S V E N S K A

S P E L

A N N U A L

R E P O R T

2 0 0 6 1,370 million SEK to organisations for children and youth

1724 retailers and em- ployees trained in responsible gaming

243 new millionaires

Svenska Spel Annual Report 2006 Table of contents

2 CEO commentary 5 The Swedish gaming market S venska Spel now and 11 in the future

14 Retail Division CEO commentary Direct Division Profi ts growing fast2er 20 than gaming, the ideal 26 Brand Retail Division combination. The Retail and14 Direct Divisions 29 SOCIAL RESPONSIBILITY REPORT are the pillars of the business. Svenska Spel has partnerships 30 Responsible gaming with more than 6,000 retail 36 Ethical marketing outlets, some 2,000 restaurants and several sports clubs. 38 Security 40 Employees 44 Environment 1724 46 Profi t retailers and em- ployees trained in FINANCIAL STATEMENTS Social responsible gaming 49 Responsibility Repo29rt 50 Directors’ Report Svenska Spel is a major employer and 54 Distribution of profi ts market leader in the gaming industry, 54 Risks and risk management important reasons for contributing to society’s healthy development. 56 Group 59 Parent Company 64 Notes Financial Calendar 2007 81 Audit report Annual General Meeting 25 April 2007 Interim report, January–March 20 April 2007 82 Corporate Governance Report Interim report, January–June 20 July 2007 88 Board of Directors Interim report, January–September 23 Oktober 2007

90 Key management The Annual General Meeting will be held at 4 p.m. on 92 Chairman’s statement Wednesday 25 April at the Wisby Hotel in Visby, Gotland. 93 Two 20-year anniversaries in 2006

Svenska Spel Annual Report 2006 Svenska Spel in summary

Group Retail Division Direct Division

The organisation has two divisions – Retail and Direct – Retail Outlet, Restaurant and Association Internet & Mobile, Casino and Bingo Hall each with associated business areas. The International business areas. business areas. business area reports directly to the CEO.

Key indicators

2006 2005 2006 2005 2006 2005 Revenue from gaming, SEK m 20,281 19,287 Revenue from gaming, SEK m 17,599 17,768 Revenue from gaming, SEK m 2,790 2,152 Net revenue from gaming, SEK m 8,905 8,506 Net revenue from gaming, SEK m 7,050 7,093 Net revenue from gaming, SEK m 1,855 1,413 Operating profi t, SEK m 4,763 4,521 Operating profi t, SEK m 4,044 3,966 Operating profi t, SEK m 920 792 Operating margin, % 23.5 22.8 Operating margin, % 23.1 22.5 Operating margin, % 35.9 40.9 Full-time positions* 1,486 1,425 Full-time positions 203 205 Full-time positions 910 841 * others are full-time staff positions

Signifi cant events in 2006

■ I ncreased sales and record profits led to increased ■ Nearly 700 retailers certified in responsible ga ming ■ Poker on svenskaspel.se rapidly gained 30% sporting grants ■ All gaming and lottery retailers equipped with new market share ■ Further applications for modified concessions, online terminals ■ Strong growth on svenskaspel.se but no permits granted yet ■ 2,000 Winwave VLTs replaced older terminals ■ Increased sales, more guests and improving ■ W LA audit of responsible gaming ranks Svenska in restaurants attitudes to casino operations Spel amongst world best ■ More than 500 new lottery retailers established ■ The SOU 2006:64 casino survey reports that Casino ■ Gaming support centralised in Visby ■ New business area being established: Association Cosmopol easily meets expectations ■ S trategy introduced for long-term management business area ■ New business areas being established: Bingo Hall development ■ Triss celebrated the 20-year anniversary with its and Subscription business areas ■ L imbo project started, also Project P – a unique successful Triss Jubileum package future investment in responsible gaming ■ Oddset celebrated its 20-year anniversary and ■ A nnual sales for Oddset reached record levels largely launched three matches on -Bomben due to successful ■ New lottery tickets with shorter life: Monte Carlo ■ Keno also recorded record sales. and Skrap-Sudoku.

Priorities for 2007

■ World leader in responsible gaming ■ Continue trying to achieve earlier concession ■ Develop new and existing distribution channels ■ G row to retain: Implement strategies to maintain changes ■ Introduce more objects on Oddset Lången market share and competitiveness ■ Develop the new Association business area ■ Development and evaluation of responsible gaming ■ Reduce operational costs ■ Launch Project P tools ■ I ntroduce and certify an information security man- ■ 18-year age limit ■ Efforts to increase market share for svenskaspel.se agement system in compliance with international ■ Implementation of new responsible gaming training ■ Improve the gaming experience on svenskaspel.se standards SS-ISO/IEC 27001 for restaurant proprietors ■ Further improve the gaming and guest experience ■ I nitiatives for environmental protection continue ■ Launch Limbo in early 2007 at Casino Cosmopol Introduce environmental standards and key indicators ■ Launch new lotteries ■ Develop the new business areas ■ I ntroduce 18-year age limits for all games other ■ Introduce new central system in the Restaurant ■ Further channel development than lotteries business area

Our games

Sports betting Numbers games Lotteries Casino games and exclusive ■ Oddset ■ Lotto ■ Triss internet games ■ Stryktipset ■ Viking Lotto ■ Tia ■ Casino games ■ Europatipset ■ Joker ■ Skrap-Spel (table and slots) ■ Måltipset ■ Keno ■ Penning ■ Poker on svenskaspel.se ■ Limbo ■ Association lotteries ■ Bingo on svenskaspel.se (introduction 2007) ■ Lotteries with short life ■ Pick’n’Click on svenskaspel.se Svenska Spel in summary 2006 in summary

Group Retail Division Direct Division A somewhat dismal winter was followed by a radiant spring, Meanwhile, gaming on Jack Vegas VLTs recovered after the summer and autumn. We ended 2006 by handing over a decline caused by the previous year’s smoking ban. The organisation has two divisions – Retail and Direct – Retail Outlet, Restaurant and Association Internet & Mobile, Casino and Bingo Hall each with associated business areas. The International business areas. business areas. cheque for SEK 1.2 billion to the sports movement. Old faithfuls Lotto and Keno gained steadily throughout business area reports directly to the CEO. Internet poker was launched on svenskaspel.se during the the year. Dream winnings on Lotto and Joker were won on spring, with some 137,000 players joining the new poker three occasions, at best paying out SEK 93.3 million to a lucky Key indicators room with integrated responsible gaming. It didn’t take long svenskaspel.se customer. Keno ended the year with a new 2006 2005 2006 2005 2006 2005 before Svenska Spel’s internet poker had achieved a market sales record having not run any campaigns other than profes- Revenue from gaming, SEK m 20,281 19,287 Revenue from gaming, SEK m 17,599 17,768 Revenue from gaming, SEK m 2,790 2,152 share of 30%. sional marketing and yet another successful Keno festival. Net revenue from gaming, SEK m 8,905 8,506 Net revenue from gaming, SEK m 7,050 7,093 Net revenue from gaming, SEK m 1,855 1,413 2006 was a great year for sports. The big event of the sum- The change of government last autumn also means delays Operating profi t, SEK m 4,763 4,521 Operating profi t, SEK m 4,044 3,966 Operating profi t, SEK m 920 792 mer was the Football World Cup, which boosted interest in can be expected in the review of the Swedish gaming market. Operating margin, % 23.5 22.8 Operating margin, % 23.1 22.5 Operating margin, % 35.9 40.9 our sports betting and contributed strongly to sales records Full-time positions* 1,486 1,425 Full-time positions 203 205 Full-time positions 910 841 for the 20-year old Oddset game. * others are full-time staff positions Two 20-year anniversaries in 2006 Signifi cant events in 2006

■ I ncreased sales and record profits led to increased ■ N early 700 retailers certified in responsible ga ming ■ P oker on svenskaspel.se rapidly gained 30% Triss and Oddset were both introduced in 1986 and are today sporting grants ■ A ll gaming and lottery retailers equipped with new market share amongst the most popular games on the market, with annual ■ Further applications for modified concessions, online terminals ■ Strong growth on svenskaspel.se sales over the SEK billion mark. but no permits granted yet ■ 2 ,000 Winwave VLTs replaced older terminals ■ I ncreased sales, more guests and improving ■ W LA audit of responsible gaming ranks Svenska in restaurants attitudes to casino operations Spel amongst world best ■ More than 500 new lottery retailers established ■ T he SOU 2006:64 casino survey reports that Casino Triss – ’s most popular lottery ■ Gaming support centralised in Visby ■ N ew business area being established: Association Cosmopol easily meets expectations When the Triss lottery was launched on 29 September 1986 it was ■ S trategy introduced for long-term management business area ■ N ew business areas being established: Bingo Hall Profi t for the year priced at SEK 20, with the biggest prize being SEK 100,000. Triss ■ development T riss celebrated the 20-year anniversary with its and Subscription business areas sales grew from SEK 360 million in 1986 to some SEK 1,500 mil- ■ L imbo project started, also Project P – a unique successful Triss Jubileum package future investment in responsible gaming ■ O ddset celebrated its 20-year anniversary and lion in 1990. The price was increased to SEK 25 in 1992. Sales The entire profi t is used for the benefi t of Swedish society. Guidelines for the ■ A nnual sales for Oddset reached record levels largely launched three matches on Hockey-Bomben Distribution of profits really gained momentum in 1994 when the “TV scratch” was ■ distribution of the profi t are determined by the Swedish Parliament and pro- due to successful World Cup N ew lottery tickets with shorter life: Monte Carlo 2002–2006 introduced and the winner could scratch up winnings of between ■ Keno also recorded record sales. and Skrap-Sudoku. posed to the Annual General Meeting for resolution. 2006 profi t was SEK SEK 50,000 and SEK 5,000,000. 4,807 million of which SEK 1,370 million (1,151) went to non-government SEK million Priorities for 2007 1,500 Månadsklöver was launched on 17 October 1997 and multiple and sports organisations for children and youth through the Swedish Sports prizes introduced in 2002. ■ ■ ■ World leader in responsible gaming C ontinue trying to achieve earlier concession Develop new and existing distribution channels Confederation and the Swedish National Board for Youth Affairs. SEK 1,216 1,200 ■ ■ To mark the 20-year anniversary in 2006, the luxury Jubileum G row to retain: Implement strategies to maintain changes Introduce more objects on Oddset Lången million (1,019) went to the Swedish Sports Confederation and SEK 154 million market share and competitiveness ■ Develop the new Association business area ■ D evelopment and evaluation of responsible gaming package was launched at a price of SEK 250 per lottery ticket. 900 ■ Reduce operational costs ■ Launch Project P tools (131) to the Swedish National Board for Youth Affairs. SEK 435,000 of the ■ I ntroduce and certify an information security man- ■ 18-year age limit ■ Efforts to increase market share for svenskaspel.se profi t from Penninglotten is used to support culture. The remaining SEK Oddset – the world’s fi rst online betting ■ ■ 600 agement system in compliance with international I mplementation of new responsible gaming training I mprove the gaming experience on svenskaspel.se 3,437 million goes to the public treasury, ultimately benefi ting the Swedish Oddset was introduced on 27 October 1986 as the world’s fi rst ■ standards SS-ISO/IEC 27001 for restaurant proprietors F urther improve the gaming and guest experience population in a variety of ways. ■ I nitiatives for environmental protection continue ■ Launch Limbo in early 2007 at Casino Cosmopol 300 online betting game, and by 1990 its sales had surpassed the Introduce environmental standards and key indicators ■ Launch new lotteries ■ Develop the new business areas SEK 1 billion mark. 02 03 04 05 06 ■ I ntroduce 18-year age limits for all games other ■ I ntroduce new central system in the Restaurant ■ Further channel development Defi nition of sales In the gaming industry a distinction is made between In 2000, Lången was launched on svenskaspel.se and in 2001, than lotteries business area Swedish Sports Confederation gross sales, which is the total amount in the pool, and net sales, which is the the Oddset range was expanded with the Bomben game. Mixen Swedish Sports Confederation Our games amount remaining once the winnings have been paid out. Net sales only are (Through Handslaget and special grants) was added in 2004, and in 2006 Oddset achieved record sales of Swedish National Board for more than SEK 2 billion. Sports betting Numbers games Lotteries Casino games and exclusive calculated in the casino business. Youth Affairs ■ Oddset ■ Lotto ■ Triss internet games The 20-year anniversary of Oddset in 2006 coincided with ■ Stryktipset ■ Viking Lotto ■ Tia ■ C asino games Bomben players for the fi rst time being able to bet on three ice ■ Europatipset ■ Joker ■ Skrap-Spel (table and slots) hockey matches. An event which gave the highest odds of all ■ ■ ■ ■ Måltipset Keno Penning P oker on svenskaspel.se time: 2,043,523.50. ■ L imbo ■ Association lotteries ■ B ingo on svenskaspel.se (introduction 2007) ■ Lotteries with short life ■ P ick’n’Click on svenskaspel.se

Solberg Printing: Strokirk-Landström • Photography: Olof Holdar, Peter Orevi, Bildbyrån i Hässleholm and others • Translation: Jenny Harlen Marketstrat Svenska Spel’s mission

The Swedish State aims to promote positive development of the ga ming market within the bounds of social responsibility, and provide a high level of service with an emphasis on security. This is to be achieved while maintaining and developing strong profi tability to benefi t sports associations and the State. The mandate assigned Sven- ska Spel by the State is, through innovation and development, to meet consumer demand for attrac- tive lotteries and games. The mis- sion also involves closely monitor- ing international competition and offering a competitive alternative which achieves high standards in responsible gaming. Record profi ts for Svenska Spel

Profi t for 2006 was SEK 4,807 million. The entire profi t is allocated between non-government and sports organisations !for children and youth, and the public treasury.

SVENSKA SPEL ANNUAL REPORT 2006 1 CEO COMMENTARY

Profi ts growing faster than gaming, the ideal combination

■ SEK 11,165,809,084 in paid winnings Jack Vegas VLTs harder than we’d expected, the licences we’d applied for as early as last summer were overshad- ■ SEK 4,807,102,400 in profi t owed by the election, and competitors were more preva- ■ SEK 1,216,141,000 to sport lent than ever. A great many sites with varying degrees of ■ SEK 153,910,000 to the National Board quality and seriousness are now offering games on the for Youth Affairs Swedish market – products that we have no chance of ■ 137,000 responsible poker players being licensed to run ourselves, and nearly all with better ■ 1,945 fabulous employees terms than we have. And to top it off, these operators are spending increasingly large sums on aggressive marketing ■ 243 new millionaires while we’ve been reducing our media investments over ■ 2 new business areas the past couple of years. ■ No. 1 in responsible gaming Despite this diffi cult situation, which is far from being the monopoly many imagine it to be, we managed to retain our sales on the same level – and increase our prof- s you can see 2006 was a good year, even if it had a its. Compared to 2005 we increased our net profi ts by Asomewhat slow start. Following a huge Christmas SEK 238 million to a record level of SEK 4,807 million, rush at the end of 2005 lotteries had a downswing at the the best in the Company’s history, without any signifi cant start of the year, the smoking ban in restaurants hit our increase in gaming.

2 SVENSKA SPEL ANNUAL REPORT 2006 A number of new opera- tions and business areas Someone put the ■ were started in 2006 – The Bingo Hall business area also aims to strengthen question to us: does the standing of associations on the gaming market. In some of these have it get any better than conjunction with over a thousand sports clubs and their ”already gained momen- this? Maintaining bingo alliances, we have decided to put the old favourite tum while others will gaming on the same Bingo back on the map again, something which will breakthrough in 2007. level while increasing benefi t hundreds of thousands of club members assum- profi ts? Well, there ing the licence is granted. Well-managed, Bingo’s more are a number of ways effi cient operation and greater popularity will also show it could actually be in our profi t. improved. First and f oremost, we’re hoping for effective ■ Subscription is an upcoming business area with a lot of gaming regulations – also covering internet. promise as we believe there are many people who’d like More people now understand that discussions on to subscribe to four Triss tickets a month or the like. Or monopolies and licensing systems are secondary to the perhaps a standing Lotto row with a chance at the need for effective gaming and lottery legislation that Dream price? covers the entire gaming market, and which prevents unlicensed operators from being active on the market. ■ Part of the Internet & Mobile business area, Svenska Should politicians decide on a licensing system for inter- Spel’s internet poker is the fi rst State-controlled and net gaming, which is the alternative currently being dis- regulated poker on the internet. It proved an overnight cussed, it’s not something we’d be afraid of. Quite the success when launched in March, and was the main fac- opposite in fact; it would enable us to meet our competi- tor behind our increased profi ts in 2006. After little tors on equal terms. more than a half-year, Svenska Spel’s poker site is one of the fi ve biggest in the world. It is also solid proof that Svenska Spel has a proud and long history – the fi rst you don’t have to ignore responsible gaming to run Penninglotten was sold as early as 1897 and the fi rst internet poker. Poker on svenskaspel.se is almost com- Stryktips coupon submitted in 1934 – and through many pletely free of excessive gaming and other problems a new business initiative in later years. We have an inter- common on other online poker sites, largely due to the esting future ahead with great opportunities. self-limitations the player has to defi ne before he or she During the past two years we’ve made major changes can start playing. to strengthen the Company in a global and increasingly turbulent gaming market. We have fundamentally Another area in which we changed the organisation and have the customer as a have invested a lot of starting point today rather than our various products. energy is strengthening It is our customers who buy our products and it is their the Svenska Spel brand. needs that must guide our development. They are the rea- Most people have no son we need to continue developing our total business. doubt seen our red and It is our customers In 2006 a number of new businesses and business areas white “winner” pop up who buy our were started – some of these have already gained momen- in every imaginable, products and it is tum while others are expected to breakthrough in 2007. and unimaginable, sit- their needs that uation. Our products ■ ” The Association business area is a new distribution also have “the winner” must guide our channel with a broader reach than Triss and our other as their unmistakeable development. products, and aims to help the many associations in sender – purely to Sweden to boost their self-fi nancing with contributions increase awareness that from attractive gaming products. Svenska Spel is the

SVENSKA SPEL ANNUAL REPORT 2006 3 CEO COMMENTARY

company behind so focussed on achieving the ten-year goal set by the Board many of the great of Directors and is broken down into seven, fi ve and games bought by nearly three-year assignments for different parts of the organisa- The goal is clear fi v e million Swedes tion. We also list hundreds of actions that are to be every year. That it is completed during the year. This means Svenska Spel is – we shall continue the same Svenska Spel now an organisation with full delegation in which all to be the world that annually gives over operative decisions are taken as close to the customer as ”leader in responsi- a billion kronor to possible in the staff and business areas – Retail Outlet, ble gaming. sport and is the main Restaurant, Association, Internet & Mobile, Casino, sponsor of football, ice International, Bingo Hall and Subscription. All strategic hockey, , hand- decisions are meanwhile centralised to Key management. ball and indoor bandy. Out of the hundreds of “actions” we have defi ned for Responsible gaming has 2007, the most important have been collected under the also been in the limelight “13 matches” banner which makes up Svenska Spel’s during the year, and you can read more about it in our internal Stryktips coupon. Matches may be won, lost or social responsibility report, which is part of this annual drawn – all depending on how well the Company per- report. Our long-term objective for responsible gaming is forms during the year. In the same way as last year, that it should not need to be discussed – that it is simply a Svenska Spel employees put in their predictions in Decem- natural part of our what we do. And we are well on the ber and can follow the match results and their own rows road to getting there. during the year. One year later the winner is announced. We performed a number of different studies and sur- But at Svenska Spel there are many more winners in veys in 2006 to see how well we’re succeeding. The out- reality, 1,945 fantastic employees to be precise. A big come speaks for itself – we can have a clear conscience in thank you to you all – you are the ones who are making saying that we live up to our gaming responsibility. But it happen. our sights are set still higher. The goal is clear – we shall continue to be the world leader in responsible gaming. One such future initiative, currently running under the working name Project P, involves investing in research to improve the level of responsible gaming we offer our customers. The project is being run in collaboration with mathematicians and psychologists.

Objectives for 2007 We don’t talk about short-term goals at Svenska Spel but rather use a methodology based on tasks to be completed Jesper Kärrbrink over a longer perspective. The Company as a whole is CEO Svenska Spel

4 SVENSKA SPEL ANNUAL REPORT 2006 THE SWEDISH GAMING MARKET 2006

Continued growth on the gaming market

The Swedish gaming market is developing, expanding and becoming broader. Or more correctly, the two Swedish gaming markets if you include both the State regulated gaming market and the unregulated gaming market with foreign internet gaming companies. While the gaming market surged with activity, uncertainty about the future reigned in the 2006 election year in anticipation of political decisions.

nternet gaming operators, regulated and unregulated bility followed by regulated companies are non-existent in Ialike, show great initiative and creativity in the battle for the unregulated internet companies. The Lotteries Act that Swedish gaming customers. The regulated gaming market prohibits foreign gaming companies from marketing in grew to SEK 36.6 billion (35.5) in 2006. Sweden does not prevent numerous internet operators from Svenska Spel’s profi t improved 5.2% over the previous targeting the Swedish market through widespread advertis- year to SEK 4,807 million and gross sales increased by 2% ing in Swedish media. Total internet stakes by Swedish to more than SEK 20 billion. Svenska Spel thus retained its players increased by 35% in 2006 to some SEK 19 billion. market share of 55% of the regulated market. How the market should best be regulated is a political Retailers are Svenska Spel’s biggest distribution channel, issue. Sweden had a change of government in autumn 2006 representing some SEK 17 billion of total sales of SEK 20 and before being elected the new government expressed its billion. The downwards trend in traditional betting agen- ambition to deregulate the market. cies has stabilised during 2006, but Jack Vegas restaurants All European countries have state-regulated gaming showed a 2% decline primarily due to the smoking ban in markets and the EU Commission has commenced an 2005. enquiry into state-owned gaming companies to determine Svenska Spel’s internet site, svenskaspel.se, has the whether they contend with the EU’s standing on free com- highest visiting frequency on the Swedish market and its petition. Gaming operators are also awaiting resolution of market share increased from 18% to 30% in 2006. Net this matter. gaming on svenskaspel.se increased by 70%. Primarily due to the successful launch of poker in spring 2006, the Harder competition increase is also due to the increasing popularity of inter- The unregulated gam- net sports betting, internet numbers games and last ing market, consisting year’s success, internet bingo. Internet gaming repre- of the foreign internet How widespread sented nearly 10% of Svenska Spel’s total gaming reve- gaming companies that is illegal gaming nue, and for the fi rst time our leading competitor ATG have established them- It is naturally diffi cult to had sales of more than SEK 11 billion in 2006. Non-gov- selves in Sweden, has know exactly. The most ernment gaming and lotteries increased due to the Post- changed the competitive recent study made by the National Gaming Board in code Lottery entering the Swedish market. Folkspel’s situation. In contrast to 2003 reported that illegal decline in recent years continued with annual sales clos- regulated operators they gaming represented SEK 3 ing on just over SEK 1.2 billion. operate in defi ance of to 5 billion. Nothing would indicate that this has declined. The unregulated gaming market operates under differ- the Lotteries Act. Indi- ent conditions to the regulated. The framework provided vidual convictions and by the Lotteries Act and the self-imposed gaming responsi- marketing bans have

SVENSKA SPEL ANNUAL REPORT 2006 5 THE SWEDISH GAMING MARKET 2006

not had any signifi cant effect as unregulated companies gaming via retailers has stagnated or declined. Svenska simply ignore the concept of responsible gaming that is Spel has maintained its position as market leader. the hallmark of the regulated market. These companies ATG is still the major competitor in retail outlets, but compete with higher payback and with other products. they are losing ground from retail to internet gaming. Sweden is on the way to completely losing control over Folkspel, with its fl agship product Bingolotto, is strug- internet gaming; there is a growing need for reform of gling against the competition with the negative trend of Swedish gaming legislation. There is also an extensive past years continuing. Changes and improvement to the market for illegal gaming – the “black bandits” and illegal Bingolotto TV programme have had marginal effect. poker clubs. Similarly, gaming in Bingo premises continues to lose Market share for regulated operators declined a few ground and is having diffi culty in surviving. percentage points in 2005, while internet operators gained share as they had the poker market to themselves. In 2006, Changing attitudes both Svenska Spel and ATG regained some of the previ- Svenska Spel’s annual gaming survey shows that 84% of ously lost market share. the population plays at some stage during the year and that 75% are Svenska Spel customers, a fi gure which Still market leader represents nearly fi ve million people. Svenska Spel has 280,000 active internet customers and Men are the most frequent players across the spectrum market share of approximately 30%; ATG’s website has of games and are also the trendsetting internet players. an estimated 70,000 customers. Among the largest for- However, Bingo on svenskaspel.se has made a break- eign internet operators with advantageous conditions through with female internet users. The games that attract from various tax paradises that are active in the Swedish women are primarily lotteries and other games of chance, market are Expekt, Unibet and Ladbrokes. They have with popular favourites Triss and Lotto having the broad- already succeeded in gaining a foothold in sports betting est base. and poker, and the 2006 World Cup as well as the grow- Internet poker and Svenska Spel’s Jack Vegas VLT are ing interest in poker contributed to their growth. The gaming forms that attract a younger audience. Older successful poker launch on svenskaspel.se in the spring of players tend to choose more established games such as 2006 was however a setback. Lotto, Stryktipset, Måltipset, Bingolotto and in-house In autumn 2006 the US Congress passed legislation ban- Bingo, with the majority opting to play in the traditional ning internet gaming in the US. The internet operators manner at retailers. Some 10% play on internet and 5% involved were hit hard and are interested in playing via their mobile phone. Not are expected to intensify unsurprisingly, it is mainly men under the age of 50 that Is there any common their efforts on the have adopted modern gaming technology. regulation of gaming in the EU European market. Swedish attitudes towards gaming for money have No, the gaming business within Russia has also decided changed in recent years with an increasingly high percent- the EU is not harmonised. to implement a ban in age being negative, most likely due to the debate on There are no common gaming regulations in the EU; gaming 2008. gaming addiction. As much as 81% of the population is regulated at a national level In Sweden, internet considers the regulated gaming market to be benefi cial and has long been arranged gaming has shown the and a large majority, 70%, also believe State-owned gam- by each country individually. Technology development, primarily internet, has led fastest growth in recent ing operators take greater responsibility than unregulated to gaming increasingly being run with years while traditional operators. no respect for national borders and national rules and regulations.

6 SVENSKA SPEL ANNUAL REPORT 2006 SVENSKA SPEL ANNUAL REPORT 2006 7 THE SWEDISH GAMING MARKET 2006

Facts, the Swedish gaming market

The regulated Swedish gaming market, gross revenue per gaming operator Regulation in practice

SEK million 2006 2005 2004 2003 2002 In 1934 AB Tipstjänst was launched to provide a safe ATG 11,278 10,988 10,776 10,534 10,177 and reliable alternative to illegal betting. In the Svenska Spel1) 20,071 19,586 20,207 19,533 17,989 1970s there was a problem similar to the “betting Total 31,349 30,574 30,983 30,067 28,166 hysteria” of the 1930s, although this time it was in the form of one-arm bandits. The response was pro- NGO games and lotteries hibition, which in turn led to an explosion of illegal Folkspels lotteries 1,240 1,391 1,888 2,269 3,011 slot machines. Bingo 1,600 1,665 1,796 1,820 1,836 In 1995 Svenska Spel obtained a licence to oper- Rikslotterier 1,598 996 932 878 853 ate 7,500 video lottery terminals (VLTs) in a secure National lotteries 100 102 103 105 107 and responsible way. We have succeeded in chan- Regional lotteries 4 4 3 5 9 nelling this type of gaming within the framework of Total 4,542 4,158 4,722 5,077 5,816 the current regulations and today there are only an estimated 3,000 to 5,000 illegal terminals. In 2005 Restaurant casinos 2) 700 759 870 1,058 1,126 we received permission to launch poker on sven- Total 36,591 35,491 36,575 36,202 35,108 skaspel.se with the intention of channelling gaming to more secure forms in Sweden. 1) Including net sales for Casino Cosmopol and Poker. 2) Low response frequency among surveyed restaurant casino operators means the information on restaurant casino gaming is less reliable than other reported information.

The Swedish regulated gaming market 2006

Svenska Spel, total (Incl. Casino Cosmopol and Poker), 55% ATG, 31% Other national lotteries, 5% The biggest games in Sweden, gross revenue per gaming type Bingo, 4% Folkspel lotteries, 3% SEK million 2006 2005 2004 2003 2002 Restaurant casinos, 2% Jack och Miss Vegas 6,811 6,830 7,270 6,919 5,993 V75 4,141 4,115 4,156 3,996 3,599 Triss 3,147 3,093 3,246 3,187 3,132 Lotto 2,350 2,255 2,104 2,159 2,152 Oddset 2,112 1,924 1,990 1,776 1,691 Dagens Dubbel 1,911 1,988 1,986 1,994 2,001 Bingo 1,600 1,665 1,960 1,820 1,836 Vinnare, Plats 1,562 1,671 1,585 1,589 1,694 Svenska Spel’s Keno 1,322 1,221 1,155 1,091 1,034 winnings 2002–2006 V65 1,185 1,311 1,325 1,373 Bingolotto 1,065 1,257 1,637 2,180 2,790 SEK million Casino Cosmopol1) 1,002 922 853 720 304 5,000 V64 824 110 Stryktipset 790 862 931 1,003 1,029 4,000 Restaurant casino games 700 759 1,165 1,018 1,126 Joker 691 681 634 610 579 3,000 Postkodlotteriet 445 Miljonlotteriet 405 398 381 364 330 2,000 Tvilling 401 187 162

Trio 369 442 525 565 649 1,000 Kombilotteriet 336 331 324 308 288

Tia 323 368 384 343 401 02 03 04 05 06

1) Net sales shown. Source: Current and latest available statistics from the Swedish Gaming Board for 2006.

