NOTICE OF ANNUAL GENERAL MEETING OF THE SHAREHOLDERS OF KARO BIO

The annual general meeting of the shareholders of Karo Bio Aktiebolag (publ) will be held on Wednesday May 3, 2006 at 4.00 p.m. in Wallenbergsalen, IVA’s Conference Center, Grev Turegatan 18, Stockholm, Sweden.

I. RIGHT TO PARTICIPATE, NOTIFICATION
Shareholders who wish to participate in the general meeting must be recorded in the share register kept by the Swedish Securities Register Center (VPC AB) by Wednesday April 26, 2006 and, further, must notify the company of their intention to participate in the meeting by no later than Thursday April 27, 2006 at 4.00 p.m.
Notification should be made in writing to Karo Bio AB, att: Eva Kruse, Novum, SE-141 57 Huddinge, Sweden, by fax + 46 8 774 52 80, or by e-mail to agm@karobio.com. Notification can also be made on the company’s web site www.karobio.com/agm. When notifying, the shareholders should state name, personal/corporate identity number (where applicable), address, telephone number and e-mail address. In the case of representatives participating in the meeting, proof of due authorization should be forwarded to the company in conjunction with the notification. One or two advisors may accompany a shareholder to the meeting, provided that the shareholder gives notice as to the number of such advisors.
Shareholders whose shares are registered under the name of a nominee must temporarily register their shares in their own names to be entitled to participate in the meeting. Such registration must be in effect at Swedish Securities Register Center (VPC AB) no later than Wednesday April 26, 2006, which means that shareholders must notify their nominee well in advance of that date.

II. PROPOSED AGENDA
1. Opening of the meeting;
2. Election of chairman at the meeting;
3. Preparation and approval of the voting list;
4. Approval of the agenda;
5. Election of persons to confirm the minutes;
6. The determination as to whether the meeting has been duly convened;
7. Presentation of the annual report and the audit report as well as the group consolidated financial statement and the audit report thereon;
8. Resolution to adopt the income statement and the balance sheet as well as the consolidated income statement and the consolidated balance sheet;
9. Resolution as to the treatment of the loss in accordance with the adopted balance sheet;
10. Resolution as to the board of directors’ and the presidents’ discharge from liability;
11. Resolution as to the number of board directors and deputy board directors;
12. Resolution on the remuneration to the board of directors and auditor;
13. Election of board of directors and the chairman of the board;
14. Resolution on a nominating committee;
15. Resolution as to the board of directors’ proposal on amendment of the by-laws due to the new Swedish Companies Act, etc.;
16. Resolution as to the board of directors’ proposal on amendment of the by-laws due to the reduction of the share capital
17. Resolution as to the board of directors’ proposal on reduction of the share capital;
18. Closing of the meeting.

III. PROPOSED RESOLUTIONS

Item 9: The board of directors’ proposal as to the treatment of the company’s loss in accordance with the adopted balance sheet
The board of directors proposes that no dividend be paid for the financial year 2005 and that the parent company’s aggregate deficit be carried over.

Item 11: Resolution as to the number of board directors and deputy board directors
The nominating committee, consisting of Thomas Ehlin, chairman and appointed by Nordea funds; Björn Franzon, Fourth Swedish National Pension Fund; Ragnhild Wiborg, Pecunia; Carl Rosén, Second Swedish National Pension Fund and Per-Olof Mårtensson, chairman of the Karo Bio board of directors, proposes that the board of directors shall consist of seven board members with one deputy board member.

Item 12: Resolution on the remuneration to the board of directors and auditors
The nominating committee proposes that remuneration to the board of directors be paid with SEK 410,000 to the chairman and SEK 150,000 each to the directors elected by the general meeting, who are not employed by the company and do not have consulting engagements with the company. It is also proposed SEK 110,000 in remuneration for committee work to be distributed as per resolution by the board of directors. Remuneration to the auditor is proposed to be as per approved invoice.

Item 13: Election of board of directors
The nominating committee proposes that Dana Fowlkes, Lars Ingelmark, Ulla Litzén, Per-Olof Mårtensson, Leon Rosenberg and Per Olof Wallström be re-elected as directors as well as Jan-Åke Gustafsson be re-elected as deputy director. The nomination committee also proposes that Laurent Leksell be elected as new director. Per-Olof Mårtensson is proposed to be chairman.
Laurent Leksell is executive director in Elekta AB and chairman of the board of directors of Stockholm City Mission. Further, Leksell is member of the board of directors of Ortivus AB and was president and chief executive officer of Elekta AB 1974 – 2005.

Item 14: Resolution on a nominating committee
The nominating committee proposes that the four largest shareholders as of August 31, 2006, not being represented in the board of directors, shall appoint one representative each, which together with the chairman of the board shall be members of the nominating committee in respect of the 2007 annual general meeting. The represent¬atives shall be appointed and announced no later than in conjunction with the company’s quarterly report for the third quarter 2006. The nominating committee shall appoint a chairman among themselves, whereby the chairman of the board of directors shall not be chairman. Should a shareholder decline to participate in the nominating committee or leave the nominating committee before its work is completed, the right to appoint a representative shall turn to the closest largest shareholder not represented in the nominating committee. Should the ownership structure significantly change subsequent to the establishment of the nominating committee, the composition of the nominating committee shall be changed in accordance with the above principles.
The nominating committee shall prepare proposals to be presented at the annual general meeting 2007 for resolution as regards chairman at the general meeting, chairman and other members of the board of directors, remuneration to the board of directors etc., fees to and election of auditor, and principles for appointment of nominating committee. The term of office of the nominating committee runs until a new nominating committee has been appointed in accordance with the resolution on appointment of the nominating committee by the annual general meeting 2007.
If the nominating committee finds it necessary, it may utilize reasonable resources of external consultants at the account of the company.

