Annual Report • Mar 29, 2018
Annual Report
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ANNuAL REPORT 2017
"We build leading digital businesses"
| Chairman's Review | 03 |
|---|---|
| Chief Executive's Review | 04 |
| Kinnevik in Summary | 05 |
| Kinnevik's Operating Framework | 06 |
| The Kinnevik Footprint | 08 |
| Kinnevik's Digital Brands | 10 |
| The Kinnevik Management Team | 13 |
| Sustainability at a Glance | 14 |
| The Kinnevik Share | 18 |
| Fair Value of Financial Assets | 20 |
| Valuation of Unlisted Assets | 21 |
| Corporate Governance Report | 23 |
| Sustainability Report | 29 |
| Board of Directors' Report | 42 |
| Group Financial Statements & Notes | 46 |
The Annual Report for Kinnevik AB (publ) 556047-9742 consists of a review of operations on pages 3-41 and Board of Directors' Report, fnancial statements and other information on pages 42-81. The Sustainability Report on page 29-41 has been subject to a limited assurance review. The annual accounts and consolidated accounts on page 42-75 have been audited.
Dear shareholders,
Kinnevik had a good year in 2017, featuring strong operational performances by our companies, a high level of investment activity and total return to our shareholders of 31%. Key focus areas for the Board during the year were the appointment of Kinnevik's new CeO, Georgi Ganev, and strategic opportunities in the nordic TmT sector. i believe Kinnevik entered 2018 in a very strong position to continue creating sustainable value for our shareholders.
The Kinnevik Board had a busy and eventful year.We held fourteen meetings in total, one of which was dedicated to discussing Kinnevik's strategy. It was held in Stockholm in September.
A key focus area for the Board during the frst half of the year was the appointment of a new CEO. We spent signifcant time and resources identifying an individual with the right background, capabilities and personality for the role. On 26 June 2017, we announced that Georgi Ganev had been appointed CEO of Kinnevik with effect from 1 January 2018. Georgi has a keen appreciation of Kinnevik's strategy, markets and companies and he combines a successful track record as a CEO, taking a fast-growing digital e-commerce company public, with solid experience in the Nordic TMT sector. I am confdent that he will be a strong leader for Kinnevik in our next phase of identifying, scaling and transforming businesses to continue to create value for shareholders.
During the year, the Board dedicated signifcant time to strategic opportunities in the Nordic TMT sector. Through our investment in Com hem in April 2017 and endorsement of the proposed merger between Tele2 and Com Hem announced in January 2018, i believe that we are creating a strong platform to move into the next phase of value creation.
Ensuring sustainable growth in our private companies is a critical consideration for the Board. Through active board representation and management discussions, we supported our companies in the development of their strategic roadmaps including the recruitment of world-class talent and establishment of key partnerships, as well as by attracting other leading institutional investors. We also continued to implement and follow up rigorous governance, risk management, compliance and corporate responsibility practices within our businesses, ensuring they lead the way in their respective markets.
During 2017, we made further investments in Betterment, Babylon and BIMA, supporting them on their respective growth journeys. We also approved the investment in a new company, the US-based consumer digital health company, Livongo.
Kinnevik has an established policy to pay shareholders an annual, growing dividend. For the fscal year 2017, we are pleased to recommend a dividend of SEK 8.25 per share, corresponding to a 3.0% dividend yield based on the closing share price for 2017. This is subject to approval by the Annual General Meeting in May.
As announced in December 2017, i will not be standing for nomination at the Annual General Meeting in May and the Nomination Committee has proposed that Dame Amelia Fawcett be elected Chairman at the 2018 AGM.
Since joining the Kinnevik board in 2011, it has been a privilege and pleasure to play a part in development of the unique and strong company that is Kinnevik. Working with such knowledgeable and active board colleagues has been a highly rewarding experience.
On behalf of the Board of Directors, i would like to express my appreciation to all the Kinnevik team for their hard work and dedication throughout the year. I would also like to extend our gratitude to our CFO Joakim Andersson for his signifcant contributions to Kinnevik while holding the position as acting CEO during 2017.
i would also like to thank you, our shareholders, for your continued support of Kinnevik.
Tom Boardman Chairman of the Board of Directors
I am honoured to write my frst letter as Kinnevik's CEO, a position I assumed on 1 January 2018. Joining Kinnevik feels like coming home, having spent fve years at Tele2 at the start of my career. The business acumen, entrepreneurial spirit and culture in the Kinnevik group is as buoyant as ever. I am taking over a company in a strong position following signifcant proftable growth in our larger companies in 2017 as well as new investments in digital consumer businesses in our target sectors, and i am excited about the possibilities that this platform creates.
Kinnevik's NAV increased by 25% to SEK 90.6bn, or SEK 329 per share in 2017, driven mainly by strong development in our large listed assets, including Zalando, Millicom and Tele2. The value of our private assets remained stable at SEK 11.7bn.We returned SEK 2.2bn to our shareholders in ordinary dividends, and delivered TSR of 31% during the year.
One of Kinnevik's key priorities in 2017 was to grow and protect value in our large public companies.TMT is a sector in rapid change, with ever-increasing customer demands and global convergence trends. As an active owner who continuously evaluates strategic options for our companies, Kinnevik is excited to support the industry-defning merger between Tele2 and Com Hem. Both consumers and shareholders are set to beneft as the combination of Tele2 and Com hem will create a leading integrated connectivity provider with an award-winning mobile network, the fastest fxed network and the widest range of content in the market.
Millicom continued its strategy execution in 2017: accelerating the deployment of high speed data networks and connecting a record number of new 4G customers. Its fnancial results improved throughout the year and the company has become increasingly effcient whilst maintaining its rapid cable network expansion in Latin America.
I would like to highlight Zalando's performance in 2017. The company reported 23% growth for the full year and solid proftability with an adjusted EBIT margin of 5%. This was achieved while continuing to invest in the customer experience, launching new fulflment centres, introducing Zalando fulflment solutions which allow partners to employ Zalando's logistics expertise and network, and launching a new beauty category.
MTG achieved strong organic growth and improved proftability in 2017. The company's strategic transformation into a global digital entertainer has been underway for three years, and has included signifcant investments and very active portfolio management.
in our private portfolio, Global Fashion Group ("GFG") continued to focus on technological and operational effciency gains. GFG entered into partnerships in the Middle East and in the Philippines, which are expected to generate strategic and operational benefts to the businesses in their respective regions.
Betterment, the independent automated investing service in the United States, continued to grow strongly in 2017. Assets under management amounted to USD 12.4bn at the end of 2017, an increase of 83% compared to the same time last year. The number of customers totalled over 315,000, a yearly increase of 51%. During the year, the company has launched several product innovations and has continued to develop its platform from a single digital product to a multi-plan advice offering that also includes access to certifed fnancial planners and licensed fnancial consultants.
The microinsurance company BiMA, co-founded by Kinnevik, attracted global insurance company Allianz as a new strategic partner in a funding round completed by the end of 2017. Allianz's knowledge of insurance markets, coupled with BiMA's strategy utilising mobile technology to reach the mass markets, will enable BiMA to continue developing its product portfolio across emerging markets.
We invested SEK 4.8bn in 2017. That fgure is comprised of a SEK 3.7bn investment in 19% of Com Hem and add-on investments in the private portfolio, including an investment of SEK 0.5bn in Betterment, increasing our ownership stake in that company to 16%. We also made two signifcant divestments, exiting our entire stakes in Rocket internet and lazada for a total consideration of SEK 5bn. Kinnevik's partnership with Rocket Internet was instrumental in broadening our investment focus and in building a large and successful vertical within e-commerce, and the investments and subsequent dividends and divestments are equal to a return of six times invested capital.
Kinnevik ended the year in a strong fnancial position and net debt of SEK 1.1bn, corresponding to a leverage of 1%. For fscal year 2017, Kinnevik's Board of Directors recommends a dividend of SEK 8.25 per share, equal to a 3.0% dividend yield based on the closing price for 2017, subject to approval by the Annual General Meeting in May.
Kinnevik builds digital businesses that use the power of technology to make life better for people around the world. The opportunities this creates are fascinating, both for the technology itself, and because of how it affects people's lives. Technology gives consumers the right to choose, be it more convenient shopping online, a better Internet connection, simple and cost-effcient access to insurance and fnancial services, or seeing a doctor on your mobile device when you choose.
With the recently announced transaction between Tele2 and Com hem, i am convinced that we are creating a strong platform for the next phase of value creation.
in the private portfolio, we will work hard to increase value by clearly identifying winners among our existing companies and supporting them to reach their full long-term potential.We remain frmly focused on fnding new opportunities in our target sectors and aim to make a number of new investments in the coming years. Among 25% of our assets are based in the Nordics and we will be increasing our efforts to identify new investments in the region, whilst remaining opportunistic about attractive prospects in selected markets across the globe.
It has been a busy frst few weeks in the offce, and I look forward to meeting many of you in the coming months to discuss our strategy and way forward. On behalf of the entire Kinnevik team, I would like to thank all of you, our shareholders, for your support during 2017.
Georgi Ganev Chief Executive Offcer
Kinnevik is an industry focused investment company with an entrepreneurial spirit. Our purpose is to build digital businesses that provide more and better choice. we do this by working in partnership with talented founders and management teams to create, develop and invest in fast growing businesses in developed and emerging markets. we believe in delivering both shareholder and social value by building companies that contribute positively to society. Kinnevik was founded in 1936 by the stenbeck, Klingspor and von horn families. Kinnevik's shares are listed on nasdaq stockholm's list for large cap companies under the ticker codes Kinv a and Kinv B.
We believe in the power of technology to make life better for people around the world. That's why we build digital businesses that make a positive difference to peoples' lives. Whether it is commerce, communication, entertainment, fnancial services or healthcare, technology is making everything easier, speedier and more freely available.
The consumer and their right to choose is at the heart of everything we do. We believe everyone should have the opportunity to seek, fnd and beneft from the services they need and want. The businesses we build are the key to providing that opportunity.
To make people's lives better by providing choice
We build digital businesses that provide more and better choice
attractive returns
increasing shareholder remuneration Our Criteria for New Investments
Addresses a material, everyday consumer need with a signifcant proft pool
led by a talented and experienced team with a clear vision
Customers often recommend the product and cohorts suggest high repeat usage
Places innovation and product development at its core
Well positioned relative to digital peers and differentiated from offine incumbents
high barriers to entry over time protect the business model from competition
Revenue generating and unit economics that are positive and sustainable
Based on realistic projections, an ability to generate appropriate risk-adjusted returns
Compatibility with Kinnevik's values and way of doing business
Opportunity to own a material minority stake in the company over time to form a long-term partnership
Kinnevik's objective is to generate long term total return for our shareholders in excess of the cost of capital. we aim to deliver annual total shareholder return of 12-15% over the business cycle
Low Leverage Given the nature of Kinnevik's investments our goal is to carry low leverage in the parent company, not exceeding 10% of portfolio value
Kinnevik aims to pay an annual dividend growing in line with dividends received from its investee companies and the cash fow generated from its investment activities
Kinnevik's companies are active across developed and emerging markets in Europe, latin America, Africa, Asia & Oceania and North America. The growth of Zalando has contributed to the growth of the relative weight of the European presence in recent years. Further, the exit from Tele2 Russia in 2013 and Avito in 2015 has reduced the relative weight of Russia & CIS. With the investment in Betterment in 2016, Kinnevik expanded its footprint to include North America.
Portfolio Value per 31 December each year.
Zalando is an online fashion platform for women, men and children, offering a broad assortment of shoes, apparel and accessories from around 2,000 global and local brands as well as private labels. With its localised offering, Zalando addresses country specifc customer preferences in each of its 15 European markets.
Quikr is an online classifeds platform operating in India. headquartered in Bangalore, Quikr serves approximately 20 million unique monthly visitors and focuses its operations on fve verticals; Goods, Cars, Jobs, Homes and Services.
KiNNEViK STAKE
FAiR VAlUE
Global Fashion Group (GFG) is an online fashion destination for growth markets. GFG operates with fve branded platforms, Lamoda, Dafti, Zalora, The Iconic and Namshi, offering over 3,000 international and local brands across 24 countries with a 1.9 billion population, addressing a fashion market estimated to be worth EUR 300bn.
Go to company website > Go to company website >
Qliro Group is a Nordic e-commerce group in consumer goods and complementary fnancial services. Qliro Group operates CDON Marketplace, Nelly and Qliro Financial Services (QFS).
home24 is an online shop for furniture and home accessories in seven core markets in Europe and Brazil.The broad range of products includes furniture, lamps, home accessories and garden equipment.
17% seK 479m 1.0m KiNNEViK STAKE
Brazil and Russia.
Westwing is an international e-commerce company for home & living, offering a curated selection of home décor and furniture products. Westwing has more than 3,500 brand partners and operates in 14 markets across Europe,
ACTiVE CUSTOMERS
FAiR VAlUE
ACTiVE CUSTOMERS
Go to company website > Go to company website >
Millicom is a provider of cable and mobile services dedicated to emerging markets in Latin America and Africa. The company offers high-speed broadband and digital lifestyle services through its principal brand Tigo.
Tele2 offers mobile services, fxed broadband and telephony, data network services, content services and global ioT solutions to 15 million customers in 7 countries across Europe.
| seK | seK | 14.9m | ||
|---|---|---|---|---|
| FAiR | MOBilE | KiNNEViK | FAiR | MOBilE |
| VAlUE | CUSTOMERS | STAKE | VAlUE | CUSTOMERS |
| 20.9Bn | 49m | 30% | 15.4Bn |
Go to company website > Go to company website >
Com hem offers broadband, TV, play and telephony services to Swedish households and companies.The company offers a range of digital TV channels and play services via set top boxes as well as on-the-go for tablets and smartphones.
KiNNEViK STAKE
ADDRESSABlE hOUSEhOlDS
Entertainment
MTG is an international digital entertainment group. Its brands span TV, radio and next generation entertainment experiences in esports, digital video networks and online gaming.
KiNNEViK STAKE
Financial Services
ANNUAl REPORT 2017 KiNNEViK'S DiGiTAl BRANDS
Betterment is an independent automated investing service in the United States. The company operates a vertically integrated platform that provides fully automated, personalised advice and access to a low cost, globally diversifed investment portfolio.
Bayport provides fnancial solutions to formally and informally employed individuals in emerging markets. The company's operations span 9 countries across Africa and Latin America.
KiNNEViK STAKE
16% seK 1.1Bn 315K FAiR VAlUE
KiNNEViK STAKE
FAiR VAlUE
22% seK 1.1Bn 500K CORE PAyROll CUSTOMERS
Milvik offers, under the brand BiMA, affordable and uniquely designed life and health insurance products via mobile phones. BIMA is active in 14 countries across Africa, Asia, Latin America and the Caribbean.
FAiR VAlUE
Babylon is a digital healthcare service based in the United Kingdom. Combining mobile tech and artifcial intelligence with medical expertise, Babylon's mission is to make healthcare more accessible and affordable for people everywhere.
KiNNEViK STAKE
REGiSTRATiONS
livongo is a California based consumer digital health company that empowers people with chronic conditions to live better and healthier lives. Livongo has developed a new approach for diabetes management that combines the latest technology with coaching.
KiNNEViK STAKE
3% seK 105m 54K FAiR VAlUE
MEMBERS
Georgi Ganev Chief Executive Offcer
Joakim Andersson Chief Financial Offcer
mattias andersson General Counsel
Chris Bischoff Senior investment Director
Torun Litzén Director Corporate Communication
Chief Executive Offcer
Employed: 2018
Nationality: Swedish
Born: 1976
Board positions: Non-Executive Director of Tele2 and Global Fashion Group
Shareholding* : 75,000 class B shares and 200,000 call options on class B shares, issued by Verdere S.à r.l.
Joakim Andersson Chief Financial Offcer Employed: 2007 Nationality: Swedish Born: 1974 Board positions:
Modern Times Group
insurance or similar
Shareholding* : 21,432 class B shares, of which 4,150 held through pension plan,
Non-Executive Director of General Counsel Employed: 2016 Nationality: Swedish Born: 1976 Board positions: -
Shareholding* : 6,025 class B shares, of which 2,525 held through pension plan, insurance or similar
Senior Investment Director Employed: 2013 Nationality: British Born: 1973 Board positions: Chairman of Milvik/BiMA, Board Director of Babylon health, Betterment, livongo and Quikr Shareholding* : 7,124 class B shares, of which 4,855 held through pension plan, insurance or similar
Director Corporate Communication
Employed: 2007
Nationality: Swedish
Born: 1967
Board positions: Board Director of Reach for Change
Shareholding* 20,621 class B shares, of which 1,000 held through pension plan, insurance or similar
* Including holdings of closely affliated persons
Note: Georgi Ganev joined Kinnevik on 1 January 2018. On 1 February 2018, Christoph Barchewitz, Investment Director, left Kinnevik to join Global Fashion Group as Co-CEO.
Driving an ambitious sustainability agenda in our investee companies is central in Kinnevik's role as active owners. We believe operating in a responsible manner is the key to achieving long-term proftable growth. Kinnevik has developed a structured framework, the GRC Standards, to defne sustainability best practices for our companies, to measure sustainability performance and to set priorities and roadmaps.
Kinnevik's GRC Standards comprise a total of 62 standards divided into six sections and weighted according to their importance to our stakeholders as well as their relevance to our companies' sustainability performance. Kinnevik performs a yearly assessment of all our larger investee companies based on the GRC Standards. For 2017, the assessment included 18 companies corresponding to ca 98% of our portfolio value.
More information about the GRC Standards and Kinnevik's sustainability work is available in the 2017 Sustainability Report on page 29-41.
Mathew heads up Kinnevik's GRC function and leads the work of assessing our investee companies according to the GRC Standards.
During 2017, we updated our GRC Standards and introduced a framework to measure GRC performance in our companies. Based on Kinnevik's sustainability strategy as set out by the GRC Committee, we expanded the scope of our work to also include public companies.
We have seen some encouraging progress in 2017 across our investee companies. For example, Zalando has published a Modern Slavery Act Statement that shows how they work across their supply chain to protect human rights. BIMA has signed an Anti-Corruption Memorandum of Understanding together with other multinational companies operating in Cambodia to fght corruption in the country. GFG has issued guidelines to its operating entities on the responsible recruitment and employment of migrant labourers.
We see information security as a key focus area for 2018. With the introduction of EU's General Data Protection Regulation ('GDPR'), companies must make signifcant changes to their internal processes and systems to comply with this regulation. All our investee companies that are under the scope of the GDPR have roadmaps with initiatives to comply with the regulations by 25 May 2018. Other topics that are high on our agenda for 2018 are risks related to cyber security and supply chain.
Reach for Change is a non-profit organisation founded by Kinnevik to improve children's lives through social innovations. The core product is a three year incubator program for early stage social entrepreneurs. To help the entrepreneurs develop and scale, the program offers strategy development, advisory support, technical training, mentoring, peer-topeer learning, network development and connections to further investments and funding. Since the start, Reach for Change has grown to offer support in 17 countries, across three continents.
Through multi-sector partnerships, Reach for Change continued to develop and scale social innovations that help children live better lives. These are some of the results achieved during the year.
Incubator
191 social entrepreneurs were supported to create a better world for children through our incubator program
accordance with eleven of the 17 UN Sustainable Development Goals (SDGs), with a majority targeting goals 3. Good health and well-being, 4. Quality education, 8.
AnnuAl RepoRt 2017 SuStAinAbility At A GlAnCe
think they were considerably or greatly helped by RfC advisory to overcome key challenges
found the grant very or extremely important for developing their operations to achieve more impact
83 %
of the ventures think 74% that RfC considerably or greatly contributed to increasing their organization's credibility
5, killing almost 40,000 children every year. 90% water supply and inadequate personal hygiene. In order to enable and foster hygienic behaviour, Ayatam Simeneh and his organisation Beautiful Minds collect leftover soap from hotels and spas, recycle it and supply it to schools, where they train students on when and how to wash their hands. During 2017, Beautiful Minds grew their revenues from less than USD 400 to more than USD 25,000, enabling them to support 3,000 Melat.
Beautiful Minds supported
children in 2017
Melat is a fourth grade student at Abiyoit Primary school. Before Beautiful Minds came to her school, there was no water came hygiene champions who taught our class about the importance of hand washing. I learned learned how to wash them with proper steps lace the fingers", says Melat.
In total 102,716 children where supported to develop and live healthier lives through interventions carried out by our social entrepreneurs in 2017
the price of Kinnevik's class B share increased, based on closing prices, by 27% in 2017, or by 31% including the SeK 8.00 per share paid in ordinary dividend in 2017. the oMXSBpI index (market weighted price index) increased by 7% during the year, and the oMXSBGI (market weighted total return index) increased by 10%.
the chart below shows the total return on the Kinnevik share including and excluding reinvested dividends during the past fve years.
Kinnevik's class A and class B shares have been listed on nasdaq Stockholm since 12 november 1992. the shares are listed on the Nordic list for large cap companies within the fnancial sector. the ticker codes are KInV A and KInV B. During 2017, an average of 715,000 class B shares, corresponding to SeK 180m, were traded daily.
As of 31 December 2017, the number of shares in Kinnevik amounted to 275,466,638 of which 41,157,144 are class A shares with ten votes each and 234,309,494 are class B shares with one vote
% Of CAPITAL PER 31 DEC 2017 % Of VOTES PER 31 DEC 2017
each, of which 350,479 are class B treasury shares which may not be represented at general meetings.
the total number of votes in the Company amounted at 31 December 2017 to 645,880,934 (645,530,455 excluding the 350,479 class B treasury shares). During the year, 424 Class B shares were delivered to a participant in a long term incentive plan. the Board has authorization to repurchase a maximum of 10% of all shares in the Company over 12 months up until the next Annual General Meeting. this authorization was not utilised during 2017. there are no convertibles or warrants in issue.
For the fnancial year 2017, the Board recommends a cash dividend of SeK 8.25 per share, which would correspond to a yield of 3.0% and an increase of 3.1% compared to the ordinary dividend of SEK 8.00 for the fnancial year 2016.
Kinnevik aims to pay an annual dividend growing in line with dividends received from its investee companies and the cash fow generated from its investment activities. Kinnevik will make share buybacks when the Kinnevik share trades at a signifcant discount to their intrinsic value, as perceived by Kinnevik, and the company has signifcant net cash, taking into consideration its dividend expectations, net investment plan and operating costs.
| The Kinnevik share's average annual total return | |
|---|---|
| past 30 years | 14% |
| past 10 years | 11% |
| past 5 years | 21% |
| past 12 months | 31% |
total return is calculated on the assumption that the shareholder has reinvested all cash dividends and dividends in kind into the Kinnevik share.
| Size of holding | # of holders |
% of holders |
# of shares (m) |
% of capital |
|---|---|---|---|---|
| 50 001 - | 240 | 0.2% | 194.9 | 71% |
| 10 001 - 50 000 | 584 | 0.6% | 12.1 | 4% |
| 5 001 - 10 000 | 740 | 0.7% | 5.5 | 2% |
| 1 001 - 5 000 | 6 546 | 6.2% | 14.2 | 5% |
| 501 - 1 000 | 7 936 | 7.5% | 6.4 | 2% |
| 201 - 500 | 14 810 | 14.0% | 5.3 | 2% |
| 1 - 200 | 74 581 | 70.7% | 4.4 | 2% |
| Anonymous | n/A | n/A | 32.6 | 12% |
| Total | 105 437 | 100.0% | 275.5 | 100% |
Kinnevik's 20 largest shareholders in terms of capital and votes according to Modular Finance at 31 December 2017.
| Shareholder | A shares | B shares | % of votes |
% of capital |
|---|---|---|---|---|
| Verdere S.à r.l. | 28 291 001 | - | 43.8% | 10.3% |
| Klingspor family | 7 055 545 | 2 420 086 | 11.3% | 3.4% |
| von Horn family | 2 107 580 | 354 296 | 3.3% | 0.9% |
| Baillie Gifford | - | 16 272 693 | 2.5% | 5.9% |
| Alecta | 759 800 | 7 088 000 | 2.3% | 2.8% |
| Swedbank Robur | - | 9 387 703 | 1.5% | 3.4% |
| nordea | - | 8 631 052 | 1.3% | 3.1% |
| AMF | - | 8 454 120 | 1.3% | 3.1% |
| thornburg | 777 837 | - | 1.2% | 0.3% |
| Morgan Stanley | 762 066 | 376 | 1.2% | 0.3% |
| GAMCo | 562 500 | 536 500 | 1.0% | 0.4% |
| BlackRock | - | 5 843 888 | 0.9% | 2.1% |
| Vanguard | - | 5 740 907 | 0.9% | 2.1% |
| Skandia | 192 883 | 3 713 527 | 0.9% | 1.4% |
| norges Bank | - | 4 285 398 | 0.7% | 1.6% |
| SHB | 5 346 | 4 004 268 | 0.6% | 1.5% |
| Skagen | - | 3 461 146 | 0.5% | 1.3% |
| AFA | - | 3 458 676 | 0.5% | 1.3% |
| SeB | 133 860 | 2 101 374 | 0.5% | 0.8% |
| unionen | - | 3 310 812 | 0.5% | 1.2% |
| others | 508 726 | 145 244 672 | 23.3% | 52.9% |
| Total | 41 157 144 234 309 494 | 100.0% 100.0% | ||
| of which class B shares held by Kinnevik |
350 479 |
Verdere was established to hold equal shares in Kinnevik for the beneft of its shareholders Cristina Stenbeck and Andreas M. Stenbeck and the CMS and AMS Sapere Aude trusts. Cristina Stenbeck owns 25.9% of the shares of Verdere directly with CMS Sapere Aude Trust reg., a trust of which Cristina Stenbeck is benefciary, owning an additional 44.5% of the share capital. the remaining 29.6% is held by AMS Sapere Aude trust.
