CONTENTS

Operations

Kommuninvest in brief 2

President’s statement 4

Municipal sector finances 7

Market 9

Funding 12

Lending 14

Finance support 17

Human resources 18

Risk management 20

Corporate governance 24

Annual Report

Administration Report 31Accounting and valuation principles 36Income Statement 38Balance Sheet 39Cash Flow Statement 40Notes 41Other information 46Five-year summary 48Signatures 50Report of the Auditors 51

The Board of Kommuninvest Cooperative Society 52

1CONTENTS

2 KOMMUNINVEST IN BRIEF

VISION

BUSINESS CONCEPT

OBJECTIVESGrowth

Credit ratings

Membership, 1998 – 2005

0

50

100

150

200

20052004200320022001200019991998

The following 5 members joined after the end of the year:

Stability

Customer benefit

At year-end 2005, Kommuninvest had 174 members. The 16 new members that joined in the year were:

3KOMMUNINVEST IN BRIEF

THE YEAR IN BRIEF

• Kommuninvest expanded by 16 new members to 168 municipalities and 6 county councils.

• The balance sheet total grew by 34% to SEK 91.1 billion.

• Net lending grew by SEK 5.6 billion, to SEK 56.7 billion.

• Operating profit was the highest in Kommuninvest’s history at SEK 56.0 million.

• Kommuninvest has retained the market’s highest rating (Aaa)

• Kommuninvest won ‘Most Innovative Product’ for a bond launched on the Danish private client market alongside Danske Bank.

4

Intense competition favours the municipal sector

PRESIDENT’S STATEMENT

5

Successful funding

Continuous quality enhancement

Focusing on our values

PRESIDENT’S STATEMENT

6

New regulations ahead

Continued growth towards realizing our vision

PRESIDENT’S STATEMENT

7

A substantial share of Sweden’s public finances

The best results for a very considerable period

Firm cost control

MUNICIPAL SECTOR FINANCES

8 MUNICIPAL SECTOR FINANCES

More surpluses in the coming years

An improved financial position

Investments increase while borrowing remains relatively unchanged

Pension commitments

Municipalities’ and county councils’ resultsResults before extraordinary items at current prices

-15

-10

-5

0

5

10

15

08070605040302010099989796

Municipalities County councils Total05–08 forecast

SEK bn

Division of municipal sector’s * debt, provisions and pension commitments

Other provisions and short-term liabilities, 19%

Borrowings, 44%

Total pension commitments, 37%

The municipal sector’s * borrowingsBillions of kronor at current prices

300

310

320

330

340

350

360

2005

SEK bn

forecast

200420032002200120001999

9 MARKET

Protecting municipal interests

Grow

th

10

Intense competition over lending

MARKET

A top-rated borrower

Grow

th

11MARKETG

rowth

Sweden’s coat of arms

Credit ratings

12 FUNDING

Stability

13

Diversified funding

FUNDINGStability

New borrowing by geographical market

Europe, 32%

Japan, 29%

Sweden, 22%

Asia, 16%

Middle East, 1%

14

Custom

er benefit

LENDING

15LENDINGLENDINGC

ustomer benefit

A guarantor of competition

A tailored offering

Increased market shares

The role of an interest group

16

The importance of advisory services

Loans from the CEB and EIB

LENDING

Lending as of 31 December each year

0

10

20

30

40

50

60

SEK bn

20052004200320022001200019991998199719961995

Custom

er benefit

17FINANCE SUPPORTFINANCE SUPPORT

18

Challenges for staff

HUMAN RESOURCES

Skills enhancement initiatives

19

A foundation of shared values

Balance and health

Salaries and incentives

HUMAN RESOURCES

HR statistics

20

Market risks

Interest risks limited at portfolio level

%

02468

1012141618

USFra

nce

Germany UK

Japan

Denmark

Netherlands

Switzerla

ndSweden

Australia

Belgium

Geographical division of derivatives contracts 31 Dec. 2005

%

0

10

20

30

40

50

Sweden UKSpain

France

Denmark

Germany

Netherlands

Finland

Belgium

Australia

Norway

Geographical division of investments, 31 Dec. 2005

RISK MANAGEMENT

21

Foreign exchange limits currency risks

Liquidity risks

Credit-related counterparty risksSecure counterparties are a prerequisite for long-term value growth

Invested assets by rating, 31 December 2005

Group AAA, 73%

Group AA, 21%Group A, 6%

Nominal amount on derivatives by rating, 31 December 2005

Group AAA, 19%

Group AA, 72%Group A, 9%

RISK MANAGEMENT

22

Ongoing research and update of counterparties

RISK MANAGEMENT

23

Operational riskInternal controls a priority

Reliable processes for secure risk management

RISK MANAGEMENT

24 CORPORATE GOVERNANCE

Alf Egnerfors Sören Gunnarsson

25CORPORATE GOVERNANCE

The Swedish Corporate Governance Code

Corporate Governance

Articles of Association

Annual General Meeting

Election Committee

26 CORPORATE GOVERNANCE

Election Committee members

Anders Ceder (born in 1951)

