in administration, iT and purchasing, with a special focus on non-food, fruit and vegetables. The com-pany operates chains of wholly owned stores in three formats to adapt to different locations and customer categories. Rimi Hypermarket and Rimi supermarket with a focus on fresh foods and good service, the smaller Compact Hypermarket, as well as säästumarket and supernetto with a hard discount focus.

efficiency improvements on broad front in 2007

sales rose 19.4%. 14 new stores were opened in the region. internal efficiency was a priority, with the goal of improving profitability. A major project was conducted to optimize man-agement systems. Another project was designed to improve energy efficiency at distribution centers and in stores.

A new central kitchen opened in Estonia early in the year. This kitchen will take over food production previously handled by the stores.


in 2007, Rimi Baltic’s revenues rose 19.4% to EUR 1,161 M (972). operating profit amounted to EUR 11.6 M (2.2). Capital gains from property sales, including impairment losses, are included in earnings with EUR –0.3 M (7.8).

a highly dynamic market

The Baltic market for food products grew by 12% (15) in 2007, to approximately EUR 6.7 billion. The discount mar-ket, where Rimi Baltic has a very strong position, stagnated due to rising real wages.

in 2007 Maxima was the market leader in the region, followed by Rimi Baltic with a share of 17.3%. in Estonia, competition was intense in 2007, mainly due to Maxima’s rapid expansion in discount stores. Rimi Baltic’s sales rose 5.3% while market share decreased to 22.4% (24). in latvia, Rimi Baltic is market leader with a market share of 22.7% (22). sales rose 26.9% during 2007. in lithuania, Rimi Baltic increased its sales by 27.6% and is the fourth largest com-pany with a market share of approximately 9.3% (7).

focus in 2008

Competition in the Baltic region is expected to intensify in 2008 when five European chains allied under the name Coopernic enter the market after acquiring an 80% interest in iKi in lithuania and latvia. The five players are leclerc (France), Conad (italy), Rewe (germany), Colruyt (Belgium), and Coop in switzerland.

Rimi Baltic will focus on upgrading and modernizing its concept in the supermarket segment while pursuing its hard discount profile. The company will also focus on improving quality levels in the hypermarket concept. in Estonia, Rimi Baltic will continue its upgrades and launch new store projects.

Intensifying competition but strong concept. Rimi Baltic is one of the leading and most modern grocery chains in the Baltic region with a total of 215 stores operated by the company.

Revenues 2007: EUR 1,161 M (972)Operating profit: EUR 11.6 M (2.2)No. of FTEs: 8,221 (9,132)No. of stores: 215 (205)

Hypermarket supermarket Discount total

estonia 9 5 51 65

latvia 13 30 51 94

lithuania 10 22 24 56

total 32 57 126 215


iCA AB

B A n K e n

simple services on competitive terms

good interest on current accounts, clear terms and low charges are the philosophy behind iCA Banken’s operations. The bank offers the simplified services customers want such as current accounts and various forms of bank cards. iCA Banken also offers unsecured loans with competitive terms. Mortgages are offered in cooperation with sBAB, and accident, life and disability insurance in cooperation with genworth Financial. iCA Banken continues to install new ATMs in stores.

iCA Banken administers iCA’s customers card.iCA Banken offers its own branded products in the finan-

cial services sector in sweden. When iCA’s card is used, it also reduces processing fees for iCA retailers.

more customers and new services in 2007

The number of customers who utilize iCA Banken’s banking services rose to 350,000 (285,000) during the year. The number of iCA cards in issue rose to 260,000 (213,000).

iCA Banken launched new savings products during the year. The range was broadened with banking services includ-ing trading in equities and funds as well as individual pension savings (iPs) in cooperation with nordnet Bank AB.

iCA Banken added 36 ATMs in cooperation with and adjacent to iCA stores around sweden.

iCA Banken was named Bank of the Year 2007 by the maga-zine Privata Affärer, and nominated as sweden’s best work-place in Alecta’s annual survey. in the swedish Quality index's (sQi) annual survey, iCA Banken dropped from first place to fifth. sQi's analysis showed that this may have been because iCA Banken was unable to offer equity and pension savings until the end of the year.


in 2007, iCA Banken’s revenues rose 12.7% to sEK 517 M (458). operating profit amounted to sEK 83 M (11).

niche banks catching up

The four major swedish banks – sEB, swedbank, nordea and Handelsbanken – continue to account for about 80% of the market. smaller banks such as iCA Banken, skandia-banken and länsförsäkringar Bank have well-established market positions.

focus in 2008

iCA Banken has developed a broad-based offering for con-sumers and will utilize various marketing measures to cultivate new customers. To improve customer service, iCA Banken has started a training project where service staff at a number of Maxi iCA stormarknad will learn more about the bank’s services. during the year, payment terminals will be opened in the norwegian iCA and Rimi stores, which will reduce transaction costs for customers who use other credit cards.

Bank of the Year 2007. iCA Banken offers financial services that make life a little easier for iCA customers and in the process strengthen their loyalty to iCA.

Business volume (deposits + lending including mortgages) 2007: sEK 14,728 M (13,480)Deposits 2007: sEK 7,509 M (6,394)Number of ATMs: 105 (69)No. of payment terminals: 6,000 (6,000)

2005 2006 2007

revenues (sEK M) 316 458 1) 517

operating profit (sEK M) –82 2) 11 83

number of Ftes 154 174 196

1) Revenues include a capital gain of sEK 6 M.2) 2005 operating profit adjusted due to changed

accounting principles related to accrual of card charges.


customer offering

operations focus on consumer and trade magazines, book publishing and contract communication. As well as in sweden, the magazine operations are conducted in Finland, Estonia and latvia. Forma is sweden’s third largest general book publisher and the biggest within contract publishing and other editorial contract communication. The aim is to provide people with knowledge and inspiration in both their private and professional lives.

development in 2007

during the year, Forma’s operations were reorganized from four to three business areas: Forma Magazine, Forma Books and Forma Contract. The acquisitions of damm Förlag and oTW strengthen the market position within books and con-tract publishing respectively. These acquisitions are entirely in line with Forma’s strategy to grow both organically and through acquisitions.

in spring 2007, Forma Magazine launched a new design for icakuriren, sweden’s largest weekly magazine. The maga-zine is now smaller and easier to manage. A clearer division of content makes icakuriren even more accessible and interest-ing for a wider target group.

Forma has also expanded its operations to include moving media. Forma Contract’s acquisition of all the shares in oTW marks a transition from exclusively customer magazines to an offering that includes magazines, the internet and television.

in June 2007, oTW concluded an agreement for production of all Canal+ sports programs in sweden, a total of more than 4,000 hours per year.

in Forma Magazine, the internet and event sections were strengthened within the trade magazine concept Market, which targets the entire retail trade.

Forma Books established a platform with three clear areas: non-fiction, children and young people, and fiction.


in 2007, revenues amounted to sEK 795 M (660), an increase of 20% compared with the previous year. Revenues within books and contract publishing increased as a result of the acquisitions of damm Förlag and oTW. Revenues from con-sumer magazines fell since Forma had fewer titles compared with 2006. Trade magazines showed a stable revenue trend.

operating profit amounted to sEK 30 M (37). The decrease is due to integration of acquired operations and increased costs from the launch of the new icakuriren.

Profit for the year amounted to sEK 17 M (27).

market and customers

new technology and new media phenomena are leading to changed consumer habits which in turn is leading to restruc-turing in the media and publishing market. The consolidation in the business in recent years means that already large play-ers have become larger and fewer.

Market position advancedForma Publishing group is one of sweden’s biggest publishing houses. The acquisitions of damm Förlag and oTW mark a further step forward in the market for books and editorial communication.

F o r m A P u B l I s H I n G G r o u P

2005 2006 2007

revenues (sEK M) 596 660 795

operating profit (sEK M) 54 37 30

Profit for the year (sEK M) 52 27 17

number of Ftes 308 309 432

Hakon Invest’s holding: 100 %

Acquisition year:1999

the acquisitions of damm förlag and otW made forma an almost complete media company.


FoRMA PUBl isHing gRoUP

The trend with several new magazines has continued and led to even tougher competi-tion in the consumer magazine market. At the same time, reduced loyalty can be noticed among both subscribers and buyers of single copies.

Advertising sales, an important source of income for Forma, depend in the short term on the general economic situation. The continued stable economic growth in sweden during 2007 meant that the advertising market remained stable. According to a fore-cast issued by the swedish institute for Advertising and Media (iRM) in February 2008, total media investments increased by 6%1) to sEK 32 billion in 2007. iRM expects media investments in sweden to rise by just over 2% to almost sEK 33 billion in 2008.

in the longer term, advertising sales are affected by structural changes such as new media, product development and changed competition. The redistribution in the media mix, where printed media is forced to give way to digital, became clearer in 2007 and there is every indication that this trend will continue.

demand for company and customer magazines continued to grow in pace with companies’ growing interest in clarifying their image and strengthening relationships with customers and employees. This trend will allow Forma through increased contract production to reduce its exposure to the traditional advertising market.

The number of magazine titles per capita in Finland is lower than in sweden and the competition is therefore less intense than in sweden. According to a forecast from the World Advertising Association total media investments in Finland increased by 1.8% to EUR 1,550 M in 2007 and an upswing to EUR 1,601 M is expected in 2008.

Estonia and latvia have a lower purchasing power than sweden and Finland but growth is much faster. Economic growth is contributing to higher advertising investments and demand for advertising space.

forma’s group and business structure

Forma is the parent company of a group with wholly and partly owned subsidiaries in sweden, Finland, Estonia and latvia. since 2007, operations have been divided into three business areas: Forma Magazine, Forma Books and Forma Contract.

focus in 2008

Forma’s strategy is to grow both by developing existing and new business and by add-on acquisitions within existing business areas. At the same time, Forma will continue to develop its business methods and improve its organizational efficiency.

in 2008 the focus will be on integration of acquired companies. Following a clear focus on growth in recent years, the emphasis will now be on profitability improvements.

The goal is to increase revenues to sEK 1,000 M and achieve an operating margin of 10% in 2010.

How forma started

Forma’s first magazine, Praktiskt Butiksarbete (practical store work) was published in 1941. icakuriren was distributed free in iCA stores in 1942.

The swedish publishing operations have grown steadily and operations were started in Finland in 1983. since then, magazine operations have been started in Estonia and latvia.

The acquisition of B. Wahlströms Bokförlag in 2006 and damm Förlag in 2007, make Forma’s publishing operations number three in general publishing in sweden.1) According to iRM’s quarterly report February 19, 2008.

Board of directors

Claes-Göran sylvénPresident, Hakon Invest (Chairman)vivianne AhlbinTrade union representativeGunnar GöranssonTrade union representativeGöran HessebornCFO Hakon InvestIngrid Jonasson-BlankEVP ICA ABnaomi seidPresident Titeldataronnie törnblomICA retailerPatrik widlundPresident Formalars ÖhlanderICA retailer


Patrik widlundPresident and CEOeva AbrahamssonPublications Managermaria CroonHead of Forma MagazineKatarina HillmanCFOAnn näslundVice President, Human ResourcesPer sundbergHead of Forma ContractGöran sunehagHead of Forma Books

President:Patrik widlund

3 questions to Patrik Widlund

What was Forma Publishing Group’s most important step in 2007?

one of the most important steps was the clearer division into three business areas: Magazines, Books and Contract. We have achieved very strong positions within book publishing and contract production.

What is the biggest challenge in 2008?

We will move from a clear priority on growth to nurturing profitability. Forma Magazine must tackle intensifying compe-tition, while Forma Books needs to focus on integration of recent acquisitions.

What is your favorite city for shopping?

new York.


customer offering

Kjell & Company is a chain of wholly owned stores which sell accessories for modern home electronics while providing a high level of service. All stores carry a full range of over 7,000 products, many of which are computer accessories. The store network extends from Malmö in the south to Umeå in the north. sales are also conducted over the internet and by mail order.

The website includes “KjellFakta” a knowledge bank that answers technical questions and provides practical hints ahead of purchase. The approximately 300-page product and information catalog is issued twice a year.

development in 2007

Together with Hakon invest, Kjell & Company streamlined its concept through an improved level of service and clarified the price profile. since autumn 2007 all new employees attend a two-week training course at the recently started Kjell & Company school to learn more about products and service.

in the third quarter, the distribution center and head office relocated to new premises that are more suitable for the con-tinued expansion. Twelve new stores opened during the year in locations that included the center of stockholm, Uddevalla and sundsvall. The rate of new openings is considerably higher than the original plan with 29 stores by year-end 2007. The strong expansion and new distribution center will allow larger and more efficient purchases.


in 2007 revenues rose 36% to sEK 345 M (254). in compa-rable units revenues rose 14%. operating loss amounted to sEK –4 M (+11) and loss for the year was sEK –3 M (+7). The expansive investment program with twelve new stores reduced earnings.

market

Computers and home electronics are today a natural part of people’s everyday lives. This, combined with consumers’ growing expertise, creates a need for attractively priced, easily available accessories. A large portion of accessories sales today are made through home electronics retailers who mainly focus on the sales of main products. This creates scope for players that focus fully on accessories.

focus in 2008

Hakon invest together with Kjell & Company’s management has laid the foundations for successful expansion. The large new distribution center in Malmö makes product supply more efficient which will allow a continued high rate of new store openings. in 2008 about ten new stores are expected to open their doors, in gothenburg, Kalmar and elsewhere. The aim is to reach 60 stores by 2010 at the latest.

At the same time work on streamlining the customer offer-ing will continue and include recruitment of store staff with a real interest in service, computers and home electronics.

new store openings doubledKjell & Company is a leading retailer of home electronics accessories. The strong concept and efficient handling of purchasing, stock and logistics allowed rapid expansion in 2007.

2006 2007

revenues (sEK M) 254 345

operating profit/loss (sEK M) 11 –4

Profit/loss for the year (sEK M) 7 –3

number of Ftes 130 188


Investment year:2006

K J e l l & C o m P A n y

Vinyl player with UsB connection was the most popular christmas present at Kjell & company in 2007.


KJEll & CoMPAnY

Another goal is to continue to increase sales via the online store, which will be more clearly linked to the whole concept.

How Kjell & company started

Kjell & Company was started in 1990 by entrepreneur Kjell dahnelius and his three sons. The first store was in the Triangeln shopping center in Malmö. The business has grown steadily ever since with a number of new stores each year, mail order sales and most recently sales in an internet store.

Hakon invest became an owner in July 2006 with an investment of sEK 102 M.

3 questions to Mikael dahnelius

What was Kjell & Company’s most important step in 2007?

We very much focused on expansion which means that we increased from 17 to 29 stores. Another major project was the move to larger and better ware-house premises in Malmö.


We have said that about ten new stores will open during the year and the chal-lenge will be finding the right locations. We will also work on increasing the proportion of imported products.


skärholmen shopping center outside stockholm.

President:mikael Dahnelius

Board of directors

Göran HessebornCFO Hakon Invest (Chairman)

Fredrik Dahneliusmanagement Kjell & Company

Kjell Dahneliusmanagement Kjell & Company

markus Dahneliusmanagement Kjell & Company

mikael DahneliusPresident, Kjell & Company

edgar sesemannPurchasing Director, ICA AB

stein Petter skiSenior Investment Manager, Hakon Invest

Christina ståhlPresident Mio


mikael DahneliusPresident

Bo AnderssonPersonnel Manager

Fredrik DahneliusHead of Purchasing & Logistics

marcus DahneliusHead of Products & Assortment

Kjell DahneliusSenior Advisor

Annika lundbergCFO

In spring 2008, thomas Keifer will become the new president. Former president mikael Dahnelius will stay at Kjell & Company and be responsible for sales and new stores.


customer offering

Hemma owns 20 stores in metropolitan regions and is the member organization for 85 retailer-owned stores. The busi-ness concept is to offer customers known-brand products for the home, kitchen and laundry backed by considerable expertise, enthusiasm and cost efficiency. The chain is nation-wide with stores in suburbs, central areas of small towns or in locations along the main highways outside city centers. All stores carry a broad range and have skilled and dedicated employees. The stores also sell small electrical appliances and other products for the home such as heat pumps and kitchen utensils.

To strengthen the concept and offer attractive prices, the 105 stores cooperate within marketing, environmental and quality development and purchasing. Membership of Euronics, Europe’s largest white goods purchasing chain, provides access to low prices for products from leading suppliers.

development in 2007

Together with Hakon invest, Hemma initiated a major change program designed to build a solid platform for continued growth. This included recruitment of a new management group with Torkel Hallander as the new president.

The year was devoted, among other things, to analysis of the chain’s current position. Retailer agreements were refor-mulated and a new advisory structure was introduced as a

mouthpiece and sounding-board for management. The inde-pendent retailers’ stores will be reprofiled to the shared Hemma brand.

Hemma reduced the number of stores slightly during the year. This was done as part of the ongoing restructuring of the store network and because some retailers left the chain.


in 2007 revenues totaled sEK 368 M. operating loss amounted to sEK –30 M. Earnings were affected by stock impairments and costs linked to the restructuring during the year. loss for the year was sEK 23. The Hemma chain in its present form was founded at the beginning of 2006 so there are no comparative figures.

market

during 2007 total sales in the white goods market in sweden amounted to approximately sEK 7 billion, an increase of 3.4% compared with 2006. The Hemma stores have a market share of about 20%, a 0.5% improvement over 2006.

The increased importance of the home and general growing interest in furnishings and design has had a positive impact on demand for products for the kitchen and laundry. in general, consumers are willing to pay more to renovate their homes. The trend is greater polarization: rising demand for products in both high and low-price segments.

The retailer segment of the white goods sector is highly

H e m m A

Well organized for the futureWith over 100 stores Hemma is sweden’s largest white goods retailer. Hemma combines the strength of local entrepreneurship with an efficient and profitable centrally located chain.

2007

revenues (sEK M) 368

operating loss (sEK M) –30

loss for the year (sEK M) –23

number of Ftes 175



in one of Hemma’s store surveys the majority of customers who invested in a new washing machine said they also needed a new iron.


HEMMA

fragmented in sweden. specialist stores dominate sales of both white goods and kitchen appliances. At the same time, the general electronics chains and online traders are increasing their market shares in the discount segment.

focus in 2008

Together with Hakon invest, Hemma’s management and member stores will further develop the customer offering and concept. The aim is that all stores, both wholly owned and member stores, will comply with the shared concept and brand program.

The goal is to increase the number of stores in the Hemma chain, both by opening new stores and by adding more independent retailers. since Hemma’s start in 2001, the number has risen substantially and in the short term the focus is on integration and coordination of the chain’s existing stores.

With a sharpened customer offering and more wholly owned stores, the aim is that wholly owned stores will reach total sales in excess of sEK 1,000 M in five years’ time.

How Hemma started

Hemma has existed since 2001 when the chain changed its name from sparman which was originally purely a purchasing organization. in 2006 the Hemma chain underwent a major change when a newly formed limited company acquired Hemmabutikerna i sverige AB, which runs central functions such as new stores, purchasing, marketing and assortment development for the entire chain, and the store companies dala Hemma, Vitvaruhuset i norrtälje and Konsumentköp in Helsingborg. This created a chain of both wholly owned stores and independent member stores.

Hakon invest became an owner in october 2006 with an investment of sEK 90 M and has since invested an additional sEK 15 M.

3 questions to Torkel Hallander

What was Hemma’s most important step in 2007?

Most important was the build-up of the new organization and the fact that we have now laid the foundations for conti-nued strategic work.


We have a strong focus on increasing volumes and improving earnings in the stores. We will also continue to draw up the strategies for the entire chain, i.e. how our retailers can grow and earn money.


i am very happy in stockholm and that applies to shopping as well.

President:torkel Hallander

Board of directors

George müllerKaxxig Marknadsföring & Kommunikation (Chairman)

Catharina GrundströmICA retailer

sven-Göte GustavssonLogistics consultant

stefan olssonHemma retailer

Henrik PatekCRM Manager, ICA AB

leif rehnHemma retailer

Johan ÖrengårdInvestment Manager, Hakon Invest

organization

torkel HallanderPresident

ebba BlumSVP Human Resources

Peter FagerströmSVP New Stores

elisabeth slungeSVP Marketing/Purchasing

tommy wahlbergCFO


customer offering

Cervera is a chain of wholly and partly owned stores as well as franchise stores. The product range consists of between 4,000 and 5,000 items within glassware and porcelain from known suppliers as well as related products such as cutlery, kitchenware and small electrical appliances. Many stores also sell lighting and furniture with a link to cooking and meals.