Item 15: The board of directors’ proposal to amend the by-laws due to the new Swedish Companies Act
The board of directors proposes that the general meeting resolves to amend the by-laws as set forth below, for the purpose of adapting the by-laws to the new Swedish Companies Act, and to make certain editorial adjustments. The main content of the board of directors’ proposal is:

that the nominal amount of the shares is eliminated from the by-laws and replaced by a provision that the number of shares shall be not less than thirty million (30,000,000) and not more than hundred and twenty million (120,000,000) (section 4);

that the provision in section 5 on the board of directors’ term of office and that the members of the board shall be appointed at the annual general meeting is deleted;

that section 6, first paragraph, is amended to the effect that the provision on the auditor’s term of office and that the auditor shall be appointed at the annual general meeting is deleted as well as to the effect that it is stipulated that one registered public accounting firm shall be appointed auditor (the provision that no more than two deputy auditors shall be appointed is deleted);

that the provision in section 6, second paragraph, on the board of directors’ authorization in certain situations to appoint a special auditor receives the following changed wording: “The board is authorized to appoint one or several special auditors to audit such statements or plans prepared by the board in accordance with the Swedish Companies Act in relation to an issue of shares, warrants or convertibles with provisions on non-cash consideration or that subscription shall be made against payment through set-off of claims or other provisions, transfer of own shares against non-cash consideration, reduction of the share capital or the statutory reserve, merger or division of limited companies. An authorized accountant or a registered public accounting firm shall be appointed as such special auditor.”;

that notice convening shareholder’s meeting shall be announced in Post- och Inrikes Tidningar and in Svenska Dagbladet (section 7)

that in order to be entitled to attend a shareholders’ meeting a shareholder shall be registered in the transcription or other form of display of the complete share register with reference to the status five days, excluding Sundays, before the meeting (and shall notify the company not later than 4.00 p.m. the day stated in the notice for the meeting) (section 8);

that section 9, stipulating that at a shareholders’ meeting each person entitled to vote may vote for the total number of shares represented by him, is deleted, since this is expressly stated in law, whereby the numbers of the following sections are changed;

that the word “for” in section 10, sub-section 9, is changed to “towards the Company” and the words “of directors” in section 10, sub-section 12, are changed to “members and deputy board members”;

that the provision in section 12 to the effect that the company’s shares shall be registered in a central securities depository register receives the following wording: “The Company’s shares shall be registered in a central securities depository register pursuant to the Financial Instruments Accounts Act (1998:1479).”

Item 16: The board of directors’ proposal to amend the by-laws due to the reduction of the share capital
Due to the board of directors’ proposal in accordance with item 17 below on reduction of the share capital, the board of directors proposes that the general meeting resolves on an amendment of the by-laws to the effect that section 4 receives the following wording: “The share capital shall be not less than SEK thirty-five million (35,000,000) and not more than SEK one hundred forty million (140,000,000). The number of shares shall be not less than seventy million (70,000,000) and not more than two hundred and eighty million (280,000,000).”
The resolution in accordance with this item 16 shall be conditioned on the general meeting’s resolution to reduce the share capital in accordance with item 17 below.

Item 17: The board of directors’ proposal on a reduction of the share capital
The board of directors proposes – under the condition that the general meeting has resolved to amend the by-laws in accordance with item 16 above – that the general meeting resolve to reduce the company’s share capital by SEK 116,119,193 to SEK 38,706,398 to be used to immediately cover losses as per the adopted balance sheet. The reduction shall be made without the redemption of shares, whereby the ratio value of the Karo Bio share will be reduced from SEK 2 to SEK 0.50.
The resolution in accordance with this item 17 shall be conditioned on that the amendment of the by-laws to the effect that section 4 is changed in accordance with item 16 above is duly registered with the Companies Registration Office.

IV. DOCUMENTS
The annual report and the audit report as well as the board of directors’ complete proposals will be available at the company’s offices in Huddinge and on the company’s web site www.karobio.com/agm from Wednesday April 19, 2006. Copies of all documents will be sent to shareholders that so request and state their address or e-mail address. Copies of all documents will be available at the general meeting.

V. MISCELLANEOUS
The resolution by the general meeting under item 15, 16 and 17 above shall be valid only if supported by shareholders with at least two thirds of the votes cast as well as the shares represented at the meeting.
The board of directors proposes that the meeting in conjunction with items 15, 16 and 17 above authorize the president, the board of directors or whoever may be authorized by the board of directors to make such minor adjustments to these resolutions that may prove necessary when registering the meeting’s resolutions with the Swedish Companies Registration Office.
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Huddinge in April 2006
Karo Bio Aktiebolag (publ)
The Board of Directors

For further information, please contact:
Per Olof Wallström, President & Chief Executive Officer Telephone: +46 8 608 60 20

Bertil Jungmar, Chief Financial Officer Telephone: +46 8 608 60 52

Facts about Karo Bio
Karo Bio is an innovative drug discovery and development company specializing in nuclear receptors for the development of novel pharmaceuticals with focus on metabolic diseases. Karo Bio is listed on the Stockholm stock exchange (Reuters: KARO.ST) since 1998.
The Company has expanded from being a drug discovery company by adding in-house preclinical development resources and competence for development of drugs to treat metabolic diseases. The Company has a strong project portfolio primarily targeting diseases such as diabetes, obesity, atherosclerosis and dyslipidemia.
In addition, Karo Bio has two strategic collaborations with international pharmaceutical companies for development of innovative therapies for the treatment of common diseases.

This press release is also available online at: www.karobio.com and www.waymaker.net.