Information regarding share split and redemption of shares in AB Volvo 2007

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1 Information regarding share split and redemption of shares in AB Volvo 2007

2 The share split and redemption procedure in summary Table of contents 2 The share split and redemption procedure in summary 3 Timetable 4 How the share split and redemption procedure works 5 Practical information on the share split and redemption procedure 6 The proposal of the Board of Directors 9 Financial effects for Volvo 10 Tax considerations in Sweden 12 Tax considerations in the United States 14 Questions and answers The share split and redemption procedure requires resolution by the Annual General Meeting on April 4, 2007, in accordance with the Board s proposal. The share split and redemption procedure implies that every Volvo share (Series A as well as Series B) will be split into six shares of the same Series (share split) of which one will be designated redemption share in the VPC system. The redemption share will be automatically redeemed at SEK 25 in cash. The share split and redemption procedure is automatic. No action is needed on behalf of the shareholder. The record date for the share split and entitlement to redemption shares is April 30, Payment of the redemption amount is expected to occur on May 28, Trading in redemption shares will take place during the period May 2 18, Information regarding share split and redemption

3 Timetable Annual General Meeting First day of trading in Volvo shares after share split First day of trading in redemption shares Expected date for payment of redemption amount April 25 April 30 May 18 April 4 April 26 May 2 May 28 Last day of trading in Volvo shares before share split and right to receive redemption shares Record date for the share split and right to receive redemption shares Last day of trading in redemption shares This document does not constitute an offer and is merely information on the Board of Directors proposal to the Annual General Meeting on an automatic redemption procedure, including a share split 6:1 etc. The purpose of this document is to provide the shareholders of AB Volvo with information before the Annual General Meeting on April 4, This is a translation of a Swedish document. The English version contains information for holders of Volvo American Depositary Receipts as well as information on tax consequences of the redemption procedure for shareholders in the US. In the event of any discrepancy between this translation and the Swedish version, apart from the above-mentioned additional information, the Swedish version shall prevail. Information regarding share split and redemption

4 How the share split and redemption procedure works Example: You are on the record date for the share split the registered owner of 100 Volvo Series B shares. In this example, the current price per share is assumed to be SEK 500. Your shares are thus worth 100 x SEK 500 = SEK 50,000. Through the share split and redemption procedure, each share will be split into six shares, whereof five Volvo shares and one redemption share. The redemption share will be automatically redeemed by AB Volvo at SEK 25 in cash. The value of the five Volvo shares is then calculated at SEK 475 (SEK 500 SEK 25). Theoretical price for the Volvo Series B share after the share split is SEK 95 (SEK 475./. 5) in this example. Your share holding is then represented by 500 Volvo Series B shares x SEK 95 = SEK 47,500 and 100 redemption shares x SEK 25 = SEK 2,500, totally SEK 50,000. AB Volvo will thereafter redeem your redemption shares at SEK 25 each in cash. This will take place automatically without any action required on your part. When the redemption procedure is completed, you will hold 500 Volvo Series B shares x SEK 95 (theoretical share price) = SEK 47,500 and SEK 2,500 in cash, which amount has been paid in cash by AB Volvo. You may, instead of awaiting AB Volvo s redemption of your redemption shares, elect to sell all or some of your redemption shares on the Stockholm Stock Exchange during the period May 2 18, The example above does not take into account any tax effects that may arise in connection with the share split and redemption procedure. For a summary of certain tax consequences, please see the sections Tax considerations in Sweden and Tax considerations in the United States. Each Volvo share, Series A as well as Series B, will be split into six shares of the same Series (share split) of which one will be designated redemption share in the VPC system. Before Share Redemption share Share Every Volvo share is split into five Volvo Shares and one redemption share. The redemption share will be automatically redeemed at a redemption price of SEK 25. Share After Every redemption share is thereafter redeemed at a redemption price in cash of SEK 25. Information regarding share split and redemption