With its broad assortment and large stores, Cervera seeks to create attraction and provide interesting customer experiences. The chain has a total of 48 stores, of which 26 are wholly or partly owned and 22 are franchise stores. The store network stretches from Malmö in the south to luleå in the north, mainly in towns of more than 70,000 people.

development in 2007

Cervera is in an intensive development phase and worked to strengthen the customer offering and modernize the profile and store concept in 2007. one key step was the strengthen-ing of the organization and management resources. Håkan Filipsson took over as the new president in the autumn and earlier in the year Kajsa Borgqvist was employed as market-ing director.

The management group analyzed and streamlined the assortment and customer offering as well as defining a num-ber of tangible focus areas for future work.

in January 2007, Cervera acquired the operations in Anders Petter, a homeware and household utensils retailer. The acqui-sition of Anders Petter strengthens Cervera’s customer offering.


in 2007, revenues amounted to sEK 377 M. operating loss was sEK –1 M and loss for the year amounted to sEK – 2 M. since Cervera started in its present form in september 2006, there are no comparative figures.

market

The increased importance of the home and general growing interest in furnishings and design has increased demand for glass and porcelain products, furnishings and furniture.

Younger consumers are more trend-conscious and accus-tomed to short fashion cycles which also results in more pur-chases of glass, porcelain and furnishings. This is a strong contributory factor to the current sector overlap, which means that a growing number of players are adding glassware, porcelain and furnishings to their product range. Many home furnishings, furniture and electrical goods stores now also compete in glassware and porcelain. At the same time, some suppliers are choosing to open their own outlet stores aimed directly at consumers.

sector overlap has increased activity and willingness to change among traditional glassware and porcelain retailers.

strengthened customer offeringCervera is a well-established and nationwide glassware and porcelain chain with 48 stores throughout sweden. The product range includes branded goods from known suppliers within glassware, porcelain, kitchen and household appliances, lighting and furniture.

With approximately 2 million customers per year, cervera’s employees gift wrap 1.5 million packages a year.

2007

revenues (sEK M) 377

operating loss (sEK M) –1

loss for the year (sEK M) –2

number of Ftes 183



C e r v e r A


CERVERA

Cervera’s share of the total market for food serving products is approximately 17% and the corresponding share of the homeware segment is about 7%. Measured in volume, market share is approximately 6% and 2% respectively.

strategic ambitions

Hakon invest is helping to make the concept more uniform and the supply chain more effi-cient in order to boost growth and improve profitability. in consultation with Hakon invest, Cervera has drafted a strategic plan which will streamline the assortment, strengthen rela-tionships with suppliers and make the supply chain more efficient.

The goal for the next few years is to strengthen Cervera’s market position and at least double sales by 2011.

How cervera started

Cervera started as a voluntary specialized retail chain in 1987 and since then has estab-lished a leading brand within glassware and porcelain products in sweden.

Hakon invest became an owner in december 2006 with an investment of sEK 85 M.

3 questions to Håkan Filipsson

What was Cervera’s most important step in 2007?

We reviewed the product range – the core of the operations and the base of our customer offering. We also defined a number of focus areas for our conti-nued work.


it is important to make the supply chain to the stores more efficient and one of the ways we will do this is to implement a business system.


norrtälje is a very pleasant town to go shopping in.

President:Håkan Filipsson

Board of directors

ragnar BohmanChairman

stein Petter skiVice Chairman,Senior Investment Manager, Hakon Invest

Conny JosefssonCervera retailer

tomas KopschCervera retailer

Bo PetterssonConsultant

Claes-Göran sylvénPresident & CEO, Hakon Invest


Håkan FilipssonPresident

Kajsa BorgqvistSVP Marketing

tomas KilströmCFO

mathias KopschSVP Purchasing

Johan norströmSVP Sales


customer offering

inkClub’s sales are made exclusively over the internet. Custo-mers are offered ink cartridges and other printer accessories at low prices and with fast home delivery. in addition to sim-plicity and speed, regular loyalty campaigns are a key part of the offering.

Managing all sales and customer service via e-mail leads to high cost efficiency which in turn makes it possible to offer low prices throughout Europe. The majority of sales take place in the nordic region.

development in 2007

since the start seven years ago, inkClub has shown rapid and profitable growth. operations are established in 14 countries in Europe. in 2007 the number of orders increased by about 100,000 to approximately 1.1 million.

in conjunction with the acquisition, Mats Munther, head of business development at iCA AB, entrepreneur Mats Hultin and stein Petter ski, senior investment Manager at Hakon invest, were appointed to represent Hakon invest on inkClub’s board. The board together with management has prioritized among previously identified development projects. As a result, the build-up of a new web platform was initiated in order to prepare for a broader product offering. inkClub also worked to further improve customer satisfaction, among other things

by introducing three shifts in the packaging unit to guarantee deliveries the day after order.


in 2007 revenues increased by 6% to sEK 364 M (342). operating profit amounted to sEK 45 M (41). Profit for the year was sEK 34 M (33).

market

online shopping has a become an increasingly important retail sales channel. ink cartridges, printer accessories and products that are comparatively small in size are particularly suitable for purchase via the internet and home delivery. With operations in 14 countries in 2007, inkClub places itself at the top among global players with internet sales of ink car-tridges. sales are about 20 times higher than those of the closest nordic competitor.

Competition for consumer attention is intense and the economic boom in recent years led to a substantial upturn in advertising prices on the internet. inkClub does not only com-pete with online sellers of printer accessories. The fight for advertising space is waged against companies from widely different areas. small companies’ advertisements compete on the same terms as major, well-known brands.

Major potential for online sales of printer accessoriesAs a leading player within internet-based sales of ink cartridges, inkClub is well placed for continued profitable growth. Hakon invest became an owner of the company in July 2007.

inkclub’s website has more than 25 million visitors per year.

2006 2007

revenues (sEK M) 342 364

operating profit (sEK M) 41 45

Profit for the year (sEK M) 33 34

number of Ftes 45 48



I n K C l u B


inKClUB

strategic ambitions

With its long experience of retailing, Hakon invest can contribute to the further devel-opment of inkClub’s business, among other things by strengthening customer relation-ships and creating opportunities for growth through new products and new geographic markets. At the same time as inkClub can benefit from Hakon invest’s knowledge of customer offerings, concept and supply chain, inkClub can help to strengthen Hakon invest’s online retailing expertise.

How inkclub started

inkClub was formed in 2000 by entrepreneur lennart nyberg and was profitable from the start. The company was built up with relatively small resources but still showed very strong growth. in 2006 inkClub was awarded the Export Hermes prize and the World Class Award from the stockholm Chamber of Commerce. lennart nyberg was named Businessperson of the Year by the business daily dagens industri in 2005.

Hakon invest became owners of 50% of the shares in July 2007 with an investment of sEK 428 M.

3 questions to Fredrik Brandt

What was inkClub’s most important step in 2007?

A major and important event was natu-rally that inkClub became part of Hakon invest. it is always good to have a strong owner with high ambitions for the future.


one key challenge, which at the same time creates major opportunities, is to get our new web platform in place. This is extremely important for growth.


i have come to appreciate shopping in Uppsala. it is a small town but it has everything and within walking distance.

President:Fredrik Brandt

Board of directors

mats HultinChairman

Gunnar mattssonpartner Lindahls Advokatfirma

mats muntherHead of Business Development, ICA AB

Hans nilssonfounder and SVP IT, inkClub

lennart nybergfounder inkClub

stein Petter skiSenior Investment Manager, Hakon Invest


Fredrik BrandtPresident

martin BenckertSVP Purchasing

Alissar GhaddarSVP Orders and Stock

thomas GrandinCFO

Christina mattfolkSVP Customer Service

Hans nilssonSVP IT

Henrik nilzénSVP Marketing


Financial report

55 Board of Directors’ report

59 Consolidated income statement

60 Consolidated balance sheet

62 Consolidated statement of changes in equity

63 Consolidated cash flow statement

64 notes to the consolidated accounts

79 Parent company income statement

80 Parent company balance sheet

82 Parent company statement of changes in equity

83 Parent company cash flow statement

84 Parent company’s notes

88 Proposed disposition of profits

89 Audit report


Board of directors’ report

the Board of directors and the president of Hakon invest aB (publ) hereby present the annual accounts and the consolidated accounts for the fiscal year 2007. the company has its registered office in stockholm and its corporate registration number is 556048-2837.

all amounts are in seK million (seK M) unless stated otherwise.

Ownershipat december 31, 2007, 67.4% of the company was owned by ica-handlarnas förbund (the parent company), corporate registration number 802001-5577. the remaining 32.6% is owned by 12,720 shareholders. the company’s common shares are listed on the oMX Nordic exchange.

The company’s operationsHakon invest makes long-term investments in retail-oriented companies with a geographic focus on the Nordic and Baltic regions. our vision, with ownership of ica aB as a foundation, is to be the leading Nordic development partner for companies in the retail sector. the 40% hold-ing in ica aB forms the base of our ownership philosophy and opera-tions. through active and responsible ownership we will contribute to create value growth in ica and develop our portfolio companies, all of which are independent companies with their own earnings and profit-ability responsibility. added value will be created for Hakon invest’s shareholders through value growth in the investments combined with a good dividend yield.

Significant events during the year on November 22, Hakon invest received payment from the settlement fund that was set up in connection with settlement of the class action against the dutch company royal ahold in the U.s. the amount paid to Hakon invest was seK 122 M and corresponds to approximately 95% of the company’s total claim in the settlement. the remaining 5% is expected to be paid out within twelve months.

on July 11, 2007, Hakon invest completed its acquisition of 50% of the capital and voting rights in inkclub, which conducts online sales of ink cartridges and printer accessories. inkclub has more than 1 mil-lion active customers in 14 european countries. the purchase price for the shares amounted to seK 428 M.

Hakon invest’s wholly owned subsidiary forma acquired off the Wall aB (otW) and damm förlag aB during the second quarter of 2007. otW mainly comprises contract operations within customer magazines, television and pr and is a significant addition to forma’s contract publishing business. damm förlag aB publishes fiction and non-fiction for children, young people and adults.

on april 4, 2007, Hakon invest increased its ownership in Hemmabutikerna i sverige Utvecklings aB (”HUaB”) from 49% to 59% of the capital and voting rights, through acquisition of existing shares. Hakon invest paid seK 14 M for the additional shares. Hakon invest subsequently acquired additional shares in Hemma, which increased the holding to 60% of capital and votes.

according to a decision from the swedish tax agency in february, Hakon invest was allowed a loss carry forward for the shareholding in the dutch company royal ahold. this tax deduction relates to losses on the ahold holding during tax years 2002–2005, which can be off-set against taxable profits in the 2006 tax year and beyond. this

resulted in a positive effect on income tax of seK 350 M in the first quarter of 2007, of which seK 67 M comprises current tax for tax years 2004–2006 and seK 283 M comprises deferred tax.

ica announced a number of major property sales in 2007. in January 2007 a portfolio of store properties was sold in Norway for NoK 516 M and the property sjølyst arken, west of oslo, was sold in february for NoK 330 M. in april, alta storsenter was sold at an underlying property value of NoK 273 M. in sweden, two properties were sold in May for seK 237 M. in June, a portfolio of store proper-ties was sold in sweden for seK 601 M. in November, ica con-cluded an agreement to sell two properties to epGf for seK 199 M, which will have a positive impact on ica’s operating profit of approxi-mately seK 60 M in the third quarter of 2008 at the latest.

in June 2007, the swedish tax agency informed ica that an interest deduction in ica finans aB of almost seK 1.8 billion for the period 2001–2003 was disallowed. the tax agency’s demand amounts to seK 716 M, including a tax surcharge and interest. ica contests both the additional tax and the tax surcharge and has appealed against this decision in the county administrative court. the tax agency has also submitted an application to the county administrative court related to an interest deduction of seK 1.7 billion, made in 2004–2005. ica is of the opinion that the deductions made were in accordance with tax legislation and has contested the swedish tax agency’s claim. in November, the swedish tax agency withdrew its application relating to the years 2004–2005.

in february 2007, ica introduced a new organization which means that the subsidiaries will have clearer profit responsibility and the number of group functions is reduced from four to three. these changes were carried out to better adjust the organization to the streamlining carried out last year and to enable cost savings over time.

Significant events after the end of the periodin february 2008, 3,529,800 shares were acquired in Hemtex aB, which corresponds to 12.1% of the share capital and voting rights.

the Board of ica aB proposes that the dividend payout ratio be raised from the normal 40% to 50% for 2007.

The Group’s revenues and earningsconsolidated revenues amounted to seK 1,075 M (660), of which revenues from forma comprised seK 795 M (660) and from Hemma seK 280 M (0). consolidated operating profit amounted to seK 768 M (885). the comparative figure from the previous year includes the earnings impact from the sold company ica Meny of seK 122 M.

Net financial items amounted to seK 214 M (219). financial management showed a positive return during the period January – december, well in line with the previous year. during the year seK 122 M was received from the settlement fund set up in conjunction with the settlement of the class action against royal ahold in the U.s. in total, the return from the Group’s financial management was over 8%. excluding the compensation from royal ahold, the return was almost 4%, which is below the target for financial management of an annual return of 5%. during 2007, the oMX index fell 6%, the Msci World index rose 3.5% and oMrX t-bill increased by 3.4%.

positive income tax is reported for the period of seK 344 M (–50). the swedish tax agency allowed Hakon invest a tax deduction on



losses on a shareholding, which had a positive effect on income tax of seK 350 M.

profit for the year was seK 1,326 M (1,054). earnings per share amounted to seK 8.30 (6.55).

Financial positionthe Group’s cash and cash equivalents and the current value of short-term investments at december 31, 2007, amounted to seK 2,292 M compared with seK 2,717 M at december 31, 2006.

at december 31, 2007, financial investments under external man-agement amounted to seK 1,776 M and investments under internal management to seK 516 M. at year-end, investments were distributed as follows: 29% equities, 24% fixed-income securities, 35% hedge funds and 12% cash and cash equivalents.

the Hakon invest Group’s non-current financial liabilities amounted to seK 73 M (16). the equity/assets ratio at the end of the period was 94.4% (95.2).

Cash flowcash flow from operating activities amounted to seK 633 M (166) in 2007. the change is primarily attributable to an increased dividend from ica aB and a change in working capital. dividend received from ica aB amounted to seK 383 M (244).

cash flow from investing activities amounted to seK –204 M (–17). changes in short-term investments are included with seK 301 M (334), while acquisition of participations in new companies and investments and divestments in non-current assets are included with seK –505 M (–351).

in May 2007 a dividend of seK 5.50 per common share was paid to shareholders which affected cash flow from financing activities by seK –433 M (–355).

cash and cash equivalents decreased to seK 281 M (349) at december 31, 2007.

HoldingsICA ABica aB is a joint venture of which Hakon invest owns 40% and the dutch company royal ahold N.V. owns 60%. through the shareholder agreement between Hakon invest and royal ahold, the owners have joint control of ica aB, through a contractual requirement for unanimity for all decisions made by the annual General Meeting and the Board of directors. the ica Group is one of the Nordic region’s largest retail companies with a focus on food, and has approximately 2,250 own and retailer-owned stores in sweden, Norway, and the Baltic countries.

ica aB is the parent company of the ica Group. the Group includes ica sverige, ica Norge and rimi Baltic. ica also offers financial services to its swedish customers through ica Banken. ica also owns a 5% stake in the company Netto Marknad.

ica celebrated its 90th anniversary in 2007. Hakonbolaget – the origin of today’s ica – was formed by Hakon swenson in 1917.

ICA Sverigeica sverige cooperates with independent retailers who own and operate their stores. sales in the 1,382 swedish ica stores rose 5.7%. a total of 16 stores were opened in 2007, while over 200 stores were remodeled during the year. ica’s investment in a modern-ized distribution network continued and a new, ultra-modern and fully automated distribution center was opened in Helsingborg.

ICA Norgestore sales in Norway during 2007 decreased by 0.9%. ica Norge has 642 stores which are operated by the company or as franchise stores. Nine new stores were opened during the year while 60 stores were closed or sold outside ica.

Rimi Balticin the three Baltic countries, estonia, Latvia and Lithuania, rimi Baltic is one of the leading and most modern food retail chains. during 2007, sales in the 215 stores increased by 19.3%.

ICA Group’s financial performancein 2007 the ica Group’s revenues increased by 22.2% to seK 82,326 M (67,395). With effect from January 1, 2007, rimi Baltic is consolidated in the ica Group’s revenues. excluding rimi Baltic, ica’s revenues increased by 6.2% to seK 71,590 M. revenues increased in all segments. ica sverige’s revenues increased by 6.5%, ica Norge’s by 4.0%, and within ica Banken revenues rose 12.7%. in local currency, ica’s revenues in Norway increased by 3.6% and in the Baltic countries by 19.4%.

the ica Group’s operating profit amounted to seK 2,602 M (2,297), an increase of 13.3%. operating profit includes capital gains from property sales and impairment of non-current assets of seK 596 M (588).

operating profit for ica sverige amounted to seK 2,372 M (2,557). operating profit includes capital gains from property sales and impairment of non-current assets of seK 290 M (464). operating profit was affected positively by higher sales volumes and an improved gross margin. earnings were charged, however, with increased logistics costs as a result of the start-up of the new distribution center in Helsingborg. some of the increased operating expenses within logistics were compen-sated by ica’s raised fees for logistics services to ica retailers.

ica Norge’s operating profit amounted to seK 144 M (114). operating profit includes capital gains from property sales and impair-ment of non-current assets of seK 308 M (124). earnings were charged with higher shrinkage, the fact that newly opened stores are not yet profitable and by a number of unprofitable franchise stores taken over earlier in the year. costs for product range development and market-ing were also higher than in the previous year.

rimi Baltic’s operating profit improved to seK 92 M. the compara-ble result for 2006 was seK 20 M. capital gains from property sales, including impairment losses, are included with seK –3 M (71).

ica Banken’s operating profit improved to seK 83 M (11). Business volumes increased by 9.3%. Lower depreciation, improved net interest income and higher commission revenues contributed to the improved earnings.

the ica Group-Wide segment reports an operating loss of seK –89 M (–373) in January – december. Lower group-wide costs, attributable among other things to ica’s earlier joint ventures, as well as some adjustments in the allocation of costs between the segments, improved earnings.

profit for the year for continuing operations amounted to seK 2,166 M (2,034).

cash flow from operating activities in 2007 amounted to seK 4,169 M (3,044). the difference is mainly due to a higher operating profit and increased deposits in ica Banken. cash flow from investing activities amounted to seK –149 M (–389). cash flow from financing activities was seK –3,372 M (–1,872). the positive cash flow was used to repay loans and for the dividend. consolidated cash and cash equiva-lents at december 31, 2007, amounted to seK 4,360 M (3,749).

the equity/assets ratio amounted to 32.4% (28.8). the Group’s net debt, excluding ica Banken, was seK 2,344 M (4,539).

Investmentsica aB’s investments in 2007 amounted to seK 2,805 M (2,423).

Personnelthe Group had an average of 20,081 employees (11,698) during the year. rimi Baltic, which is consolidated as of January 1, 2007, has 8,221 employees.



Forma Publishing Group ABHakon invest’s holding amounts to 100% of the capital and voting rights in forma publishing Group. forma is the parent company of a group consisting of wholly and partly owned subsidiaries in sweden, finland, estonia and Latvia. associates in sweden and Norway are also included. the group’s publishing operations include magazines, contract publishing and books. in 2007 forma’s revenues amounted to seK 795 M (660). the increase is a result of forma’s acquisition of otW and damm förlag during the spring.

operating profit was seK 30 M (37). integration of acquired oper-ations and costs for the launch of the new icakuriren were charged against earnings.

profit for the year amounted to seK 17 M (27).

Hemmathe white goods retail chain Hemma reported revenues of seK 368 M in 2007. since the Hemma chain, in its present structure, was formed at the beginning of 2006, there are no comparative figures for the full-year 2006. a major change program has been under way during the year, which included recruitment of a new management and strength-ening of other central functions.

operating loss amounted to seK 30 M and loss for the year was seK 23 M. earnings were charged with impairment losses on invento-ries and costs linked to the restructuring carried out during the year.

