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2006 English

2006

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Subsidiaries and other major shareholdings

Annual Report

Outline of Lundbergs

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• On December 31, 2006, net asset value after deferred tax amounted to SEK 33.1 billion (SEK 535 per share), compared with SEK 26.1 billion (SEK 421 per share) at the end of 2005. On February 20, 2007, the corresponding value was SEK 35.4 billion (SEK 571 per share).

• The Group’s net sales totaled SEK 21,937 m. (19,388).

• The Group’s proﬁt after tax was SEK 6,121 m. (3,897), of which the minority share amounted to SEK 2,929 m.

(1,637).

• Proﬁt (excluding minority share) per share amounted to SEK 51.50 (36.46).

• An increase in the dividend to SEK 8.50 (7.75) per share is proposed.

EARNINGS AND KEY DATA

2006 2005

Net asset value after deferred tax, SEK billion 33.1 26.1

Net asset value per share after deferred tax, SEK 535 421

Shareholders’ equity per share attributable to Parent Company’s shareholders, SEK 407 340

Net sales, SEK m. 21,937 19,388

Proﬁt after tax, SEK m. 6,121 3,897

of which, minority share, SEK m. 2,929 1,637

Proﬁt per share, excluding minority share, SEK 51.50 36.46

Dividend per share, SEK 8.50 ¹ 7.75

Debt/equity ratio,% 0.27 0.33

Equity/assets ratio,% 60 57

1) The Board of Directors’ proposal.

The year in brief

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The President’s review

Favorable growth in 2006

Economic growth was high in large parts of the world during 2006. Particularly strong development was noted in China, In- dia and other countries in Asia, as well as Eastern Europe and Russia. The Nordic countries also showed favorable growth, and increased economic activity was noted in Germany. Eco- nomic development in other parts of Europe was fragmented.

Inﬂation remained relatively low in the major economies, but interest rates increased across the board. Sweden showed continued high growth in relation to the rest of Europe and trends on the Stockholm Exchange were strong, with values rising 24% after a substantial increase of 32% in 2005.

Strong year for Lundbergs

Lundbergs reported a consolidated, after-tax proﬁt of SEK 6,121 m. (2005: 3,897) in 2006. Less minority interests, after- tax proﬁt amounted to SEK 3,193 m. (2,261). The earnings improvement was mainly attributable to value changes in Group properties.

Net asset value per share after deferred tax rose 27%

during the year to SEK 535 (421). The Lundberg share price increased 32%, generating a total return to shareholders of 35% in 2006. Over the past ﬁve years, shareholders in Lund- bergs have received an average total return of 26% per year, compared with the average index return of 13%. The corresponding return over the past 10 years is 20%, compared with an average index return of 13%.

Lundberg’s Board of Directors proposes to the Annual General Meeting a dividend of SEK 8.50 per share, compared with SEK 7.75 per share for the preceding year. Accordingly, dividend growth over the past 10 years has averaged 10%

annually.

Our financial position remains strong. In relation to the market value of our assets (see page 10), net debt amounted to 7%. It has always been Lundberg’s philosophy to maintain a low level of net debt, which has proved over time to be successful. Our financial strength has enabled us, on many occasions, to accept challenges and move aggressively in situ- ations that were uncertain and risk-filled. As a result, we have been able to capitalize on investment opportunities that, in retrospect, generated favorable capital returns.

Fastighets AB L E Lundberg

Lundbergs’ consolidated accounts include operating proﬁt of SEK 1,109 m. (950) reported by Fastighets AB L E Lund- berg. The increase was mainly attributable to value changes in the property portfolio. Higher expenses for maintenance and rebuilding were charged against earnings. After adjust- ment for divestments and investments, the property portfolio’s value growth during the year amounted to about 9%. The main reason for the increase in value was the market’s lower required return. Signiﬁcant interest both from Swedish and foreign buyers contributed to the lower return requirement.

Most of our property holdings in Enköping were sold during the year for SEK 68 m. In Stockholm, rebuilding of a centrally located residential and ofﬁce property was completed for a total of approximately SEK 127 m. The rental market for ofﬁce premises showed general improvement during 2006. Demand for retail premises remained stable. Demand for housing remained strong, even in smaller communities, which led to low vacancy rates. The total vacancy rate in our property portfolio in February 2007 was 2.5%, comprising 0.9% for residential properties and 3.4% for commercial premises.

