of accounting principles and misuse of facts relating to acquisition accounting; (4) improper accounting for certain
reserves, allowances and provisions; (5) improper accounting for certain real estate transactions; and (6) certain other
accounting issues and items arising as a result of the misapplication of or errors in the application of Dutch GAAP and
US GAAP.
In addition to the adjustments referred to above, Ahold adjusted its comparative consolidated financial statements as of
fiscal year-end 2001 and results for fiscal 2001 and fiscal 2000 for certain reclassifications and changes in its
accounting principles with respect to pensions, revaluations of properties and restructuring provisions. For additional
information on these adjustments, please see Note 2 to our financial statements of this annual report.
Ahold is taking steps to address the significant internal control weaknesses raised or confirmed in the internal
investigations. A special task force reporting to the Audit Committee has been formed, consisting of members of Ahold
management and outside advisors, to address these internal control weaknesses.
Each of the matters announced on February 24, 2003, and related developments, are discussed in further detail below.
Joint ventures
In October 2002, the Corporate Executive Board informed the Chairman of the Audit Committee that a letter relating to
the consolidation in our financial statements of our 50% owned Scandinavian joint venture ICA had not been provided to
Ahold's independent auditors, D&T. The letter (the "ICA Side Letter"), which had been signed by Ahold and the other two
joint venture partners shortly after the April 2000 formation of the joint venture, contradicted a letter sent three days
earlier. That prior letter (the "ICA Control Letter") had been provided to D&T and was the basis on which ICA had been
consolidated in our financial statements. At the request of D&T, in November 2002, the Chairman of the Audit Committee
requested that Sjoerd Eisma of the law firm of De Brauw Blackstone Westbroek ("De Brauw") conduct an investigation into
the decision to consolidate ICA, including the circumstances surrounding the creation of the ICA Side Letter and the
failure to provide it to D&T. Mr. Eisma conducted the investigation with his partner Jan Marten van Dijk with assistance
from the law firm of Morvillo, Abramowitz, Grand, Iason Silberberg, P.C. (the "Morvillo Firm") as to matters of U.S. law
and certain Dutch and U.S. accounting experts.
As a result of the investigation, which was completed in January 2003, Messrs. Eisma and Van Dijk concluded that,
although when the ICA joint venture was formed the joint venture partners agreed that Ahold should be able to consolidate
ICA under Dutch GAAP and IAS, there was no written evidence to conclude that the joint venture parties agreed that Ahold
would have legal control over ICA. According to accounting experts assisting in the investigation, Ahold did not have the
ability to control ICA and therefore should not have consolidated ICA in its financial statements under Dutch GAAP or
US GAAP.
On February 22, 2003, it was discovered that letters similar to the ICA Side Letter also existed in respect of control letters
given in connection with other Ahold joint ventures and that these letters also had not been provided to D&T. The joint
ventures were: (1) Bomprego, which was formed in December 1996 with Ahold having a 50% interest until July 2000
when Ahold acquired 100% of the joint venture, (2) Disco Ahold International Holdings ("DAIH"), which was formed in
January 1998 with Ahold having a 50% interest which interest was increased to more than 662/3% in July 2002 and
100% in August 2002, and (3) Paiz Ahold, which was formed in December 1999 with Ahold having a 50% interest until
January 2002 when Paiz Ahold became party to a joint venture with another party and Ahold's indirect interest in the new
joint venture was reduced to 33V3%. All of these joint ventures had been fully consolidated in our financial statements
since the respective dates of formation, except Paiz Ahold which ceased to be consolidated on January 1, 2002, when our
indirect interest in the new joint venture was reduced to 33V3%, at which time we began to account for our interest in the
joint venture on an equity basis. At the request of D&T, the Chairman of the Audit Committee directed Messrs. Eisma and
Van Dijk to conduct further investigations with respect to the control letters and side letters for Bomprego, DAIH and Paiz
Ahold. Messrs. Eisma and Van Dijk's investigations outlined the history relating to the creation of each of the control and
side letters and the concealment of the side letters from the Supervisory Board, our Audit Committee and D&T.
In light of the various side letters referred to above and on the basis of the available facts and circumstances, we decided
in February 2003 that we should restate our historical financial statements so as to proportionally consolidate ICA and the
other joint ventures for which there were side letters for the periods they were 50% owned by us, as well as our joint
venture in Portugal, Jerónimo Martins Retail ("JMR"). We have held a 49% interest in JMR since its formation in 1992
and, although no side letters existed regarding our control of JMR, we had been fully consolidating JMR in our financial
statements since the formation of the joint venture, as we believed that we had control over JMR. In light of the evaluation
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