| 2017 | 2016 | 2015 | 2014 | 2013 | |
|---|---|---|---|---|---|
| Average number of shares (000s) | 275 116 | 275 570 | 277 381 | 277 343 | 277 564 |
| earnings per share, SeK | 73.90 | -12.55 | 4.49 | 75.27 | 30.51 |
| Shareholders' equity per share, SeK | 311.36 | 263.29 | 300.22 | 303.60 | 235.38 |
| Market price class B share at 31 December, SeK | 276.40 | 218.90 | 262.00 | 255.20 | 297.50 |
| Dividend per share, SeK | 8.251) | 8.00 | 25.75 2) | 7.25 | 7.00 |
| Direct yield | 3.0% | 3,7% | 9.8% 2) | 2.8% | 2.4% |
1) proposed dividend
2) Including a share redemption program of 18 SeK per share
| Investment (SEKm) | Capital (%) | Votes (%) | fair value 31 Dec 2017 |
fair value 31 Dec 2016 |
Total return 2017 1 |
|---|---|---|---|---|---|
| Zalando | 31.7 | 31.7 | 34 097 | 27 245 | 25% |
| Global Fashion Group | 35.4 | 35.4 | 5 239 | 5 641 | -7% |
| Rocket Internet | - | - | - | 3 990 | 2% |
| Quikr | 17.7 | 17.7 | 1 358 | 1 535 | -12% |
| Qliro Group | 28.5 | 28.5 | 767 | 367 | 109% |
| other 2 | - | - | 1 213 | 2 051 | 6% |
| Total E-Commerce & Marketplaces | 42 674 | 40 829 | 18% | ||
| Millicom | 37.6 | 37.6 | 20 942 | 14 790 | 48% |
| tele2 | 30.3 | 47.9 | 15 350 | 11 166 | 45% |
| Com Hem | 19.0 | 19.0 | 4 226 | - | 15% |
| Total Communication | 40 518 | 25 956 | 42% | ||
| MtG | 20.2 | 48.0 | 4 645 | 3 650 | 32% |
| other | - | - | 277 | 439 | -32% |
| Total Entertainment | 4 922 | 4 089 | 26% | ||
| Bayport | 21.8 | 21.8 | 1 082 | 1 201 | -10% |
| Betterment | 16.3 | 16.3 | 1 064 | 590 | -5% |
| other 2 | - | - | 932 | 649 | 35% |
| Total financial Services & Other | 3 078 | 2 440 | 2% | ||
| Healthcare & Other 2 | 503 | 487 | 27% | ||
| Portfolio Value | 91 695 | 73 801 | 29% | ||
| net debt | -1 062 | -1 367 | |||
| - of which unpaid investments/divestments | - | -49 | |||
| Total Net Asset Value | 90 633 | 72 434 | 29% | ||
| net Asset Value per share, SeK | 329.44 | 263.29 | 29% | ||
| Closing price, class B share, SeK | 276.40 | 218.90 | 31% |
1) Including investments, divestments and dividends
2) For split see page 21
| Investment (SEKm) | Kinnevik ownership |
Accumulated net invested amount |
fair value 31 Dec 2017 |
Change in fair value full-year 2017 |
Valuation method |
|---|---|---|---|---|---|
| e-Commerce | |||||
| Global Fashion Group 1,2 | 35% | 5 658 | 5 239 | -402 | Revenue multiple |
| Home24 2 | 17% | 871 | 218 | 86 | Revenue multiple |
| Westwing 2 | 17% | 419 | 479 | 50 | Revenue multiple |
| other 1 | Mixed | 523 | 321 | -242 | Mixed |
| Marketplaces | |||||
| Quikr | 18% | 879 | 1 358 | -177 | DCF |
| Saltside | 61% | 195 | 195 | -5 | DCF |
| other | Mixed | - | - | -19 | Mixed |
| Total E-Commerce & Marketplaces | 8 544 | 7 810 | -448 | ||
| Entertainment | Mixed | 1 072 | 277 | -140 | Mixed |
| Bayport 3 | 22% | 467 | 1 082 | -119 | latest transaction |
| Betterment | 16% | 1 065 | 1 064 | -53 | latest transaction |
| Milvik/BIMA | 33% | 257 | 806 | 298 | latest transaction |
| other | Mixed | 100 | 118 | -45 | Mixed |
| Total financial Services | 1 889 | 3 070 | 81 | ||
| Babylon | 20% | 308 | 375 | 77 | latest transaction |
| livongo | 3% | 113 | 105 | -8 | latest transaction |
| other | Mixed | 242 | 45 | -6 | Mixed |
| Total Healthcare and Other | 663 | 525 | 63 | ||
| Total Unlisted Assets | 12 169 | 11 682 | -444 |
1) net invested amounts include SeK 1.0bn of share distributions received from Rocket Internet
2) ownership not adjusted for employee stock option plans and employee equity at subsidiary level
3) ownership on a fully diluted as converted basis
At the end of the year, the fair value of Kinnevik's unlisted fnancial assets amounted to a total of SeK 11,682m, to be compared with an accumulated invested amount (net after dividends received) of SeK 12,169m. the change in fair value amounted to a decrease of SeK 444m for the year, as specifed in the table on the previous page.
Kinnevik's unlisted investee companies adopt different fnancing structures, and at times issue shares with liquidation preference rights. liquidation preferences determine how proceeds from a liquidity event are allocated between shareholders. this allocation may become increasingly complex as a company completes several funding rounds at different valuations. As Kinnevik's participation often varies between funding rounds, Kinnevik's share of proceeds may signifcantly deviate from its percentage ownership of the investee company's issued equity. Accordingly, an increase or decrease in value of an investee company's equity where liquidation preferences are applicable may result in a disproportionate increase or decrease in the fair value of Kinnevik's shareholding in that investee company.
the fair value of Kinnevik's 35 percent shareholding in Global fashion Group ("GfG") amounted to SeK 5,239m as at 31 December 2017, based on a total value of GFG's fully diluted equity of euR 1.6bn. the valuation of GFG implied an average multiple of 1.3x the company's last twelve months' net revenues as at 30 September 2017. the implied average multiple corresponded to a 45 percent discount to a group of listed and proftable developed market fashion e-commerce peers, and discounts vary between GFG's different regional businesses. the implied discount not only refected differences in growth and proftability, but also Kinnevik's assessment of equity risk premiums across GFG's partly emerging market focused footprint as may be referenced from a broader set of listed emerging market e-commerce companies.
the fair value of Kinnevik's 17 percent shareholding in Home24 amounted to SeK 218m as at 31 December 2017, based on a total value of Home24's fully diluted equity of euR 296m. the valuation of Home24 applied a multiple of 1.1x the company's last twelve months' net revenues as at 30 September 2017. the applied multiple corresponds to a 40 percent discount to a group of listed ecommerce peers, and refects differences in growth and proftability.
the fair value of Kinnevik's 17 percent shareholding in Westwing amounted to SeK 479m as at 31 December 2017, based on a total value of Westwing's fully diluted equity of euR 288m. the valuation of Westwing applied a multiple of 1.3x the company's last twelve months' net revenues as at 30 September 2017. the applied multiple corresponds to a 30 percent discount to a group of listed e-commerce peers, which refects differences in growth and proftability.
the fair value of Kinnevik's 18 percent shareholding in quikr amounted to SeK 1,358m as at 31 December 2017, based on a total value of Quikr's fully diluted equity of uSD 935m. the valuation of Quikr was based on a discounted cash fow analysis. A number of all-stock transactions have been concluded at an approximate 66 percent premium to the uSD 935m valuation, but due to the lack of a signifcant cash element in each of these transactions they are not considered as suffciently robust to be used as basis for the assessment of the fair value of Kinnevik's shareholding.
the fair value of Kinnevik's 61 percent shareholding in Saltside amounted to SeK 195m as at 31 December 2017. the valuation of Saltside was based on a discounted cash fow analysis.
the fair value of Kinnevik's 22 percent shareholding in Bayport amounted to SeK 1,082m as at 31 December 2017, based on a total value of Bayport's fully diluted equity of uSD 608m. the valuation of Bayport was based on the valuation applied in a funding round during the third quarter of 2017.
the fair value of Kinnevik's 16 percent shareholding in Betterment amounted to SeK 1,064m as at 31 December 2017, based on a total value of Betterment's fully diluted equity of USD 800m. The valuation of Betterment was based on the valuation applied in a funding round during the third quarter of 2017.
the fair value of Kinnevik's 33 percent shareholding in Bima amountsed to SeK 806m as at 31 December 2017, based on a total value of Bima's fully diluted equity of approximately uSD 290m. the valuation of Bima was based on the valuation applied in a funding round in the fourth quarter of 2017.
the fair value of Kinnevik's 20 percent shareholding in Babylon amounted to SeK 375m as at 31 December 2017. the valuation of Babylon was based on the valuation applied in a funding round during the second quarter of 2017.
the fair value of Kinnevik's 3 percent shareholding in Livongo amounted to SeK 105m as at 31 December 2017. the valuation of livongo was based on the valuation applied in a funding round during the frst quarter of 2017.
Corporate Governance in the Kinnevik Group is based on Swedish legislation and generally accepted sound practice on the securities market. Kinnevik applies the Swedish Corporate Governance Code (the "Code")1).
During 2017, Kinnevik, in line with previous years, deviated from the Code rule stipulating that a member of the Board of Directors may not chair the nomination Committee. this deviation from the Code is explained in more detail in the section nomination Committee below.
the Swedish Companies Act (2005:551) (the "Swedish Companies Act") and the Articles of Association determine how the notice to the Annual General Meeting and extraordinary general meetings shall occur, and who has the right to participate in and vote at the meeting. there are no restrictions on the number of votes each shareholder may cast at the general meeting. Class A shares entitle to ten votes, whereas other shares entitle to one vote. Distance participation and voting at the general meeting is not possible.
Information on major shareholders in the Company is provided on page19, and authorizations approved by the Annual General Meeting for the Board to resolve on repurchase of own shares is provided in note 10 for the parent Company, Shareholders' equity.
At the 2017 Annual General Meeting, it was decided that a nomination Committee consisting of at least three members appointed by the Company's largest shareholders would be established during September 2017 following consultation with the largest shareholders in the Company as at 31 August 2017. the Annual General Meeting further resolved that Cristina Stenbeck should be a member of the nomination Committee and be responsible for convening the nomination Committee.
In accordance with the resolution of the 2017 Annual General Meeting, Cristina Stenbeck convened a nomination Committee consisting of members representing the largest shareholders in Kinnevik. the nomination Committee is comprised of Cristina Stenbeck as representative of verdere S.à r.l., Wilhelm Klingspor appointed by the Klingspor family, edvard von Horn appointed by the von Horn family, James Anderson appointed by Baillie Gifford, and Ramsay Brufer appointed by Alecta. the nomination Committee's task is to submit proposals for the Board of Directors and auditors, in the event auditors shall be elected, and fees to the Board of Directors and auditors, a proposal for the Chairman of the Annual General Meeting as well as the procedure for the nomination Committee ahead of the 2018 Annual General Meeting. Cristina Stenbeck, member of the Board of Directors, was appointed Chairman of the nomination Committee, an appointment that deviates from what the Code prescribes. the other members of the nomination Committee declared their decision as being in the Company's and its shareholders' best interest and a natural consequence of Cristina Stenbeck leading the nomination Committee's work in recent years, as well as her connection to the Company's largest shareholders.
In its work, the nomination Committee applies rule 4.1 of the Code as its diversity policy. Further information may be found in the nomination Committee's motivated statement regarding its proposals to the 2017 Annual General Meeting.
According to the Articles of Association, the Company shall have not more than three auditors, with not more than three deputies, or a registered audit frm. At the 2017 Annual General Meeting, the registered audit frm Deloitte AB was re-elected Company auditor for a period of four years until the 2021 Annual General Meeting, with authorized public accountant Jan Berntsson as auditor-incharge. Jan Berntsson, born 1964, is also the auditor-in-charge in Boliden AB. the auditor's independence is ensured by legislation and professional ethics and the audit frm's internal guidelines, as well as by adhering to the Audit Committee's guidelines governing the type of assignments that the audit frm may conduct in addition to the audit. During 2017, Deloitte AB has provided advise regarding interpretation of accounting principles for long term incentive plans. Information regarding audit fees is provided in the Annual Report's note 12 for the Group and note 5 for the parent Company, Auditors' Fees.
Board members are elected at the Annual General Meeting for a period ending at the close of the next Annual General Meeting. the Articles of Association contains no restrictions pertaining to the eligibility of Board members. According to the Articles of Association, the number of Board members can be no less than three and no more than twelve members elected by shareholders.
At the 2017 Annual General Meeting, following a motion by the nomination Committee, tom Boardman, Anders Borg, Dame Amelia Fawcett, Wilhelm Klingspor, lothar lanz, erik Mitteregger, Mario Queiroz, John Shakeshaft and Cristina Stenbeck were re-elected members of the Board and Cynthia Gordon and Henrik poulsen were elected as new members of the Board. the Annual General Meeting further elected tom Boardman as Chairman of the Board. At its constituent meeting, the Board appointed Dame Amelia Fawcett and Anders Borg as Deputy Chairmen of the Board. In August 2017, Anders Borg resigned as a Board member and Henrik poulsen was appointed Deputy Chairman of the Board.
the independence of Board members in relation to the Company and its management, and to the major shareholders of the Company, is specifed on pages 25-27. None of the Board members are employed within the Group. per end of 2017, Senior executives in Kinnevik included acting Chief Executive Offcer and Chief Financial Offcer Joakim Andersson, Director of Corporate Communications torun litzén, Senior Investment Director Chris Bischoff, Investment Director Christoph Barchewitz and General Counsel Mattias Andersson. In January 2018, Georgi Ganev joined Kinnevik as Chief Executive Offcer and Christoph Barchewitz left Kinnevik to assume the role as Co-Chief Executive Offcer of Kinnevik's investee company Global Fashion Group. For information about Senior executives, please see page 13 in the Annual Report, and note 16 for the Group.
Kinnevik's Board of Directors is responsible for the overall strategy of the Group and for organizing its administration in accordance with the Swedish Companies Act. the Board's work and delegation procedures, instructions for the Chief Executive Offcer, and
1) the Code is available at: www.corporategovernanceboard.se
reporting instructions are updated and approved at least annually following the Annual General Meeting.
Signifcant issues addressed by Kinnevik's Board during 2017 include the succession of the company's Chief Executive Offcer, the overall strategy and fnancial performance of Kinnevik and its larger portfolio companies, and Kinnevik's private investment strategy. As the basis for discussions concerning the listed portfolio companies, Kinnevik's management presented independent analyses of each company's strategy, operations and future opportunities within the markets in which they are active. Furthermore, Chief executive offcers of certain listed portfolio companies held customary investor presentations directly to the Kinnevik Board.
Compliance with laws and regulations, responsibility and market confdence in Kinnevik are some of the key issues which the Board actively focuses on. Kinnevik's Code of Conduct and Corporate Responsibility policy adopted by the Board describes Kinnevik's policy on issues pertaining to social responsibility, environmental considerations and ethics.
As in previous years, a Remuneration Committee, an Audit Committee and a Governance, Risk and Compliance ("GRC") Committee have been established within the Board. these committees are preparatory bodies of the Board and do not reduce the Board's overall responsibility for the governance of the Company and decisions taken. General Counsel Mattias Andersson is responsible for ensuring that rules of procedure are complied with, and all Board members can turn to the Secretary for advice and assistance in their Board work.
During 2017, Kinnevik's Board of Directors held fourteen meetings (including the constituent meeting), of which eight were extra meetings held via telephone.
the Board complies with an annual performance review process to assess how well the Board, its committees and processes are functioning and how they might be improved. every three years a more extensive Board evaluation is undertaken either by an independent Board member or an external consultant.
the evaluation of the Board's work during 2017 was conducted by an external consultant by way of a formal questionnaire and inperson interviews, covering areas such as the Board's performance against its key duties, the Board's composition and processes, as well as the performance of individual Board members. the results of the evaluation were presented to the nomination Committee by the Chairman of the Board, and were also reported in full to the nomination Committee in writing.
the Remuneration Committee's assignments are stipulated in Chapter 9.1 of the Code, and comprise issues concerning salaries, pension terms and conditions, incentive programs and other conditions of employment for the senior executives. the guidelines applied in 2017 are presented in note 16 for the Group, personnel. the Remuneration Committee shall strive to meet not less than twice a year, and more frequently as required. Minutes are kept at the Remuneration Committee's meetings and are reported to the Board at its next meeting.
| Board Director | position | Audit Committee |
Remuneration Committee |
GRC Committee |
|---|---|---|---|---|
| tom Boardman | Chairman | Member | Member | Member until May 2017 |
| Dame Amelia Fawcett | Deputy Chairman | - | Chairman | Chairman |
| Henrik poulsen (from May 2017) | Deputy Chairman | Member from May 2017 | - | - |
| Cynthia Gordon (from May 2017) | Member | - | - | Member from May 2017 |
| Wilhelm Klingspor | Member | - | - | - |
| lothar lanz | Member | Member until May 2017 | - | - |
| erik Mitteregger | Member | Member | Member | - |
| Mario Queiroz | Member | - | - | - |
| John Shakeshaft | Member | Chairman | - | Member |
| Cristina Stenbeck | Member | - | Member until May 2017 | - |
| Anders Borg (until August 2017) | Deputy Chairman | - | - | - |
| Board Director | Board | Audit Committee |
Remuneration Committee |
GRC Committee |
|---|---|---|---|---|
| tom Boardman | 14/14 | 11/11 | 5/5 | 2/2 |
| Dame Amelia Fawcett | 10/14 | - | 5/5 | 5/5 |
| Henrik poulsen (from May 2017) | 8/9 | 5/6 | - | - |
| Cynthia Gordon (from May 2017) | 9/9 | - | - | 3/3 |
| Wilhelm Klingspor | 13/14 | - | - | - |
| lothar lanz | 14/14 | 5/5 | - | - |
| erik Mitteregger | 14/14 | 10/11 | 5/5 | - |
| Mario Queiroz | 11/14 | - | - | - |
| John Shakeshaft | 12/14 | 11/11 | - | 5/5 |
| Cristina Stenbeck | 14/14 | - | 3/3 | - |
| Anders Borg (until August 2017) | 10/10 | - | - | - |
the Audit Committee's assignments are stipulated in Chapter 8, Section 49b of the Swedish Companies Act. these tasks include monitoring the Company's fnancial reporting and the effciency of the Company's internal controls and internal audits, as well as maintaining frequent contacts with the external and internal auditors. the Audit Committee's work primarily focuses on the quality and accuracy of the Group's fnancial accounting and the accompanying reporting, as well as the internal fnancial controls within the Company. Furthermore, the Audit Committee evaluates the auditors' work, qualifcations and independence. The Audit Committee monitors the development of relevant accounting policies and requirements, discusses other signifcant issues connected with the Company's fnancial reporting and reports its observations to the Board. the Audit Committee shall meet not less than four times annually. Minutes are kept at the Audit Committee's meetings and are reported to the Board at its next meeting.
the GRC Committee is appointed by the Board of Directors to assist the Board in monitoring the governance structures of Kinnevik's investee companies, Kinnevik's risk management process and compliance with laws, regulations and codes of conduct. the GRC Committee shall meet not less than four times annually. Minutes are kept at the GRC Committee's meeting and are reported to the Board at its next meeting.
the Board is responsible for internal control in accordance with the Swedish Companies Act and the Code. this description has been prepared in accordance with the Code's Rule 7.3 and 7.4, and Chapter 6, Section 6 and Chapter 7, Section 31 of the Annual Accounts Act (1995:1554), and is thus restricted to the internal control pertaining to the fnancial reporting.
CHAIRMAn
Born: 1949
Nationality: South African citizen.
Independence: Independent of the Company and management and independent of major shareholders.
Direct or related person ownership: 10,000 class B shares.
Committee work: Member of the Audit Committee, member of the Remuneration Committee.
tom Boardman has been a Director of the Board of Kinnevik AB since 2011 and was elected Chairman of the Board in 2016. He is also Chairman of the Board of Millicom and non-executive Director of nedbank Group, Woolworths Holdings, Royal Bafokeng Holdings and African Rainbow Minerals, and was a non-executive Director of vodacom Group 2009-2011. tom held various managerial positions within the South African mining and retailing industries during 1973-1986. Between 1986 and 2002 he held managerial positions within the Boe Bank and 2003-2010 he was Chief executive of nedbank Group. tom holds a B Com and CtA from university of Witwatersrand, South Africa.
Deputy CHAIRMAn
Born: 1956
Nationality: uS and uK citizen.
Independence: Independent of the Company and management, not independent of major shareholders.
Direct or related person ownership: 10,000 class B shares.
Committee work: Chairman of the Remuneration Committee, Chairman of the GRC Committee.
Dame Amelia Fawcett has been a Director of the Board of Kinnevik since 2011 and was appointed Deputy Chairman in 2013. She is also Chairman of the Standards Board for Alternative Investments, a Board Director of State Street Corporation in Boston, uSA and Chairman of its Risk Committee, and a member of the Board of the uK treasury. Dame Amelia is Deputy Chairman and a Governor of the london Business School, Chairman of the prince of Wales's Charitable Foundation and a trustee of project Hope uK. She held managerial positions within Morgan Stanley during 1987-2006 and was vice Chairman and Chief Operating Offcer of its European operations during 2002-2006. She was a Board Director of the Guardian Media Group during 2007-2013, and Chairman during 2009-2013. In 2010 she was awarded a DBe (Dame Commander of the British empire) by HM Queen elizabeth II for services to the fnancial services industry. She has a law Degree from university of virginia, uSA, and a BA in History from the Wellesley College in Massachusetts, uSA.
Deputy CHAIRMAn
Born: 1967
Nationality: Danish citizen.
Independence: Independent of the Company and management and independent of major shareholders.
Direct or related person ownership: 15,000 class B shares.
Committee work: Member of the Audit Committee.
Henrik poulsen was elected a Director and appointed Deputy Chairman of the Board of Kinnevik AB in 2017. He is the Chief executive Offcer of Ørsted (formerly DONG Energy). Prior to joining Ørsted in 2012, Henrik was the Chief Executive Offcer of Danish telecommunications company tDC between 2008 and 2012, and also spent two years at KKR & Co after seven years at lego. Henrik graduated with BSc and MSc degrees in International Business and Finance & Accounting from Aarhus School of Business.
the purpose of the Board of Directors' rules of procedure and instructions for the Chief Executive Offcer and Board Committees is to ensure a distinct division of roles and responsibility that promotes the effcient management of operational and fnancial risks. the Board has also adopted a number of fundamental guidelines of signifcance to activities involving internal controls, which are described in Kinnevik's policy and procedure Manual and include instructions governing the fnancial reporting of results, authorization procedures, purchasing policies, investment policies, accounting principles, fnancial risk management and internal audits. the Company's management reports regularly to the Board in accordance with established procedures. In addition, the Audit Committee and the GRC Committee report on its respective work. the Company's management is responsible for the system of internal controls required for managing risks associated with ongoing operations. this includes guidelines for the employees to ensure that they understand the importance of their particular roles in efforts to maintain effcient internal control. The Company's operational and fnancial risks are reported each quarter to the Board, including an analysis of their consequences and fnancial impact in the event of them materializing, and how and who exercises ongoing control over each risk and how these can be mitigated in part or in full.
Kinnevik has implemented a model for assessing the risk of errors in accounting and the fnancial reporting based on COSO's framework for internal control. The most signifcant items and processes in which the risk of signifcant errors can typically arise encompass fnancial assets and instruments in the income statement and balance sheet, and the investment process. Kinnevik has established documented work routines and continuously evaluates how well the controls function in relation to these items and processes.
the Board of Directors evaluate the need for a separate internal audit function on a yearly basis. Kinnevik does not currently have a separate internal audit function, taking into account the size of the company's operations. Instead Kinnevik, on instructions from
BoARD DIReCtoR
Born: 1962
Nationality: uK citizen.
Independence: not independent of the Company and management, independent of major shareholders.
Direct or related person ownership: 1,381 class B shares.
Committee work: Member of the GRC Committee.
Cynthia Gordon was elected a Director of the Board of Kinnevik AB in 2017. She is currently a member of the Board of tele2 and was until February 2017 Ceo of the Africa Division at Millicom. prior to joining Millicom in 2015, Cynthia spent three years at MENA and Asia Pacifc telecommunications company ooredoo as Chief Commercial Offcer, and also spent nine years at orange as vice president, Business between 2001 and 2006, and vice president, partnerships and emerging Markets between 2009 and 2012. Between 2007 and 2009, Cynthia was Chief Commercial Offcer at the Russian/eastern european communications company MtS. Cynthia holds a BA Business Studies Degree.
BoARD DIReCtoR
Born: 1962
Nationality: Swedish citizen.
Independence: Independent of the Company and management and independent of major shareholders.
Direct or related person ownership: 1,315,474 class A shares and 780,071 class B shares.
Committee work: -
Wilhelm Klingspor has been a Director of the Board of Kinnevik AB since 2004 and was Director of Industriförvaltnings AB Kinnevik 1999-2004. He also served as Director of the Board of Billerud-Korsnäs 2012-2014 (Director of Korsnäs 2003-2012). Wilhelm is Ceo of Hellekis Säteri. He graduated as a Forest engineer from the Swedish university of Agricultural Sciences in Skinnskatteberg.
BoARD DIReCtoR Born: 1948
Nationality: German citizen.
Independence: Independent of the Company and management and independent of major shareholders.
Direct or related person ownership: -
Committee work: -
lothar lanz has been a Director of the Board of Kinnevik AB since 2016. He was also elected Chairman of the Supervisory Board of Zalando in 2016, where he has been a Supervisory Board Member and Chairman of the Audit Committee since 2014. He is also Chairman of the Supervisory Board of Home24, and a Supervisory Board Member of Axel Springer, tAG Immobilien and Dermapharm. lothar was Chief Financial and Operating Offcer at Axel Springer 2009-2014, after having spent 12 years at proSiebenSat.1 Media as Chief Financial Offcer. Lothar graduated with a Master of Commerce after studies in Business Administration in Stuttgart and Berlin.
BoARD DIReCtoR
Born: 1960
Nationality: Swedish citizen.
Independence: Independent of the Company and management and independent of major shareholders.
Direct or related person ownership: 35,000 class A shares and 165,000 class B shares.