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Portfolio companies

During 2006, we acquired shares in Handelsbanken for SEK 493 m. and shares in Sandvik for SEK 443 m. In February 2007, we invested an additional SEK 353 m. in Sandvik shares and SEK 466 m. in Handelsbanken shares. We believe the investments will generate sustained long-term value growth and a favorable risk spread in our portfolio.

Holmen reported higher earnings in 2006 compared with earnings in the preceding year. Favorable development was noted for Iggesund Paperboard (cartonboard), as well as Holmen Timber and Holmen Skog (forest). Despite higher costs for energy, wood and recycled paper, Holmen Paper (printing paper) reported improved earnings as a result of higher prices and increased deliveries. The new newsprint machine in Madrid was placed in operation toward year-end 2005. High energy and recycled paper prices had negative effects on earnings during 2006, while increased production volume had a positive impact. Low water supplies had a negative impact on earnings by Holmen Energi.

Hufvudstaden’s earnings increased sharply in 2006 as a result of unrealized value changes in the property portfolio and divestment of the World Trade Center (WTC) property in Stockholm. The rental market for ofﬁce premises in Stockholm improved, resulting in higher rent levels. Demand for rental premises remained strong. In Gothenburg, the rental market for ofﬁce and retail premises was stable. The vacancy rate de- clined in Hufvudstaden’s overall property portfolio. In view of the favorable development and divestment of WTC, the Board of Directors has proposed an extra dividend totaling approximately SEK 2 billion.

Cardo’s earnings in 2006 increased marginally compared with the preceding year. Organic growth was favorable and positive effects were derived from a couple of company acquisitions. The comprehensive changes implemented in Cardo during 2005 and 2006 are now beginning to yield results.

NCC had a very good year, with higher sales and order bookings, and the company reported record earnings. The Nordic construction market remained strong, with particular emphasis on housing construction, but the contracting sector also developed well. As in the preceding year, the Board has proposed an extra dividend of slightly more than SEK 1 billion.

Our investment in Industrivärden has shown highly positive development. The shares in Industrivärden’s portfolio of companies continued to perform favorably, generating good value growth. Most of these companies have ﬁrst-class market positions and are included among the leaders in their respective industrial sectors.

The investment in Indutrade has also developed favorably.

Supported by organic growth and acquisitions, the company showed strong growth during 2006 and earnings increased.

Future outlook

Through investments over the past ﬁve-year period, Lundbergs has achieved a signiﬁcant risk spread in business operations.

Our wholly owned property management activities provide a good cash flow and, over time, value appreciation. Combined with the holding in Hufvudstaden, properties now account for slightly more than 40% of our assets. In addition to our primary ownership in Hufvudstaden, Holmen and Cardo, we are now a major shareholder in five companies of varying types and size. We believe these companies, within their respective sectors, have good potential for favorable development. We look upon these investments, accordingly, in a long-term perspective. We shall also continue to diversify our operations over the long term. This could entail investments in new companies, but also a more intensified commitment in one or some of our portfolio companies. With our strong financial position, I believe we shall continue to have the ability to capitalize on interesting investment opportunities.

Our earnings goal is to achieve a return on our investments in the form of value growth and direct return on invested capital that, over time, exceeds risk-free interest by a broad margin.

It is my ﬁrm belief and ambition this will provide Lundbergs’

shareholders with a continued favorable total return on investment, compared with other investment alternatives.

Stockholm, February 28, 2007

Fredrik Lundberg

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Lundbergs as an investment company

Danske Bank acquires Lundbergs’

holding in Östgöta Enskilda Bank.

Lundbergs becomes a major shareholder in NCC through NCC’s acquisition of Siab. Lundbergs acquires major holding in Cardo.

1997

Structural transaction whereby Lundbergs’ construction operations are merged with Siab.

1994

Principal shareholder in MoDo, currently Holmen.

1993

Additional capital contribution to Östgöta Enskilda Bank.

1992

Tetra Pak’s public offer to acquire Alfa Laval was accepted. Major new issue of shares in Östgöta Enskilda Bank.

1991

Incentive holding is sold.

1990

Major purchases of shares in MoDo, currently Holmen. The holding in Skaraborgsbanken was divested.