Associates and joint venturesKjell & CompanyKjell & company is one of sweden’s largest retailers for home elec-tronic accessories. in 2007 revenues for Kjell & company amounted to seK 345 M (254). this represents an increase of 36%. twelve new stores were opened during the period and at year-end 2007 Kjell & company had 29 stores in sweden.

operating loss amounted to seK 4 M (+11). a high rate of estab-lishment for new stores during the year was charged against earnings. Loss for the year amounted to seK 3 M (+7).

Cerveracervera is franchise chain within glassware, porcelain, cutlery, kitchen accessories and furnishings. cervera’s revenues for 2007 amounted to seK 377 M. since cervera, in its present structure, was formed in september 2006, there are no comparative figures for the full-year 2006. during the year cervera carried out a review of its concept and product range – areas that will be further developed in 2008.

cervera’s operating loss in 2007 amounted to seK 1 M. Loss for the year was seK 2 M.

inkClubacquisition of 50% in the online retail company inkclub, which con-ducts online sales of ink cartridges and accessories, was completed in July 2007. a share of profit from inkclub is reported in Hakon invest with effect from July.

inkclub’s revenues for the period January – december amounted to seK 364 M (342). inkclub’s operating profit amounted to seK 45 M (41). profit for the year was seK 34 M (33).

Parent Companyparent company revenues amounted to seK 0 M (0) during the period.

operating profit amounted to seK –64 M (–60). the financial result amounted to seK 612 M (466). during the year Hakon invest received seK 122 M from the settlement fund established in conjunc-tion with the class action against royal ahold in the U.s.

positive income tax of seK 320 M (–32) is reported for the period. the positive income tax is due to the swedish tax agency allowing

Hakon invest aB a tax deduction on losses on the shareholding in the dutch company royal ahold attributable to previous years.

profit for the year amounted to seK 938 M (335).

Future outlookfuture development for the retail market is expected to be generally positive. there are, however, more uncertain factors than there were one year ago and it is highly probable that the growth rate will slow down somewhat in the years ahead.

development for interest rates and in the housing market will proba-bly affect consumer choice to some extent in the future. the capital-intensive sectors, such as furniture, building materials and home elec-tronics, are expected to have a tougher time in the future while salary-based consumption such as clothes, shoes and food is expected to continue to develop well.

Households’ disposable income is expected to rise slightly in 2008, something that benefits both the retail and service sectors. Growth in the retail sector will therefore continue in 2008, although at a somewhat slower rate. it is reasonable to expect a growth rate of around 5%.

Share informationshare capital in Hakon invest amounts to seK 402,293,590 distrib-uted among 160,917,436 shares, each with a par value of seK 2.50. Hakon invest’s earnings per share is calculated based on profit after tax and an average number of shares during the period January – december of 160,813,095.

in March 2007, Hakon invest repurchased 128,200 common shares to cover allocations under the 2006 option program. the num-ber of c shares amounted to 82,067,892 and the number of com-mon shares was 78,721,344 at the end of the period.

common shares and c shares carry the same voting rights. While common shares have an unlimited dividend entitlement, c shares do not carry entitlement to cash profit distribution, to the extent the annual General Meeting decides on cash dividends. such entitlement may include c shares in 2016 at the earliest. c shares carry entitlement to profit distribution through distribution in kind.

the Board of Hakon invest has decided that the company, within the framework of the authorization from the annual General Meeting, will repurchase up to 240,000 common shares to cover the allocation in the 2007 option program. the shares will be repurchased over the oMX Nordic exchange at a market price during the period March 1 through april 8, 2008. Hakon invest’s holding of treasury shares, prior to the repurchases decided by the Board, amounts to 128,200 shares.

Other informationPrinciples for remuneration and other terms of employment for senior executivesthe president and other senior executives in the company are subject to the remuneration principles based on basic salaries, pensions, severance pay, etc., incentive programs, and options approved by the annual General Meeting for 2006. the Board proposes that the same princi-ples shall be approved by the annual General Meeting for 2007 for the period until the annual General Meeting for 2008 has been held.

some key employees are also included in the Board’s proposal for an incentive program for senior executives and can acquire call options in the company.

the company’s remuneration for senior executives must be market-compliant, long-term and measurable and promote cohesion within the Group. improvements, primarily in earnings per share, will be rewarded and there must be a ”ceiling” for variable remuneration. total remuneration shall comprise the following components: basic salary, pension benefits, terms for termination and severance pay, bonus, options and other benefits.




at Hakon invest’s annual General Meeting in 2007 it was decided to introduce an annual performance-based incentive program, consisting of a bonus and option program. the program includes the ceo, other members of executive Management and certain key personnel. for 2007, a bonus became payable if earnings per share increased by 15% and a maximum payout was subject to an increase in earnings per share of 22%. in 2007 the maximum payout criteria for the bonus program were met. the call option program for 2007 comprises a maximum of 350,000 options each of which carries entitlement to purchase one common share.

the proposal to the 2008 annual General Meeting is that the incen-tive program should be unchanged compared with the previous year.

Environmental impactHakon invest’s organization is small and the business is mainly con-ducted in an office environment which means that negative environ-mental impact is limited. internal sustainability work is therefore focused on the employees’ work environment. Guidelines for environ-mental work are stipulated in the working environment policy, as well as an equal opportunities and diversity policy.

during 2007 Hakon invest initiated extensive work to establish a strategy for sustainability issues, which can be used as a starting point in corporate governance in associates and portfolio companies.

Risk managementHakon invest’s portfolio build-up with good risk diversification as well as active, responsible ownership is designed to balance business opportunities and risks. Hakon invest makes every effort to keep finan-cial risk at a low level through a low level of debt and good liquidity preparedness. the financial strategy within the ica Group is conser-vative and focuses on identifying and managing financial risks. ica Banken is part of the Group’s operations, which means that the finan-cial risks taking the bank’s operations into account are higher than those normally associated with retail companies. a more detailed description of financial risks and risk management at Hakon invest is provided in Note 2 to the consolidated accounts.

Dividendthe Board of directors of Hakon invest proposes an ordinary dividend of seK 6.00 per common share for 2007. the dividend corresponds to 50.4% of the parent company’s profit after tax. in 2006, a divi-dend of seK 5.50 per common share was paid.


coNsoLidated iNcoMe stateMeNt

consolidated income statement seK M Note 2007 2006

revenues 4 1,075 660cost of goods sold 5,7 –664 –338

Gross profit 411 322 other operating income 29 1selling expenses 5,7 –316 –164administrative expenses 5,6,7 –187 –184other operating expenses –1 –share of profit of companies accounted for using the equity method 8 832 910

operating profit 4 768 885 financial income 9 211 67financial expenses 10 –41 –6change to fair value of financial instruments 11 44 158

214 219

profit before tax 4 982 1,104 income tax 12 344 –50

profit for the year 4 1,326 1,054 profit for the year attributable to equity holders of the parent 1,334 1,054profit for the year attributable to minority interests –8 – Earnings per share before and after dilution, SEK 13 common share 8.30 6.55c share 8.30 6.55


coNsoLidated BaLaNce sHeet

consolidated balance sheetassets seK M Note Dec. 31, 2007 dec. 31, 2006

non-current assets Goodwill 14 279 101other intangible assets 14 119 35Land and buildings 15 5 40equipment 16 33 20interests in companies accounted for using the equity method 8 7,016 5,962deferred tax assets 12 182 –other securities held as non-current assets 17, 18 2 14

total non-current assets 7,636 6,172 Current assets 18 inventories 19 180 55trade and other receivables 20 195 75receivables from Group companies 21 1 2receivables from companies accounted for using the equity method 21 0 9tax receivables 14 –other current receivables 28 31prepaid expenses 22 33 26short-term investments 23 2,011 2,368cash and cash equivalents 24 281 349

total current assets 2,743 2,915 totaL assets 4 10,379 9,087


coNsoLidated BaLaNce sHeet

eQUitY aNd LiaBiLities

seK M Note Dec. 31, 2007 dec. 31, 2006

equity 25 share capital 402 402other paid-in capital 2,773 2,773reserves 25 464 140retained earnings including profit for the year 6,157 5,335

equity attributable to equity holders of the parent company 9,796 8,650Minority interests 0 –

total equity 9,796 8,650 non-current liabilities 18 provisions for pensions and similar commitments 26 123 117deferred tax liability 12 – 71interest-bearing loan 28 74 –other non-current liabilities 13 24

total non-current liabilities 210 212 Current liabilities 18 advance payments from customers 73 52trade and other payables 27 227 96current income tax liabilities 2 25Liabilities to companies accounted for using the equity method 21 2 3interest-bearing loans 28 5 –other current liabilities 56 44deferred income 3 –current provisions 26 5 5

total current liabilities 373 225 totaL eQUitY aNd LiaBiLities 10,379 9,087 pledged assets 29 contingent liabilities 29


coNsoLidated stateMeNt of cHaNGes iN eQUitY

consolidated statement of changes in equity

equity attributable to equity holders of the parent company

retained other earnings incl. seK M share paid-in profit for Minority total capital capital reserves the year interests equity

Balance at January 1, 2006 402 2,773 110 4,640 – 7,925change of accounting principle1) –5 –5

opening equity after introduction of new accounting principles 402 2,773 110 4,635 0 7,920 change in fair value of derivatives – – 15 – – 15exchange rate differences – – –184 – – –184revaluation reserve – – 199 – – 199

Total income and expenses recognized directly in equity 0 0 30 0 0 30 profit for the year – – – 1,054 – 1,054

Total recognized income and expenses for 2006 – – 30 1,054 0 1,084 shareholder contribution – – – 1 – 1dividend – – – –355 – –355

equity at year-end December 31, 2006/ beginning of the year January 1, 2007 402 2,773 140 5,335 0 8,650 change in fair value of derivatives – – 15 – – 15exchange rate differences – – 309 –63 – 246

Total income and expenses recognized directly in equity 0 0 324 –63 0 261 profit for the year – – – 1,334 –8 1,326

Total recognized income and expenses for 2007 – – 324 1,271 –8 1,587 purchase of treasury shares – – – –18 – –18payment for call options – – – 2 – 2acquisitions – – – –1 8 7shareholder contribution – – – 1 – 1dividend – – – –433 – –433

equity at year-end December 31, 2007 402 2,773 464 6,157 0 9,7961) due to changes in ias 39, financial guarantees are recognized at fair value in the balance sheet.


coNsoLidated casH fLoW stateMeNt

consolidated cash flow statement

seK M Note Dec. 31, 2007 dec. 31, 2006

operating activities profit before tax 982 1,104adjustment for non-cash items 30 –853 –1,060

129 44 dividends from companies accounted for using the equity method 8 383 244income tax paid 33 –39

Cash flow from operating activities before change in working capital 545 249 Change in working capital inventories –3 –current receivables 126 –48current liabilities –35 –35

Cash flow from operating activities 633 166 Investing activities investments in non-current assets –1 –9acquisition of subsidiaries 3 –111 –81acquisition of associates/joint ventures 3 –431 –261divestment of non-current assets 40 –changes in short-term investments 299 334

Cash flow from investing activities –204 –17 Financing activities purchase of treasury shares –16 –amortization of loans –49 –dividends paid –433 –355

Cash flow from financing activities –498 –355 cash flow for the year –69 –206cash and cash equivalents at beginning of the year 349 556exchange differences in cash and cash equivalents 1 –1

Cash and cash equivalents at end of the year 24 281 349

Information about interest paid during the period, interest paid amounted to seK 12 M (6) during the period, interest received amounted to seK 42 M (36)


Notes to the consolidated accounts

Notes to tHe coNsoLidated accoUNts

Note 1 Accounting principles

Company’s registered office, etc.the company Hakon invest aB conducts operations as a limited liability company and its registered office is in the municipality of stockholm. Hakon invest is a public company.

the address of the company’s head office is Hakon invest aB, Box 1508, se-171 29 solna, sweden. the company’s website is www.hakoninvest.se and its telephone number is +46 8 55 33 99 00. the corporate registration number is 556048-2837.

the consolidated accounts will be presented to the annual General Meeting for approval and were approved for publication according to a Board decision on March 10, 2008.

the company’s operations are described in the Board of directors’ report.

Accounting principlesthe consolidated accounts are prepared in accordance with international financial reporting standards (ifrs) approved by the eU and interpretations issued by the international financial reporting interpretation committee (ifric) that have been adopted by the eU. the accounting principles described apply to the Hakon invest Group, but several of the principles are only significant within ica aB.

the swedish financial accounting standards council’s recommen-dation rr30:06 complementary accounting standards for Groups is also applied.

all amounts are in seK millions (seK M), unless otherwise indicated.

Changed accounting principles and disclosure requirements 2007With effect from 2007, ifrs 7 financial instruments is applied as well as revised ias 1 presentation of financial statements. ifrs 7 and revised ias 1 do not lead to any change in recognition and measurement of financial instruments, but primarily extended disclosure requirements.

Key assessments and assumptions in applying the accounting principles, the Board of directors and the president have to make a number of assessments and assumptions. actual results may differ from these assessments and assumptions, which might affect the value of the recognized assets and liabilities. for Hakon invest, this primarily involves the carrying amounts for good-will and interests in companies accounted for using the equity method.

Basis of the financial statements the consolidated accounts are based on historical costs, except for derivative financial instruments and certain financial assets, which are measured at fair value. the carrying amounts of assets and liabilities recognized at amortized cost and hedged are adjusted for changes in the hedged values of the risks hedged.

Consolidated accountsthe consolidated accounts include the parent company, Hakon invest aB, and its subsidiaries. a subsidiary is included in the consolidated accounts from the date the parent company has control over the com-pany and is no longer included from the date the parent company’s control over the company ceases. forma publishing Group aB and Hemmabutikerna i sverige Utveckling aB are subsidiaries of Hakon invest aB. subsidiaries are reported in the consolidated accounts according to the acquisition method.

the financial reports of the parent company and subsidiaries

included in the consolidated accounts refer to the same period and are prepared according to the accounting principles that apply for the Group. Uniform accounting principles are applied to all units included in the consolidated accounts. this also applies to companies accounted for using the equity method.

all intra-Group receivables and liabilities, income and expenses, gains or losses arising from transactions between companies included in the consolidated accounts are eliminated in their entirety.

Investments in associatesinvestments in associates are accounted for using the equity method. an associate is an entity in which the Group has a significant, but not controlling, influence. Use of the equity method means that investments in associates are recognized in the balance sheet at cost, with the addition of changes in the Group’s share of the associate’s net assets and minus any impairment and dividend. the income statement reflects the Group’s share of associates’ profit after tax. the Group’s investments in associates include goodwill items treated in accor-dance with the accounting principles for goodwill stated below. any impairment loss on reported investments in associates including good-will is tested if there are indications of impairment.

Investments in joint venturesa joint venture is a business enterprise undertaken by two or more part-ners whose cooperation is contractually regulated and where the con-tract gives the parties joint control of the enterprise.

ica aB is operated as a joint venture between Hakon invest and royal ahold N.V. in addition to ica, the Group has joint ventures in Kjell & co elektronik aB and inkclub development aB. Hakon invest reports joint ventures using the equity method and testing for impairment is carried out in the same manner as described above for associates.

Acquisition of minority at acquisition of additional minority shares, after control is obtained, the entire difference between the purchase price and the carrying amount of the minority share acquired is recognized in equity.

Group companiesGroup companies, with regard to the consolidated balance sheet, refer to the parent company and sister companies of Hakon invest aB.

Translation of foreign currencythe functional currency of the parent company is swedish kronor (seK), which is also the presentation currency for the parent company and Group.

transactions in foreign currency are reported in the accounts at their spot rate on the transaction date. Monetary assets and liabilities denominated in foreign currency are reported in the balance sheet at the closing rate. any exchange rate differences are reported over the income statement.

income, expenses, assets and liabilities of operations with a func-tional currency other than seK – i.e. normally, foreign subsidiaries – are translated into seK. these assets and liabilities are reported in the consolidated balance sheet translated into seK according to the clos-ing rate. income and expenses are reported in the consolidated income statement translated at the average exchange rate for the year. the exchange differences that arise in translation are recognized directly in equity. When such an operation is divested the accumu-lated exchange differences are recognized in the income statement together with the gain or loss on the divestment.



Property, plant and equipmentproperty, plant and equipment are recognized at cost after deduction for accumulated depreciation and any impairment losses.

the cost of property, plant and equipment is depreciated on a straight-line basis over the estimated useful life to an estimated residual value. the residual value and useful life are tested in conjunction with every period-end report and adjusted in the event of new assessments.

carrying amounts of property, plant and equipment are tested when events or changed circumstances indicate that the carrying amount may not be recoverable. the test entails a comparison of the carrying amount with the higher of the asset’s net selling price and its value in use. Value in use consists of the present value of the future net cash flow generated by the asset. if an individual asset does not gen-erate a cash flow that is independent of other assets, the cash flow is calculated for a group of assets, a cash-generating unit. present value is calculated according to a discount factor before tax that reflects the risks inherent with the asset. if the carrying amount exceeds the higher of the asset’s net selling price and value in use, an impairment loss is recognized for the asset to the higher of these values. impairments are reported in the income statement.

Goodwill and other intangible assets with an indeterminable useful lifeGoodwill represents the portion of the acquisition cost that exceeds the fair value of acquired net assets on the acquisition date. Net assets refer here to the difference between identifiable assets and liabilities in an acquired subsidiary, associate or joint venture. it is assumed that the useful life of goodwill is indeterminable. Goodwill and other intan-gible assets with an indeterminable useful life are not amortized.

the carrying amount of intangible assets that are not amortized is tested annually for impairment as well as any indication of impair-ment. impairment losses are reported in the income statement.

the goodwill amount calculated at a company acquisition is attrib-uted in conjunction with the acquisition to assets that generate a cash flow independent of other assets (cash-generating units). if the carrying amount of the cash-generating unit’s assets exceeds the present value of the future cash flow or the selling price with deduction for selling costs, the carrying amount is impaired to the higher of the present value of these amounts. present value is calculated according to a dis-count factor before tax that reflects the inherent risks in the asset.

Intangible assets with limited useful lifeintangible assets with a limited useful life are recognized in the bal-ance sheet at cost with deduction for accumulated amortization. the cost of identifiable intangible assets acquired as part of a company acquisition consist of the assessed fair value at the acquisition date. intangible assets with a limited useful life are amortized on a straight-line basis over the assessed useful life to an assessed residual value. the carrying amounts of the intangible assets are tested for impairment when events or changed circumstances indicate that the value may not be recoverable or if other impairment indications exist. amortization is straight-line over estimated useful life.

Development costsdevelopment costs are recognized as an expense as incurred, although expenditure for development attributable to a single project, such as an it system, is recognized as an asset in the balance sheet when it is probable that the amount can be recovered in the future. the asset is amortized during the period in which it is used.

the carrying amount of development costs recognized as an asset in the balance sheet is tested annually for possible impairment, pro-vided the asset has not yet gone into operation. subsequently, the value is tested if events or changed circumstances indicate that the car-rying amount may not be recoverable.

Financial instrumentsfinancial instruments are recognized in the balance sheet when the Group becomes a party to the contractual conditions of the instrument. financial assets are derecognized from the balance sheet when the contractual rights to cash flows from the asset cease to exist. financial liabilities are derecognized from the balance sheet when the commit-ment is fulfilled, annulled or ceases to exist.

Short-term investments and long-term securities holdingsHakon invest’s short-term investments and other equities are recog-nized at fair value in the income statement. recognition at fair value takes place on the basis that management follows up the investments in this way.

in order to determine a fair value for financial assets and liabilities official market listings are used for the assets and liabilities that are traded in an active market. for investments that are actively traded in the market, the fair value is determined when the market closes on the balance sheet date. for investments that do not have a market listing, the fair value is determined as the actual market price for another instrument that is essentially similar or at an amount calculated on the basis of anticipated cash flows.

all normal acquisitions of financial assets are reported in the bal-ance sheet on the settlement date, i.e. the date on which the Group purchases the assets. all normal sales of financial assets are reported on the settlement date, i.e. the date the asset is delivered to the coun-terparty. Normal acquisitions or sales refer to acquisition or sales of financial assets that require that the assets are delivered within the timeframe customarily imposed by law or market convention.