Committee work: Member of the Audit Committee, member of the Remuneration Committee.
erik Mitteregger has been a Director of the Board of Kinnevik AB since 2004. He is also Chairman of the Board of Firefy, Fasadglas Bäcklin, MatHem and Wise Group. erik was Founding partner and Fund Manager at Brummer & partners Kapitalförvaltning 1995- 2002. In 1989-1995 he was Head of equity Research and member of the Management Board at Alfred Berg Fondkommission. erik holds a B.Sc. in economics and Business Administration from Stockholm School of economics.
the Audit Committee, engages independent internal auditors to follow up and evaluate work relating to inter alia risk management and internal control. the internal auditors continuously report the results of their examination in the form of written reports to the Audit Committee. During 2017, an internal audit of Kinnevik's valuation of unlisted assets, code of conduct, and policies and procedures was performed, with satisfactory results.
Kinnevik's policy and procedure Manual and other guidelines of importance to fnancial reporting are updated at least once annually. Both formal and informal information channels to the Company's management and Board of Directors are available for internal communication. For external communication, guidelines have been
compiled in an Information policy ensuring the Company complies with the meticulous demands for timely and accurate information to market participants and other various constituencies, such as shareholders, Board members, employees and customers.
the Board of Directors continuously evaluates the information provided by management, the Audit Committee and the GRC Committee. The work to monitor the effciency of management's efforts in this area is of particular importance to the follow-up of internal controls. this work includes ensuring that action is taken concerning those shortcomings and proposed measures that result from external and internal audits.
BoARD DIReCtoR
Born: 1966
Nationality: Brazilian and uS citizen.
Independence: Independent of the Company and management and independent of major shareholders.
Direct or related person ownership: -
Committee work: -
Mario Queiroz has been a Director of the Board of Kinnevik AB since 2016. He is vice president of product Management at Google for consumer hardware, including smartphones, Chromecast, Google Home, vR, and others. previously at Google, Mario led Android product management, product internationalization, and the build out of Google R&D centres outside of the united States. prior to joining Google in 2005, Mario held a number of positions at Hewlett-packard, including vice president of operations and Senior Director of Global eCommerce. Mario also served as non-executive director of Metro International 2008-2013. Mario holds BSc and MSc degrees in electrical engineering from Stanford university.
BoARD DIReCtoR Born: 1954
Nationality: uK citizen.
Independence: Independent of the Company and management and independent of major shareholders.
Direct or related person ownership: 3,200 class B shares.
Committee work: Chairman of the Audit Committee, member of the GRC Committee.
John Shakeshaft has been a Director of the Board of Kinnevik AB since 2014. He is also Deputy Chairman of the Council of Cambridge university, Chairman of valiance Funds, Investment Director of Cornerstone Investment Managers and a trustee of the Institute of Historical Research, the london Symphony orchestra and trinity College, Cambridge. John served as Director of the Board of tele2 2003-2014. He has 28 years of global fnancial services expertise and held leadership positions at ABn Amro (2004-2006), lazard llp (2000-2002) and Barings (1994-2000). John previously served in HM Diplomatic Service and holds a master's degree from Cambridge university.
BoARD DIReCtoR Born: 1977
Nationality: Swedish citizen.
Independence: Independent of the Company and management, not independent of major shareholders.
Direct or related person ownership: 2,200 class B shares. Cristina Stenbeck owns 25.9% of the shares of verdere S.à r.l. directly, with CMS Sapere Aude trust reg., a trust of which Cristina Stenbeck is benefciary, owning an additional 44.5% of the share capital. verdere S.à r.l. owns 28.3 million Class A shares, corresponding to 43.8% of the votes and 10.3% of the capital in Kinnevik.
Cristina was elected vice Chairman of the Board in 2003 and was the Chairman of the Board during 2007-2016. She currently serves as a non-executive on both the Board of one of Kinnevik's private investee companies, Babylon Health, as well as the Board of Kinnevik. She also serves on the Board of Spotify. Cristina has held Board positions in a number of Kinnevik's investee companies within e-commerce, fnancial services and communications, including Zalando, Invik & Co., Millicom, tele2 and MtG. Cristina graduated with a B.Sc. from Georgetown university in Washington DC, uSA.
Ceo Born: 1976
Nationality: Swedish citizen.
Direct or related person ownership: 75,000 class B shares and 200,000 call options on class B shares, issued by verdere S.à r.l.
Committee work: -
Georgi Ganev has been Ceo of Kinnevik since 2018. He is a board member of tele2 since 2016 and was Ceo of Dustin 2012-2017. prior to Dustin, Georgi was CMo at telenor Sweden AB between 2010-2012, Ceo of Bredbandsbolaget AB 2007-2010 and Sales & Marketing Director and product Manager at tele2 2002-2007. Georgi holds a MSc in engineering in Information technology from uppsala university.
It is the Board of Directors who is responsible for the corporate governance statement for the year 2017 included in the printed version of this document on pages 23-27 ensuring that it has been prepared in accordance with the Annual Accounts Act.
our examination of the corporate governance statement is conducted in accordance with FAR´s auditing standard Revu 16 the auditor´s examination of the corporate governance statement. this means that our examination of the corporate governance statement is different and substantially less in scope than an audit conducted in accordance with International Standards on Auditing and generally accepted auditing standards in Sweden. We believe that the examination has provided us with suffcient basis for our opinions.
A corporate governance statement has been prepared. Disclosures in accordance with chapter 6 section 6 the second paragraph points 2-6 of the Annual Accounts Act and chapter 7 section 31 the second paragraph the same law are consistent with the other parts of the annual accounts and consolidated accounts and are in accordance with the Annual Accounts Act.
Stockholm 28 March 2018
Deloitte AB
Jan Berntsson Authorized public Accountant
This is a translation of the Swedish language original. In the event of any differences between this translation and the Swedish language original, the latter shall prevail.
Digitalisation and sustainability are two of the most powerful market infuences in today's corporate landscape. The increasing speed and spread of digital technology such as big data, artifcial intelligence and Internet of things is not only changing business models but altering the way people live their lives. Similarly, it is increasingly recognised by investors that sustainability is one of the most important sources of both opportunities and risks for businesses.
At Kinnevik, we build digital consumer businesses. We believe in delivering both shareholder and social value for the long term by building well-governed companies that contribute positively to society. operating in a responsible manner is critical for building value as well as valuation, and is the key to long-term sustainable growth, development and proftability. Moreover, it preserves business integrity and protects our reputation.
In the last few years, we have spent considerable time and resources shifting the business models of our businesses towards becoming more sustainable and digital. We have also focused on identifying new investment opportunities, as evidenced by our investments in for example Betterment, Babylon and livongo, that have the potential to become leaders in terms of leveraging the opportunities of the digital era as well as in sustainability.
As an investment company, our sustainability work centres around infuencing our investee companies to implement sound values and structures for sustainable development. Companies that operate in a responsible and ethical manner will be better able to offer products and services that meet the demands of their customers, as well as to recruit the best employees, thereby outperforming their competitors in the long run.
As a long-term and responsible owner, Kinnevik needs to lead by example. Sustainability is an integral part of Kinnevik's operations and forms part of the agenda in management discussions, annual performance reviews, staff meetings and employee dialogues. As a clear example of this approach, Kinnevik has developed a structured program that continuously trains and upskills our investment team in sustainability and responsible investing. In addition, during 2017 we have allocated a portion of the investment team's short-term incentives based on the sustainability performance of their companies.
In this time of rapid change, and with the ever-increasing expectations from various stakeholders, the ability of a Board to guide their companies over the long term is ever as important. Sustainability is at the core of Kinnevik's strategy and we aim to continue developing our sustainability work and reporting to refect that commitment.
Tom Boardman Chairman of Kinnevik's Board of Directors
Wherever we operate around the world, our focus is on building digital consumer businesses that make a positive difference to people's lives. As an active owner and lead investor, we have clear expectations on our investee companies to conduct their operations in a responsible and ethical manner.
Sustainability to Kinnevik is about creating long-term shareholder and social value by building well governed companies that contribute positively to society. Consequently, our defnition of sustainability includes building sound governance, risk management and compliance structures ("GRC") in our investee companies, as well as promoting healthy social, environmental and economic systems.
the Board of Directors is responsible for Kinnevik's overall strategy, including how we approach sustainability as an integrated part of our value creation. to support the integration of sound GRC practices and our sustainability agenda into our companies, Kinnevik established a dedicated GRC function in 2014. the purpose of the GRC function is to drive and follow up the implementation of GRC and sustainability structures in Kinnevik and our investee companies. In 2016, Kinnevik also established a GRC Committee, appointed by the Board of Directors, to assist the Board in monitoring such structures at Kinnevik and at our investee companies.
Maintaining a close dialogue with our principal stakeholder groups is a central part of Kinnevik's sustainability work. the below table shows the stakeholder groups that are most important to Kinnevik and the methods we use to engage with them. the key stakeholder groups were identifed through board and management discussions as those that are most affected by our operations, as well as have a high degree of infuence over Kinnevik. The focus areas for each stakeholder group were raised when engaging with Kinnevik during the year.
| STAKEHOLDER GROUpS |
METHODS OF ENGAGEMENT |
FOCUS AREAS | RESpONSE / OUTCOME |
|---|---|---|---|
| Employees at Kinnevik and in our investee companies |
Regular communication and meetings, annual and semi annual performance reviews, annual reviews of personal objectives and compensation. |
equal opportunities, diversity, work-life balance, economic performance, business eth - ics, performance manage ment, attractive compensation structures, mission and vision, culture, work environment and safety. |
Structured on-boarding for new employees, talent man agement program, implemen tation and training of policies and procedures such as Code of Conduct, Whistleblower policy, Corporate Responsi bility policy, talent Manage ment policy and employee handbook. |
| Investors and analysts | Annual and Sustainability Report, interim reports and webcasts, website, investor and analyst meetings and road shows, press releases, Annual General Meetings. |
Sustainable economic perfor mance, solid governance, risk management and compliance structures, sound social and environmental practices. |
Continuous communication on fnancial development and sustainability work, develop ment of GRC Standards for investee companies, imple mentation and training of policies and procedures such as Code of Conduct, Corpo rate Responsibility policy and Whistleblower policy. |
| Investee companies |
Regular communication and meetings, annual assessment according to the GRC Stand ards, active representation on Boards and in committees. |
Sustainable economic perfor mance, fnancial and opera tional support, sound social and environmental structures, busi ness ethics. |
Continuous operational sup port, review and implementa tion of GRC workstreams, policies and procedures, par ticipation in fnancing rounds. |
| Authorities and regulators |
Dialogue and meetings with decision makers in Swedish Government Offces, Annual and Sustainability Report. |
Maintain dialogue on relevant policy and business community issues, upholding of good cor porate citizenship, complying with applicable laws, regula tions and standards related to sustainability. |
Implementation of policies and guidelines for corporate governance, risk manage ment, compliance and corpo rate responsibility. |
Kinnevik's material aspects were identifed through an interactive stakeholder dialogue, coupled with peer benchmarking and industry best practice.
When determining our material aspects, we have considered the key sustainability risks and opportunities for Kinnevik and our investee companies. these issues are the areas on which we believe it is important to focus, in our own operations and through our infuence with our investee companies.
Based on our analysis of the focus areas identifed through our stakeholder interactions, we consider the following aspects to be material for Kinnevik:
on the following pages we describe how we approach each material aspect.
The identifed material aspects refect our Corporate Responsibility policy, in which we outline our expectations of our investee companies with regards to sustainability, and which draws reference from international guidelines such as the un Global Compact and the oeCD Guidelines for Multinational enterprises.
this report covers the sustainability performance of Kinnevik for the period 1 January to 31 December 2017. As Kinnevik is not an operating company, the report does not include performance information on issues that are material at an investee company level.
Kinnevik aims to have board representation in all its companies and a sizeable minority shareholding. this means that, while Kinnevik can exercise some infuence over its investee companies, Kinnevik does not directly control its investee companies.
The issues identifed as relevant for investee companies relate to those organisations at Group level, and does not consider issues which may be relevant for their local operations or subsidiaries.
the focus of this report is on sustainability arrangements in place at Kinnevik, and performance relating to issues from Kinnevik's own operations. Additional case study material is provided on specifc initiatives at investee company level; further information on investee company performance can be found on the companies websites.
Kinnevik's economic performance is directly infuenced by the economic performance of our investee companies, and therefore economic performance is only covered in this report on a parent company level.
Driving an ambitious GRC and sustainability agenda in our investee companies is central in Kinnevik's role as an active owner. We believe operating in a responsible manner is the key to achieving long-term proftable growth.
For Kinnevik, sustainability is about creating long-term shareholder and social value by building well governing companies that contribute positively to society. In 2014, Kinnevik initiated the development of a structured framework to defne GRC and sustainability best practices for our companies, to measure performance and to set priorities and roadmaps. Kinnevik's Governance, Risk and Compliance ('GRC') Standards were developed based on stakeholder dialogues, peer benchmarking and industry best practice.
the GRC Standards comprise 62 standards divided into six sections and weighted according to their importance to our stakeholders, as well as their relevance to our companies' performance. An overview of the GRC Standards is provided in the table below.
Kinnevik performs a yearly assessment of all our larger investee companies, public and private, based on the GRC Standards. Larger companies are defned as those stated separately in our nAv reporting, or with a fair value exceeding SeK 100m per 31 December the previous calendar year. Following the completion of the assessment, Kinnevik scores the investee companies on their fulflment of each standard. The companies are given an aggregate total GRC score which can be tracked over time.
the GRC Standards generally stretch well beyond the legal requirements in the markets where our companies operate. As such, achieving a score of 100 percent across sections is not feasible, as our companies and the conditions under which they operate constantly change.
our public companies perform a yearly self-assessment to evaluate their fulflment of the GRC Standards. The self-assessment is compared to Kinnevik's assessment and any material gaps are addressed. the management team, together with Kinnevik's representative on the board and the GRC function, identify key risks and set priorities for the coming year. Following approval by the company's board or audit committee, the agreed sustainability agenda is implemented and followed-up by management.
private companies at an earlier stage of development generally beneft from active support on a management level to implement the GRC standards. their sustainability performance is assessed yearly by Kinnevik's GRC function together with the company's management. A roadmap is defned and adopted by the company's board, where Kinnevik is represented.
the assessment for 2017 included 18 companies, 5 public and 13 private, corresponding to ca 98% of Kinnevik's portfolio value. A key refection from this year's assessment is that most companies have made good progress in developing sound GRC organisations and structures. For example, Zalando has published a Modern Day Slavery Act Statement that shows how they work across their supply chain to protect human rights. BIMA has signed an Anti-Corruption Memorandum of understanding together with other multinational companies operating in Cambodia to fght corruption in the country. GFG has issued guidelines to its operating entities on the responsible recruitment and employment of migrant labourers.
Information security is an area where many companies are still in early stages of development and therefore tend have lower scores. With the introduction of eu's General Data protection Regulation ('GDPR'), companies must make signifcant changes to their internal processes and systems to comply with this regulation. All our investee companies that are under the scope of the GDpR have roadmaps with initiatives to comply with the regulations by 25 May 2018. other topics that are high on our agenda for next year are risks related to cyber security and supply chain. For companies that operate in high risk markets, we are working closely with the management teams to ensure adequate processes are implemented to mitigate corruption risk. the key corruption risks in Kinnevik's portfolio relate to certain emerging markets when dealing with government authorities, particularly within the supply chain.
the target for the reporting year 2018 is to improve the scores across all sections of the GRC Standards, for public and private companies.
| SECTION | EXAMpLE CONTENTS | WEIGHTING |
|---|---|---|
| Organisation and structure | • Structure of responsibilities • Agenda of the Board • Management incentives |
11% |
| Governance | • Membership and committees of the Board • Code of Conduct • Whistleblowing system |
32% |
| Risk management | • Policy and framework • Organisation |
8% |
| Compliance | • Business ethics and anti-corruption • Privacy and data protection • Anti-trust/competition policy |
20% |
| Corporate responsibility | • Supply chain compliance • Employee development, health safety and wellbeing • Human rights • Environment |
23% |
| Information security | • Business continuity | 6% |
As a responsible and active owner, Kinnevik aims to be a role model for our investee companies. Important sustainability aspects for us as an investment company includes having a clear organisation, strong policies and structured processes in place, as well as robust governance, risk management and compliance arrangements.
the basis for corporate governance in Kinnevik is Swedish legislation, the nasdaq Stockholm Rule Book for Issuers, and the regulations and recommendations issued by relevant self-regulatory bodies. Kinnevik follows the Swedish Corporate Governance Code (Swedish: Svensk kod för bolagsstyrning).
the responsibility for sustainability is split between Kinnevik's Board, GRC Committee, Risk Committee, Ceo and General Counsel. the Board is responsible for Kinnevik's overall strategy, including sustainability, and is well familiar with Kinnevik's sustainability policies and procedures.
the GRC Committee constitutes a subset of the Board of Directors and is appointed by the Board to assist in monitoring the governance structures of Kinnevik's investee companies, Kinnevik's risk management process and compliance with laws, regulations and codes of conduct. More information about Kinnevik's governance bodies and their work is available on page 23-27 in the Annual Report 2017.
Kinnevik's key sustainability policies are our Code of Conduct, Whistleblower policy and Corporate Responsibility policy. All employees and representatives of Kinnevik are expected to comply fully with the Code of Conduct. Kinnevik has an onboarding process for new employees that introduces them to the Code of Conduct, which includes anti-bribery and business ethics, and to other key policies and procedures. In addition, Kinnevik conducts mandatory annual Code of Conduct training for all employees.
As outlined in the Whistleblower policy, Kinnevik expects all employees, as well as relevant third parties who deal with the company, to come forward and voice all serious concerns about any aspect of Kinnevik's work. In the Corporate Responsibility policy, we outline Kinnevik's expectations in relation to our investee companies' sustainability performance.
A part of senior managements' compensation is linked to the sustainability performance of our investee companies.
Kinnevik's Board is responsible for internal control in accordance with the Swedish Companies Act (Swedish: Aktiebolagslagen) and with the Swedish Corporate Governance Code. Kinnevik's risk framework is outlined in the Risk Management policy. Kinnevik's management has established a Risk Committee that meets at least once every quarter to review key risks, developments since the previous meeting and the effciency of mitigating actions. The work of the Risk Committee is presented to the GRC Committee and the Audit Committee on a periodic basis.
Kinnevik's compliance framework is mainly focused on compliance with the laws and regulations that govern listed companies in Sweden, such as the nasdaq Stockholm Rule Book for Issuers, the european union Market Abuse Regulation (no 596/2014), SFSA's Guide for listed Companies (Swedish: vägledning för Börs- och MtF-bolag), and other laws and regulations relating to Kinnevik's operations and investment activities. the GRC Committee and the Audit Committee receive periodic updates on compliance status. Kinnevik conducts mandatory annual compliance training for all employees, as well as periodic deep-dives on specifc matters such as anti-corruption and supply chain.
Sustainability is a separate due diligence work stream for all Kinnevik's new investments in private companies. All potential new investments are evaluated in terms of their sustainability performance and structures, and the key risks are identifed. We use the GRC Standards as a basis for the sustainability due diligence, which is conducted through discussions and interviews with the company's management team. the sustainability due diligence includes, among other aspects, human rights screening and a corruption risk assessment. In instances where potential investments do not adhere to relevant standards, or are not considered to be susceptible to the required improvements, Kinnevik refrains from the investment.
During 2017, Kinnevik invested in consumer digital healthcare company livongo. As with all new investments, livongo was subject to sustainability due diligence to ensure the company would meet our expectations. Identifed issues were discussed with the management team and we aim to implement a sustainability roadmap for the company during 2018.
Being a fnancially strong company is necessary to create long- term value for our stakeholders, and to support our companies in achieving proftable growth in a sustainable manner.
During 2017, Kinnevik's net Asset value increased by 25 percent to SEK 90.6bn (72.4), mainly driven by strong performance in our listed e-commerce and communication assets. total investments for the year amounted to SEK 4.8bn (3.4), of which SEK 3.7bn into Com Hem. Total divestments amounted to SEK 5.3bn (0.6), of which SEK 4.1bn was attributable to Rocket Internet and SEK 1.0bn to lazada. Kinnevik ended 2017 in a net debt position of SeK 1.1bn (1.4), corresponding to a leverage of 1 (2) percent of portfolio value.
Kinnevik does not consolidate its operating subsidiaries and has a negative operating result, and is therefore not subject to corporation tax.
Kinnevik's economic value generated and distributed during 2017, SEKm
Total shareholder return is calculated on the basis of shareholders reinvesting all cash dividends, dividends in kind and mandatory share redemption proceeds into the Kinnevik share.
our greatest asset is and has always been our people and as such, attracting and retaining top talent is a key priority. Kinnevik regards diversity as a lever for value creation, and we make full use of the opportunities that arise from employing a team with different backgrounds and perspectives.
While the nature of our work changes frequently, our core values do not. Kinnevik's team members share an entrepreneurial spirit, as well as a belief in long-term business building, long-lasting partnerships, accountability, adaptability and responsible investing.
Kinnevik strongly advocates diversity and equal opportunities. This is refected in the composition of our organisation, where a total of eleven different nationalities are represented. Kinnevik's organisation comprised 37 (40) people on average during 2017, with 23 people based in the Stockholm offce and 14 people in the London offce (full-time equivalents "FTE"). The investment management organisation is mainly based in london and consisted of 11 professionals committed to the development of our existing investee companies, and to the identifcation of new potential investments. In addition, during 2017 Kinnevik employed 26 people across Finance, legal, Sustainability, Corporate Communications, Human Resources and Administration. All employees are on fulltime permanent contracts.
Age distribution of employees in 2017 (FTE)
the proportion of women employed at Kinnevik was 43 (42) percent (Fte average) for 2017. the proportion of women in Kinnevik's investment organisation was 16 (17) percent, and on the Board of Directors 30 (22) percent. over the next few years, we aim to increase the proportion of women in both the investment team and on the Board.
Age distribution of the Board of Directors in 2017 (FTE)
Kinnevik offers our employees continuous opportunities for personal growth in order to develop their professional skill set and to take increasing responsibility for value creation at Kinnevik and our companies. the small size of our organisation enables us to personalise career development and training opportunities for each employee. ongoing assessments of employees' performance and
New employee hires and employee turnover during 2017
| NEW HIRES | totAl | RAte | ||||
|---|---|---|---|---|---|---|
| Sweden | 20-29 | 30-39 | 40-49 | 50+ | ||
| Women | 0 | 2 | 0 | 0 | ||
| Men | 0 | 0 | 0 | 0 | 2 | 9% |
| uK | ||||||
| Women | 0 | 1 | 0 | 0 | ||
| Men | 1 | 0 | 0 | 0 | 2 | 14% |
| TURNOVER | totAl | RAte | ||||
| Sweden | 20-29 | 30-39 | 40-49 | 50+ | ||
| Women | 1 | 0 | 0 | 0 | ||
| Men | 0 | 2 | 0 | 1 | 4 | 17% |
| uK |
Note: New hire and turnover rate is calculated in relation to the FTE average number of employees in each region during the year.
Women 0 0 0 0 1 7% Men 0 1 0 0
success in meeting their objectives are key in order to ensure that Kinnevik offers the right personal development tools at an individual and group level. All employees participate in yearly performance reviews and have individual objectives that are reviewed twice a year.
Kinnevik added four new people to the team during 2017, and four people left Kinnevik, excluding termination due to end of fxed-term contract or retirement. We had a total new hire rate of 11 (15) percent and a turnover rate of 13 (13) percent for 2017.
Kinnevik encourages employees to take parental leave. In 2017, the average parental leave taken was 3 (26) weeks for men and 48 (36) weeks for women. this refers to parental leave that started during 2017 and includes the full number of weeks requested. the leave may therefore be completed during the following year.
the low level of sick leave, below 1 (<1) percent of total working time, highlights Kinnevik's efforts to improve our employees' health through healthcare insurance and other initiatives.
All companies have a carbon footprint. We believe it is important to track, offset and reduce Kinnevik's footprint in order to be a role model for our investee companies.
Kinnevik conducts a yearly greenhouse gas ("GHG") emissions estimate which quantifes the total greenhouse gases produced directly and indirectly by our operations. this is Kinnevik's second yearly estimate and it provides us with a tool to monitor and reduce our climate change impacts. The GHG assessment quantifes all seven Kyoto greenhouse gases where applicable and is measured in units of carbon dioxide equivalence, or Co2e.
the results of the report are summarized below, and the full Greenhouse Gas Report is available on our website www.kinnevik.com. the report includes Kinnevik AB and Kinnevik Capital ltd.
During 2017, Kinnevik generated 602 (591) tonnes of Co2e in total, corresponding to 16.1 (14.8) tonnes per full time equivalent employee.
Summary by Greenhouse Gas
| GREENHOUSE GAS | GLOBAL WARMING pOTENTIAL |
TONNES CO2E |
|---|---|---|
| Carbon dioxide (CO2) | 1 | 527 |
| Methane (CH4) | 25 | 0.029 |
| Nitrous oxide (N2O) | 298 | 2.55 |
| Other gases | 1 | 73.2 |
| TOTAL | 602 |
Kinnevik's 2017 emissions
| ACtIvIty | tonneS Co2e | ||
|---|---|---|---|
| Business travel | 572 | 95% | |
| premises | 16 | 3% | |
| Company-owned / leased vehicles | 13 | 2% | |
| Materials purchased | 2 | 0% | |
| totAl | 602 | 100% | |
Kinnevik continuously strives to reduce its carbon footprint. our most material environmental impact is business travel, consisting almost entirely of air travel, accounting for 95 (91) percent of total emissions in 2017.
the assessment has been carried out in accordance with the World Business Council for Sustainable Development and World Resources Institute's Greenhouse Gas protocol; a Corporate Accounting and Reporting Standard, including the GHG protocol Scope 2 Guidance. this protocol is considered current best practice for corporate or organisational greenhouse gas emissions reporting.
All use of company owned cars during 2017 has been included in the assessment, although they are primarily used by employees outside of work for personal purposes. Gas is subject to fringe benefts tax.
District heating and electricity in the Stockholm offce is already subject to a carbon offsetting program directly through the suppliers.