8 SVENSKA SPEL ANNUAL REPORT 2006 Internet market share 2005–2006, net

% 30

25

20 Gaming market trends Irrespective of future political decisions, the gaming 15 market shows a number of clear trends: 10 Technical development improves availability 5 Modern technology is used by many for different types of 2005 2006 services. Technology enables users to quickly and easily Full year Jan Feb Mar Apr May Jun Jul Aug SepOct Nov Dec enter their games regardless of where they are at the time. Svenska Spel is an innovator in terms of using modern Svenska Spel ATG Unibet Expekt Ladbrokes technology, having introduced online technology twenty years ago. Internet followed and Svenska Spel’s gaming site is now the most visited, and is constantly being improved and developed. The Oddset Bomben game was the fi rst new game to be simultaneously launched on High winnings continue to attract internet and in retailers. Nowadays special games are The trend towards high pools is not new but is expected developed for svenskaspel.se such as Poker, Bingo and to continue as long as players are increasing their stakes Pick’n’Click, while Viking Lotto and Sportbagen are sold on Jackpots and other occasions where they have a exclusively in retail outlets. Internet gaming is expected chance to win the really big prizes. Some say it would be to drive the continued growth of the total gaming market. better if many winners were to share the million-kronor An increasing number of games are now also available prizes instead of them going to a handful of people. via mobile phone even though mobile gaming is still in its However, fi gures from gaming companies show that infancy. One example of a game that requires several gaming increases with high pools. One example is the technical channels is Oddset Live, where it is possible introduction of Dream Winnings on Lotto/Joker, with to play on various situations in a live TV match via prizes of at least SEK 50 million and record winnings of svenskaspel.se or mobile. Even in the future, Svenska Spel some SEK 122 million in 2005. This helped turn the aims to remain at the forefront of technical innovation. weakening interest in Lotto and Joker, and they now show positive sales development. Speed as demanded by customers Technology makes gaming faster and more accessible. Higher paybacks for knowledgeable sports bettors The trend towards speed is also affecting the way games Gaming customers are motivated and knowledgeable are designed. Players are looking for faster games with and the expanding range and competition on the gaming only a short time between submitting the game and the market has helped make them more selective. This applies result and payment of winnings. The games that have mainly to sports gaming where internet competition is gained most ground in recent years are fast games such greatest, and where the most information is available. as Oddset, Keno, Triss, Poker and casino games. Games Customers can shop around, compare the odds and pick where customers have to wait for results, such as and choose at will. Gaming companies not able to offer Stryktipset and ATG’s V75, are stagnating or declining high payback are deselected by many sports bettors if with the exception of Lotto customers who prioritise high they don’t add value through security, variety or good winnings over rapid results. service.

SVENSKA SPEL ANNUAL REPORT 2006 9 THE SWEDISH GAMING MARKET 2006

Casino – more than just gaming The trend is that games should provide more than just the gaming itself. Customers wanting experiences can have their fi ll with internet poker and also at the four casinos run by Svenska Spel. Added value such as atmosphere, social interaction, culture and other experiences that add to the occasion are expected to continue to attract a broader customer base in the future.

Growing interest from mass media The strong public interest in gaming goes hand in hand with a strong interest from the mass media. As a lot will be happening on the gaming market in future media interest can only be expected to grow. The gaming market with its millions of custom- Who are the market ers, million kronor pools, millionaire win- operators ners, billions in profi t and ongoing record The Swedish gaming market sales is an exciting and to some extent con- is restricted to the State, non troversial area with a high level of news government organisations value. The debate on unhealthy gaming and the horse racing industry. Private interests are only and political decision making can be permitted to earn money on expected to continue in the mass media. gaming in restaurant casinos, on recreational terminals or as service providers. Since 2000 a number of foreign Increased knowledge about the operators have taken signifi cant share of risks of gaming the Swedish internet gaming market. Ethics, a sign of the times Customer demands for an effective Responsible gaming is a glo- approach to responsible gaming are bal trend that has come to expected to grow in future. Knowledge stay. In line with our increas- about the risks of gaming is expanding due ing awareness of the environment, poverty, injustice and to closer cooperation with researchers. Svenska Spel’s other issues, a responsible and ethical attitude has Project P which is under development, aims to develop a become an important competitive tool. Svenska Spel has globally-unique product that addresses these problems. a leading position in this area with policies and action Competition on the gaming market will undoubtedly programmes for responsible gaming. The customers that continue to grow. With technical innovations, frequent have this year made svenskaspel.se the market leader in introductions of new games and increasingly effective mar- internet poker have thus shown a positive attitude keting, gaming companies will attract ever more cus tomers. towards the Company’s approach to responsible gaming, Uncertainty over the rules of the game and the wait for as have those who have been loyal to Svenska Spel’s political decisions affects development on the gaming mar- Oddset despite the higher paybacks available from for eign ket, but is hardly likely to stop it. Svenska Spel has so far internet operators. Given the increasingly tough competi- been the market’s most sensitive gaming company. We are tion, responsible gaming is steadily becoming a more in a good position to lead the market into the future in important sales argument. terms of taking responsibility and developing safe games.

10 SVENSKA SPEL ANNUAL REPORT 2006 SVENSKA SPEL NOW AND IN THE FUTURE

Introducing Svenska Spel

The mission assigned Svenska Spel by the Swedish State is to meet consumer demand for attractive lotteries and games though innovation and development. This is done within the framework of our concession and through high demands on responsible gaming.

venska Spel runs the business under the high stand- assigned Svenska Spel by its owner is to meet consumer Sards imposed on Sweden’s only fully State-owned demand for attractive lotteries and games though innova- gaming company. On the one hand, it is necessary to sell tion and development. The mission also involves monitor- attractive games under heavy competition, create millions ing international competition and being able to offer a of satisfi ed and happy customers, and deliver a signifi cant competitive alternative that meets the high standards profi t for the benefi t of society. On the other hand, we with respect to promoting responsible gaming. should be proactive in preventing unhealthy gaming and Svenska Spel’s organisation is built on the basis of gaming dependency by offering the customer information interaction with the customer, and on centralisation of and tools that help them control their gaming. It is a diffi - long-term planning and strategy issues and decentralisa- cult balancing act on a gaming market where many new tion of the operative business. (unregulated) operators do not face the same demands. It The organisation is divided into the two divisions could be considered an impossible task, but the balance Retail and Direct with their associated business units, as has been maintained so far as a result of clear strategies. well as a number of Group staff units. Divisional and staff unit management report directly to the CEO. Svenska Spel’s organisation Svenska Spel was founded in 1997 through the merger of AB Tipstjänst and Svenska Penninglotteriet AB. The mission

Svenska Spel’s organisation CEO

Legal Finance

Information IT & Society

Human Resources

Retail Division Direct Division

Brand

Internet Retail Outlets Restaurants Association Casino Bingo Halls International & Mobile

SVENSKA SPEL ANNUAL REPORT 2006 11 SVENSKA SPEL NOW AND IN THE FUTURE

Svenska Spel’s strategies

An assumption for Svenska Spel to maintain its position as Sweden’s leading gaming opera- tor is to continue being the world leader in responsible gaming – but also to broaden the business by developing existing and new products.

venska Spel’s mission is to sell a variety of exciting Broaden the business Sand entertaining games with cash winnings in a con- To retain its market leadership and infl uential role in the venient, responsible and safe manner. gaming market, Svenska Spel is increasing its efforts by starting new businesses with the objective of channelling Overall goal and strategies gaming to Sweden. In this way we ensure that as much In 10 years Svenska Spel shall, regardless of the form of gov- gaming as possible occurs in controlled environments ernment, be Sweden’s most responsible, biggest and most with a high level of responsible gaming and that the com- profi table gaming and lottery company. As such, Svenska munity continues to receive substantial revenue. Broaden- Spel shall annually distribute as much profi t for socially- ing the business has resulted in Svenska Spel going from benefi cial purposes – primarily sport – as in 2004. The busi- four to seven business areas. It should be emphasized that ness is to be based on the same four values as now: commit- we are not aiming to increase gaming, but to channel ment, professionalism, awareness and responsibility. already existing gaming to Svenska Spel. This is to be achieved through: We want to take market share in an increasingly tough ■ active development of existing and new products as well competitive environment. This means we must be better at as new business areas listening to what our customers want, managing develop- ■ greater accessibility and new forms of distribution ment and creating an enjoyable gaming experience, to ■ world leader in responsible gaming broaden the concept through fun and innovative new ■ s tronger customer relationships games and through creative acquisitions. We want to ■ b rand reinforcement: make effective use of existing and future IT technology. In Svenska Spel in the lead, Responsible this way, we will maintain our market gaming, Links to Sports share and ensure that as much gaming ■ s trengthened intellectual capital: as possible occurs in a responsible Higher effi ciency, Greater It should be environment. renewal, Balanced risk. emphasized that we Stronger brands To achieve and monitor its long- are not aiming to A signifi cant part of the future term objectives and strategies, Sven- increase gaming, but strategy is to strengthen the Svenska ska Spel uses an internal manage- to channel already Spel brand. We have some of the ment model based on a number of ! strongest product brands in the existing gaming to performance indicators for the mar- country – Stryktipset, Lotto, Triss, ket, customers, responsible gaming, Svenska Spel. Oddset. Awareness is already high, process and employees. (The model but now we plan to “fi ll” the Svenska is shown on page 51.) Spel brand with a clearer content.

12 SVENSKA SPEL ANNUAL REPORT 2006 World leader in responsible gaming Responsibility is put before profi t at Svenska Spel. Our responsibility for preventing unhealthy gaming means that we don’t aim to maximise profi ts in the business, refrain- ing, for example, from marketing certain games. Core values that permeate In the fi eld of responsible gaming, Svenska Spel is seen daily activities as the world leader and we can be even better – and use responsibility as a competitive advantage. Our customers should always be provided with an attractive offering that Svenska Spel brings pleasure to millions of people, makes dreams come true, creates excitement and fellowship. Every incorporates secure and reliable gaming. day. That makes it a fun company to work for. In the base are our core values that all employees follow: Professional- Knowledge as an export ism, Awareness, Commitment and Responsibility. They are words that we highlight, as to us they are more than just Svenska Spel’s business attracts much international atten- words – they are commandments. tion, and the poker initiative with our unique responsible gaming solution is of interest to the gaming world. We have PROFESSIONALISM commenced a partnership with Lithuania’s regulated gam- ■ We shall develop and sell competitive games ing company Olifeja which will enable Lithuanian citizens ■ We shall maintain a balance between profi tability and to play games such as Triss and Pick’n’Click in 2007. The responsible gaming benefi ciary for the operations is the Lithuanian Olympic AWARENESS Committee. ■ We act on the signals we receive from players, business We have also had a number of enquiries about providing partners and the market our responsible poker under licence to gaming companies in ■ We listen, interpret and accept messages from leaders other countries, something which would require permission and colleagues ■ We treat each other such that everyone feels included, from the government. The International business area is seen and heard working with these opportunities and a handful of other ■ We have open and clear communication ■ enquiries. In this context it is important to point out that We are straightforward, free from prestige, and respect each other and our differences Svenska Spel’s international operations always follow and respect the national legislation of individual countries which COMMITMENT means cross-border trade in gaming is not permitted. ■ We care about the players, our business partners and each other ■ We are fully present in heart and mind Improved leadership ■ We are all ambassadors for Svenska Spel One of the key challenges is to improve the Company’s RESPONSIBILITY internal leadership. We are addressing this through a ■ We are responsible for our games being safe, secure and special strategy for future supply of management, manage- being highly accessible ment education, the Assessment Centre and annual ■ We prevent and inform about the back side of gaming management reviews. The Assessment Centre is a manage- ■ We take responsibility for our own assignments and contribute to the Company’s operations ment development school that aims to increase individual ■ Leaders and employees are responsible for the assign- self-awareness through interviews, tests and exercises. The ments and results of the group course concludes with the employee preparing a future ■ Cooperation and teamwork are a given. development plan with their manager.

IT part of the business Most of what we do is connected in one way or another with the IT department. IT is part of the business and ongoing IT development should therefore take place as close to the busi- ness as possible. The goal is to create shorter leadtimes between ideas and release on the market.

SVENSKA SPEL ANNUAL REPORT 2006 13 DIVISIONS/ RETAIL DIVISION

The retailer – an extension of Svenska Spel

Svenska Spel has partnerships with more than 6,000 retail outlets, some 2,000 restaurants and several hundred sports clubs. Together, they are responsible for more than SEK 17 billion of Svenska Spel’s revenues of over SEK 20 billion.

venska Spel interacts with its customers directly and through retail outlets was in line with the p revious year. Sthrough its retailers, and this is refl ected in the Com- Gaming revenues from retailers represented 53% (SEK pany’s organisation. 10.7 billion gross) of Svenska Spel’s sales of SEK 20.1 bil- The Retail Division comprises three business units each lion, which emphasizes the importance of an effective of which is responsible for a specifi c type of retailer: The retail business for the Company. Retail Outlet business area (games and lotteries), Restau- In 2006 we made investments for the future at our rant business area (gaming on VLTs) and the new Associa- retailers, including replacing online terminals and gaming tion business unit (club lotteries). systems to reduce leadtimes and reach the market faster. Svenska Spel’s other operations, including gaming at Another development project is the proprietary daily num- casinos, on internet, via mobile phone and an ongoing bers game Limbo which was introduced in January 2007. project with Bingo halls, come under the Direct Division. Restaurants – better environment Retail Outlet business area remains strong The Restaurant business area had sales of SEK 6.8 billion The 6,300 or so retail outlets that represented Svenska in 2006. The business area is responsible for management Spel in 2006 are spread throughout the country and can of the Jack Vegas VLTs which can be found in 2,190 be divided into supermarket, petrol station and conven- restaurants throughout the country and of the Miss ience stores, and traditional betting agencies. Vegas VLTs in 93 Bingo halls. More than half of the outlets are equipped with online The Restaurant business area comprises normal restau- terminals and offer the full range of games and lotteries: rants, Bingo halls, local restaurants, pubs, sportsman’s ■ Sports betting Oddset, Stryktipset, Europatipset and bars, night clubs and roadside restaurants. A universal Måltipset condition is that all gaming environments are subject to ■ Numbers games Lotto, Joker, Viking Lotto, Keno and age restrictions. Limbo Jack Vegas is a game which often arises in debates ■ Lotteries Triss, Tia, Skrap-Spel and Penning. related to responsible gaming. Checks of gaming on Jack Other outlets only sell lottery tickets. Vegas are made regularly and restaurants are obliged to meet the standards set by Svenska Spel and the National Gaming in retail outlets remains the dominating business, Gaming Board. As it does for retail outlets, Svenska Spel but has declined as digital distribution forms have gained provides restaurants with extensive training in responsible ground. The business unit noted only a marginal fall in gaming. People are becoming increasingly aware that a net gaming revenue however compared to 2005. Sports responsible approach is a competitive advantage that betting, which faces the most competition, declined some- improves the attraction and enjoyment of playing Jack what while numbers games increased. Sales of lotteries Vegas.

14 SVENSKA SPEL ANNUAL REPORT 2006 How much does the community spend on com- bating gaming dependency

It is hard to say exactly. The Swedish National I nstitute of Public Health receives an annual grant to fi g h t gaming problems – an amount of SEK 29 million in 2006. To this should be added the money spent by local authorities on healthcare and support for people with gaming dependency problems.

SVENSKA SPEL ANNUAL REPORT 2006 15 DIVISIONS/ RETAIL DIVISION

Despite a slight decline in gaming stakes for the second During the year we have also steadily replaced old VLTs year running, Jack Vegas and Miss Vegas remained the with new in restaurants. While the stylish new design single biggest gaming form in Sweden in 2006 in terms encourages new players to try Jack Vegas, the various of gross revenue. The decline is partly due to the smoking control functions help players to maintain control over ban in public premises and partly to the termination of their gaming. agreements with a number of restaurants that did not meet the responsible gaming standards required. In other Development based on customer needs locations we have also reduced the number of VLTs. The Being good at renewing and developing its products is a declining trend in gaming revenue stabilised noticeably at precondition for Svenska Spel to remain market leader. the end of the year however, although there is a disturb- Listening to customers’ requests and taking advantage of ing trend towards increasing illegal and unregulated VLT the creativity of our employees and retailers resulted in gaming. numerous successful innovations in 2006. Triss celebrated its 20th anniversary during the year Association business area latest addition with the Triss Jubileum package. Never before has a lot- In association with the biggest sporting event of the year, tery ticket cost as much as SEK 250. Nor has a lottery had the Football World Cup, Svenska Spel developed VM- so many major prizes as the Jubileum lottery, which made Triss in association with sports clubs which were later it a success. followed by lottery tickets in the form of Christmas cards The primary product development in 2006 was in the and labels. In conjunction with voluntary associations, lottery area. New packaging, campaign lotteries and the new business area will continue to develop products completely new lotteries are now being launched increas- suited to their needs, a successful cooperation which is ingly often to satisfy lottery-buyers’ demand for new important for their continued vitality. products, while the life of new products became increas- ingly shorter. Monte Carlo released in winter and Skrap- Future technology Sudoku in spring reached reasonable levels before sales A new technical platform was installed at retailers in levelled off and they were removed from the range the spring 2006. New VLTs were installed in more than autumn of 2006. 3,000 gaming outlets while lotto retailers were equipped with new lottery termi- Strong year for many products nals. The response has Hockey-Bomben was launched in November 2006 and How many, and been highly positive as now also offers the chance of betting on the fi nal score who are players the new VLTs are con- in three hockey matches. The launch coincided with the Svenska Spel’s surveys show sidered easier to man- 20-year anniversary of Oddset and was a major success. that 84% of the Swedish popu- age and learn. We have In Week 47, Bomben had sales of SEK 18.8 million lation has played during the past 12 months and 75% are also started a project which was a new record. To the joy of Oddset players, Svenska Spel customers. related to digital post- the odds on Hockey-Bomben went through the roof and Roughly equal numbers of ers and signs which the record odds of 2,043,523 gave two players the same men and women play, although men tend to be more frequent players. will help improve amount in kronor. Young people often play interactive and information and cus- VLT gaming is under constant development. VLTs online games while older people prefer tomer service in retail currently have sixteen games, the latest being the wheel games of chance and weekly games. outlets. game Queen of Egypt.

16 SVENSKA SPEL ANNUAL REPORT 2006 Numbers games are maintaining their position through good packaging and effective marketing. Both Keno and Lotto have maintained their strong positions on the mar- ket. Bonus games on Stryktips and Europatipset never took off under the name 13Plus and were therefore relaunched during the autumn under the name Dubbelvinsten. Despite Stryktipset’s unique position in Sweden after 72 years on the market with extraordinary awareness and deep-rooted popularity, the level of football pools has declined in recent years. Stryktipset’s younger brother, Europatipset, is having the opposite experiance and increasing strongly despite a seven week pause during the 2006 World Cup when it was temporarily and success- fully replaced by VM-Tipset. Expanded action plan for VLTs The marketing of lottery tickets as presents is gaining Svenska Spel is responsibility for helping greater acceptance, particularly on occasions such as restaurant personnel promote responsible Mother’s day, Father’s day and Easter. Triss sales are gaming. Information should always be availa- lifted to their highest levels towards the end of the year ble as part of the game itself, around the VLTs and in the restaurant. The game should have during the traditional Christmas campaign. functionality to help minimise the risk of exces- sive gaming. Many retailers and wide range ! Gaming should not be the dominant feature The main competition in sales outlets is AB Trav och in the restaurant milieu. Restaurants with Svenska Spel VLTs must maintain a reasonable Galopp (ATG) and their horserace betting. Svenska Spel’s balance between VLT sales and total turnover strength is a greater range of retailers and a large and in the restaurant. Personnel should always varied product range. Svenska Spel has some 2,000 have the VLTs in full view to more easily be able to control the age of players. retailers in common with ATG. Both Svenska Spel and ATG are exposed to competi- VLTs are not to be placed in premises with other games that do not have age restrictions. tion from overseas online operators. In 2006, 10% of To limit the opportunities for underage gam- Svenska Spel’s net gaming revenue was from svenskaspel.se ing, our VLTs are not to be in restaurants which and mobile gaming but despite this, Svenska Spel’s retail- offer other games with no age restrictions. The restaurant must appoint a person to be respon- ers have managed to maintain their sales impressively sible for providing training and information in well in 2006. gaming matters to personnel. Opening times for the VLTs are restricted by the restaurant licence. Growth of illegal gaming Product features As soon as the form and As Jack Vegas is the only type of VLT permitted by law content of the gaming product is developed, in the Swedish market outside the casinos, it should not consideration should be made of the risks have any competition. Illegal gaming is however growing associated with its usage. Progressive bonuses are not allowed. Responsible gaming advice is in Sweden; legislation has not resulted in illegal terminals to be included in and around the product. disappearing from the market. Experience also shows

SVENSKA SPEL ANNUAL REPORT 2006 17 DIVISIONS/ RETAIL DIVISION

Facts, Retail Division

Retail Outlet business area Association business area Sales Change Sales SEK million 2006 2005 SEK million % SEK million 2006 2005 Stryktipset 371 414 –43 –10.4 Triss 4 0 Europatips, Brassetips, EM-Tips 122 110 12 10.7 Christmas products 1 0 Dubbelvinsten 12 11 1 12.3 Total net revenue from games 5 0 Måltipset 134 149 –16 –10.4 Oddset 591 545 46 8.4 Total gross revenue from games 9 0 Greyhound 0 63 –63 –100.0 Lotto 1,166 1,144 23 2.0 Viking Lotto 52 56 –5 –8.1 Lotto Express 0 6 –6 –100.0 Business partners Joker 371 374 –3 –0.7

Keno 555 513 41 8.1 Number 2006 2005 Penninglotten 19 26 –8 –28.9 Triss 1,534 1,520 14 0.9 Restaurants 2,190 2,145 Skrap-Spel 104 141 –37 –26.1 Jack Vegas 6,791 6,532 Tia 146 172 –26 –15.1 Bingo halls 93 91 Other lotteries 46 0 46 Miss Vegas 396 389 Total net revenue 5,223 5,244 –22 –0.4 from games Number 2006 2005 Total gross revenue 10,689 10,821 –131 –1.2 from games Gaming retailers 2,992 3,105 Lottery retailers 3,393 3,086 Total 6,385 6,191 Restaurant business area Sales Change SEK million 2006 2005 SEK million % Jack Vegas 1,595 1,634 –38 –2.3 Miss Vegas 227 214 12 5.8 Total net revenue 1,822 1,848 –26 –1.4 from games Net revenue from games 2006 Total gross revenue 6,811 6,830 –19 –0.3 from games Retail Outlet, 59% Restaurant, 20%

Casino, 11%

Internet & Mobile, 10% Gross gaming revenue, Gross gaming revenue, Retail Outlet 2002–2006 Restaurant 2002–2006

SEK million SEK million 12,000 8,000

9,000 6,000 Retailers’ net revenue from games 2006

Retail Outlet, 74% 6,000 4,000 Restaurant, 26%

3,000 2,000

02 03 04 05 06 02 03 04 05 06

18 SVENSKA SPEL ANNUAL REPORT 2006 that the illegal terminals are largely used by underage Trends players. The battle against illegal gaming is unfortunately ■ New games have shorter life, lotteries in particular. given a low priority by the authorities responsible for Retail outlets that are quick to promote new releases administering justice. succeed best in the competition. ■ Retailers are a very dynamic group, with new business Oscars’ gala for retailers partners with greater potential being established while The retailers’ gala is the highlight of the year in Svenska unprofi table and stagnant partnerships end. More than Spel’s partnership with its retail outlets. Several hundred 500 new lottery retailers were established in 2006. retailers come to for a two-day meeting at the ■ Knowledge of the games, high levels of service, pleasant Globe arena, having earned their tickets to the gala customer interaction, responsible gaming and inviting through their active retail efforts. retail environments are becoming increasingly impor- Restaurants, too, have their “Oscars’ gala”. The combi- tant competitive tools. It is important to emphasise the nation of reward, party and professional communication outlet as a meeting place for people in the real world as provides a base for the positive long-term partnership opposed to the online cyberworld. between Svenska Spel and its retailers. The galas provide ■ More stringent ethical requirements. Retailers who do a unique occasion for Svenska Spel to get highly-valuable not fulfi l requirements when inspected are terminated direct feedback from the best retailers in the country. and may lose their contract with Svenska Spel. ■ Illegal gaming primarily in restaurant environments – and in retail outlets – is growing due to lack of atten- tion from the authorities.

Signifi cant events in 2006 Priorities for 2007

■ 2,000 Winwave VLTs replaced old terminals ■ Further improve responsible gaming in restaurants ■ Launch of Limbo ■ Sales record for Oddset and Keno ■ N ew centralised system in the Restaurant business area ■ All gaming and lottery retailers equipped with ■ Increased focus on product development new online terminals ■ D evelop new and existing distribution channels ■ More than 500 new lottery retailers established ■ More active retail outlet and restaurant agencies ■ Triss jubileum lottery a success ■ Secure implementation of the new 18-year age limits ■ More VLTs in operation ■ More objects on Oddset Lången ■ New Association business area established ■ I ncrease knowledge and awareness in the Association ■ Numbers games continue to grow business area ■ 680 retailers educated in responsible gaming

SVENSKA SPEL ANNUAL REPORT 2006 19 DIVISIONS / DIRECT DIVISION

20 SVENSKA SPEL ANNUAL REPORT 2006 Direct gaming continues to grow

The Direct Division is responsible for the gaming forms Svenska Spel runs in direct contact with customers. It operates through the Internet & Mobile and Casino business areas, which both showed strong growth in 2006, as well as through the development of the two new business areas, Bingo Hall and Subscription. Direct gaming increased by 32% in 2006 and represented 13% of Svenska Spel’s gross sales.

he Internet & Mobile and Casino business areas not customer must set his personal gaming limits in terms of Tonly stood for the division’s growth in 2006, but also time and money. Svenska Spel’s approach to responsible for that of Svenska Spel as a whole. The new Bingo Hall gaming is described on pages 32–35. business area established last year will be launched in 2007 if licenses are granted. Direct gaming sales were Broad product offer SEK 2.6 billion in 2006, of which Internet & Mobile Certain games can only be played on svenskaspel.se such represented SEK 1.6 billion and the Casino business area as poker, Oddset Live, Bingo and Pick’n’click. Other games SEK 1 billion. This represents an increase of 32% or SEK are also available including Stryktipset, Europatipset, Mål- 627 million in comparison with 2005. tipset, Oddset, Lotto, Keno, Limbo, Triss, Tia and Skrap- Spel. Games available via mobile phone include sports bet- Internet & Mobile business area growing ting Stryktipset, Europatipset, Oddset Live, Lången, Svenska Spel’s market share on internet increased from Mixen and Bomben, the Lotto and Bingo numbers games approximately 18% to 30% in 2006. Sales on and the Triss and Tia lotteries. svenskaspel.se increased by 74% net (54% gross). This is Numbers games is the biggest gaming category, with a primarily due to the launch of poker in March 2006, 40% increase in gross sales in 2006 to SEK 676 million. although other games also increased by 30% in 2006. Svenska Spel was fi rst to introduce internet Bingo, a success- From December 2006 it has been possible to play around ful initiative with continued growth of 74% in 2006. the clock on svenskaspel.se with a few exceptions. Most This is followed by sports betting with a 33% increase to forms of games are also available through retailers, but SEK 474 million. Lotteries represent SEK 205 million, an some have been developed specifi cally for internet gam- increase of 16%. Internet poker was launched in March ing. Today svenskaspel.se has some 280,000 active 2006 and despite hard customers, meaning customers that have played during competition succeeded the past three months. Gaming via mobile phone in achieving market Do more people in increased strongly in 2006 but is so far only a marginal leader status with 30% Sweden have gaming phenomenon on the Swedish gaming market. market share. dependency problems than people elsewhere Integrated responsible gaming Poker boom No, Sweden has relatively To be able to play on svenskaspel.se and via mobile phone in Sweden few people with gaming dependency problems in a player needs a customer loyalty card (Spelkort) and During 2004–2006, comparison with other gaming account, and must be at least 18 years old. The poker gained a serious countries. This has been highlighted age limit checks are made using the offi cial Swedish popu- foothold on the Swedish in studies including a prevalence study conducted by the National lation address register (SPAR). The player can also set up market, to the extent it Centre for Social Research. a personal gaming budget. A number of games have built- could even be called a in stake limits. Before it is possible to play poker, the poker boom. Some

SVENSKA SPEL ANNUAL REPORT 2006 21 DIVISIONS / DIRECT DIVISION

180,000 Swedes were playing on sites run by interna- types of self-regulating restrictions. No other gaming tional internet gaming operators in early 2006. When operator in the world takes equivalent responsibility for Svenska Spel was able to confront the competition with a gaming with proven results. Some 137,000 customers Swedish poker site in March 2006 – with integrated played on Svenska Spel’s poker site in 2006 and by responsible gaming and a competitive rake – it was an December it had achieved market share of around 30%. immediate success. The launch of poker on svenskaspel.se This means that we have succeeded in channelling much was the most noteworthy event on the Swedish gaming of the gaming to a safe and secure environment. market. It is differentiated from competitive poker games mainly because the players must specify limits for the Internet competition amount of money and time they want to spend before the The regulated internet gaming market has a market share game starts. of around 50%, of which Svenska Spel has approximately Svenska Spel’s poker was an instant success and many 30% and ATG 20%. The unregulated competitors based players welcomed the integrated tools for responsible outside Sweden have an advantage in being able to offer gaming, such as the collective pauses built into the game. several forms of games with some having higher payback. Svenska Spel is the only gaming operator to offer these Svenska Spel still does not have the possibility of compet- ing with higher paybacks and this is reducing its market share, primarily in sports betting. The Swedish internet gaming market Cecilia Nordenstam, Svenska Spel’s Do we spend badly needs effective regulation with poker personality. more money on gaming now than 30 years ago equal conditions for all operators. Within the EU there was political and Statistics Sweden and the National Gaming Board legal uncertainty regarding the internet report that we have spent gaming market causing market prices approximately 1.3% of our for listed gaming companies to swing disposable income on gam- ing in recent decades, which up and down. International gaming indicates it has not increased. operators faced a number of setbacks in 2006, with representatives having been convicted or to be put on court trial for infringement of the law. In the US, internet gaming is prohibited through the Unlawful Internet Gaming Enforcement Act (UIGEA), which requires banks and credit companies to stop trans- actions to internet gaming companies.

Future outlook The market for gaming via digital forms of distribution is far from saturated. Further product development, tech- nical development and a broader customer base will gen- erate continued growth. The competition will also become harder and a number of smaller internet operators will have diffi culty surviving, enabling the major gaming oper- ators to increase their market shares. The main way of

22 SVENSKA SPEL ANNUAL REPORT 2006

Expanded casino action plan kasinoi

The basis for ensuring a healthy gaming milieu is creating slowing the growth of internet gaming is through a social casino where gaming is part of the overall experi- legislative changes such as those made by the US in 2006. ence, incorporating good food, entertainment and danc- The major breakthrough for gaming via mobile phone is ing. Special steps are also taken to prevent uncontrolled gaming. currently held back by technical limitations. When these are solved and availability increases, strong growth in the !Voluntary ban programme. Our casinos offer guests with gaming distribution channel is expected. a gaming problem the chance to sign a voluntary ban There is a clear trend towards young players increas- agreement. One alternative is limiting the number of vis- its permitted. There are guidelines for alcohol consump- ingly choosing internet sites as their “fi r st” gaming outlet. tion in connection with gaming.