5 Practical information on the share split and redemption procedure Share split and redemption Those registered in the share register kept by VPC as shareholders in AB Volvo on the record date April 30, 2007 will for each share (Series A or Series B) receive six shares (of the same Series), of which one will be designated redemption share in the VPC system. Every redemption share will be automatically redeemed at a cash payment of SEK 25. Last day for trading before the share split The last day for trading in the Volvo share before the share split and entitlement to receive redemption shares will be April 25, Starting April 26, 2007 the Volvo share will be traded after the share split and excluding the right to receive redemption shares. Record date The record date at VPC for the share split and the accompanying entitlement to redemption shares is April 30, The redemption shares are thereafter booked into the shareholder s VP-account. The shareholder will receive a VP-notice as confirmation of the number of redemption shares received. The number of Volvo shares (excluding redemption shares) simultaneously becomes five times as many as before. Trading in redemption shares Trading in redemption shares will take place on the Stockholm Stock Exchange during the period May 2 18, Banks and other securities companies with the necessary permits can assist with trading in redemption shares. Payment of redemption amount Cash payment of SEK 25 for each redemption share is expected to take place around May 28, Payment will be made via VPC to the yield account linked to the shareholder s VPaccount. A VP-notice will be sent out as confirmation of payment. In connection with the payment of the redemption amount, the redemption shares booked on the shareholder s VP-account will be removed. A VP-notice relating to the removal will not be sent out. Shares registered with nominees Shareholders in Volvo whose shares are registered with a nominee, for example a bank or other securities company, will receive redemption shares in connection with the information given by each nominee. Foreign shareholders Shareholders who are not tax resident in Sweden and whose shares are redeemed are obliged to pay Swedish withholding tax on the redemption amount; please see the section Tax considerations in Sweden. Withholding tax will thus be withheld for foreign shareholders in connection with the payment of the redemption amount. Consequently, part of the redemption amount could be withheld to cover withholding tax. Information for ADR holders No Swedish withholding tax is payable if the redemption shares are sold in the market. AB Volvo intends to instruct J.P. Morgan Chase Bank, N.A., as Depositary for AB Volvo s ADR program (the Depositary ), to endeavour to sell over the Stockholm Stock Exchange all redemption shares attributable to American Depositary Shares on deposit in the ADR program, unless instructed otherwise by an ADR holder with respect to its holding before May 1, The Depositary will remit the net proceeds from any such sale to the ADR holders. J.P. Morgan Chase Bank, N.A., ADR Client Services, can be contacted at telephone or through ; The Depositary will issue four ADRs for each ADR held on the record date (April 30, 2007), resulting in five ADRs in total for each ADR so held. Additional information relating to the trading in ADRs, including the last day for trading in ADRs entitled to receive redemption shares, will be communicated by NASDAQ. Preconditions for the share split and redemption procedure The share split and redemption procedure requires that the Annual General Meeting on April 4, 2007, resolves on a change of the Articles of Association, a share split, reduction of the share capital and a bonus issue to restore the share capital in accordance with the Board s proposal. The completion of the share split and redemption procedure further requires that the resolutions of the Annual General Meeting are carried into effect and registered with the Swedish Companies Registration Office ( Bolagsverket ). Questions Questions regarding the share split and redemption procedure will be answered by: AB Volvo Investor Relations Tel: (USA) (Sweden) Information regarding share split and redemption