In order to take responsibility for our carbon footprint, Kinnevik offsets our emissions in full. For every tonne of carbon emission caused by Kinnevik's own operations, we offset one tonne of carbon in order to achieve net carbon neutrality. For 2017, Kinnevik offset our carbon footprint by contributing to a community-based reforestation initiative in the municipality of San Juan de limay in Nicaragua. The initiative is designed and verifed to the Plan Vivo Standard, the oldest standard for certifcation of climate protection projects in the feld of land usage. The projects have to pursue a holistic approach, fghting deforestation and poverty while focussing on reforestation.
| SCope | tonneS Co2e | |||
|---|---|---|---|---|
| 1 | Company-owned / leased vehicles | 11 | 2% | |
| 2 | power consumption and distance heating |
15 | 2% | |
| 3 | Business trips and waste disposal | 577 | 96% | |
| totAl | 602 | 100% | ||
As a signatory of the un Global Compact, Kinnevik is committed to the promotion of the universal principles on human rights, labour, environment and anti-corruption. In September 2015, the united nations introduced its 2030 Agenda for Sustainable Development supported by 17 Sustainable Development Goals (SDGs). the Agenda is a plan of action for people, planet and prosperity adopted by un General Assembly. In 2017, Kinnevik reviewed how our operations, including our infuence through investee companies, can contribute to the SDGs. Below are examples where Kinnevik has identifed opportunities and contribute.
Kinnevik invests in developing countries and thereby contributes to the mobilization of resources and to the development of these countries. BIMA, for example, offers insurance products via mobile phones in developing countries, often to people who have never had insurance before. Bayport provides unsecured credit and other fnancial services in Africa and Latin America, thereby contributing to fnancial inclusion. Read more about BIMA and Bayport on page 12 in the Annual Report, as well as in the case studies on the next page.
Scalable solutions that improve access to, and quality of, healthcare is one of Kinnevik's focus areas for new investments. In January 2016 Kinnevik made its frst investment in UK based digital healthcare service Babylon. Furthermore, in March 2017 Kinnevik invested in livongo, a uS based consumer digital health company focusing on diabetes management, one of the largest and fastest growing chronic conditions globally. Read more about Babylon and livongo on page 12 in the Annual Report, as well as in the case study about Babylon on the next page.
Kinnevik's Code of Conduct states that all employees shall have equal opportunities based on competencies, experience and performance, regardless of gender. Kinnevik also encourages all employees to take parental leave. Read more about diversity and equality in Kinnevik's team on page 35 in the Annual Report.
A key focus area in promoting the GRC Standards in our investee companies includes the adoption and implementation of a Code of Conduct containing provisions on gender equality. the GRC Standards state that investee companies should adopt an antidiscrimination policy. In addition, we actively engage with our investee companies to increase the representation of women on their boards.
According to Kinnevik's Code of Conduct, Kinnevik shall offer healthy and safe workplaces for all employees at all times. We work actively with our investee companies to implement their own Code of Conduct covering labour rights and safe working environments. Most of the large companies we invest in have implemented a supplier code of conduct that deals with decent work environment. An example related to our largest private company Global Fashion Group is included on the next page.
Kinnevik's Code of Conduct and GRC Standards states that Kinnevik and its investee companies have a zero tolerance to bribery and other forms of corruption. Read more about BIMA's partnership with the Anti-Corruption unit in Cambodia on the next page.
As evidence of Kinnevik's commitment to conducting its business to the highest ethical standards, we have adopted a Code of Conduct which all offcers and employees of Kinnevik are expected to fully comply with. The Code of Conduct includes principles on anti-bribery and business ethics, human rights, equal opportunities, treating colleagues with respect and the upholding of labour standards, among others. In addition, the GRC Standards, with which we track and promote sustainability progress in our investee companies, refect our expectations on our companies and their suppliers in these areas.
The UN Sustainable Development Goals
AnnuAl RepoRt 2017 SuStAInABIlIty RepoRt
Bayport provides fnancial solutions to formally and informally employed individuals in emerging markets. The company's operations span 9 countries across Africa and Latin America.
As a leader in emerging markets, Bayport offers its customers in Botswana, Colombia, Ghana, Mexico, Mozambique, South Africa, tanzania, uganda and Zambia unique and tailored savings, transacting, insurance and credit solutions.
Babylon is a digital healthcare service operating in the United Kingdom, Ireland and Rwanda. Combining mobile tech and artifcial intelligence with medical expertise, Babylon's mission is to make healthcare more accessible and affordable for people everywhere.
Almost half of the global population has little access to quality healthcare. yet irrespective of where we live, most of us have a mobile phone in our pocket. babylon combines the latest technology with the knowledge and experience of the best doctors to make healthcare simpler, better, and more accessible and affordable for people everywhere.
Global Fashion Group (GFG) is an online fashion destination for growth markets. GFG operates with fve branded platforms, Lamoda, Dafti, Zalora,The Iconic, and Namshi, offering over 3,000 international and local brands across 24 countries with a 1.9 billion population, addressing a fashion market estimated to be worth EUR 300bn.
GFG has issued guidelines to its operating entities on the responsible recruitment and employment of migrant labourers. Its Code of Conduct addresses employment practices, working conditions, environmental protection and compliance.
Milvik offers, under the brand BIMA, affordable and uniquely designed life and health insurance products via mobile phones. BIMA is active in 14 countries across Africa, Asia, Latin America and the Caribbean.
the largest life-insurance provider in Cambodia, BIMA, and the Anti-Corruption Unit (ACU), offcially partnered to increase transparency in business practices, signing a memorandum of understanding at ACu headquarters. In a country where corrupt practices make up everyday life, disassembling Cambodia's culture of corruption is only possible with the cooperation of the private sector.
Kinnevik's Sustainability Report refers to the calendar year 2017 and is prepared in accordance with the Global Reporting Initiative's ("GRI") guidelines for sustainability reporting, specifcally Version G4 at the Core level in addition to relevant sections of GRI G4 Sector Disclosures for Financial Services. For a description of how we identifed the Material Aspects, refer to page 31 in the Annual Report. this is Kinnevik's second Sustainability Report, and Kinnevik intends to continue this reporting on an annual basis. the Sustainability Report 2017 has been subject to a limited assurance review, see statement on page 41.
Kinnevik recognizes that the key to long term sustainable growth and proftability is ensuring we operate in a responsible manner. equally we believe that good sustainability performance is a prerequisite for good economic performance. We have allocated a portion of the short-term incentives of our investment team to be based on the GRC performance of their companies. Kinnevik has developed a structured program that continuously trains and upskills our investment team in sustainability and responsible investing.
Kinnevik conducts a yearly greenhouse gas emissions estimate which quantifes the total greenhouse gases produced directly and indirectly by our operations. this is Kinnevik's second yearly estimate and it provides us with a tool to monitor, raise awareness and reduce our climate change impacts.
For more information about our emissions, see Kinnevik's Greenhouse Gas protocol Report 2017 available on www.kinnevik.com.
the small size of our organisation enables us to personalise career development and training opportunities for each employee. ongoing assessments of employees' performance and success in meeting their objectives are key in order to ensure that Kinnevik offers the right personal development tools at an individual and group level. All employees participate in yearly performance reviews and have individual objectives that are reviewed twice a year.
During 2017, we updated our GRC Standards and introduced a framework to measure GRC performance in our companies. the GRC Committee and the Audit Committee receive periodic updates on compliance status with the material provisions of governing laws, regulations and guidelines. Kinnevik conducts mandatory annual compliance training for all employees, as well as periodic deepdives on specifc matters such as anti-corruption and supply chain.
our Code of Conduct, Whistleblower policy, talent Management policy and employee handbook set out both our commitments and expectations towards our employees in the way we do business.
| GRI INDICATOR | REpORTED (Y/N) |
COMMENT | pAGE IN AR |
|
|---|---|---|---|---|
| G4-1 | Chairman's statement about the relevance of sustainability to the organisation and the organi sation's strategy for addressing sustainability |
y | 29 | |
| G4-3 | name of the organisation | y | 42 | |
| G4-4 | primary brands, products and services | y | 5-7 | |
| G4-5 | location of the organisation's headquarters | y | 42 | |
| G4-6 | number of countries where the organisation operates, and names of countries where either the organisation has signifcant operations or that are specifcally relevant to the sustainability topics covered in the report |
y | 8-9 | |
| G4-7 | nature of ownership and legal form | y | 18-19, 42 | |
| G4-8 | Markets served | y | 5, 8-9 | |
| G4-9 | Scale of the organisation | y | 20, 35, 42 | |
| G4-10 G4-11 |
Breakdown of workforce percentage of total employees covered by collective bargaining agreements |
y y |
All employees are on full time contracts. no (zero) employees are covered by such agreements. However, freedom of |
35 |
| assembly and association is clearly stated in our Code of Conduct. | ||||
| G4-12 | organisation's supply chain | y | Kinnevik's purchases include services and products to offce operations in Stockholm and london and consultancy in the acquisition and sales processes as well as development procedures. Suppliers operate primarily in the nordic countries and the uK. |
|
| G4-13 | Signifcant changes during the reporting period regarding the organisation's size, structure, ownership or its supply chain |
y | No signifcant changes this year. | |
| G4-14 | Whether and how the precautionary principle is addressed by the organisation | y | See Kinnevik's Corporate Responsibility policy. | link |
| G4-15 | external developed economic, environmental and social charters, principles or other initiatives to which the organisation subscribes or which it endorses |
y | un Global Compact, GRI G4 Sustainability Reporting Guidelines and our Impacts. |
|
| G4-16 | Memberships of associations and national or international advocacy organisations | y | Stockholm Chamber of Commerce and Stockholm School of economics. | |
| G4-17 | Entities included in the organisation's consolidated fnancial statements or equivalent documents | y | 71-72 | |
| G4-18 | Process for defning the report content and the Aspect Boundaries | y | 30-31 | |
| G4-19 | Material Aspects identifed in the process for defning report content | y | 30-31 | |
| G4-20 | For each material Aspect, the Aspect Boundary within the organisation | y | Active ownership concerns our investee companies, and all other aspects concerns Kinnevik's own operations. |
31 |
| G4-21 | For each material Aspect, the Aspect Boundary outside the organisation | y | See above. | 31 |
| G4-22 | the effect of any restatements of information provided in previous reports | y | no restatements have been made. | |
| G4-23 | Signifcant changes from previous reporting periods in the Scope and Aspect Boundaries | y | No signifcant changes have been made. | |
| G4-24 | Stakeholder groups engaged by the organisation | y | 30 | |
| G4-25 | Basis for identifcation and selection of stakeholders with whom to engage | y | 30 | |
| G4-26 | Approach to stakeholder engagement | y | Stakeholders have not been specifcally consulted in preparation of the Sustainability Report 2017. |
30 |
| G4-27 | Key topics and concerns that have been raised through stakeholder engagement, and how the organisation has responded to those key topics and concerns |
y | 30 | |
| G4-28 G4-29 |
Reporting period for information provided Date of most recent previous report |
y y |
the Sustainability Report 2016 covers the sustainability performance of Kin nevik for the period 1 January to 31 December 2016. |
31 |
| G4-30 | Reporting cycle | y | 31 | |
| G4-31 | Contact point for questions regarding the report or its contents | y | torun litzen, Director of Corporate Communications: +46 8 562 000 83 | |
| G4-32 | the 'in accordance' option the organisation has chosen; the GRI content index for the chosen option |
y | 39 | |
| G4-33 | policy and current practice with regard to seeking external assurance for the report | y | the Sustainability Report 2017 has been subject to a limited assurance review. | |
| G4-34 | Governance structure of the organisation, including committees of the highest governance body; any committees responsible for decision-making on economic, environmental and social impacts |
y | 23-27, 33 | |
| G4-56 | organisation's values, principles, standards and norms of behaviour | y | 29, 35 | |
| G4-DMA Generic Disclosures on Management Approach eConoMIC peRFoRMAnCe |
y | 39 | ||
| G4-eC1 | Direct economic value generated and distributed | y | 34 | |
| eMISSIonS | ||||
| G4-en15 Direct greenhouse gas emissions (Scope 1) | y | Company-owned or long-term leased vehicles. | 36 | |
| G4-en16 energy indirect greenhouse gas emissions (Scope 2) | y | power consumption and district heating. | 36 | |
| G4-en17 other indirect greenhouse gas emissions (Scope 3) | y | Business trips by plane, train and taxi, offce material/paper consumption and waste from properties. |
36 | |
| eMployMent | ||||
| G4-lA1 | total number and rates of new employee hires and employee turnover by age group, gender and region |
y | 35 | |
| tRAInInG AnD eDuCAtIon | ||||
| G4-lA11 percentage of employees receiving regular performance and career development reviews, by gender and by employee category |
y | 100% of employees. | 35 | |
| DIveRSIty AnD eQuAl oppoRtunIty G4-lA12 Composition of governance bodies and breakdown of employees per employee category ac |
y | 25-27, 35 | ||
| cording to gender, age group, minority group membership, and other indicators of diversity | ||||
| InveStMentS G4-HR1 |
Total number and percentage of signifcant investment agreements and contracts that include | y | All Kinnevik's new investments in private companies are subject to a | 32-33 |
| human rights clauses or that underwent human rights screening SeCtoR SpeCIFIC InDICAtoRS: pRoDuCt ReSponSIBIlIty DISCloSuReS FoR tHe FInAnCIAl SeRvICeS SeCtoR |
sustainability due diligence process. | |||
| G4-FS10 percentage and number of companies held in the institution's portfolio with which the reporting organization has interacted on environmental or social issues |
y | All Kinnevik's larger investee companies are covered by the GRC standards. |
32 | |
| AntI-CoRRuptIon G4-So3 |
total number and percentage of operations assessed for risks related to corruption and the | y | All Kinnevik's larger investee companies are covered by the GRC | 32 |
| G4-So4 | signifcant risks identifed Communication and training on anti-corruption policies and procedures |
y | standards. All Kinnevik's larger investee companies are covered by the GRC standards. |
32-33 |
| CoMplIAnCe | ||||
| G4-So8 | Monetary value of signifcant fnes and total number of non-monetary sanctions for non compliance with laws and regulations |
y | No fnes or non-moneraty sanctions were received during 2017. |
this is the translation of the auditor's report in Swedish.
TO KINNEVIK AB (pUBL)
We have been engaged by the Board of Directors of Kinnevik AB (publ) ("Kinnevik AB") to undertake a limited assurance engagement of the Kinnevik AB Sustainability Report for the year 2017. The Company has defned the scope of the Sustainability Report in the GRI index on pages 39-40 in the Annual Report.
the Board of Directors and the executive Management are responsible for the preparation of the Sustainability Report in accordance with the applicable criteria, as explained on page 39 in the Annual Report, and are the parts of the Sustainability Reporting Guidelines (published by the Global Reporting Initiative (GRI)) which are applicable to the Sustainability Report, as well as the accounting and calculation principles that the Company has developed. this responsibility also includes the internal control relevant to the preparation of a Sustainability Report that is free from material misstatements, whether due to fraud or error.
our responsibility is to express a conclusion on the Sustainability Report based on the limited assurance procedures we have performed.
We conducted our limited assurance engagement in accordance with ISAe 3000 Assurance engagements other than Audits or Reviews of Historical Financial Information. A limited assurance engagement consists of making inquiries, primarily of persons responsible for the preparation of the Sustainability Report, and applying analytical and other limited assurance procedures. the procedures performed in a limited assurance engagement vary in nature from, and are less in extent than for, a reasonable assurance engagement conducted in accordance with IAASB's Standards on Auditing and other generally accepted auditing standards in Sweden.
The frm applies ISQC 1 (International Standard on Quality Control) and accordingly maintains a comprehensive system of quality control including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements. We are independent of Kinnevik AB in accordance with professional ethics for accountants in Sweden and have otherwise fulflled our ethical responsibilities in accordance with these requirements.
The procedures performed consequently do not enable us to obtain assurance that we would become aware of all signifcant matters that might be identifed in a reasonable assurance engagement.
Accordingly, the conclusion of the procedures performed do not express a reasonable assurance conclusion.
Our procedures are based on the criteria defned by the Board of Directors and the Executive Management as described above. We consider these criteria suitable for the preparation of the Sustainability Report.
We believe that the evidence we have obtained is suffcient and appropriate to provide a basis for our conclusion below.
Based on the limited assurance procedures we have performed, nothing has come to our attention that causes us to believe that the Sustainability Report, is not prepared, in all material respects, in accordance with the criteria defned by the Board of Directors and Executive Management.
Stockholm 28 March 2018
Deloitte AB
Jan Berntsson lennart nordqvist Authorized public Accountant expert Member of FAR
Kinnevik is an industry focused investment company with an entrepreneurial spirit. our purpose is to build digital businesses that provide more and better choice. We do this by working in partnership with talented founders and management teams to create, develop and invest in fast growing businesses in developed and emerging markets. We believe in delivering both shareholder and social value by building companies that contribute positively to society. Kinnevik was founded in 1936 by the Stenbeck, Klingspor and von Horn families.
Kinnevik is a publicly traded company and its shares are listed on nasdaq Stockholm's list for large cap companies under the ticker codes KInv A and KInv B.
Kinnevik's registered address is Skeppsbron 18, Box 2094, Se-103 13 Stockholm. the company's corporate registration number is 556047-9742.
| Five-year summary (SEK m) | 2017 | 2016 | 2015 | 2014 | 2013 |
|---|---|---|---|---|---|
| equity | 90 633 | 72 434 | 83 464 | 84 206 | 65 319 |
| equity/assets ratio, % | 97% | 97% | 98% | 98% | 97% |
| net cash/(net debt) (incl. debt unpaid investments) | -1 062 | -1 309 | 7 568 | 402 | 2 435 |
| Debt/equity ratio, multiple | 0.03 | 0.02 | 0.02 | 0.02 | 0.02 |
| net asset value | 90 633 | 72 434 | 83 517 | 84 370 | 65 527 |
| net asset value per share, SeK | 329 | 263 | 301 | 304 | 236 |
| net asset value growth | 25% | -13% | -1% | 29% | 11% |
| Kinnevik market capitalization | 76 042 | 60 223 | 72 680 | 70 727 | 82 641 |
| Market price class B share at 31 December, SeK | 276 | 219 | 262 | 255 | 298 |
| Dividend per share, SeK | 8.25 1) | 8.00 | 7.75 | 7.25 | 7.00 |
| Share redemption program per share, SeK | - | - | 18.00 | - | - |
| total shareholder return % | 31% | -6% | 5% | -12% | 125% |
| Fair value, e-commerce & Marketplaces | 42 674 | 40 829 | 40 452 | 42 854 | 20 898 |
| Share of total net asset value | 47% | 55% | 53% | 51% | 33% |
| Fair value, Communication | 40 518 | 25 956 | 30 003 | 34 904 | 34 079 |
| Share of total net asset value | 44% | 35% | 39% | 41% | 54% |
| Fair value, entertainment | 4 922 | 4 089 | 3 427 | 3 925 | 5 686 |
| Share of total net asset value | 5% | 6% | 5% | 5% | 9% |
| Fair value, Finacial Services, Healthcare and other | 3 581 | 2 927 | 2 077 | 2 557 | 2 730 |
| Share of total net asset value | 4% | 4% | 3% | 3% | 4% |
| total portfolio value (excl. net cash/net debt) | 91 695 | 73 801 | 75 959 | 84 240 | 63 393 |
| Change in fair value of fnancial assets (incl. dividends received) | 20 655 | -3 236 | 1 447 | 21 844 | 8 880 |
| Proft/loss for the year | 20 359 | -3 459 | 1 207 | 20 863 | 8 429 |
| earnings per share | 73.90 | -12.55 | 4.35 | 75.27 | 30.51 |
| Cash fow from operations (excluding dividend received) | -267 | -237 | -209 | -34 | -84 |
| Cash fow from investments in fnancial assets | -4 843 | -3 330 | -1 590 | -1 581 | -2 088 |
| Cash fow from sale of shares and other securities | 5 304 | 480 | 8 259 | 61 | 3 894 |
| Dividends received | 2 260 | 1 733 | 2 984 | 1 400 | 5 828 |
| Dividend paid | -2 201 | -7 084 | -2 011 | -1 941 | -1 803 |
| Cash fow for the year | 1 475 | -8 557 | 7 490 | -2 373 | 3 513 |
For defnitions of fnancial key ratios, refer to page 79.
1) proposed cash dividend 2018
Note: Comparable fgures 2013-2014 are not adjusted for the change in accounting to Investment Entity according to IFRS 10 from 1 January 2016
The fnancial statements were approved by the Board of Directors on 28 March 2018 and the Board of Directors and the Ceo hereby present the annual report and consolidated fnancial statements for the 2017 fnancial year. The balance sheets and the income statements for the Group and the parent Company will be presented for adoption at the Annual General Meeting on 21 May 2018.
the consolidated accounts comprise only subsidiaries that only own shares in investee companies or provide services mainly to the parent company. other subsidiaries are valued at fair value through the income statement.
The fgures in this report pertain to the full-year 2017. The fgures in parentheses pertain comparative fgures for 2016 unless otherwise stated.
Kinnevik invested approximately SeK 4.8bn in 2017, of which SeK 3.7bn for a 18.5% stake in Com Hem and the remainder was into existing portfolio companies of which the most signifcant individual investments were:
During the year Kinnevik divested shares for a total consideration of SeK 5.3bn of which SeK 4.1bn from the sale of all shares in Rocket Internet and SeK 1.0bn from the sale of the remaining shareholding in lazada.
The change in fair value of fnancial assets, including dividends received, amounted to a proft of SEK 20,655m (loss of 3,236) for the year, of which a proft of SEK 21,099m (loss of 2,920) pertained to listed holdings and a loss of SeK 444m (loss of 316) pertained to unlisted fnancial assets; refer to Note 3 for the Group for more details.
The Group's cash fow from operating activities amounted to SeK 1,993m (1,496) during the year, of which dividends received amounted to SeK 2,260m (1,733). During the year, Kinnevik signed agreements to invest SeK 4,774m in other shares and securities, while cash paid on investments amounted to SeK 4,843m. Divestments of other shares and securities contributed to the cash fow by SeK 5,304m, see note 6 for the Group for more details.
total net debt amounted to SeK 1,062m (net debt 1,309) as at 31 December 2017.
Kinnevik had available credit facilities of SeK 6,130m as at 31 December 2017 and SeK 2,850m in outstanding bonds.
Available cash and cash equivalents, including unutilized available credit facilities, totalled SeK 7,995m (6,053) at 31 December 2017. For more information about the interest-bearing borrowing, see note 10 for the Group.
Borrowing primarily occurs in SeK. During 2017, the Group did not have any signifcant cash fows in foreign currency except for dividends received and investment activities.
Kinnevik has a model for risk management, which aims to identify, control and reduce risks. The identifed risks and how they are managed are reported to the Kinnevik Board of Directors on a quarterly basis.
Kinnevik's fnancing and management of fnancial risks is centralised within Kinnevik's fnance function and is conducted on the basis of a fnance policy established by the Board of Directors. Kinnevik is exposed to fnancial risks mainly in the form of changes in the value of the stock portfolio, changes in currency and interest rates, and fnancing risks.
operational risks are managed within each company with an operating business.
Kinnevik is also exposed to political risks since the companies in which Kinnevik has invested have substantial operations in less developed markets in latin America, Sub-Saharan Africa and South east Asia.
For a more detailed description of Kinnevik's risks and uncertainties, as well as risk management, refer to note 17 for the Group.
The main fnancial items 2017 for the Parent Company were the following:
During the year, the parent Company paid shareholders' contributions to subsidiaries totaling SEK 4,721m (1,948) to fnance external investments mainly within Communication and e-Commerce, as well as group internal transfers. During 2017, the parent Company received repayment of shareholders' contribution of SeK 3,989m following the sale of fnancial assets within E-Commerce.
the parent Company's cash and cash equivalents, including shortterm investments and unutilised credit facilities, totalled SEK 7,918m (6,447) at 31 December 2017. the interest-bearing external liabilities amounted to SeK 2,855m (1,627) on the same date.
As of 31 December 2017, the number of shares in Kinnevik AB amounted to 275,466,638, of which 41,157,144 are class A shares carrying ten votes each and 234,309,494 class B shares carrying one vote each (of which 350,479 held in treasury).
During the year 424 class B shares have been delivered to a participant in a long term incentive plan.
the AGM on 8 May 2017 resolved the Board of Director's proposed treatment of unappropriated earnings and to authorize the Board to resolve on a new issue of class C shares to ensure delivery of shares to participants in Kinnevik's long-term incentive plan for 2017.
the Board of Directors is authorised to repurchase a maximum of 10% of all shares in the company during a 12 months period ending at the AGM 2018. this authorization was not utilised during 2017.
there are no convertibles or warrants in issue.
As per 31 December 2017, there was one shareholder owning shares representing more than 10% of the total number of the votes in the company; verdere S.à.r.l. with 43.8%. to the knowledge of the Board, there are no shareholder agreements or share associations in Kinnevik.
the Board proposes the following guidelines for 2018 for remuneration for the Chief Executive Offcer and the other persons in the executive management of Kinnevik (the "Senior executives"), as well as Members of the Board to the extent they are remunerated outside their Board duties.
the objectives of Kinnevik's remuneration guidelines are to offer competitive compensation to attract, motivate and retain key employees. the aim is to create incentives for the Senior executives to execute strategic plans and deliver excellent operating results and to align their incentives with the interests of the shareholders. The intention is that all Senior Executives shall have a signifcant long-term shareholding in the company.
the remuneration for the Senior executives shall consist of an annual fxed salary, short-term variable remuneration paid in cash ("STI"), the possibility to participate in long-term share or cash-based incentive plans ("LTI"), pension and other customary benefts. Kinnevik regularly carries out a remuneration benchmarking exercise to ensure that it is aware of the relevant benchmarks for key positions.
Other benefts may include a company car, housing benefts for expatriated Senior executives for a limited period of time, as well as other customary benefts. Other benefts shall not constitute a signifcant part of total remuneration. The Senior executives may also be offered health care insurance.
The Senior Executives are offered defned contribution pension solutions, with premiums amounting to a maximum of 30 percent of the fxed salary, these premiums are paid to insurance companies. Senior executives that are non-Swedish residents may be offered, if it is approved by the Board, cash based pension solutions corresponding to the premiums that otherwise would have been paid to insurance companies.