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As a supplement to reporting in accordance with IFRS (pages 29-72), Lundberg’s cash ﬂow is reported in this section as if it were an investment company based on the Parent Company and the wholly owned subsidiaries. This procedure means that Fastighets AB L E Lundberg is reported as a fully consolidated company and not as a shareholding, which is a modiﬁcation compared with the reporting in 2005.

Lundbergs is an investment company that manages and develops a number of companies based on active, long- term ownership. The asset portfolio in- cludes the wholly owned unlisted real estate company Fastighets AB L E Lundberg and the publicly traded subsidiaries and associated companies Cardo, Holmen, Hufvudstaden and NCC. Lundbergs also has substantial holdings in Handelsbanken, Indus- trivärden, Indutrade and Sandvik.

Lundbergs’ objective is to generate a return on invested capital over time that substantially exceeds the yield on a risk-free interest-bearing investment.

Lundbergs’ strategy is to generate such a return and value appreciation while maintaining a low risk. Investments focus mainly on companies character-

ized by solid market positions, strong and stable cash ﬂow and that have their own products and brands. The ﬁnancial risk is minimized by combining low indebtedness with good access to funds.

The time perspective of Lundbergs’

ownership enables the companies and their management to adopt a long-term approach in their efforts to develop market positions and competitive strengths.

Long-term ownership is usually accom- panied by participation on boards of directors. Lundbergs is represented on the boards of Cardo, Handelsbanken, Holmen, Hufvudstaden, Industrivärden, Indutrade, NCC and Sandvik.

Assets

Lundbergs’ assets are concentrated to a few major holdings. The real estate holdings, through wholly owned sub-

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Lundbergs becomes the principal owner of Cardo. Wholly owned property portfolio is concentrated through divestment to Realia.

sidiary Fastighets AB L E Lundberg and shares in Hufvudstaden, represented a value of SEK 15.9 billion at the end of 2006, or 43% of the Group’s total assets. The shareholdings in Cardo, Handelsbanken Holmen, Industri- värden, Indutrade, NCC and Sandvik accounted for SEK 20.6 billion or 56%

of total assets.

Organization

Lundbergs long-term investment work is conducted in a small organization that represents a wealth of collective experience. The organization that focuses on investment activities and active ownership has about ten employees, including the personnel of the subsidiary

L E Lundberg Kapitalförvaltning. The wholly owned real estate holdings are separated in organizational terms from

the Parent Company and are assigned the same status as the Group’s other major investments. Management expenses in relation to total assets amounted to 0.11% during 2006.

L E Lundberg Kapitalförvaltning AB L E Lundberg Kapitalförvaltning is a subsidiary that engages in securities trading. The objective of operations is to utilize macroeconomic and corporate analyses in order to generate a favorable return on capital employed. In addition to securities trading, the company accounts for the analysis and follow-up of other investments within the Group.

The securities trading activities include equities and equity-related instruments.

Although shares listed on the Stockholm Stock Exchange account for most of the investments, investments may also be

made in other mature markets. Gross exposure, calculated as the sum total of the market value of long-term and short-term holdings, as well as exposure via derivatives, amounted to SEK 300 m.

at year-end. The organization consists of ﬁve employees.

Investment activities

During 2006, additional shares in Handelsbanken and Sandvik were acquired in the amount of SEK 493 m.

and SEK 443 m. respectively, a total of SEK 937 m. In February 2007, an additional SEK 466 m. in Handelsbanken shares and SEK 353 m. in Sandvik shares was invested. Handelsbanken is one of the leading universal banks in the Nordic region and Sandvik is one of Sweden’s leading global engineering companies. The investments in these

2006

Continued acquisition of Industrivärden shares.

Participates in structural transaction when Ramirent acquires Altima.

2003

Acquisition of Industrivärden shares.

2002

Lundbergs launches a share buyback program.

2000

Acquires 20% of Stadium through a private placement.

2001 1998

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Divests holdings in Stadium and Ramirent. Acquires shares in Indutrade, Handels- banken and Sandvik.

2005

Continues share acquisition in Handelsbanken and Sandvik.

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two major Swedish companies contrib- ute to further diversify Lundberg’s assets and increase portfolio liquidity.