Derivatives pertaining to financial instrumentsthe Group uses derivatives of financial instruments such as currency forward contracts and interest swaps to a limited extent to reduce the risks involved in interest and exchange rate fluctuations. these deriva-tives are reported at fair value. official quotations on the balance sheet date are used when determining fair value of derivatives. in the annual accounts as at december 31, 2007, Hakon invest had no derivatives.

Inventoriesinventories are valued at the lower of cost and net selling price. the net selling price corresponds to the estimated selling price under nor-mal circumstances, less estimated manufacturing and selling costs.

Trade and other receivablesreceivables are reported in the amounts in which they are expected to be received. trade receivables, for which payment is normally due after 10–90 days, are initially reported at the invoiced amount. an assessment of doubtful debts is made when it is no longer probable that the full amount will be received.

Cash and cash equivalentscash and cash equivalents include cash and bank balances, as well as short-term investments with an original maturity of not more than three months.

Interest-bearing loans all loans are initially reported at cost, which corresponds to the fair value of the amount received, less expenses related to the borrowing.

the loan debt is subsequently reported at amortized cost, implying that the value is adjusted for any discounts or premiums in connection with the loan and that costs in connection with the procurement of the loan are distributed over the term of the loan. the distribution over time is calculated on the basis of the effective interest of the loan.

Gains and losses that arise when a loan is redeemed are recog-nized in the income statement.

Provisionsprovisions are reported in the balance sheet when the Group has a contractual or constructive obligation as the result of events that have occurred and it is probable that payments will be required to fulfill the obligation and the amount can be calculated in a reliable manner. if it is probable that reimbursement will be received corresponding to the provision made, for example through an insurance contract, the reim-bursement is recognized as an asset in the balance sheet. the value of the provision is determined by a present value calculation of antici-pated future cash flow and the gradual increase in the allocated amount as a result of the present value calculation is recognized as an interest expense in the income statement.

Pensions and other post-retirement benefitspension commitments are classified as defined contribution or defined benefit plans. the present value of defined benefit obligations for cur-rent or former employees are calculated on the basis of actuarial



assumptions at least once a year. actuarial assumptions comprise the company’s best assessment of the different variables that determine the cost of providing the benefits. since actuarial assumptions are used, actuarial gains and losses arise. these may be caused by a high or low employee turnover, salary changes and changes in the discount rate. Hakon invest recognizes actuarial gains and losses directly in profit or loss as they arise.

the company’s responsibility for the defined contribution plans is limited to paying premiums to an insurance company

LeasingLeases are classified in the Group as either operating or finance leases. finance leases are leases where essentially all economic risks and rewards incidental to ownership are transferred from the lessor to the lessee. all other leases are operating leases.

Sale and leasebackWhen ica sells a property that is then leased back, an overall assess-ment is made of who bears the essential risks and rewards in the prop-erty and whether the Group still has a significant interest in the sold property. a significant interest exists, for example, if the leased back property is rented out to an independent ica retailer. if the assessment is that the essential risks and rewards taken as a whole remain with ica, no income is recognized from the sale on the transaction date, and not until these risks and rewards are transferred to the purchaser at a later date. if ica still has a significant interest, no income is recog-nized until this interest ceases to exist.

if the risks and rewards remain in ica, alternatively ica has a con-tinued interest in the property, the property is recognized in the bal-ance sheet as if no sale had taken place and depreciation continues on the basis of assessed useful life. the purchase price received from the sale is regarded as a loan and recognized as a liability. any lease payments made are allocated between interest expense and amortiza-tion of the debt.

Revenuerevenue is recognized to the extent to which the financial rewards are likely to accrue to the Group and revenue can be estimated in a reli-able manner.

Sale of goodsrevenue is recognized when the significant risks and rewards associ-ated with ownership of the goods are transferred to the purchaser and when the revenue can be estimated in a reliable manner.

Other incomeother income primarily consists of income from contract magazine operations, subscription income for publications and income from vari-ous forms of consulting services. other income in ica includes royal-ties, franchise fees, income from various forms of consulting services to ica retailers and bonuses from suppliers. other income is recognized when it is earned.

Interestinterest income is reported as it is earned. interest income is calculated on the basis of the return on the underlying asset, according to the effective interest rate.

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

Rental incomerental income from investment properties is reported straight-line over the term of the lease.

Income taxincome tax within the Group consists of current and deferred tax.

Hakon invest’s current tax consists of those taxes to be paid or received for the current year. it refers to the parent company, Hemmabutikerna i sverige Utveckling aB, with operations in sweden only, and to forma publishing Group, with operations in sweden, finland, estonia and Latvia. the current tax rate in sweden is 28%, in finland 26%, in estonia 0% and in Latvia 15%.

deferred tax is reported in accordance with the balance-sheet

method. this implies that deferred taxes are calculated as per the bal-ance sheet date – that is, the difference between the tax base of the assets or the liabilities on the one hand and the values reported in the consolidated balance sheet on the other.

deferred tax liabilities are recognized in the balance sheet for all temporary differences except when they are related to goodwill or an asset or liability in a transaction that is not a company acquisition and which, at the date of the transaction, affected neither the reported nor taxable profit or loss during the period. in addition, temporary differ-ences that are attributable to investments in subsidiaries, associates and interests in joint ventures are only taken into account to the extent it is probable that the temporary differences can be reversed in the fore-seeable future.

deferred tax assets are recognized for deductible temporary differ-ences and unutilized loss carry forwards to the extent it is probable that future taxable profits will be available and against which the tem-porary differences or unutilized loss carry forwards can be utilized.

the carrying amounts of deferred tax assets are tested on each bal-ance sheet date and reduced to the extent it is not longer probable that a sufficiently large taxable profit will be available to utilize all or parts of the deferred tax assets.

deferred tax assets and tax liabilities are calculated on the basis of tax rates (and tax legislation) that prevail or prevail in practice on the balance sheet date.

New accounting standardsNew ifrs amendments or interpretations that have been published but not yet come into effect are not applied. the new accounting rules that are assessed as possibly affecting Hakon invest’s accounts in 2008 are ifric 13 customer Loyalty programmes. the assessment is that applica-tion of ifric 13 from 2009 will not affect the financial statements to any material extent. ifrs 8 operating segments, which is effective from 2009 onwards, may affect the segment allocation. revised ias 1 comes into effect in 2009. the changes relate to disclosure require-ments and presentation of equity and earnings, among other things.

Note 2 Risks

Financial risksHakon invest’s operations involve exposure mainly to currency risk, interest rate risk on investments, credit risk and share price risk. for ica, there is also interest rate risk in borrowing.

Currency risksTransaction exposurethe Group does not have significant flows in foreign currency. Hakon invest’s policy is that speculative positions for the purpose of generat-ing revenue on exchange rate fluctuations may not occur.

subsidiaries shall follow a finance policy for managing currency risks. Normally, flows in foreign currency are not hedged. However, Hakon invest can decide to deviate from that policy.

Translation exposureto the extent that Hakon invest holds net assets or net liabilities in for-eign currency, these should be hedged. permissible instruments for hedging of translation exposure include futures, loans and options. translation exposure occurs with financial assets and liabilities in for-eign currency.

Interest rate risksfixed-income investments are subject to interest rate risk.

in direct investments in fixed-income securities the modified duration is 2.0 years, which means that if the yield curve should rise (fall) paral-lel with 1%, the value would fall (rise) by 2% (seK 11 M).

Hakon invest’s sources of financing consist mainly of equity, cash flow from operating activities, including dividends, and borrowing. interest-bearing borrowing means that the Group is exposed to interest rate risk. changes in the interest level have a direct effect on Hakon invest’s net interest. interest rate risk arises at changes in market interest rates.

interest rate risk is managed by regulating the structure of interest due dates in the loan portfolio and by using interest derivatives. according to Hakon invest’s policy, a maximum of 50% of the total loan portfolio can be composed of floating interest and also be unse-



cured. the maximum permissible fixed interest term is five years. fixed interest shall, according to the policy, be based on anticipated interest rate trends, financial strength and cash flow.

the costs for interest rate sensitivity may amount to a maximum of 20% of the budgeted earnings. interest rate sensitivity is defined as the cost of a change in the interest rate of 1%.

Within ica aB, interest rate risk in the Group’s debt portfolio is off-set with cash flow from operations and correlation to the company’s earnings and interest-rate level. the finance policy states that the Group’s fixed-interest term shall be 18 months, with a mandate for deviation from this standard of +/– 6 months. interest rate swaps are used to adjust interest rate exposure.

Credit risksHakon invest’s finance policy regulates maximum credit exposure for various counterparties. the goal is for Hakon invest’s financial transac-tions counterparties to have a credit rating of at least a from standard & poor’s or Moody’s. credit risk consists of the risk of non-payments from counterparties.

Maximum credit risk exposure corresponds to the book value of financial assets.

Share price riskshare price risk occurs through changes in the value of investments in equities. of the portfolio’s investments in swedish and foreign equities, depository receipts and share-related instruments, at least 90% must be listed, i.e. subject to regular trading in markets that are open to the public and which are under the supervision of authorities or other rele-vant bodies.

Investment funds and hedge fundsthe funds must be focused on individual assets classes (such as fixed-income securities) or so-called multi-strategy funds. only funds that are under the supervision of an authority or other regulatory body in an eU country may be utilized in management.

Hakon Invest’s policy for management of short-term investments, other non-current securities and cash and cash equivalentsHakon invest has established guidelines and a finance policy for how to manage and limit financial risks.

Hakon invest aB has significant liquidity under management which at december 31, 2007, totaled approximately seK 2.2 billion. for cash and cash equivalents not used in day-to-day operations, man-agement is partly external and partly in-house. external management is handled by carlson investment Management. Both internal and external management are handled in accordance with the company’s investment and finance policies. the purpose of internal management is primarily to handle the company’s holding of ahold shares, hedge funds/investment funds as well as cash and bank balances.

the target for management by carlson investment Management is to achieve a return that corresponds to the change in the consumer price index (cpi) plus four percentage points. rules regarding financial management are regulated through a finance policy and attest authori-zation adopted by the Board. compliance with these rules is super-vised by the Board’s audit committee.

securities trading is conducted within the framework of manage-ment. funds that are invested through either internal or external man-agement, including funds used in day-to-day operations, must be allo-cated in accordance with the following limits:

cash and bank balances > 5% of total funds under management

own management < 25%external management < 80%

investment rules for both external and internal management mean that the portfolio’s funds can be invested in the following asset classes:

1. fixed-income securities listed in swedish and foreign currencies.2. swedish and foreign equities, depository receipts and share-

related instruments.3. investment funds, including hedge funds, as well as so-called struc-

tured products.

derivatives may be used by the portfolio’s manager for more efficient management and for the purpose of increasing returns or hedging an investment. derivative instruments refer to options, futures, swap con-tracts and fra, pertaining to currencies and securities in which the man-ager is allowed to invest funds, or to indexes related to such securities. the manager may also enter into repurchase agreements related to fixed-income securities. there are no limits as to what may be invested in derivative instruments according to the above. in internal manage-ment, derivatives may only be used to hedge assets in foreign currency.

the market value of directly owned shares, bonds and other finan-cial instruments attributable to an individual issuer, or issuers within the same group, may comprise a maximum of 10% of the portfolio’s total market value. the exception to this limit applies to issuer categories 1, 2 and 3 in the table below (see column “Max share of portfolio per issuer, %”).

for directly owned fixed-income securities in swedish and foreign currency, the limits in the table below apply. the percentages in the table below refer to the share of the assets’ (under external manage-ment) total market value.

the portfolio’s fixed-income securities, both directly owned and through mutual funds, may have a maximum average term of 10 years.

of the portfolio’s investments in swedish and foreign equities, depository receipts and share-related instruments, at least 90% shall be listed, i.e. subject to regular trading in a marketplace that is open to everyone and which is under the supervision of authorities or other relevant bodies. of assets under own management, a maximum of 50% may be invested in equities, and of those 50% in foreign equities (corresponding to 25% of assets under own management, with the exception of the investment in ahold shares).

all assets under external management are accessible to Hakon invest within a maximum of 5 days. Under internal management, liquidity risk is handled by investing at least 90% in listed securities.

currency allocation of the portfolio holdings as of december 31, 2007, was 85.4% in seK, 8% in Usd and 3.4% in eUr. the rest of the portfolio, i.e. 3.2%, was allocated among various other currencies.

Max share of Max share of issuer portfolio per portfolio per category issuer/security1) issuer category, % issuer, %

1. swedish government or securities guaranteed by the swedish government; securities with aaa/aaa ratings 100 100

2. swedish housing finance institutions 70 303. swedish municipalities and county

councils; securities with aa/aa rating 50 204. securities with a/a rating 40 101) rating from standard & poor’s and/or Moody’s. issuer/security shall in appropriate

cases be credit-rated by at least one of these institutes. in the event of a split rating, the lowest shall apply.

Risks related to holdings and investmentsStock market trends and interest ratesa negative stock market trend could impact the estimated value of both Hakon invest’s listed shareholdings as well as Hakon invest’s unlisted holdings. interest rates are another factor that could impact the calcu-lated value of holdings. the interest-rate situation also impacts the cost of loan financing.

Decline in value of the financial portfolio and shareholdingsfor the financial portfolio and shareholding in ahold that, combined, amounted to seK 1,807 M as of december 31, 2007, adjustments of the book values are made on the basis of changes in share prices and exchange rates, which could have a negative impact on Hakon invest.

Factors related to holdingsHakon invest’s earnings are affected significantly by its interest in the earnings of the holdings. accordingly, factors that could have a nega-tive impact on the holdings’ operations, financial position and earn-ings could have a less than insignificant impact on Hakon invest.

the future development of the unlisted holdings and/or changes in external factors could affect the assessment of the value of these hold-ings and, accordingly, in the case an assessment results in an estima-tion of a reduced value, require an impairment of book values.



the table below shows how companies acquired during the period would have affected Hakon invest’s sales and earnings if they had been acquired at January 1, 2007. acquired companies Hakon invest Hakon invest before the Group Group acquisition date pro forma

Net sales 1,075 160 1,235profit for the period 1,326 –14 1,312

Associates and joint venturesin 2007, Hakon invest’s wholly owned subsidiary inkclub intressenter aB acquired 50% of the shares in the online retail company inkclub development aB.

the table below shows a summary of the acquisition analysis. inkclub

purchase price for shares in associates and joint ventures 428acquisition costs 3

total acquisition cost 431

Hakon Invest’s share of identified acquired assets:Non-current assets 229current assets 89current liabilities –21

Hakon Invest’s share of identified acquired assets 297

Goodwill 134

shares in earnings of companies reported in accordance with the equity method 431

Acquired operations 2006Subsidiariesduring 2006 Hakon invest’s wholly owned subsidiary forma acquired B. Wahlströms Bokförlag aB. B. Wahlströms has a broad register within primarily youth titles and provides a good complement to forma’s present book publishing operations. forma acquired 100% of the shares in the company for seK 69 M including acquisition costs.

Goodwill in connection with the acquisition of Wahlströms consists of the value of cost synergies. if the acquisition had taken place at January 1, 2006, the Group’s pro forma revenues would have been seK 688 M and profit for the year seK 1,050 M.

the assets and liabilities included in the acquisition are as follows:

Note 3 Acquired operations

Acquired operations 2007Subsidiariesin april, Hakon invest’s wholly owned subsidiary Hemmabutikerna intressenter aB became the majority shareholder in Hemmabutikerna i sverige Utveckling aB (HUaB) through acquisition of an additional approximately 9% of existing shares for seK 14 M. this increased the holding to approximately 59% of the capital and voting rights in Hemma. Goodwill in conjunction with the acquisition comprises synergy effects including economies of scale within purchasing and logistics. in august, an additional 1% of the shares in Hemma were acquired for seK 1 M. Hemmabutikerna intressenter thus owns 59.9% of the shares.

during the year Hakon invest’s wholly owned subsidiary forma

acquired damm förlag aB. damm förlag publishes fiction and non-fiction for children, young people and adults. 100% of the shares in the company were acquired for seK 8 M including acquisition costs. Goodwill in conjunction with the acquisition of damm förlag mainly comprises synergies relating to reduced distribution costs and revenue synergies.

forma also acquired 88% of the shares in otW (off the Wall aB). forma previously owned 12% of the share capital, which means that forma now holds 100% of the shares in otW. otW is the market leader in editorial communication in sweden. the 88% shareholding was acquired for seK 100 M including acquisition costs. the goodwill value mainly includes synergies within personnel and organization.

the assets and liabilities included in the acquisition are as follows:

HUaB damm otW carrying Value carrying Value carrying Value amount in according to amount in according to amount in according to acquired acquisition acquired acquisition acquired acquisition company 1) analysis company 1) analysis company 1) analysis

Brands 42 42 6 32customer relations 6order book 1property, plant and equipment 25 25 2 2financial assets 2 2inventories 91 91 32 32current receivables 26 26 30 30 15 15prepaid expenses and accrued revenues 51 51 2 2 1 1cash and bank balances 6 6 5 5provisions –7 –7deferred tax liabilities –22 –22 6 4 –3 –14Non-current liabilities –90 –90 –38 –38current liabilities –110 –110 –27 –27 –18 –18

acquired identifiable net assets 21 21 –2 2 2 30

Less minority –9share in profits during period 4Goodwill 89 6 83 purchase price for shares in subsidiary 103 7 112acquisition costs 2 1 1

total acquisition cost 105 8 113 total acquisition cost for acquisitions during the year 14 8 100cash and cash equivalents in acquired subsidiary –6 0 –5

Change in cash and cash equivalents at acquisitions for the year 8 8 95

1) accounted for in the company with applications of Hakon invest’s principles.



B. Wahlströms carrying Value amount in according to acquired acquisition company 1) analysis

Brands – 23customer relations – 1investments in associates 1 2inventories 27 27current receivables 24 24cash at bank and in hand 1 1deferred tax liability 0 –7Non-current liabilities –17 –17current liabilities –24 –24

acquired identifiable net assets 12 30

Goodwill 39

purchase price for shares in subsidiary 66acquisition costs 3

total acquisition cost 69

total acquisition cost for acquisitions during the year 69cash and cash equivalents in acquired subsidiary –1payment of loan in subsidiary 13

Change in cash and cash equivalents at acquisition 81

1) accounted for in B. Wahlströms Bokförlag applying Hakon invest’s principles.

Associates and joint venturesin 2006, Hakon invest aB acquired 50% of the shares and voting rights in the home electronics chain Kjell & co elektronik aB, 49.9% of the shares and voting rights in Hemmabutikerna i sverige Utvecklings aB (HUaB) and 45% of the shares and voting rights in cervera aB.

the table below shows a summary of the acquisition analyses.

Kjell & co HUaB cervera

purchase price for shares in associates and joint ventures 80 3New issue 20 85 83acquisition costs 2 2 2

total acquisition cost 102 90 85

Hakon Invest’s share of acquired identifiable net assets: Non-current assets 11 34 36current assets 31 122 91Non-current liabilities and provisions –9 –90 –6current liabilities –16 –53 –57

Hakon Invest’s share of acquired identifiable net assets: 17 13 64

Goodwill 85 77 21

participation in company accounted for using the equity method1) 102 90 85

1) seK 16 M of the purchase price for the shares in Kjell & co will be paid in January 2008.

publishing White goods other incl. operations operations eliminations total

2007 2006 2007 2006 2007 2006 2007 2006

external revenues 795 660 280 – – – 1,075 660operating profit/loss 30 37 –29 – 767 848 768 885profit/loss after financial items 23 34 –32 – 991 1,070 982 1,104profit/loss for the period 17 27 –21 – 1,330 1,027 1,326 1,054

assets 600 446 346 – 9,433 8,641 10,379 9,087Liabilities 462 325 203 – –82 112 583 437 investments 105 89 0 – 441 262 546 351depreciation 13 13 3 – 0 0 16 13 the publishing and white goods operations are divided into secondary segments as set out below:

finland and finland and sweden Baltic countries sweden Baltic countries

2007 2006

external revenues 912 163 514 146 operating profit/loss –4 5 26 11 profit/loss after financial items –13 4 23 11 profit/loss after tax –10 6 18 9

assets 899 47 390 56 Liabilities 633 32 287 38

investments 104 1 88 1 depreciation 15 1 11 2

Note 4 Segment information

Hakon invest had two segments during the year: publishing operations and white goods operations. in 2006 there was one segment: pub-lishing operations.

all internal accounting and follow-up is based on business segments. for this reason business segments are the company’s primary format for segment accounting, while the secondary format is geographical.

additional to this are holdings in associates, joint ventures and finan-cial management.

the risks and opportunities facing the joint venture ica aB have been identified in the following business segments: ica sverige, ica Norge, ica Baltic and ica Banken. the first three refer to retail operations in each geographic area. ica Banken conducts banking operations.