Board Members, elected at General Meetings, may in certain cases receive a fee for services performed within their respective areas of expertise, outside of their Board duties. Compensation for these services shall be paid at market terms and be approved by the Board.
In special circumstances, the Board may deviate from the above guidelines. In such a case, the Board is obligated to give account for the appearance of, and the reason for, the deviation at the following Annual General Meeting.
For further information regarding the existing guidelines and remuneration for the Senior executives paid out during 2017, please refer to Kinnevik's 2017 Annual Report, note 16 for the Group.
Kinnevik's objective is to deliver long-term shareholder value, through net asset value growth, as well as annual dividends and the purchase of own shares. the Board of Directors of Kinnevik has established the following fnancial targets that refect how Kinnevik evaluates its balance sheet, the criteria on which dividend payments to shareholders are based, as well as the return requirements placed on investee companies.
Kinnevik's objective is to generate a long term total return to our shareholders in excess of our cost of capital. We aim to deliver an annual total shareholder return of 12-15% over the business cycle.
Given the nature of Kinnevik's investments, our goal is to carry low leverage, not exceeding 10% of portfolio value.
Kinnevik aims to pay an annual dividend growing in line with dividends received from our investee companies and the cash fow generated from our investment activities.
Kinnevik will make share buybacks when our shares trade at a signifcant discount to their intrinsic value, as perceived by Kinnevik, and the company has signifcant net cash (taking into consideration its dividend expectations, net investment plan and operating cost).
| Area | Target | Outcome 2017 |
|---|---|---|
| Return | Annual tSR of 12-15% over the cycle 1) |
+31% (1 year) +21% (5 years) +11% (10 years) |
| leverage | low leverage | 1% |
| Dividend | Growing shareholder re muneration |
+3% |
1) tSR is calculated on the assumption that shareholders have reinvested all cash dividends and dividends in kind into the Kinnevik share.
on 1 February 2018, Christoph Barchewitz, Investment Director, left Kinnevik to join its portfolio company Global Fashion Group as Co-Ceo.
on 1 January 2018, Georgi Ganev joined Kinnevik as Ceo.
on 10 January 2018, tele2 and Com Hem announced that their Boards of Directors had agreed to merge the two companies to create a leading integrated operator.
on 1 February 2018, MtG announced that it had agreed to combine its nordic businesses with tDC Group, creating a fully convergent media and communications provider. the tDC Group Board later withdrew its recommendation of the combination with MtG nordics.
the Group's future development depends mainly on the performance of our investee companies together with future investments. In addition, trends in the fnancial markets can have a signifcant impact on the Group's reported earnings and position.
the Board of Directors of Millicom, tele2, Com Hem and MtG have recommended to their respective Annual General Meetings in May that ordinary dividends be approved according to the following:
| Kinnevik's part of dividend recommended to be paid from listed investee companies |
Amount (SEKm) |
|
|---|---|---|
| Millicom | uSD 2.64 per share | 794 1) |
| tele2 | SeK 4.00 per share | 610 |
| Com Hem | SeK 6.00 per share | 203 |
| MtG | SeK 12.50 per share | 169 |
| Total expected ordinary dividends | 1 776 |
1) Based on an exchange rate of 7.95 SeK/uSD.
the Kinnevik Board proposes that the Annual General Meeting approves a cash dividend of SeK 8.25 (8.00) per share, corresponding to an increase of 3%. the corresponding total dividend payment to Kinnevik shareholders will then amount to SeK 2,270m.
the following amounts in SeK are at the disposal of the parent Company's Annual General Meeting:
| Total | 41 929 437 690 |
|---|---|
| Share premium | 1 615 929 594 |
| Retained earnings | 40 313 508 096 |
the Board and the Ceo propose that the unappropriated earnings and share premium at the disposal of the Annual General Meeting be disposed of as follows:
| Total | 41 929 437 690 |
|---|---|
| Retained earnings carried forward | 38 043 548 316 |
| Share premium carried forward | 1 615 929 594 |
| Cash dividend of SeK 8.25 per share | 2 269 959 780 1) |
1) In the dividend proposal, expected allocation has been assumed in accordance with the long-term incentive program that expires on 31 March 2018. Insofar as allocation occurs prior to the Annual General Meeting, these shares will be entitled to dividend payment
| For the period 1 January-31 December (SEK m) | Note | 2017 | 2016 |
|---|---|---|---|
| Change in fair value of fnancial assets | 3 | 18 395 | -4 969 |
| Dividends received | 3 | 2 260 | 1 733 |
| Administration costs | 16 | -245 | -261 |
| Other operating income | 41 | 47 | |
| Other operating expenses | 0 | -1 | |
| Operating proft/loss | 20 451 | -3 451 | |
| Interest income and other fnancial income | 4 | 12 | 71 |
| Interest expenses and other fnancial expenses | 4 | -102 | -78 |
| Proft/loss after fnancial net | 20 361 | -3 458 | |
| Tax | 7 | -2 | -1 |
| Net proft/loss for the year | 20 359 | -3 459 | |
| Net proft/loss per share before dilution, SEK | 5 | 74.00 | -12.55 |
| Net proft/loss per share after dilution, SEK | 5 | 73.90 | -12.55 |
| Other comprehensive income for the year | |||
| Items that can be reclassifed to proft or loss | |||
| Cash fow hedging- proft/loss during the year, net after tax | 29 | 5 | |
| Total comprehensive income for the year | 20 388 | -3 454 | |
| Outstanding shares at the end of the year | 275 115 735 | 275 115 735 | |
| Average number of shares before dilution | 275 115 947 | 275 570 219 |
Average number of shares after dilution 275 464 517 275 802 078
| For the period 1 January-31 December (SEK m) | Note | 2017 | 2016 |
|---|---|---|---|
| Dividends received | 3 | 2 260 | 1 733 |
| Cash fow from operation | -201 | -250 | |
| Cash fow from operation before interest net and income taxes | 2 059 | 1 483 | |
| Interests, received | 10 | 54 | |
| Interests, paid | -76 | -41 | |
| Cash fow from operations | 1 993 | 1 496 | |
| Investments in shares and other securities | 6 | -4 843 | -3 330 |
| Sale of shares and other securities | 6 | 5 304 | 480 |
| Cash fow from investing activities | 461 | -2 850 | |
| Amortization | -1 611 | - | |
| Borrowing | 2 833 | 381 | |
| Repurchase of own shares | - | -500 | |
| Redemption program and dividend paid to equity holders of the Parent Company | -2 201 | -7 084 | |
| Cash fow from fnancing activities | -979 | -7 203 | |
| Cash fow for the year | 1 475 | -8 557 | |
| Short term investments and cash, opening balance | 323 | 8 880 | |
| Short term investments and cash, closing balance | 1 798 | 323 |
| 31 December (SEK m) | Note | 2017 | 2016 |
|---|---|---|---|
| ASSETS | |||
| Fixed assets | |||
| Financial assets held at fair value through proft or loss | 2 | 91 717 | 73 827 |
| Tangible fxed assets | 58 | 63 | |
| Other fxed assets | 3 | 3 | |
| Total fxed assets | 91 778 | 73 893 | |
| Current assets | |||
| Other current assets | 46 | 103 | |
| Short-term investments | 1 750 | - | |
| Cash and cash equivalents | 8 | 48 | 323 |
| Total current assets | 1 844 | 426 | |
| TOTAL ASSETS | 93 622 | 74 319 | |
| SHAREHOLDERS' EQUITY AND LIABILITIES | |||
| Shareholders' equity | 9 | ||
| Share capital | 27 | 27 | |
| Other contributed capital | 8 840 | 8 840 | |
| Reserves | - | -29 | |
| Retained earnings including net proft/loss for the year | 81 766 | 63 596 | |
| Total shareholders' equity | 90 633 | 72 434 | |
| Long-term liabilities | |||
| Interest-bearing loans | 10 | 2 833 | 10 |
| Provisions for pensions | 30 | 31 | |
| Other liabilities | 11 | 0 | 5 |
| Total long-term liabilities | 2 863 | 46 | |
| Short-term liabilities | |||
| Interest-bearing loans | 10 | - | 1 600 |
| Other liabilities | 11 | 126 | 239 |
| Total short-term liabilities | 126 | 1 839 | |
| TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES | 93 622 | 74 319 |
| Share capital |
Other contributed capital |
Hedging reserve |
Retained earnings including net result for the year |
Total share holders' equity |
|
|---|---|---|---|---|---|
| Opening balance 1 January 2016 | 28 | 8 840 | -34 | 74 630 | 83 464 |
| Loss for the year | -3 459 | -3 459 | |||
| Other comprehensive income | 5 | 5 | |||
| Total comprehensive income for the year | 0 | 0 | 5 | - 3 459 | -3 454 |
| Transactions with shareholders | |||||
| Effect of employee share saving programme | 8 | 8 | |||
| Cash dividend and redemption program2) | -7 084 | -7 084 | |||
| Repurchase of own shares | -1 | -499 | -500 | ||
| Closing balance 31 December 2016 | 27 | 8 840 | -29 | 63 596 | 72 434 |
| Proft for the year | 20 359 | 20 359 | |||
| Other comprehensive income | 29 | 29 | |||
| Total comprehensive income for the year | 0 | 0 | 29 | 20 359 | 20 388 |
| Transactions with shareholders | |||||
| Effect of employee share saving programme | 12 | 12 | |||
| Cash dividend 2) | -2 201 | -2 201 | |||
| Closing balance 31 December 2017 | 27 | 8 840 | 0 | 81 766 | 90 633 |
1) The Annual General Meeting 2016, resolved in favor of paying an ordinary cash dividend of SEK 7.75 per share and a share redemption program of 18.00 SEK per share
2) The Annual General Meeting 2017, resolved in favor of paying an ordinary cash dividend of SEK 8.00 per share
The consolidated accounts have been prepared in accordance with International Financial Reporting Standards (IFRS). Since the Parent Company is a company that is active in the EU, only EUapproved IFRS are applied. The consolidated accounts have also been prepared in accordance with Swedish law, with application of the Swedish Financial Reporting Board's recommendation RFR 1 Supplementary accounting regulations for Groups. The Parent Company's annual accounts have been prepared in accordance with Swedish law, and with application of the Swedish Financial Reporting Board's recommendation RFR 2 Reporting for legal entities. This means that the IFRS valuation and disclosure rules are applied with the deviations reported in the Parent Company's accounting principles.
To provide a better representation of Kinnevik's fnancial position and performance Kinnevik applies Investment Entity accounting according to IFRS 10. This means that the operating subsidiaries are valued at fair value through proft and loss instead of being consolidated from.
The amendments require an entity to provide disclosures that enable users of fnancial statements to evaluate changes in liabilities arising from fnancing activities, including both cash and non-cash changes. The Group has applied these amendments for the frst time in the fnancial statements for 2017. A reconciliation between the opening and closing balance of these items is provided in note 6. The group has not disclosed comparative information for the prior periods.
Kinnevik believes that the Company meets the criteria to qualify as an Investment Entity and the following key considerations were observed in conjunction with the assessment:
A subsidiary is a company which the parent company, directly or indirectly, controls or exercises a controlling infuence over. An investor has a controlling infuence over the investee company when it is exposed to, or has the right to, dividends or other returns resulting from its interest in the investee company and has the ability to infuence those returns through its controlling infuence over the investee company.
An Investment Entity shall not consolidate its holdings in subsidiaries or apply IFRS 3 Business Combinations when they reach controlling infuence except for subsidiaries performing services connected to the Investment Entity's investment activity. Instead, subsidiaries are valued at fair value through proft and loss in accordance with IAS 39 Financial instruments: Recognition and Measurement.
An associated company is an entity over which the parent company has signifcant infuence, through the ability to participate in decisions concerning the business' fnancial and operational strategies, but not a controlling infuence or joint controlling infuence over these strategies. A holding of 20-50% of the voting power (directly or through subsidiaries) indicates signifcant infuence. Kinnevik is an Investment Entity. In accordance with IAS 28 Investments in Associates and Joint Ventures, associated companies are valued at fair value through proft and loss in accordance with IAS 39 Financial Instruments: Recognition and Measurement.
IFRS 9 Financial Instruments replaces IAS 39 Financial Instruments: Recognition and Measurement and introduce requirements for the classifcation and measurement, impairment, derecognition and requirements for general hedge accounting. Classifcation and measurement under IFRS 9 is based on the entity's business model for managing the fnancial asset and the characteristics of the contractual cash fows of the asset. Based on Kinnevik's analysis performed during the year Kinnevik does not anticipate, apart from providing more extensive disclosures on the Group's revenue transactions, that the application of IFRS 9 will have a signifcant impact on the fnancial position and/or fnancial performance of the Group.
IFRS 15 replaces IAS 18 Revenue, IAS 11 Construction Contracts and the related interpretations. The new standard established a single comprehensive model for entities to use in accounting for revenues (5-step approach) based on when the control of goods or services is transferred to the customer. The core principle of IFRS 15 is that an entity should recognise revenue to depict the transfer of promised goods or services to customers in an amount that refects the consideration to which the entity expects to be entitled in exchange for those goods or services. Based on Kinnevik's analysis performed during the year Kinnevik does not anticipate that the application of IFRS 15 will have a signifcant impact on the fnancial position and/or fnancial performance of the Group.
IFRS 16 Leases will replace IAS 17 Leases. IFRS 16 introduces a "right of use model" which implicates that lessees recognise assets and liabilities for all leases unless the lease term is 12 months or less or the underlying asset has a low value. In the Income Statement depreciations are done on the asset and interest costs against debt. The standard includes more disclosure requirements than the current standard. For lessors there is no signifcant difference between reporting as per IFRS 16 compared to IAS 17. IFRS 16 applies to annual reporting periods beginning on 1 January 2019. Kinnevik 's assessment is that IFRS 16 will not have any signifcant effect on Kinnevik's fnancial statements.
An operating segment is a component of an entity that engages in business activities from which it may earn revenues and incur expenses, whose operating results are reviewed regularly by the entity's chief operating decision maker and for which stand-alone fnancial information is available. The chief operating decision maker is the function that assesses the performance of the operating segment and makes decisions about resource allocation. Kinnevik considers its chief operating decision maker to be the CEO. In the regular internal reporting to the CEO, results are reported for the investment company as a whole. The CEO does not regularly review the results on a lower level to make decisions about allocation of resources and assess the performance of different parts of the investment company. The investment company is therefore considered one single operating segment.
The consolidated fnancial statements comprise the fnancial statements of the Group as of 31 December each year. The fnancial statements of subsidiaries are prepared for the same reporting year as the Parent Company, using consistent accounting policies.
The consolidated fnancial statements have been prepared on a historical cost basis, except for investments in derivative fnancial instruments and fnancial assets valued at fair value through proft or loss. The consolidated statements are presented in Swedish kronor (SEK) and all values are rounded to the nearest million except when otherwise indicated.
The consolidated fnancial statements include the Parent Company and subsidiaries that serve in a supporting function to the Parent Company while subsidiaries and associated companies that are investments (investee companies) are not consolidated, but are stated at fair value. Consolidated subsidiaries are consolidated from the date on which control is transferred to the Group and cease to be consolidated from the date on which control is transferred out of the Group. Where control of a subsidiary ceases, its results are only included for the part of the reporting year during which the Group had control over the subsidiary.
The consolidated accounts are prepared using the purchase method. The difference between the acquisition value of shares in a subsidiary, excluding the transaction costs which are recognised directly through the income statement, and the fair value of identifable assets and liabilities of that subsidiary at the time of acquisition is reported as goodwill.
Intercompany transactions, balance sheet items and unrealized gains on transactions between companies are eliminated. Unrealized losses are also eliminated, unless the transaction evidences the need to write down the transferred asset.
The functional and presentation currency of the Parent Company and its Swedish subsidiaries is Swedish kronor (SEK). Transactions in foreign currencies are initially recorded in the functional currency exchange rate at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency rate of exchange at the balance sheet date. Realized and unrealized exchange gains/losses on receivables and liabilities of an operating nature are reported in operating income, while exchange rate differences on fnancial assets and liabilities in foreign currencies are reported among fnancial items.
As at the reporting date, the assets and liabilities of subsidiaries
that have not the same functional currency as the Group (SEK) are translated at the rate of exchange at the balance sheet date. Their income statements are translated at the average exchange rates for the year. The exchange differences arising on the translation are taken in other comprehensive income and as a separate component of equity. On disposal of a foreign entity, the deferred cumulative amount recognized in equity relating to that particular foreign operation is recognized in the income statement through Other comprehensive income.
Long-term monetary balances between the Parent Company and subsidiaries may be deemed to represent an extension or a contraction of the Parent Company's net investment in the subsidiary. Foreign currency differences arising on such balances are therefore charged as Other comprehensive income as a translation difference.
Tangible assets are recognized at cost less deduction of accumulated depreciation and any impairment. Depreciation is calculated on a straight-line schedule based on the acquisition value of the asset and its estimated useful life. The assets residual values, useful lives and methods are reviewed, and adjusted if appropriate, at each fnancial year-end.
Financial assets in Kinnevik's Statement of Financial Position includes Financial assets accounted to fair value through proft or loss, Trade receivables, Other current assets, and Cash and cash equivalents. On the liability side, it includes Interest-bearing loans, Trade payables and partly Other payables.
A fnancial asset or fnancial liability is recognized in the balance sheet when the Company becomes a party to the instrument's contractual terms. Accounts receivable are recognized when the invoice is sent. A liability is recognized when the counterparty has performed and there is a contractual obligation to pay, even if the invoice has not yet been sent.
A fnancial asset is derecognized from the balance sheet when the rights in the contract are realized, expired or the Company loses control over them. The same applies for a portion of a fnancial asset. A fnancial liability is derecognized from the balance sheet when the obligation in the contract is met or in some other manner is extinguished. The same applies for a portion of a fnancial liability.
Acquisition and divestment of fnancial assets are reported on the transaction date, which is the date on which the Company commits to acquire or divest the assets.
Financial instruments are allocated to different categories. A fnancial instrument is classifed upon initial recognition based on the purpose for which it was acquired. The classifcation determines how the fnancial instrument is measured after initial recognition.
Financial instruments allocated to Financial assets accounted to fair value through proft and loss, are initially recognized at fair value (excluding transaction costs). Other fnancial instruments are initially recognized at cost, which corresponds to the instrument's fair value (including transaction costs. Measurement after initial recognition is described under each category below.
Financial Assets valued at fair value through proft and loss
Financial assets held at fair value through proft or loss are continuously measured at fair value and value changes are reported in the Income Statement.
This category has two subcategories: Financial assets that are initially placed in this category ("Fair value option") and held-fortrading fnancial assets. All of Kinnevik's fnancial assets in this category have been allocated to the frst of the subcategories and includes fnancial assets that are managed and measured on the basis of fair values in accordance with the risk management and investment strategies. Kinnevik does not have any held-for-trading fnancial assets.
Loan receivables and other receivables, including cash and cash equivalents, are non-derivative fnancial assets with defned or defnable payments and defned maturities that are not listed on an active market. Loan receivables and other receivables are valued at amortized cost.
Trade receivables generally have 30-90 day terms.
Kinnevik may occasionally invest in derivatives with the purpose to hedge certain cash fows. One example is when Kinnevik invests in interest rate swaps to hedge the interest rate risk relating to the bond fnancings. The derivatives are categorized as cash fow hedging according to IAS 39 and fulflls the criteria for hedge accounting. The derivatives are reported initially and continuously at fair value in the Statement of Financial Position. Changes in the value of the derivatives are reported as Other Comprehensive Income and are reversed to the income statement in pace with effect of the hedge cash fow on earnings. Any ineffective portion of the change in value is reported directly in the income statement.
Financial liabilities not held for trading are measured at accrued acquisition value, which is determined based on the effective interest rate calculated when the liability was assumed. This means that surplus and defcit values as well as direct costs in conjunction with assuming of loans are distributed over the term of the liability.
Long-term liabilities have an expected term of exceeding one year, while current liabilities have a term of less than one year. Trade payables have short expected term and are valued at nominal value.
IFRS 13 defnes fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
The fair value of fnancial instruments traded on an active market is based on the market prices listed on the closing date. The listed market price used for the Group's fnancial assets is the fnal bid price. For companies with two classes of shares the market price for the most liquid share class is used.
When establishing the fair value of other fnancial instruments, methods that in every individual case are assumed to provide the best estimation of fair value have been used. For assets and liabilities maturing within one year, a nominal value adjusted for interest payments and premiums is assumed to provide a good approximation to fair value.
Kinnevik's unlisted holdings are valued using IFRS 13, whereby a collective assessment is made to establish the valuation method that is most suitable for each individual holding. Firstly, it is considered whether any recent transactions have been made at arm's length in the companies. For new share issues, consideration is taken to if the newly issued shares have preferential rights, such as senior liquidation preference to the company's assets than earlier issued shares if the company is being liquidated or sold. For companies where no or few recent arm's length transactions have been performed, a valuation is conducted by applying relevant multiples to the company's historical and forecast key fgures, such as sales, proft, equity, or a valuation based on future cash fows. When performing a valuation based on multiples, consideration is given to potential adjustments due to, for example, difference in size, historic growth and geographic market between the current company and the group of comparable companies.
Measuring Kinnevik's unlisted holdings at fair value is performed by the fnancial department and based on fnancial information reported from each holding. The correctness of the fnancial information received is ensured through continuous contacts with management of each holding as well as monthly reviews of the accounts. Prior to decisions being made about the valuation method to be applied for each holding, and the most suitable peers with which to compare the holding, the fnancial department obtains information and views from the investment team, as well as external sources of information. Information and opinions on applicable methods and groups of comparable companies are also obtained periodically from well-renowned, valuation companies in the market. The results from the valuation is discussed frstly with the CFO and the CEO, following which a draft is sent to the Audit Committee, who analyze and discuss the outcome before it is approved at a meeting attended by the company's external auditors.
Information is provided in Note 2 for the Group per class of fnancial instruments that are measured at fair value through proft or loss, distributed in the three levels stated below:
The Group has defned beneft plans for some former employees within the Parent Company only. The yearly expenses for these defned beneft plans as well as the premium-based pension benefts are reported in Proft or Loss.
Kinnevik has share-saving programs for which the fair value, calculated on the date of allotment, of the allotted share-based instruments is expensed over the vesting period and is recognized directly in equity. Instrument issued within the Group's sharesavings program consists of share rights. Kinnevik classifes the share-related remuneration programs as transactions that will be regulated with equity instrument. The fair value of the share rights consists of the market price on each allocation occasion. The cost is based on the Group's assessment of the number of shares that will be allotted. A new assessment of the anticipated number of allocated shares is performed at year-end. Fair value is restated on every balance-sheet date, to refect calculations of social security costs expensed continuously over the vesting period in the various companies and programs.
In 2017 Kinnevik adopted a long-term cash based incentive program where synthetic option were issued to employees. The options were subscribed to at fair market value with a subsidy paid by Kinnevik of 50%. The cost for the subsidy, except for social costs, is accounted for over three years while the social cost is accounted for directly when it is paid. All costs are included in share-based remuneration under personnel costs. The options are continuously evaluated to fair market value and any value increase is included in share-based remuneration under personnel costs and as debt in the balance sheet.
Provisions are reported when the Group has a legal or contractual obligation to fulfll the obligation, when it is likely that a payment or some other form of compensation is required to settle the undertaking and a reliable estimate of the amount can be made.
Rendering of services - Revenue from the sale of services is recognized at the time the service is rendered to the customer, after deductions for discounts.
Interest - Revenue is recognized as the interest accrues to the net carrying amount of the fnancial assets.
Dividends received - Dividends received are recognized when the shareholders' right to receive the payment is assessed as certain.
The total tax on the year's income consists of current and deferred tax. Taxes are stated in the income statement except when the underlying transaction is charged to other comprehensive income or directly against equity, in which case the related tax effect is also stated in equity. Current tax expense is the tax that is to be paid or received for the year in question, plus correction of tax expense for earlier periods. Deferred tax is calculated on the basis of the temporary differences between the book values of assets and liabilities and their value for tax purposes. The amounts are calculated on the basis of how these differences can be expected to be evened out and using the tax rates and rules in effect or announced as of the closing date. The deferred tax asset component of deductible temporary differences and tax loss carry forwards is only recorded in so far as it is likely that these will result in a lower tax payment in the future.
Cash dividends to shareholders are recorded in the accounting period the dividend is approved.
Leases are classifed in the consolidated accounts as fnancial leases or operating leases. Kinnevik only has leases classifed as operating leases, mainly leasing of offce premises. For operating leases, the rental expense is reported in the lessee's accounts distributed equally over the period during which the asset is used, even if the payments are made according to some other schedule.
The cash-fow statements for the Group and for the Parent company are prepared using the indirect method. For purposes of the Parent Company and the consolidated cash-fow statements, the Group include cash and investments with original duration of maximum three months among cash and bank. The book value of these items corresponds to fair value.