Return

Lundbergs’ mission is to generate a healthy absolute return for its shareholders. This is to be achieved through growth in both net asset value and dividends. During 2006, net asset value per share rose by 27% after deferred tax.

Since 1997, net asset value per share after deferred tax has grown by an annual average of 15%.

The average total annual return¹ has been 20% during the past ten years and

26% over the past five years. The total return in 2006 was 35%. Interest-bearing net indebtedness in relation to market valued assets² on December 31, 2006 amounted to 7% (8) during the same period. During the past ten-year period, the corresponding figure has varied between 1% and 13%. Accordingly, total return was generated by consistent low financial risks.

Cash ﬂow

During 2006, dividends received totaled SEK 877 m. (994). Funds received from the sale of securities amounted to SEK 147 m. (984) and SEK 430 m. (787)

was received from real estate operations. Accordingly, total funds received amounted to SEK 1,454 m.

A total of SEK 937 (1,630) was invested in shares and SEK 86 m. (168) in real estate. Own dividends amounted to SEK 481 m.

Interest-bearing assets increased by SEK 12 m. and interest-bearing liabilities by SEK 321 m. At December 31, 2006, interest-bearing net indebtedness increased by SEK 309 m. to a total of SEK 519 m. (2,210). For more information, refer to the cash-ﬂow report on the next page.

Lundbergs as an investment company

SEK billion

0 10 20 30 40 50 60 70 80 90 100

%

Handelsbanken Sandvik Other

Indutrade Industrivärden

Cardo NCC Holmen

Hufvudstaden Properties

2006 2005

2004 2003

2002 2001

2000 1999

1998 1997

0 5 10 15 20 25 30 35 40

Totalt value, left scale

DISTRIBUTION OF MARKET-VALUED ASSETS AS A PERCENTAGE AND IN SEK BILLION 8

1) The total return is deﬁned as the sum total of the change in the share price and reinvested dividends.

2) Refer to deﬁnitions on page 10.

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CASH FLOW REPORT

SEK m. 2006 2005 2004 2003 2002 2001

Dividends

Cardo 86 86 86 402 80 70

Handelsbanken 50

Holmen 260 236 881 242 218 1,503

Hufvudstaden 135 373 112 103 93 79

Industrivärden 142 122 100 65 2 2

Indutrade 11

NCC ¹ 168 157 38 38 31 63

Sandvik 14

Other 12 19 11 12 10 15

877 994 1,229 863 435 1,733

Trading in securities 147 984 0 171 52 0

Results, property management 283 330 433 428 420 414

Sales, property management 147 457 28 50 7 10

Total assets contributed 1,454 2,765 1,690 1,512 914 2,157

Investments, equity management

Cardo 131

Handelsbanken 493 1,075

Holmen 344 9 40 44

Hufvudstaden 66

Industrivärden 701 651 890

Indutrade 288

NCC 14

Sandvik 443 252

Other 89 3 4 259

937 1,630 1,134 794 934 369

Investments, property management 86 168 106 33 24 21

Own dividend 481 434 403 372 357 333

Repurchase of shares 17 13 493

Other, net 229 315 242 119 92 217

Total assets used 1,731 2,547 1,902 1,318 1,419 1,433

Change in net receivable/debt -277 217 -213 194 -506 724

Closing net receivable/debt -2,906 -2,629 -2,846 -2,633 -2,828 -2,322

Of which, interest-bearing -2,519 -2,210 -2,477 -2,296 -2,386 -1,771

1) In addition to the cash dividend, shares in Altima were also received in 2003 with a value corresponding to SEK 94 m.

PROPORTION OF VOTING RIGHTS, SHARE CAPITAL, ACQUISITION VALUE AND MARKET VALUE OF SHAREHOLDINGS

Feb. 20, 2007 Dec. 31, 2006 Dec. 31, 2005

% Share capital Voting rights Share capital Voting rights Share capital Voting rights

Cardo 36.0 36.0 36.0 36.0 36.0 36.0

Handelsbanken¹ 1.3 1.4 1.3 1.4 0.9 0.9

Holmen 27.9 51.9 27.9 51.9 27.9 51.9

Hufvudstaden 45.2 88.0 45.2 88.0 45.2 88.0

Industrivärden 10.5 14.4 10.5 14.4 10.5 14.4

Indutrade 10.0 10.0 10.0 10.0 10.0 10.0

NCC² 10.0 20.2 10.0 20.2 10.1 18.7

Sandvik 1.0 1.0 0.8 0.8 0.3 0.3

Feb. 20, 2007 Dec. 31, 2006 Dec. 31, 2005

SEK m. Acquisition value Value³ Acquisition value Value³ Acquisition value Value³