6 The proposal of the Board of Directors Background Against the background of the Group s profitability and capacity to generate free cash-flow the Board of Directors of Aktiebolaget Volvo ( the Company ) proposes that the Annual General Meeting resolves to implement an automatic redemption of shares. According to this procedure each share is to be divided into six shares (share split 6:1), each share with a quota value of SEK 1, of which one share will be redeemed at SEK 25 and, as a result, a total amount of SEK 10,119,964,750 1 will be distributed to the shareholders. To make it possible to distribute funds in an easy and time-efficient way, the Board of Directors further proposes that a bonus issue be implemented by a transfer of SEK 425,684,044 from the Company s non-restricted equity to the share capital. For these reasons, the Board of Directors proposes that the General Meeting decides in accordance with the following proposal. A. Change of the Articles of Association The Board of Directors proposes that the wording of the Articles of Association be changed, to the effect that the permitted range of the number of shares be increased from a minimum of 300,000,000 and a maximum of 1,200,000,000 to a minimum of 1,000,000,000 and a maximum of 4,000,000,000 (Section 4). B. Share split The Board of Directors proposes that the quota value of the share (the share capital divided by the number of shares) is changed by way of a so called share split, so that each share be divided into six shares, of which one is to be named redemption share in the VPC system and be redeemed in the manner described under Section C. below. The record day at VPC AB (the Swedish Central Security Depository) for implementation of the share split is set to 30 April After implementation of the share split, the number of shares in the Company will increase from 425,684,044 to 2,554,104,264, each share with a quota value of SEK 1. C. Reduction of the share capital for repayment to the shareholders The Board of Directors proposes that the Annual General Meeting resolves that the share capital of the Company be reduced for repayment to the shareholders by SEK 425,684,044 (the reduction amount) by way of redemption of 425,684,044 shares, of which 135,520,326 are shares of series A and 290,163,718 are shares of series B. The shares that are to be redeemed are the shares which, after implementation of the share split in accordance with Section B. above, are named redemption shares in the VPC system, whereby the record day for the right to receive redemption shares according to Section B. above is set to 30 April This amount may increase if the Company s holding of treasury shares decreases. The Company s treasury shares do not carry any right to repayment. The distributed amount will not be more than SEK 10,139,533,500. Information regarding share split and redemption

7 The purpose of the reduction of the share capital is repayment to the shareholders and, to the extent that the reduction of the share capital is implemented by way of redemption of shares held by the Company, for transfer to a fund to be used pursuant to a resolution adopted by the General Meeting. For each redeemed share (irrespective of the series of shares) a redemption price of SEK 25 is to be paid in cash, of which SEK 24 exceeds the quota value of the share. In addition to the reduction amount, a total amount of SEK 9,715,166,160 2 will be distributed, by use of the Company s non-restricted equity. Payment for the redeemed shares is to be made as early as possible, however not later than ten banking days after the Swedish Companies Registration Office s registration of all resolutions pursuant to Sections A. D. After implementation of the reduction of the share capital, the Company s share capital will amount to SEK 2,128,420,220 divided on, in total, 2,128,420,220 shares, of which 677,601,630 are shares of series A and 1,450,818,590 are shares of series B, each share with a quota value of SEK 1. Apart from the reduction of the share capital, the Company s restricted shareholders equity will not be affected. As its statement pursuant to Chapter 20, Section 13, fourth paragraph of the Swedish Companies Act, the Board of Directors states the following. The resolution on reduction of the share capital for repayment to the shareholders by redemption of shares according to this Section C. may be implemented without obtaining the Swedish Companies Registration Office s or a general court s permission, since the Company at the same time implements a bonus issue according to Section D. below, which implies that neither the Company s restricted shareholders equity, nor its share capital will be reduced. The effect of the reduction of the share capital and of the bonus issue on the Company s restricted shareholders equity and the share capital appears, in so far as concerns the reduction, from what is stated in the preceding paragraph and, in so far as concerns the bonus issue, from what is stated in Section D. below. The Board of Directors statement pursuant to Chapter 20, Section 8 of the Swedish Companies Act is enclosed as Appendix 1. D. Increase of the share capital by way of a bonus issue The Board of Directors further proposes that the Annual General Meeting resolves that the share capital of the Company be increased by way of a bonus issue by SEK 425,684,044 to SEK 2,554,104,264, by a transfer of SEK 425,684,044 from the non-restricted equity. No new shares are to be issued in connection with the increase of the share capital. The number of shares of the Company will, after implementation of the increase of the share capital, be 2,128,420,220, of which 677,601,630 are shares of series A and 1,450,818,590 are shares of series B, each share with a quota value of SEK Resolutions adopted by the Annual General Meeting pursuant to Sections A. D. above are to be adopted as one single resolution. To be valid, the General Meeting s resolution must be supported by shareholders holding at least two thirds of both the votes cast and the shares represented at the Meeting. Finally, the Board of Directors proposes that the Annual General Meeting resolves to authorise the Company s CEO to make such minor adjustments of the resolutions pursuant to Sections A. D. above that may be required in connection with the registration of the resolutions by the Swedish Companies Registration Office or VPC AB. Göteborg February 1, 2007 Aktiebolaget Volvo (publ) THE BOARD OF DIRECTORS 2 Calculated on the number of outstanding shares per 31 December 2006, at which time the Company held 20,885,454 treasury shares. The Company may dispose of treasury shares in connection with the ongoing incentive programmes, in which case the total redemption price will increase. The total redemption price can amount to maximum SEK 10,139,533,500. Information regarding share split and redemption 7