Casino business area growing Excessive alcohol consumption and gaming do not belong together. Guests that are denied more alcohol due In June 1999, the Swedish Parliament decided that up to to intoxication are not permitted to continue gaming and six casinos of international standard would be permitted are required to leave the casino premises. to open in Sweden. Svenska Spel was assigned by the Par- Regular exchange of ideas. The casino business is still liament to start casinos in , Malmö, Gothenburg relatively new in Sweden. This makes it particularly and Stockholm. The business is run under the Casino important to constantly develop and improve the gaming Cosmopol brand. environment to encourage responsibility. Every year, we hold a responsible gaming conference for educational The fi rst casino was opened in Sundsvall in July 2001. purposes and to encourage the exchange of ideas. Thereafter followed Malmö in December 2001 and Gothenburg in August 2002. The fourth casino was opened in Stockholm in March 2003. Our casinos have since had more than four million guests. Casino Cosmopol had more than a million guests in 2006 and sales of over SEK 1 billion – an increase of 9%. The casinos were also improved in other ways in 2006, Casino revenue peaks in December, partly due to Christ- including the rebuilding of foyers, restaurants and other mas dinners at the casinos with more than ten thousand areas. The staff has been expanded with more dealers, bookings, and the popular New Year activities. inspectors and poker dealers, and partially reorganised into smaller teams to further improve service standards. Highly-varied casino games Organisational and environmental improvements will Casino Cosmopol provides all games traditionally found continue in 2007, with a number of innovations to be in international casinos, such as Roulette, Black Jack, dice launched. Casino Cosmopol’s ambition is to achieve a games and poker, with the same rules as other interna- standard comparable to the most successful international tional casinos. The most popular game amongst casino casinos. guests is the many varieties of VLTs, known as slots, with stakes ranging from 10 öre to 10 kronor. Gaming on Security and responsible gaming VLTs is showing the highest growth. There is a high level of awareness within Casino Cos- mopol of the potential risks associated with unhealthy 2006 highlights gaming, and there is a responsible gaming programme The poker boom continues to run, even at the casinos. including solid staff training in matters relating to gaming To satisfy demand, two of the casinos built special poker dependency. This education is extremely important and is rooms in 2006 and six major poker tournaments were regularly followed up with additional training to main- arranged in 2006. Theme nights for Chinese New Year tain and improve the knowledge of employees. and other occasions are appreciated by Asian guests in Voluntary suspension is one of the methods offered by particular. the responsible gaming programme.

SVENSKA SPEL ANNUAL REPORT 2006 23 DIVISIONS / DIRECT DIVISION

Casino enquiry SOU 2006:64 Trends The decision of the Swedish Parliament to introduce casi- The overall situation is very promising for the casino busi- nos was associated with fears that it would attract various ness. Casino Cosmopol has much growth potential in the forms of criminality. The enquiry “International casinos near future: in Sweden – An evaluation.” (SOU 2006:64) concluded ■ There is growing demand for experiences and entertain- there was no reason for concern. It was considered that ment guest registration and camera monitoring help prevent ■ Interest in casino gaming is increasing crime. ■ The strong interest in poker is holding The enquiry made an in-depth analysis of international ■ Tourism to Sweden is increasing. casinos and contains a great deal of information about casino operations in Sweden. The conclusion is that Bingo Hall business area awaiting licences Casino Cosmopol effectively meets the conditions for Local sports clubs have been losing revenue for many running casino operations in Sweden. years as Bingo hall attendances decline. In 2005 Svenska Spel decided to apply for permission from the Govern- Awarded casino ment to lift the situation and work with Bingo alliances The international style of Casino Cosmopol is expressed and sports associations to make Bingo halls more attrac- in many ways – not least through its employees. Since tive. The idea is that Bingo halls should offer visitors a opening in 2001, some 1,200 employees have been modern and fresh environment with a combination of recruited to and trained in a profession that is completely games and refreshments. We have applied for licences new in Sweden. Employees represent all corners of the from the Government and are awaiting notifi cation. globe and speak over 40 different languages. Casino Cosmopol in Malmö received the city’s diversity prize in Subscription business area – new channel 2005 for this conscious and long-term approach. Svenska Spel will start offering its customers the chance to subscribe to their favourite games in 2007. Initially Broad competition they will be able to have lottery tickets sent home with The casino’s concept is to merge gaming and entertain- additional products gradually being offered. ment in the one experience, which means that Casino Cosmopol competes with many forms of entertainment: dance, theatre, cinemas and pubs.

Signifi cant events in 2006 Priorities for 2007

■ S uccessful launch of poker on svenskaspel.se ■ I nternet market share ■ S trong growth of gaming on svenskaspel.se ■ D evelop gaming and visitor experience ■ Increased sales, more visits and better attitudes towards casino ■ E stablish Bingo hall concept operations ■ Further channel development ■ New Bingo Hall business area established

24 SVENSKA SPEL ANNUAL REPORT 2006 Facts, Direct Division

Casino business area Net revenue from games 2006 Sales 1) Change SEK million 2006 2005 SEK million % Retail Outlet, 59% Sundsvall 76 69 8 11.2 Malmö 214 196 18 9.0 Restaurant, 20% Gothenburg 277 248 29 11.7 Casino, 11% Stockholm 435 410 25 6.1 Internet & Mobile, 10% Total net revenue 1,002 922 79 8.6 from games

1) Net. It is customary to report Casino turnover as net.

Internet & Mobile business area Net revenue from games 2006 Sales Change Direct Division SEK million 2006 2005 SEK million % Stryktipset 56 52 5 8.8 Europatipset 22 16 6 38.0 Casino, 54% Dubbelvinsten 3 3 1 38.0 Internet & Mobile, 46% Måltipset 12 10 1 11.3 Oddset 96 67 30 44.5 Lotto 126 97 30 30.6 Joker 44 35 9 25.1 Keno 32 27 5 18.7 Bingo, Pick ’n’ Click 151 96 56 58.6 Triss 70 57 13 22.8 Skrap-Spel 15 17 –1 –7.4 Tia 19 16 3 20.1 Poker rake 206 0 206 Total net revenue 854 491 363 73.9 from games Total gross revenue 1,560 1,013 547 54.1 from games

Gross revenue from Gaming net revenue games Internet & Casino, 2002–2006 Mobile, 2002–2006 SEK million SEK million 1,500 1,500

1,200 *Including 1,200 Poker rake

900 900

600 600

300 300

* 02 03 04 05 06 02 03 04 05 06

SVENSKA SPEL ANNUAL REPORT 2006 25 BRAND

Svenska Spel – more than Swedish gaming

Enjoyable gaming, responsibility and the use of profi t. These are Svenska Spel’s most valuable assets in the process of creating a positive image for the Company and its products, and the reason we want these values to permeate everything we do – especially our marketing.

venska Spel is the gaming company of the Swedish and makes us an attractive employer. We hope all Speople, with a customer base close to fi ve million. employees will be bearers of Svenska Spel’s values as With so many customers, it is highly important our com- common corporate values make our job easier by creating munication has a common denominator and a corporate a common factor that helps our progress. Svenska Spel’s brand manager was thus employed in 2006 with responsi- brand is also completely dependent on having a good bility for long-term brand development. A responsibility dialogue with our partners so they in turn can communi- which in the short-term involves fi lling the brand with the cate our values to customers. values we want the company to represent. A key role in this process is our Gaming Support func- Our goal is that more people should see us as the mod- tion where team members communicate with customers, ern and responsible company we are. A strong brand also retailers and restaurateurs. Gaming Support is assigned enables more cost-effective communication, which is a to answer questions and solve problems via telephone, competitive advantage in an era with more products with e-mail and letter. The quality of the service is therefore ever decreasing lives. highly important for the Svenska Spel brand and to Most of our games are well-known brands but are not ensure the highest possible level of quality we are con- always recognised as Svenska Spel products, which is why stantly striving to improve service levels and knowledge. we started a process in 2006 to reinforce the family rela- tionship between Svenska Spel and our range. As part of Responsibility before profi t this process we integrated the Svenska Spel winner sym- We are proud of our approach to responsible gaming. bol with our product logos and many more people are To strengthen the Svenska Spel brand we will in 2007 be today aware that Svenska Spel stands behind the prod- highlighting our unique position as the responsible gam- ucts. In 2007 we will create a new design and profi le ing company. We will also be explaining our role and the manual for the entire company with a view to reinforcing need for a responsible gaming market through participa- the competitiveness of our communication. tion in public debate.

Brands are built from the inside out Profi t goes to organisations for children and youth We are working on a long-term basis across the Group Other gaming operators want to make their owners rich. so that all employees can feel pride in the Company’s We want to make the Swedish people richer. By gaming success. Our knowledge, attitudes and reception adds with Svenska Spel, players contribute to the success of weight to our brand, creates credibility for the company Swedish sport at top level and to supporting the recrea-

26 SVENSKA SPEL ANNUAL REPORT 2006 Does Svenska Spel Svenska Spel – more than Swedish gaming only exist so the Swedish State can earn money

Svenska Spel’s mandate is to provide entertaining gaming in a responsible manner, putting responsibility ahead of profi t. A positive conse- quence is the money sports clubs and other associations receive from Svenska Spel. Without it, they would need to fi nd other forms of funding.

SVENSKA SPEL ANNUAL REPORT 2006 27 BRAND

tional activities of children and youth. We were very proud to be able to hand over SEK 1.2 billion in 2006 to sports organisations for children and youth in Sweden. Without Svenska Spel’s payments to sports, most clubs would need to double their membership fees to be able to run their associations at current levels. During 2007 we will be describing what this billion means to individual clubs, at a local level, through adver- tisements, match programmes and club newsletters.

Sponsorship strengthens the brand We are proud to be contributing to the success of Swedish sports. Sponsorship is an important aspect in reinforcing the Spelkortet A key part of Svenska Spel brand. Our business has a close association our responsible gaming with sports and this makes our relationship to Swedish sports important. and customer care Svenska Spel is the gaming company of the Swedish people, which not only makes it important but also rather

venska Spel annually pays out more than SEK 50 million in natural that our sponsorship has a signifi cant national Sunclaimed winnings to winners who have registered their games interest. Our sponsorship is mainly of our most popular on their customer loyalty card (Spelkortet). More than a million play- sports at a national association level. Svenska Spel cur- ers regularly use their loyalty card which is available to players older than 18 and registered in Sweden. The card and associated account is rently sponsors football, , indoor bandy and personal and is issued on a cost-free basis on application on sven- bandy. skaspel.se or through a Svenska Spel retailer. The only information The major events for the year were the Football World required is full name and national registration number and these details are then checked against the Swedish Population and Address Cup in Germany, gold medals in the winter Olympics, ice Register (SPAR) to avoid cheating and false personal data. hockey world cup and the indoor bandy world cup held in The loyalty card gives Svenska Spel the chance to develop a per- Sweden. All great successes – for Svenska Spel as well. sonal dialogue with the cus- tomer which creates confi - In 2007 we are starting a new sponsorship strategy to dence and security. In Use of Spelkortet* further lift Svenska Spel’s sponsorship. The goal is to addition to an automatic win at retailers make the operation more effective and strengthen the notifi cation system, card users % * percent of total in-store loyalty of all Swedes interested in sport. In addition to the receive personal offers, infor- gaming, excluding lotteries mation and other benefi ts. 60 major sports above, this year we are also sponsors of the Thanks to Spelkortet and alpine skiing world cup in Åre and of local sports and the checks made on applica- 45 tion, Svenska Spel can ensure cultural activities in Gotland. that minors are not permitted to play games with an age 30 limit. Should the card be mis- used, Svenska Spel has the right to block the card and 15 associated account with immediate effect. 03 04 05 06

Markering Markering

28 SVENSKA SPEL ANNUAL REPORT 2006 Social Responsibility Report

Svenska Spel is a major employer and market leader in the gaming industry. All important reasons for contributing to the healthy development of the commu- nity. This Social Responsibility Report is intended for politicians and decision- makers involved in gaming matters, but also for socially-minded citizens and the industry in general.

SVENSKA SPEL ANNUAL REPORT 2006 29 SOCIAL RESPONSIBILITY REPORT / RESPONSIBLE GAMING

Svenska Spel in society

That our profi t goes entirely to socially benefi cial purposes – via the public treasury – means that our business indirectly affects the entire Swedish population. For those of us working at Svenska Spel, being able to contribute our profi t to Swedish sports, youth activities and to benefi t society in other ways, is a signifi cant source of motivation.

venska Spel’s operations affect and employ many tal responsibility involves working to ensure that the Sgroups in society: customers, retailers, self-employed, products and services we provide have the least possible employees, politicians, suppliers, media and youth organ- impact on the environment. isations – to name a few. We have a customer base of Svenska Spel is owned by the Swedish State and is a 75% of the Swedish population, almost fi ve million major employer and market leader in the industry, and it people, who think gaming is fun and exciting. is therefore important we contribute to positive social A basic assumption for us to be able to run our busi- development. This Social Responsibility Report is ness successfully is that we play our part in contributing intended for politicians and decision-makers involved in to the sustainable development of the community. This gaming matters, but also for socially-aware citizens and means that we combine economic profi tability with social the industry in general. In this report we describe our responsibility and an active environmental role. Eco- endeavours to be a responsible operator, our work in nomic responsibility means that our long-term growth 2006 as well as our future plans in the fi elds of responsi- enables us to generate a profi t for Swedish sports, culture ble gaming, security, environment and our employees. and youth activities. Social responsibility means that we work in a preventative manner to reduce the risk of Responsible gaming – part of our business uncontrolled gaming. Social responsibility also involves That our business is regulated with particular emphasis being an attractive place to work where employees are on responsibility and security is nothing new. On the satisfi ed and can develop professionally. Our environmen- contrary, as early as 1934 when Tipstjänst was formed the intention was to create a safe and secure alternative to the illegal betting prevalent in the early 1930s. A lot has happened on the gaming market since 1934, but the fun-

Keep it enjoyable! We provide the damental concerns remain the same. basis for a healthy gaming environment. Since 1993 we have developed a number of pro- Four simple rules to follow: grammes for responsible gaming. The Board adopted a policy in 2004 and based on this we have developed an 1. Decide in advance how much money you can action programme with associated key indicators. The afford to lose. Never play for more than this key performance indicators presented in the 2006 report amount. 4 are those we consider most signifi cant to our business. 2. Never play for more than you feel comforta- ble telling your friends and family about. Our ambition is for the 2007 report to be reviewed by an 3. Never believe that you can win back what independent party. you have lost. Gaming is a meaningful part of our culture and has 4. Never borrow money for gaming. long been a form of socialising, adding to a sense of fellowship among friends and acquaintances. This can

30 SVENSKA SPEL ANNUAL REPORT 2006 clearly be seen at our retailers which have become natural Key indicators for responsible gaming meeting places for many customers. Eight of ten Swedes 2006 2005 played at some stage in 2006 with 98% able to manage Social responsibility Support for a regulated market1), % 81 81 their gaming. Gaming is quite simply a valued popular 1) Player base , % 75 77 1) entertainment. Players with problems , % 1.5 1.7 Our long-term ambition is to meet the expectations of Number of voluntarily banned casino guests 1,558 1,513 society and the market and the demand for extremely Interviews with casino guests about responsible gaming. By the market we mean customers, their gaming habits, No. 2,338 2,100 State-run companies take owners and authorities. The expectations on us as a gam- greater responsibility 1), % 70 69 ing company are underscored by the fact that the Govern- ment – and ultimately the Swedish population – is our Financial responsibility Gross revenue, SEK million 20,071 19,586 owner and principal. This means that responsible gaming Net revenue, SEK million 8,905 8,506 is a central and self-evident part of what we do. Marketing, SEK/player 70 70 As the country’s leading gaming operator it is our job Profi t, SEK million 1,216 1,150 to try to prevent unhealthy gaming. Our responsibility is Business partner responsibility purely preventative and by providing tools such as self- Certifi ed retailers, % 41 19 tests, various forms of gaming budgets and account-bar- Test visits, No. 6,998 5,845 Suspended due to gaming ring we help our customers to control their gaming and on credit/test visits, No. 4 5 play in moderation. All holders of the customer loyalty card (Spelkort) have access to these tools online. Employee responsibility Certifi ed employees in responsible gaming, % 91 53 According to the Swedish National Institute of Public Employees who see responsible gaming Health, around 2% of people in Sweden have a problem as interesting and positive2), % 96 — with their gaming. The overall responsibility for gaming 1) Information from Svenska Spel’s annual gaming survey. addiction lies with the Government and Parliament 2) Internal survey. through the Ministry of Health and Social Affairs, which in turn contributes to the Swedish National Institute of Public Health to work in a preventative manner through research, information and treatment. In other words, the gaming permeates the entire business, in everything from provision or fi nancing of treatment for gaming addiction how games are developed to how they are marketed. is not part of Svenska Spel’s mission or responsibility. In practice, responsible gaming means that we refrain These matters are primarily dealt with by the National for example from developing gaming forms that can be Institute of Public Health and the local social service considered aggressive. In key markets we should provide agencies. Obviously each individual is also responsible for a more responsible alternative. The action programme their own gaming. also involves avoiding aspects that research indicates may encourage uncontrolled gaming. The process is supported A responsibility that permeates our entire organisation by our policy for responsible gaming. Promoting responsible gaming is and will always be a Svenska Spel offers unique tools to help customers stay crucial element of our work. From an organisational within the limits of healthy gaming. One of the tools is the perspective, the Society section is assigned overall respon- interactive self-test which provides an early-warning signal sibility for responsible gaming. The section implements, and can thus help prevent unhealthy gaming. The self-test monitors and develops the internal processes. is available on our website www.svenskaspel.se/spelansvar. Internally we have a responsible gaming counsel which is Within the Group virtually all employees consider responsible, in conjunction with the Society department, for Svenska Spel’s work with responsible gaming to be posi- monitoring and analysing the Company’s responsible gam- tive as well as important (96%). Most (77%) also con- ing performance. The counsel meets four times per year. sider that Svenska Spel lives up to its gaming responsibil- The action programme is implemented in every busi- ity quite well or extremely well. A clear majority (83%) ness area, which then takes over the operative responsi- consider they have good or very good knowledge of what bility for its completion. This means that responsible Svenska Spel does to promote responsible gaming.

SVENSKA SPEL ANNUAL REPORT 2006 31 SOCIAL RESPONSIBILITY REPORT / RESPONSIBLE GAMING

Preventative action pays off

Svenska Spel’s strong position on the market had not been possible without the strong commitment to responsible gaming issues by employees throughout the entire organisation. All employees and business partners are certifi ed in responsible gaming. 41% of our retailers have undergone responsible gaming education and are certifi ed by the Gaming Institute. 91% of all employees in the Group are certifi ed. A compulsory, customised education is provided for employees in casino operations and customer support.

art of our gaming responsibility is to prevent minors receiving a personal diploma in responsible gaming. Pplaying on the higher-risk games, and for this reason The certifi cation is managed by the Gaming Institute. retailers and restaurant proprietors must request to see ID The increased support shown by the Swedish population cards for games with age limits. We check this through test for a regulated market is most likely an effect of Svenska visits using external suppliers. Inadequate responsibility is Spel’s widespread promotion of responsible gaming. An grounds for suspension. 6,998 tests were undertaken in annual gaming survey is conducted which showed that in 2006, which is 1,153 more than in 2005. These checks 2006, 70% of the population fully or partially agreed with resulted in four terminations, one less than in 2005. the statement that State-owned gaming operators take In cases where a retailer fails a test visit, a warning is greater responsibility than private for preventing gaming given and after a further three warnings the agency is sus- addiction. 81% agree fully or partially that current regula- pended for a limited period. Restaurant proprietors who do tion of the gaming market is good. The opinion of the not meet their responsibilities are suspended after two Swedish population is probably based to a large extent on failed tests. If gaming on credit has occurred at a retailer or the media image of the gaming market. Research shows a restaurant, the contract is terminated immediately with- that Svenska Spel is increasingly associated with being “the out warning. Since 2005 all retailer have been offered, in responsible gaming company”. The fact that Svenska Spel conjunction with ATG, a voluntary interactive education in takes more responsibility than other operators is having a responsible gaming. Some 41% of retailers have completed greater impact while criticism of Svenska Spel has declined. the training so far, resulting in 2,694 retail employees To always strive for an objective view of gaming addiction and responsible gaming in the media is one of our priorities for 2006 and the process will be ongoing.

World leader in responsible gaming Age limits from 2007 Svenska Spel shall develop entertaining and safe games while offering tools that can help customers maintain ■ Gaming in retail outlets 18 years on all games other control over their gaming. Effective age limits are an than lotteries important part of this work. The Board therefore decided ■ Gaming in restaurants 18 years in 2006 to introduce an 18-year age limit on all our ■ Internet & Mobile 18 years games from 1 February 2007. Research shows that people (including lotteries) who start gaming on the higher-risk games at a young age ■ Casino 20 years ■ Customer loyalty card face a higher risk of later developing unhealthy gaming (Spelkortet) 18 years habits. The age limit is therefore an important tool in the preventative process. Lotteries are the exception from the 18-year limit, partly because the lotteries sold in shops

32 SVENSKA SPEL ANNUAL REPORT 2006 National helpline helps players and their families

national helpline has been available for players and “I would estimate Thomas Nilsson, Atheir families since 1999. The phone number to the that Svenska Spel is reg. psychologist, Spelinstitutet helpline can be found on all lotteries, game coupons and among the fi ve fore- receipts, as well as on internet, at casinos, at retailers most in terms of and in restaurants. responsible gaming. The helpline is manned by the Gaming Institute on The gaming world is assignment by the Swedish National Institute of P ublic interested in what Health. It is run by Thomas Nilsson, registered psychol- Svenska Spel does. ogist, who has worked with dependency issues and crisis There is a lot of curi- management since 1987. Svenska Spel has contracted osity over how players Thomas Nilsson during recent years as a consultant for have reacted to the advice in gaming dependency issues. measures adopted. “I have to admit I was sceptical at the start of our “The challenge in cooperation with Svenska Spel, but that soon passed,” the future is primarily says Thomas Nilsson. “I was positively surprised that one of technology and globalisation. Technology devel- they really wanted to translate opment in the gaming industry is words into deeds and considered it “Svenska Spel shows that it is making the games more interactive, natural that responsible gaming possible to introduce responsible faster and more accessible, but the should apply throughout the com- gaming at all levels, from the big risks are increasing,” says Thomas. pany. Everyone who worked at casinos, internet poker to gaming “At the same time, the technology Svenska Spel should be educated retailers around the country.” is creating great opportunities for the in and have knowledge about the players themselves to be able to con- basic pillars of the responsible gaming programme. This trol their playing, which is excellent. Technical develop- convinced me that they really thought the matter was ment is led by a number of unregulated companies and important.” they are not interested in working in a preventative The basic idea behind Svenska Spel’s responsible gam- manner, something which is directly harmful for players ing programme is to allow players themselves to decide and society. For that reason I don’t think that Swedish how much time and money they want to spend on their gaming legislation today is adequate. It is made for a gaming. physical market and hasn’t kept pace with today’s devel- “As I see it,” says Thomas Nilsson, “it is a sensible oping gaming market.” way to relate to players. Svenska Spel shows that it is possible to introduce responsible gaming at all levels, from the big casinos, internet poker to gaming retailers Facts, national helpline around the country. The great majority of players accept The helpline answered 5,827 calls in 2006, 1,077 of which were support the measures and think it is good they are introduced.” calls. Most of the people who have problems with their gaming play Thomas Nilsson has a broad network nationally and on VLTs, primarily Jack Vegas. Online poker comes in second place with 204 calls, eight of which gave Svenska Spel’s poker site as their primary internationally. He says Sweden is far ahead of many gaming problem. other countries with regards to responsible gaming. The phone number to the helpline is +46 20 81 91 00.

SVENSKA SPEL ANNUAL REPORT 2006 33 SOCIAL RESPONSIBILITY REPORT / RESPONSIBLE GAMING

Svenska Spel’s key stakeholders

Dialogue with stakeholders Svenska Spel’s operations affect and employ many groups in society. Alongside customers, the key stakeholders are retailers/restaurant proprietors, employees, the owner, sport, the National Board for Youth Affairs and the local community. The media and authorities also have a major impact on Svenska Spel. Company development takes place in ongoing dialogue with our stakeholders.

Stakeholders Needs/Expectations Key interface/dialogue

Customers Attractive gaming in an easily accessi- Retailers, restaurant proprietors, Casino Cosmopol, svenskaspel.se, ble, safe and responsible manner. Bingo, associations, customer support, customer measurements, Profi ts to sports focus groups, claims handling

Employees Development, appreciation, opportunity Employee reviews, satisfi ed-employee index, internal and external to affect work situation, good working education, assessment centre environment

Retailers/restaurant Business conditions, dialogue and Direct contact via sales organisations, satisfi ed-partner index, proprietors (business education publications, education, extranet partners)

Suppliers Business terms, trust, dialogue Negotiations

Owner To sell games in a responsible and safe Ownership policy, concessions, regular reporting and dialogue, manner, national retailer network, confi - Annual General Meeting dence and dialogue, profi t requirements

Local community Good service, employment at retailers, Meetings with local authorities and local interest organisations dialogue with local gaming dependency associations (local activity support, profi t via national association)

Serious and knowledgeable opera- Dialogue with benefi ciaries (Swedish Sports Confederation and Interest organisations tors, involvement in key issues Swedish National Board for Youth Affairs), National Association of Gaming Dependency, retailer interest organisations and the Swedish Hotel and Restaurant Employers’ Association (SHR), Svebico, OSS, CSR Sweden

34 SVENSKA SPEL ANNUAL REPORT 2006

are possibly the least risky product on the market, and Dialogue important with our stakeholders partly because there is no age limit on other lotteries sold Our future is directly dependent on our ability to listen by clubs and associations. To introduce an age limit on to customer requirements. The Company is developed in only a portion of the lotteries on the market would cause ongoing dialogue with our stakeholders. Our key stake- many complications. Retailers and customers would holders are customers, employees, business partners, experience the situation as confusing and associations owners, politicians, society and interest organisations. would no longer be able to let youths sell lottery tickets to The media also has a major impact on Svenska Spel. fi n a nce their operations. The dialogue with stakeholders is highly important for Poker on svenskaspel.se is a unique product on the mar- us and our business. Within the industry we try not to ket as our poker has amount limits, gaming budgets and compete on responsible gaming – instead we cooperate integrated pauses in the game. This shows that creating a with companies such as ATG and Folkspel in the Gaming healthy gaming environment is possible – and is even Council (Spelrådet). We actively participate in a number of appreciated by players. Read more about how we work international associations and councils that work with with responsible gaming on svenskaspel.se on page 37. responsible gaming issues, including the specifi c group led by European Lottery (EL). SNSUS is a Nordic foundation Regularly compared to other companies founded in 1999 to spread knowledge and information on As the world leader in responsible gaming, we make gaming dependency. Since its start, SNSUS has grown and ongoing comparisons with other gaming companies all fi ve Nordic countries are now represented. We also sup- around the world. In the fi eld of internet gaming, Svenska port gaming research carried out by the European Associa- Spel comes out on top. Overall, svenskaspel.se is posi- tion for the Study of Gambling (EASG). On a national tioned well with clear and comprehensive information level, we have been involved in the Independent Gaming related to responsible gaming. What makes svenskaspel.se Cooperation (OSS) along with the National Gaming Board unique are the direct links to the gaming budget and self- and the National Association of Gaming Dependency. We banning, as well as the age limit being guaranteed by the have also had a responsible gaming council internally with loyalty card (Spelkortet). This means Svenska Spel is business area managers as representatives. experienced as being more serious than foreign operators. In 2005 Svenska Spel joined CSR Sweden (Corporate The World Lottery Association (WLA) decided in 2006 Social Responsibility), to introduce guidelines/rules for responsible gaming. The which is a network of guidelines are divided into seven different principles and companies with a focus How many people are areas which members are expected to live up to. In 2007 on voluntary social there with a gaming dependency in Sweden these principles were connected to an action plan where responsibility and social gaming operators can be affi liated at different levels and commitment. We cur- Statistics from the Swedish National Institute of Public gain certifi cation accordingly. rently use CSR Sweden Health (1997/98) show that A survey was made during the autumn in the WLA on primarily to build net- 2%, or 125,000 people, had Svenska Spel’s initiative. The purpose was to see how well works and exchange problems with their gaming of which some 35,000 or we and other companies live up to the requirements of experiences with other 0.5% are classifi ed as having gaming responsible gaming set by the WLA. companies. dependency. Svenska Spel’s gaming surveys The survey is based on the seven principles that WLA show the number of problem gamers and people with gaming dependency remains members determined in 2006, and which involve providing on a relatively stable level over time. tools to players along with information and education, and working in various networks and following research. Svenska Spel ranked fi rst.

SVENSKA SPEL ANNUAL REPORT 2006 35

SOCIAL RESPONSIBILITY REPORT / ETHICAL MARKETING

Marketing is part of responsible gaming

Svenska Spel has a clear social mandate where responsibility is prioritised ahead of profi t. To run a professional operation with full social responsibility means that we try to optimise profi ts instead of maximising them. For example, we don’t market our products as broadly as if we were a profi t-maximising company.

arketing is often discussed as part of the responsi- association with unhealthy gaming. It is important to Mble gaming debate. There is no research showing point out that the objective of our marketing and our that the extent of marketing is of signifi cance to individu- product range is not to increase the total amount of gam- als developing a gaming dependency. On the other hand, ing taking place. We want the Swedish people’s gaming to the message itself is important. We there- be on less risky games. It is part of our fore follow the ethical guidelines devel- mandate to channel gaming from unregu- oped by the gaming industry through the Media investments per lated players to a safe environment. Gaming Council and have decided to customer and company As a natural part of Svenska Spel’s work

refrain from marketing certain products SEK with restrictive and ethical marketing, 600 for responsible gaming reasons. The eth- 600 *Calculated as Svenska Spel has decided to participate in an average of ical guidelines can be read on sven- 500 the biggest: the MediaSmart project initiated by the skaspel.se/spelansvar. Expekt, Uni- Association of Swedish Advertisers. The bet, Ladbrokes We are very restrictive in marketing 400 purpose is to stimulate youth to be more

products that we know are associated 300 critical to media, the advertising industry with major risks, such as VLTs which we and companies. Even if people under the 200 have chosen not to market. On the other age of 18 are not included in our customer 100 hand, we market products such as Lotto 60 50 groups, it is likely they are reached by the Inter- and Triss as they do not have any proven SvS ATG net* message in our advertising.