Cardo 2,021 2,965 2,021 2,808 2,021 2,101

Handelsbanken¹ 1,568 1,802 1,568 1,760 1,075 1,182

Holmen 2,941 7,281 2,941 7,056 2,941 6,382

Hufvudstaden 2,828 8,510 2,828 7,424 2,828 4,934

Industrivärden 2,280 5,873 2,280 5,508 2,280 4,394

Indutrade 288 568 288 540 288 356

NCC 775 2,219 775 2,029 775 1,546

Sandvik 1,049 1,401 696 896 252 259

Other shares 291 317 276 287 402 473

TOTAL 14,040 30,935 13,673 28,307 12,863 21,628

1) At the end of February, meaning after February 20, 2007, which was the break point for the year-end report, an additional 2.2 million Handelsbanken shares were acquired. The shareholding on February 28, 2007 amounted to 1.7% (1.7).

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The calculation of Lundbergs’ net asset value is based on the fair value of assets less liabilities and deferred tax on sur- plus value. On December 31, 2006, net asset value after deferred tax amounted to SEK 33,147 m.(SEK 535 per share),

compared with SEK 26,078 m.(SEK 421 per share) at the end of 2005.

On February 20, 2007, estimated net asset value after deferred tax was SEK 35,372 m. (SEK 571 per share).

CALCULATION OF NET ASSET VALUE

Dec. 31, 2006 Dec. 31, 2005

SEK m. SEK per share SEK m. SEK per share

Properties ¹ 8,521 137 7,698 124

Cardo ² 2,808 45 2,101 34

Handelsbanken ² 1,760 28 1,182 19

Holmen ² 7,056 114 6,382 103

Hufvudstaden ² 7,424 120 4,934 80

Industrivärden ² 5,508 89 4,394 71

Indutrade ² 540 9 356 6

NCC ² 2,029 33 1,546 25

Sandvik ² 896 14 259 4

Other securities ² 287 5 473 8

Total market-valued assets 36,828 594 29,325 473

Other assets, provisions and liabilities ³ -2,784 -45 -2,531 -41

Net asset value before deferred tax 34,043 549 26,794 432

Deferred tax ⁴ -896 -14 -716 -12

NET ASSET VALUE AFTER DEFERRED TAX 33,147 535 26,078 421

Market value 27,528 444 20,801 336

Price/NAV,% 83 80

1) The properties’ estimated fair value on December 31, 2006 was SEK 8,521 m. (7,698), of which development properties accounted for SEK 249 m. (226).

2) Publicly traded assets have been entered at the current market price or at the exercise price for written options if the latter price is lower.

3) Other assets, provisions (excl. deferred tax) and liabilities have been entered at the carrying amount at December 31, 2006 and 2005.

4) Deferred tax (28%) has been computed on the basis of the provision to the tax deferral reserve and the diﬀerence between the market value and tax-assessment value. Due to legal considerations, from July 1, 2003, deferred tax on

business-related participations was not computed on the basis of the diﬀerence between the market value and the tax-assessment value. Deferred tax on the diﬀerence between estimated market value and tax-assessment value of properties in Fastighets AB L E Lundberg was assessed at a standard rate of 10%.

Lundbergs as an investment company - Net asset value

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11 11

0 50 100 150 200 250 300 350 400 450 500 550

2006 2005

2004 2003

2002 2001

2000 1999

1998 1997

SEK

NET ASSET VALUE AFTER DEFERRED TAX, PER SHARE

-20 -10 0 10 20 30 40

2006 2005

2004 2003

2002 2001

2000 1999

1998 1997

%

CHANGES IN NET ASSET VALUE PER SHARE

KEY FIGURES

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Net asset value, SEK m. 11,892 10,783 14,874 13,380 13,665 13,692 18,024 21,520 26,078 33,147

Net asset value/share, SEK 157 142 196 205 220 221 290 347 421 535

Changes in net asset value/share, % 23 -10 38 5 7 0 32 20 21 27

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0 1,000 2,000 3,000 4,000 5,000 Thousands /month

Lundbergs Series B SIX General Index SIX Investment and Management Index Number of shares traded, right scale 0

50 100 150 200 250 300 350 400 450 500

2007 Feb 2006

2005 2004

2003 2002

SEK

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Series B Lundberg shares are listed on the Stockholm Stock Exchange’s Large Cap. A round lot consists of 50 shares.