8 The Board of Directors of Aktiebolaget Volvo statement pursuant to Chapter 18, Section 4 and Chapter 20, Section 8 of the Swedish Companies Act (2005:551) (Appendix 1 to the Board s proposal) In view of the Board of Director s proposal to the Annual General Meeting to be held April 4, 2007 to decide on the distribution of an ordinary dividend of SEK 25 and on an automatic redemption of shares, including a reduction of the share capital for repayment to the shareholders, the Board hereby makes the following statement. The proposed ordinary dividend and the proposed reduction of the share capital for repayment to the shareholders reduces the Company s solvency from 85.3% to 77.4% and the Group s, excluding Financial Services, solvency from 43.5% to 37.2%, calculated as per year end The Board of Directors considers this solvency to be satisfactory with regard to the business in which the Group is active. According to the Board of Directors opinion, the proposed ordinary dividend and the proposed reduction of the share capital for repayment to the shareholders will not affect the Company s or the Group s ability to fulfil their payment obligations and the Company and the Group are well prepared to handle both changes in the liquidity and unexpected events. The Board of Directors is of the opinion that the Company and the Group have capacity to take future business risks as well as to bear contingent losses. The proposed ordinary dividend and the proposed reduction of the share capital for repayment to the shareholders will not negatively affect the Company s and the Group s ability to make further commercially justified investments in accordance with the Board of Directors plans. In addition to what has been stated above, the Board of Directors has considered other known circumstances which may be of importance for the Company s and the Group s financial position. In doing so, no circumstance has appeared that does not justify the proposed ordinary dividend and the proposed reduction of the share capital for repayment to the shareholders. If the Annual General Meeting resolves in accordance with the Board of Directors proposals regarding ordinary dividend, reduction of the share capital for repayment to the shareholders and bonus issue, SEK 18,680 M will remain of the Company s non-restricted equity, calculated as per year end The Board of Directors has the view that the Company s and the Group s shareholders equity will, after the proposed ordinary dividend and the proposed reduction of the share capital with repayment to the shareholders, be sufficient in relation to the nature, scope and risks of the business. Had the assets and liabilities which have been estimated at their market value pursuant to Chapter 4, Section 14 of the Swedish Annual Accounts Act instead been estimated at the lower cost principle, the company s shareholders equity would have been SEK 475,922,222 less. Göteborg February 1, 2007 Aktiebolaget Volvo (publ) THE BOARD OF DIRECTORS Information regarding share split and redemption

