KinnevikOmsl-06 08-03-11 16.59 Sida 3 Investment AB Kinnevik Head office: Skeppsbron 18 Box 2094 SE-103 13 Stockholm Telephone: + 46 8 562 000 00 Telefax: + 46 8 20 37 74 Registration number: 556047-9742 www.kinnevik.se Annual Report 2007 Elanders Falköping 2008 ”More than seventy years of entrepreneurial tradition under the same group of principal owners” Contents Five-year Summary 4 Chief Executive’s review 5 Board of Directors 6 Senior Executives 8 Historical background 9 The Kinnevik share 10 Book and fair value of assets 12 Proportional part of revenue and result 13 Our Group 14 Major Unlisted Holdings Korsnäs 16 Major Listed Holdings Millicom 20 Tele2 21 Modern Times Group MTG 22 Metro 23 Transcom 23 New Ventures 24 Corporate Governance Report 26 Annual and Consolidated Accounts for 2007 Board of Directors’ Report 29 Financial Statements and Notes for the Group 32 Financial Statements and Notes for the Parent Company 56 Audit Report 63 Definitions of financial key ratios 64 Five-year Summary For definitions of financial key ratios, refer to page 64. (SEK million) 2007 2006 2005 2004 2003 1) Summary of Income Statement 1) Revenue 7 673 6 305 4 618 4 600 5 660 Operating income 885 478 353 1 526 716 Change in fair value of financial assets 15 540 10 974 3 893 -2 544 - Result from participation in associated companies - - - - 2 675 Result after net financial items 16 266 11 608 4 647 -1 198 3 325 Result for the year 16 179 11 549 4 097 -1 417 3 731 Summary of Cash Flow Statement Cash flow from operations 878 1 533 52 1 128 806 Cash flow from investing activities 695 -3 302 266 1 775 -483 Cash flow from financing activities -1 581 1 717 -34 -2 802 -483 Cash flow from discontinued operations - -50 -367 -33 - Cash flow for the year -8 -102 -83 68 -160 Key ratios Operating margin 11.5% 7.6% 7.6% 33.2% 12.7% Capital employed 59 778 44 629 31 022 30 262 19 700 Return on capital employed 32.0% 31.6% 15.9% -3.4% 20.5% Return on shareholders’ equity 38.2% 40.0% 18.9% -7.2% 37.8% Equity/assets ratio 80% 72% 70% 58% 65% 2) Net debt 9 205 9 856 7 249 7 168 6 803 Debt/equity ratio, multiple 0.2 0.3 0.3 0.7 0.7 Risk capital ratio 82.2% 75.3% 72.3% 60.3% 57.7% 1) IFRS have been applied as from 2005. Figures for 2004 have been recalculated in line with IFRS. 2003 are reported in accordance with earlier principles based on recom- mendations from the Swedish Accounting Standards. 2) Adjusted for surplus value in the share portfolio in line with earlier accounting principles. 4 Chief Executive’s review 2007 was a very good year for Kinnevik and our sharehol- ders. Kinnevik’s net profit for the year was the highest ever at SEK 16,179 million, the net asset value increased by SEK 15,832 million and the value of the Kinnevik share increased by 28%, significantly outperforming the Stockholm Stock Exchange which decreased by 7%. 2007 was a year full of activity and I would like to highlight some factors that have contributed to the strong performance during the year. Kinnevik has a strong tradition to build on with more than 70 years of entrepreneurship with the same group of principal owners. The performance in 2007 is a further re- cognition of our long term strategy as Kinnevik’s investments generate value by growth. A good example is Millicom, which in 2007 accelerated its network roll-out and showed tremendous growth with the number of mobile subscribers increasing by 57%, which was reflected in a very strong share price development during the year. In practice, Kinnevik exerts its ownership through the Gateway TV, as well as an African micro finance company, Board of Directors of our portfolio companies. In this work, Bayport, to our portfolio. We have also increased our invest- we strive to strengthen each company’s unique position. In ments in Kontakt East Holding and Black Earth Farming. Our Tele2, the realignment of the company intitated by the Tele2 strategy for the New Ventures is simple and the investment Board in 2006 was successfully executed and Tele2 refocused mandate is wide. Kinnevik is looking to invest in industries its activities towards mobile infrastructure with selective and markets with very strong growth potential, be it an broadband operations and exiting fixed-line telephony in emerging market or an emerging technology. The business several European markets. In Metro, a strategic review was should be easily scalable and we want to invest at an early initiated in the second half of 2007, aiming to turn around stage, aiming to get a significant influence in the company, the company’s financial performance. preferably through the Board of Directors. So far, Kinnevik In Korsnäs, Kinnevik’s