Signifi cant events in 2006 Priorities for 2007

■ Adopted a programme for responsible ■ Developed education in responsible ■ Training in responsible gaming gaming gaming for personnel in Bingo halls ■ Evaluate and develop existing tools ■ Developed a special action plan for inter- ■ Developed an interactive education for for responsible gaming net poker and Bingo halls restaurant proprietors ■ Be a driving force in research related ■ Been a driving force in research related ■ Trained all employees in the basics of to game development to game development responsible gaming ■ Follow-up responsible gaming processes ■ Worked to promote an objective view of ■ Started work to enable external auditing ■ Create and maintain national and inter- gaming dependency in the media of the action programme national contacts ■ Reduced number of suspensions result- ■ Established key indicators for control ■ Drive issues related to responsible ing from age limit and gaming on credit and follow-up of responsible gaming gaming and lead development and the transgressions and environmental processes. To be guidelines followed by the regulated ■ Maintained national and international adopted in 2007 market contacts ■ Promote information initiatives

36 SVENSKA SPEL ANNUAL REPORT 2006 The Keno Festival campaign ran during weeks 39 and 40 and was promoted in retail outlets, on TV and in the evening press. Photography: Peter Orevi

How much money is spent on marketing Total gross media investments by the gaming industry in 2006 (including unregulated com- panies) amounted to SEK 1.2 billion, a heavy increase over 2005. Svenska Spel represented SEK 290 million, ATG stood for SEK 115 million, the international online operators for SEK 680 million, and others (NGO games, etc.) to some SEK 120 million. The fi gures do not include internet advertising. Source: Carat

Poker A rapid success thanks to clearly responsible gaming

ur motto is to “play in moderation”. Playing poker with us requires the customer beginners alike, as most of us tend to lose OGaming should be a fun pastime to be 18 years old and have a personal track of time and place when we’re doing which adds an element of excitement to customer loyalty card (Spelkort). It is something fun. everyday life. To prevent unhealthy gaming not possible to start playing before the The secret of the limits is that players we offer a range of tools that help custom- national registration number and address decide themselves, and before they “get ers make good decisions about their gam- have been checked via the Swedish Popula- caught up” in the heat of the game. ing. tion and Address Register (SPAR). Games Research shows that if we can set our own Online poker on svenskaspel.se is a clear cannot start before players have completed limits we fi nd them easier to accept. The example of how we are working in a suc- the compulsory details on their gaming fact that very few people increase their cessful and integrated manner with budget, how much money they are pre- budgets shows that most had thought responsible gaming. We are the fi rst State- pared to lose each day, week and month, quite carefully about how long they should owned company in the world to have an and how much time they are prepared to play and how much they could afford to internet poker licence and our poker is spend on a daily, weekly and monthly play for. unique to the market as it contains compul- basis. When the budget is decided it is not As part of the preparation for the poker sory limits and gaming budgets and even possible to increase the total or increase launch, a research group was organised on has pauses integrated into the game. the number of gaming hours before the assignment of Svenska Spel and the Swed- The poker table that is most popular period currently registered in the system is ish National Institute of Public Health. The amongst players is that with the lowest completed. The amount or number of gam- purpose is to build a platform for all types stakes (SEK 1–5 table), which shows that ing hours can however be reduced in real of future research in the area and the Swedes want to play poker but in modera- time. The limits have proved to be appreci- project will start as soon as research funds tion in terms of time and money. ated by experienced poker players and are granted.

SVENSKA SPEL ANNUAL REPORT 2006 37 SOCIAL RESPONSIBILITY REPORT / SECURITY

Continuous security improvements

Security issues are part of our mandate. It is safe and secure to game with Svenska Spel. Customers can count on winnings being paid out to the right recipient and our games and lotteries cannot be manipulated.

omprehensive monitoring of transactions and gaming established in the mid-1990s, with 24 companies cur- Cbehaviour is integrated into all our games to ensure rently certifi ed. they are run correctly and participants cannot gain advan- The Standards are administered by the WLA’s Security tage using unfair means. A good example is camera moni- and Risk Management Committee, in which Svenska Spel toring with recording in the casinos which monitor and is represented by the company’s Security of Information register games in realtime so they can be reviewed later. Offi cer. The Committee continuously reviews security By law, monitoring also includes routines for tracing standards within the gaming industry and also acts as a money laundering. Any suspicious activities are reported forum for discussion on security issues. Certifi cation of to the Financial Police and drawings of number games gaming operators is made through regular audits by an such as Lotto, Keno and Joker are made in the presence accredited independent certifi cation body which deter- of National Gaming Board inspectors. mines whether the gaming operator meets the require- ments. World Lottery Association – Security Control Standard The latest version of the WLA-SCS:2006 standard The international gaming organisation World Lottery replaces the earlier 2003 version. A new requirement is Association (WLA) organises companies that operate in a that the certifi ed gaming operator must fulfi l the require- regulated market in compliance with the rules of each ments of the international standard ISO/IEC 27001. country. Approximately 140 companies in 75 countries are currently members. Svenska Spel has been certifi ed Information security management system under the organisation’s security standards that were – SS-ISO/IEC 27001 Security of information involves assuring the accessibil- ity, correctness, confi dentiality and traceability of all business-critical information. This type of information Which authorities includes material stored in databases, computers, web- monitor the gaming market sites, intranet and on paper, as well as statements made The National Gaming Board is via telephone, sent as e-mail or fax, shown on overhead to ensure that lotteries, slides or notes on whiteboards. casino gaming and other gaming operations in Swe- To fulfi l our own requirements and meet WLA certifi - den are performed in a cation requirements, we are in the process of introducing legal, secure and reliable an information security management system in compli- manner. The Board monitors the inter- ests of consumers and also contributes ance with the new international standard SS-ISO/IEC to reducing the socially damaging risks 27001. This requires us to further structure our security that can be caused by gaming. process and safety routines and make systematic, ongoing improvements as well as assure the skills of employees.

38 SVENSKA SPEL ANNUAL REPORT 2006 Signifi cant events in 2006 Priorities for 2007

■ The Group Security and Risk Manage- ■ A total review of all the policies and ■ Strengthen resources and develop skills ment department was reorganised and guidelines in the area of responsibility in the Group Security and Risk Manage- expanded. A new department manager was introduced and will be further coor- ment department, enabling us to meet was employed, a special Risk Manager dinated with the introduction of the higher demands and offer our customers appointed and a new Information Secu- information security management sys- even greater security rity Manager employed. Recruitment of tem ■ Introduce and certify the new informa- additional resources in physical security, ■ A number of security reviews were held, tion security management system, which investigation and intelligence was primarily in the Internet & Mobile and fulfi ls the requirements of the SS-ISO/IEC started Casino business areas 27001:2006 standards and WLA-SCS:2006 ■ The WLA audit was carried out in 2006 ■ Routines for dealing with abnormal ■ Raise security awareness throughout the and the process of introducing SS-ISO/IEC gaming were developed in each business Group as a whole through various secu- 27001 – Information Security Manage- area. An organisational change was rity programmes and activities ment System – prior to the 2007 audit implemented, with responsible person- ■ Greater resources and skills in IT security was commenced nel appointed. The work has started and for the expanding business in the Inter- ■ Central crisis training was carried out will continue during 2007 net & Mobile business area with Key management ■ Development of a new gaming platform ■ Further develop routines for following and organisation in the Bingo Hall busi- up abnormal gaming. Abnormal gaming ness area started refers to gaming that is in confl ict with legislation or gaming rules

SVENSKA SPEL ANNUAL REPORT 2006 39 SOCIAL RESPONSIBILITY REPORT / EMPLOYEES

Commitment and development help us achieve our goals

One of the key success factors for Svenska Spel succeeding in creating strong long-term profi ta- bility is its ability to retain and develop the skills that exist in the organisation. Providing an attractive workplace is crucial if we are to remain competitive in the future.

good working environment and healthy dialogue Leadership that develops employees Astimulates better results as do happy and motivated Good leaders develop employees and help build their employees, which is why we try to offer good career commitment. We want our leadership within Svenska opportunities which match people’s abilities with availa- Spel to be characterised by professionalism, awareness, ble challenges. commitment and responsibility. Leadership issues will As many as 91% of Svenska Spel employees indicate always be prioritised in Svenska Spel as we want to secure they enjoy their work, an 89% increase over 2005 and a fi rst-rate supply of management and leadership through- an excellent result. Svenska Spel is a company where most out the entire Group. employees are healthy and happy with their employer. In 2006 we introduced a programme for management development which includes all managers having an Healthy and happy employees good for profi tability annual review with feedback and the opportunity to The level of good health across the Group was 73% in develop as team leaders. These reviews were held for the 2006, a decline of 2% from the previous year. To create fi r s t time in 2006, and now enable the Human Resources a healthy long-term working environment, we have devel- department to start systematically providing individual oped a new strategy during the year focussing on every- managers with the support they need. Some managers day health. The purpose is to provide the conditions for have also chosen other career paths within the Group. employees to feel healthy and happy in their everyday life, The programme also helps to identify and support in turn improving motivation and job performance. employees that have the talent, interest and ability to Health initiatives should be a natural and ongoing part of develop as future managers. Management development daily work and help people feel healthier on an everyday clarifi es career paths and development opportunities basis. Each employee should feel Svenska Spel is support- within Svenska Spel. ing and encouraging them to be as healthy as possible, although the ultimate responsibility for good health Secure skills for the future ultimately rests with the individual. Motivation, commu- We want to provide our employees with the best condi- nication, support and participation are the cornerstones tions to fulfi l Svenska Spel’s mission. Each employee of our approach to health. Benefi ts include health care should have the skills, ability and motivation to perform contributions, free medical care and treatment, art their specifi c job with the Company providing organisa- groups, fruit and subsidised lunches. tion, leadership, benefi ts, stimulation, culture and devel- Casino employees are prioritised in our efforts to improve opment. Svenska Spel aims to become an even more health, as their attendance fi gures are lower. We are also attractive employer by responding to the individual needs working actively to make our casinos more attractive as a of employees as far as possible. Each manager should workplace, develop the profession and available career paths conduct at least one employee review annually and help as employee turnover is higher than the Group average. the employee plan their skills development.

40 SVENSKA SPEL ANNUAL REPORT 2006 Results from the 2006 employee survey

% Does your immediate boss 88 treat you with respect? 86 Does your team work well together?

Do you feel you are able to reach your personal 73 career goals? Is your team free from conflicts that could 68 negatively affect its work?

65 Can you influence your work situation? Do you receive sufficient feedback on your 55 performance at work?

52 Are you free from negative stress?

SVENSKA SPEL ANNUAL REPORT 2006 41 SOCIAL RESPONSIBILITY REPORT / EMPLOYEES

Taking advantage of knowledge and experience corporate basis but looked at individual business areas in The Company today consists mostly of the combined terms of business models, internal and external structural knowledge of our employees. We want to continue giving capital and human capital. One of the most important employees the chance to develop within the Group and conclusions was that business areas should work more help ensure their skills remain in the organisation. In systematically to assure future competency so that we 2006 we carried out our fi rst evaluation of so-called will be well-equipped to manage our assignments in the intellectual capital. The evaluation was not made on a long term. Having our competency documented enables

Facts, employees

2006 2005 No. of employees No. of employees of which men, % No. of employees of which men, % Group 1,945 53 1,768 53 Parent Company 689 59 633 58 Other Group companies 1,256 49 1,135 50

Other full-time positions 2006 2005 Health level, % 2006 2005 Group 1,486 1,425 Group 73 75 Parent Company 647 607 Parent Company 83 83 Other Group companies 839 818 Other Group companies 64 66

Average age 2006 2005 Employee satisfaction, % 2006 2005 Group 34 33 Satisfi ed employee index 91 89 Parent Company 41 41 Employee turnover 19 18,1 Other Group companies 30 29

Health & Lifestyle – Age distribution, % 2006 2005 Achievement of goals* 2006 Goal <30 years 42 41 Health level, % 83 80 30–49 years 49 50 Rehabilitation, % 75 65 >50 years 9 9 Active rehabilitation, persons 13 <20 * Pertains to the Parent Company

Female managers, % 2006 2005 Education Group 40 40 30% of employees have a university/college Parent Company 36 33 education. Other Group companies 43 45

Length of employment, % 2006 2005 <5 years 82 72 6–9 years 6 12 >10 years 12 16

42 SVENSKA SPEL ANNUAL REPORT 2006 us to better support management in a more structured having backgrounds from all over the world and speak- manner. The intellectual capital evaluation will be ing some 40 languages in total. The company language is followed up in 2007. Swedish and Swedish will be one of the assessment varia- We also started the Svenska Spel Academy in 2006, bles in the internal skills ladder for dealers and Inspector which is responsible for all education in the Group for Dealers. management and employees alike. The Svenska Spel Our goal is to also increase the proportion of employ- Academy is a virtual education centre which offers and ees of foreign descent in other parts of the Group, partic- packages education. It is intended to be a management ularly in the areas and functions where we interact with tool for skills development that supports the long-term retailers and restaurant proprietors. Recruitment pro- tasks and our value base: a training platform which cesses therefore aim to attract people with diverse back- clearly links individual skills development and different grounds and skills. roles in the Company. Equal opportunity Diversity important to the business Svenska Spel aims to be an equal opportunity company in Diversity and respect for the individual is a hallmark of ways such as providing both parents with the same our corporate culture. Diversity has a business value that opportunities for looking after their home and family. has become increasingly evident within Svenska Spel, The amount of parenting allowance taken by male particularly in casino operations. The Malmö casino was employees is 21% up on 2005. last year awarded the City of Malmö’s prize for diversity and integration – an honour Svenska Spel is very proud Motivation and job satisfaction of. The Human Resources department is active in trying By paying attention to motivation and job satisfaction we to refl ect the diversity of Swedish society and of its casino can continue developing good leadership, a shared corpo- guests. We are working actively towards equal employ- rate culture and good working environment. In this way ment with language being a key variable. Around a third we can ensure that Svenska Spel will continue to be a of Malmö’s population is of foreign descent as is one- successful company and an attractive workplace in the third of our employee base in Malmö, with employees future.

Signifi cant events in 2006 Priorities for 2007 ■ Adapt the interactive self-test for use by employees ■ Secure competency requirements so that the Group’s ■ Communicate the employer brand as part of the overall brand lon g-term objectives can be achieved ■ Improve the work environment and create more development ■ Implement skills planning in the various business areas opportunities within casino operations – Introduced our corpo- ■ Prepare development plans for skilled and ambitious rate culture into the new business areas employees ■ Moved gaming support to Visby ■ Become more attractive to young, well-educated people ■ Implemented a review of intellectual capital in the business areas ■ Reduce employee turnover in our casinos ■ Implemented the ‘World-class hosts’ project at the casinos ■ I ntroduce a new HR system for salaries and personal ■ Introduced a long-term strategy for management development reviews ■ Started process of uniform agreements for all employees ■ Develop uniform agreements within the Group

SVENSKA SPEL ANNUAL REPORT 2006 43 SOCIAL RESPONSIBILITY REPORT / ENVIRONMENT

Respect for the environment, now and in the future

Svenska Spel’s operations have a limited environmental impact compared to many industrial and manufacturing companies but naturally we take responsibility for contributing to a healthy environment and sustainable development. Our products and services should have as little impact on the environment as possible.

venska Spel’s environmental impact is on a direct as as well as divisional level. Information & Society is Swell as indirect basis. Direct environmental impact is responsible via the Environmental Council for evaluation mainly due to transportation of lottery tickets and cou- of the action plan. pons, and consumption of resources such as paper and Svenska Spel makes environmental demands on its sup- electricity. We are therefore increasingly offering electronic pliers and some of the procurement processes run in 2006 products that replace paper to help reduce resource include transportation of lottery tickets and coupons. The consumption and waste. We also make environmental growing awareness of the climate effects of carbon dioxide demands on our suppliers and purchase renewable emissions is raising the market demands and expectations electricity. for more ecofriendly transportation. A new contract was Environmental processes were run in 2006 in accordance signed with HIT/Posten in 2006 in which the supplier with Svenska Spel’s action plan for the 2006–2007 period. reports their carbon dioxide emissions, helping us to better The Information & Society department is responsible for follow up our impact on carbon dioxide. the action programme. In 2006 we established a corporate In compliance with political directives on the relocation Environmental Council as outlined in the action pro- of government operations we have moved services and gramme. The Environmental Council consists of six envi- established new business areas in Visby, which has ronmentally-strategic people who meet four times per year. increased the number of fl ights taken during the year. We The council’s task works with the Information & Soci- aim to reduce the number of fl ights through video confer- ety department to monitor and analyse the Company’s ences and improved planning. environmental processes. The council proposes an envi- An agreement was signed with Taxi Stockholm in 2006 ronmental action plan for Svenska Spel, effective at Group to use alternative-fuel cars where possible.

Signifi cant events in 2006 Priorities for 2007 ■ ■ Introduce routines for environmental ■ Less printed material to retailers Educate employees in environmental assessments during product develop- ■ issues Progress on development of a policy- ment and purchasing of goods and ■ Implement an environmental survey based action plan services ■ for Casino Cosmopol Established an internal Environmental ■ All new company cars are alternative- ■ Introduce environmental standards and Council fuel cars ■ key indicators Ecoplan for Bingo ■ Reduce amount of air travel ■ Continue encouraging environmental ■ New contract with HIT/Posten consciousness amongst employees ■ Work started with internal information ■ Implement an environmental audit initiatives ■ Active dialogue with stakeholders

44 SVENSKA SPEL ANNUAL REPORT 2006 Respect for the environment, now and in the future

Facts, environment

Environmental policy for the Svenska Spel Group

Svenska Spel aims to be an environmentally aware group. We focus on and contribute to sustainable development in society by striving to improve the environment in all areas of our organisation. Our overall goal is to ensure that the products and services we provide have the lowest possible impact on the environment.

The policy will be achieved by

■ G radually adapting our operations to environmental demands

■ Employing specifi c environmental objectives, measures, evaluation and follow-up in our environmen- tal processes ■ Fulfi lling legislative and regulatory requirements as well Svenska Spel’s environmental impact as the guidelines of the owner. ■ Taking environmental considerations into account Company cars 2006 2005 2004 during purchasing and making environmental demands No. of cars 79 — — on our suppliers and contractors of which alternative-fuel cars 11 5 0 ■ Taking the environment into account in the design of new products and services and the development of existing products Consumption, weight in tonnes 2006 2005 2004 2003 ■ Maintain a suffi cient level of environmental knowledge Coupons 544.9 516.1 639 634 amongst employees to enable effective environmental Programmes 252.6 225.2 232 245 work Ticket rolls 219.6 174.3 165 197 ■ Make demands on our retailers and restaurateurs Lotteries 218 247 219 282 ■ Encourage players to handle our products in a responsi- Total 1,235.1 1,162.6 1,255 1,358 ble manner ■ Run an open a constructive environmental dialogue Difference 2006/2005 72.5 –92 –103 –195 with stakeholders Difference 2006/2005, % 6.2 –7.4 –7.6 –14.4

SVENSKA SPEL ANNUAL REPORT 2006 45 SOCIAL RESPONSIBILITY REPORT / PROFIT

Profi ts back to the Swedish people, sports and other non-governmental associations

100% of Svenska Spel’s profi t is channelled back into the community. The government decides how the profi t is to be distributed between sports, other non-governmental organisations and the public treasury. Our contribution to youth sports in 2006 was approximately SEK 1.2 billion.

or Svenska Spel with its traditionally strong link to clubs around the country through local activity grants. Fsports, it is natural that the biggest benefi ciaries are The remaining portion is a special contribution to sports. sporting organisations for children and youth. This way The emergence of unregulated operators on the Swedish of distributing profi t creates a basis for continued Swed- gaming market in recent years however has meant that ish sporting success in the future. sports have a lower proportion of total gaming expendi- Svenska Spel’s profi t for the 2006 fi nancial year was ture. Every krona not spent through Svenska Spel means SEK 4.8 billion. From that total a base amount is fi rst less money goes to children’s and youth sport. One of the allocated to the public treasury. The remaining portion is effects of Svenska Spel’s profi t around the country is that allocated between the State, which receives 50%; the sports associations can maintain membership fees at a Swedish Sports Confederation (RF), which receives 40%; reasonable level. Research shows that many sports associ- and the Swedish National Board for Youth Affairs, which ations without local activity grants would be forced to receives the fi nal 10%. Additionally, the government has double their membership fees for children and youth. announced in its 2006/2007 budget proposal that the The Swedish National Board for Youth Affairs is a gov- Swedish Sports Confederation will receive an additional ernment agency that works to increase the infl uence and SEK 500 million from Svenska Spel during its term of welfare of young people in society. Funds are allocated offi ce, as part of a special new focus on Swedish youth between various youth organisations, ranging from polit- sports. This is complemented by a special ical and religious youth organisations to contribution of SEK 60 million to sports. relief organisations, outdoor clubs and These investments are fi nanced from the temperance organisations. Distribution of profits State’s share of the funds. 2002–2006 In total this means that the Swedish Long history in Swedish sports SEK million Sports Confederation receives SEK 1,216 1,500 Svenska Spel and sports have a long and million from Svenska Spel’s 2006 profi t. successful history together. The partner- The amount received by the Swedish 1,200 ship with Swedish football began as early National Board for Youth Affairs as 1934, and today we also sponsor the 900 amounts to SEK 154 million, while the , handball, bandy and indoor State receives SEK 3,437 million. 600 bandy associations. Most of our gaming The Swedish Sports Confederation objects come from the series and competi- then allocates around half of the money 300 tions run by these associations. to children and youth activities in sports 02 03 04 05 06

Swedish Sports Confederation Swedish Sports Confederation (Through Handslaget and special grants) Swedish National Board for Youth Affairs

46 SVENSKA SPEL ANNUAL REPORT 2006 Profi ts back to the Swedish people, sports How much profi t does and other non-governmental associations Svenska Spel retain Nothing. Everything is used for community-related pur- poses. In 2006, the sports movement received SEK 1.2 billion and the Swedish National Board for Youth Affairs received SEK 154 million.

SVENSKA SPEL ANNUAL REPORT 2006 47 SOCIAL RESPONSIBILITY REPORT / PROFIT

The Elite sport scholarship is awarded by Svenska Spel and the Swedish Sports Confederation. It aims to help elite athletes compete at a national level while studying at college or university.

The Sports journalist scholarship is awarded annually by Svenska Spel and the Swedish Sports Journalist Associa- tion to sports journalists that want to improve profession- ally, develop their skills in a particular sport or gain expertise in a specifi c fi eld.

BOO FF won the Svenska Spel and TV4 Travel Triss competition in autumn 2006. Svenska Spel’s Research scholarship aims to stimulate gaming research at Gotland University. The scholarship applies to gaming research in general. Papers may be Distribution of profi t is not to be confused with Svenska written in fi elds including business administration, sociol- Spel’s sponsorship programme which is fi nanced from ogy, behavioural science or cultural history, with the only operating activities. Sponsorship is the window through requirement being that it relates to gaming. which our strong sporting link is seen; on national team uniforms, arenas and hockey rinks around the country. Svenska Spel’s Community Prize aims to award football To promote development in sports and research, we clubs working on projects that benefi t the community. annually award a number of grants to individuals or The prize is run jointly by the Swedish Football Associa- clubs who have made special achievements. tion/Swedish Elite Football and Svenska Spel.

The allFair prize is an award made jointly by Svenska The Swedish Sports Leader Prize is awarded by Svenska Spel and the allFair association. The prize aims to reward Spel in conjunction with the Coaches Association to a sportsperson or persons who has been an active and sporting leaders in general. The prize is intended to positive role model for good sportsmanship in sporting reward skilled leaders in Swedish sporting clubs. arenas around the country.

Signifi cant events in 2006

■ Allocated SEK 1.2 billion to the Swedish Sports Confederation, of which SEK 500 million is a special government grant to Sports ■ Distributed SEK 154 million to the Swedish National Board for Youth Affairs ■ SEK 3.4 billion to the public treasury

48 SVENSKA SPEL ANNUAL REPORT 2006 Financial statements

TABLE OF CONTENTS 50 Directors’ Report 54 Proposed distribution of profi ts 54 Risks and risk management 56 Consolidated income statement 57 Consolidated balance sheet 58 Consolidated cash fl ow statement 58 Consolidated statement of changes in equity 59 Income statement, Parent Company 60 Balance sheet, Parent Company 62 Cash fl ow statement, Parent Company 63 Statement of changes in equity, Parent Company 64 Notes 81 Audit report

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ate enu bed ons ges nanc new gies 200 follo fou con s o ist h 2 sell a cap ing , R ess use r hie ing hips t a e o ver a ver ngs nde on th esp 0 4. tri ial ial enew w u ital for of th s a 05 nd ved ved f 4 but var and ite ons d i in acoin ms n i p i is pr mos ten .7% .7% e n iet ion ms thr e f al, n 1 nte ts ibl new of di y o -ye ext ext orm oug s, ima Bal lon t p 9 e g for for rna for for nve 96 f e to sp to ar str rofi anc pag pro g-t ami ril h: 200 l m . T of re the xci nie per y d ibut

erm tab ed duc rnational he e. ort ng, ana tin nt, nt, 6 i iod Gro ue gul ion – le risk pro g a s i ts s t gem obj Lin res to a gam up. to be ati n p he as we nd fi ks

ect pon t on, wor ent art hig Spl tot ent ing to ive Swe- sib icu- l thu al it ld h- l er- s as le s Gross and net Operating profit, Profit after gaming revenue operating margin financial items

SEK million SEK million % SEK million 25,000 5,000 50 5,000

20,000 4,000 40 4,000

15,000 3,000 30 3,000

10,000 2,000 20 2,000

5,000 1,000 10 1,000

02 03 04 05 06 02 03 04 05 06 02 03 04 05 06

Gross gaming revenue Operating profit Profit for the year Net gaming revenue Operating margin

between the two divisions, the Direct Division shows an • Operating profi t increased by 5.3% to SEK 4,763 million increase of 31% while the Retail Division remains on the same (4,524). level. • The operating margin was 23.5% (22.8). The increase shown by the Direct Division is due to the • Profi t after fi nancial items and tax increased by 5.2% to SEK introduction of internet poker and growth of other internet 4,807 million (4,569). products, as well as growth in the casino business. • Investments in property, plant and equipment were SEK 254 The internet poker licence has enabled Svenska Spel to million (288), and investments in intangible assets were SEK channel poker gaming from foreign operators to the Swedish 95 million (92). alternative. • The average number of employees in 2006 was 1,486 • Gross gaming revenue amounted to SEK 20,071 million (1,425). (19,586), which is a 2.5% increase. • The Board of Directors proposes that profi t of SEK 1,216 • Net gaming revenue (gross gaming revenues less winners’ million be distributed to the Swedish Sports Confederation, share) amounted to SEK 8,905 million (8,506), an increase SEK 154 million to the Swedish National Board for Youth of 4.7%. Affairs, SEK 0.4 million to Swedish culture and SEK 3,437 million to the Swedish Government.

Svenska Spel’s management model

Long-term objectives, 10 years Svenska Spel shall, irrespective of the form of regulation, become Sweden’s biggest, most profi table and most responsible gaming and lottery company, thus enabling socially-benefi cial contributions on the same level as 2004.