9 Financial effects for Volvo The streamlining of the Volvo Group, which commenced with the sale of passenger car operations in 1999 and continued in the form of a number of successful acquisitions, has created a strong group with a renewed focus on commercial vehicles and equipment. A new organization featuring business units with Group-wide responsibility for engines and product development, purchasing and product planning has fuelled in-house efficiency programs and ensured the realization of the considerable potential synergies. Overall, the Volvo Group s new composition has led to structurally higher margins and stronger cash-flow. Higher earnings have led to a sharp increase in dividends in recent years, while also creating resources that have been used for product development, geographic expansion and other developments. In turn, this has resulted in geographic and product diversification that has also reduced risk in the company. Moreover, the Volvo Group s stronger focus on aftermarket operations, which are less sensitive to economic trends, has contributed to reducing risk. The purpose of Volvo s long-term financial strategy is to ensure the optimal use of Group funds in providing shareholders with a favorable return and offering creditors reliable security. However, a prerequisite for the long-term competitive development of the company is the availability of sufficient financial resources to secure investments and active participation in industry consolidation worldwide, thereby maintaining a strategically competitive position in all business areas. The Volvo Group s financial resources will be used for investments, acquisitions and a competitive dividend with a stable and long-term development. Any surplus capital will be transferred to the shareholders. In order to present the effect on the Volvo Group s consolidated accounts from the share split and share redemption program some key ratios are presented pro forma at December 31, Balance sheet items are presented as if the shares were redeemed at December 31, Items from the income statement have been calculated as if the shares were redeemed at January 1, The redemption amount of approximately SEK 10,120 M may increase if the Company s holding of treasury shares decreases. Dec 31, 2006 Key ratios Dec 31, 2006 Adjustment Pro forma Number of shares 425,684,044 1,702,736,176 2,128,420,220 Profit for the year, billion 1 16,318 (184) 16,134 Shareholders Equity, billion 87,188 (10,304) 76,884 Net financial position, billion 2 24,679 (10,304) 14,375 Earnings per share, SEK (32.25) 7.95 Equity ratio, % (2.7) Profit for the year has been adjusted to reflect decreased interest income due to lower net financial assets. 2 Cash and cash equivalents, marketable securities and interest-bearing short- and long-term receivables reduced by short- and long-term interest-bearing loans and provisions for post-employment benefits. Net debt in Financial Services is not included since the interest expense on these liabilities is charged against operating income and does not affect consolidated interest net. 3 Calculated on the total number of outstanding shares. 4 Shareholders equity divided by total assets. Information regarding share split and redemption

10 Tax considerations in Sweden Example Assume in this example, that a shareholder has one B share in Volvo with an average acquisition cost of SEK 400 immediately before the share split, that the trading price at the time of the share split is SEK 500 and that the price of the redemption share is SEK 25. Furthermore, assume in this example, that the Swedish Tax Agency in its forthcoming general advice determines that 95 per cent (note that this is solely an assumption) of the acquisition cost for one original B share will be allocated to the remaining five ordinary shares that are received pursuant to the share split and 5 per cent shall be allocated to the series B redemption share. The acquisition cost of the redemption share will consequently be SEK 20 (5 per cent of SEK 400). The average acquisition cost of the remaining five B shares will then be SEK 380 (95 per cent of SEK 400) or SEK 76 per share (95 per cent of SEK 400./.5). Thus, when the redemption share is redeemed or sold a capital gain of (25 20) = SEK 5 will arise on each redemption share. The presentation below is a summary of certain Swedish tax regulations that apply to shareholders in Volvo as a result of the redemption procedure. Unless otherwise stated, the summary is based on regulations and practice currently in force for shareholders with an unlimited tax liability in Sweden. The summary does not cover situations in which securities are held as current assets in business operations or are held by partnerships. Neither does it deal with the special tax regulations applying to certain corporate categories nor the rules on tax-exempt capital gains (including non-deductible capital losses) and dividends on shares considered to be held for business purposes. Nor does the summary cover the special rules that may apply to holdings in companies that have been acquired by means of qualified shares in closely held companies. For shareholders that are not tax resident in Sweden, the tax consequences are affected by provisions of the shareholder s home state and by tax treaties between Sweden and other states. The tax implications for each shareholder depend on the shareholder s specific circumstances. All shareholders should consult a tax advisor for information on the specific tax consequences arising from the redemption procedure for their part. Tax considerations for shareholders in Sweden Receipt of redemption shares The receipt of redemption shares pursuant to the share split as such does not give rise to any taxation. Instead, the acquisition cost of the original Volvo A and B shares immediately before the share split shall be allocated between the redemption shares and the ordinary shares in Volvo. The allocation will be made separately regarding A shares and B shares, based on the market values of the redemption shares and the ordinary shares in relation to the share split and the detachment of the redemption shares. Volvo intends to seek general advice from the Swedish Tax Agency regarding how this allocation shall be made. Information on the Swedish Tax Agency s general advice will be published on Volvo s website ( and www. volvo.com) and on the Swedish Tax Agency s website ( se). Redemption and sale of redemption shares Redemption of shares and sale of redemption shares, for example by sale in the market, give rise to capital gains taxation. A capital gain or capital loss shall be computed based on the difference between the received payment, after deduction of sales costs, if any, and the acquisition cost of the shares redeemed or sold. The received payment for shares redeemed is the redemption amount. The received payment for redemption shares sold in the market is the sales price. 10 Information regarding share split and redemption