The preparation of the annual fnancial statements and consolidated fnancial statements includes a number of estimates and assumptions. The application of these estimates and assumptions affects the reporting and disclosures. Accounting policies that require more signifcant judgments by the Board and the management in the application of IFRS, and assumptions and estimations in matters that are inherently uncertain, are summarized below.
| Matter | Estimates and assumptions |
See Note |
|---|---|---|
| Valuation of unlisted holdings |
Appropriate valuation method, peer group, future revenue and proft margins |
Note 2 |
| Environmental cases | Future decisions from County administrative board |
Note 14 |
| Deferred tax losses | Judgment of possibility to use deferred tax losses against future profts |
Note 7 |
| 2017 | Fair value through proft or loss |
Loans and receivables |
Derivatives used in hedge accounting |
Financial liabilities |
Total book value |
Fair value |
|---|---|---|---|---|---|---|
| Financial assets accounted at fair value through proft and loss |
91 717 | - | - | - | 91 717 | 91 717 |
| Other current assets | - | 46 | - | - | 46 | 46 |
| Short term investments | 1 750 | - | - | - | 1 750 | 1 750 |
| Cash and cash equivalents | - | 48 | - | - | 48 | 48 |
| Total fnancial assets | 93 467 | 94 | - | - | 93 561 | 93 561 |
| Interest-bearing loans | - | - | - | 2 833 | 2 833 | 2 833 |
| Trade payables | - | - | - | 4 | 4 | 4 |
| Other payables | - | - | 0 | 122 | 122 | 122 |
| Total fnancial liabilities | - | - | 0 | 2 959 | 2 959 | 2 959 |
| 2016 | Fair value through proft or loss |
Loans and receivables |
Derivatives used in hedge accounting |
Financial liabilities |
Total book value |
Fair value |
|---|---|---|---|---|---|---|
| Financial assets accounted at fair value through proft and loss |
73 827 | - | - | - | 73 827 | 73 827 |
| Other current assets | - | 103 | - | - | 103 | 103 |
| Cash and cash equivalents | - | 323 | - | - | 323 | 323 |
| Total fnancial assets | 73 827 | 426 | - | - | 74 253 | 74 253 |
| Interest-bearing loans | - | - | - | 1 610 | 1 610 | 1 610 |
| Trade payables | - | - | - | 4 | 4 | 4 |
| Other payables | - | - | 19 | 225 | 244 | 244 |
| Total fnancial liabilities | - | - | 19 | 1 839 | 1 858 | 1 858 |
The table below indicates how fair value is measured for Kinnevik's fnancial assets and liabilities. The fnancial instruments are categorized on three levels, depending on how the fair value is measured:
Level 1: Fair value established based on listed prices in an active market for the same instrument
Level 3: Fair value established using valuation techniques, with signifcant input from data that is not observable in the market
| Level 1 | Level 2 | Level 3 | 2017 Total |
Level 1 | Level 2 | Level 3 | 2016 Total |
|
|---|---|---|---|---|---|---|---|---|
| Black Earth Farming | - | - | - | - | 308 | - | - | 308 |
| Com Hem | 4 226 | 4 226 | - | - | - | - | ||
| Millicom | 20 942 | - | - | 20 942 | 14 790 | - | - | 14 790 |
| MtG | 4 645 | - | - | 4 645 | 3 650 | - | - | 3 650 |
| Qliro Group | 767 | - | - | 767 | 367 | - | - | 367 |
| Rocket Internet | - | - | - | - | 3 990 | - | - | 3 990 |
| SDS | 8 | - | - | 8 | - | - | - | - |
| Seamless | - | - | - | - | 20 | - | - | 20 |
| tele2 | 15 350 | - | - | 15 350 | 11 166 | - | - | 11 166 |
| Zalando | 34 097 | - | - | 34 097 | 27 245 | - | - | 27 245 |
| Total Listed Assets | 80 035 | - | - | 80 035 | 61 536 | - | - | 61 536 |
| Babylon | - | - | 375 | 375 | - | - | 154 | 154 |
| Bayport | - | - | 1 082 | 1 082 | - | - | 1 201 | 1 201 |
| Betterment | - | - | 1 064 | 1 064 | - | - | 590 | 590 |
| Global Fashion Group | - | - | 5 239 | 5 239 | - | - | 5 641 | 5 641 |
| Home24 | - | - | 218 | 218 | - | - | 94 | 94 |
| Lazada | - | - | - | - | - | - | 706 | 706 |
| livongo | - | - | 105 | 105 | - | - | - | - |
| Milvik/BIMA | - | - | 806 | 806 | - | - | 464 | 464 |
| Quikr | - | - | 1 358 | 1 358 | - | - | 1 535 | 1 535 |
| Saltside | - | - | 195 | 195 | - | - | 200 | 200 |
| Westwing | - | - | 479 | 479 | - | - | 429 | 429 |
| Other | - | - | 761 | 761 | - | - | 1 277 | 1 277 |
| Total Unlisted Assets | - | - | 11 682 | 11 682 | - | - | 12 291 | 12 291 |
| Short term investments | 1 750 | - | - | 1 750 | - | - | - | - |
| Total Financial Assets measured at Fair Value through Proft or Loss |
81 785 | - | 11 682 | 93 467 | 61 536 | - | 12 291 | 73 827 |
Level 2: Fair value established based on valuation techniques with observable market data, either directly (as a price) or indirectly (derived from a price) and not included in Level 1
| 2017 | 2016 | |
|---|---|---|
| Opening balance 1 January | 12 291 | 10 692 |
| Investments | 1 023 | 2 501 |
| Disposals / Exit proceeds | -1 188 | -556 |
| Change in fair value | -444 | -346 |
| Closing balance, 31 December | 11 682 | 12 291 |
| Company | valuation method | valuation assumptions |
|---|---|---|
| Global Fashion Group |
The valuation is based on a sum-of-the-parts method using sales multiples for each region applying in dividual regional discounts to a group of listed and proftable developed market fashion e-commerce peers (Zalando, Asos and Yoox Net-a-Porter Group). The implied average multiple corresponds to a 45% discount on an aggregated level. The applied discounts refect differences in growth and proft ability as well as emerging market exposure referenced from a broader set of listed emerging market e-commerce companies. On a fully diluted basis GFG is valued at EUR 1.6bn. The valuation consid ers preferential rights in case of a liquidation or sale of the company. |
Last 12 months sales (ending 30 September 2017) Multiple: 1.3x |
| Home24 | The valuation is based on the average sales multiple of a group of comparable companies (includ ing Asos, Wayfair and Maison du Monde), adjusted with a 40% discount on an aggregated level to adjust for growth and proftability. On a fully diluted basis Home24 is valued at EUR 296m. The valuation considers preferential rights in case of a liquidation or sale of the company and results in Kinnevik's 17% stake in Home24 being valued at SEK 218m. |
Last 12 months sales (ending 30 September 2017) Multiple: 1.1x |
| Westwing | The valuation is based on the average sales multiple of a group of comparable companies (includ ing Asos, Wayfair and Maison du Monde). The average sales multiple of the peer group has been reduced by 30% due to factors such as growth and proftability. On a fully diluted basis Westwing is valued at EUR 288m. The valuation considers preferential rights in case of a liquidation or sale of the company and results in Kinnevik's 17% stake, together with warrants worth SEK 86m, being valued at SEK 479m. |
Last 12 months sales (ending 30 September 2017) Multiple: 1.3x |
| Quikr | The fair value of Kinnevik's 18% shareholding in Quikr valued at SEK 1.4bn is valued based on dis counted cash fows valuing Quikr at USD 935m on a fully diluted basis. |
Average WACC: 19% |
| Saltside | The valuation is based on discounted cash fows valuing Kinnevik's 61% shareholding to SEK 195m. | Average WACC 23% |
| Bayport | The valuation is based on the latest funding round in September 2017. The transaction values all shares in Bayport at USD 608m on a fully converted and diluted basis. |
|
| Betterment | The valuation is based on the latest funding round in July 2017. The transaction values all shares in Betterment at USD 800m on a fully diluted basis. |
|
| Milvik/BIMA | The valuation is based on the latest funding round in December 2017. The transaction values all shares in BIMA at approximately USD 290m. |
|
| Babylon | The valuation is based on the latest funding round in April 2017. | |
| livongo | The valuation is based on the latest funding round in March 2017. |
For the companies in the table above that are valued based on multiples (i.e. Global Fashion Group, Home24 and Westwing), an increase in the multiple by 10% would have increased estimated fair value by SEK 461m. Similarly, a decrease in the multiple by 10% would have decreased estimated fair value by SEK 401m. For the companies in the table above that are valued based on discounted cash fows (i.e. Quikr and Saltside), a decrease in the WACC by 2 percentage points would have increased estimated fair value by SEK 326m. Similarly, an increase by 2 percentage points would have decreased estimated fair value by SEK 225m.
For the duration of interest bearing loans refer to Note 10. Of other fnancial liabilities the major part will fall due within one to six months.
On 31 December 2017, Kinnevik had three derivative outstanding; three interest rate swaps with the purpose to create a cash fow hedge for the part of the bonds, issued in March 2017 and May 2017, where Kinnevik is paying foating interest rates. The nominal amounts of the swaps were SEK 2,350m (1,000m). Also refer to Note 10 for the Group. For SEK 1,000m and SEK 400m the fxed rates that are paid in the swaps are 1.495% and 1.361% and they expire in March 2022. For SEK 950m the fxed rate that is paid in the swap is 0.665% and it expires in May 2020. The derivative had a negative market value of SEK 0.3m (negative SEK 19m) at year-end. The derivatives are marked to market based on discounted cash fows with observable market data. The derivatives are covered by ISDA agreement.
Maturity structure for undiscounted, contracted non-interest-bearing/interest-bearing receivables and liabilities along with future interest payments accruing therewith. The interest-bearing liabilities maturing in 2018 will be refnanced during the year by new loans or by utilisation of existing unutilized credit facilities.
| 2018 | 2019 | 2020 | 2021 | Later | Total | |
|---|---|---|---|---|---|---|
| Non-interest-bearing receivables | 46 | - | - | - | - | 46 |
| Interest-bearing receivables | 11 | 11 | 9 | 8 | 2 | 41 |
| Non-interest-bearing liabilities | -126 | - | - | - | - | -126 |
| Interest-bearing liabilities | -46 | -46 | -1 487 | -31 | -1 429 | -3 040 |
| Total as per 31 December 2017 | -116 | -36 | -1 478 | -22 | -1 427 | -3 079 |
| 2017 | 2018 | 2019 | 2020 | Later | Total | |
| Non-interest-bearing receivables | 103 | - | - | - | - | 103 |
| Interest-bearing receivables | 91 | - | - | - | - | 91 |
| Non-interest-bearing liabilities | -244 | - | - | - | - | -244 |
| Interest-bearing liabilities | -1 683 | -2 | -2 | -2 | -2 | -1 691 |
| Total as per 31 December 2016 | -1 733 | -2 | -2 | -2 | -2 | -1 741 |
| Listed assets |
Unlisted assets |
Total | |
|---|---|---|---|
| Opening balance, 1 January 2016 | 65 268 | 10 692 | 75 960 |
| Investments | 898 | 2 501 | 3 399 |
| Change in fair value | -4 623 | -346 | -4 969 |
| Disposals | -7 | -556 | -563 |
| Closing balance, 31 December 2016 | 61 536 | 12 291 | 73 827 |
| Investments | 3 751 | 1 023 | 4 774 |
| Change in fair value | 18 839 | -444 | 18 395 |
| Disposals | -4 091 | -1 188 | -5 279 |
| Closing balance, 31 December 2017 | 80 035 | 11 682 | 91 717 |
| 2017 | 2016 | |
|---|---|---|
| Com Hem | 3 730 | - |
| tele2 | - | 898 |
| SDS | 21 | - |
| Total Listed assets | 3 751 | 898 |
| Babylon | 144 | 164 |
| Betterment | 527 | 538 |
| BIMA | 106 | - |
| Global Fashion Group | - | 1 503 |
| Home24 | 38 | 27 |
| linio | - | 115 |
| livongo | 113 | - |
| Westwing | - | 58 |
| Other | 95 | 96 |
| Total Unlisted assets | 1 023 | 2 501 |
| Total Financial assets | 4 774 | 3 399 |
| 2017 | 2016 | |
|---|---|---|
| Rocket Internet | -4 071 | - |
| Seamless | -20 | -7 |
| Total Listed assets | -4 091 | -7 |
| Lazada | -967 | -415 |
| Glossybox | -104 | - |
| Other | -118 | -141 |
| Total Unlisted assets | -1 189 | -556 |
| Totalt Financial assets | -5 280 | -563 |
| Dividends received |
Change in fair value |
2017 Total |
Dividends received |
Change in fair value |
2016 Total |
|
|---|---|---|---|---|---|---|
| Black Earth Farming | 350 | -309 | 41 | - | 100 | 100 |
| Com Hem | 68 | 496 | 564 | |||
| Millicom | 883 | 6 152 | 7 035 | 823 | -3 689 | -2 866 |
| MtG | 162 | 995 | 1 157 | 155 | 711 | 866 |
| Qliro Group | - | 401 | 401 | - | - 147 | - 147 |
| Rocket Internet | - | 81 | 81 | - | -1 637 | -1 637 |
| Seamless | - | 1 | 1 | - | - 7 | - 7 |
| SDS | - | -13 | -13 | |||
| tele2 | 797 | 4 184 | 4 981 | 725 | -1 255 | - 530 |
| Zalando | - | 6 851 | 6 851 | - | 1 302 | 1 302 |
| Total Listed assets | 2 260 | 18 839 | 21 099 | 1 703 | -4 623 | -2 920 |
| Babylon | - | 77 | 77 | - | - 10 | - 10 |
| Bayport | - | -119 | -119 | - | - 77 | - 77 |
| Betterment | - | -53 | -53 | - | 52 | 52 |
| Global Fashion Group | - | -402 | -402 | - | 71 | 71 |
| Home24 | - | 86 | 86 | - | - 734 | - 734 |
| Lazada | - | 261 | 261 | - | 601 | 601 |
| livongo | - | -8 | -8 | - | - | - |
| Milvik/BIMA | - | 298 | 298 | - | 113 | 113 |
| Quikr | - | -177 | -177 | - | 16 | 16 |
| Westwing | - | 50 | 50 | - | - 16 | - 16 |
| Other | - | -457 | -457 | 30 | - 362 | - 332 |
| Total Unlisted assets | - | -444 | -444 | 30 | - 346 | - 316 |
| Total Financial assets | 2 260 | 18 395 | 20 655 | 1 733 | -4 969 | -3 236 |
| Capital/votes (%) | Book value | ||||||
|---|---|---|---|---|---|---|---|
| Trade name | Company name | Registered offce |
Number of shares 2017 |
2017 | 2016 | 2017 | 2016 |
| Black Earth Farming | Black Earth Farming Ltd | Jersey | 51 811 828 | -/- 24.6/24.6 | - | 308 | |
| Com Hem | Com Hem Holding AB | Sweden | 33 911 671 19.0/19.0 | -/- | 4 226 | - | |
| Millicom | Millicom International Cellular S.A. | Luxembourg | 37 835 438 37.6/37.6 37.7/37.7 | 20 942 | 14 790 | ||
| MtG | Modern Times Group MTG AB | Sweden | 13 503 856 20.2/48.0 20.3/48.0 | 4 645 | 3 650 | ||
| Qliro Group | Qliro Group AB | Sweden | 42 613 642 28.5/28.5 28.5/28.5 | 767 | 367 | ||
| Rocket Internet | Rocket Internet SE | Germany | - | -/- 13.2/13.2 | - | 3 990 | |
| Seamless | Seamless Distribution AB | Sweden | - | -/- | 6.0/6.0 | - | 20 |
| SDS | Seamless Distribution Systems AB | Sweden | 587 722 | 8.5/8.5 | -/- | 8 | - |
| tele2 | tele2 AB | Sweden | 152 433 152 30.3/47.9 30.3/47.9 | 15 350 | 11 166 | ||
| Zalando | Zalando Se | Germany | 78 427 800 31.7/31.7 31.7/31.7 | 34 097 | 27 245 | ||
| Total Listed Assets | 80 035 | 61 536 | |||||
| Babylon | Babylon Holdings Ltd | Great Britain | 20/20 | 13/13 | 375 | 154 | |
| Bayport | Bayport Management Ltd | Mauritius | 22/22 | 24/24 | 1 082 | 1 201 | |
| Betterment | Betterment Holdings, Inc. | uSA | 16/16 | 9/9 | 1 064 | 590 | |
| Global Fashion Group | Global Fashion Holding S.A. | Luxembourg | 35/35 | 35/35 | 5 239 | 5 641 | |
| Home24 | Home24 GmbH | Germany | 17/17 | 17/17 | 218 | 94 | |
| Lazada | Lazada Group S.A. | Luxembourg | - | 4/4 | - | 706 | |
| livongo | Livongo Health, Inc. | uSA | 3/3 | - | 105 | - | |
| Milvik/BIMA | Milvik AB | Sweden | 33/33 | 39/39 | 806 | 464 | |
| Quikr | Quikr Mauritius Holding Private Ltd | Mauritius | 18/18 | 18/18 | 1 358 | 1 535 | |
| Saltside | Saltside Technologies AB | Sweden | 61/61 | 61/61 | 195 | 200 | |
| Westwing | Westwing Group GmbH | Germany | 17/17 | 17/17 | 479 | 429 | |
| Other | 761 | 1 277 |
Total 91 717 73 827
| 2017 | 2016 | |
|---|---|---|
| Interest income fnancial assets accounted at fair value |
12 | 56 |
| Exchange differences | 0 | 15 |
| Financial income | 12 | 71 |
| Interest expenses, loans from credit institutions | -57 | -41 |
| Exchange differences | -25 | - |
| Other fnancial expenses | -20 | -37 |
| Financial expenses | -102 | -78 |
| Net fnancial income/expenses | -90 | -7 |
Earnings per share are calculated by dividing proft for the year attributable to holders of shares in the parent company by a weighted average number of shares outstanding. Earnings per share after dilution is calculated by dividing proft for the year attributable to holders of shares in the parent company by the average of the number of shares outstanding during the year, adjusted for the dilution effect of potential shares from outstanding share saving plans.
| 2017 | 2016 | |
|---|---|---|
| Net proft for the year | 20 359 | -3 459 |
| Average number of shares outstanding | 275 115 947 | 275 570 219 |
| Earnings per share before dilution | 74.00 | -12.55 |
| Average number of shares outstanding | 275 115 947 | 275 570 219 |
| Effect from outstanding share saving program, see Note 16 for information |
348 570 | 231 859 |
| Average number of shares outstand ing after dilution |
275 464 517 | 275 802 078 |
| Earnings per share after dilution, SEK |
73.90 | -12.55 |
| 2017 | ||
|---|---|---|
| INTEREST BEARING LOANS | ||
| Opening balance 1 January | 1 610 | |
| Amortization of loans | -1 610 | |
| New long-term capital markets fnancing | 2 833 | |
| Closing balance 31 December | 2 833 | |
| 2017 | 2016 | |
| Investments in shares and other securities, |
| securities | -4 843 | -3 330 |
|---|---|---|
| Cash fow from investments in shares and other | ||
| Prior year investments, paid in current year | -69 | - |
| Current year investment, paid after year end | - | 69 |
| see note 3 | -4 774 | -3 399 |
| Cash fow from sale of shares and other securities |
5 304 | 480 |
|---|---|---|
| Sale of shares paid after year end | 24 | -83 |
| Other | 138 | 148 |
| Rocket Internet | 4 071 | |
| Lazada | 967 | 415 |
| Glossybox | 104 | - |
| 2017 | 2016 | |
|---|---|---|
| Current tax expense | ||
| Tax expense for the period | -2 | -1 |
| -2 | -1 |
| 2017 | % | 2016 | % | |
|---|---|---|---|---|
| Proft/loss before tax | 20 361 | -3 458 | ||
| Income tax at statutory rate of Parent Company |
-4 479 | -22.0% | 761 | 22.0% |
| Change in fair value of fnan cial assets |
4 047 | 19.9% | -1 093 | -31.6% |
| Non-taxable dividends received |
497 | 2.4% | 381 | 11.0% |
| Change in not recognized tax loss carry forwards |
-67 | -0.3% | -50 | -1.4% |
| Effective tax/tax rate | -2 | 0.0% | -1 | 0.0% |
No tax has been recognised against other comprehensive income or shareholders' equity.
Deferred tax is not stated for associated companies, subsidiaries and other shareholdings, as any dividend paid by these companies will not give rise to a tax liability, and divestments may be made without giving rise to capital gains taxation.
The Group's tax loss carryforwards in Sweden with eternal duration amounted to SEK 1,420m (1,149) at 31 December 2017. No defferred tax carried forward is accounted for.
| Total | 1 798 | 323 |
|---|---|---|
| Cash and bank | 48 | 323 |
| Short term investments | 1 750 | - |
| 2017 | 2016 |
In addition to cash and cash equivalents reported above, the Group had on 31 December 2017 undrawn credit facilities of SEK 6,197m (5,730) see Note 10.
Share capital refers to the Parent Company's share capital; refer to Note 10 for the Parent Company.
Other contributed capital consist of the Parent Company's share premium reserve, which arose through the conversion of convertible loans in 1997 and 1998, capital injected in conjunction with the merger between Invik & Co. AB and Industriförvaltnings AB Kinnevik in 2004, capital injected in conjunction with a new share issue when acquiring the assets in Emesco AB 2009, as well as by the Parent Company's legal reserve.
Retained earnings that are reported in the Group include the current and preceding year's proft/loss.
Kinnevik's managed capital consists of shareholders' equity. There are no other external capital requirements, other than what is specifed in the Swedish Companies Act. For dividend policy and leverage targets, please refer to the Board of Directors' report.
| 2017 | 2016 | |
|---|---|---|
| Interest-bearing long-term loans | ||
| Capital markets fnancing | 2 850 | - |
| Liabilities to credit institutions | - | 21 |
| Other interset bearing liabilities | - | 1 |
| Accrued borrowing costs | -17 | -12 |
| 2 833 | 10 | |
| Interest-bearing short-term loans | ||
| Capital market fnancing | - | 1 200 |
| Commercial paper | - | 400 |
| - | 1 600 | |
| Total interest-bearing loans | 2 833 | 1 610 |
| Financing source | facility as per 31 Dec 2017 |
Utilised amount 31 Dec 2017 |
tilised amount 31 Dec |
2017 Currency |
|---|---|---|---|---|
| Long-term loans | ||||
| Syndicated bank facilities | 6 000 | - | 6 000 | SEK |
| Total long-term loans | 6 000 | - | 6 000 | |
| Short-term loans | ||||
| Overdraft facilities | 130 | - | 130 | SEK |
| Total short-term loans | 130 | - | 130 |
The long-term fnancing is mainly two syndicated bank facilities of in total SEK 6,000m. The frst one of SEK 3,000m provided by DNB Bank ASA Sweden Branch, Nordea Bank AB (publ), Skandinaviska Enskilda Banken AB (publ), Svenska Handelsbanken AB (publ) and Swedbank AB (publ), matures in July 2021. The second one of SEK 3,000m is provided by the same banks as well as Crédit Agricole Corporate & Investment Bank (France) and Danske Bank (Denmark) and matures in December 2022 with possible lengthening up to two years. The facilities are secured by listed shares but does not involve any fnancial covenants. It is multicurrency facilities with a part being available as a backup against the refnancing risk of any outstanding commercial papers which by 31 December 2017 amounted to SEK 0m. Kinnevik has also issued one bond of SEK 1,450m with maturity in May 2020 and one bond of SEK 1,400m with maturity in March 2022. The bond with maturity in May 2020 have dual tranches, SEK 500m at an annual coupon of 1.385% and SEK 950m at foating interest corresponding to 3 onths Stibor + 0.75%. The bond with maturity in March 2022 has a foating interest corresponding to 3 months Stibor + 1.10%. The bonds are unsecured and has no fnancial covenants. The interest rate risk under the tranches with foating interest are fully hedged with interest rate swaps.
The outstanding loans carry an interest rate of Stibor or similar base rate with an average margin of 0.91% (1.3%).
All bank loans have variable interest rates (up to 3 months) while fnancing from the capital markets vary between 1 to 12 months for loans under the commercial paper program and 3 to 5 years for the outstanding bond.
As per 31 December 2017, the average remaining duration was 3.9 (2.7) years for all credit facilities including the bonds.
| 2017 | 2016 | |
|---|---|---|
| Other long-term liabilities | 0 | 5 |
| Total other long-term liabilities | 0 | 5 |
| Interest rate swap | 0 | 19 |
| Accrued interest expenses | 22 | 2 |
| Accrued personnel expenses | 60 | 65 |
| Debt unpaid investments | - | 131 |
| Other liabilities | 44 | 22 |
| Total other short-term liabilities | 126 | 239 |
For trade creditors and other liabilities to related parties refer to Note 15.
| 1 | 2 | |
|---|---|---|
| Other services | 0 | 1 |
| Audit assignments | 1 | 1 |
| To Deloitte | ||
| 2017 | 2016 | |
At 31 December 2017 and 2016, Kinnevik did not have any listed shares in associated companies pledged in relation to the Group's fnancing. At utilization of the syndicated credit facilities, pledged listed shares' market value shall, at any given time, amount to 200% of the outstanding loans. If the value of the pledge remains below the threshold for a defned period of time and Kinnevik, despite written request by the banks, has not remedied the breach, the banks will be entitled to enforce the pledge. Such right to enforcement also applies to un-remedied breaches of other terms and conditions in the credit facility agreement.
There were no outstanding loans in relation to this fnancing at 31 December 2017.
| 2017 | 2016 | |
|---|---|---|
| Guarantee commitments, FPG | 1 | 1 |
| 1 | 1 |
County administrative boards have submitted claims to Kinnevik regarding environmental studies at a number of sites where Fagersta AB (through name changes and a merger, Kinnevik AB) conducted operations until 1983. Kinnevik's position is that the Company's responsibility to perform any decontamination measures must be limited, primarily out of consideration to the long period of time that has passed since any potential contamination damages occurred and the regulations that were in force at the time, and the fact that a quarter century has passed since operations were shut down or turned over to new owners. Kinnevik has therefore not made any provisions for potential future claims for decontamination measures. SEK 5m was provided in 2007 for potential environmental studies that Kinnevik might be required to pay for of which SEK 1.2m was used in 2010 to 2017.
Kinnevik's related party transactions primarily consists of short term bridge loans to investee companies, which are included in fnancial assets accounted at fair value through proft and loss. Interest income from such loans are recognised as external interest income through proft and loss. Other income relates to the rent out of offce premises in Gamla Stan in Stockholm as well as re-invoicing of costs. Kinnevik buys telephony-, advertising- and consultancy services from related parties.
During 2017, Kinnevik acquired 526,980 shares in Milvik AB from Millicom for a total amount of USD 10.3m.