Market Customer Responsible gaming Process Employees

Strategies • Product development • Stronger brand • World leader in respon- • IT part of the business • Strong employer • International cooperation • Development of customer sible gaming process brand • New forms of distribution loyalty card (Spelkortet) • Customer-oriented and • Long-term manage- • Greater availability • Stronger customer effective organisation ment and competency relationships • Stronger intellectual supply capital Performance measurement Profit Customer Responsible gaming Process Employees areas

Indicators • Net gaming revenue • Brand awareness • Number of certifi cations • Effi ciency • Employee index • Operating profi t • Visiting frequency • Age verifi cation • Renewal • Leadership index • Share of new products • Customer growth • Number of terminations • Balanced risk • Skills development • International business in relation to frequency • Operating effi ciency • Health index • Market shares of test visits

SVENSKA SPEL ANNUAL REPORT 2006 51 FINANCIAL STATEMENTS 52 SVEN adt wds prsCneeain E ilo 126 ,1 105 6 767 868 1,015 1,019 1,216 Paid toSwedishGove Y Paid toSwedishNationalBoa Paid toSwedishSportsConfederation,SEKmillion Other information Equity ratio,% persha Earnings Operating margin,% Net gaming Key ratios iaca tm Profi Financial items Profi Operating pro Capitalised workforownaccount expenses Other external Employee expenses oto od n evcssl Cost ofgoodsandservicessold Total income Other operatingincome Revenue f Revenue f Revenue f Revenue f Revenue f Income statementinsummarySEKmillion Five ■ ■ ■ Firs Sign 1) I 2) I DIRE Ohr Gross pro Other Commissions

SKA SKA outh A Winners’ share Winners’ in t term Laun gamin Exch Star games nica Hall Inte FRS FRS ncl t q

t/loss f ifi -ye CTO o h er t fortheyear ude he uar SPE rne

t-u l ga has has bus ang ina can ch f g a Ret ar p o s u in th ter ar,SKmlin fairs, SEKmillion t & of in L A min ls ine RS’ rom gaming,Associationbusinessa rom gaming,Casinobusinessa rom gaming,Inte rom gaming,Restau rom gaming,RetailOutletbusinessa bee e c fi t even nd o soits rom associates

ncl ail at Sv summa f t t Mob eeu,SKmlin revenue, SEKmillion omm s N g p e R n a s he ter lotte aim REP bus NU are fi ens eta lat p net commo

e E ilo re, SEKmillion ile ile

ts ed 2) ine enc AL t pl as ORT

ry for il ka ied du and in 2006 winni pok s ry ed REP Out ret s m f Spe net E ilo SEKmillion rnment, area of all n t Bin Sven ail er let or ORT rin ngs l’s ers ech- go , all g 2 rnet &Mobilebusinessa rnet . 2006 ska rd for 0 rant businessa 04 ■ ■ ■ ■ ■ Seco

–2006. Spe ass in O Sale Five New Live Sale on l the mobi nati area thro nd oci l G ott Foo ona -ye nsi s o ugh gam of Sv for Ass le qua 1 ati ) 2006 f W ery ery de ar rea roup pho tba l ca med oci ons foo ing rter ens ann TV pr orl sal l sin ati rea ne l rea tba , w via ka Wor d C rea es ive os on sta odu ith Spe l thr int l up rsa in Sw ld bus clu rti the ern oug rea 1,560 777 495302 1,013 cti l’s ry lotte Cup ng bs ine on of hol eden et foc h dur s int ry s AB or din us 114–104 1,1 1,9 –9,960 –10,897 –11,412 –11,114 –11,064 ing er- 2 1 – – g 8 3 4 4,763 4,7514,6424,148 4,521 1 7,351 7,1106,9626,366 6,951 0 1 6 0 1 – , , 6 2 , ,873 –1,773–1,764–1,733 –1,757 ,281 20,43819,76118,197 19,827 , , ,689 11,30711,39911,390 10,821 ,787 –1,893–1,880–1,680 –1,786 905 8,7628,6007,987 8,506 437 3,6343,6773,300 3,417 1 807 4,8034,6874,210 4,569 8 2 002 853720304 922 811 6,830 – Thir ■ ■ 7 2 3 5 04 –705–652–504 –762 4 8 1 2

.9 71.775.275.1 68.0 . .5 23.223.522.8 22.8 4 154143 131 4 2.42.32.1 2.3 2 3 9 0 231228208 241 9 –26 –23 –21 –23 9 –26 popu 10 A s have on b t w unfo incr well ga hat th ven

d q as rev 0, min eas 0 pre ska eha uar and und iew lar pla 0 g a 0 e b e i spe sen ter lf yed yed uni pok ed tha of th n c d usi of th di ted l.s que rim er t c int cti ness e, e ca 2 , w onc site e G on ern 0 ina Swe 4 9 cus — — — 200420032002 05 7 0 1 2 hic is op sin wer ove ern lit

et tom

den h s y a o b pok s o rnm e era how ers ’s nd usi ver er tin mos ent ness ed on an g t 7 , 1 270 6,9195,993 ■ ■ ■ ■ Four 5 1

2 9 p O prop Sale Lice Gross O were ex vide day exte sion

oss pen d th ds nce on sv s g o l ess nsi of th qua ert et gam for ott ran ons su ion s f exc y w ten rter ens e S or gam ery ery ted ing e in Ja ith ded ede und lotte kas bmi ter ing for rev con . N nua 4 9 pel d S byb min 5 6 rie t enu the 24 ho o c vey ted

EK 2 EK .se ry s a erg als onc e f anc lic 2007 nd urs (VL or enc billi es- e a Ts) Ts) per e on nd –192 6 1 2 9 Board of Directors offering a competitive alternative that meets the high stand- The Board of Directors is responsible to the shareholder for the ards required for responsible gaming. Responsible gaming organisation and management of the company in accordance involves Svenska Spel working in a preventive manner, offering with the Swedish Companies Act. The Rules of Procedure for the players the best opportunities to control their gaming. Board as well as CEO Instructions are established annually in Svenska Spel is facing increasingly hard competition and a conjunction with the statutory Board meeting following the rapidly changing market, and its current position and future is Annual General Meeting. The Rules of Procedure and CEO to some extent dependent on how politicians choose to regu- instructions with any adjustments made by the Board apply until late and control the overall Swedish gaming market. The cur- the statutory Board meeting in conjunction with the next AGM. rent position is that Svenska Spel in many aspects faces Svenska Spel’s directors elected by the AGM are: Anders tougher conditions than foreign suppliers in such areas as the Gustafzon (Chairman), Lars-Åke Lagrell, Karin Johansson, Kjell launch of new products and player payback levels. Nordström, Marianne Samuelsson, Lena Melinder and Jens The Company’s future is thus dependent on political deci- Henriksson. Jens Henriksson resigned from the Board on 26 sions, but can obviously also be affected by commercial activi- October 2006. Three members with three alternates have been ties over which it has control. appointed to represent employees: Håkan Bergström, Sabina Svenska Spel’s overall strategy is to broaden the business by Lindqvist, Bertil Sandström, Anders Andersson, Britta Höglund offering new and renewed games, balanced with responsible and Elin Sundin. In compliance with the Rules of Procedure, the gaming, which attract consumers and thus channel gaming to Board is to hold at least fi ve meetings per year. The Board held Svenska Spel. nine meetings in 2006. The Board has formed an Audit Com- Some good examples of this are the launch of internet mittee and a Benefi ts Committee from within its ranks. poker as well as the live odds in the Oddset product group, The main task of the Audit Committee is supervising which clearly demonstrates that gaming can be channelled to accounting routines, fi nancial reporting, risk management and Svenska Spel while maintaining a high degree of responsible internal control at AB Svenska Spel and its subsidiaries. The gaming. Svenskaspel.se became Sweden’s biggest poker site company’s own review of internal control is reported to the within 60 days despite extremely limited marketing. Audit Committee. The Benefi ts Committee and the Audit Market demands for gaming operators to take more respon- Committee report to the Board. sibility are also positive for Svenska Spel’s future prospects, as The Benefi ts Committee handles issues relating to salaries highlighted by the poker success. and other employment terms for the CEO and other members The introduction of internet poker has been followed by a of Key management. number of licence applications, including gaming in bingo Svenska Spel has no nominations process, with nominations halls in conjunction with sports clubs. The reason for the being managed by the owner. Further information about applications is that continued development of existing prod- directors and the work of the Board can be found in the Cor- ucts within the current licence framework is insuffi cient to porate Governance Report. ensure competitive products in the long term. Svenska Spel currently has a two-year extension of the Corporate Social Responsibility licence that ended at the end of 2006. None of the licence Svenska Spel prepares a Corporate Social Responsibility (CSR) changes needed to support the overall strategy have so far report. The purpose of this report is to provide a balanced been granted. view of Svenska Spel’s activities in the areas of responsible If access to this market continues to be withheld due to gaming, the environment, society and fi nance. For more infor- licences not being granted for new products and distribution mation see pages 29–48. forms, it will not be possible to channel gaming and net gam- ing revenue will be heavily reduced in favour of international Parent Company gaming operators. The Parent Company comprises all gaming operations with the In the short-term, based on current strategies, there are exception of casino operations. Net gaming revenue in the opportunities to maintain market leadership in Sweden. If the Parent Company amounted to SEK 7,903 million (7,584). The Swedish gaming model is to hold in a longer perspective how- Parent Company’s share of the total net gaming revenue in the ever, gaming regulations are needed that cover all actors on the Group is 88.8% (89.2). Swedish market with effective supervision and control by the Profi t after fi nancial items amounted to SEK 4,766 million authorities. (4,566), an increase of SEK 200 million or 4.4%. Events after balance sheet date Outlook for 2007 The purchaser of the property Orgeln 7 in Sundbyberg in The mission assigned Svenska Spel by the Government is to December 2006 has, in conformity with contract, taken posses- meet consumer demand for attractive lotteries and games sion of the property and shares in Svenska Spels Fastighets AB through innovation and development. The mission also on 15 January 2007. All contractual matters were settled with involves closely monitoring international competition and the selling party Svenska Spels Förvaltnings AB at this date.

SVENSKA SPEL ANNUAL REPORT 2006 53 FINANCIAL STATEMENTS 54 SVEN amou are owr 114,101,190 Carried forward To theSwedishState ofdrto To supportculture P Y To theNationalBoa 656,141,000 Confederation To theSwedishSports Confederation To theSwedishSports SEK The Total Profi Retained p SEK Non- For Sven Risk Prop rupt agem Risk busi • • Un • Co foll an o • Effe bala nent • Ri SKA SKA outh A To e Iden they owi Sve tfrteya tfortheyear ness ness ed, a ed, nce nce sk Boa rga man ska of all all of m ifo ent nt nt res SPE cti f ng: tifi ca rep nsk mo exi fe nis rm f rd bet be di Spe ar fairs ve age ope tri L A cti is need str st ort ati n d a S rofi dec of Di pro han wee tio vel cte l’s uct N ment rat on s a t ing str pel efi NU isi n o y d cess cess ope ose dli ured

ion d e rec n r ibu and a and nit on ’s ’s ed. bas AL f k eal ng sho isk bus tor rat s. ion ted ted qui dfr 139000 P 153,910,000 rd for and mak , e ey REP ed Ide of ma wit s a ion s a nd nd uld uld ine ris f of ri ty as fo ris fe on es ing for ORT nd nti h r nd s a k m ks s cti 4 3 be ana be in th d s fyi sks mat , nag isk , opp re 921,203,190 the and 436,616,000 Prop 2003/04 5 to fu to ve l and lo ana 2006 tab 6 ng s, exp ws: 0,000,000 Prop 2006/07 and eab ort e P CEO CEO Sve for gem 4 lis ris ris whe nct tur ose 3 uni hed le ks 5,000 Prop 2006/07 m t are bus nsk ion al ist pro ent ris re d t tie sha he and ine a S rout nt ks in th and de o v s i k m pos pro l l bas s pel n S Com be an an be s- ari imp ine e t expend. class17. cess cess e o rib dri expend. class17 is ven ous has has expend. class2 e e 4 4 s. hat th hat vel ort x x for for ven ven rga ,921,203,190 , pany 765,854,022 1 pend. class2 pend. class2 rop 2003/04 rop 2003/04 ska bas ong 5 op typ est ant nis 5,349,168 an op ris ana ed e a abl Spe uni es oin uti ati k m com bov on th of ri ish on nte g p l’s tim an- po- ed e r- roc- sk. um e on on gem the pany The Unif Risk Comm the ble Sven pose Gove EK SEK siti profi and alwa es adop profi The Swed 2,46 agem ment tion made take the s The Non- Fund ons of pr of pro at org Com bus al

n t Boa obj 4,9 the is de 0,6 ska ys t f t. ’s ’s orm tio rnm of wh ish ent is to is on re all pla pro or for for int o m fi ani be fo s a ine ect on res 21,

n o 02 02 rd bud ts a Spe pan Sta lev fi ent ent n is to is ern the

vai fi sat pro 200 n tri s ni ive be ma 203

of Di ana f t per ich defi ni s qui t ed els re te l’s get ng y’s l cte al lab pro obj lo wit ion he s t yea ens 3/2 cess cess ,19 to be to be ge mad sit is to is as wed wed Art sha of th con foc rec ass d e hat hat le ect pro ’s ’s h n pos min ion. de r a 0, 0, a m. the 0 ure tio icl for for re. cap ets. tor use qui tro ofi e b 04 ive thr nd pro o d pos Sve up wi and al is th e o and of wh ute es dis n o tha Div s h l a pro ty s a aci y 3 s o eat (th SEK ivi tec nsk of Asso rga tri iti s o nd tha in th as re ty ide t den ons for f r n a e s 0 J fi but th a

ich t of an an of f t a S nis t ere he 155 ult ris ide to ac to isk t ts une o-c nds dis rea he he mat ed ds e P ati for for pel SEK k m for ima he pla ope nti cia tri ,34 s all s w sha AGM AGM . D on pay as pr eve are are hie e b 200 but fi has has n o gre ana tio ed te

4,7 rat 9,1 ed, ivi her reh and nt nt abl ve nt nt ase to be to be n s res ion f a ate pro den esc 6/2 ion gem 65, est 68 wit Com e s old or si and its its e t tip cti d o pon ide st rib ’s ’s fi thu abl 0 854 con ds

h d pec o t goa ers t on ent 07. ula pai ris bus n t tua nti ed tha pan dis sib ish to ot s a he ivi sis ks ’ i ,022 ifi te for for , t d f he ls. fi tio tri

ine by th

ili ed t m nve den mou c r ed k y a ts sha he and tha ty oll but bud the her n t s isk of re for ri for eas mou con stm s owi for for ove ds reh t a ey nt nt e S hat hat ion and thr ir ass get par ure to to l sis ent the old con to SE to rall rall ng ris l tai wed sk nte eat ava red mod ess- tie ts th ope ks s a pro ned man- ers. the tro and pur- d t Com- s t e of s a ish uce ila- K re sha po- ra- el) o o l. re s l l Coordination and follow-up of the various risks in each unit is Operational risks are divided into: conducted by an independent risk assessment function – Risk • Administrative risks – the risk of loss arising from defi cien- Manager – who is assigned the task of coordinating and cies in allocation of responsibility, competence, reporting administrating the Group’s overall risk assessment process. routines, risk assessment and valuation models, and control Regular risk assessments are conducted to identify potential and follow-up routines. threats and evaluate their probability and impact. Risk assess- • Legal risks – the risk of loss arising from an agreement not ment is conducted in every business area and staff function being able to be completed due to defi cient documenta- with quarterly follow-up. In addition, risk assessments are tion, counterparties that lack the authority to enter into always conducted for development projects and on other agreements, or uncertainty in the validity of the agreement. signifi cant changes. • IT risks – the risk of loss arising from shortcomings in IT sys- tems. Identifying signifi cant risks To limit operational risk within Svenska Spel, each business Svenska Spel has split its risks into four categories: industry area is responsible for there being well-documented routines, and market risks, business risks, operational risks and fi nancial reliable IT systems, and satisfactory internal control. risks.

Financial risks Industry and market risks The Svenska Spel Group is exposed in its day-to-day opera- Political risks are regarded as the most signifi cant in this cate- tions to fi nancial risks in the form of credit and counterparty gory. Political risks relate to changes in the rules and regula- risk as well as currency and interest risk. The fi nancing risks are tions for the industry determined at the national level or at a low level since all fi nancing is carried out internally. within the EU. Gaming within the EU is not harmonised. It is regulated at the national level and is primarily organised within Effective handling of manageable risks each individual country. For all risks that are identifi ed during a risk assessment, the At EU level, gaming is currently being taken from the Serv- person responsible is to determine whether the risk is accepta- ices Directive which means it will be removed from the free ble or if actions are required to reduce or eliminate the risk. movement of goods and services. Meanwhile treaty infringe- As part of the Group’s risk management there is well-balanced ments are pending against seven EU countries, including Swe- insurance protection. The insurance protection is designed in den. conjunction with an insurance broker and regularly reviewed. The Group’s general security measures and internal audit also Business risks play an important role in the management of operational risks. Competition on the gaming market has increased signifi cantly Svenska Spel’s World Lottery Association (WLA) certifi cation, in recent years and is expected to increase further. Foreign contingency planning and internal control are important fac- internet operators have established operations in Sweden and tors in managing operational and other risks. internet gaming has a considerable turnover. Changes in gaming behaviour towards fast games and Reporting on risks according to established routines higher paybacks to winners are tangible business risks, as An annual summary of the Group’s risks is provided to Key competitors are able to offer higher paybacks than Svenska management, the Risk Committee and the Audit Committee, Spel is able to do under its current licence. Other risks in this and a quarterly review is made of the risk assessment and the category could include the impact on Svenska Spel of new action plan’s currency. products, services, pricing models and sales methods. The Risk Committee is led by the Chief Financial Offi cer and has the mandate to review policies, guidelines, risk assess- Operational risks ments and focus of the Group’s risk assessment process. Operational risk is the risk that errors or defi ciencies in the Company’s administrative routines or their supporting systems lead to economic damage or loss of confi dence.

SVENSKA SPEL ANNUAL REPORT 2006 55 FINANCIAL STATEMENTS 56 SVEN Profi Pro Tax Pro Total Interest expensesandothe Interest andothe Share ofp mlyeepne 5 –804 –209 –1,612 –261 5 6 9,10 Pro Operating pro plant andequipmentintangibleassets Amortisation, depreciation andimpairmentofpropert Capitalised workforownaccount expenses Other external Employee expenses ubro hrsi huad persha Earnings Number ofshares inthousands Earnings pershare Ohr Gross pro Other Commissions 2) A 1) I Cost ofgoodsandservicessold Revenues f SEK million 1 January–31December Cons SKA SKA Winners’ share Winners’ ncl fi fi fi tattributabletoParent Company min

t fortheyear t after t on ude SPE fi

ori aca tm nancial items s u L A

ty rofi fi fi o aig t 2 2,8 19,827 20,281 2,3 rom gaming,etc

ncl aca netet nancial investments t int N fi to soits tofassociates

aim NU aca tm nancial items er fi oli es

e E huad re, SEKthousand AL

ed r t 1) t i

ac noe 118 7 nance income winni n t REP he ORT dat ngs. sub r fi sid 2006

ac ot 7 –76 7 nance costs iar y U ed ed AB ’s shareholders Win lot inc o i s n ot rep 2)

y, ome ome ort ed sep ara tel y f sta or mat N o 473 4,521 4,763 22 17 t 4 8 e eri

al tem rea son s. – ent 11,114 –11,064 – 4 4 7,351 6,951 2 2 4,807 4,569 1 , , , , ,787 –1,786 807 4,569 808 4,567 2006 404 2,284 000 2,000 – 4 8 2 –1 2 3 5 9 9

–26 – 1,550 – 1 762 2 – 0 68 13 4 9 05 1 6 2 Consolidated balance sheet

SEK million Note 31 Dec. 2006 31 Dec. 2005

ASSETS Non-current assets Intangible assets 9 321 269 Property, plant and equipment 10 1,353 1,322 Investments in associates — 6 Financial assets 11 1,262 1,183 Total non-current assets 2,936 2,780

Current assets Trade and other receivables 12, 13 370 360 Set off National Debt Offi ce 24 1,000 1,200 Prepaid expenses 14 89 73 Investments 11, 15 37 25 Cash and cash equivalents 12, 15 2,643 2,274 Total current assets 4,139 3,933 TOTAL ASSETS 4 7,076 6,713

TOTAL EQUITY AND LIABILITIES Equity 16 Share capital 0 0 Reserves 0 0 Retained earnings including profi t for the year 4,807 4,569 Equity attributable to equity holders of the Parent Company 4,807 4,569 Minority interest 2 — Total shareholders’ equity 4,810 4,569

Non-current liabilities Subordinated loan 15 15 Retailer collateral 16 17 Unpaid winnings 18 1,001 945 Other non-current liabilities 3 3 Provisions for pensions 19 18 16 Total non-current liabilities 1,054 996

Current liabilities Trade and other payables 12, 20 482 438 Unpaid winnings 18 384 361 Settlement funds 67 49 Funded winnings 198 212 Deferred income 20 81 87 Total current liabilities 1,212 1,148

Total liabilities 2,266 2,144 TOTAL EQUITY AND LIABILITIES 4 7,076 6,713

SVENSKA SPEL ANNUAL REPORT 2006 57 FINANCIAL STATEMENTS 58 SVEN Cash andcashequivalentsatendoftheyear Cash andcashequivalentsatbeginningoftheyear Cash iacn ciiis Cash Dividend Financing activities netn ciiis –95 9 Cash Proceeds from saleofp Purchases offi Purchases ofintangibleassets Purchases ofp Investing activities hne nonrhp Equity 31December2006 Changes inownership prtn sesadlaiiis Cash Change inotheroperatingliabilities Change intradeandotherpayables Change inothercurrent assets Change intradeandotherreceivables operating assetsandliabilities Profi hne noeaigast n iblte Cash changes inoperatingassetsandliabilities qiy3 eebr20 Distributedpro Transactions withowners Equity 31December2005

adtx Cash Paid tax Otheradjustments Changeinpensionp Equity 31December2004 Cons 209 261 9,10 P plantandequipmentintangibleassets Amortisation,depreciation andimpairmentofpropert Adjustments foritemsnotincludedincash Profi Operating activities SEK million December 1 January–31 Cons Profi SEK million Distributedpro Transactions withowners in e SKA SKA roceeds from saleofp tfrteya tfortheyear tfrteya tfortheyear tfrteya tfortheyear fl fl fl fl fl fl SPE

wfrteya ow fortheyear ow from wfo netn ciiis ow frominvestingactivities ow fromoperatingactivities ow fromchangesin ow fromoperatingactivitiesbefore

L A qui N nnilast 1 –4 –251 –64 11 nancialassets NU rope oli oli fi fi AL fi

ts ts acn ciiis nancing activities rt REP ,patadeupet 0 –254 10 y, plantandequipment ty rovision 19 2 rope dat dat ORT rope rt 2006 ,patadeupet y, plantandequipment rt ,patadeupet y, plantandequipment ed ed ed N fl

o ow 16 sta cas te capital

tem h flow y, y, S hare including p 0 0 0 . . . 487 4,810 2 2 4,807 459 4,569 — 2 4,569 483 — 2 4,803 4,803

Retained ea ent rteya inte for theyear N –4,569 — –4,803 — o 15 15 4,807 0 4,569 — t 7 rnings e rofi sta — 2 2 of ch of

ioiy Total t minority

tem Attributable to – – 2 2 4 4 5 5 4 – , , ,569 –4,803 ,569 –4,803 , , , ang 680 2,299 299 2,386 3 4 354 5,344 1 061 4,767 2006 807 4,569 rests equity –10 –32 8 05 –628 7 4 8 – – 1 –87 8 5 4 4 359 0 6 3

ent

es es – – 4 4,569 4 4,803 – ,807 ,569 288 2 2 – – 0 92 1 40 1 05 4 0 0 2 0 1 Income statement, Parent Company

1 January–31 December SEK million Note 2006 2005

Revenues from gaming, etc. 2 19,180 18,802 Total revenue from gaming, etc. 19,180 18,802

Capitalised work for own account 89 92 Total work for own account 89 92

Cost of goods and services sold Winners’ share 1) –11,114 –11,064 Commissions –1,787 –1,786 Total cost of goods and services sold –12,901 –12,850

Gross profi t 22 6,368 6,044

Employee expenses 5 –427 –410 Other external expenses 6 –1,450 –1,396 Amortisation, depreciation and impairment of property, plant and equipment and intangible assets 9, 10 –178 –126 Operating profi t 4,313 4,113

Profi t on fi nancial investments Share of profi t of associates 3 — Share of profi t of Group companies 26 381 381 Interest and other fi nance income 7 145 140 Interest expenses and other fi nance costs 7 –76 –68 Total fi nancial items 453 454

Profi t after fi nancial items 4,766 4,566 Tax — — Profi t for the year 4,766 4,566

1) Includes unclaimed winnings.

SVENSKA SPEL ANNUAL REPORT 2006 59 FINANCIAL STATEMENTS 60 SVEN Ohrivsmns 1 5 8 102 2,463 68 15 11,15 13 TOTAL ASSETS 317 1,262 Total currentassets Cashandbank Otherinvestments Investments P 11 9 Otherreceivables Seto Receivablesf Current Current assets Total non-currentassets Otherinvestmentsheldasnon-current assets Non-current InvestmentinG Investmentsinassociates Financial assets Equipmentandcomputers Constructioninprog Constructionandextension Buildingsandland Prope Intangible assets Non-current assets ASSETS SEK million Balan SKA SKA rd eevbe 3 327 13 Trade receivables repayments andacc rt SPE f ,patadeupet 10 y, plantandequipment f NationalDebtO receivables

L A N NU eevbe,Gopcmais 70 930 790 receivables, Group companies o ru opne rom Group companies

AL opcmais 5 151 25 roup companies ce ce REP ress udicm 1 83 14 rued income ORT ffi ce24 1,000 sheet 2006 , P are nt nt Com N o t e

pany 31 Dec. 7,414 7,221 4 3 , , 2006 4 401 4,264 013 2,957 4 3 2 1 2 4 — 3 443 2 6 45 6 5 9

3 1

Dec. 2005 2 1,200 1 ,108 ,183 1 3 2 3 45 59 07 1 2 69 8 2 5 7 6 0 SEK million Note 31 Dec. 2006 31 Dec. 2005

TOTAL EQUITY AND LIABILITIES Equity 16 Restricted equity Share capital 0 0 Statutory reserve 0 0 Non-restricted equity Retained earnings 155 158 Profi t for the year 4,766 4,566 Total equity 4,921 4,724

Provisions Provisions for pensions 19 16 16 Total provisions 16 16

Non-current liabilities Subordinated loan 15 15 Liabilities to Group companies 0 1 Retailer collateral 16 17 Unpaid winnings 18 1,001 945 Other non-current liabilities 3 3 Total non-current liabilities 1,036 981

Current liabilities Trade payables 20 213 241 Unpaid winnings 18 384 361 Liabilities to Group companies 339 443 Settlement funds 67 49 Funded winnings 186 212 Other current liabilities 20 128 70 Accrued expenses and deferred income 20 124 124 Total current liabilities 1,441 1,501

TOTAL EQUITY, PROVISIONS AND LIABILITIES 7,414 7,221

MEMORANDUM ITEMS Pledged assets 23 2 3 Contingent liabilities 23 0 1

SVENSKA SPEL ANNUAL REPORT 2006 61 FINANCIAL STATEMENTS 62 SVEN Cash andcashequivalentsatendoftheyear Cash andcashequivalentsatbeginningoftheyear Cash iacn ciiis Cash Dividend Financing activities netn ciiis –89 9 Cash Proceeds from saleofp Purchases offi Purchases ofintangibleassets Purchases ofp Investing activities prtn sesadlaiiis Change inothercurrent assets Change intradereceivables operating assetsandliabilities hnei rd aals Cash Change inotheroperatingliabilities Change intradepayables hne noeaigast n iblte Cash changes inoperatingassetsandliabilities adtx 126 –381 178 26 9,10 Cash Paid tax Otheradjustments Changeinpensionp AnticipateddividendCasinoCosmopolAB P plantandequipmentintangibleassets Amortisation,depreciation andimpairmentofpropert Adjustments foritemsnotincludedincash Profi Operating activities SEK million 1 January–31December Cash SKA SKA tfrteya tfortheyear roceeds from saleofp fl fl fl fl fl fl SPE

wfrteya ow fortheyear ow from wfo netn ciiis ow frominvestingactivities wfo prtn ciiis ow fromoperatingactivities ow fromchangesin ow fromoperatingactivitiesbefore

L A N nnilast 1,2 49 277 449 11,26 nancialassets NU rope AL fi fl

acn ciiis nancing activities rt

REP ,patadeupet 0 –206 10 y, plantandequipment ow s rope rovision 19 1 ORT rope rt 2006 ,patadeupet y, plantandequipment rt ,patadeupet y, plantandequipment tat fl

ow eme y, y, nt, nt, Par N o 15 15 t e ent – –4,569 –4,803 2 2 4 4 4 4 Com , , ,569 –4,803 , , , 531 2,210 210 2,325 3 1 728 4,770 2 550 4,301 2006 766 4,566 –21 –32 – 2 6 0 2 3 – – — 0 –115 1 –81 7 4 370 8 4 39 9 4

pany – – 270 2 381 – – 0 92 9 1 — 05 3 1 1 0 1

Statement of changes in equity, Parent Company

Share Statutory Non-restricted Total SEK million Note capital reserve equity equity

Equity 31 December 2004 16 0.2 0 4,961 4,961 Transactions with owners Distributed profi ts –4,803 –4,803 Profi t for the year 4,566 4,566 Equity 31 December 2005 0.2 0 4,724 4,724 Transactions with owners Distributed profi ts –4,569 –4,569 Profi t for the year 4,766 4,766 Equity 31 December 2006 0.2 0 4,921 4,921

Number of outstanding shares amounts to 2,000 and has not changed during the fi nancial year.

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Investments in associates Revenue recognition The Group’s investment in an associate, which is an entity over which The reporting of gaming revenue varies somewhat between different the Group has a signifi cant but not controlling infl uence, and that is types of games. Revenue from games, lotteries and VLTs are reported neither a subsidiary nor joint venture, is recognized using the equity as gross amounts, which means that the stakes are reported as reve- method. nue and the winners’ share is reported as an expense in the income statement. Revenue from games and VLTs arises at the time stakes are Changed accounting policies paid, while revenue from lottery tickets arises when a retailer activates With the following exceptions, there have been no changes to a batch of tickets for sale, which in principle represents the time of accounting policies since the previous fi nancial year: sale. All revenue from casino games (gaming tables and VLTs) are The consolidated accounts have only been affected by and adopted accounted for net. This means that the winners’ share reduces the rev- the following supplements to existing IFRS during 2006. Application of enue at the time of reporting, which is the usual reporting method these standards and interpretations has had no signifi cant effect on within the casino industry. Casino revenue arises in principle at the the Group’s profi t and position, nor has it entailed greater disclosure. time of sale, and in practice when the gaming tables or VLTs are closed. Revenue from casino games is reported daily, while revenue Supplement to IAS 19 – Employee benefi ts from games and lotteries as well as restaurant VLTs is reported on a Supplement to IAS 39 – Financial instruments: Recognition and meas- weekly basis. When a week is split over a month, the week is attrib- urement uted to the month that the greater part belongs to. Poker is settled daily and accounted for net. The fi nancial reporting comprises the per- IFRIC 4,5 and 6 and the supplement to IAS 21, ‘The effects of changes centage share of the stakes credited to Svenska Spel known as the in foreign exchange rates’, has not had any signifi cant effect on the “rake”. Group’s reporting. The Group has not applied advance application of Other operating income consists mainly of sales revenue from res- IFRS 7, supplements to IAS 1 and IFRIC 8. taurant operations, leasing income from leased VLTs and premises, casino entrance fees, registration fees and the sale of promotional The supplements and changes above have led to the following effects materials. These revenues are recognised in the period to which they on Group accounts. relate. Interest income is calculated using the effective interest method and IAS 19 ’Employee benefi ts’ recognised in the period to which it relates. Effective interest is the The supplement primarily concerns extended disclosure requirements interest which makes the present value of all estimated future receipts for defi ned benefi t pension plans and a new opportunity to charge and payments during the fi xed interest term equal to the carrying actuarial gains and losses directly to equity. As the Group’s pension amount of the receivable or liability. plans that are recognised as defi ned benefi t plans are insignifi cant in size, these supplements have no effect on either accounting policies or Financial instruments disclosures. Financial investments are classifi ed as either cash and cash equivalents, fi n a ncial assets and liabilities at fair value in the income statement, IAS 39 ’Financial instruments: Recognition and measurement’ investments held to maturity, loan receivables and trade receivables, The supplement aims to limit the possibility to classify certain fi nancial fi n a ncial assets held for sale, and other fi nancial liabilities. Financial assets or liabilities that are valued at fair value via the income state- instruments are initially carried at cost representing the fair value of the ment. Where the Group’s fi nancial assets and liabilities recognised in instrument, with transaction costs added for all fi nancial instruments this category in 2005 also meet the new conditions required to value except those defi ned as a fi nancial instrument carried at fair value in them at fair value via the income statement, the supplement has no the balance sheet. The instrument is recognised according to its classi- effect on the Group’s accounting. fi c a tion. The classifi cation is determined by the Company on acquisi- tion date but, should the assumptions change, it can later be reclassi- The only new standard that is expected to affect Svenska Spel is IFRS 7, fi e d with the appropriate revaluation to another category in the annual ‘Financial Instruments’. The changes will require additional disclosure fi n a ncial statements. regarding fi nancial instruments and quantitative and qualitative infor- A fi nancial asset or fi nancial liability is entered in the balance sheet mation on the nature and scope of risks in the 2007 consolidated when the company enters into the agreement. Trade receivables are fi n a ncial statements. charged to the balance sheet once an invoice has been sent out. Liabili- ties are entered when the counterparty has performed and a liability to Transactions in foreign currencies pay arises under the agreement even if an invoice has not yet been Foreign currency transactions are translated into the functional currency received. Trade payables are recognised when the invoice is received. using the exchange rates prevailing at the dates of the transactions. A fi nancial asset is removed from the balance sheet when the con- Assets and liabilities in foreign currency are translated at the closing tractual rights are realised or expire. A fi nancial liability is removed exchange rate. Income and expenses in foreign operations are translated from the balance sheet when the contractual obligations are fulfi lled or to SEK at average exchange rates. Foreign exchange gains and losses in otherwise ended. current receivables and liabilities are included in operating profi t, but for- Acquisition and sale of fi nancial assets are recognised on the trans- eign exchange gains and losses on fi nancial assets and liabilities are rec- action date, which is the date when the Company contracts to acquire ognised among fi nancial items. The payment fl ow in foreign currencies is or sell the asset, except in those cases where the acquisition or sale limited. pertains to listed securities which are recognised on settlement day.