Kenneth Carlsson (born in 1952)

Alf Egnerfors (born in 1946)

Margareta Karlsson (born in 1942)

Kerstin Sjöström (born in 1955)

Barbro Tjärnström (born in 1936)

Auditing Committee

Auditing Committee members

Erik Johansson (born in 1933)

Bengt Björnemalm (born in 1935)

Bo Johansson (born in 1944)

Ingemar Andersson (born in 1944)

Committees appointed by the Board

Credit Research Committee

Credit Research Committee members

Chairman Thomas Åkelius

David Nyberg

Tommy Karlsryd

Ingalill Hellberg

Karin Hydén

Nils-Eric Gustavsson

Madeleine Sjöstrand

Gunnar Tidemand

27CORPORATE GOVERNANCE

Financial Committee

Financial Committee Members

Chairman Tomas Werngren

Victoria Galbe

Bo Johansson

Lars Sjökvist

Kerstin Gustavsson

Anders Ottensten

Björn Ryd

Stefan Ekfeldt

Bernt Gran

Corporate management

Executive managers

Thomas Åkelius (born in 1954)

Tomas Werngren (born in 1961)

Harriet Forsell Söderberg (born in 1959)

Malin Gillberg (born in 1971)

Maria Viimne (born in 1970)

Remuneration to the Executive Management

28 CORPORATE GOVERNANCE

The Board of Directors and its Activities

Board Members’ remuneration

Committees

Credit Committee

Kommuninvest’s Board of Directors

29CORPORATE GOVERNANCE

30

Auditors

Audit Report

The Board’s Report on Internal Controls

CORPORATE GOVERNANCE

31ADMINISTRATION REPORT

Operations

Operations that build on member needs

Shareholders and share capital

Joint and several guarantees

The Board

Legal status

0

50

100

150

200

20052004200320022001200019991998

Number of members

Kommuninvest i Sverige AB (publ) Annual Report 2005

32 ADMINISTRATION REPORTADMINISTRATION REPORT

Rating

Financial results

Net interest income

Other operating income

Expenses

Personnel costs

Other expenses

Group contribution to parent society

33ADMINISTRATION REPORT

Increased membership permits new issues

Liquidity reserve

Operations

Risk management

34 ADMINISTRATION REPORTADMINISTRATION REPORT

Human resources

New accounting and capital cover standards

Executive Management Group

Prospects for 2006

35ADMINISTRATION REPORT

Appropriation of surplus

Capital coverage analysis

36

Assets and liabilities in foreign currencies

Lending

Liquid assets

Liabilities

Equipment

Government bonds eligible as collateral, and bonds and other interest-bearing securities

Early redemption of loans

Repurchase agreements

Index-linked notes

Valuing derivatives

Foreign currency translation

ACCOUNTING AND VALUATION PRINCIPLES

37ACCOUNTING AND VALUATION PRINCIPLES

Re-allocation of expenses within the notes section

38 INCOME STATEMENT

39BALANCE SHEET

40 CASH FLOW STATEMENT

41

All amounts in SEK 000 unless otherwise stated.

NOTES

42

Öhrlings PricewaterhouseCoopers AB:

Ernst & Young AB:

KPMG Bohlins AB:

NOTES

43NOTES

44 NOTES

45NOTES

46

Off-Balance Sheet commitments

OTHER INFORMATION

47OTHER INFORMATION

Accrued acquisition value

Credit risk exposure

Maturities

Interest fixing terms, interest exposure

Details of actual value

48 FIVE-YEAR SUMMARY

49FIVE-YEAR SUMMARY

50 SIGNATURES

51REPORT OF THE AUDITORS

52 THE BOARD OF KOMMUNINVEST COOPERATIVE SOCIETY

StabilityWith the majority of Sweden’s municipalities and a number of county councils as members, Kommuninvest operates as a local debt office and interest group offering attractive funding, advisory services and efficient financial management methodologies.

Customer benefitKommuninvest’s mere presence stimulates competition, creating a societal benefit every year by cutting its members’ interest costs by many millions of kronor.

GrowthCollectively, Kommuninvest’s members exert integrated power that can access efficient funding solutions.

A voluntary approach and influence have helped create Sweden’s largest inter-municipal cooperation on finance issues. The decision to join is autonomous and voluntary, as is the decision on if and when to raise funding.

More municipalities and county councils are choosing Kommuninvest: we’ve never been stronger.

Postal address: Box 124 SE-701 42 Örebro, Sweden. Visiting address: Fenix House, Drottninggatan 2, Örebro.Telephone: +46 (0)19-16 78 00. Fax: +46 (0)19-12 11 98. E-mail: forename.surname@kommuninvest.se.

Website: www.kommuninvest.org