Note 5 Depreciation

Dec. 31, 2007 dec. 31, 2006

cost of goods sold 15 13administrative expenses 0 –

total 15 13

depreciation refers mainly to equipment but also includes rebuilding, buildings and vehicles. the following depreciation schedules are app-lied within the Group:

Buildings and service facilities 20–50 yearsLand improvements 20 yearscomputer equipment 3 yearsequipment, other 3–10 yearsother intangible assets 5–10 years

Note 6 Fees to auditors

2007 2006

ernst & Young, audit assignments 3 2ernst & Young, other assignments 0 1

total 3 3

other assignments mainly relate to consultations in connection with acquisitions.

Note 7 Average number of employees, salaries, other remuneration and social security contributions

average number of employees is calculated on the basis of normal working hours in the Group of 1,800 hours.

average number of employees in the Group 2007 2006

swedenWomen 245 146Men 248 97

493 243FinlandWomen 45 43Men 13 12

58 55estoniaWomen 21 14Men 1 2

22 16latviaWomen 9 5Men 2 3

11 8

Women, total 320 208Men, total 264 114

average number of employees, total 584 322

salaries and remuneration amounted to (seK M):Board of Directors and president sweden 15 8finland, estonia, Latvia 2 2

17 10

other employeessweden 181 115finland, estonia, Latvia 28 25

209 140

total salaries and remuneration in the Group 226 150

social security contributions, statutory and contractual 70 47pension costs 39 23

total social security contributions and pension costs 109 70

Remuneration to senior executivesthe chairman of the Board and Board members are paid fees deter-mined by a decision of the annual General Meeting. fees to Board members are reported in thousands of kronor (seK 000s).

Fees to Parent Company’s Board members 2007

committee 2007, seK 000s1) Board fee work total fee

Lars otterbeck 500 75 575anders fredriksson 300 50 350cecilia daun Wennborg 200 50 250Jan olofsson 200 25 225Jan-olle folkesson 200 25 225olof Nyberg 200 25 225thomas strindeborn 200 200

1,800 250 2,050

1) remuneration excluding social security contributions.

Board member Lars otterbeck, tanamera aB, received a consultancy fee of seK 50,000.

remuneration to the president and other senior executives consists of a basic salary, other benefits and remuneration, and pension. other senior executives refers to the individuals who, with the president, form executive Management. the company’s remuneration committee determines compensation and other terms of employment for executive Management. remuneration to senior executives is speci-fied in thousands of kronor (seK 000s.).

Basic annual salary/ pension Bonus/ 2007, seK 000s1) Board fee Benefits cost incentive total

president 2) 1,313 147 2,440 1,935 5,835other senior executives3) 6,025 562 2,312 3,327 12,226

7,338 709 4,752 5,262 18,061

1) remuneration excluding social security contributions.2) total remuneration package of seK 4.7 M includes vacation, social security contribu-

tions, pension costs and other costs in the form of company car, etc.3) other senior executives in 2007 comprised 4 people, all of whom are men.

for more information about the incentive program, see below.a total remuneration package of seK 4.7 M has been negotiated

with the president. the package includes vacation pay, social security contributions, pension costs and other costs in the form of company car, etc. the president can make free use of the package in a manner that is cost neutral for the company. the notice period is six months, during which time the total remuneration package is available at 1/12 per month. the president is not entitled to any severance pay. the company and the president are both entitled to require the president to retire at the age of 65. Within the total remuneration package described above, the president decides the size of the pension provisions to be made.

Period of notice and severance pay for other senior executivesBetween the company and other senior executives of the Hakon invest Group, termination of employment by either party is subject to a notice period of six months. Moreover, if the termination of employment is triggered by the company, the other senior executives are entitled to severance pay of 18 monthly salaries under certain circumstances. severance pay is not deductible against other income. When giving their notice, other senior executives are, under certain circumstances, entitled to compensation for a non-competition clause that applies for six months following termination of employment. compensation is lim-ited to a maximum of 60% of the basic cash salary and applies only during the period the non-competition clause applies.

Pension benefits for other senior executivesother senior executives have a defined contribution pension plan according to which the company pays 35% of pensionable salary, although a maximum of ten price base amounts per year. pensionable salary is calculated according to the itp plan’s rules. in addition, other senior executives are entitled to retire at 62. in the event of retirement at 62, pension comprises 75% of the senior executive’s salary immedi-



ately prior to retirement for the period until normal retirement age. pension for the period after normal retirement age will be paid in the same amount as if the senior executive had continued to work until 65. pension benefits are vested, i.e. not dependent on future employment.

Basic principles for remuneration to new senior executiveschanged basic principles for forms of remuneration to apply to senior executives were adopted at 2006 annual General Meeting. these principles apply to new employment of senior executives. total remu-neration will comprise basic salary, pension benefits, termination and severance pay terms, bonus, options and other conditions. Basic sal-ary will be market compliant. pension terms mean that a defined contri-bution pension plan will be applied for senior executives. this plan means that a maximum of 35% of pensionable salary may pertain to pension premiums, which will be paid until normal retirement at 65. a mutual notice period of six (6) months will apply. severance pay will be up to 18 months basic cash salary if employment is terminated by the company and will be deduction based. if employment is termi-nated by the senior executive, the company shall, if the company chooses to impose an in some cases agreed non-competition clause, provide compensation during the period this clause applies in a maxi-mum amount of 60% of basic salary. severance pay and remuneration while a non-competition clause is in force, will not be pensionable.

Incentive programManagement and some key employeesthe president, other members of executive Management and some key employees are covered by an annual performance-related incen-tive program consisting of bonus and options. the amount of the bonus is maximized to correspond to nine monthly salaries for the president, six monthly salaries for members of executive Management, and three monthly salaries for other eligible people. a bonus for 2007 is payable since earnings per share increased by more than 15%. a maximum payout requires earnings per share to increase by 22%, which was the case.

at least 50% of the bonus must be reinvested in call options within the framework of the company’s option program. in addition, some employees in special circumstances may be covered by entitlement to a performance-based bonus limited to a certain proportion of basic annual salary, corresponding to a maximum of two monthly salaries. for 2007, the bonus reserve for management plus some key execu-tives amounts to seK 5.6 M plus social security contributions.

the number of purchased stock options based on 2006 bonus is 128,200.

personnel costs booked in income statement 2006 relating to reinvestment in stock options seK 2,936,890

In calculating the price of the call options, the Black & Scholes model was used and was based on the following assumptions:

share price1) seK 148.79 exercise price seK 164.00option price seK 17.30options term 3 yearsrisk-free interest 3.76%

1) Value of shares, based on volume-weighted average price paid during the period february 22–28, 2007.

Assumed dividend for fiscal year:

2006 seK 5.502007 seK 6.302008 seK 6.50

Volatility 25%

this assessment is based on theoretical calculations of the value of the call options. in assessment of the future volatility of Hakon invest’s shares, historic volatility in comparable companies was taken into account.

All employeesica-handlarnas förbund implemented an incentive program aimed at all employees in the parent company Hakon invest aB in december

2005, following the listing. the incentive program included an offer to acquire call options with the right to purchase common shares in Hakon invest. each call option carries entitlement to purchase one common share during the period July 1, 2008–december 31, 2008 at an exercise price corresponding to 110% of the average market price for shares in Hakon invest during a period of five trading days, beginning six trading days after the listing through the tenth trading day following the listing (“measurement period”). the financial conse-quences of the call options shall be limited by a ceiling, requiring that if the share price at exercise exceeds 200% of the share price during the measurement period (“ceiling”), then the option holder will only receive half of the value increase above that ceiling. ica-handlarnas förbund subsidizes the offer. Hakon invest will not participate in the incentive program. ica-handlarnas förbund makes the payouts and ultimately bears the costs for the program.

the fair value of services received from employees in exchange for the allocated options is measured on the basis of the fair value of the allocated options.

Stock options allocated in 2005:

Number of gross subsidized options1) 273,500Number of net subsidized options2) 55,000

personnel costs recognized in the income statement, 2005 seK 2,578,388personnel costs recognized in the income statement, 2006 seK 635,490personnel costs recognized in the income statement, 2007 seK 636,163

In calculating the price of the call options, the Black & Scholes model was used and was based on the following assumptions:

share price seK 88.82 exercise price seK 97.50option price seK 6.90options term 3 yearsrisk-free interest 2.89%

assumed dividend for fiscal year:2006 seK 5.002007 seK 3.502008 seK 3.50 Volatility 21%

this assessment is based on theoretical calculations of the value of the call options. in assessment of the future volatility of Hakon invest’s shares, historic volatility in comparable companies was taken into account.1) Gross subsidy means that employees pay the tax on the benefit value.2) Net subsidy means that the full value of the call option plus an amount which, after tax,

corresponds to the income tax that arose from both the acquisition of the call option and remuneration for taxes, is paid to the employee.

Note 8 Interests in companies accounted for using the equity method

Dec. 31, 2007 dec. 31, 2006

opening balance 5,962 4,991change in accounting principle1) –5changes for the year– acquisitions 431 277– dividends –383 –244– sales2) –87 –– profit from interests accounted for

using the equity method 832 910– items recognized directly in equity 261 33

total 7,016 5,962

1) for more information see reconciliation of equity.2) information relating to Hemmabutikerna i sverige Utveckling aB applies to 2006 and

January–March 2007 when HUaB was an associate. With effect from april 2007 the holding is 60% (1,056,000 shares) and HUaB is therefore included as a subsidiary.



the ownership interest above indicates the share of voting rights, which matches share of equity in every case.

corporate reg. no. reg. office

ica aB 556582-1559 stockholmBra förlag aB 556424-7921 stockholmtrade press as 966 705 086 osloKjell & co elektronik aB 556400-5378 MalmöHemmabutikerna i sverige Utveckling aB 556695-8673 solnacervera aB 556701-1209 stockholminkclub development aB 556712-3772 Uppsala

Joint Venturesica aB is a joint venture of which Hakon invest owns 40% and 60% is owned by the dutch company royal ahold N.V. through the share-holder agreement between Hakon invest and ahold, the owners have joint control of ica aB through a contractual requirement for unanimity in all decisions at General Meetings of shareholders and in the Board of directors. the agreement runs until year-end 2040. the shareholder agreement stipulates that right of first refusal exists between the parties at market price in the event of share transfers. transfers may only be

made to a party who becomes a party to the shareholder agreement. furthermore, at the request of a party and in the event of certain situa-tions specified in the agreement relating to company acquisitions and in the event of a serious financial situation for the ica Group, the par-ties are since year-end 2004 and during a maximum period of five years thereafter obliged in proportion to their ownership of shares in ica aB to provide capital by subscribing for shares in a new issue. for Hakon invest this amounts to a maximum of seK 720 M. Neither party has raised the question of such a new issue nor has such ques-tion been the subject of discussion between the parties or in ica aB’s Board. the probability of this conditional undertaking being raised is judged as highly unlikely.

Kjell & co elektronik aB is a joint venture that is 50% owned by the Hakon invest Group and 50% by the brothers fredrik, Markus and Mikael dahnelius together with their father Kjell dahnelius. Kjell & co elektronik aB has been 50% owned by the Hakon invest Group since July 2006.

inkclub development aB is a joint venture that is 50% owned by the Hakon invest Group and the remainder is owned by Lennart Nyberg and family and Hans Nilsson. inkclub development aB has been 50% owned by the Hakon invest Group since July 2007.

the following table shows the income statement and balance sheet for ica aB, Kjell & co elektronik aB and inkclub development aB.

Note 8, cont.

Book value Book value share of profit share of profit Dec. 31, 2007 dec. 31, 2006 2007 2006 Number share % seK M seK M seK M seK M

the Groupica aB 2,000,000 40.0 6,379 5,672 830 907Bra förlag aB 250 50.0 6 4 1 1trade press as 40 40.0 9 7 1 1Kjell & co elektronik aB 5,600 50.0 104 106 –2 3Hemmabutikerna i sverige Utveckling aB1) 881,000 49.9 – 88 –1 –2cervera aB 81,818 45.0 84 85 –1 –inkclub development aB 50,000 50.0 434 – 4 –

total 7,016 5,962 832 910of which discontinued operations 122 122

1) information relating to Hemmabutikerna i sverige Utveckling aB applies to 2006 and January–March 2007 when HUaB was an associate. With effect from april 2007 the holding is 60% (1,056,000 shares) and HUaB is therefore included as a subsidiary.


Balance sheet

inkclub ica aB Kjell & co elektronik aB development aB

Dec. 31, 2007 dec. 31, 2006 Dec. 31, 2007 dec. 31, 2006 Dec. 31, 2007

intangible non-current assets 3,599 3,447 22 19 –property, plant and equipment 14,959 13,232 9 6 0financial non-current assets 3,368 3,959 0 – –deferred tax 276 181 – – –inventories 3,934 3,550 69 46 21current receivables 6,720 6,242 14 10 35cash and cash equivalents 4,360 3,749 4 28 147Non-current assets held for sale 103 1,146 – – –

total assets 37,319 35,506 118 108 203

equity 12,073 10,216 37 42 157Non-current liabilities 5,537 7,642 11 11 –current liabilities 19,709 17,648 70 55 46

total equity and liabilities 37,319 35,506 118 108 203



Associatesthe Hakon invest Group had three associates at year-end: cervera aB, Bra förlag aB and trade press as. during half of 2006 and the first quarter of 2007, there was an additional associate, Hemmabuti-kerna i sverige Utveckling aB (HUaB). HUaB has been a subsidiary

since the beginning of april. cervera aB is owned to 45% by the Hakon invest Group since december 21, 2006.

the table below shows a summary of our share of the assets and liabilities, revenues and profits of the associates.

cervera aB HUaB other associates

2007 2006 2007 2006 2007 2006

Hakon Invest’s share of net assets:Non-current assets 35 36 – 34 1 1current assets 98 91 – 121 12 8Non-current liabilities and provisions –12 –6 – –88 –1 –current liabilities –58 –57 – –56 –2 –2

63 64 0 11 10 7

Goodwill 21 21 – 77 5 4

share in associates 84 85 0 88 15 11

Hakon Invest’s share of revenues and profits of associates:revenues 170 – 44 33 38 33profit for the period –1 – –1 –2 2 2

Income statement

inkclub ica aB Kjell & co elektronik aB development aB

July–dec. July–Dec. 2007 2006 2007 2006 2007

revenues 82,326 67,395 345 144 178cost of goods sold –70,685 –57,640 –202 –84 –90selling and administrative expenses –9,812 –8,179 –147 –50 –67other operating income 753 805 – – 6profit from associates 20 –84 – – –

operating profit 2,602 2,297 –4 10 27

Net financial items –320 –251 0 0 4income tax –116 –12 1 –3 –9

profit for the year from continuing operations 2,166 2,034 –3 7 22profit for the period from continuing operations 367

profit for the period 2,166 2,401 –3 7 22

Note 9 Financial income

2007 2006

dividends 43 29interest income 34 36exchange differences 12 2other financial income1) 122 –

total 211 67

1) relates to a payment from the settlement fund set up in conjunction with the settlement in the class action against the dutch company royal ahold in the U.s.

Note 10 Financial expenses

2007 2006

interest expenses –18 –6exchange differences –23 –

total –41 –6

Note 11 Change to fair value of financial instruments

2007 2006

short-term investments 44 158

total 44 158

the above items include both unrealized and realized changes in value.

Note 12 Income tax

2007 2006

the items included in tax expenses are shown below

Consolidated income statementCurrent income taxcurrent income tax for the year –5 –38tax attributable to previous years 67Deferred income taxdeferred tax attributable to loss carry forwards 272 –deferred tax pertaining to change in temporary differences 10 –12

tax expense recognized in the income statement 344 –50

reconciliation of effective tax expense

profit before tax 982 1,104tax based on applicable income tax in sweden, 28% 275 309Tax effect of:shares of profit accounted for using the equity method –233 –255recognized loss carry forward from previous years –320 –change in taxation 2005–2007 –67 –other non-taxable revenues –1 –1Non-deductible expenses 4 1other –2 –4

the Group’s effective tax expense –35.0% (4.5%) –344 50



Note 12, cont.

Deferred tax at December 31 pertains to the following:

Deferred tax liabilitiesproperties –3 –2investments in associates – –1short-term investments – –56intangible assets –27 –6pensions –2 –Untaxed reserves –1 –19

Deferred tax liabilities, gross –33 –84

Deferred tax assetspension provisions 12 9share in partnership 3 –Loss carry forwards 200 –properties – 4

Deferred tax assets, gross 215 13

Net deferred tax liabilities 182 –71

the net of the deferred tax liabilities and tax assets is recognized in the balance sheet.

the Group has no other unrecognized deferred tax assets and lia-bilities on temporary differences.

Note 13 Earnings per share before and after dilution

all shares, both common and c shares, carry the same voting rights. While common shares have unrestricted entitlement to dividends, as decided by the General Meeting, c shares do not carry the right to cash dividends. such rights can accrue to c shares no earlier than 2016. However, c shares are entitled to dividends through distribution in kind, in the form of shares or other participation rights in ica aB or in current or future subsidiaries or associates in the ica aB Group or in companies that could take over operations that are operated or which could be operated within the ica aB Group. the c shares, which comprise 51% of the total number of shares, are held by ica-handlarnas förbund.

c shares can be converted into common shares starting in the year 2016. during the year Hakon invest repurchased 128,200 common shares to cover the 2006 option program. common shares and c shares have an equal share in earnings per share.

earnings per share before dilution for common shares and c shares are calculated by dividing the profit for the year that accrues to the holders with the weighted average number of shares outstanding dur-ing the year.

there were no potential common shares that result in dilution in 2007. the tables below show the earnings and number of shares used in

the calculation of earnings per share for common shares: 2007

Net profit that accrues to holders of common shares and c shares, seK M 1,326Weighted average of number of shares before dilution, thousands 160,813Weighted average of number of shares after dilution, thousands 160,813

No other transactions with common shares or potential common shares took place during the period from the balance date to the date of preparation of these financial reports.

Note 14 Intangible assets

Goodwill trademarks other intangible assets

Dec. 31, dec. 31, Dec. 31, dec. 31, Dec. 31, dec. 31, 2007 2006 2007 2006 2007 2006

opening cost 101 62 22 15 15changes during the year– investments 178 39 38 22 7 2– assets in acquired operations 42– transfers –2

Closing accumulated cost 279 101 102 22 22 15

opening amortization –2 –2changes for the year– amortization –3 –2– transfers 2

Closing accumulated amortization 0 0 0 0 –5 –2

Closing book value 279 101 102 22 17 13

acquired goodwill and trademarks with an indeterminable useful life were allocated to two different cash-generating units which also are reported segments.– publishing operations– White goods operations

Carrying amount of goodwill and trademarks allocated to cash-generating units

Goodwill trademarks

Dec. 31, dec. 31, Dec. 31, dec. 31, 2007 2006 2007 2006

publishing operations 189 101 60 22White goods operations 90 42

279 101 102 22

Publishing operationsduring the year Hakon invest’s wholly owned subsidiary forma publishing Group (forma) acquired otW (off the Wall aB) and damm förlag aB. the publishing operations for newspapers, maga-zines and other publications are fully integrated and are the cash-gen-erating unit in forma to which the intangible values relate. the recover-able amount for intangible assets is assessed on the basis of value in use which exceeded book value. present value is calculated on the future cash flow from the cash-generating unit. the future cash flow is calculated on the basis on executive Management’s forecasts for a three-year period.

the most important assumptions in three-year plans and the meth-ods used to estimate values are as follows.



Key variables Method for estimating values

Growth total demand for publications and books matches the increase in private consumption. the total number of publications falls histori-cally, while contract magazines increase.

personnel costs forecast for personnel costs matches gene-ral salary development and the cost increase is based on general inflation.

printing costs in general there is overcapacity in the mar-ket. price increases match Gdp.

the recoverable amount for the publishing operations exceeds the car-rying amount by a wide margin. the values used in the value in use calculations are as follows:

Variable Assumed value

Market growth Long-term growth = 2%discount rate 11% before tax

executive Management estimates that possible changes in growth, personnel costs and printing costs, although key variables in the calcu-lations, would not have such a significant impact that the recoverable amount would be reduced to an amount lower than the carrying amount.