Exchange rates Financial assets and liabilities carried at Closing Closing fair value on the income statement day rate day rate Currency 31 Dec. 2006 31 Dec. 2005 Financial investments in bonds with a real rate of interest intended to provide funds for future payments of winnings in Triss “Månadsklöver” USD 6.8975 7.9775 are shown in the balance sheet as ‘Financial assets/Other investments EUR 9.0750 9.4550 held as fi xed assets’ and ‘Investments’ respectively, and classifi ed in this category. Changes in value of investments in bonds with a real rate of interest based on the listed market prices of such bonds, and realised profi ts on sale of these investments are recognised in the income statement as ‘Interest income and other fi nance income’.

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or di ble , w mat ove ce cap and pme es ect ter or tia fea g a and ts a fe he pro unt ipm the anc opr sheet sheet ents rts per for for hee ing of th sat cha e y, y, t i al use het rom rom acc ed are onn the inc s c t tiv es and ed hav its its ial the and hic nt ti t sib d ga ita to ass ncl eri sell and re bab ope n u pme val iat e s wit ion tha spo nt ent ty, for for ng inv an it rai rge t d ons pro es, her umu ful li s t ome whe he eco int h a cos liz e G inc ili th al e s ass ect exp ude the et e. Gro ue hee ing if th wor the se any any ght h d est t he pla ate. ty le rty min the sal is do goo ed d a the is re e a end are duc ist ist cos nom re nt hor urr the em nomi ts sta et’ ion fe rou lat n t he are and ect tha stu s t sta , p men dat up’ t o nt iff rec -li cos k t carry e p in th of an an of s t c of ca res not re g p are ass ts, ed. s r dwill, dwill, and ed ts se rec ed rti cog re t e he ne he ne ere of pr cos p c lan ed wit ina dy tem and t f n d o e rea ove s a ost e t ts. are rod eco t i idu c v sell ng and rod et ts are dir xpe ogn use dep cha sub utu carry Dev bas e a pur on ast on ons nt nis ing t a t o l a fro n a pha he h t sh s int isp nha s ass alue ent. rab wit se less to al ect uct uct fro ope equ se ver suf as we the uct mou . P nd any any use cte cqu ed rge f t re new jec he ang is m u ise rec cha and osa ass elo ist ist ts amo val s rea ses et th h a nce ex le m t ing se abl fi rop he ove sal or pr s o rty fi ipm

acc d d a equ for for as t are int ful li

iat d t clo e a cien isi of ca et pme ue rai rep se imp nanc l o amo ibl d f se son nt. nt. , a n o ban l e v he gam ary ary o a , p unt ass l r p amo tio ert an ion r t ang o t umu s e ue sin is fi ght p r s e a ent the pri as ot s w ipm tes of asse rom rom of th res oce t r ves ves pr air abl alue lan rig ist he nt dat n v roc ny et unt pit y, y, k b he cos ial xpe ale ass

g o ce dat of th s ing as we rst -li ibl eso ted ted opr unt ent ell men ing ga se is re bus ina lat ent. pla cos e a t a s can alue ali exp mat are ess e t her tim ne ben , o ala e a . I inc s et as we e a ts f t nse ts es is ca put to to put as en ed urc iat sys s t sed de is te nd l m at ea mpa ts nt nd of an an of ine he ts e a r w cog es he and in th nce bas t i s ome ect e t not s tre eri be ca and l int efi se he e p s o l of no se are amo tem es rec and min ndi atu equ s lcu as con ass s are

o t chn hen no no hen boo al t. l ate ed s ang ts is nis se s t t. irm ter l ch n a diffe lac ind rea to co e b in co as co ogn use are ass an cat sta lat rea rit vel ris ime s t ove The et t w g a will will hat Pro ipm lcu rti sis ed equ carri use tai d a ica n-c ent ks. bal e i ibl ire dy y o ala y k o ed. con hat op- te- is fi ors et sat . T s- ten val- nd renc ise ith lat n- r t , a fi n t l a at m- s e min ent are

ful be car- sts ur- ct anc ip- for for nce t f ed f or a or he

ion . I he ed tin- d rst nd nd are t or he f e g e Calculation of the recoverable amount Taxes The recoverable amount of assets belonging to the categories ‘Invest- The Parent Company, AB Svenska Spel, and its subsidiary, Casino Cos- ments held to maturity’ and ‘Loan and trade receivables’ which are mopol AB, are exempt from liability to pay taxes on income from busi- carried at accrued cost are determined using present value of future ness operations and are also in principle not required to pay value cash fl ow discounted at the effective rate of interest that applied when added taxes. These companies are also exempt from lottery tax. In the the asset was fi rst recognised. Assets with short maturities are not dis- sub-group Svenska Spels Förvaltnings AB, the Company has tax liability counted. however and is also in principle required to pay value added taxes. The recoverable amount of other assets is the higher of value in use Income taxes consists of current tax and deferred tax. Income taxes and the fair value less costs to sell the asset. Value-in-use calculations are charged directly to the income statement except where the underly- project future cash fl ows using a discount rate that assumes risk-free ing transaction is charged directly to equity when the associated tax interest and specifi c risks relating to the asset. The recoverable amount effect is recognized in equity. of non cash-generating assets that are substantially independent of Deferred tax is determined using the balance sheet method based on other assets is calculated for the cash-generating unit to which the the temporary differences between the carrying amount and the value asset belongs. of assets and liabilities for tax purposes. Deferred tax assets relating to tax deductible temporary differences and tax loss carry-forwards are rec- Impairment reversal ognised to the extent it is probable they will lead to lower future tax Impairment of held-to-maturity investments or loan receivables and payments. trade receivables that are carried at accrued cost are reversed if a later increase in the recoverable amount can objectively be attributed to an Contingent liabilities event that incurred after the impairment was made. Goodwill impair- A contingent liability is recognised when there is a possible obligation ments are not reversed. Impairment of other assets is reversed if there arising from past events and whose existence will be confi rmed only on has been a change in the assumptions that underlie determination of the occurrence of one or more uncertain future events, or where there the recoverable amount. An impairment is only reversed back to the is an obligation not recognised as a liability or provision due to the low carrying amount the asset would have had if the impairment had not probability that an outfl ow of resources will be required. been made, taking into account the amortisation/depreciation that would otherwise have been made. Leasing Leasing agreements where all the risks and benefi ts associated with Auditors’ fees ownership essentially accrue to the lessor are classifi ed as operational Pension plans leasing agreements. Leasing fees related to operational leasing agree- Employees within the Svenska Spel Group with permanent positions or ments are recognised as income/expense in the income statement in who are employed for a trial period are covered by the ITP plan admin- the period to which they belong. All leasing agreements entered into istered by Alecta. The Parent Company also has older obligations that by Svenska Spel are operational in nature. Leasing agreements where are secured through the Svenska Spel Pension Fund. Pensions are paid the Group is the lessee are essentially related to leased premises. Leas- out on an ongoing basis by AB Svenska Spel, which is compensated for ing agreements where the Group is the lessor are primarily related to these payments by the Svenska Spel Pension Fund. leasing of VLTs to gaming retailers. Other operational leasing is very Pension obligations after terminated employment are either classifi ed limited. as defi ned contribution or defi ned benefi t plans. According to a state- ment from the Swedish Financial Accounting Standards Council’s Emerg- Cash fl ow statement ing Issues Task Force, URA 42, the type of pension plans used by Svenska The cash fl ow statement is prepared according to the indirect method. Spel should be classifi ed as defi ned benefi t plans under the ITP plan (up The recognised cash fl ow only includes transactions that involve to and including 2006). incoming and outgoing payments. Alecta, which insures the ITP plan, has meanwhile not been able to provide Svenska Spel or other companies with suffi cient information to Parent Company’s accounting policies be able to determine the Company’s share of the plan’s total assets and The Parent Company applies the same accounting policies as the liabilities. These are only attributable to the insurance benefi ciary. These Group except as specifi ed below. obligations are therefore recognised as a defi ned contribution plan. The Parent Company has prepared its annual fi nancial statements in Older pension obligations in the Group represent an insignifi cant conformity with the Annual Accounts Act (1995:1554) and the Recom- amount. Svenska Spel’s Pension Fund does not fully cover Svenska mendations of the Swedish Financial Accounting Standards Council RR Spel’s pension commitments. The difference is recognised as a provi- 32:05 ‘Accounting for legal entities’. RR 32:05 implies that in the sion in the balance sheet. annual fi nancial statements for the legal entity, the Parent Company is to apply all EU-approved IFRS and statements from IFRIC to the extent Termination benefi ts possible within the framework of the Annual Accounts Act and the A provision is recognised in conjunction with termination of employees Tryggendelagen act, and in consideration of the relationship between only if the Company is demonstrably committed to either terminating accounting and taxation. The recommendations state the exceptions to the employment of an employee before the retirement date or when be made from, and supplements to, IFRS. The differences between the termination benefi ts are provided to encourage voluntary redundancy. accounting policies of the Group and the Parent Company are as fol- The provision is recognised when no service is required in return from lows. the employee. The following accounting policies for the Parent Company have been applied consistently to all periods presented in the fi nancial state- Provisions ments of the Parent Company. A provision is recognised in the balance sheet when the Company has a present legal or constructive obligation resulting from past events; it Provisions for pensions is more likely than not that an outfl ow of resources will be required to Provisions for pensions in the Parent Company are calculated according settle the obligation; and the amount has been reliably estimated. to the Tryggandelagen act. Where the effect of the time that the payment is made is signifi cant, provisions are determined by discounting the expected future cashfl ow Investments in subsidiaries and associates at a pre-tax interest rate that refl ects the current market estimate of Investments in subsidiaries and associates are recognised in the Parent the value of the money at that time. Company in accordance with the cost method, which means that valu- ation is made at acquisitioncost. Onerous contract A provision for onerous contracts is recognised when the benefi ts the Group expects to receive from a contract or agreement are lower than the unavoidable costs for meeting the obligations in the contract.

SVENSKA SPEL ANNUAL REPORT 2006 67 FINANCIAL STATEMENTS 68 SVEN in S is c whil dire pany let, O ing Leas SEK T S The 3 Note S Net I 2 Note othe a fi n Sven inve Chan Amor Inve Tota Liab Tota Shar As Net Shar Inte Inte Oper devel Capi reve Tota Intr Othe Reve Inco

Busi at and per r a of i M area t lowi cove s nco etu he egm ota s a ale ale SKA SKA the tr obi se Seco Leas Leas Reve R arr nco a-c wed ibu ness sal mill nce Res res res ctl pri stm rn stm ili eve e c ng Gro s. bus imp e o e o res r t tal r fina pro me me ska ts nue nue , A nue, nue, l l a l g l 2 r r of goods of se ge le. opm ent ati ties tis ied es, y a

omp Int mar SPE t e t a tab he on th iab me ion ommo ised ing ing eve tau ult bus s nue nue nue nue f e f e nda B S ami ent ent seg inc en. ati up’ air ine in co fi se ng Spe per s r The inc SEK t fro

ern

nd xpe out , P nce ent cos tr t , a le qui qui ili etc rvi on, y g ran nue nue and ven L A ment ts ome ment of pr of VL ine efl s any s i ry ibu for res ng s rim fro fro pro m ga e G ome l F ties to al l oth

s milli

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min ts ome ts e b men igh t ces ces inc es lso seg ment le Spe est rec enu ens

p’s he nd ses 9 ses AL the Int as: year min l r usi to in e s

et ry bus ome g ment for for aur bet iat are ts l. epo e es sta int ern goo REP Cas AB is is AB ness ell sam nues nues The g 2

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seg wee ent ern as we div tem 10,777 10,6 rep

ing et & rti cat ds 3,18 ino 20 b s ORT

R e p idu ng not inc 435 435 311435 men al are s ope u ort e inc n t 8 2 ent 88 88 89 par 06 and — — — — — — — s egor tail are , R rep 8 8 7 15 15 ine 4 3 Mob orga l oli ome from from al l sys a.

ed he lud rep rat as th est tat ty. 2006 a i and Out s cie bus 1 1 ser The s tem 0 0 und var y ed ort ion nis are ile R s o ort ion 2 aur The 2 6 ,821 926 6, ,926 sta s a ,133 ,133 e R let e 1 0 3 vic ine e a , a 9 tail 9 bal 0 05 1 — — — — iou ati a i in th s 8 per oth ed . T 6 1 299 6 7 — 5 3 5 10 — 5 — er gam ant s f is ba tem ing es,

re s rep s ona anc Div s G s he or se ‘Un as vi ate er , R ope are e O ent mak est 20 ts sed ort ,811 the isi 2 8 e s 811 6, seg bus rou l s d a eta ing dis ness 9 7 7 06 — — — — — — — — — — 6 aur and as rtu on the 0 0 9 33 2 7 6 2 82 rat tru ing hee and ing

on mo p s men tri s t Gro ine il hav ant b all ed are ctu r o , e Out but lia 6 sho wo t i egm s 2 y a bus bal , up. s 3 830 830 1, e b a b 0 tat per by th bil tems tems re tc. us- 3 05 ed’ are — — — — let ws l leg nit 0 11 0 13 0 11 0 1 5 0 0 2 0 0 7 5 anc l ine iti ion ent int e

ati ope . C en as, and ori es I al the e P n s o b e s are ons 1 s a tern s int 20 ons , ng ent for for rat sep 560 usi Ret 565 1, seg are hee usi Int 30 39 all re 06 — — — — o p dir 8 44 8 44 0 4 8 44 8 44 ion et & et bus ness the it oli ara the ail

oca nt ern men set to to set ness ie t i ect rim dat s a s, ine ted 1 Out- Com- Mob tems tems 2 D are fol- tio et & , ly 3 016 1, 0 13 013 ary ary and i ts re ion rect 4 2 0 s — — — — , a b n s 9 7 9 6 5 l C ile

40

seg Div 1

2006 men , 02 922 922 002 6 usi 6 109 1, 109 isi 7 5 30 1 5 63 01 01 0 — — — — on 0 66 0 66 1 66 7 9 1 3 ness R D As Incl – – – – O asi 0,2 0,0

t,

eta ire 20 the Oper Sale Goth Cas phon I o O no so Sale LTs VLTs Reta Sale Rest nt see ude 5 81 81 71 71 61 9 are 06 2 ct 4 6 7 cia ern 6 il 019 82 019 82 68 0 r o ino

6 85 05 — — — — s o a o Not s o s o Div aur 5 70 4 6 il 4 6 5 7 5 1 4 1 7 9 11 — 2 Div ati enb es. tio in bi the et &

pera Out f l bus f l f ga on n b ant e 4. isi isi G urg ott ott Gro 20 ngo r let Mob of Swof ine on oup pera on usi tio mes 94 04 94 ery ery 06 – bus — — — — , M ery ery 4 8 9 8 4 43 28 4 5 9 1 3 up’ the bus s ness

halls. ns s tio ine ile tic alm via tic are ede s p r 2 ine ns 8 ket 8 8 0 1 1 bus s ket 04 0 uni 2 1 1 0 —— — — — 20 — 52 — 52 19 — — — — — 92 — 89 rop 9 ö a s 9 Jac a s 6 2, 6 4 5, 6 7 — 9 3 n’s n’s 7 5 , ,586 19 area 2 s a s 2,

827 19 s a ine 0 ts. k V nd area ert 5 1 05 fou nd 5 6 5 5 9 — nd U – 20 s ,

250 1,250 250 1,250 2 179 179 5, 179 ega y b Sto n s 27 – 06 — — — — — — dist r i gam area gam 6 4 usi

nte ckh s V rib ness, es 5 ing rna LTs LTs 2 olm. ute , 0 14 014 914 0 914 –1 173 173 via 09 –3 3 05 — — — — d i tio — 7 — — 3 — 5 — 5 — — 4 — 0 via at re

as we the nal –1,5 ntr ret E – 2 ,53 sta l 4 – –64 – 3 0 a-g imin Int cas ail 6 34 72 – 72 06 — — — — — l ,06 4 – 4 l ,18 ura 20 rou ern ers. –6

as th ino ati 5 — 06 7 83 4 9 0 1 –1,3 nts nts p i on et 1,3

s i – 2 tem 460 7, 4 P e n 0 f S of and n S a 90 90 and 6 63 05 — — — — — — rent 0 7 3 2 ew s G

und mob 4 2 Miss 0,2 2 4

2006 Com , , , ,07 ,07 , Bin 807 2 2 26 076 6, 7 2 18 218 – 118 ven sva 5 6 89 92 52 1 65 81 7 10 10 — — 6 1 6 4 0 6 6 ile go pany 380

–68 Veg

ska roup l l, 18, 1 8,8 and 4 9 9,5 4 2 Spe 2 as 2 , ,827 , 6 ,708 2 , , 14 569 2 14 524 713 2 0 113 0 64 02 5 86 0 — — 97 4 05 l 05 5 4 9 5 0 4 1 1 Note 4 Profi t, assets and liabilities in closed companies

Agreement was reached in December on sale of the shares in the sub- erty took place in January 2007. The sale generated a tax-free capital sidiary Svenska Spels Fastighets AB, for a preliminary purchase price gain of SEK 90.7 million. estimate of SEK 90.8 million based on a property value in the sold The Group’s 50% holding in its associate Onside Tv-production AB company of SEK 370 million. Conveyance and possession of the prop- was sold in 2006 at a purchase price of SEK 7.5 million which generated a tax-free capital gain of SEK 2.5 million.

Income statement, Svenska Spel Fastighets AB, SEK million 2006 Eliminations Group Revenue from gaming, etc. 35 –26 9 Other external expenses –13 0 –13 Amortisation, depreciation and impairment of property, plant and equipment and intangible assets –10 — –10 Operating profi t 12 — –14

Interest and other fi nance income 0 — 0 Interest expenses and other fi nance costs –12 12 0 Total fi nancial items –12 — 0

Profi t after fi nancial items 0 — –14 Tax 0 — 0 Profi t for the year 0 — –14

Balance sheet, Svenska Spel Fastighets AB, SEK million 31 Dec. 2006 Eliminations Group Non-current assets 272 — 272 Trade and other receivables 0 — 0 Receivables from Group companies 3 –3 0 Cash and cash equivalents — — 0 Total assets 275 — 272

Equity 1 0 1 Liabilities to Group companies 267 –267 0 Trade and other payables 6 — 6 Deferred income 2 — 2 Total equity and liabilities 276 — 9

Net cash fl ow from closed business During the 2006 fi nancial year, Svenska Spel Fastighets AB had a cash Reclassifi cation has not been made in the balance sheet or income fl o w from operating activities of SEK 12 million, cash fl ow from invest- statement to disclose the assets, liabilities and profi t items attributable ing activities of SEK 0 million, and cash fl ow from fi nancing activities to assets classifi ed as held for closure. amounting to SEK –13 million.

Note 5 Employees, employee costs and benefi ts

2006 2005 Average number of employees Number of employees of which men, % Number of employees of which men, % Parent Company 647 59 607 58 Other Group companies 839 51 818 51 Total 1,486 55 1,425 54

2006 2005 Board of Directors, CEO and Key management Number of which men Number of which men Board of Directors 10 6 12 7 CEO 1 1 1 1 Key management1) 8 6 8 6 1) Including CEO Group Parent Company Absence due to illness, % 2006 2005 2006 2005 Absence due to illness 4.60 4.69 3.57 3.35 Absence due to illness, women 6.80 6.68 6.80 5.51 Absence due to illness, men 2.80 2.96 1.30 1.82

Absence due to illness, 29 years and younger 5.60 6.55 1.90 1.89 Absence due to illness, 30–49 years 3.70 7.56 2.90 2.70 Absence due to illness, 50 years and older 6.40 5.79 6.50 5.83

Absence due to illness, 1–14 days 2.40 2.50 1.35 1.38 Absence due to illness, 15–60 days 0.44 0.65 0.34 0.33 Absence due to illness, > 60 days 1.79 1.56 1.88 1.63 Absence due to illness is calculated as the total number of hours of absence due to illness divided by the total number of scheduled working hours.

SVENSKA SPEL ANNUAL REPORT 2006 69 FINANCIAL STATEMENTS 70 SVEN empl urt Curt thou Lars rece thou Mari An Eva Kjell Comm Jens Tota Britta Ande Sabi Håkan B P Rela Beng Elin Bert Magd Lena Pens Key Wage T 2) R Ande Boar Fees a Soci Wage Pare In 2 Boar 1) R Clae Jesp Key 1) R J W NOTES Kari Math Tota Ande 2) A Bene

T Othe Andr Ande T Pens Soci Wage Grou Soci Note an SKA SKA ota ota ota ens age In a ni esi esi esi p 0 man Blo n J Wette -Åk ive al al al Sun il tio na er po s T fi ion ion ann ion san man san ca Hen Nor nt l B oye l K l P l o l G eas Mal s, gne gne 06

t P d o gne d o Mel ias rs rs rs rs nd p r G ts p San s a s a s a ale Hög d int sec sec sec SPE itt oha d a ns & ns Kärrb oth ell mbe Lin are e L Axe di oar the ey age alm 5, con 5, And Gus Gra Hägg, Com rou din d ( d 3 d a d ( d 1 erg oth d b cos cos cos e S the ed 1 ed nd nd dst nd Hed e f D f D na mbo rou Jan rik aid ind man tio age dst uri uri uri e er rda dqv tot lun agr nss 720 t A L A 1 A 180 9 O man men , D nt d 8 r G gre amu nva er s lss y t rec rg, str röm ts ts ts p 2 taf ben ben ben ire Commu Ger ire n t ersso s ben ty ty ty Cha er, to rin so Sept röm p c lun GM pan so al ugu l, rg, d, cto men , D on, ell ben on, he epu ist Com öm, N ). ). eiv Chi ) a zon o r rou n, n,

cos cos cos cto cto Dir t, ld, k, Hum of SE n, Dir ger efi efi efi efi , D age omp elsso d, NU , D emb Dep ber t. The em , D irm on 27 on st ire , D SEK Dir Com nd y ed egu efi n, Chi Dir

Chi Dir ty ef Div ect ts Dir IT Di ts ts ts ts ts ts , C 2006 rs ect rs Div p c t ire Dir , D ire

cto pan ire 2006 AL ire ts er an, ect Dep men nic and an SEK SEK ect t 13 — uty the K 3 Fin ect ef tho n, ani ect lar ef or hai isi cto cto Apr or omp ect 2006 ire cto isi pan to di cto r o rec ati or REP 1) ona Res Leg or anc y 1 And Dir Exe plo 4 t or ona usa soc Boa uty 14 uty — — — or rma

oth ctor es r 9 il 29 th r 9 or t 1 r 1 1) f C r 1 2) ons y r tor 1,tor 2006 rec

hou ect

ani yee yee our of Co ial al l D ial nd cut ORT l D er ers ers rd ece ust n 1 1) tor 1) Cou

sec or ire ous Offi ce

san es ces ces ive dir ire fee rep ome Gus ive s, uri cto rpo 2006 cto ect and SEK nse s, d ( Offi ce res Dir d f ty taf r–R dir r rat 26) 26) r 995 r 995 69 52 ors r–D e ent l 1 ect cos tho (26 es ect zon e C eta ire and rec ts, r 2 or ati usa tot ). ). ors , w omm il ct SEK ves ves eiv all nd Sal mem on th Sal as ing ed

on th tho es B uni pai es a fee sic ber SEK SEK usa e A cat d f e B sal s t s o nd udi e ions 71 th 71 ary ary ota es oar f t h

t C Boa o he of SE 2) l inc d w lida lin

ous omm rd Ben ludi 1 1 0,1 g S y p , ,03 , ho ,56 9 043 1 043 6 3 52 252 and fee 3 K 1 Boar 90 4 9 9 9 80 36 3 3 3 6 4 81 81 1 1 1 EK EK ng efi ay itt are 3 0 — 0 — 81 0 0 5 35 0 55 0 2 2 — 0 1 7 0 — 5 0 2 5 5 2 0 0 6 66 6 66 6 20 7 60 s and 80

e ts (41 585 e d o Key Key ). ). f D A u man ire dit cto Commi age 1 1 rs, the Boar The Bene are te 3,2 8,6 4 4 1 3 5 3 4 3 b 1 ,089 25 , men , , , , e 161 499, ,161 , e. e. , 65 465 072 3 20 520 61 561 75 575 CEO Ot 41 141 10 83 110 O Bene n 95 56 7 det Boa 3 efi t pol t Ben d a 9 17 her tee 3 t e 6 8 1 fi — — — — —

ts 0 3 4 6 7 1 7 5 3 7 3, 3 erm ts ici fte rd fi

efi

ts a es

of Di r p o K ts ine 20 B for for nd and rep e d b 06 ey n rec efi ben oth

ara y t

man oth ts tor 3 mpl 7 3 er 1 2 tio efi he 8 Commi 3 3 7 9 4 5 4 er s.

2,88 2,03 9 5 1 1,7 con 7,37 9,15 7 ts n b age oyee CEO CEO ,877 ,90 429 4, ,429 ,581 3, 704 2, ,704 P ,33 con 127 11 127 e pai her Bo 54 nsio y t dit c 2 350 2 2 5 2 3 1 7 1 1 4, 9 1 3 141 — t o ment s a dit tee 2 8 56 37 37

7 d t s O sts 13 — 193 in co — — — — — — — — he ion 2 — 9 5 — 3 — 1, 6 — 1, 8 — 375 6 — 3 — 930 n ion

o k Ben s f nd ard nju s f ey or Key Key efi or of Di nct man Key Key

ts the man ion O rec Commi the t age man her CEO CEO age tor wit 1 r b 0 9,333 9,333 ment 7,0 s, C ben age 206 24 ,206 men ,622 ,31 ,41 h t ene 042 58 6 709 41 709 3 103 89 103 are t 6 69 16 3 18 18 EO tee. efi he 3 6 5 330 6 2 ment t e fi — 93 — — — —

are ts T ts det 1 Ben

2 det erm 0 exc 05 efi erm

ept th ine ts Commi d b ine 3 7 4 mpl 7 0 7 7 3 13,7 e C 1 y t d b 1 1,845 9 1 3,369 3,395 1 3, 1,594 0,3 1,478 9,4 7 O oyees ,804 ,640 ,948 ,394 ,999 ,985 ,503 ,041 T ,014 he 90 348 590 106 079 otal o EO t y t- 9 30 her 50 9 97 33 33 18 1 1 16 14 1 1 1 51 t al 0 9 5 3 0 2 2 0 Note 5, cont.

CEO Other Key management The Chief Executive Offi cer Jesper Kärrbrink, received salary and bene- Other members of Key management, a total of 7 individuals, received fi ts in 2006 of SEK 3,369 thousand (2,865). Other benefi ts include a salary and other benefi ts, totalling SEK 10,349 thousand (9,464). Indi- company car and pension benefi ts. vidual salaries and other benefi ts are listed in the table on the previous A mutual term of notice of six months applies. In the case of dis- page. missal of the CEO by the company, the CEO is entitled to the equiva- Other benefi ts are company cars and pension benefi ts according to lent of 18 monthly salaries. Deduction of any salary received from a the ITP plan. No severance pay has been contracted. A mutual term of new employer will be made by the company. The normal retirement notice of six months applies. The normal retirement age is 65. age is 65. Pension premiums have been paid for the CEO of the Parent Company according to the ITP plan and a complementary pension insurance of SEK 360 thousand per year.

Note 6 Auditors’ remuneration

Group Parent Company Auditors’ remuneration, SEK thousand 2006 2005 2006 2005 Audit engagements pertain to auditing of the annual fi nancial state- Ernst & Young, audit 2,313 1,981 1,722 1,210 ments and accounting as well as the administration of the Board of Ernst & Young, Directors and CEO. It also includes other assignments performed by other assignments 734 1,002 734 835 the Company’s auditors, and consulting or other counsel resulting from Swedish National observations related to the audit. Everything else is included under Audit Offi ce 234 281 157 185 other assignments. Total 3,281 3,264 2,613 2,230

Note 7 Interest and other fi nance income and expenses

Group Parent Company Interest income and other fi nance income, SEK million 2006 2005 2006 2005 Other interest income 42 34 69 62 Currency exchange gains 0 — 0 — Change in value of assets, Triss Månadsklöver 76 79 76 79 Other fi nance income 0 0 0 — Total 118 113 145 140

Group Parent Company Interest income and other fi nance expenses, SEK million 2006 2005 2006 2005 Interest expense 0 0 0 0 Currency exchange losses –9 0 –9 0 Change in value of liabilities, Triss Månadsklöver –67 –68 –67 –68 Other fi nance expenses — 0 — 0 Total –76 –68 –76 –68

Group Parent Company Paid and received interest in operating activities, SEK million 2006 2005 2006 2005 Paid interest 0 0 0 0 Received interest 38 29 65 57

Intra-group income of SEK 32.1 million (33.3) is included in the Parent Company’s interest income.

Note 8 Taxes

Group Parent Company Recognised in the income statement, SEK million 2006 2005 2006 2005 Current tax (–) — — — —

Deferred tax (–) Deferred tax pertaining to temporary differences –1 2 — — Total consolidated tax charge recognised –1 2 — —

The Svenska Spel Group has previously unrecognised tax losses of SEK 125 million (132). Deferred tax assets have not been recognised in cases where it is unlikely the Group will credit them against future taxable winnings.