During 2006, an average of 26,853 Series B shares were traded per trading day. Total share turnover amounted to 6.7 million Series B shares, corresponding to 18% of the total number of Series B shares. The lowest price paid for the share in 2006 was SEK 327.50 and the highest was SEK 449.

Market capitalization

Lundbergs’ market capitalization at year-end was SEK 27,528 m. (20,801).

The share price rose by 32% during the year.

Share capital

The share capital of L E Lundbergföreta- gen AB (publ) amounted to SEK 621 m.

(621) during the year. On December 31, 2006, the total number of shares was 62,145,483 (62,145,483), each with a par value of SEK 10. The shares are divided into 24,000,000 (24,000,000) Series A shares, carrying ten votes per share, 38,000,000 (38,000,000) Series B shares, carrying one vote per share, plus 145,483 (145,483) repurchased

Series B shares.

Repurchase of own shares The Board has been authorized to purchase Lundberg shares. For more detailed information, see page 35.

Ownership structure

Lundbergs has a total of about 12,400 shareholders (11,500), of whom some 8,700 (7,800) are registered in a nomi- nee’s name and about 3,700 (approx 3,700) in the owner’s own name. For- eign ownership amounts to 5.6% (5.5) of the share capital.

KEY FIGURES

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Dividend per share, SEK 3.75 4.25 4.75 5.25 5.75 6.00 6.50 7.00 7.75 8.501

Growth in dividend per share, % 15 13 12 11 10 4 8 8 11 10

Direct return, % 3.2 4.5 5.1 4.6 3.6 3.1 2.8 2.5 2.3 1.9

Total return, % 25.4 -17.0 27.9 28.6 15.4 27.2 23.1 25.9 20.4 34.9

Stock market price, SEK 116.00 94.00 94.00 115.00 158.00 195.00 232.50 284.50 335.50 444.00

1) Board of Directors’ proposal.

Lundbergs as an investment company – The Lundberg share

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13

0 1 2 3 4 5 6 7 8 9

-06¹ -05 -04 -03 -02 -01 -00 -99 -98 -97

SEK/share %

0 1 2 3 4 5 6 7 8 9

Dividend/share Direct return, right scale 1) Board of Directors’ proposal.

DIVIDEND AND DIRECT RETURN DISTRIBUTION OF SHAREHOLDINGS

No. of

shareholders As % of all

shareholders No. of shares held

As % of share capital

Average no.

of shares/

shareholders

1 – 500 10,061 80.9 1,389,291 2.2 138

502 – 2,000 1,733 13.9 1,823,334 2.9 1,052 2,001 – 5,000 308 2.5 1,063,636 1.7 3,453 5,001 – 20,000 216 1.7 2,214,435 3.6 10,252 20,001 – 50,000 58 0.5 1,925,297 3.1 33,195 50,001 – 58 0.5 53,729,490 86.5 926,371

TOTAL 12,434 100.0 62,145,483 100.0 4,998

TREND OF SHARE CAPITAL, SEK M.

Share capital Total paid in/

paid-out amount Added/

canceled Total

1981 Bonus issue, 3:1 75 100

1982 Bonus issue, 1:1 100 200

1983 New issue 300 30 230

1984 Bonus issue, 1:1 230 460

1989 New issue 412 46 506

1990 Bonus issue, 1:2 253 759

2000 Cancellation of repurchased shares -909 -76 683 2002 Cancellation of repurchased shares -884 -62 621 LARGEST SHAREHOLDERS