The following is a summary of Kinnevik's revenue, expense, receivables and liabilities to and from related parties (exceeding SEK 1m).
| Group | Parent Company |
|||
|---|---|---|---|---|
| 2017 | 2016 | 2017 | 2016 | |
| Revenue | ||||
| Millicom | 1 | 0 | - | 0 |
| MtG | 3 | 4 | - | 1 |
| SecureValue | 1 | 2 | - | - |
| tele2 | 4 | 5 | - | 1 |
| 9 | 11 | - | 2 | |
| Operating expenses | ||||
| Altlorenscheurerhof S.A. | -0 | -2 | -0 | -2 |
| SecureValue | -4 | -4 | -4 | -4 |
| tele2 | -0 | -1 | -0 | -1 |
| -4 | -7 | -4 | -7 | |
| Interest income | ||||
| GFG | - | 51 | - | - |
| Other | 10 | 5 | - | - |
| 10 | 56 | - | - | |
| Financial receivables from associated companies | ||||
| Babylon | - | 46 | - | - |
| Beauty Trend | - | 20 | - | - |
| Konga | - | 24 | - | - |
| - | 90 | - | ||
| Accounts receivables and other current receivables | ||||
| tele2 | 1 | 1 | - | - |
| 1 | 1 | - | - |
All transactions with related parties have taken place at arm's length basis, i.e. on market conditions. In connection with acquisitions from and divestments to major shareholders of the company or directors or offcers of the group, valuation reports are obtained from independent experts, in accordance with the Swedish Securities Council's statement 2012:05. In all agreements relating to goods and services prices are compared with up-to-date prices from independent suppliers in the market to ensure that all agreements are entered into on market conditions.
For transactions with the Board of Directors and Senior Executives refer to Note 16 for the Group.
AvERAGE NUMBER OF EMPLOYEES
| 2017 | 2016 | |||
|---|---|---|---|---|
| men | women | men | women | |
| Sweden | 10 | 12 | 14 | 13 |
| UK | 10 | 4 | 9 | 4 |
| Total number of employees | 20 | 16 | 23 | 17 |
AvERAGE DISTRIBUTION OF wOMEN AND MEN ON THE BOARD AND IN THE MANAGEMENT GROUP
| 2017 | 2016 | |||
|---|---|---|---|---|
| men | women | men | women | |
| Board members | 7 | 3 | 7 | 2 |
| Acting CEO/CEO | 1 | - | 1 | - |
| Other senior executives | 3 | 1 | 4 | 2 |
| 11 | 4 | 12 | 4 |
| 2017 | 2016 | ||||
|---|---|---|---|---|---|
| Board, acting CEO and senior execu tives |
Other employ ees |
Board, CEO, senior execu tives |
Other employ ees |
||
| Total salaries and other remuneration |
45 666 | 56 504 | 70 675 | 63 378 | |
| Social security expenses | 12 349 | 10 915 | 10 998 | 15 625 | |
| Pension contributions/ expenses |
2 730 | 5 745 | 2 758 | 4 440 | |
| Estimated costs for share-based remuneration including social securities cost |
5 170 | 9 741 | 5 242 | 10 993 | |
| Total | 65 915 | 82 905 | 89 673 | 94 436 |
The following principles and guidelines were approved by the AGM in May 2017 and are provided for the Chief Executive Offcer and the other persons in the executive management of Kinnevik (the Senior Executives), as well as Members of the Board to the extent they are remunerated outside their Board duties.
The objectives of Kinnevik's remuneration guidelines are to offer competitive compensation to attract, motivate and retain key employees. The aim is to create incentives for the Senior Executives to execute strategic plans and deliver excellent operating results and to align their incentives with the interests of the shareholders. The intention is that all Senior Executives shall have a signifcant long-term shareholding in the company.
The remuneration for the Senior Executives shall consist of an annual fxed salary, short-term variable remuneration paid in cash ("STI"), the possibility to participate in long-term (i) share or share price related incentive plans or (ii) cash based incentive plans ("LTI"), pension and other customary benefts. Kinnevik regularly carries out a remuneration benchmarking exercise to ensure that it is aware of the relevant benchmarks for key positions.
Board Members, elected at General Meetings, in certain cases may receive a fee for services performed within their respective areas of expertise, outside of their Board duties. Compensation for these services shall be paid at market terms and be approved by the Board.
In special circumstances, the Board may deviate from the above guidelines. In such cases, the Board is obligated to give account for the appearance of, and the reason for, the deviation at the following Annual General Meeting.
The Board's proposal to the Annual General Meeting 2018 regarding adoption of new guidelines on remuneration for senior executives can be found in the Board of Directors' report.
| (SEK 000's) | 2017 Acting CEO |
Other senior execu tives 1) |
2016 CEO 2) |
Other senior execu tives |
|---|---|---|---|---|
| Fixed salaries | 3 965 | 12 649 | 10 945 3) | 17 120 |
| Variable salaries | 3 900 | 14 966 | 5 264 | 11 992 |
| Benefts | 93 | 389 | 25 | 382 |
| Pension contributions | 824 | 1 907 | - | 2 758 |
| Termination pay including benefts |
- | - | 16 422 | - |
| Estimated costs for share based remuneration exclu ding social securities cost |
1 171 | 3 714 | - | 5 242 |
| Total | 9 953 | 33 624 | 32 656 37 495 |
1) Other senior executives consisted during 2017 of 4 (6) persons.
2) Relates to Lorenzo Grabau as CEO until 7 December 2016 and reservation for termination pay to be paid over 18 months thereafter.
3) Fixed salary for CEO during 2016 includes 30% pension cash payment.
The Board of Directors announced on 7 December 2016 that Lorenzo Grabau was leaving Kinnevik with immediate effect. Joakim Andersson, the company's CFO, has been acting CEO from 7 December 2016 until 31 December 2017.
Joakim Andersson is, in his role as CFO, included in other senior executives for 2016. In addition to remuneration paid by Kinnevik, as specifed in the table above, Joakim Andersson has received Board fees from associated companies amounting to SEK 0.7m (0.7).
For senior executives, pension premium payments of a maximum of 30% of fxed salary were paid. Pension premiums are mainly paid to insurance companies.
Due to the departure of Kinnevik's former CEO, the Board made retention agreements with two senior executives on a cash bonus that has lead to variable salaries exceeding 100 percent of their fxed salary for 2017 and can lead to variable salaries exceeding 100 percent of their fxed salary also for 2018.
On 26 June 2017, Kinnevik announced that Georgi Ganev had been appointed new CEO for Kinnevik with effect from 1 January 2018. Georgi Ganev received a "sign on" bonus of SEK 8m during 2017 which will be included in his remuneration cost for 2018. Mr. Ganev also participates in the share-based plan launched in 2017. See further information about the plan below. On 12 February 2018 Kinnevik was informed by its largest shareholder Verdere S.à r.l. that Verdere S.a r.l. had agreed to grant 200,000 call options that entitles Mr. Ganev to purchase 200,000 Kinnevik Class B shares in order to further align his interest with Kinnevik's shareholders. The call options were purchased on market terms, and the value of the call options (the premium) has been calculated by an independent valuation institute using a standard valuation model (Black-Scholes). Each option entitles Mr. Ganev to purchase one (1) Kinnevik Class B share during a period of three months after a fve-year period at a strike price of SEK 325.44 per share.
For Senior Executives and other personnel employed within the Kinnevik Group there are long-term incentive plans ("the Plans").
There are three long-term share-based incentive plans for senior executives and other employees in the Kinnevik Group that require participants to own shares in Kinnevik.
For each share held within the framework of the Plans, the Company has distributed retention and performance-based share rights which, subject to:
(i) fulflment of certain retention and performance-based conditions during the individual 3-year periods included in the Plans (the "Measurement Periods")
(ii) the participant remaining in the employment of Kinnevik at the end of the Measurement Periods and
(iii) the participant retaining the investments shares
will entitle the participant to receive one class B share in the Company.
The number of shares the employee will receive depends on the fulflment of defned retention- and performance-based conditions during the Measurement Periods, based on the:
In order to align participants' interests with those of shareholders, the Company will compensate for forfeited dividends by increasing the number of shares and rights to which they would otherwise be entitled.
The value of the share rights for each plan has been based on the average share price (highest and lowest bid price) during fve trading days before the date of distribution of the B shares. For the share rights that have market-related performance conditions (according to IFRS 2), the value has been set at an estimated fair value. The multiplier includes the performance criteria and the probability for different outcome in these share rights. The average value of the rights at grant has been estimated to SEK 191.40 for LTIP 2017 based on a Monte Carlo simulation using the volatility at grant date.
At 31 December 2017, 25,808 investment shares held by participating employees remained for the Plan established in 2015 with vesting date on 31 March 2018. These investment shares entitle the participants to a maximum allotment of 133,282 share rights. The Plan encompasses the following number of participants and maximum number of share rights;
| Plan 2015-2018 | Number of participants |
Allotment of rights |
|---|---|---|
| Executive Management | 4 | 44 000 |
| Other employees | 18 | 89 282 |
| Total | 22 | 133 282 |
The participants' maximum award value is limited to SEK 820 per right, including dividend compensation, as measured based on three times the average closing price of the Kinnevik B share during February 2015. The maximum dilution is 0.1% in terms of shares outstanding, 0.04% in terms of votes and 0.06% in terms of costs for the program as defned in IFRS 2 in relation to Kinnevik's market capitalization.
At 31 December 2017, 35,346 investment shares held by participating employees remained for the Plan that was established in 2016 with vesting date on 31 March 2019. These investment shares entitle the participants to a maximum allotment of 268,184 share rights.
The Plan encompasses the following number of participants and maximum number of share rights;
| Plan 2016-2019 | Number of participants |
Allotment of rights |
|---|---|---|
| Executive Management | 5 | 104 000 |
| Other employees | 21 | 164 184 |
| Total | 26 | 268 184 |
The participants' maximum award value is limited to SEK 623 per right, including dividend compensation, as measured based on three times the average closing price of the Kinnevik B share during February 2016. The maximum dilution is 0.18% in terms of shares outstanding, 0.08% in terms of votes and 0.10% in terms of costs for the program as defned in IFRS 2 in relation to Kinnevik's market capitalization.
At 31 December 2017, 30,135 investment shares held by participating employees remained for the Plan that was established in 2017 with vesting date on 31 March 2020. These investment shares entitle the participants to a maximum allotment of 241,510 share rights. The Plan encompasses the following number of participants and maximum number of share rights;
| Plan 2017-2020 | Number of participants |
Allotment of rights |
|---|---|---|
| Ceo 1) | 1 | 50 000 |
| Executive Management | 3 | 56 000 |
| Other employees | 19 | 135 510 |
| Total | 23 | 241 510 |
1) Georgi Ganev, with effect from 1 January 2018
The participants' maximum award value is limited to SEK 711 per right, including dividend compensation, as measured based on three times the average closing price of the Kinnevik B share during February 2017. The maximum dilution is 0.09% in terms of shares outstanding, 0.04% in terms of votes and 0.08% in terms of costs for the program as defned in IFRS 2 in relation to Kinnevik's market capitalization.
The total cost before tax for share rights outstanding in all outstanding incentive programs is expensed continuously during a three-year period and is, calculated based on remaining participants and anticipated aggregate outcome, amounting to approximately SEK 105m, including social security costs, of which SEK 15m (16) was expensed during 2017. Total liability for social security costs pertaining to theses incentive programs amounted to SEK 9m (5) on 31 December 2017.
The AGM 2017 approved a new long-term, cash-based incentive plan for Kinnevik employees that have a direct impact on, and are working almost exclusively with, the value creation in Kinnevik's private portfolio ("VCPP 2017"). The participants in VCPP 2017 were not entitled to participate in LTIP 2017.
VCPP 2017 amounts to 48 issued non-transferrable synthetic options (the "Options") subscribed by two executive managers and four other senior employees within the Investment team. Settlement of the Options will be made in cash and will not increase the number of shares in Kinnevik.
The Options were subscribed to at fair market value with a subsidy received from Kinnevik of 50 percent. The subsidy will be accounted for over three years and is included in share-based remuneration. The cost for 2017 amounts to SEK 1.4m.
Each Option entitles the holder, at the end of the Option's fve-year term, to receive a cash amount from Kinnevik of SEK 1m multiplied by a value creation multiple where the entry threshold shall be a value growth of the private portfolio of 8 percent IRR and a value creation multiple of 0.46 (SEK 0.46m) and with a cap at a value growth of 25 percent IRR. The maximum outcome is SEK 2m per Option.
Any payment to the Option holders will be made in April 2022. Assuming a Value Growth of 25 percent is achieved during the term of VCPP 2017, the maximum costs attributable to VCPP 2017 are SEK 109m (assuming no personnel turn-over and including subsidies as well as social security costs).
In 2015, Kinnevik launched a cash-based program that gives the participants the right to receive 50 percent cash, net of tax, of an amount invested in Kinnevik shares over three years provided continued employment. The program was adopted to compensate for option programs approved by the AGM 2014 that were never launched. During 2017, the cost for this program was SEK 2m and the last instalment of the same amount will be paid out in May 2018.
| Board fees, Parent Company |
2017 Other assignment |
Total fee | Board fees, Parent Company |
2016 Other assignment |
Total fee | |
|---|---|---|---|---|---|---|
| Tom Boardman (Chairman) | 2 520 | - | 2 520 | 2 350 | - | 2 350 |
| Anders Borg (until 5 August 2017) | 261 | - | 261 | 1 000 | - | 1 000 |
| Dame Amelia Fawcett | 1 450 1) | - | 1 450 | 1 250 | - | 1 250 |
| Henrik Poulsen | 959 | - | 959 | - | - | - |
| Cynthia Gordon | 625 | 3 025 2) |
3 650 | - | - | - |
| Wilhelm Klingspor | 550 | - | 550 | 650 | - | 650 |
| Lothar Lanz | 550 | - | 550 | 550 | - | 550 |
| Erik Mitteregger | 845 1) | - | 845 | 725 | - | 725 |
| Mario Queiroz | 550 | - | 550 | 550 | - | 550 |
| John Shakeshaft | 845 | - | 845 | 825 | - | 825 |
| Cristina Stenbeck | 550 | - | 550 | 625 | - | 625 |
| 9 705 | 3 025 | 12 730 | 8 525 | - | 8 525 |
1) The board fees for 2017 includes an extra remuneration in the amount of 75,000 SEK each, paid to Dame Amelia Fawcett and Erk Mitteregger for extraordinary services related to the Remuneration Committee's work during 2016, as approved by the AGM 2017.
2) During the period April-December 2017, Cynthia Gordon received an amount of 275,000 GBP for work performed within investee companies in addition to customary Board work.
The Group's management of fnancial risks is centralized within Kinnevik's fnance function and is conducted on the basis of a fnance policy established by the Board of Directors. The policy is reviewed continuously by the fnance function and updated when appropriate in discussion with the Audit Committee, after approval by the Kinnevik Board. The Group has a model for risk management with the aim to identify, control and reduce risks. The output of the model is reported to Kinnevik's GRC Committee and Board on a regular basis.
Kinnevik is exposed to fnancial risks mainly in respect of:
Kinnevik is invested in both listed and unlisted investee companies where the share price and total market value can fuctuate based on a number of different factors.
On 31 December 2017, 87% (83%) of Kinnevik's total assets (excluding cash) pertained to listed investee companies and 13% (17%) to unlisted investee companies.
As Kinnevik intends to act as a long-term shareholder, it has no strategy for managing short-term fuctuations in the share prices of its listed investee companies. The share price risk associated with Kinnevik's portfolio may be illustrated by stating that a 10% change in the prices of all listed shareholdings at 31 December 2017 would have affected the Group's earnings and shareholders' equity by SEK 8.0bn (SEK 6.2bn).
The value of Kinnevik's unlisted investee companies may increase or decrease due to a number of different factors, of which changes of trends in the stock markets is one. In the process of valuing its unlisted holdings, Kinnevik considers a number of factors such as relative valuations of comparable publicly traded companies, the operational and fnancial performance of the respective investee company, and the valuations resulting from transactions in the respective investee company's shares. Any changes in these factors have an impact on the total value. For companies that are valued based on multiples (i.e. Global Fashion Group, Home24 and Westwing), a decrease in the multiples by 10% would at 31 December 2017 have decreased the value by SEK 401m (SEK 517m).
Kinnevik's liquidity and fnancing risk is limited because listed shares account for a large part of the Company's assets. Kinnevik relies in part on dividends received from a number of its investee companies in order to fnance its operations and investment activities. Without dividend from its investee companies Kinnevik would be compelled to rely on asset management and/or debt fnancing to secure the funding of its operations and maintain its targeted fnancial position.
On 31 December 2017, the Company had cash and cash equivalents amounting to SEK 1,798m (SEK 323m) and committed but not utilized, or reserved in any other way, credit facilities amounting to SEK 6,130m (SEK 5,730m).
Financing risk is the risk that Kinnevik may not be able to obtain fnancing or that fnancing can only be obtained at a considerable cost. Kinnevik's fnancing risk is limited since its operations are fnanced from different sources, its debt fnancing is sourced from a number of different credit institutions with diversifed maturities as well as by striving for refnancing of all facilities at least six months prior to maturity. On 31 December 2017, the total amount of committed fnancing was SEK 8,980m (7,330) with an average remaining facility duration of 3.9 (2.7) years. For further details, please refer to Note 10 for the Group.
Transaction exposure arises from cash fows denominated in foreign currencies. Kinnevik's debt funding and cash position consist mainly of SEK. Excluding dividends received and investments and disposals made, Kinnevik does not have any material cash fows in foreign currencies.
Translation exposure arises from the translation of balance sheet items denominated in foreign currencies. Kinnevik's balance sheet is mainly exposed to foreign exchange risk by owning shares denominated in either EUR or USD. Kinnevik is also exposed to indirect translation exposure as a majority of its investee companies conduct operations internationally. On 31 December 2017, 45% of Kinnevik's total assets (excluding cash), equal to a value of SEK 41.2bn, pertained to shareholdings denominated in EUR.
Kinnevik is also exposed to indirect translation exposure as a majority of the investments are active internationally. By being active internationally, foreign currencies have an indirect effect on the share prices of these investments.
Interest rate risk is the risk that the value of interest bearing receivables and liabilities will vary due to changes in market interest rates. On 31 December 2017, none of Kinnevik's interest bearing liabilities, SEK 2.9bn, were exposed to interest rate changes. SEK 2.4bn out of Kinnevik's SEK 2.9bn in outstanding bonds were originally exposed to interest rate risk with foating rates (3 months Stibor). This risk was hedged by entering into interest rate swaps expiring on the same dates as the repayment of the bonds. On 31 December 2017, these swaps had a negative market value of SEK 0.3m.
In connection with refnancing, or if Kinnevik would increase its receivables or liabilities, the interest rate risk may change materially.
| Note | 2017 | 2016 | |
|---|---|---|---|
| Administration costs | 5,16 | -235 | -245 |
| Other operating income | 5 | 7 | |
| Operating loss | -230 | -238 | |
| Dividends received | 2 | 9 489 | 2 446 |
| Loss from fnancial assets, associated companies and other |
4 | - | -3 |
| Loss from fnancial assets, subsidiaries |
4 | -221 | -5 088 |
| Interest income and other fnancial income |
3 | 53 | 17 |
| Interest expenses and other fnancial expenses |
3 | -76 | -62 |
| Proft/loss after fnancial items | 9 015 | -2 928 | |
| appropriations | |||
| Group contributions, paid | -120 | -10 | |
| Group contributions, received | 11 | 110 | |
| Proft/loss before tax | 8 906 | -2 828 | |
| Taxes | 6 | - | - |
| Net proft/loss for the year 1) | 8 906 | -2 828 |
1) Net proft corresponds with total comprehensive income
| aS at 31 december (Sek m) | |||
|---|---|---|---|
| Note | 2017 | 2016 | |
| aSSetS | |||
| Tangible fxed assets | |||
| Equipment | 7 | 3 | 4 |
| Shares and participations in Group companies |
9 | 41 785 | 41 376 |
| Shares and participations in associated companies |
8 | 10 580 | 10 580 |
| Other long-term receivables | 3 | 5 | |
| Total fxed assets | 52 371 | 51 965 | |
| current assets | |||
| Receivables from Group companies |
12 | 113 | |
| Other receivables | 6 | 2 | |
| Accrued income and prepayments |
15 | 4 | |
| Short term investments | 1 750 | - | |
| Cash and cash equivalents | 39 | 317 | |
| total current assets | 1 822 | 436 | |
| tOtaL aSSetS | 54 193 | 52 402 |
| Note | 2017 | 2016 | |
|---|---|---|---|
| SharehOLderS' equity aNd LiabiLitieS | |||
| Shareholders equity | 10,15 | ||
| Restricted equity | |||
| Share capital (275,466,638 shares of SEK 0.10) |
27 | 27 | |
| Premium reserve | 6 868 | 6 868 | |
| Unrestricted equity | |||
| Share premium | 1 616 | 1 616 | |
| Retained earnings | 31 408 | 36 425 | |
| Net result | 8 906 | -2 828 | |
| Total shareholders' equity | 48 825 | 42 108 | |
| Liabilities | 13 | ||
| provisions | |||
| Provisions for pensions | 22 | 23 | |
| Other provisions | 4 | 4 | |
| total provisions | 26 | 27 | |
| Long-term liabilities | |||
| External interest-bearing loans | 11 | 2 833 | - |
| Liabilities to Group companies | 2 284 | 6 617 | |
| Total long-term liabilities | 5 117 | 6 617 | |
| Short-term liabilities | |||
| External interest-bearing loans | 11 | - | 1 588 |
| Trade creditors | 3 | 3 | |
| Liabilities to Group companies | 161 | 1 986 | |
| Other liabilities | 2 | 17 | |
| Accrued expenses | 12 | 59 | 56 |
| Total short-term liabilities | 225 | 3 650 | |
| tOtaL SharehOLderS' equity aNd LiabiLitieS |
54 193 | 52 402 |
| 2017 | 2016 | |
|---|---|---|
| Cash fow from operations | ||
| External dividends received | 857 | 786 |
| Cash fow from operating costs | -178 | -211 |
| Cash fow from operations before interest net and income taxes | 679 | 575 |
| Interest, received | 0 | 17 |
| Interest, paid | -74 | -59 |
| Income taxes, paid | - | - |
| Cash fow from operations | 605 | 533 |
| Divestments of fnancial assets | 86 | - |
| Investments in fnancial assets | - | -832 |
| Cash fow from investing activities | 86 | -832 |
| Borrowing | 2 833 | 396 |
| Amortization | -1 588 | |
| Dividend paid | -2 201 | -7 084 |
| Share buybacks | - | -500 |
| Received from subsidiaries | 12 731 | 1 726 |
| Paid to subsidiaries | -10 994 | -2 605 |
| Cash fow from fnancing activities | 781 | -8 067 |
| Cash fow for the year | 1 472 | -8 366 |
| Cash and short term investments, opening balance | 317 | 8 683 |
| Cash and short term investments, closing balance | 1 789 | 317 |
| Share capital |
premium reserve |
Unrestricted equity |
total | |
|---|---|---|---|---|
| Opening balance, 1 January 2016 | 28 | 6 868 | 45 617 | 52 513 |
| Cash dividend and share redemption programme1) | – | – | -7 084 | -7 084 |
| Effect of employee share saving programme | – | – | 7 | 7 |
| Effect of share buybacks | -1 | - | -499 | -500 |
| Net result | – | – | -2 828 | -2 828 |
| Closing balance, 31 December 2016 | 27 | 6 868 | 35 213 | 42 108 |
| Cash dividend2) | - | - | -2 201 | -2 201 |
| Effect of employee share saving programme | - | - | 12 | 12 |
| Net result | - | - | 8 906 | 8 906 |
| Closing balance, 31 December 2017 | 27 | 6 868 | 41 930 | 48 825 |
1) The Annual General Meeting held on 23 May 2016, resolved in favor of paying a cash dividend of SEK 7.75 per share, as well as a share redemption programme of 18,00 SEK per share, a total of SEK 7,084m.
2) The Annual General Meeting held on 8 May 2017, resolved in favor of paying a cash dividend of SEK 8.00 per share, a total of SEK 2,201m.
The Parent Company's annual accounts have been prepared in accordance with Swedish law and the Swedish Financial Reporting Board's recommendation RFR 2 (Reporting for legal entities).
The Parent Company's accounting principles depart from the principles governing consolidated accounting in respect of the valuation of fnancial instruments and pension liabilities. The Parent Company applies RFR 2 in respect of the option not to observe IAS 39. Financial instruments are thus not valued at fair value as in the Group but at their acquisition cost and after write-down, if any. Pension liabilities are reported in accordance with Swedish principles.