White goods operationsduring the year Hakon invest’s wholly owned subsidiary Hemmabuti-kerna intressenter aB acquired an additional 10% in Hemmabutikerna i sverige Utveckling aB (HUaB) which means that Hakon now owns 60% of the shares in HUaB. White goods operations is the cash-generating unit to which the intangible values relate. the recoverable amount for intangible assets is assessed on the basis of value in use which exceeded book value. present value is calculated on the future cash flow from the cash-generating unit. the future cash flow is calculated on the basis on executive Management’s forecasts for a five-year period. the most important assumptions in the five-year plans and the methods used to estimate values are as follows.

Key variables Method for estimating values

Growth total demand for white goods matches the increase in private consumption. the increased importance of the home and inte-rest in furnishing and design has benefited the white goods industry in recent years.

personnel costs forecast for personnel costs matches gene-ral salary development and the cost increase is based on general inflation.

Market additional polarization towards premium and low-price segment respectively.

the recoverable amount for the white goods operations exceeds the carry-ing amount. the values used in the value in use calculations are as follows:

Variable Assumed value

Market growth Long-term growth = 3%discount rate 13% before tax

executive Management estimates that possible changes in growth, personnel costs and market, although key variables in the calculations, would not have such a significant impact that the recoverable amount would be reduced to an amount lower than the carrying amount.

Note 15 Buildings and land

Dec. 31, 2007 dec. 31, 2006

Buildingsopening accumulated costs 43 43– assets in acquired operations 13 –– sales and disposals –54 –

Closing accumulated costs 2 43

opening accumulated depreciation –4 –4– opening accumulated depreciation

in acquired operations 1 –– sales and disposals 4 –– depreciation –1 –

Closing accumulated depreciation 0 –4

Closing book value 2 39

tax value of buildings in sweden – 22

landopening accumulated cost 1 1– assets in acquired operations 3 –– purchases 2 –– sales and disposals –3 –

Closing accumulated cost 3 1


tax value of land in sweden – 6

Note 16 Equipment

Dec. 31, 2007 dec. 31, 2006

opening accumulated costs 62 66– purchases 17 8– assets in acquired operations 31 –– sales and disposals –7 –12


opening accumulated depreciation –42 –44– opening accumulated depreciation in acquired operations –19 –– sales and disposals 3 13– depreciation –12 –11– exchange rate differences 0 0

Closing accumulated depreciation –70 –42


Note 17 Other securities held as non-current assets

other securities held as non-current assets mainly comprise unlisted shares in otW (off the Wall Media production & consulting aB, 556531-5131). the remaining shares in otW were acquired during the year which means that otW is now a subsidiary.

Note 18 Financial assets and liabilities

Fair value of financial instruments

2007 2006

Financial assets1)

Financial assets which at initial recognition were identified as measured at fair value through profit or loss– other non-current securities2) 2 14

Financial assets held for trading measured at fair value– short-term investments 2,011 2,368

total 2,013 2,382



Note 18, cont.

Loans and receivables– trade and other receivables 195 75– receivables from group companies 1 2– receivables from companies reported

according to the equity method 0 9– other current receivables 28 31– cash and cash equivalents 281 349

total 505 466

Financial liabilities1)

Other financial liabilities– Non-current liabilities where hedge

accounting is not applied3) 0 16– Non-current interest-bearing liabilities 74 –– trade and other payables 227 96– payables to companies reported

according to the equity method 2 3– current interest-bearing liabilities 5 –– other current liabilities 56 44

total 364 159

1) carry amount corresponds to fair value. for trade receivables, trade payables, other current receivables and liabilities measured at cost the maturity is short and therefore fair value corresponds to carrying amount.

2) 2007 amount pertains to unlisted shares in Jerntorget sverige aB. 2006 amount pertains to unlisted shares in otW (off the Wall Media production & consulting aB). in 2007 the remaining shares in otW were acquired and the company is now a subsidiary.

3) is part of non-current liabilities and relates to purchase price for the shares in Kjell & co.

Note 19 Inventories

Dec. 31, 2007 dec. 31, 2006

finished goods 180 55

total 180 55

inventories consist of white goods seK 75 M (0) and books seK 105 M (55).

Note 20 Bad debts

Dec. 31, 2007 dec. 31, 2006

provision at the beginning of the year –2 –1reserve for possible losses –1 0confirmed losses 2 –1

provisions at the end of the year –1 –2

Note 21 Related party disclosures

sales purchases receivables Liabilities

2007 2006 2007 2006 2007 2006 2007 2006

ica-handlarnas förbund 1 1ica-handlarnas förbund aB 2 2 0 1 0 1ica-handlarnas förbund finans aBica aB 75 87 3 20 0 9 2 3Kjell & co elektronik aB 0cervera aBinkclub development aB

total 77 89 3 21 1 11 2 3

Note 22 Prepaid expenses

Dec. 31, 2007 dec. 31, 2006

production and distribution costs 8 10Marketing costs 7 6rental costs 8 2other prepaid expenses 10 8

total 33 26

Note 23 Short-term investments

Dec. 31, 2007 dec. 31, 2006

Breakdown of short-term investmentsequities 587 815Hedge funds 802 547fixed-income securities 550 933ahold shares 72 73

Book value 2,011 2,368

cash and cash equivalents 281 349

total short-term investments and cash and cash equivalents 2,292 2,717

ICA-handlarnas Förbundica-handlarnas förbund owns 67% of the shares in Hakon invest aB.

ICA-handlarnas Förbund ABica-handlarnas förbund owns 100% of ica-handlarnas förbund aB.

ICA-handlarnas Förbund Finans ABica-handlarnas förbund owns 100% of ica-handlarnas förbund finans aB.

ICA ABHakon invest owns 40% of ica aB.

Kjell & Co Elektronik ABKjell & co intressenter owns 50% of Kjell & co elektronik aB.Kjell & co intressenter is 100% owned by Hakon invest aB.

Cervera ABcervera intressenter aB owns 45% of cervera aB. cervera intressenter aB is 100% owned by Hakon invest aB.

inkClub Development ABinkclub intressenter aB owns 50% of inkclub development aB. inkclub intressenter aB is 100% owned by Hakon invest aB.

for information about benefits to senior executives, see Note 7.



financial investments under external management amounted to seK 1,776 M at december 31, 2007, and investments under own man-agement totaled seK 516 M. at year-end 2007 investments were allocated as follows: 29% equities, 24% fixed-income securities, 35% hedge funds and 12% cash and cash equivalents.

the equities are mainly attributable to shares in ahold (800,000 shares). the value of the ahold shares amounted to seK 72 M at december 31, 2007.

the hedge fund holding refers to the hedge funds prisma, topach and indecap Guide.

these items are measured at fair value in the income statement. in order to establish fair value, official market listings were used.

Note 24 Cash and cash equivalents

cash and cash equivalents consist of cash and bank balances totaling seK 220 M (349) and short-term investments with original maturities of less than three months totaling seK 61 M (0).

Unutilized bank overdraft facilities as of december 31, 2007, amounted to seK 132 M (50).

the consolidated cash flow statement includes cash and cash equivalents at year-end, amounting to:

2007 2006

cash and bank balances 220 349short-term investments (maximum maturity three months) 61 –

total 281 349

Note 25 Equity

share capital, number of shares, 000s Dec. 31, 2007 dec. 31, 2006

common shares with a par value of seK 2.50 per share 78,849 78,849c shares with a par value of seK 2.50 per share 82,068 82,068

total 160,917 160,917

shares have the same value (2.50) and equal voting rights.share capital totals seK 402,294,000.during the year Hakon invest repurchased 128,200 common

shares to cover the 2006 option program.

Reserves

Dec. 31, 2007 dec. 31, 2006

Hedging reserve 6 –9revaluation reserve 199 199translation reserve 259 –50

total 464 140

Hedging reservethe hedging reserve includes the effective component of accumulated net change in fair value of a cash flow hedging instrument attributable to hedging transactions that have not yet occurred.

Revaluation reservethe revaluation reserve includes changes in value attributable to tangi-ble and intangible non-current assets. at business combinations achieved in stages, the revaluation of an already owned share of the assets is recognized in a revaluation reserve. the revaluation of the previously owned share of assets in rimi Baltic aB is recognized as a revaluation reserve within equity in the comparative year.

Translation reservethe translation reserve includes all exchange rate differences that arise in translation of financial reports from foreign operations that prepare their financial reports in a currency other than the currency in which the Group’s financial reports are presented.

Dividendcommon shares carry unrestricted entitlement to receive dividends decided by a General Meeting, while c shares (which comprise 51% of the total number of shares and are held by ica-handlarnas förbund) do not carry entitlement to cash dividends. such rights can accrue to c shares in 2016 at the earliest. However, c shares are entitled to divi-dends through distribution in kind, in the form of shares or other interests in ica aB or in current or future subsidiaries or associates in the ica aB Group or in companies that could take over operations that are oper-ated or which could be operated within the ica aB Group.

Hakon invest’s target is that the dividend rate will normally be at least 50% of the parent company’s profit after tax. 100% of dividends are distributed among 49% of the shares since the c shares are not entitled to cash dividends. this policy assumes that the company’s position and liquidity allows it to issue a dividend to the extent referred to above.

Paid and proposed dividends

2007

Decided and paid during the year:dividend on common shares:dividend for 2006: seK 5.50/share 433

Dividend proposal to the 2008 Annual General Meeting:dividend on common shares:dividend for 2007: seK 6.00/share 472

ica-handlarnas förbund, which owns 82,067,892 c shares, is not entitled to a cash dividend. the Board of Hakon invest aB has decided to propose to the annual General Meeting on april 22, 2008, an ordi-nary dividend of seK 6.00. see also Note 13, earnings per share regarding dividend rules in the articles of association.

Note 26 Provisions for pensions and similar commitments

Hakon invest makes a provision in its balance sheet in accordance with the pri system. these obligations are insured through fpG. for the itp plan, the company applies the so-called ten-pointer solution for high earners with detached premiums. obligations in addition to pri and itp are insured, among other things, with endowment insurance.

Reported pension cost

Dec. 31, 2007 dec. 31, 2006

Itp planDefined benefit plans:current service cost 4 4actuarial gains/losses 3 –3effects of curtailments and settlements 0 1interest expense 6 6

total cost for defined benefit plans 13 8

cost of defined contribution plans 26 15

total pension costs 39 23

Change in pension obligationspresent value of obligations, opening balance 126 122Benefits earned during the period 4 4pension payments –5 –3reclassifications – –interest 6 6actuarial gains(–)/losses(+) 3 –3

present value of pension obligations, closing balance 134 126

Change in plan assetsopening plan assets 4 3contributions paid by employer 2 1actuarial gains(–)/losses(+) 0 0

Closing plan assets 6 4

actual return on plan assets 0 0



Note 26, cont

Dec. 31, 2007 dec. 31, 2006

Assumptions for actuarial calculations:discount rate 5.5% 5%future annual salary increases 3% 3%future annual pension increases 2% 2%anticipated return on plan assets 7% 7%

Provisions recognized in the balance sheet

2007 2006 2005

present value of defined benefit obligations 134 126 122plan assets –6 –4 –3

provisions at year-end 128 122 119

of which:Long-term component 123 117 115short-term component 5 5 4

experience-based adjustments for obligations 2 2experience-based adjustments for plan assets 0 0

Other pension commitmentsother pension commitments are paid in amounts that correspond to the value of funds in pledged endowment insurance policies. the capital value of the commitment amounted to seK 41 M (40) at december 31, 2007, thus corresponding to the value of the endowment insurance.

Note 27 Trade and other payables

Dec. 31, 2007 dec. 31, 2006

trade payables 102 44accrued vacation pay 31 19accrued social security contributions 11 6royalties payable 2 8accrued bonus 7 7accrued members bonus 36 –accrued advertising costs 11 –accrued acquisition costs 5 –other accrued expenses 22 12

total 227 96

Note 28 Interest-bearing loans

Dec. 31, 2007 dec. 31, 2006

non-current liabilitiesBank loan 48 –Bank overdraft facility 26 –

total 74 0

Current liabilitiescurrent portion of bank loan 5 –

total 5 0

Terms and repayment periodsthe lending bank is Nordea Bank aB (publ). the fixed-interest period is 3 months and bears an interest rate of stiBor 7 and a margin of 0.4%. seK 23 M of the bank loan is amortized by seK 5.4 M per year final maturity 2011.

Note 29 Contingent liabilities and pledged assets

Dec. 31, 2007 dec. 31, 2006

försäkringsbolaget pensionsgaranti/guarantee 3 3Guarantee and guarantee commitments for subsidiaries 124 –Guarantee associates 3 1

total 130 4

operating leases – Group as lesseefuture minimum lease payments according to operating leases amount to:

cost for the year 22 18

Within one year 15 18after one year but within five years 34 43after 5 years 12 20

total 61 81

the operating leases specified above are rent for premises, renting of office machines and car rentals.

Hakon invest’s interest in joint venture company ica’s total invest-ment commitments amounts to seK 592 M.

Pledged assets

Dec. 31, 2007 dec. 31, 2006

endowment insurance pledged as collateral for pension obligation 41 40

total 41 40

Note 30 Adjustment for non-cash items

Dec. 31, 2007 dec. 31, 2006

depreciation and impairment of non-current assets 16 13Measurement at fair value –44 –158Unpaid interest income –6 –15change in provisions 15 10capital gain on the sale of non-current assets –2 –interests accounted for using the equity method –832 –910

total –853 –1,060


pareNt coMpaNY iNcoMe stateMeNt

parent company income statement

seK M Note 2007 2006

revenues – – operating expenses administrative expenses 3,4,5 –64 –60

operating loss –64 –60 result from financial investments result from interests in joint ventures 6 383 244financial income 7 208 65financial expenses 8 –23 –1change to fair value of financial instruments 9 44 158

total result from financial investments 612 466

profit after financial items 548 406 appropriations 18 70 –39

profit before tax 618 367 tax on profit for the year 10 320 –32

profit for the year 938 335


pareNt coMpaNY BaLaNce sHeet

parent company balance sheetassets

seK M Note Dec. 31, 2007 dec. 31, 2006

non-current assets Financial assets interests in group companies 11 206 201interests in joint ventures 12 2,960 2,960deferred tax asset 10 209 –other non-current receivables 13 41 40Non-current receivables group companies 14 802 261

total financial assets 4,218 3,462

total non-current assets 4,218 3,462 Current assets 15 Current receivables receivables from group companies 6 20receivables from joint ventures – –other current receivables 0 0prepaid expenses and accrued income 2 2

total current receivables 8 22 short-term investments 15 securities under separate management 16 1,938 2,295other shares 17 72 73

total short-term investments 2,010 2,368 cash and bank balances 227 259

total current assets 2,245 2,649 totaL assets 6,463 6,111


pareNt coMpaNY BaLaNce sHeet

eQUitY aNd LiaBiLities seK M Note Dec. 31, 2007 dec. 31, 2006

equity restricted equity share capital 402 402statutory reserve 2,772 2,772

total restricted equity 3,174 3,174 unrestricted equity retained earnings 2,280 2,393profit for the year 938 335

total unrestricted equity 3,218 2,728

total equity 6,392 5,902 untaxed reserves 18 0 70 provisions provisions for pensions and similar commitments 19 44 42deferred tax liability 10 0 45

total provisions 44 87 Current liabilities 15 trade payables 2 4tax liabilities 0 25other current liabilities 12 11accrued expenses and deferred income 20 13 12

total current liabilities 27 52 totaL eQUitY aNd LiaBiLities 6,463 6,111 pledged assets 21 41 40contingent liabilities 22 202 121


pareNt coMpaNY stateMeNt of cHaNGes iN eQUitY

parent company statement of changes in equity

share statutory retained profit for total seK M capital reserve earnings the year equity

Balance at January 1, 2006 402 2,772 2,294 441 5,909shareholder contribution 1 1disposition of earnings for previous year 441 –441 0dividend –355 –355Group contribution 17 17tax effect of group contribution –5 –5profit for the year 335 335

equity December 31, 2006/January 1, 2007 402 2,772 2,393 335 5,902 shareholder contribution 1 1disposition of earnings for previous year 335 –335 0dividend –433 –433repurchased shares –18 –18payment for call options 2 2profit for the year 938 938

Balance at December 31, 2007 402 2,772 2,280 938 6,392

share capital comprises 78,849,544 common shares with a par value of seK 2.50 each and 82,067,892 c shares with a par value of seK 2.50. all shares carry the same voting rights.


pareNt coMpaNY casH fLoW stateMeNt

parent company cash flow statement

seK M Note Dec. 31, 2007 dec. 31, 2006

operating activities profit after financial items 548 406adjustment for non-cash items 23 –48 –169

500 237 income tax paid 41 –32

Cash flow from operating activities before change in working capital 541 205 Change in working capital receivables 115 –46Liabilities 1 –9

Cash flow from operating activities 657 150 Investing activities acquisition of property, plant and equipment –1 –investments in financial assets –541 –261divestment/reduction of financial assets 301 333

Cash flow from investing activities –241 72 Financing activities shareholders’ contribution received 1 3repurchase of treasury shares –16 –Loans raised – –85Group contribution – 39dividends paid –433 –355

Cash flow from financing activities –448 –398 cash flow for the year –32 –176cash and cash equivalents at beginning of the year 259 435

Cash and cash equivalents at end of the year 227 259


pareNt coMpaNY’s Notes

parent company’s notes

Note 1 Accounting principles

the parent company’s annual accounts are prepared in accordance with swedish law and applying rr32:06 (reporting of Legal entities). this means that the parent company shall comply with ifrs as much as possible. the Group’s accounting principles are set out in Note 1 in the section Notes to the consolidated accounts. any deviations that arise between the accounting principles of the parent company and the Group are due to restrictions in the possibility to apply ifrs in the parent company due to the annual accounts act and the pension obligations Vesting act, and in some instances for tax reasons.

all amounts in the annual accounts are in seK millions (seK M) except where the amounts are minor and instead shown in another form to provide a more explanatory picture of the actual situation.

Pensions and other post-retirement benefitsin sweden all employees are covered by pension benefits according to collective agreements which means that salaried employees receive defined benefit pensions according to the itp plan. pension obligations are secured through provisions in the balance sheet and pension pre-miums. pension obligations are calculated annually on the balance sheet date according to the actuarial bases established in the fpG/pri system and by the swedish financial supervisory authority.

Untaxed reservesin the parent company, untaxed reserves are reported including deferred tax liability. in the consolidated accounts, on the other hand, untaxed reserves are divided between deferred tax liability and equity. changes in untaxed reserves are reported as appropriations in the income statement.

Group contribution and shareholder contributionsthe company reports Group contributions and shareholder contribu-tions in accordance with the statement from the swedish financial accounting standards council’s emerging issues task force.

Group contributions are reported according to financial implica-tion. this means that Group contributions provided in order to mini-mize the Group’s total tax are recognized directly in equity.

a shareholder contribution is taken directly to equity by the recipi-ent and capitalized as shares and participations by the issuer, to the extent no impairment loss is identified.

Associates and joint venturesinterests in associates and joint ventures are reported in the parent company’s own income statement and balance sheet according to the cost method. in the consolidated accounts, interests in associates are reported according to the equity method.

Note 2 Financial risks

in Hakon invest’s operations, exposures arise primarily in currency risk, interest rate risk, credit risk and share price risk. for more information about financial risks, see Note 2, in the consolidated accounts section.

Note 3 Average number of employees, salaries, other remuneration and social security contributions

2007 2006

average number of employees, broken down by gender amounted to:Women 5 5Men 8 8

total 13 13

seK Msalaries and remuneration paid to:Board and president 5 6other employees 17 17

total salaries and remuneration 22 23

social security contributions, statutory and contractual 10 9pension costs 8 7

total salaries, remuneration, social security contributions and pension costs 40 39

during the year, a fee of seK 575 thousand (530) was paid to the chairman of the Board as well as a consultancy fee of seK 50 thou-sand. of the pension amount, seK 2,440 thousand (2,203) pertains to the Group Board of directors and president,

salary paid to the company’s president during the year amounted to seK 1,313 thousand. a total remuneration package of seK 4.7 M (4.6) has been agreed with the president. the package includes vacation, social security contributions, pension costs and other costs in the form of a car, etc. retirement age is 65. the notice period is six months during which period the total remuneration package is available at 1/12 per month. Bonus in addition to this amount was seK 5.6 M, of which seK 5.3 M pertains to the Group president and other senior executives.