Feb 2007

Holdings as % of Feb 2006 Holdings as % of share capital votes share capital votes Fredrik Lundberg

incl. companies 52.0 89.3 51.9 89.3

Louise Lindh 7.5 1.7 7.5 1.7

Katarina Lundberg 7.5 1.7 7.5 1.7

AMF Pension 2.4 0.5 2.4 0.5

FPG 2.0 0.5 2.3 0.5

Swedbank Robur funds 1.3 0.3 1.2 0.3

SEB Fonder 1.2 0.3 0.6 0.1

Fourth AP-fund 1.1 0.3 - -

Knowledge Foundation 1.1 0.3 1.1 0.3

Handelsbanken funds 0.8 0.2 0.9 0.2

Others 22.9 4.9 24.4 5.4

Summa 99.8 100.0 99.8 100.0

Repurchased Lundberg shares¹ 0.2 - 0.2 -

Subtotal 100.0 100.0 100.0 100.0

Swedish shareholders 94.4 98.8 94.5 98.8

Foreign shareholders 5.6 1.2 5.5 1.2

TOTAL 100.0 100.0 100.0 100.0

1) The Company’s own holding of repurchased Lundberg shares amounts to 145,483 (145,483).

-20 -10 0 10 20 30 40

-06 -05 -04 -03 -02 -01 -00 -99 -98 -97

%

TOTAL RETURN

Direct return – Dividend per share as a percentage of share price on December 31.

Total return – Sum total of change in share price and reinvested dividends.

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Fastighets AB L E Lundberg

Housing 48%

Oﬃce 26%

Retail 14%

Other 12%

Distribution of annual rental revenues by type of premises Share of Lundbergs’

total assets, Dec 31, 2006

Properties 23%

14

Housing 53 % Retail 9%

Oﬃce 17%

Other 21%

Distribution of floor space by category

Chairman: Fredrik Lundberg CEO: Peter Whass www.lundbergs.se

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Fastighets AB L E Lundberg is one of the major private real estate owners in Sweden. The real estate portfolio consists largely of centrally located residential, ofﬁce and retail premises.

With strategic positions in several of Sweden’s expansive municipalities, the company is well positioned for contin- ued strong growth.

The real estate holdings include 138 wholly or jointly owned investment properties in 16 municipalities throughout central and southern Sweden, with particular focus on major metropolitan areas and university cities. The portfolio also includes about 80 development objects. Most of the structures in the real estate portfolio were built during the construction-intensive years of the 1960s and 1970s, and consist largely of structures built on a proprietary basis.

Originally, investments were concentrated primarily on residential properties but, during the 1980s and 1990s, the portfolio was supplemented by the addition of several commercial properties.

Today, the division between residential and commercial properties is largely unchanged at 48% and 52%, respectively, of rentable value.

Business concept and strategy Fastighets AB L E Lundbergs’ business concept is to manage and develop residential and commercial properties in municipalities where favorable growth

is expected. The company focuses on:

– low sensitivity to economic ﬂuctua- tions through an even distribution between residential and commercial properties.

– comprehensive local market knowledge through a decentralized organization.

– utilizing the company’s many years of experience in property management and construction operations as the basis for effective management with high levels of tenant service.

– within project development and development operations, to strive for optimal operating and development gains based on the potential of each individual property.

Market trend

The rental market for commercial premises was favorable during 2006, which was evident in the increase in net rentals in regions where we operate.

Demand for ofﬁces increased somewhat and the demand for retail premises remained favorable. Demand for housing in major metropolitan regions and cities with colleges and universities also remained favorable.

The real estate portfolio is concentrated in central locations, and it is estimated that Fastighets AB L E Lundberg will be able to capitalize on a future increase in demand for commercial properties in attractive locations.

Organization

The company’s management is divided into three regions: Stockholm, West and East. The management group includes the President, Assistant to the President, three regional managers, ﬁnancial director, project development manager and rental administration manager. The organization provides excellent prerequi- sites for continued focus on current management operations, and the possibility to further improve and develop new and existing properties in attractive locations.

Property-management operations are led by the three regional managers. Eve- ryday management and rental activities are handled locally by the respective ofﬁces.

Property-development operations are conducted centrally from the head ofﬁce in Norrköping, which also has resources for administration, operation, accounting, purchasing, information, IT, and environmental and quality matters.

Regions

The Stockholm region consists of Enköping, Eskilstuna, Nyköping, Solna, Stockholm, Södertälje and Uppsala.

Most of the municipalities in the region are developing favorably due to their close proximity to Stockholm, which supports strong conditions.