SVENSKA SPEL ANNUAL REPORT 2006 71 FINANCIAL STATEMENTS 72 SVEN 20 e fi v ing expe carr gamin plet mate ap A C Cost Open the e fi v C Grou Open Ac Note Inta Re-c Amou O Clos Amor Open C 9 Note NOTES R P ale — Sale Recl Othe Clos

Open Clos –1Sale Othe — — — – Recl

Open Ac Clos — Sale Depr Clos Open Impa SKA SKA api urc e-c los arr ngo mou pl 09 cum cum amo ely ngi Ret yin tal ass ass yea cas has ied p, lassi lassi ing ing ing ing ing ing s i yin rie eci ing r p irm r p d a . T ing ing ing ing ing ing tis nt g p ise SPE SEK ncu nt g a ble ula ifi ifi ail wri nce h-g ula rs o t ati es urc urc whe ati g a mor unt ent pro

fi fi cos amo bal bal bal bal at st d cat cat

amo bal cos bal bal bal lat at en mou and cati cati Out on 10 10 his sh r t ted de for for on mill L A ass ted has ene has re te mou jec utilis eve for ion ion anc anc anc anc t 3 is SE for for tis anc anc anc re anc t 88 t 88 d art art n o for for on on rti ets ets rti for for ion let the ts, N es es the nt rat ati lop IT pl m f cos s — 7 2 –9 — 0 —8 0 —8 0 –8 s d o the e 1 e 1 e 1 e 1 oul NU sat e 3 e 3 e 3 e 3 ed sat uri nt f K 2 of ye SEK

Inta the and on for for the pre f com ing men yea invest or t in th f y ion –4 ng Prop d b atf 1 D 1 D 1 D 1 D ove AL ion Jan Jan Jan Jan yea 4 m per mill GEM yea cia the uni yea r 5 — — — Int ear 34 34 ear 22 pri ar t e orm the e a ngi r a ece ece ece ece uar uar uar uar REP

—— 0 0 — — r e y iod tio ill ion 2006 xpe men ern ts. r – se r – Res d ion ert per s o ear yea y 2 y 2 y 2 y 2 amo mbe mbe mbe mbe de n a ble cap ORT The ndi et & is te tau t w f t 0 d c 0 0 0 (34 iod r 8 y, y, 201 nd tur 05 54 06 54 05 –5 05 — 05 ita unt he r 2 r 2 r 2 r 2 n y bigge ran ill ass api Mob ). ). 2006 pla e, of at at of lis imp 6. be co s t typ 0 0 0 0 The es ear t b SEK ed tal 05 54 06 53 05 –6 5— –6 — — 05 The ets o S ile nt st air e r usi s a ise dev lea mill mpl EK EK uni bus epr men d ness nd ten tim and st elo ion 2006 243 243 t i ete ese ine evel the ten ten -ye ate s a pme t are s ly nte ar equi d a mill s yea inv opm B gam a a c wri are u nt n amo d b ildi mor est d ion rs. all t as exp lan ent ex ing te ngs an y G men pme ed — — rti Ano tis (22 n o calle 0 2 0 2 0 2 9 2 7 – 7 – 9 – d o end

sat pla EM ati ES. t w 8). f the pen f ion d G on tfo itu nt in th are The The es ill r u res res dit rm per per EM. EM. be co C wn d e fro nit o e y carry- ure fo for for for for nstr iod iod xten pro m The is a is ti- ear m- uct is is pert sio r ion Co 60 52 35 23 45 45 52 52 1 — — 1 — — –6 n, 1 0 1 y h —

Deve numb expe The Syst for New Amor non- e – x 2 2 2 – 2 tens 8 84 – 7 8 bot 8 43 2 eld em tot nst nse 7 4 8 14 9 6 – 41 7 41 28 9 –4 commi app lop er 5

ion tis h t unde al ruc pla d of sm , p ati lic men amo he tio tfo rop G G ati uri s r l on r r si n a Par oup oup eas 2 rms 2 ons 2 2 – – unt oned all ert t p ng 4 4 4 5 3 2 – nd per ent er 6 8 8 11 0 11 1, 9 2 — 3 — 7 — –6 –73 –6 7 — 7 — –6 –73 –6 7 — e i y roj the 1 2 2

for for for for of de sys iod Com gam ect per gam new tem C s f vel 2 2 o – cos ing 0 0 pan iod n p nstr 8 8 26 26 2 or 05 05 ing s t opm 8 3 8 5 – 2 228 2 228 142 2 8 1 –4 6 – 2 gam rog

ts sys ota y a int is SE uct pro ress ent ing tem nd ion Eq angi l 17 2 — –1 — — 8 lin K 2 9 27 duc

g S the pro pro s a 9 m ble ts 3 ts EK EK nd jec duc Gro a ill ass 34 millio 34 n t c una ion ts d up. ost com ets: mor (26 uip 20 20 –1,4 – –1,2 284 5 284 –5 284 3 s t pute 1,65 1,91 5–1 1,91 4 8 8 7 06 06 160 –1 –160 ment ) a hat tis 4 228 1 88 9 92 6 –26 3 41 2 – 8 8 636 2, yea n. 516 –517 516 P P

36 29 7 a a ed nd 0 y rs rent rent 0 2 3 – 9 2 5 2 5 2 7 hav rs ear por rel (3 ye Com Com e b ate s ( tio e 5–1 ars) pany pany n f en to pr or a or 0 y – – 1 1 oje ear ,562 ,682 ,383 ,959 T ,959 2 2 – 696 2 o 0 0 4 5 8 89 8 21 13 tal cts 0 0 s) 6 2 0 4 8 8 5 5

Note 10, cont.

Construction Construction and Buildings and extension, extension, property Construction Equipment Group, SEK million and land own property held under lease in progress and computers Total

Opening balance 1 January 2006 –67 –35 –32 — –1,429 –1,563 Depreciation for the year –7 –12 –9 — –189 –218 Sale 1 — — — 512 512 Closing balance 31 December 2006 –74 –46 –41 — –1,107 –1,269

Opening balance 1 January 2006 — — –67 — –6 –73 Impairment for the year — — –1 — — –1 Closing balance 31 December 2006 — — –68 — –6 –74

Assessed value Assessed value, buildings 293 Assessed value, land 214

In December 2006, a letter of intent was signed regarding the sale of shares in Svenska Spels Fastighets AB incorporating the property Orgeln 7 situ- ated in Sundbyberg in Stockholm, see Note 4.

Construction Construction and Buildings and extension, extension, property Construction Equipment Parent Company, SEK million and land own property held under lease in progress and computers Total

Accumulated cost Opening balance 1 January 2005 37 20 — 1 1,351 1,409 Other purchases — 0 — 5 265 270 Reclassifi cations — 4 — –4 –10 –10 Sale — — — — — — Closing balance 31 December 2005 37 24 — 2 1,606 1,669

Opening balance 1 January 2006 37 24 — 2 1,606 1,669 Other purchases — — — 2 204 206 Reclassifi cations — 2 — –2 0 0 Sale –1 — — — –507 –508 Closing balance 31 December 2006 36 26 — 2 1,303 1,367

Accumulated depreciation and impairment Opening balance 1 January 2005 –11 –5 — — –1,129 –1,145 Depreciation for the year –1 –2 — — –102 –105 Sale — — — — 6 6 Closing balance 31 December 2005 –12 –7 — — –1,225 –1,244

Opening balance 1 January 2005 — — — — — — Impairment for the year — — — — — — Closing balance 31 December 2005 — — — — — —

Opening balance 1 January 2006 –12 –7 — — –1,225 –1,244 Depreciation for the year –1 –3 — — –133 –136 Sale 1 — — — 505 505 Closing balance 31 December 2006 –11 –10 — — –853 –874

Opening balance 1 January 2006 — — — — — — Impairment for the year — — — — — — Closing balance 31 December 2006 — — — — — —

Assessed value Assessed value, buildings 22 Assessed value, land 5

Depreciation periods for property, plant and equipment:

Buildings 50 years Construction and extension, own property 10 years Construction and extension, 20-30 years property held under lease (based on duration of lease) Land No depreciation Land improvements 20 years VLTs 5 years Equipment 5 years Computers 3–5 years

SVENSKA SPEL ANNUAL REPORT 2006 73 FINANCIAL STATEMENTS 74 SVEN 0–90 Inve 3104 42 3102 198 3105 172 3001 104 3106 192 3101 237 Othe Cash Trad Swed Trad Fina b Real I Real Inst Inte Comp Inve Inve Real Fina for F Note Non- Open Secu Note NOTES T Cash 361– 91–3 Othe C Othe C C P

Clos Comp

nve SKA SKA air urc he ala los los han rum the res stm stm stm rit nce has tab e a e a ing ing ing nci nci stm val rat rat 1,080 60 r s r i r n curre ge rat ish ing and and day uls ies t r SPE uls nve ent nd nd hor fi e o e o le es on- al al ent ent ent ue

ate day sheet in va e o ent inv sec inv nanc Gov ory ory hol sec s o ory ory cas cas bel 12 12 1 nt lia ass (va L A and stm oth oth f i f i t- t- s i s i s i curre fi day risk s o f i est est uri din

1 f i s uri nte nte invest ern nanc invest and bil ow lue –5 lue h e h e n z n z n a lua ial ets . F inv er er N nte ent nte f i

sal s o gs, tie tie men men iti NU res res tio air ero ero men qui qui s ins nt rec pay nte sho est so non s 3 res es, s T f i res s T es SEK ial n p men men t b t b Fina Fina invest val AL tru val val -co -co cia eiv nte res abl ts ts riss ws a ws men t — — t r riss riss net 12 t b rin -cu ins ond ond ue mill men ent ent tes — tes abl hel hel upo upo REP t 3 eal res t r es ts cip ond “Må r tru nci nci “Må men corre ese t r ion 2006 es re s, s 1 s 2 s 2 com per t 99 t 99 d a d a rat le) ts n b n b ORT nt per ese men s rve nad al al rec tai e o ts s n s c nad par ond ond int spo tai rve ni ogn inv ins urr f i Tri 2006 skl on- er ts iso ng ni nds s a s a skl nte s es öve ng ent Tri s ise n o tru est curre to Tr nd nd t-b öve “Må res to s d i r” to Tr f s ass ear comme comme men men t b th “Må r” n t iss iss air nad nt e c ing ets 37 37 ets 25 68 102 ond iss iss he Mån val ass skl arr nad Mån ts ts lia con s ue rci rci öve ets 1, yin ads bil al al skl and sol ads iti g a r” pap pap klö öve es ida klö mou nom ver 1, ers ers 13 ted ted r” ver — ver nt. ina l v alue

Nom ina Fair 1 l v 1 1 val , ,64 ,64 , ,17 , 20 3 4 6 262 1,262 1 7 alu 3 01 101 170 1, 170 24 124 0 8 5 8 8 7 9 31 D ue 2 e.20 F 20Dec.2007 7 2. 3 — 0 0– 6 1– >5 0 >5 3 68 0 1 2 48 0 37 0 3 3 2 0 9 7 2 2 5 8 6 e M

ec. 2006 G r oup N

Dc 08 3.50 4.00 3.50 4.00 1 Dec.2028 1 Dec.2020 1 Dec.2015 1 Dec.2008 1 Ap 1 Ap o atu mina Q rit 4 1 y 5 y .21 0.00 1.00 r. 2014 r. 2012

l v 1 1 y d 1 200 yea , ,64 , 2 , ear ear 003 1, 236 047 1, 183 1, 183 alu 124 1 0 ate Effe 36 3 45 45 31 — 31 77 — 6 05 rs 8 F 3 6 2 4 3 2 2 3 93 6 93 136 5 3 8 – 3 1 e s 1 s 1

Fai Floa loa loa r v 1 1 1 , , , ,27 tin tin tin 20 20 262 1,262 034 0 alu 170 1, 170 124 1, 124 1 3 60 38 72 52 52 28 28 47 47 6 06 1 g i g i g i 1 161 4 2 0 7 25

e N cti P Dec

a nte nte nte rent ve . 2 res res res rat 0 Com 05 e o t t t N ( ( ( sti sti sti o f i omin pany m bor 3 bor 3 bor 3 bor nte ina al res l y mon mon mon 1 1 1 val .359 . .559 ,274 , , iel 2 0 8 3 4 047 6 183 624 124 1 t, % 0 3 5 ths ths ths 56 6 6 7 03 4 81 d/ ue 05 2 2 8 7 6 8 3 ) ) )

Note 13 Trade and other receivables

Group Parent Company SEK million 2006 2005 2006 2005 Trade receivables Receivables, gaming and lottery retailers 297 286 297 286 Receivables, restaurants 25 21 25 21 Other 14 3 6 — Total trade receivables 336 310 327 307

Other receivables Receivables, associates — 18 — 18 Other current receivables 35 33 26 27 Total other receivables 35 50 26 45 Total trade and other receivables 370 360 354 352

Note 14 Prepayments and accrued income

Group Parent Company Prepayments and accrued income, SEK million 2006 2005 2006 2005 Prepaid retailer commissions 7 7 7 7 Other interim receivables 82 66 77 52 Total 89 73 83 59

Note 15 Cash and cash equivalents

Group Parent Company Cash and cash equivalents, SEK million 2006 2005 2006 2005 Cash and cash equivalents 2,643 2,274 2,463 2,108 of which funds on internet gaming accounts 106 36 106 36 of which collateral on deposit from retailers 17 17 17 17 of which Triss Månadsklöver, deposits 31 77 — — Investments and other investments 37 25 68 102 of which zero-coupon bonds and commercial papers 37 25 37 25 of which Triss Månadsklöver, deposits — — 31 77 Total 2,680 2,299 2,531 2,210

Cash and cash equivalents consists partly of funds to customers/players investments’ for the Parent Company is the current component of the and retailers. Group investments pertain to cash and cash equivalents Triss lottery “Månadsköver” which is included in cash and cash equiva- placed in interest-bearing commercial papers. Also included in ‘Other lents on a consolidated basis.

Note 16 Equity

Group Retained earnings Share capital Retained earnings including profi t for the year includes profi t in the The registered share capital included 2,000 ordinary shares on 31 Parent Company and its subsidiaries. December 2006, at a par value of SEK 100 per share. Holders of ordi- nary shares are entitled to dividends that are subsequently determined. Parent Company Statutory reserve Translation reserve Restricted equity may not be reduced through profi t distribution. The Translation reserves include all foreign exchange gains and losses that statutory reserve is intended as a means of setting aside part of net arise in translating fi nancial statements from foreign operations that profi t not used to cover retained losses. have prepared their fi nancial statements in a currency other than that used in the consolidated fi nancial statements. Current translation Non-restricted equity reserves are insignifi cant in size. This consists of non-restricted equity from the previous year after any provisions are made to statutory reserves and profi t distribution. Non- restricted equity is the amount available for distribution to shareholders. Note 17 Earnings per share

The calculation of earnings per share for 2006 is based on profi t for the year attributable to the Parent Company’s shareholders of SEK 4,807 million (4,569) divided by the number of outstanding shares. Earnings per share for 2006 are SEK 2,404 thousand (2,284).

SVENSKA SPEL ANNUAL REPORT 2006 75 FINANCIAL STATEMENTS 76 SVEN and at S Note NOTES Trad A Othe Tota Tota Trad sion Empl Othe with not Unpa Unpa SEK SEK SEK mini wort a fi n U N Tota coun fulfi l Cred Tota Cred Note Prep Ac Note cent Alec Pens Clos O Note C Tota Unpa C Coun Coun cred cred SKA SKA ven urr han c npa on- pen tr cr cr ibu nce mill mill mill be ab mis oth age e p it it ual ta’ aid ing ska ion cos ual ent it hy e a l l l l l 1 ter oyee- r l r i the the it ge id id id id ter ing curre ter pol ass SPE tab ris iab tems 0 tems s c ion ion ion s a ris aya par e t er cou s c winni winni winni winni pol ts nd sta par s a ir Spe of li pen k i par invest lia pen ess icy icy ons le ks ili nd le

18 18 21 21 20 19 ove he gam fi for for L A rel ble

nd ty. kes kes icy nt s t nte ty tie oth nanc bil to fu l’s at ba abilit men ty wit sio ate sio oli def ngs ngs ngs ngs ris he , w red red the s 2 ris N s 1 lia iti def rpa es men lia for for er dat risk k, NU n p h e n p d l k w err ial es ris lfi hic ts , T , t , T , T bil bil ies lan ope by AB AB by Sve rti

invest err pay mul l i iab ion Unpa rad Prov Fina k t Ac sta ed rov AL riss riss riss and t o obl iti rov iti h s ith es ts ce bas nsk rat es ed hat ili es f a bli inc tip iti abl isi iga cr in tip lev obl REP and ”Må ”Må ”Må isi sheet sheet tie colla men ed ed con ona Sve ons 16ons 16 16 16 she s a S nci le inc ome the ual isi ula el ons 18 ons 16 16 16 Sve se tio es s 6 iga id ORT on Al by th wee by li pel nad nad nad nsk ts was sis d r l ga ons ome ns. ns. ter tes tes ts al nsk tio are dat s a winni wit for for t o out are al a S Gro mit skl skl skl k ga mes n m Thi tha a o ris a S 143 e P 2006 ect e t f c nd h v etc. the for for pel ine öve öve öve mad ing s r up t o f f fina pel are urr ks ust ust a’s mes .1% .1% ari and s f ’s ’s isk he Par r” r” >5 r” def ngs und ent amo ’s ’s the nt ous pen act e a be li Pen or

<1 ye <1 1–5 1–5 ris is ma nci ent par (12 lotte Com ed c uar han and err commi k t unt to to unt fi sio co ng mit

8.5 tne sio n yea Com yea winni hat a hat ial rie rdi anc nag n F ar dli pan ed act non ed ) a rs rs s 2 ng ns rs ass ng und 2 und pan ial tme t 3 ed SEK SEK will will ivi y. by ch ngs -cu inc cou ump to an an to fi tie ins 1 D

acc y c nanc nts nts not r 34. s i re nte fro tit ome o ons ece ord tio os s a nt wit uti est 5 m m l be ab ial rpa ns. ns. ing ist ist mbe s ing acc ons h e abl so fl ott ill rty

of de o Thi cia cre oun ion to a to . T ach ish ws, le r 2 eri will will s c ted ted o dit- to ed es 0 ts (31 ferre 06 alc .5) . T ula d i he in 2006. tio nco con n d me Curr chan The in U poli cies 1 cont 1 w fl o sign oes 0 0 sol ,00 2 2 2 384 4 3 1 6 0% 0% 0% 0% 006 006 006 and 84 0 8 6 6 8 3 81 51 51 cy, SD ida ifi curre thr , a rac enc 6 4 6 1 8 2 43 2 4 2 4 2 60 1 9 9 33 89 0 89 100 2 ges not

can

of th ove re acc tio oug and emp t i y r in ex curre to be be to ncy ncy s t i n l ord r a G G G h f isk nse e c loy EUR ign r r r eve oup oup oup ris cha per ing orw ntl ont e cur ed. hed l i k t e- . T iod y c nge s d to wh ard rel rac ity o w he Pro ged onf ete ate , e of 6– ted ted rat ris con hic jec .g. .g. orm 2 2 2 rmi ich d e bef 3 2 2 k i es 0 0 0 curre 9 45 87 7 7 ted ted h t 6 tra 0 0 0 12 12 wit s m 8 21 1 3 7 9 8 3 8 0 2 28 1 38 8 6 7 3 4 0 1 xpe 5 5 5 ned ore the aff

9

2 he wit cts fl mon h r ana

ect ncy ncy nse ows the Gro Gro h t . T as th ega ing ged s t he ths he fl up con up

are ows rd o t e f . P Gro the bas acc hed is ex tra to he air to be be to lanne are is up’ lia ord th ct val val ges pos of ca bil e c is si s fina to be be to ue 1 ue ing hed d i iti , fl 20 20 20 ed urr 01 945 001 1

ows es gne nve of SE lcu of pl 69 2 32 32 81 74 74 06 06 06 to ged 3 2 4 32 0 92 8 70 4 2 4 3 enc nce rel hed to fo

P P P lat stm th d. a a a ate in fo an K 1 rent rent rent y a ion to ale to e G pol ged ent rei s m ass nd 24 24 rei icy icy rou in IA Com Com Com gn s t whe ain ets ets mill siz gn vel sta p’s hat suppl pany pany pany e o ly S 1 as ion curre n t of 50– tes tes fi to inv

9. 9. f t a nanc he (12 ier tha per- he Pen- olv 3 6 2 2 2 3 n- 0 0 0 0 4 8 87 72 3 61 41 s 4). 05 05 05 t e 3 5 9 4 0 8 7 e

Note 21, cont.

Interest risks The Group’s interest risks pertain to interest rate fl uctuations that winner. The liability to the winners is upwardly adjusted annually affect investments in real rate of interest bonds and other surplus according to the CPI trend. To manage interest rate risk relating to real liquidity investments. Real rate of interest bonds are used to secure rate of interest bonds, it is the responsibility of the manager to ensure commitments to Månadsklöver Triss winners. The amounts and periods that the interest rate sensitivity of an investment in such a bond is the vary depending on the winnings (SEK 10-25 thousand per month for same as for the debt, and that the portfolio’s interest rate sensitivity 10-25 years). Svenska Spel allocates a one-off amount for each prize to corresponds as far as possible to that of the debt. an independent fund manager. The one-off amount is calculated on Other investments are only permitted in interest-bearing securities the prevailing rate of interest in the Swedish real rate of interest market with low risk and high liquidity. and the amount needed to cover future monthly disbursements to the

Note 22 Operational leasing

Operational leasing agreements property, Orgeln 7, was sold to an external party with possession of – Group/Parent Company as lessee the property and shares in Svenska Spels Fastighets AB on 15 January All leasing agreements entered into by Svenska Spel are operational in 2007. See Note 4. nature. Leasing agreements mainly relate to offi ce and casino premises. The Group’s leasing costs for 2006 amounted to SEK 37 million (36), Operational leasing agreements – Group/Parent Company Group Parent Company and the Parent Company’s amounted to SEK 36 million (34). as lessor SEK million 2006 2005 2006 2005

Operational leasing agreements Within a year 54 66 54 55 – Group/Parent Company Group Parent Company After one year as lessee, SEK million 2006 2005 2006 2005 but within fi ve years 216 228 216 220 Within a year 50 26 24 22 After fi ve years (about SEK 54 After one year million/year until further notice) but within fi ve years 200 102 97 88 Total 270 294 270 275 After fi ve years 455 355 121 Open ended Total 706 483 242 110 The Group’s leasing costs for 2006 amounted to SEK 62.8 million (67.7), of which the Parent Company’s represented SEK 53.7 million The Casino in Sundsvall has a 30-year lease, while the length of the (55.3). leases for the casinos in Gothenburg and Malmö is 20 years. The agree- ments contain an indexing clause for annual calculation of rental pay- Leased gaming and lottery Group Parent Company VLTs, SEK million 2006 2005 2006 2005 ments. The Parent Company’s rental costs relate to the offi ce space in Sundbyberg for Svenska Spels Fastighets AB. This rental agreement is Opening cost 434 296 434 296 open ended and does not contain an indexing clause. After the new Purchases for the year 5 138 5 138 owner takes possession of shares in Svenska Spels Fastighets AB on 15 Sales for the year –296 — –296 — January 2007, the previous intra-Group rent paid by the Parent Company Closing cost 144 434 144 434 for premises in Sundbyberg will become external rent to third party. Opening depreciation –294 –291 –294 –291 Operational leasing agreements Depreciation for the year –23 –3 –23 –3 – Group/Parent Company as lessor Sales for the year 296 — 296 — Rental agreements relate to the gaming and lottery VLTs rented out to Closing depreciation –21 –294 –21 –294 retailers and rented premises in the Group’s Sundbyberg property. This Carrying amount 122 140 122 140

Note 23 Commitments, contingent liabilities and future obligations

Commitments, contingent liabilities and future obligations The Parent Company has signed a guarantee for Onside TV-Production for SEK 120 thousand (600).

Group Parent Company Pledged assets, SEK million 2006 2005 2006 2005 Blocked funds as collateral for loans 1 2 1 2 Credit security 1 2 1 1 Total 2 4 2 3

Group 2006 Parent Company 2006 Future obligations concerning purchase of property, Property, Property, plant and equipment and other contracted plant and plant and commitments, SEK million equipment Other equipment Other Within a year 10 350 10 349 After one year but within fi ve years — 408 — 407 After fi ve years — 52 — 52 Total 10 810 10 808

SVENSKA SPEL ANNUAL REPORT 2006 77 FINANCIAL STATEMENTS 78 SVEN 2) 3) olnsEeg B Gotlands EnergiAB V otnA T Posten AB TeliaSonera AB for value Comp and Pare Carr Clos the M T Retu R Impa I S G in Pare CCsn etuagA 568-06 tchl 10 ,0 — — — 100 1,000 100 100 1,000 1,000 100 Stockholm 100 100 Visby 556586-7016 1) Stockholm Stockholm 100 556485-4304 Svenska SpelsFastighetsAB 556485-4296 556574-1682 CC CasinoRestaurangAB Visby UAB 556597-7278 Casino CosmopolAB Bellman CasinoAB T Keno AB Svenska SpelsFörvaltningsAB Open Pare Note Note NOTES aioCsoosFsiht B 55830 Sokom 0 100 — — 1,000 100 100 Visby Stockholm 556240-7881 556598-3409 AB SvenskaSpelsServicecenter Casino CosmopolsFastighetsAB Clos P Reve Purc Open

n 2 rcmA eracom AB isig B 54542 Vsy 100 Visby 556485-4320 rissBingo AB isA 568-32 ib 100 Visby 556485-4312 riss AB aid SKA SKA tat tefl B attenfall AB ecl rou ark ndir Ref shar See The the 0 Gro nt nt nt ass ing has pro e-o ing rne rse yin sha irm Win 06 et ers ing ing p c of SE any e o Not min Com Com Com ect SPE ifi amo d i up es ter duc d s acc g a wne to im reh ent

the f e omp acc cat e 4 loto ly- ori cos imp

mpa 1) pur 25 25 24 pan pan pan ms qui L A hare K 2 for a for

umu ty mou old own ts unt ion umu for for pai Gro Pro t d c air ty 1) sha cha ani y’s y’s y’s bet and 5.1 N

irm ers rme fi of SE hol s s i ed

men the lat NU re up t, a omp val nt inv inv inv es sed lat wee ndi ’ c nt ent mill in UA sub ed der cos s ue Inve K 2 Affi AL pur est est est se yea ont of sh ed t cat ts ani ser sid ion 2) imp n c s’ ,81 t-b of SE ment men men B W

cha REP r and rib cos

ed: are con iar vic 8 t omp lia es ase stm (21 air inl uti t i t i sed s a ies hou lia

es t K 8 ORT

tri oto men tes 3) n s n G d p .2) bil nd ons

ani san fro but ent iti ser ubs .6 is no rou par ric and es es t d i m o 2006 ion mill vic idi ing tic in cl p c n A t r s i in th ipa ari sol es s eco the omp ion ugu ose app n G tio es fro d s gni e G r c d c st

ns (6. ani ly sed m S erv 200 omp omp in Sv rou 5 rou 3). 3). es, in th 5 ice sep 6. 6 tat C C ani ens p. p. SEK 761 tchl 10 ,0 — — — 1,000 100 477-6317 Stockholm ani o o p c ara s t S S S rp. rp. e d e-o es. ka In 2006 2006 In E E E es o tel K K K tho S S ID no ID no Spe eli omp wne 10.5million(13.0) 35.6million(34.1) 86.0million(86.0) E E y i in th K 4.9million(6.7) K 1.0million(1.0) the usa ver n t ls . D . D För d c he

r c nd

e G of se the ani val inc omp omp rou tni ome Par rvi es ngs ani ani p f ent ces ces sta AB du Lith es es or a or tem omi omi in uan ent e t cil cil o t as th ia e e he e a carry loan of t w A f basi Stat pany 20 A S und mou wed c n as co 04 nu ing he e ( s o s. gra s a ’s ’s nt rdi al to or

ish amo Nat Swe n 3 profi is co re ng nte Gen qui qui Shar Shar unt ion Sta off 0 A nsi gan dis to ape to y s % ty, y s % ty, d a

ts d era f N e of N e of dere exc set al 5 te h C pri n e 1 ise ise l M Deb uri e

l, d t ed aga omp xce lotte rmi 31 Ju 31 ng o b ing e t O et ins pti e i t i the the ani ing rie ffi m t d s on ly, su

ma con es ce) s, fi for for ivi

umb umb 31 Oc 31 ed fro nanc ter 1 und Act Act sol . P

den 1 1,000 100 100 1,000 100 100 97,353 1,000 101,066 1 0 the ial har har m t by th ida ,000 — ,000 — ,5 er er aym . T er ial wit 57 2, ds tio tob es es of S of S he he yea Oth n yea ent e G follo h r com er pro r. r. et Carr Carr esp s a er r s ove and On 5 On pan val win vis hall hall pro re yin yin ect to to ect ue. EK EK 3 3 –40, – rnm 184, y w ion 1 1 1 1 15 Fe 15 g t 4 to be be to 91, 5

g a g a vis Oc Dec Dec tho tho 0,000 be le 1,02 2 as 3 s i 200 — –200 he 46,845 46,845 ent , 2 , 0 mou mou ion 698 37 698 028 18 18 — 818 7 tob for 0 n C the usa usa . 2 . 2 0 13 — 13 — — –1 — bru 0 res mad 8 1 0 med 818 — 818 nt 6 s, 0 0 on 22 22 on er

t C nt, C nt, d S nd S nd hap 06 31 31 06 06 31 31 06 pro ary olu ite to 199 thr e o m 8 ter . A th hib tio oug Dec arr arr n a 8 S e S dva n o 21 Se 21 it .5, .5, h p yin yin io EK EK wed ven emb qua f t nce aym n o the g a g a Dec Dec – – tho tho he ska cti 4 4 4 87, ish rte n ent er d mou mou 4, 0,000 4,6 0,000 com- 1,7 usa usa . 2 . 2 on 1 2 rly 084 698 100 100 Spe of 0 0 0 98 82 nt, nt, — nd nd 05 05 05 l Note 26 Share of profi t of Group companies

Group Parent Company Share of profi t of Group companies, SEK million 2006 2005 2006 2005 Anticipated dividend from Casino Cosmopol AB — — 381 381

Note 27 Events after balance sheet date

The purchaser of the property at Orgeln 7 in Sundbyberg outside on 15 January 2007. All contractual matters have been settled with the Stockholm in December 2006 has, in conformity with contract, taken selling party Svenska Spels Förvaltnings AB. The sale is expected to possession of the property and shares in Svenska Spels Fastighets AB generate a tax-free capital gain of SEK 90.7 million.

Note 28 Uncertainty in estimates and assessments

Sources of uncertainty in estimates pertain to a number of system platforms for games run by Group com- Key management has analysed key uncertainty factors for the Group’s panies such as restaurant games of the Jack Vegas type, as well as development as well as core accounting policies. The following is a list Triss, Stryktips, Lotto etc. The opportunity to recover current capital- of some key risk factors that could affect Svenska Spel’s business, ised development expenditure is naturally dependent on future sales fi n a ncial position and profi t. prospects for those games associated with current gaming platforms and the incomes they generate. The carrying amount of the platforms Capitalised development expenditures should be recoverable involved may be signifi cantly affected should the income-generating At the end of the year, the Svenska Spel Group had capitalised devel- possibilities of these platforms and their lifetime not prove reasonable. opment expenditures totalling SEK 321 million (269). The expenditures

Note 29 Information about the Parent Company

AB Svenska Spel is a limited liability company registered in Sweden Svenska Spel’s Annual Report for 2006 was approved for publication with corporate registration number 556460-1812. Its place of business by the Board of Directors on 22 March 2007. is Visby, Sweden. Shares in the Parent Company are administered by the Ministry of Finance. The address of the head offi ce is Norra Hansegatan 17, 621 80 Visby, Sweden.

Note 30 Paid and proposed distribution of profi t

Svenska Spel’s Articles of Association state that all available profi ts shall be distributed as prescribed by the Swedish State and that no amount shall be paid as dividend to shareholders.

Approved and distributed during the year, SEK To the Swedish Sports Confederation 1,019,574,000 To the Swedish National Board for Youth Affairs 131,258,000 To support culture 611,000 To the Swedish State 3,417,221,441 Total 4,568,664,441

Proposed distribution to be approved by the Annual General Meeting, SEK To the Swedish Sports Confederation 1,216,141,000 To the Swedish National Board for Youth Affairs 153,910,000 To support culture 435,000 To the Swedish State 3,436,616,000 Total 4,807,102,000

The annual report and consolidated fi nancial statements are subject to adoption at the AGM on 25 April 2007.