11 The acquisition cost for redemption shares received at the share split shall be calculated by allocating the acquisition cost as described under the heading Receipt of redemption shares and in the example on page 10. The acquisition cost of shares acquired in the market is the actual acquisition cost for the shares. The acquisition cost of all shares of the same series and type shall be computed collectively in accordance with the average method. It should be noted that the redemption shares of series A and B respectively are no longer considered to be of the same series and type as the ordinary Volvo shares. For shares that are quoted on a market, the acquisition cost may alternatively be determined in accordance with the standard method to 20 percent of the sales price after deduction of sales costs. For individuals, the capital gain is taxed in the capital income category. The tax rate is 30 percent. A capital loss on quoted shares is fully deductible against taxable capital gains in the same year on shares and other quoted securities that are taxed as shares except for units in Swedish investment funds that only contain Swedish receivables (Sw: räntefonder). Any excess losses are 70 percent deductible against other income from capital. If an overall capital deficit arises, a reduction from tax on income from employment and business operations as well as real estate tax is granted. A tax reduction of 30 percent is provided for deficits that do not exceed SEK 100,000 and 21 percent of any remaining deficit. Deficits cannot be carried forward to later fiscal years. In the case of limited liability companies, capital gains on shares that are not deemed to be held for business purposes are taxed as income from business operations at a tax rate of 28 percent. Deductible capital losses on shares and other securities that are taxed as shares may only be offset against taxable capital gains on shares and other securities. In certain cases, capital losses may be offset against capital gains within a certain corporate group if group contributions are permitted among the companies. Capital losses that cannot be utilized during a certain year may be carried forward and be utilized against eligible capital gains in subsequent fiscal years. Certain tax considerations for shareholders with a limited tax liability in Sweden In the case of shareholders that have a limited tax liability in Sweden, the redemption of shares for cash payment is deemed to be a dividend, which means that Swedish withholding tax is levied on the received payment. The tax rate is 30 percent but is generally reduced under tax treaties that Sweden has concluded with other countries. Swedish withholding tax is levied regardless of the redemption shares being received by the share split or acquired in the market. A right to claim a refund for the withholding tax that is attributable to the acquisition cost of the shares or, provided that the shares are quoted, 20 percent of the redemption amount, may be admitted if a claim for a refund is filed with the Swedish Tax Agency. The acquisition cost is usually allocated between the redemption shares and ordinary shares as mentioned in the example on page 10. A claim for refund is to be filed with the Swedish Tax Agency at the latest at the end of the fifth calendar year after payment. Shareholders with a limited tax liability in Sweden and who are not carrying on business operations from a fixed place or a permanent establishment in Sweden are generally exempt from capital gains taxation in Sweden on the disposal of shares. However, shareholders may be liable for tax in their country of residence. If a shareholder with a limited tax liability in Sweden, being an individual, has been resident or lived permanently in Sweden at any time during the year of the sale or the ten calendar years immediately preceding the year of the sale of Swedish shares, Sweden has the right under a domestic rule to tax such a holder. This right to tax is, however, limited by several tax treaties that Sweden has concluded with other countries. It should be noted that no Swedish withholding tax is payable if the redemption shares are sold in the market. Information regarding share split and redemption 11