Board members and senior executives

Number on of whom Number on of whom Dec. 31, 2007 men, % dec. 31, 2006 men, %

Board members 7 86 7 86president and other senior executives 5 100 4 100

Absence due to illnesstotal absence due to illness is 0.58% (0.76%). details per group are not provided due to an exemption clause in the legislation which states that information should not be provided if the number of employees in the group is a maximum of ten or if the information can be attributed to an individual person.



Note 4 Deprecation

depreciation of property, plant and equipment amounts to seK 81 thousand (0).

Note 5 Fees to auditors

2007 2006

ernst & Young, audit assignments 1 1ernst & Young, other assignments – 1

total 1 2

other assignments primarily relate to consultation in conjunction with acquisitions.

Note 6 Result from interests in joint ventures

2007 2006

dividend 383 244

total 383 244

Note 7 Financial income

2007 2006

dividends 42 29interest income 31 34interest income from group companies 1 –exchange differences 12 2other financial income1) 122 –

total 208 65

1) pertains to payment from settlement fund set up in conjunction with settlement in the class action against the dutch company royal ahold in the U.s.

Note 8 Financial expenses

2007 2006

interest expenses 0 0interest expenses to group companies – –1exchange rate differences –23 0

total –23 –1

Note 9 Change to fair value of financial instruments

2007 2006

short-term investments 44 158

total 44 158

Note 10 Tax on profit for the year

2007 2006

items included in the tax expense are specified below

Income statementCurrent income taxcurrent income tax for the year – –34tax attributable to previous years 67 –Deferred income taxdeferred tax attributable to loss carry forwards 253 –deferred tax pertaining to change in temporary differences – –3tax effect Group contribution – 5

tax expense/income (–/+) recognized in the income statement 320 –32

reconciliation of effective tax expense

profit before tax 618 366tax according to current tax rate in sweden, 28% 173 103Tax effect of:recognized loss carry forwards from previous years –320 –change in taxation 2005–2007 –67 –dividend –107 –68other non-taxable income 0 –5Non-deductible expenses 1 1other 0 1

Company’s effective tax cost –51.7% (8.6) –320 32

Deferred tax at December 31 pertains to the following:

Deferred tax liabilitiesshort-term investments – –56

Deferred tax liabilities, gross 0 –56

Deferred tax assetsLoss carry forwards 197 –pension provisions 12 11

Deferred tax assets, gross 209 11

the net of deferred tax liabilities and deferred tax assets is reported in the balance sheet.

the swedish tax agency has allowed Hakon invest aB a tax deduc-tion relating to realized and unrealized losses on the shareholding in the dutch company royal ahold. the tax deduction relates to unutilized loss carry forwards during the income years 2002–2005, which can be utilized against taxable profits in the income year 2006 and thereafter.



Note 11 Participations in Group companies

Number equity and Book value Book value reg. of voting par Dec. 31, dec. 31, corp. reg. no. office shares rights, % value 2007 2006

forma publishing Group aB 556045-0297 Västerås 30,000 100 30 200 200Kjell & co intressenter aB 556703-2924 solna 100 1 1Hemmabutikerna intressenter aB 556720-3210 solna 100 0 0cervera intressenter aB 556720-9563 solna 100 0 0inkclub intressenter aB 556720-3467 solna 100 5 0Hakon invest förvärvsbolag 2 aB 556720-3608 solna 100 0 0

subsidiaries of Forma publishing Group aBidé-förlaget i Västerås aB 556306-7783 Västerås 100 HB tapplinan 969632-5050 stockholm 100 tidskriften Hus & Hem aB 556609-2010 Västerås 100 idé & Mediaproduktion i Västerås aB 556279-4940 Västerås 100 ica Kuriren aB 556609-2234 Västerås 100 ica förlaget annonsservice aB 556351-2531 Västerås 100 ica facktidningar aB 556372-6529 Västerås 100 ica Bokförlag aB 556071-2241 Västerås 100 Bokklubben Hemma aB 556586-2363 Västerås 100 forma publishing Group oY 0503546-4 Helsinki 100 forma publishing international oY 1510258-7 Helsinki 70 forma Media as, tallinn 10555124 tallinn 70 forma Media sia, riga 40003484906 riga 70 off the Wall aB (otW aB) 556654-6387 stockholm 100 off the Wall Media production & consulting aB 556531-5131 stockholm 100 off the Wall publishing aB 556567-9841 stockholm 100 off the Wall communication aB 556574-4843 stockholm 100 off the Wall television aB 556596-0969 stockholm 100 off the Wall sportproduction aB 556598-1759 stockholm 100 off the Wall interactive aB 556742-3693 stockholm 100

subsidiaries of Hemmabutikerna Intressenter aBHemmabutikerna i sverige Utveckling aB 556695-8673 solna 60 Hemmabutikerna i sverige aB 556518-8705 solna 60 dala Hemma aB 556103-7929 täby 60 Vitvaruhuset i roslagen aB 556467-4199 Norrtälje 60 Hemmabutikerna i syd aB 556544-2455 stockholm 60

Dec. 31, dec. 31, seK M 2007 2006

cost 206 201

Note 12 Interests in joint ventures

Dec. 31, 2007 dec. 31, 2006

opening costs 2,960 2,960

Closing costs 2,960 2,960

Book value Book value par share, Dec. 31, dec. 31, Number value % 2007 2006

ica aB 2,000,000 200 40.0 2,960 2,960

the participating interest shown above refers to a share of voting rights that corresponds to share of capital, however there is a share-holder agreement between the parties (Hakon invest and ahold) under which they have joint control. the agreement runs until year-end 2040. the shareholder agreement stipulates that right of first refusal exists between the parties at market price in the event of share trans-

fers. transfers may only be made to a party who becomes a party to the shareholder agreement. furthermore, at the request of a party and in the event of certain situations specified in the agreement relating to company acquisitions and in the event of a serious financial situation for the ica Group, the parties are since year-end 2004 and during a maximum period of five years thereafter obliged in proportion to their ownership shares in ica aB to provide capital by subscribing for shares in a new issue. for Hakon invest this amounts to a maximum of seK 720 M. Neither party has raised the question of such a new issue nor has such question been the subject of discussion between the parties or in ica aB’s Board. the probability of this conditional under-taking being raised is judged as highly unlikely.

Corporate reg. no. reg. office

ica aB 556582-1559 stockholm



Note 13 Other non-current receivables

Dec. 31, 2007 dec. 31, 2006

opening accumulated costs 40 37– investment 1 3



of which pledged endowment insurance of seK 41 M (40).

Note 14 Non-current receivables from Group companies

Dec. 31, 2007 dec. 31, 2006

Kjell & co intressenter aB 86 86Hemmabutikernas intressenter aB 106 90cervera intressenter aB 85 85forma publishing Group aB 95 –inkclub intressenter aB 430 –

total 802 261

Note 15 Financial assets and liabilities

Fair value of financial instruments

Dec. 31, 2007 dec. 31, 2006

Financial assets1)

Financial assets which at initial recognition were identified as measured at fair value through profit or loss

Financial assets held for trading measured at fair value– short-term investments 2,010 2,368

total 2,010 2,368

Loans and receivables– Non-current receivables from group companies 802 261– receivables from group companies 6 20– cash and cash equivalents 227 259

total 1,035 540

Financial liabilities1)

Other financial liabilities– trade payables 2 4– other current liabilities 12 11

total 14 15

1) carrying amount corresponds to fair value.

Note 16 Securities under separate management

Dec. 31, 2007 dec. 31, 2006

equities 587 815Hedge funds 801 547fixed-income securities 550 933

Book value 1,938 2,295

Market value 1,938 2,295 for more information about securities under separate management, see section consolidated accounts Notes 2 and 23.

Note 17 Other shares

other shares refers to 800,000 shares in royal ahold at a price of eUr 9.47 (8.06) eUr/seK 9.4735 (9.025).

Note 18 Untaxed reserves

Dec. 31, 2007 dec. 31, 2006

tax allocation reserve, 2006 0 30tax allocation reserve, 2007 0 40

total 0 70

Note 19 Provisions for pensions and similar commitments

Dec. 31, 2007 dec. 31, 2006

provision pri pensions 3 2provision other pensions 41 40

total 44 42

Note 20 Accrued expenses and deferred income

Dec. 31, 2007 dec. 31, 2006

accrued vacation pay 2 1accrued option costs 1 1accrued bonus 7 7other accrued costs 3 3

total 13 12

Note 21 Pledged assets

Dec. 31, 2007 dec. 31, 2006

endowment insurance pledged as collateral for pension obligations 41 40

total 41 40

Note 22 Contingent liabilities

Dec. 31, 2007 dec. 31, 2006

Guarantee to subsidiaries 202 121

total 202 121

Note 23 Other non-cash items

Dec. 31, 2007 dec. 31, 2006

change in provisions 1 4Measurement at fair value –44 –158Unpaid interest expenses –5 –15

total –48 –169


proposed disposit ioN of profits

proposed disposition of profits

the following profits are at the disposal of the annual General Meeting sek 000s

retained earnings 2,279,839profit for the year 937,853

3,217,692

the Board of directors and the president propose that the profits be distributed as follows– to the holders of common shares,

a dividend of seK 6.00/share 472,328– to be carried forward 2,745,364

3,217,692

the undersigned hereby affirm that to the best of their knowledge the consolidated financial statements have been prepared in accordance with the international financial reporting standards ifrs, that have been adopted by the eU, and generally accepted accounting princi-ples and give a true and fair view of the Group’s and the parent company’s financial position and results of operations, and that the Board of directors’ report provides a fair review of the Group’s and the parent company’s operations, financial position and results of operations and describes material risks and uncertainties facing the companies included in the Group.

stockholm, March 10, 2008

Lars otterbeck cecilia daun Wennborg Jan-olle folkesson Chairman Board member Board member

anders fredriksson thomas strindeborn olle Nyberg Board member Board member Board member

Jan olofsson claes-Göran sylvén Board member President

our audit report was submitted on March 10, 2008

ernst & Young aB

erik ÅströmAuthorized Public Accountant


aUdit report

audit report

To the Annual General Meeting of Shareholders of Hakon Invest AB

corporate reg. no. 556048-2837

We have audited the annual accounts, the consolidated accounts, the accounting records and the administration of the Board of directors and the president of Hakon invest aB for the year 2007. the company’s annual accounts are included in this document on pages 54 to 88. the Board of directors and the president are responsible for these accounts and the administration of the company as well as for the application of the annual accounts act when preparing the annual accounts and the application of international financial reporting standards ifrs as adopted by the eU and the annual accounts act when preparing the consoli-dated accounts. our responsibility is to express an opinion on the annual accounts, the consolidated accounts and the administration based on our audit.

We conducted our audit in accordance with generally accepted auditing standards in sweden. those standards require that we plan and perform the audit to obtain high but not absolute assurance that the annual accounts and the con-solidated accounts are free of material misstatement. an audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the accounts. an audit also includes assessing the accounting principles used and their application by the Board of directors and the president and significant estimates made by the Board of directors and the president when preparing the annual accounts and the con-solidated accounts as well as evaluating the overall presenta-tion of information in the annual accounts and the consolidated accounts. as a basis for our opinion concerning discharge from liability, we examined significant decisions, actions 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 president. We also examined whether any board member or the president has, in any other way, acted in contravention of the companies act, the annual accounts act or the articles of association. We believe that our audit provides a reasonable basis for our 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 financial position and results of operations in accordance with generally accepted accounting principles in sweden. the consolidated accounts have been prepared in accordance with interna tional financial reporting standards ifrs 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 con-sistent with the other parts of the annual accounts and the con-solidated accounts.

We recommend to the annual General 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 president be dis-charged from liability for the financial year.

stockholm, March 10, 2008

ernst & Young aB

erik ÅströmAuthorized Public Accountant


corporate GoVerNaNce report 2007

corporate governance within Hakon invest

The corporate governance report

corporate governance is about how a company, that is not managed by its owners, is operated so that the interests of its owners are safeguarded with the overall objective of raising shareholder value and in this way meeting the demands placed by the owners on their invested capital.

Hakon invest applies the swedish code of corporate Governance (the code), which since July 1, 2005, is included as part of the listing agreement with the oMX Nordic exchange.

Hakon invest’s 2007 corporate Governance report has not been reviewed by the company’s auditors.

Corporate governance and value

creation at Hakon Invest

Hakon invest is a public company with its registered office in stockholm, sweden. Governance of the company is based, among other things, on the swedish companies act and the listing agreement with the oMX Nordic exchange which includes the code.

the internal framework for Hakon invest’s corporate gov-ernance comprises the articles of association, the Board’s for-mal work plan, the instructions to the president and adopted policies. extracts from the policies are available on Hakon invest’s website (www.hakoninvest.se).

the annual General Meeting, the Board of directors and the president are responsible jointly and severally for ensuring that governance is conducted in accordance with what is

stipulated in the articles of association as well as applicable legislation and rules.

Hakon invest’s business concept is to make long-term invest-ments with favorable risk diversification within the retail sector in the Nordic and Baltic regions. Hakon invest possesses sig-nificant expertise and experience as well as access to an exten-sive network within retail and retail-related operations. the company has an investment organization that works actively with both existing holdings and evaluation of new, attractive investment candidates. on the basis of significant and active ownership Hakon invest aims to provide its holdings with con-ditions and resources for development and profitable growth.

as a part-owner of ica aB, Hakon invest works to develop and strengthen the ica concept, which means that merchants own and operate retail grocery stores with access to economies of scale and intellectual property rights through the ica aB Group.

a good return is created on shareholders’ invested capital through value growth in the investments and a good dividend yield, which are achieved through active and responsible ownership.

Hakon Invest’s deviations from the Code

Hakon invest has deviated from the part of the code’s rule 3.8.2 which stipulates that the audit committee shall comprise three members. today, Hakon invest’s audit committee con-sists of two members. in view of the fact that ica aB constitutes the main holding in Hakon invest and ica aB has an audit

the 2007 annual General Meeting, which was held in stockholm on april 26, re-elected all Board members with Lars otterbeck as chairman of the Board. the Board held a total of 18 meetings during 2007 and matters considered at these meetings included governance of the holdings and evaluation of new investment candidates.



committee in which Hakon invest has three representatives, the company has decided that two members are sufficient.

Annual General Meeting

the annual General Meeting of shareholders, which must be held within six months from the end of the fiscal year, consid-ers among other things matters relating to election of Board members, where applicable election of auditors, dividend, adoption of income statement and balance sheet, discharge from liability for the members of the Board and the president. shareholders are entitled to have a matter considered at the

Meeting provided a legitimate request has been received by the company.

it is through the annual General Meeting that Hakon invest’s owners exercise their owner influence. shareholders who are registered in the share register as of the settlement date and who have submitted due notification are entitled to attend the Meeting.

the 2007 annual General Meeting was held at Grand Hôtel in stockholm on april 26, 2007. in addition to sharehold-ers, the meeting was attended by all members of Hakon invest’s Board, all members of executive Management, employees, media representatives and a number of invited guests.

lars otterbeck chairman

What is special about the governance of Hakon Invest? as a board we naturally have to work in the interests of all shareholders, which equally obviously is what we do. at the same time, Hakon invest has a principal owner – ica-handlarnas förbund – which has a very solid majority and intends to remain as principal owner. Half the Board has its roots in ica. our 40%- holding in ica is at the same time our dominant asset. this link to ica in both directions makes the circumstances a little special. it makes the company somewhat hard for the market to analyze.

The ICA influence is strong. Is that good or bad? i usually say “it is”. What is special about sweden’s most successful retail group, also affects Hakon invest. Both

companies have an entrepreneur-driven and facilitating culture, where at the same time there is an understanding for size and cooperation.

there are some differences in corpo-rate governance. ica is a perpetual hold-ing and a well-developed company while the portfolio companies are in earlier phases of development. in neither case do we do the work of company management, but we influence the companies primarily through active work on their boards. developing the holdings portfolio through acquisitions is the part of the work of the Board that is the most “operational”.

What characterized the work of the Board in 2007 is major deals that did not materialize in that very year. We analyzed a number of companies, sev-eral of which would have suited our port-folio well, but price expectations were

too high. this is why there were no major acquisitions in 2007. We therefore chose not to utilize our balance sheet capacity which with hindsight we can see was probably rather fortunate. in a slightly weaker economic climate there will be more business opportunities and acquisition opportunities will improve.

from the outset we labeled our shares as a defensive investment that offered a good return over time and growth in value. at the same time, both our principal owner and individual ica retailers who are also in the owner circle wish to get something out of their owner-ship in Hakon invest. in this respect they are no different from other shareholders. Given all the facts we can still be rather pleased with our share performance dur-ing the year. it is our task to ensure that this trend continues.

a few words from Lars otterbeck, chairman

Nomination Committee’s composition ahead of 2008 Annual General Meeting Holding in Hakon Invest at Member representative for appointment of nomination Committee

Håkan olofsson, ica retailer in Boden ica-handlarnas förbund 67.41 %claes ottosson, ica retailer in Hovås (chairman) ica-handlarnas förbund 67.41 %KG Lindvall, swedbank robur fonder swedbank robur fonder 1.04 %stefan roos, seB asset Management seB fonder 1.70 %



the Meeting resolved, among other things:◾ to re-elect Lars otterbeck, cecilia daun Wennborg,

anders fredriksson, olle Nyberg, Jan-olle folkesson, thomas strindeborn and Jan olofsson as members of the Board

◾ a dividend for 2006 of seK 5.50 per common share should be paid

the 2008 annual General Meeting will be held on tuesday, april 22, 2008 in the stockholm conference room, Grand Hôtel, s. Blasieholmshamnen 8, stockholm. shareholders who are registered in the share register as at april 17, 2008, and who have notified their attendance are entitled to attend the annual General Meeting in person or through a proxy. in order to have a matter considered by the 2008 annual General Meeting, shareholders in accordance with instructions on the website must submit a request no later than March 4, 2008.

Nomination Committee

the tasks of the Nomination committee include evaluating the Board and its work and ahead of the annual General Meeting submitting proposals regarding the chairman and other Board members, Board fees, and, when appropriate, proposals for the election of auditors as well as auditing fees.

the rules for Hakon invest’s Nomination committee were adopted at the 2007 annual General Meeting. it is to consist of four members who represent the company’s shareholders. two of the members are appointed by the majority share-holder ica-handlarnas förbund and two members are appointed by the next largest owners, which at september

14, 2007, were swedbank robur fonder and seB fonder. the composition of the Nomination committee was announced on october 5, 2007.

The work of the Nomination Committee

the Nomination committee held three meetings ahead of the 2008 annual General Meeting. all members were present at these meetings. Hakon invest’s General counsel, fredrik Hägglund, has been co-opted to all the Nomination committee’s meetings as secretary.

No fees were paid to the members of the Nomination committee for their work.

at its initial meeting the Nomination committee met the chairman of the Board, Lars otterbeck, and the president, claes-Göran sylvén each separately in order to be informed about Hakon invest’s operations and Board work. at the sec-ond meeting the Nomination committee met chairman of the Board Lars otterbeck and cfo Göran Hesseborn in order to obtain information about audit work and the finance function. the chairman of the Board then also presented the 2007 evaluation of the Board. the Nomination committee subse-quently completed its evaluation of the Board, received and evaluated proposals for Board members, agreed on propos-als to the annual General Meeting and prepared a report on the work of the Nomination committee. the Nomination committee’s report, which describes this work in more detail, is available on Hakon invest’s website (www.hakoninvest.se). the Nomination committee’s proposals ahead of the 2008 annual General Meeting are specified in the notice of the meeting and on the website.

Board members elected at the 2007 Annual General Meeting

independent in attendance remuneration for relation to at Board Board work/committee Name elected position company/owners committee work meetings work (seK 000s)

cecilia daun Wennborg 2005 Member Yes/Yes audit committee (chairman) 16/18 200/50

Jan-olle folkesson 2005 Member Yes/Yes investment committee 17/18 200/25

deputy investment committeeanders fredriksson 1997 chairman Yes/ No remuneration committee 18/18 300/25/25

olle Nyberg 2000 Member Yes/ No audit committee 16/18 200/25

Jan olofsson 2005 Member Yes/Yes investment committee 18/18 200/25

investment committee (chairman)Lars otterbeck 2005 chairman Yes/Yes remuneration committee (chairman) 17/18 500/25/50

thomas strindeborn 2006 Member Yes/ No – 18/18 200



ANNUAL GENERAL MEETINGis Hakon invest’s highest decision-making body where shareholders can exercise their influence.