wholly owned pulp and paper has invested around SEK 980 million in New Ventures, and company, the integration work between the mills in Gävle the value of the portfolio at the end of 2007 was some SEK and Frövi was completed, and the benefits of synergies was 1,800 million. increasingly visible in the financial result. Despite chal- A case study of a new venture in the Kinnevik portfo- lenging operational conditions in 2007, mainly caused by lio is Black Earth Farming, where Kinnevik was one of the steeply rising costs for pulpwood, Korsnäs maintained a founding investors in 2006. Black Earth Farming buys and profitability in the top range of Swedish pulp and paper operates farmland in Russia. Agriculture is a sector where companies. Kinnevik has a long tradition and know-how, which has Our strategy has resulted in a strong presence in emer- been instrumental in developing Black Earth Farming. With ging markets where Kinnevik has more than half of the as- its 280,000 hectares of land in the Black Earth region in sets, spread over Central and South America, Africa, Eastern Russia, Black Earth Farming is one of the largest agricultural Europe including Russia and Asia. In the developed markets, companies in the world. Black Earth Farming undertook an the Kinnevik companies have a strong platform in the Nordic initial public offering in 2007 and was listed at First North countries, but also significant presence in the rest of Europe. in Stockholm. The issue met with strong investor interest. On a macro economic level the strong global economic Kinnevik remains one of the largest shareholders in the com- growth continued, particularly in emerging markets. Growing pany. The total investment of SEK 493 million in 2006-2007 private consumption in these markets is one of the main dri- was valued at SEK 1,208 million at the end of 2007. vers behind increasing penetration of mobile telephony – a Looking into 2008, we are likely tol meet challenges as key driver for Millicom and Tele2, the two mobile operators the global economic outlook at the time of writing is uncer- in our portfolio. tain and financial markets are volatile. We cannot expect the The financial markets were buyoant in the first half of Kinnevik portfolio of companies to be protected from slo- 2007. Kinnevik took advantage of this development and wing global economic growth or unstable financial markets. exited its ownership in the financial group Invik, at what However, I remain convinced of the long-term possibilities in we believe was a favourable price for our shareholders. The our portfolio of companies and we are dedicated to continue sale was a reflection of the consolidation taking place in the our strategy of active ownership. Nordic financial market and it gave us increased financial I would like to thank the employees for their excellent ef- flexibility to invest in new growth markets. forts and all our shareholders for your confidence in Kinnevik. During the year, Kinnevik has intensified its activities within New Ventures, adding an African pay-TV company, Mia Brunell Livfors 5 Board of Directors The Board of Directors, Chief Executive Officer and Company Secretary of Investment AB Kinnevik. Left to right: Erik Mitteregger, Henrik Nord, Allen Sangines-Krause, Per Eriksson, Vigo Carlund, Cristina Stenbeck, Stig Nordin, Mia Brunell Livfors, Wilhelm Klingspor, Bo Gidlund, Hans Wahlbom and Mikael Larsson. 6 BOARD OF DIRECTORS Board of Directors Cristina Stenbeck Chairman Stig Nordin Board member B.Sc. Georgetown University, Washington DC, USA, born M.Sc. Engineering, Chalmers University of Technology, born 1977. Chairman of the Board of Investment AB Kinnevik 1943. Member of the Board of Investment AB Kinnevik since 2007. Vice Chairman of Investment AB Kinnevik since 2004 and Industriförvaltnings AB Kinnevik 1992-2004. 2004-2007 and Industriförvaltnings AB Kinnevik 2003-2004. Member of the Board of Korsnäs AB 1992-2000 and since Chairman of Emesco AB. Member of the Board of Metro In- 2004. President and CEO of Industriförvaltnings AB Kinnevik ternational S.A., Millicom International Cellular S.A., Modern 1992-1999, CEO of Korsnäs AB 1993-1998 and CEO of Invik Times Group MTG AB, Tele2 AB, Transcom WorldWide S.A. & Co. AB 1999-2001. and Korsnäs AB since 2003. Shareholding: 43,668 Class B shares, including related physi- Shareholding: 2,200 Class B shares. cal persons. Vigo Carlund Board member Allen Sangines-Krause Board member Born 1946. Member of the Board of Investment AB Kin- Ph.D., Harvard University, born 1959. Member of the Board nevik since August 2006, President and CEO of Kinne- of Investment AB Kinnevik since 2007.