SVENSKA SPEL ANNUAL REPORT 2006 79 FINANCIAL STATEMENTS 80 SVEN

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Aud hat n rd- it Offi ce Audit Report

To the annual meeting of the shareholders of AB Svenska Spel Corporate identity number 556460-1812

We have audited the annual accounts, the consolidated fi na- As a basis for our opinion concerning discharge from liability, cial statements, included on pages 50–80 (of the printed ver- we examined signifi cant decisions, actions taken and circum- sion of this document), the accounting records and the admin- stances of the company in order to be able to determine the istration of the Board of Directors and the CEO of AB Svenska liability, if any, to the company of any director or the CEO. We Spel for the 2006 fi nancial year. The Board of Directors and also examined whether any director or the CEO has, in any the CEO are responsible for these accounts and the adminis- other way, acted in contravention of the Companies Act, the tration of the company as well as for the application of the Annual Accounts Act or the Articles of Association. We believe Annual Accounts Act when preparing the annual accounts and that our audit provides a reasonable basis for our opinion set the application of international fi nancial reporting standards out below. IFRS as adopted by the EU and the Annual Accounts Act when The annual accounts have been prepared in accordance preparing the consolidated accounts. Our responsibility is to with the Annual Accounts Act and give a true and fair view of express an opinion on the annual accounts, the consolidated the company’s fi nancial position and results of operations in accounts and the administration based on our audit. accordance with generally accepted accounting principles in We conducted our audit in accordance with generally Sweden. The consolidated accounts have been prepared in accepted auditing standards in Sweden. Those standards accordance with the international fi nancial reporting standards require that we plan and perform the audit to obtain reasona- IFRS as adopted by the EU and the Annual Accounts Act and ble assurance that the annual accounts and the consolidated give a true and fair view of the group´s fi nancial position and accounts are free of material misstatement. An audit includes results of operations. The statutory administration report is examining, on a test basis, evidence supporting the amounts consistent with the other parts of the annual accounts and the and disclosures in the accounts. An audit also includes assess- consolidated fi nancial statements. ing the accounting principles used and their application by the We recommend to the annual meeting of shareholders that Board of Directors and the CEO and signifi cant estimates made the income statements and balance sheets of the Parent Com- by the Board of Directors and the CEO when preparing the pany and the Group be adopted, that the profi t of the Parent annual accounts and consolidated fi nancial statements as well Company be dealt with in accordance with the proposal in the as evaluating the overall presentation of information in the Directors’ report and that the members of the Board of Directors annual accounts and the consolidated fi nancial statements. and the CEO be discharged from liability for the fi nancial year.

Stockholm, 26 March 2007

Ernst & Young AB Accountant appointed by State Audit Institute (Riksrevisionen)

Torsten Lyth Lars Nordstrand Authorised Public Accountant Authorised Public Accountant

SVENSKA SPEL ANNUAL REPORT 2006 81 Corporate Governance Report

Application of the Swedish Nomination process Code of Corporate Governance According to the Government’s 2005 ownership policy, com- The Ministry of Industry, Employment and Communications panies that are owned wholly by the State are subject to uni- has decided that the Swedish Code of Corporate Governance form and common principles for a structured nomination (“the Code”) is to be part of the Government’s framework for process. The Minister for Industry and Trade has specifi c the administration of State-owned companies. The basic prin- responsibility for all board nominations for all State-owned ciple is that the Code will complement the State ownership companies. There is no Nomination Committee as described in policy. the Code as it is run and coordinated by the entity within the Svenska Spel has complied with the Code in 2006 with the fol- Ministry for Industry, Employment and Communications lowing exceptions: responsible for State ownership.

Deviation from the Code Annual General Meeting The Corporate Governance Report does not contain informa- and Articles of Association tion about directors independence in relation to major share- The Annual General Meeting is the highest decisionmaking holders. body in Svenska Spel. Explanation: The Government’s ownership policy states that The Annual General Meeting is governed by the Swedish the nomination of directors shall be published according to Companies Act and the Articles of Association. The Articles the guidelines in the Code with the exception of reporting on of Association are available on the Company’s website the independence of nominated directors’ in relation to major www.svenskaspel.se. The Annual General Meeting is to be shareholders. The reason for requiring that companies must held annually, not later than April. Notice of the Annual Gen- have at least two directors that are independent from major eral Meeting is to be published not earlier than six weeks and shareholders and that the independence of all directors from not later than four weeks prior to the Meeting. Members of major shareholders must be declared according to the Code, is Parliament are entitled to attend the AGM after registration primarily to protect minority shareholders in companies with with the Board of Directors, and raise matters at the meeting. widespread ownership. In the case of companies wholly owned by the State, there is no reason to declare such inde- 2006 Annual General Meeting pendence. The last AGM was held on 27 April 2006. With respect to the transition solution for the Code’s rule At the Meeting on 27 April 2006, Karin Johansson, Lars- on internal control of fi nancial reporting, the Board’s Report Åke Lagrell, Lena Melinder, Kjell Nordström and Marianne on Internal Control is limited, according to 3.7.2 of the Code, Samuelsson were reelected and Jens Henriksson elected. to a description of how internal control is organised without Anders Gustafzon was elected Chairman. Information about any statement from the Board on its effi ciency, nor is the the age, education and experience of each director is pre- report reviewed by the auditors. sented on page 88. This Corporate Governance Report has not been reviewed The AGM adopted the 2005 income statement and balance by the Company’s auditors and is not part of the formal sheets and disposition of Company profi ts as proposed by the Annual Report. Board. The AGM also discharged the directors and CEO from personal liability for administration of the Company in 2005.

82 SVENSKA SPEL ANNUAL REPORT 2006 2007 Annual General Meeting In 2006 the Board held one statutory meeting, four regular The 2007 Annual General Meeting will take place on 25 April meetings and fi ve extraordinary meetings. In 2006 the Board 2007 in Visby, with Notice of the AGM sent at the end of dealt with such issues as Svenska Spel’s strategic focus, March 2007. restructuring transactions, the company’s internationalisation, the need for changes to operating licences and the responsible Board of Directors and its Rules of Procedure gaming programme. Every year the Board establishes Rules of Procedure for its The Board received assistance in 2006 from the secretary of work, instructions on the division of responsibilities between the Board and Chief Legal Counsel Bengt Palmgren, who is not the Board and the CEO, and instructions on fi nancial reporting a Board director. to the Board. The Rules of Procedure stipulate such items as the number Board committees of meetings to be held by the Board, which matters are to be Audit Committee addressed at general shareholders’ meetings, the division of The Board has formed an Audit Committee consisting of three responsibilities between the Board and its two committees, members. the Audit Committee and the Benefi ts Committee, and the The Audit Committee’s members since the statutory meet- distribution of work responsibilities between the Board of ing in April 2006 have been Karin Johansson (Chairman), Lena Directors and the CEO. Melinder and Jens Henriksson (prior to 26 October 2006, the The CEO Instructions specify the responsibilities of the CEO responsibilities of the Audit Committee are described in the and the authority he is assigned. Board committees act as Board’s Rules of Procedure). working groups for the Board. The Committee’s tasks include working on behalf of the Three of the directors are women and three are men. The Board to ensure the quality of the Group’s fi nancial reporting, average age is 58. Three of the employee representatives are meeting regularly with the company’s auditors to learn about women and three are men. The average age is 45. the focus and scope of the audit, discussing coordination between the external and internal auditing activities, review- Composition of the Board ing the Group’s risks, and establishing guidelines for determin- According to the Articles of Association, the Board of Direc- ing which other services, in addition to auditing services, tors shall comprise a minimum of three and a maximum of ten should be provided by the company’s auditors as well as the directors elected by the Annual General Meeting. In 2006 the focus of internal auditing. Both the company’s external and Board consisted of nine elected directors. In addition, the internal auditors are called in to the Committee’s meetings. Board had three directors and three alternates appointed by The company’s CFO and Chief Legal Counsel present reports the employees via the employee associations. The CEO is not a at the Committee’s meetings. The Audit Committee held four director. meeting during the fi nancial year. Committee meeting attendance is presented on page 84. Board meetings According to the Board’s Rules of Procedure, the Board shall Benefi ts Committee normally convene fi ve meetings per year in addition to the The Board has established a Benefi ts Committee consisting of statutory meeting. three members. The members of the Benefi ts Committee since

SVENSKA SPEL ANNUAL REPORT 2006 83 CORPORATE GOVERNANCE REPORT

Facts, Board of Directors

B. Benefi ts C. Audit Attendance3) Board A. Board Committee Committee A B C Elected Indep. appointments Born

Total number of meetings 9 1 4

Directors elected by the AGM Anders Gustafzon chairman chairman 9 1 2003 I 2 1943 Jan Blomberg1) member chairman 4 1 1996 I – 1939 Magdalena Gerger1) member 1 2004 I – 1964 Jens Henriksson2) member member 1 1 2006 I – 1967 Karin Johansson member chairman 7 4 2003 I – 1956 Lars-Åke Lagrell member 7 2001 D4) 5 1940 Curt Malmborg1) member member 0 1 2003 I – 1951 Lena Melinder member member 7 3 2004 I – 1957 Kjell Nordström member member 8 1 2001 I 3 1949 Marianne Samuelsson member member 5 1 2003 I 4 1945

Employee representatives Håkan Bergström member 9 2003 – – 1956 Bertil Sandström member 9 1996 – – 1948 Sabina Lindqvist member 8 2005 – – 1979 Anders Andersson deputy 8 2005 – – 1954 Britta Höglund deputy 8 2003 – – 1948 Elin Sundin deputy 8 2005 – – 1979 Average 86% 100% 88% 3.5 years 1.2 52 years

1) Resigned at AGM on 27 April 2006. 2) Elected at AGM on 27 April 2006. Resigned 26 October 2006. 3) Attendance does not include directors who resigned during the year. 4) Lars-Åke Lagrell is considered dependent in his role as Chairman of the Swedish Football Association. Lars-Åke Lagrell does not participate in matters involving Svenska Spel and the Swedish Football Association.

84 SVENSKA SPEL ANNUAL REPORT 2006 the statutory Board meeting in April 2005 have been Anders All members of Key management, including the CEO, receive a Gustafzon (Chairman), Kjell Nordström and Marianne Samu- fi x e d salary and pension benefi ts and normal retirement age in elsson. accordance with the owner’s guidelines. The Benefi t Committee’s responsibilities are described in the The CEO is also entitled to a one-time payment equivalent Board’s Rules of Procedure. The Committee is to work with to 18 monthly salaries if the Company should terminate the issues related to benefi ts and other employments terms for CEO’s employment without grounds for dismissal. For more Key management. In 2006 the Benefi ts Committee met on information on CEO and Key management benefi ts, see Note one occasion. Committee meeting attendance is presented on 5 on page 69. page 84. Svenska Spel does not have any share or share-price related incentive schemes for the Board or Key management. CEO and Key management The CEO is Jesper Kärrbrink. His education and work experi- Auditors ence are described on page 90. The State ownership policy stipulates that the election of audi- The policies for benefi ts paid to Key management were tors for State-owned companies is always the responsibility of adopted at the latest AGM on 27 April 2006, and stipulate the owner. The actual procurement process is handled by the that: Company’s fi nance department and the Audit Committee. Procurement of auditing services will take place during the 1. The policies apply to all members of Key management fi r s t quarter of 2007. 2. Fix ed monthly salary and company car entitlement, which is There is no Nomination Committee as described in the deductible from gross salary when taken as a benefi t Code, rather the Government Offi ces administrator follows all 3. Defi ned contribution pensions as defi ned in the ownership stages in the procurement process from procurement criteria policy. The contribution is to be in reasonable proportion to to selection and evaluation. The fi nal decision is made by the the fi xed base salary with an upper limit of 30% owner at the Annual General Meeting. According to the Articles of Association, the Swedish State 4. Retirement age is 65 Audit Institution (Riksrevisionen) is entitled to appoint one or 5. There are to be no bonus and incentive schemes more auditors to participate in the audit with the other audi- tors. At the 2003 Annual General Meeting the Ernst & Young 6. Housing is not supplied AB accounting fi rm was selected for the period 2003–2007. 7. On termination by the Company, the term of notice is not to The auditor in charge has been Authorised Public Accountant, exceed 6 months Torsten Lyth (born in 1952). In addition to AB Svenska Spel, 8. On termination by the Company, severance pay may be paid Torsten Lyth also has audit assignments for Sveaskog, Handels- equivalent to not more than 18 months’ salary excluding banken and Praktikertjänst. the term of notice Ernst & Young has the competence and experience within a number of the areas critical to Svenska Spel and is also con- 9. On termination by the employee, no severence pay is to be paid. tracted to provide tax consulting services. On 3 July 2003 the State Audit Institution appointed Matters relating to benefi ts for Group management are pre- Authorised Public Accountant Lars Nordstrand (born 1954), as pared by the Board through its Benefi ts Committee. Decisions auditor and Staffan Nyström as deputy auditor. These appoint- relating to CEO benefi ts are made by the Board, while deci- ments will apply until the 2007 Annual General Meeting. Lars sions relating to benefi ts for other members of Key manage- Nordstrand also conducts audit assignments for Apoteket AB, ment are made by the CEO. Karolinska Institutet, Sveriges Television AB, Lantmäteriet and the Swedish National Courts Administration.

SVENSKA SPEL ANNUAL REPORT 2006 85 CORPORATE GOVERNANCE REPORT

Neither Torsten Lyth nor Lars Nordstrand are involved in audit Internal audit assignments for companies that would affect their independ- The Group has an internal audit department that focuses on ence as auditors for AB Svenska Spel. In 2005 the auditors such matters as reviewing and ensuring the quality of the conducted their audit based on an audit schedule established fi n a ncial information and reporting, the security of internal in consultation with the Board’s Audit Committee. control systems and compliance with rules. The internal audi- The auditors and accounting fi rm received remuneration as tor reports directly to the Board’s Audit Committee. prescribed by law for audit work and other assignments and for consulting work and other audit-related services. Ernst & Internal Control Report for 2006 Young were also paid fees for separate consulting work. Most fi n a n cial reporting of the consulting work relates to consultation on tax and This report was prepared in accordance with the Swedish accounting issues. Information about audit fees is found in Code of Corporate Governance and the guidelines issued by Note 6 on page 71. the Swedish Institute of Authorised Public Accountants and the Confederation of Swedish Enterprise, and the directions Financial reporting for application issued by the Swedish Corporate Governance The Board is responsible for the Company being organised Board on 5 December 2006. The directions state that: such that the Company’s fi nancial situation can be managed in a safe manner and that fi nancial reports, such as interim • The Board of Directors is to present an annual report on the reports and annual reports, are prepared in conformity with organisation of internal control to the extent that it applies legislation, current accounting standards and other relevant to fi nancial reporting. requirements. • The report does not need to include any statements on the The CEO Instructions specify which fi nancial reports and effectiveness of the internal control during the previous other fi nancial information are to be submitted to the Board. fi n a ncial year. Auditors’ review of the report is voluntary. The CEO is to ensure that accounting in Group companies • The report is to be included as a separate section in the complies with legislation and that assets are managed in a safe Corporate Governance Report. It should be indicated manner. whether or not the section has been reviewed by the Com- The CEO and one or more members of Key management is pany’s auditor. included in the Board of each subsidiary. The Audit Committee is responsible for preparations for the The report is thus limited to a description of how internal con- Board’s work in ensuring the quality of fi nancial reporting. The trol of fi nancial reporting is organised. Committee works in cooperation with management and the auditors to monitor and assess the handling of complex Control environment accounting issues, the choice of accounting policies and the The Rules of Procedure for the Board, CEO Instruction and effect of these on the consolidated accounts. Board committees provide clear allocation of roles and respon- Internal and external auditors are always present at Audit sibilities, to the advantage of such areas as the effective man- Committee meetings, thus enabling information to be shared agement of corporate risk. on a regular basis and for coordination between the internal The organisational structure, roles and responsibilities bro- and external auditing work as well as reviewing the Group’s ken down by objectives per division are uniformly documented risks. for the whole Group. Signifi cant policies and instructions The Audit Committee reports to the full Board of Directors regarding fi nancial reporting have been drawn up and subsequent to each meeting. adapted for the entire Group. A new and amended policy has

86 SVENSKA SPEL ANNUAL REPORT 2006 been established by Key management. Certain policies shall, Information and communication according to the guidelines, also be established by the Board. Important routines and instructions of signifi cance for fi nancial Descriptions of processes for internal control of fi nancial reporting are updated and communicated to the relevant reporting have been prepared for several key processes. Work employees on a regular basis. Financial routines for managers on tightening the control environment by preparing a compre- are available on the Company’s intranet, alongside all other hensive description of processes for fi nancial reporting was Group’s policies. The introduction of new employees involves implemented in 2006. The work routines and instructions for reviewing the Group’s policies. All employees are informed ongoing accounting work and closing the books are well doc- about new or amended policies at each quarterly information umented and detailed. meeting. Policies exist for risk management, and risk analysis is car- ried out annually at both the operational and Group level. Monitoring The Board of Directors reviews the information provided by Risk assessment and control structures management and the Audit Committee on an ongoing basis. The main and most signifi cant risk for the Group’s fi nancial The Audit Committee’s work includes ensuring that steps reporting is related to the process for accounting for game- are taken if problems arise or measures are proposed in con- related transactions. The process is very transaction intensive. nection with internal control activity and the internal and The control system that has been built up around this process external audits. An annual review is made of the application of is deemed to provide a good level of certainty and reliability in the Group’s policies. The unit responsible for a policy is also the fi nancial reporting. Risk assessment is carried out annually responsible for checking its compliance. Monitoring takes as a basis for assessing the need for changes in internal control place at the Key management meeting in January when the of fi nancial reporting. unit responsible provides a written compliance report for the The description of processes for fi nancial reporting imple- past year. This report should indicate if any signifi cant devia- mented in 2006 also includes risk assessment and the control tions have occurred. At the statutory Board meeting for AB structures established for managing risks. Svenska Spel in connection with the Annual General Meeting, A clear division of responsibility within the fi nance depart- the CEO provides a written report on the scrutiny of the ment and detailed work routines are documented for fi nancial Group’s policies for the previous year. The internal control reporting. The accounting processes are regularly evaluated process for fi nancial reporting should be reviewed and and adjusted in line with generally accepted accounting prac- updated annually. The detailed instructions/job descriptions tices, applicable laws and decrees, and other requirements are updated regularly as soon a change has occurred. that apply to the Group’s fi nancial reporting. A signifi cant number of routines were updated in 2006 as Compliance with policies and instructions that affect fi nan- part of the transition to the Company’s new gaming platform. cial reporting is checked on a regular basis and deviations are reported to the relevant manager. Monitoring and control of the company’s business and fi nancial position in relation to established goals is carried out on a regular basis.

SVENSKA SPEL ANNUAL REPORT 2006 87 Board of Directors

Anders Gustafzon. Born 1943 Karin Johansson. Born 1956 Marianne Samuelsson. Born 1945 Chairman since 2003 Director since 2003 Director since 2003 Other Board appointments: State Secretary, Ministry of Health and Governor of the County of Gotland Chairman of the Board of Bostocken AB, Social Affairs. Degree from the Graduate since 2004. director of Prenax Global AB and family School of Socíal Work and Public Adminis- Other Board appointments: companies. tration. Course in corporate management Chairman of the Executive Committee Previous positions and assignments: at IFL. of the County Administrative Board, Division Manager and Vice President Previous positions and assignments: Gotlands fornvänner and the national Föreningssparbanken Publik and Sales Director, Microsoft; Sales Manager, association Hela Människan. Alternate Lotterinämnden. France Telecom; Political Advisor, Cabinet on the Board of the National Theatre Offi ce; Sales Manager, Word Perfect and (Riksteatern). Lena Melinder. Born 1957 director of the Communications Commit- Previous positions and assignments: Director since 2004 tee, Media Concentration Committee and Member of Parliament and Spokesperson General Counsel, Boxer TV Access AB Chairman of the Board of Sveriges Radio. for the Swedish Green Party. since 2006. Master of Laws, University. Lars-Åke Lagrell. Born 1940 Kjell Nordström. Born 1949 Previous positions and assignments: Director since 2001 Director since 2001 Partner in Melinder Lundquist Advokat- Governor of the County of Kronoberg Other Board appointments byrå; General Counsel, MTG; General since 2002. University studies in Växjö. Board of Governors of the Bank of Council, TV1000; Solicitor, Grönberg Other Board appointments: Sweden, Board of Allmänna Barnhuset Advokatbyrå and Advokatfi rman Baker Chairman of the Board of the Swedish Foot- and Sätra Bruk AB. & McKenzie; Managing Director of Rally ball Association and UEFA – National Teams Previous positions and assignments: TV; and Deputy Managing Director of Committee; director of Onside TV-produc- Member of the Swedish Parliament Sonet Film. tion AB; director of Kommanditbolaget 1985-2006. Member of the boards Råsunda Stadion; and Vice Chairman of the of Atlas Copco AB, the National Debt Bertil Sandström. Born 1948 Swedish Sports Confederation. Offi ce and Chairman of the Swedish Employee representative since 1988. Previous positions and assignments: Metal Workers’ Union, Division 28. Manager Corporate Sales since 1997. Executive Chairman of the Board, Swedish MA from Stockholm University. Football Association; Managing Director, Sabina Lindqvist. Born 1979 Previous positions and assignments: Ecco Finishing; PR Director Sparbanksgrup- Employee representative since 2005 Product Manager, Project Manager, pen AB; and director of the Småland Foot- Dealer Gaming, Casino Cosmopol in Advertising Manager, Svenska Spel and ball Association, Swedish Handball Federa- Stockholm. Chairman of the HTF Club since 1998. tion and Östers IF

Håkan Bergström. Born 1956 Employee representative since 2003 Service technician Jack Vegas technology since 1997. Previous positions and assignments: Service technician, International Equip- ment; Service technician, Agfa Geavert. Alternates

Anders Andersson. Born 1954 Britta Höglund. Born 1948 Elin Sundin. Born 1979 Employee representative (alternate) Employee representative (alternate) Employee representative (alternate) since 2005. since 2003. since 2005. System developer and system architect since System developer since 1988. Inspector Dealer Casino Cosmopol since 1996. Studies in mathematics and statistics Studies in systems science at Örebro 2001. (140 credits) at Uppsala University. University. Previous positions and assignments: System technician, Postgirot and Tipstjänst.

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SVENSKA SPEL ANNUAL REPORT 2006 89 Key management

Jesper Kärrbrink. Born 1964 Bengt Palmgren. Born 1952 Anders Hägg. Born 1950 CEO Chief Legal Counsel Chief Financial Offi cer Employed 2004. Employed 2000. Employed 1994. Board appointments: Previous positions and assignments: Previous positions and assignments: Director of Trångsviksbolaget AB and Company Solicitor, Akza Nobel 1997– Controller, Svenska Spel 1994–2005; IQube AB 2000; Corporate Solicitor, SwedenPost Controller, Swedish Armed Forces, Previous positions and assignments: 1990–1997; Chief Legal Offi cer Banco Fin- Gotland Military Commando and i Partner IT-Provider 2000–2004; Managing ans 1983–1989. nternal consultant for the Swedish Director, Bonnier Interaktiv and Bonnier Education: Armed Forces 1975–1994. Veckotidningar 1998–1999; Managing Master of Laws, Stockholm University. Education: Director, Metro International 1997; Studies in business administration (120 Managing Director, Östersundsposten Anders Granvald. Born 1960 credits) at Linköping University. 1993–1996; Managing Director FrontPage AB 1989-1993. IT Director Education: Employed 2003. Andreas Jansson. Born 1972 Studies in business administration Previous positions and assignments: Director of Corporate Communications (80 credits) at Örebro University. Operations Manager, Svenska Spel Employed 1999. 2003–2005; Managing Director, Previous positions and assignments: Eva Wetterdal. Born 1958 Capital C 1998–2003; Project Manager, Head of Public Relations, Svenska Spel Alfred Berg Fondkommission 1994–1998; Human Resources Director 2000–2005; Public Relations Offi cer Project Manager, UNUM Life Insurance Svenska Spel 1999–2000; Education Employed 2000. 1991–1994. Previous positions and assignments: 1997–1999; Allmänna Idrottsklubben Education: 1992–1997. Personnel Manager, Svenska Spel BSc Computer Science, Umeå University. 2000–2005; consultant, Synergica Education: BA, Stockholm University. 1996–2000; internal consultant and Håkan Sjöstrand. Born 1966 manager, Gotland Municipality 1983–1996. Acting Divisional Director – Retail Sales Mathias Hedlund. Born 1970 Education: Employed 1998. Divisional Director – Direct Sales MA in Sociology from the University of Previous positions and assignments: Employed 1997. Gothenburg and stage one in psychother- Business Area Manager–Retail Outlet Previous positions and assignments: apy education. Svenska Spel 2005–2006; Chief of Strategy and Business Intelligence Sales Manager–Retail Outlet Svenska 2004–2005; Head of Strategic Planning Annica Axelsson. Born 1970 Spel 2003–2005; Establishment Manager Svenska Spel 2003–2004; Head of Strate- Svenska Spel 2001–2003; Key Account Divisional Director – Retail Sales gic Business Coordination Svenska Spel Manager Svenska Spel 1998–2001; ICA 2001–2003; Division Manager Svenska Spel (parental leave 2007). Handlarnas AB 1994–1998; Employed 1999. 1999–2002, Marketing Manager Svenska Länsförsäkringar 1989–1993. Spel 1997–1998; Project Manager, Golden Previous positions and assignments: Education: Vice President Games of Chance, Svenska Casket 1996–1997; Tipstjänst 1991–1996. Degree in Marketing Management and Education Spel 2002–2005; Marketing Manager Master of Organisational Leadership. Number Games, Svenska Spel 2000–2002; Studies in business administration Product Group Manager, Svenska Spel (155 credits) at Stockholm University. 1999–2000; Brand Manager Coca-Cola 1996–1998; Market Analyst and Trainee, Coca-Cola 1995–1996. Education: BA business administration, Falu-Borlänge University and MBA, University of Colo- rado.

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SVENSKA SPEL ANNUAL REPORT 2006 91 CHAIRMAN’S STATEMENT

Yet another successful year for Svenska Spel

2006 was a fantastic year for Svenska Spel: an exciting year We’re also seeing with many sporting highlights, a winning year with 243 new a growing interna- millionaires, and a historic year for us in terms of profi t. The tional interest in efforts of our employees – their creativity in designing new partnering with games and lotteries and supporting the rationalisation process Svenska Spel. – in combination with the growth in internet gaming, has There are however resulted in record profi t of SEK 4,807 million. a number of storm How the profi t generated by Svenska Spel is to be allocated clouds on the Swed- will be determined by the Swedish Parliament. A sizeable ish gaming market. amount will go to sporting organisations for children and The estimated youth and to other youth associations, with the amount number of illegal increasing this year to SEK 1,370 million. VLTs is increasing as Svenska Spel’s mandate is to meet Swedish demand for is marketing by inter- gaming and lotteries in a responsible and safe manner; gam- national operators in ing in moderation is a form of entertainment and recre ation defi ance of Swedish that appeals to many. legislation. Interna- Our eventual launch of internet poker was within our man- tional companies continue to increase their advertising despite date, and included gaming limits on the amount of money and a number of c onvictions. We believe the efforts of our judicial time people could spend. Despite international internet opera- authorities are inadequate as is the punishment scale for viola- tors signifi cantly increasing their marketing spend to almost tions of the Lotteries Act. Where the profi t opportunities are SEK 700 million, Svenska Spel has managed to channel some seen to outweigh the consequences it is considered worth 30% of poker players back to the regulated market without defying the legislation. any TV or similar advertising. This is a good example of how we We await new gaming legislation. Regardless of the posi- can provide hundreds of thousands of internet poker players tion taken by the Swedish Government and the Swedish Parlia- with a safer and more secure game in a regulated gaming ment on new gaming legislation, Swedish operators must have market under the auspices of the community. Our research the same regulations for internet gaming as their international before launching internet poker showed that internet-based counterparts. If Sweden continues to have a regulated gaming gaming was a cause of gaming addiction. In this light we are market, restrictions would need to be introduced on aspects very pleased to note how few calls have been received by the such as payments to and from unregulated companies as prac- national support line for gaming addiction (eight calls, to be tised by the US, France, the Netherlands, Hungary and a precise) from players with problems caused by Svenska Spel’s number of other countries. The alternative is to completely poker. We see this as very encouraging evidence of what can remove the restrictions on Swedish gaming operators so they be achieved through effective responsible gaming measures. can compete with international operators on a level playing Responsible gaming is one of the cornerstones of our man- fi e l d. Clearly this would have serious social implications includ- date and this naturally makes it one of our most important ing far more gaming addiction – something which Sweden strategies. We are therefore very proud to have been ranked would have to bear the cost of. fi r s t this year in terms of responsible gaming by the World Lottery Association. I am convinced that our approach to responsible gaming is one of the main reasons the general Anders Gustafzon public’s confi dence in Svenska Spel has grown during the year. Chairman of the Board, Svenska Spel

92 SVENSKA SPEL ANNUAL REPORT 2006 Two 20-year anniversaries in 2006

Triss and Oddset were both introduced in 1986 and are today amongst the most popular games on the market, with annual sales over the SEK billion mark.

Triss – Sweden’s most popular lottery When the Triss lottery was launched on 29 September 1986 it was priced at SEK 20, with the biggest prize being SEK 100,000. Triss sales grew from SEK 360 million in 1986 to some SEK 1,500 mil- lion in 1990. The price was increased to SEK 25 in 1992. Sales really gained momentum in 1994 when the “TV scratch” was introduced and the winner could scratch up winnings of between SEK 50,000 and SEK 5,000,000. Månadsklöver was launched on 17 October 1997 and multiple prizes introduced in 2002. To mark the 20-year anniversary in 2006, the luxury Jubileum package was launched at a price of SEK 250 per lottery ticket.

Oddset – the world’s fi rst online betting Oddset was introduced on 27 October 1986 as the world’s fi rst online betting game, and by 1990 its sales had surpassed the SEK 1 billion mark. In 2000, Lången was launched on svenskaspel.se and in 2001, the Oddset range was expanded with the Bomben game. Mixen was added in 2004, and in 2006 Oddset achieved record sales of more than SEK 2 billion. The 20-year anniversary of Oddset in 2006 coincided with Bomben players for the fi rst time being able to bet on three ice hockey matches. An event which gave the highest odds of all time: 2,043,523.50.

Solberg Printing: Strokirk-Landström • Photography: Olof Holdar, Peter Orevi, Bildbyrån i Hässleholm and others • Translation: Jenny Harlen Marketstrat S V E N S K A

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SE-621 80 Visby, Sweden 6

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Visiting address: Norra Hansegatan 17, N

E L C Visby, Gotland I T R A Tel. +46 498 26 35 00

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Customer Service +46 770-11 11 11 www.svenskaspel.se