HAKON INVEST’S BOARD has 7 members including the chairman.

HAKON INVEST’S MANAGEMENT GROUP comprises 5 people including the president.

HAKON INVEST’S HOLDINGS

ownership and governance of Hakon Invest

the nomination Committee proposes a Chairman of the Board and members ahead of the annual General Meeting.

auditors appointed by the annual General Meeting examine the annual accounts and inform the Meeting of their conclusions.

ICa aB’saudit Committee

ACTIVE OwNERSHIP EVERy DAy



Board of Directors

the work of the Board is led by a chairman and regulated by the formal work plan adopted by the Board as well as appli-cable laws and regulations. the Board has also prepared working instructions for its three committees, a work instruction for the president as well as other policy documents as guide-lines for Hakon invest’s activities. in august each year the Board reviews the adopted formal work plans. the present formal work plans and instructions were examined in august and formally adopted on october 2, 2007.

the responsibility of the Board is, on behalf of the owners, to manage the affairs of Hakon invest in such a way that the owners’ interest in a long-term good capital return are met in the best possible manner. the Board can make decisions on matters of major significance to the company such as signifi-cant financial commitments and agreements as well as on significant changes to the organization. in addition to a statu-tory Board meeting in conjunction with the annual General Meeting, the Board shall hold at least five meetings a year that are announced in advance.

an evaluation of the Board is carried out every year. each Board member must complete a comprehensive questionnaire containing a range of questions about the work of the Board. the evaluation is used both to develop the work of the Board and as a basis for the Nomination committee’s evaluation of the composition of the Board.

during 2007 KpMG, on behalf of the oMX Nordic exchange, carried out a one-year follow-up, i.e. a review of companies that have been listed for one year. in its follow-up report, KpMG stated that the work of the Board is well struc-tured and maintains a high listed-company class. it was fur-ther stated that minutes of Board meetings are of a very high class and clearly state what decisions were made and on what basis.

Board committees

Hakon invest’s Board has set up three working committees. the committees are subordinate to the Board and do not dis-charge Board members from their duties and responsibilities. the work of the committees is reported to the Board on a regular basis.

audit Committee has as its main task supervising the accounts and financial reporting and obtaining information about the auditing of Hakon invest. the committee also moni-tors risk analyses within the company. the audit committee shall hold at least three meetings per year.

remuneration Committee is responsible for the prepa-ration of issues regarding remuneration and other terms of employment for Hakon invest’s executive Management. the

remuneration committee must hold at least two meetings per year, one of which must be held in december. the commit-tee’s chairman in consultation with other members decides on the number of meetings and when they should be held.

Investment Committee has as its main task examining the decision-making basis with regard to acquisition matters, recommending decisions and ensuring compliance with the company’s investment policy. the number of meetings shall be at least one a year at which, among other things, the invest-ment policy is examined. additional meetings are called by the committee chairman when required.

Composition of the Board

according to the articles of association, Hakon invest’s Board shall consist of a minimum of five and a maximum of nine mem-bers. the present Board consists of seven members. at the annual General Meeting, Lars otterbeck was elected as the chairman of the Board and at the statutory Board meeting, anders fredriksson was elected as deputy chairman. the president makes presentations at Board meetings and the General counsel is the secretary to the Board.

Board’s independence criteria

four members of the Board, Lars otterbeck, cecilia daun Wennborg, Jan-olle folkesson and Jan olofsson, are inde-pendent in relation to both the company and its management and the company’s major shareholder. they all have many years of experience from management and board work in various listed companies.

the other three Board members, anders fredriksson, thomas strindeborn and olle Nyberg, are ica retailers and the two last-named are also members of the Board of ica-handlarnas förbund. ica-handlarnas förbund is a non-profit association for ica retailers. according to detailed formula-tion of the oMX Nordic exchange and the code’s rules on independence criteria for board members, these three mem-bers are independent in relation to the company and its management but not in relation to the principal owner ica-handlarnas förbund.

The work of the Board in 2007

during 2007 a total of 18 Board meetings were held, of which 13 were held by the present Board elected on april 26, 2007.significant issues dealt with during the year included:◾ the structure of the investment organization◾ acquisition candidates, including a decision on part owner-

ship of inkclub development aB◾ responsible corporate governance in the portfolio holdings ◾ focused examination and corporate governance of ica



◾ the intensified sustainability work with development of comprehensive policies and guidelines for environmental, social & Governance (esG) within Hakon invest

Committee work

the audit committee held five meetings before year-end. erik Åström (the company’s external auditor) attended all meetings.

the remuneration committee met four times, most recently in december 2007.

the investment committee held three meetings before year-end. investment projects were also examined at regular Board meetings.

all committee members attended all meetings.

President and Executive Management

the president, claes-Göran sylvén, is responsible for the day-to-day administration of Hakon invest in line with Board guidelines and instructions. in consultation with the Board’s chairman and deputy chairman, the president shall draw up an agenda for Board meetings and prepare the requisite basis for information and decision-making at Board meetings. in addition, the president must ensure that the Board’s mem-bers continually receive information on Hakon invest’s devel-opment in order to be able to make valid decisions.

the Board has approved president claes-Göran sylvén’s significant assignments and financial involvement outside the company, for example in ica-handlarnas förbund, and has performed an assessment of him without management being present. the Board’s formal work plan and work instructions for the president govern in particular the handling of and deci-sions on matters related to agreements and other dealings between Hakon invest and ica-handlarnas förbund.

in addition to the president claes-Göran sylvén, Hakon invest’s executive Management comprises cfo Göran Hesseborn, Legal counsel fredrik Hägglund, senior Vice president communication anders Hallgren and senior investment Manager stein petter ski. executive Management meets regularly to discuss the development of the company and make decisions about matters of importance to the business.

the company’s operating activities are divided into investment, finance, Legal affairs and communication.

the investment organization comprises one investment manager and two controllers headed by a senior investment Manager who is also responsible for the portfolio companies. these work actively with both existing holdings and potential future investments. taken overall the investment organization possesses broad retail-oriented and financial expertise.

the finance and treasury function comprises five people headed by the cfo and is responsible for the Group’s finan-

cial statements. the unit also handles management of Hakon invest’s financial assets.

Legal affairs is headed by a legal counsel and is respon-sible for legal issues. the unit assists closely related companies when required with legal services on market terms. external legal expertise is engaged when required.

the communication function consists of the senior Vice president communication and is responsible for the Group’s external and internal communication, as well as an investor relations Manager who is responsible for investor relations and similar matters.

work on auditing and accounting

the Board has drawn up formal working routines to ensure that work with auditing and accounting issues functions smoothly. the Board has established an audit committee and adopted work procedures and instructions for the president, Board of directors and committees in order to maintain good control and appropriate relations with the company’s auditors.

Internal control of financial reporting

during 2007 Hakon invest intensified its control to ensure that its operations are appropriate and efficient and that financial reporting is reliable. in the internal control process the company applies the internationally accepted coso model which is based on five control components: control environment, risk assessment, control activities, information and monitoring.

the coso model is established in Hakon invest and its wholly owned subsidiary forma publishing Group. as part of intensified internal control, the company has made active efforts for the coso model to also be applied in the port-folio companies.

Hakon invest’s risk management activities are described in the section “risk management – part of our core business” on pages 25–27 of this annual report.

according to the above-mentioned one-year follow-up performed by KpMG, Hakon invest’s monthly reports are of a high quality that allows relevant governance and monitoring.

Control environment

in the Board’s formal work plan and instructions for the president and Board committees, a clear role and responsibility distri-bution is ensured in the interests of the efficient management of operational risks. the Board has also adopted a number of basic guidelines of significance for the work on internal con-trol where the formal work plans for the investment committee, investment policy and finance policy are the most important elements.



executive Management reports regularly to the Board in line with fixed routines. in addition, there are reports from the audit committee’s work. executive Management is responsi-ble for the system of internal controls required to handle signif-icant risks in the day-to-day operations. these include guide-lines for the authority of different employees so that they are aware and realize the importance of their particular roles in maintaining good internal control.

Risk assessment

By applying the coso model, Hakon invest has identified a number of items in the income statement and balance sheet that may be associated with increased risk.

Control activities

risk assessment results in a number of control activities. Hakon invest places particular emphasis on checks designed to prevent, reveal and correct inadequacies in the income statement and balance sheet items that might be associated with increased risk.

Information and communication

efficient and correct dissemination of information, both inter-nally and externally, is important in order to safeguard finan-cial control within Hakon invest. policies, routines, handbooks and other items of significance for financial reporting are updated and communicated to the parties involved on an ongoing basis.

Hakon invest’s employees provide relevant information to executive Management and the Board through both formal and informal information channels. the communications pol-icy and associated guidelines ensure that external communi-cation is correct and meets the requirements placed on com-panies that are listed on the oMX Nordic exchange.

financial information is provided regularly through annual reports, interim reports, press releases and notices on the website. since the interim report for January–september 2007, Hakon invest’s press conferences can be accessed via webcasts.

in its one-year follow-up report referred to above, KpMG notes that the provision of information by Hakon invest is good and largely in accordance with the listing agreement.

Follow-up

the Board continually assesses the information submitted by executive Management and the audit committee.

the audit committee’s work in monitoring the efficiency of executive Management’s internal control is of particular importance. this follow-up includes ensuring that action is taken to deal with any shortcomings and that proposed mea-

sures arising from internal and external audit in Hakon invest and the holdings are taken into account.

Internal audit

Hakon invest has no internal audit function, in view of the limited size of its own operations. ica aB, which is Hakon invest’s largest holding, has on the other hand an extensive internal audit which continually reports its findings to the audit committee within ica aB’s Board where Hakon invest is represented with three people. these three people report in their turn to Hakon invest’s audit committee. the Board has decided that this follow-up is sufficient.

Internal control in the holdings

Hakon invest works actively with internal control in its holding companies, including application of the coso model. ownership is exercised in the holdings through representa-tion on the boards and under the motto “active ownership every day”. this includes close contacts with the holdings and continuous work with strategic and operational matters. at least one board member in each holding must be con-nected with Hakon invest and the company normally seeks to be entrusted with the chairmanship. representation on the boards ensures that reporting and internal control are man-aged in a satisfactory manner.

it is very important that board members and manage-ments in the ho ldings have adequate competence for their assignment. as part of active ownership, in 2007 Hakon invest contributed to the process of appointing new presidents in three of its holdings – Kjell & company, Hemma and cervera – in order to further strengthen the expertise required for the future development of these companies. during the year all the presidents of the holdings met Hakon invest’s Board to present their company’s operations.

Hakon invest’s finance function has an ongoing dialog with those responsible for finance in all the holding compa-nies and issues instructions and advice for the preparation of each monthly, quarterly, and full-year accounts. this provides Hakon invest with a basis for its financial reports according to current principles and accounting standards.

an assessment is made of internal control in each individ-ual holding. the assessment is made both ahead of an acqui-sition and during the ownership period. ahead of an acquisi-tion, due diligence of the company is carried out where the accounting, legal and operational consequences are analyzed. Hakon invest’s information and communication channels are designed to promote complete and accurate financial report-ing. the extent of control within the holding is then decided separately for each company according to need.



Where risks relating to internal control are identified these are managed by the investment organization and in each hold-ing’s board in consultation with the auditors. in addition, the investment organization and Hakon invest’s board member in each holding keeps Hakon invest’s executive Management continuously informed. Hakon invest’s president reports in turn to the Board.

Auditors

according to the articles of association, the annual General Meeting shall appoint a minimum of one and a maximum of two auditors or one or two registered public accounting firms. at the 2006 annual General Meeting the registered public accounting firm ernst & Young aB was appointed as auditor for a mandate period of four years until the 2010 annual General Meeting. authorized public accountant erik Åström was appointed as auditor in charge.

ernst & Young aB meets Hakon invest’s requirement for requisite expertise. erik Åström has experience as auditor of other listed companies such as Hennes & Mauritz (H&M), investment aB Kinnevik, Modern times Group (MtG), onetwocom and apoteket aB.

the company’s auditors attended a Board meeting in order to present ernst & Young’s audit process in Hakon invest and offer Board members an opportunity to ask questions without management being present.

Incentive program

ica-handlarnas förbund implemented an incentive program for all employees in the parent company Hakon invest aB in december 2005 following the ipo.

the president, other members of executive Management and some key employees at Hakon invest are included in an annual performance-based incentive program which consists of bonus and options. More information about these incentive programs is provided in Note 7 on page 71 in the audited section of this annual report.


Board of directors

lars otterbeck Born 1942

chairman

Lars otterbeck, chairman of the Board since the annual General Meeting in 2005. He is assistant professor at the stockholm school of economics and is a doctor of economics. Lars otterbeck was president and ceo of alecta pension insurance during the period 2000–2004 and was previ-ously president and ceo at d & d dagligvaror aB (now axfood). Lars otterbeck is chairman of the swedish industry and commerce stock exchange committee, Vice chairman of the third National pension fund and the swedish corpo-rate Governance Board. He is also a Member of the Boards of försäkringsaktiebolaget skandia, aB svenska spel and old Mutual plc.

shareholding: 1,200 shares

anders Fredriksson Born 1954

deputy chairman

anders fredriksson was elected to the Board at the annual General Meeting in 1997. anders fredriksson was a Board member of ica-handlar-nas förbund from 1997 to 2006. He was also chairman of the Board of ica-handlarnas förbund from 2001 to 2006. He is also an ica retailer in ica Kvantum Hjertbergs in Lidköping. anders fredriksson studied economics and law at univer-sity and has attended a number of courses at the ica academy.


Cecilia Daun Wennborg Born 1963

cecilia daun Wennborg was elected to the Board at the 2005 annual General Meeting. she is ceo of carema Vård och omsorg aB. Until april 2005, she was acting president of skandiabanken and was previously in charge of skandia’s swedish operations, president of skandiaLink Livförsäkrings aB and financial and administrative director of skandiaLink Livförsäkrings aB. she holds a degree in eco-nomics, with supplementary studies in journal ism and languages.

shareholding: 0.

Jan-olle Folkesson Born 1939

Jan-olle folkesson was elected to the Board at the annual General Meeting in 2005. He is also chairman of the Board of cBN aB, Wordfinder software and sahlgrenska international care aB, and a Board member of Wallenstam aB. He also has a number of other directorships. Jan-olle folkesson has extensive experience of ica’s operations, gained in the capacity of president of ica eoL in 1986–1990 and president of ica företagen in 1990–1991. He is a graduate of the swedish retail federation’s school of retail-ing in Malmö and has attended a number of courses at ica.

shareholding: 600 shares.

olle nyberg Born 1956

olle Nyberg was elected to the Board at the annual General Meeting in 2000. He is also a Member of the Board of ica-handlarnas förbund and is an ica retailer in ica Kvantum in söder-hamn. olle Nyberg has attended a number of courses at the ica academy.


Jan olofsson Born 1948

Jan olofsson was elected to the Board at the annual General Meeting in 2005. Jan olofsson is a bank director and senior adviser at Handels-banken capital Markets. during the period 1992–2000 he was Head of M&a at Handels-banken. prior to that, he held several senior executive positions at esselte aB, most recently in 1985–1991 as executive Vice president and deputy chief executive officer. Jan olofsson is also chairman of the Board of init aB and printley aB. He holds a degree in business administration.


thomas strindeborn Born 1961

thomas strindeborn was elected as a new member of the Hakon invest Board of directors at the 2006 annual General Meeting. thomas strindeborn is an ica retailer in Maxi ica stormarknad in partille, Gothenburg, and has been an ica retailer since 1986. He has attended a number of courses at the ica academy. thomas strindeborn was elected chairman of the Board of ica-handlarnas förbund at the 2006 annual Meeting.



eXecUtiVe MaNaGeMeNt

Claes-Göran sylvén Born 1959

president

claes-Göran sylvén has been employed at Hakon invest since 2003. claes-Göran sylvén is president of ica-handlarnas förbund, chairman of the Board of ica aB and forma publishing Group aB and Member of the Board of svensk Handel and UGaL. claes-Göran sylvén was originally an ica retailer, and together with his family he owns ica Kvantum flygfyren in Norrtälje.

shareholding: shares: 381,196 call options (2008): 50,000 call options (2010): 60,000

Göran Hesseborn Born 1960

cfo

Göran Hesseborn has been employed at Hakon invest since 2005. He joined Hakon invest from spendrups aB, where he was deputy president and cfo in 2001–2005. from 1995 to 2001, he was deputy president and cfo of servera r&s. Göran Hesseborn is a Member of the Board of forma publishing Group aB and chairman of the Board of Kjell & co elektronik aB.


Fredrik Hägglund Born 1967

General counsel

fredrik Hägglund has been employed at Hakon invest since 2002. He has a Bachelor of Law degree and worked as a lawyer at clifford chance, Brussels in 1999–2002 and assistant lawyer at Linklaters in 1996–1999. fredrik Hägglund also worked in anita Gradin’s cabinet for the european commission. since 2004, he has been a Member of the ica aB Board and of the Board of directors of eurocommerce and institutet Mot Mutor (anti-bribery institute).


anders Hallgren Born 1952

senior Vice president communication

anders Hallgren has been employed at Hakon invest since 2000. anders Hallgren was previously information manager at ica in 1990–2000 and prior to that, he was a journalist at the newspapers VLt (Vestmanlands läns tidning) and ica Nyheter in 1972–1990.


stein petter ski Born 1967

senior investment Manager

stein petter ski has been employed at Hakon invest since 2005 and in 2003–2005 was a partner at aBG sundal collier specialized in corporate finance. in 2001–2002 he worked within the swedish Ministry of enterprise, energy and communications and prior to that he held various positions within enskilda securities 1989–2001. stein petter ski is a Member of the Board of Kjell & co elektronik aB, cervera Holding aB and inkclub development aB.



f iNaNciaL caLeNdar aNd coNtacts

financial calendar and contactsAnnual General Meeting, 2008

the annual General Meeting of shareholders in Hakon invest aB will be held on tuesday, april 22, 2008, at 16.00 cet at Grand Hôtel, stockholm, in the stockholm conference room. Notice of the Meeting will be issued via a notice in the daily newspapers. the notice and other information regarding the annual General Meeting are also available at www.hakoninvest.se.

Dividend

for the 2007 fiscal year, the Board proposes to the annual General Meeting a dividend of seK 6.00 per common share, or a total of seK 472 M.

Financial calendar, 2008

interim report, January–March May 7, 2008interim report, January–June august 6, 2008interim report, January–september November 5, 2008Year-end report 2008 february 2009

the reports and other information from the company are pub lished continuously on the company’s website www.hakoninvest.se. it is also possible to subscribe to receive financial reports and other news in electronic form. financial reports and press releases intended for the capital market are published in swedish and english.

Shareholder contact

anders Hallgren, sVp communicationtel. +46 8 55 33 99 66 [email protected]

pernilla Linger, ir Managertel. +46 8 55 33 99 55 [email protected]

Göran Hesseborn, cfotel. +46 8 55 33 99 99 [email protected]

Contacts, investment organization

stein petter ski, senior investment Managertel. +46 8 55 33 99 44 [email protected]

Johan Örengård, investment Managertel. +46 8 55 33 99 15 [email protected]

The name Hakon Invest derives from Hakon Swenson who established Hakonbolaget (the Hakon Company) in 1917 which provided the base for the ICA AB of today.

Pro

du

cti

on

: H

ak

on

in

ves

t a

nd

in

tell

ecta

co

mm

un

ica

tio

n.

Prin

tin

g:

alf

aPr

int,

su

nd

byb

erg

, s

wed

en 2

00

8.

PHo

to:

sv

an

te r

em

sH

ag

en,

ma

ts l

un

dq

vis

t. P

ictu

re

ag

enc

ies:

Jo

Hn

ér,

ma

tto

n.

Printed matter

Hakon Invest AB (publ), Box 1508, SE-171 29 Solna, Sweden. Street address: Svetsarvägen 12. Telephone: +46 8 55 33 99 00. www.hakoninvest.se

hakon invest’sinvestors.icagruppen.se/afw/files/press/hakon/hakon_ar2007_eng.pdf · helsingborg...

Documents