For information concerning related party transactions, refer to Note 15 for the Group.
| 9 489 | 2 446 | |
|---|---|---|
| Tele2 AB | 738 | 671 |
| Modern Times Group MTG AB | 119 | 114 |
| Associated companies | ||
| Subsidiaries | 8 632 | 1 661 |
| 2017 | 2016 |
| 2017 | 2016 | |
|---|---|---|
| Interest income | 0 | - |
| Exchange-rate differences | 53 | 17 |
| Financial income | 53 | 17 |
| Interest expenses to credit institutions | -55 | -40 |
| Other fnancial expenses | -21 | -22 |
| Financial expenses | -76 | -62 |
| Net fnancial income/expenses | -23 | -45 |
| 2017 | 2016 | |
|---|---|---|
| Sale of other shares | - | -3 |
| Total loss from associated companies and other |
- | -3 |
| Write-down of shares in subsidiaries | -309 | -5 088 |
| Sale of shares in subsidiaries | 1 | - |
| Reversed write-down associated companies | 87 | - |
| Total loss from subsidiaries | -221 | -5 088 |
| 2017 | 2016 | |
|---|---|---|
| to deloitte | ||
| Audit assignments | 1 | 1 |
| Other services | 0 | 1 |
| 1 | 2 |
| 2017 | 2016 | |
|---|---|---|
| Tax expenses for the period | 0 | 0 |
| 0 | 0 |
| 2017 | % | 2016 | % | |
|---|---|---|---|---|
| Proft/loss before tax | 8 906 | -2 828 | ||
| Income tax at statutory rate of Parent Company |
-1 958 | -22.0% | 622 | -22.0% |
| Earnings from participations in associated companies |
- | 0.0% | -1 | -0.0% |
| Non-taxable dividends received |
2 088 | 23.4% | 538 | -19.0% |
| Write-down of shares in associated companies |
-49 | -0.5% | -1 119 | 39.6% |
| Other non-taxable expenses | - | 0.0% | -1 | -0.0% |
| Charge non-capitalized loss carry-forward |
-79 | -0.9% | -39 | 1.4% |
| Effective tax/tax rate | 0 | 0.0% | 0 | 0.0% |
| 2017 | 2016 | |
|---|---|---|
| Equipment | ||
| Opening acquisition values | 7 | 6 |
| Sales for the year | -1 | - |
| Investments for the year | - | 1 |
| Closing acquisition values | 6 | 7 |
| Opening accumulated depreciation | -3 | -2 |
| Disposals/scrapping for the year | 1 | - |
| Depreciation for the year | -1 | -1 |
| Closing accumulated depreciation | -3 | -3 |
| Closing book value | 3 | 4 |
| 2017 | 2016 | ||||||
|---|---|---|---|---|---|---|---|
| Associated companies | reg no | Registered offce |
Number of shares |
capital/ voting (%) |
book value |
capital/ voting (%) |
book value |
| Altlorenscheurerhof S.A. | Luxembourg | 625 | 33 | 12 | 33 | 12 | |
| Marma Skog 31 AB | 556580-2203 | Gävle | 500 | 50/50 | 3 | 50/50 | 3 |
| Modern Cartoons Ltd | uSA | 2 544 000 | 23 | 0 | 23 | 0 | |
| Modern Times Group MTG AB | 556309-9158 | Stockholm | 9 935 011 | 15/35 | 1 133 | 15/35 | 1 133 |
| Shared Services S.A. | Luxembourg | 200 | 30 | 0 | 30 | 0 | |
| Tele2 AB | 556410-8917 | Stockholm | 141 166 714 | 28/37 | 9 432 | 28/37 | 9 432 |
| Total book value | 10 580 | 10 580 |
| 2017 | 2016 | |
|---|---|---|
| Opening acquisition value,1 January | 10 580 | 9 748 |
| Acquisitions | - | 832 |
| Closing book value, 31 December | 10 580 | 10 580 |
| reg no | Registered offce |
Number of shares |
capital/ voting (%) |
2017 | 2016 | |
|---|---|---|---|---|---|---|
| Invik&Co. AB | 556051-6238 | Stockholm | 295 384 | 100/100 | 0 | 0 |
| Emesco AB | 556035-3749 | Stockholm | 1 635 | 100/100 | 584 | 599 |
| G3 Good Governance Ltd | Great Britain | 5 001 323 | 100/100 | 23 | 23 | |
| Invik S.A. | Luxembourg | 551 252 | 100/100 | 875 | 875 | |
| Kinnevik Capital Ltd | Great Britain | 1 000 | 100/100 | 1 | 1 | |
| Förvaltnings AB Eris & Co. | 556035-7179 | Stockholm | 1 020 000 | 100/100 | 166 | 166 |
| Kinnevik Consumer Finance Holding AB |
556833-3917 | Stockholm | 50 000 | 100/100 | 1 076 | 594 |
| Kinnevik East AB | 556930-5666 | Stockholm | 50 000 | 100/100 | 0 | 20 |
| Kinnevik Internet Lux SARL | Luxembourg | 12 500 | 100/100 | 0 | 3 989 | |
| Kinnevik Investment Partners AB | 556985-2436 | Stockholm | 50 000 | 100/100 | - | 1 |
| Kinnevik Lagerbolag AB | 559109-4239 | Stockholm | 500 | 100/100 | 0 | - |
| Kinnevik Media Holding AB | 556880-1590 | Stockholm | 50 000 | 100/100 | 175 | 397 |
| Kinnevik New Ventures AB | 556736-2412 | Stockholm | 100 | 100/100 | 4 008 | 4 008 |
| Kinnevik Online AB | 556815-4958 | Stockholm | 50 000 | 100/100 | 15 520 | 15 075 |
| Kinnevik Sweden Holding AB | 5591094221 | Stockholm | 500 | 100/100 | 3 750 | - |
| Millcellvik AB | 556604-8285 | Stockholm | 1 000 | 100/100 | 15 627 | 15 627 |
| book value | 41 785 | 41 376 |
| 2017 | 2016 | |
|---|---|---|
| Opening acquisition value, 1 January | 66 160 | 64 214 |
| Shareholders' contribution | 4 721 | 1 948 |
| Repaid shareholders´ contribution | -3 989 | - |
| Sale | -1 | -2 |
| Disposal | -13 384 | - |
| Closing acquisition value, 31 December | 53 507 | 66 160 |
| Opening write-down, 1 January | -24 784 | -19 696 |
| Write-down | -323 | -5 088 |
| Reversed write-down subsidaries | 13 384 | - |
| Closing write-down, 31 December | -11 723 | -24 784 |
| Closing book value, 31 December | 41 785 | 41 376 |
| reg.no. | Registered offce | capital/voting (%) | |
|---|---|---|---|
| Kinnevik Consumer Finance 1 AB | 556890-5540 | Stockholm | 100/100 |
| Kinnevik Internet 1 AB | 556884-6470 | Stockholm | 100/100 |
| Kinnevik Internet 2 AB | 556884-6462 | Stockholm | 100/100 |
| Kinnevik Mauritius Ltd, under liquidation | Mauritius | 100/100 | |
| Kinnevik Online Holding AB | 556862-0404 | Stockholm | 100/100 |
| Mellersta Sveriges Lantbruks AB | 556031-9013 | Vadstena | 100/100 |
| Saltside Technologies AB | 556852-1669 | Gothenburg | 61/61 |
| Bikroy.com Ltd | Bangladesh | 61/61 | |
| Ikman (pvt) Ltd | Sri Lanka | 61/61 | |
| Tonaton Ltd | Ghana | 61/61 | |
| Saltside Technologies India Pvt Ltd | India | 61/61 | |
| Metro International S.A. | Luxembourg | 100/100 | |
| Metro International Luxembourg Holding S.A. | Luxembourg | 100/100 | |
| Metro International Sweden AB | 556573-4000 | Stockholm | 100/100 |
| Metro International AB | 556275-8853 | Stockholm | 100/100 |
| Metro International IP Holding Sweden AB | 559105-2153 | Stockholm | 100/100 |
| Metro International Licensing SA | Mexico | 100/100 | |
| M. I. Advertising Services Ltd | Greece | 100/100 | |
| Edizione Metro Sarl | Italy | 100/100 | |
| Publimetro S.A. | Chile | 100/100 | |
| Inversiones Pro Medios Limitada | Chile | 100/100 | |
| SubTV S.A. | Chile | 100/100 | |
| Publisystemas S.A. | Chile | 100/100 | |
| Publimetro Colombia S.A.S. | Colombia | 100/100 | |
| Publicaciones Metropolitanas S.A. de CV Metro do Brasil Consultoria Administrativa e Editorial e Participações Ltda |
Mexiko Brazil |
76/76 100/100 |
|
| Metro Brazil Media Digital Do Brazil | Brazil | 100/100 | |
| Publimetro Puerto Rico LLC | Puerto Rico | 70/70 | |
| Rumbert SA | Uruguay | 100/100 | |
| Diarios Unidos del Ecuador S.A. | Ecuador | 80/80 | |
| Sistemas Guiasa S.A. | Ecuador | 80/80 | |
| Publicaciones Quil S.A | Ecuador | 80/80 |
Change in shareholders' equity from the preceding year's balance sheet are presented in Movements in Shareholders' equity of the Parent Company.
Kinnevik AB's share capital as of 31 December 2017 was distributed among 275,466,638 shares with a par value of SEK 0.10 per share.
| Number of shares |
Number of votes |
par value (Sek 000s) |
|
|---|---|---|---|
| Class A shares outstanding |
41 157 144 | 411 571 440 | 4 116 |
| Class B shares outstanding |
233 959 015 | 233 959 015 | 23 396 |
| Class B shares in own custody |
350 479 | 350 479 | 35 |
| Registered number of shares |
275 466 638 | 645 880 934 | 27 547 |
The total number of votes for outstanding shares in the Company amounted at 31 December 2017 to 645,530,455 excluding 350,479 class B treasury shares. During 2017, 424 Class B shares were delivered to a participant in a long term incentive program.
The AGM on 8 May 2017 resolved on the Board's proposed treatment of unappropriated earnings and to authorize the Board to resolve on a new issue of class C shares to ensure delivery of shares to participants in Kinnevik's long-term incentive plan 2017. The Board has authorization to repurchase up to a maximum of 10% of all shares in the Company over 12 months, ending at the AGM of 2018.
There are no convertibles or warrants in issue.
Regarding share based long-term incentive plans (LTIP), refer to Note 16 for the Group.
| 2017 | 2016 | |
|---|---|---|
| Long-term interest-bearing loans | ||
| Capital markets fnancing | 2 850 | |
| Acrrued borrowing costs | -17 | - |
| 2 833 | ||
| Short-term interest-bearing loans | ||
| Capital markets fnancing | - | 1 600 |
| Accrued borrowing costs | - | - 12 |
| - | 1 588 |
For further information about the Parent Company's interest bearing loans refer to Note 10 for the Group.
| 59 | 56 | |
|---|---|---|
| other | 11 | 16 |
| Accrued interest expenses | 22 | 2 |
| Accrued personnel expenses | 26 | 48 |
| 2017 | 2016 |
| 1 | 1 | |
|---|---|---|
| Guarantee commitments, FPG | 1 | 1 |
| 2017 | 2016 |
County administrative boards have submitted claims to Kinnevik regarding environmental studies at a number of sites where Fagersta AB (through name changes and a merger, Kinnevik AB) conducted operations until 1983. Kinnevik's position is that the Company's responsibility to perform any decontamination measures must be very limited, if any, primarily out of consideration to the long period of time that has passed since any potential contamination damages occurred and the regulations that were in force at the time, and the fact that a quarter century has passed since operations were shut down or turned over to new owners. Kinnevik has therefore not made any provisions for potential future claims for decontamination measures. SEK 5m was provided in 2007 for potential environmental studies that Kinnevik might be required to pay for of which SEK 1.2m was used in 2010 to 2017.
Intra-group revenue for the Parent Company amounted to SEK 1m (4) .
The Parent Company and the Swedish subsidiaries have their liquidity arranged through central bank accounts in different currencies. In addition, the Parent Company has a number of loans from subsidiaries. Market rate of interest are charged for all those balances.
The Board of Directors and the President and CEO proposes a dividend of SEK 8.25 (8.00) per share to the 2018 Annual General Meeting, corresponding to approximately SEK 2.3 bln (2.2).
| Total, SEk | 41 929 437 690 |
|---|---|
| Retained earnings carried forward | 38 043 548 316 |
| Share premium carried forward | 1 615 929 594 |
| Cash dividend, SEK 8.25 per share | 2 269 959 780 1) |
| 2017 | |
1) In the dividend proposal, expected allocation has been assumed in accordance with the long-term incentive program that expires on 31 March 2018. Insofar as allocation occurs prior to the Annual General Meeting, these shares will be entitled to dividend payment
| 2017 | 2016 | |||
|---|---|---|---|---|
| Average number of employees | men | women | men | women |
| Stockholm | 9 | 11 | 9 | 11 |
| Salaries, other remuneration and social security expenses (Sek 000s) |
2017 board, acting CEO and sen ior executives |
Other employees |
2016 board, CEO and senior execu tives 1) |
Other employees |
|---|---|---|---|---|
| Salaries and other remuneration | 24 909 | 21 240 | 54 839 | 31 639 |
| Social security expenses | 8 853 | 6 521 | 8 830 | 10 326 |
| Pension expenses/contributions | 1 856 | 3 867 | 1 838 | 2 335 |
| Provision for share-based remuneration including social securites expense |
3 553 | 4 876 | 3 566 | 6 570 |
| 39 171 | 36 503 | 69 072 | 50 870 |
1) Include termination cost for former CEO, Lorenzo Grabau, of SEK 19m in total
Salaries and other remuneration to the Board, CEO and other senior executives are further presented in Note 16 for the Group.
| 2017 | Financial assets accounted for at cost |
Loan receivables and trade receivables |
Financial liabilities |
total book value |
|---|---|---|---|---|
| Receivables from Group companies | - | 12 | 12 | |
| Other receivables | - | 6 | 6 | |
| Short term investment | 1 750 | - | 1 750 | |
| Cash at bank | - | 39 | 39 | |
| Total fnancial assets | 1 749 | 57 | 1 807 | |
| Interest-bearing liabilities | 2 833 | 2 833 | ||
| Liabilities to Group companies | 2 284 | 2 284 | ||
| Trade creditors | 3 | 3 | ||
| Other liabilities | 59 | 59 | ||
| Total fnancial liabilities | 5 179 | 5 179 |
| 2016 | Financial assets accounted for at cost |
Loan receivables and trade receivables |
Financial liabilities |
total book value |
|---|---|---|---|---|
| Receivables from Group companies | - | 113 | 113 | |
| Other receivables | - | 3 | 3 | |
| Cash at bank | - | 317 | 317 | |
| Total fnancial assets | - | 433 | 433 | |
| Interest-bearing liabilities | 1 588 | 1588 | ||
| Liabilities to Group companies | 8 603 | 8 603 | ||
| Trade creditors | 3 | 3 | ||
| Other liabilities | 56 | 56 | ||
| Total fnancial liabilities | 10 250 | 10 250 |
For fnancial assets which are valued at accrued acquisition value and are charged with foating rate or have short-term maturity, the book value correspond to fair value.
The undersigned certify that the consolidated accounts and the annual report have been prepared in accordance with International Financial Reporting Standards ("IFRS"), as adopted for use in the European Union, and generally accepted accounting principles respectively, and give a true and fair view of the fnancial positions and results of the Group and the Parent Company, and that the Board of Directors' Report gives a fair review of the development of the operations, fnancial positions and results of the Group and the Parent Company and describes substantial risks and uncertainties that the Group companies face.
Stockholm, 28 March 2018
Tom Boardman Chairman of the Board
Dame Amelia Fawcett Deputy Chairman of the Board
Henrik Poulsen Deputy Chairman of the Board
Cynthia Gordon Member of the Board
Wilhelm Klingspor Member of the Board
Lothar Lanz Member of the Board
Erik Mitteregger Member of the Board
Mario Queiroz Member of the Board
John Shakeshaft Member of the Board
Cristina Stenbeck Member of the Board
Georgi Ganev Chief Executive Offcer
Our Audit Report was issued on 28 March 2018 Deloitte AB
Jan Berntsson Authorized Public Accountant
We have audited the annual accounts and consolidated accounts of Kinnevik AB (publ) for the fnancial year 2017-01-01 - 2017-12-31. The annual accounts and consolidated accounts of the company are included on pages 42-75 in this document.
In our opinion, the annual accounts have been prepared in accordance with the Annual Accounts Act and present fairly, in all material respects, the fnancial position of the parent company as of 31 December 2017 and its fnancial performance and cash fow for the year then ended in accordance with the Annual Accounts Act. The consolidated accounts have been prepared in accordance with the Annual Accounts Act and present fairly, in all material respects, the fnancial position of the group as of 31 December 2017 and their fnancial performance and cash fow for the year then ended in accordance with International Financial Reporting Standards (IFRS), as adopted by the EU, and the Annual Accounts Act. The statutory administration report is consistent with the other parts of the annual accounts and consolidated accounts.
We therefore recommend that the general meeting of shareholders adopts the income statement and balance sheet for the parent company and the group.
Our opinions in this report on the the annual accounts and consolidated accounts are consistent with the content of the additional report that has been submitted to the parent company's audit committee in accordance with the Audit Regulation (537/2014) Article 11.
We conducted our audit in accordance with International Standards on Auditing (ISA) and generally accepted auditing standards in Sweden. Our responsibilities under those standards are further described in the Auditor's Responsibilities section. We are independent of the parent company and the group in accordance with professional ethics for accountants in Sweden and have otherwise fulflled our ethical responsibilities in accordance with these requirements. This includes that, based on the best of our knowledge and belief, no prohibited services referred to in the Audit Regulation (537/2014) Article 5.1 have been provided to the audited company or, where applicable, its parent company or its controlled companies within the EU.
We believe that the audit evidence we have obtained is suffcient and appropriate to provide a basis for our opinions.
Key audit matters of the audit are those matters that, in our professional judgment, were of most signifcance in our audit of the annual accounts and consolidated accounts of the current period. These matters were addressed in the context of our audit of, and in forming our opinion thereon, the annual accounts and consolidated accounts as a whole, but we do not provide a separate opinion on these matters.
The total carrying value of unlisted investments amounted to SEK 11.682 million as of December 31, 2017. The company's valuation policy is based on IFRS 13 and the International Private Equity and Venture Capital Valuation Guidelines. The process for valuation of unlisted investments is based on a high degree of judgement and input from data that is not observable in the market, which implies that an inappropriate assessment of input from data can have a signifcant impact in the assessment of fair value. Our audit procedures included, but were not limited to:
Refer to page 52, note 2 and note 3 for disclosure of valuation of unlisted investments.
This document also contains other information than the annual accounts and consolidated accounts and is found on pages 1-41. The Board of Directors and the Managing Director are responsible for this other information.
Our opinion on the annual accounts and consolidated accounts does not cover this other information and we do not express any form of assurance conclusion regarding this other information.
In connection with our audit of the annual accounts and consolidated accounts, our responsibility is to read the information identifed above and consider whether the information is materially inconsistent with the annual accounts and consolidated accounts. In this procedure we also take into account our knowledge otherwise obtained in the audit and assess whether the information otherwise appears to be materially misstated.
If we, based on the work performed concerning this information, conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
The Board of Directors and the Managing Director are responsible for the preparation of the annual accounts and consolidated accounts and that they give a fair presentation in accordance with the Annual Accounts Act and, concerning the consolidated accounts, in accordance with IFRS as adopted by the EU. The Board of Directors and the Managing Director are also responsible for such internal control as they determine is necessary to enable the preparation of annual accounts and consolidated accounts that are free from material misstatement, whether due to fraud or error.
In preparing the annual accounts and consolidated accounts, The Board of Directors and the Managing Director are responsible for the assessment of the company's and the group's ability to continue as a going concern. They disclose, as applicable, matters related to going concern and using the going concern basis of accounting. The going concern basis of accounting is however not applied if the Board of Directors and the Managing Director intends to liquidate the company, to cease operations, or has no realistic alternative but to do so.
The Audit Committee shall, without prejudice to the Board of Director's responsibilities and tasks in general, among other things oversee the company's fnancial reporting process.
Our objectives are to obtain reasonable assurance about whether the annual accounts and consolidated accounts as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinions. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs and generally accepted auditing standards in Sweden will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to infuence the economic decisions of users taken on the basis of these annual accounts and consolidated accounts.
As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:
We must inform the Board of Directors of, among other matters, the planned scope and timing of the audit. We must also inform of signifcant audit fndings during our audit, including any signifcant defciencies in internal control that we identifed.
We must also provide the Board of Directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with the Board of Directors, I (we) determine those matters that were of most signifcance in the audit of the annual accounts and consolidated accounts, including the most important assessed risks for material misstatement, and are therefore the key audit matters. I (We) describe these matters in the auditor's report unless law or regulation precludes disclosure about the matter.
In addition to our audit of the annual accounts and consolidated accounts, we have also audited the administration of the Board of Directors and the Managing Director of Kinnevik AB (publ) for the fnancial year 2017-01-01 - 2017-12-31 and the proposed appropriations of the company's proft or loss.
We recommend to the general meeting of shareholders that the proft to be appropriated in accordance with the proposal in the statutory administration report and that the members of the Board of Directors and the Managing Director be discharged from liability for the fnancial year.
We conducted the audit in accordance with generally accepted auditing standards in Sweden. Our responsibilities under those standards are further described in the Auditor's Responsibilities section. We are independent of the parent company and the group in accordance with professional ethics for accountants in Sweden and have otherwise fulflled our ethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is suffcient and appropriate to provide a basis for our opinions.
The Board of Directors is responsible for the proposal for appropriations of the company's proft or loss. At the proposal of a dividend, this includes an assessment of whether the dividend is justifable considering the requirements which the company's and the group's type of operations, size and risks place on the size of the parent company's and the group's equity, consolidation requirements, liquidity and position in general.
The Board of Directors is responsible for the company's organization and the administration of the company's affairs. This includes among other things continuous assessment of the company's and the group's fnancial situation and ensuring that the company's organization is designed so that the accounting, management of assets and the company's fnancial affairs otherwise are controlled in a reassuring manner. The Managing Director shall manage the ongoing administration according to the Board of Directors' guidelines and instructions and among other matters take measures that are necessary to fulfll the company's accounting in accordance with law and handle the management of assets in a reassuring manner.
Our objective concerning the audit of the administration, and thereby our opinion about discharge from liability, is to obtain audit evidence to assess with a reasonable degree of assurance whether any member of the Board of Directors or the Managing Director in any material respect:
Our objective concerning the audit of the proposed appropriations of the company's proft or loss, and thereby our opinion about this, is to assess with reasonable degree of assurance whether the proposal is in accordance with the Companies Act.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with generally accepted auditing standards in Sweden will always detect actions or omissions that can give rise to liability to the company, or that the proposed appropriations of the company's proft or loss are not in accordance with the Companies Act.
As part of an audit in accordance with generally accepted auditing standards in Sweden, we exercise professional judgment and maintain professional scepticism throughout the audit. The examination of the administration and the proposed appropriations of the company's proft or loss is based primarily on the audit of the accounts. Additional audit procedures performed are based on our professional judgment with starting point in risk and materiality. This means that we focus the examination on such actions, areas and relationships that are material for the operations and where deviations and violations would have particular importance for the company's situation. We examine and test decisions undertaken, support for decisions, actions taken and other circumstances that are relevant to our opinion concerning discharge from liability. As a basis for our opinion on the Board of Directors' proposed appropriations of the company's proft or loss we examined the Board of Directors' reasoned statement and a selection of supporting evidence in order to be able to assess whether the proposal is in accordance with the Companies Act.
Deloitte AB, was appointed auditor of Kinnevik AB by the general meeting of the shareholders on the 2017-05-08 and has been the company's auditor since 2013-05-13.
Stockholm 28 March 2018
Deloitte AB
Jan Berntsson
Authorized Public Accountant
Kinnevik applies the Esma Guidelines on Alternative Performance Measures (APM). An APM is a fnancial measure of historical or future fnancial performance, fnancial position, or cash fows, other than a fnancial measure defned or specifed in the applicable fnancial reporting framework. For Kinnevik's consolidated accounts, this typically means IFRS.
APMs are disclosed when they complement performance measures defned by IFRS. The basis for disclosed APMs are that they are used by management to evaluate the fnancial performance and in so believed to give analysts and other stakeholders valuable information. Defnitions of all APMs used are found below.
Number of customers having made at least one order within the last 12 months
Interest-bearing liabilities including interest-bearing provisions divided by shareholders' equity
Shareholders' equity as a percentage of total assets
Total value of all sale transactions during the period, including taxes but excluding shipping costs
The annual rate of return calculated in quarterly intervals on a SEK basis that renders a zero net present value of (i) fair values at the beginning and end of the respective measurement period, (ii) investments and divestments, and (iii) cash dividends and dividends in kind
All investments in listed and unlisted fnancial assets, including loans to portfolio companies
Net debt as a percentage of portfolio value
Net value of all assets on the balance sheet, equal to the shareholders' equity
Change in net asset value without adjustment for dividend paid or other transactions with shareholders
Interest bearing receivables (excluding net outstanding receivables relating to portfolio companies), short-term investments and cash and cash equivalents less interest-bearing liabilities including interest-bearing provisions and unpaid investments/divestments
The net of all investments and divestments in listed and unlisted fnancial assets
Gross merchandise value after actual and provisioned returns and rejections
Value of all assets on the balance sheet, less cash and cash equivalents
Annualized total return of the Kinnevik B share on the basis of shareholders reinvesting all cash dividends, dividends in kind, and mandatory share redemption proceeds into the Kinnevik B share, before tax, on each respective ex-dividend date. The value of Kinnevik B shares held at the end of the measurement period is divided by the price of the Kinnevik B share at the beginning of the period, and the resulting total return is then recalculated as an annual rate
the bOard OF directOrS aNd chieF eXecutive OFFicer OF kiNNevik ab For information about individual directors, please refer to pages 25-27.
Tom boardman Chairman
Cynthia gordon Board Director
erik mitteregger Board Director
Cristina Stenbeck Board Director
Dame Amelia Fawcett Deputy Chairman
Wilhelm klingspor Board Director
mario Queiroz Board Director
georgi ganev Chief Executive Offcer
henrik poulsen Deputy Chairman
Lothar Lanz Board Director
John Shakeshaft Board Director
The Annual General Meeting will be held on Monday, 21 May 2018, at 10.00 a.m. at the Hotel Rival, Mariatorget 3, Stockholm. The doors will open at 9.00 a.m. and registration will be conducted until 10.00 a.m., when the doors will be closed.
Shareholders who intend to participate at the Annual General Meeting shall:
Shareholders cannot vote or participate on distance.
Shares can be registered in the share register maintained by Euroclear Sweden in the name of the owner or the nominee. Shareholders whose shares are registered in the names of nominees must temporarily re-register the shares in their own name to be entitled to participate in the Annual General Meeting. Shareholders requiring such re-registration must inform the nominee of this in suffcient time prior to 15 May 2018.
Shareholders can notify the Company of their intention to participate from Tuesday, 17 April 2018, and shall notify the Company by using one of the following alternatives:
If participation is based on written power of attorney, this should be submitted in conjunction with notifcation of participation in the Annual General Meeting and brought in original to the Annual General Meeting. A template proxy form is available on the Company's website at www.kinnevik.com. Notifcation must be submitted to the Company no later than Tuesday, 15 May 2018.
In accordance with the resolution of the 2017 Annual General Meeting, Cristina Stenbeck has convened a Nomination Committee comprising representatives of Kinnevik's largest shareholders in terms of voting interest.
The Nomination Committee comprises Cristina Stenbeck representing Verdere S.à r.l., Wilhelm Klingspor representing the Klingspor family, Edvard von Horn representing the von Horn family, James Anderson representing Baillie Gifford, and Ramsay Brufer representing Alecta. Information about the work of the Nomination Committee can be found on Kinnevik's website at www.kinnevik.com.
| 26 April | Interim Report January-March 2018 |
|---|---|
| 23 July | Interim Report January-June 2018 |
| 25 October | Interim Report January-September 2018 |
SKEPPSBRON 18 | P.O. BOX 2094 | SE-103 13 STOCKHOLM +46 8 562 000 00 | REG. NO. 556047-9742 | WWW.KINNEVIK.COM
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