The company’s real estate holdings in Solna, Stockholm and Uppsala consist mainly of commercial premises, while housing accounts for 84% of managed

15

Eastern 33%

Western 33%

Stockholm 34%

Distribution of annual rental revenues by region

Eastern 34%

Western 36%

Stockholm 30%

Distribution of floor space by region Fair value by region

Eastern 33%

Western 32%

Stockholm 35%

(17)

properties in Eskilstuna, Nyköping and Södertälje.

The region is characterized by generally strong demand for housing.

Conditions for the commercial properties remain favorable, with some risk for increased vacancy in ofﬁce premises in Solna.

A comprehensive renovation and rebuilding program was initiated in the Klippan ofﬁce and residential property in Stockholm during 2004. The project was completed in 2006 and the property is now fully leased.

The Western region consists of Ar- vika, Gothenburg, Jönköping, Karlstad and Örebro, as well as a large industrial property in Landskrona. Supported by strong demand for housing and for of- ﬁce and retail space, the rental situation is favorable throughout the entire region.

In Gothenburg, extensive renova- tions were completed at the Krokslätt property during 2006.

During the year, a major ofﬁce refurbishment project commenced in the Stampen property. In Jönköping, a preliminary study was conducted to analyze the feasibility of new construction of retail and ofﬁce premises on the Ansvaret property.

The Eastern region comprises Katrineholm, Linköping and Norr- köping, with about 70% of the region’s portfolio concentrated in Norrköping.

The rental situation for retail premises is favorable throughout the region, while demand for ofﬁce space has increased somewhat. Tenant turnover in the residential portfolio is high, particularly in Norrköping and Katrineholm, while vacancy rates are at acceptable levels.

Investments made in 2005 in the Linden and Spiralen shopping centers contributed signiﬁcantly to the development of Norrköping city as an attractive retail location.

Development properties

The development properties are situated mainly in central Sweden and comprise 2,850 hectares of farmland, forests and about 80 objects. The aims of the property-development operations are to develop the properties into sites suitable for commercial development and to create new projects for resale. This is achieved through active involvement in planning and property formation matters, and through cooperation with the parties who need developable land.

Detailed development planning is under way for approximately 600 single-family homes and apartments in such locations as Enköping, Eskilstuna, Nacka, Strängnäs, Svedala and Han- inge. In 2006, detailed development plans for approximately 450 single- family houses and apartments gained legal force. The largest development

project is now in progress at Ekeby- Almby, outside Örebro, where 150 plots of land for single-family homes have been sold.

Quality and the environment The operations of Fastighets AB L E Lundberg have been quality certiﬁed in accordance with ISO 9001:2000 since 1998. The company’s quality policy, in which security and safety are key considerations, also includes the principal environmental issues.

The greatest environmental impact of operations derives from purchased heat, of which district heating accounts for 99%. The environmental impact of district heating depends on the fuel the district heating supplier uses for the production of heat. During recent years, approximately 80% of district heating procurements has been based on renewable fuel sources.

Investments and divestments Sales of investment properties during the year totaled SEK 83 m. (362), generating capital gains of SEK 60 m. (191).

A comprehensive refurbishment project has been in progress at the Klippan ofﬁce and residential property in central Stockholm since the autumn of 2004. The project was completed in 2006 and the total investment in the project was SEK 127 m.

Fastighets AB L E Lundberg

36% 1960-1969 12%

1980-1989

32%

1970-1979

15% 5%

1990- -1960

1 room 14%

38% 32%

13%

2 rooms 4 rooms

3 rooms

More than 4 rooms, 3%

Age structure of investment properties, sqm

Residential apartments by type

Housing 49%

18%

6%

13%

10%

< 1 SEK m.

1 - 3 SEK m.

3-5 SEK m.

> 5 SEK m.

Other 3%

Value of rental contracts, Dec 31, 2006

Housing 50%

10%

6%

13%

10%4%

2007 3%

2008 2009

2010

2011 2012- Garage 2%

Other 2%

Maturity of rental contracts distributed by rental revenues 16

2 0 0 6

2006

Contents

Outline of Lundbergs

The year in brief

The President’s review

Lundbergs as an investment company

Lundbergs as an investment company

Lundbergs as an investment company - Net asset value

Lundbergs as an investment company – The Lundberg share

Fastighets AB L E Lundberg

Fastighets AB L E Lundberg