12 Tax considerations in the United States The following discussion is a summary of certain material United States federal income tax consequences of the redemption procedure to US holders (defined below). This discussion is based on the tax laws of the United States and the US-Sweden Tax Treaty, all as in effect as of the date hereof, all of which are subject to change or changes in interpretation, possibly with retroactive effect. The discussion is not a full discussion of all the tax considerations that may be relevant to the redemption procedure and does not deal with the tax treatment of holders subject to special US tax rules including persons who own shares pursuant to the exercise of employee stock options or otherwise as compensation. Persons who may be subject to US taxation with respect to the redemption procedure are advised to consult their own tax advisors about the US federal, state, local and foreign tax consequences of the redemption procedure in light of their own particular circumstances and are also urged to consult with their tax advisors concerning whether they are eligible for benefits under the US-Sweden Tax Treaty. All holders are advised that a more detailed discussion of the US federal income tax consequences of the redemption procedure will be available on the Volvo website at com well in advance of the Annual General Meeting. For purposes of this discussion, a US holder is a beneficial owner of shares or American Depositary Shares (ADSs) who holds those shares or ADSs as capital assets and is for US federal income tax purposes: a citizen or individual resident of the United States, a corporation (or any other entity taxable as a corporation) that is organized in or under the laws of the United States or any state thereof (including the District of Columbia), a trust if a court within the United States is able to exercise primary supervision over its administration and one or more United States persons have the authority to control all of the substantial decisions of the trust, or an estate the income of which is subject to United States federal income taxation regardless of its source. To ensure compliance with Treasury Department Circular 230, persons subject to US tax are hereby notified that: (A) any discussion of United States federal tax issues in this document is not intended or written to be used, and cannot be used, by taxpayers for the purposes of avoiding penalties that may be imposed on taxpayers under the Internal Revenue Code; (B) such discussion is written in connection with the promotion or marketing of the transactions or matters addressed herein; and (C) taxpayers should seek advice based on their particular circumstances from an independent tax advisor. 12 Information regarding share split and redemption

13 Receipt of redemption shares Although the matter is not free from doubt, for US federal income tax purposes the distribution of a redemption share as a result of the share split generally will be taxable as a dividend in an amount equal to the US dollar value of the fair market value of the redemption share on the date of distribution. In general, the fair market value of the redemption share will be the mean of the high and low trading prices of the redemption share on the date of distribution. This dividend will not be eligible for the dividends received deduction in the United States and generally will be treated as foreign source passive category income for foreign tax credit purposes. US holders whose tax years began prior to January 1, 2007 should consult their own tax advisors regarding the foreign tax credit rules applicable to them. A US holder will obtain a tax basis in the redemption share equal to the fair market value of the redemption share on the date of distribution. A US holder s tax basis in a Volvo share owned prior to the redemption process will be apportioned proportionally among the five shares that will remain after redemption. Certain US holders (including individuals) are eligible for reduced rates of United States federal income tax (to a maximum rate of 15 percent) in respect of qualified dividend income received in taxable years beginning before January 1, 2011, provided that certain holding period and other requirements are met. If the distribution of the redemption share is taxable as a dividend, Volvo currently believes that it should constitute qualified dividend income for US federal income tax purposes. Sale or exchange of redemption shares For US federal income tax purposes, a US holder who sells (or, on whose behalf the ADR Depositary sells) redemption shares in the open market generally will recognize gain or loss equal to the difference between the US dollar value of the amount realized on the sale or exchange and the US holder s adjusted tax basis (determined in US dollars) in the redemption share. Such gain or loss will be capital, and generally will be short-term capital gain or loss (since by their terms the redemption shares will not be outstanding for a period in excess of one year). Any gain or loss generally will be US source gain or loss. The deductibility of capital losses is subject to significant limitations. As described above under the heading Certain tax considerations for shareholders with a limited tax liability in Sweden, no Swedish withholding tax is payable if a redemption share is sold in the market. Redemption of redemption shares In addition to the dividend income described above with respect to the receipt of the redemption share, a US holder who has a redemption share redeemed by Volvo generally should recognize gain or loss equal to the difference between the US dollar value of the net purchase price received (i.e., the SEK 25 redemption price per share less any Swedish witholding tax thereon) and the US holder s adjusted tax basis (determined in US dollars) in the redemption share. Any gain will be short term and taxable at ordinary income rates. The deductibility of capital losses is subject to significant limitations, and in some circumstances to disallowance. As described above under the heading Certain tax considerations for shareholders with a limited tax liability in Sweden, under Swedish law, the redemption of the redemption share is deemed to be a dividend resulting in Swedish withholding tax being levied on the amount paid. The tax rate may be reduced to 15 percent for US holders who are eligible for benefits under the US Sweden Tax Treaty, upon making certain representation and certifications with respect to their Treaty eligibility. Certain refunds may be available by making a claim with the Swedish Tax Agency. As a result of the applicability of the Swedish withholding tax, US holders may find it advantageous to sell redemption shares in the market rather than having them redeemed by Volvo. This is because a sale in the market may result in the receipt of a greater amount of net cash proceeds by a selling US holder. Foreign currency considerations US holders who receive foreign currency as a result of the redemption procedure may be subject to special rules. United States information reporting and backup withholding In general, the receipt of redemption shares and the proceeds from the redemption or other disposition of the redemption shares may be subject to information reporting to the Internal Revenue Service and possible federal backup withholding at a current rate of 28 percent. Backup withholding will not apply to a holder who furnishes required US tax forms and information to their broker or the payor of the income, as appropriate. Information regarding share split and redemption 13

14 Questions and answers 14 Information regarding share split and redemption Why is Volvo proposing a share split and redemption procedure? Volvo s profitability and capacity to generate free cash-flow has created a very strong financial position, which in turn motivates a distribution of surplus capital to the shareholders. Redemption of shares is a good way for Volvo to distribute surplus to its shareholders and the method is also favourable from a tax perspective for certain shareholders. The share split reduces the value of each trading lot and should make trading easier for shareholders with smaller holdings. Why does Volvo not use the surplus funds for future investments rather than distributing them to the shareholders? Volvo will have, also taking the proposed ordinary dividend of SEK 25 per share into account, a sufficiently strong financial position to enable further commercially justified investments in accordance with the Board of Directors plans. What does automatic redemption of shares entail? Automatic redemption entails that, once the share split has taken place, the shares that are designated redemption shares in the VPC system will be automatically redeemed in exchange for a predetermined cash consideration, without any action needed on the part of the shareholder. As a shareholder, do I need to do anything? Provided that the Annual General Meeting resolves in accordance with the Board s proposal, you who are a registered shareholder on the record date April 30, 2007 do not need to do anything. Your redemption shares will be automatically redeemed by AB Volvo at SEK 25 per redemption share in cash. The cash settlement is expected to be distributed on May 28, How and when will Volvo s share price be affected? It is impossible to predict in detail how the market will price the Volvo share after the split of the Volvo share into five Volvo shares and one redemption share. Theoretically, the share price of one Volvo share should after the share split correspond to a fifth of the amount that remains after a deduction of SEK 25 (corresponding to the redemption amount per redemption share) from the previous price (the price immediately prior to the share split). This share price change will occur two trading days prior to the record date for the share split of the Volvo share i.e April 26, How many shares will I have when the share split and redemption procedure is completed? When the share split and redemption procedure is completed, you will have five times as many Volvo shares as you had before. What are my options as a shareholder? Instead of awaiting the redemption of the shares you may sell your redemption shares prior to the completion of the redemption procedure. Trading in redemption shares will take place on the Stockholm Stock Exchange during the period May 2 18, Is the ordinary dividend affected by the share split and redemption procedure? No, the ordinary dividend is a separate issue. The Board of Directors proposes a cash dividend amounting to SEK 25 per share. The record date proposed by the Board of Directors for the entitlement of cash dividend is April 11, The Cash payment is expected to take place through VPC on April 16, 2007.

15

16 AB Volvo, Investor Relations,

INFORMATION REGARDING PROPOSED REDEMPTION OF SHARES IN BETSSON AB

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