Metro International S.A. Annual Report 2010 Annual Report 2010

llustrator: Cecilia Lundgren Cecilia I llustrator:

Table of contents This is Metro 3 Introduction 3 Our business 4 Our target audience 7 Financial summary 9 CEO statement 10 Operational Review 11 The Metro Share and shareholders 16

Corporate governance 17 The Company 17 Annual General Meeting 17 The 2010 Annual General Meeting 17 Nomination Committee 17 Board of Directors 17 The Board’s responsibility and work during 2010 19 Remuneration Committee 19 Audit Committee 20 Remuneration of the Board 20 Evaluation of the Board 20 Executive Management 21 External auditors 22 Internal control 22 Control environment 22 Risk assessment 22 Control activities 23 Information and communication 23 Monitoring 23

Directors’ report 24

Management responsibility statement 25

Independent auditors’ report 26

Financial statements 27 Consolidated statement of comprehensive income 27 Consolidated statement of financial position 28 Consolidated statement of changes in equity 29 Consolidated statement of cash flows 30 Notes 31

Contact details 58

For more information, please visit www.metro.lu

Financial Calendar 2011 03 February 2011 Fourth Quarter Results 2010 15 April 2011 First Quarter Results 2011 26 May 2011 Annual General Meeting 18 July 2011 Second Quarter Results 2011 17 October 2011 Third Quarter Results 2011

2 Introduction Annual Report 2010

Investment Highlights

Growing global advertising market

Track record Market leader of emerging and strong brand markets expansion

Attractive reader demo- Vehicle for graphics expansion into new media

Continuing urbanization

OUR MISSION Our Vision We are the world’s largest newspaper, we We want to become the most successful inform and entertain in a smart and effec- media company and the first choice for tive way: on-line and off-line. urban people and global brands. Our Strategy for Growth Our Financial Targets Geographical expansion in Latin America, Positive group EBIT development year-on- Asia and Russia. Consolidation in mature year. 15 percent EBIT margin in existing markets. Further investments in online operations by 2012. Double digit Group products and development of other brand EBIT margin by 2012. extensions.

3 Our business Annual Report 2010

WORLD AMERICAS EUROPE ASIA

Countries 20 Countries 7 Countries 11 Countries 2 Editions 62 Editions 22 Editions 37 Editions 3 Cities 127 Cities 35 Cities 86 Cities 6 Circulation 8,000,000 Circulation 2,200,000 Circulation 4,800,000 Circulation 1,000,000 Readership 16,900,000 Readership 4,200,000 Readership 11,300,000 Readership 1,400,000

Metro’s revenue comes from advertising. Our clients range from global brand advertisers with creative multi-market advertising Free daily newspapers campaigns, to small local businesses. Advertisers spend their money with us because we have the most efficient vehicle to deliver their messages to the target audience. free daily newspaper titles are We compete with other communication channels including on- published in 53 countries line, TV, outdoor, sponsorships, mobile, other print titles – not only across the world for advertising budgets but also for media consumer’s time and attention.

The Metro newspaper is consumed at a unique time for media consumption, the 20 minute morning commute; we call it “the Metro moment”. Metro has revolutionized the print media industry with its smart format, unique distribution and ability to attract a large, hard-to-reach young, active, urban audience. copies of free daily newspapers are distributed every day across the world Thereby Metro differs from paid for newspapers which typically have older readers. Paid for newspapers struggle with declining circulation. Free daily newspapers experience no difficulty in attract- ing young readers with the number of readers per copy going up.

Today free daily newspapers are published in virtually every major metropolis around the world; their circulation has more than dou- of total worldwide daily bled in the past 5 years. One out of five newspapers published in increase in free daily newspaper circulation is free Europe are free, 35 million copies a day are published world-wide. newspaper circulation over the past 5 years The Metro moment is challenged by mobiles and tablets. To re- (2005–10) main the most relevant media for our readers, we are investing in the newspaper. A new design, unique original content, world leader interviews, global editions dedicated to special causes and daily newspaper partnerships, will take us from ”nice to read” to ”need to read”. copy is free in Europe We also invest in online and mobile products to extend the Metro moment throughout the day. We do this by building strong verticals in areas in which we already have a strong position in print, such as recruitment and travelling.

In 2010 we celebrated the 15th anniversary of the free daily newspaper. The reason behind the success of free daily newspapers is the ability to constantly innovate and adapt to the needs of the 21st century consumer.

We will stay loyal to our low-cost DNA and entrepreneurial spirit. of free daily newspaper of free daily newspaper This will enable us to continue to improve the financial perform- circulation in the world circulation in the world ance while also investing in existing and new markets, online and is provided by Metro is provided by Metro and offline. commercial partners

Metro reaches most affluent readers in Europe of all medias.

4 Our business Annual Report 2010

There are things only the world’s largest newspaper can do

Exclusive interviews with film stars, celebrities, musicians; sitting down with heads of state and politicians; in-depth reporting; partnerships with global brands like CNN.

Global campaigns: Green Met- ro, Happy Metro, Cool Metro, Kids Metro, and many more.

Weekly sections: travel, fitness & wellbeing, style, eco-living and automotive segments, food.

Metro World News

Some things, only the world’s largest global newspaper can do. Metro World News operates along two lines: the collection and While other media owners are closing foreign and domestic bu- distribution ofportable locally generated content; and central pro- reaus, reducing staff, strengthening their reliance on wire and pool duction of original, exclusive content. This content is published in reporting, and generally tightening their belts, we do the opposite: all Metros, and reaches 37 million readers every week. investing in our product. Our strategy is to invest in increasing the What others charge for, we provide for free. Where others re- quality of our newspapers with exclusive content, revitalize our duce, we invest. Where others stagnate, we innovate. There really presentation and revolutionize our brand perception. are some things only Metro can do.

Online

Metro’s online properties make available new ways to interact with urban people on the move in metropolitan areas across the plan- et. Metro reaches over 10 million unique users in digital channels every month with content and services specifically tailored to them. We inform, entertain and engage people in conversation regard- less of means of access as they progress through their day.

In 2010, the online team provided the most flexible and powerful catalogue of advertising solutions in our 15 year history – rich media takeovers, sponsored custom solutions, integrated advertorials and cutting edge mobile advertising. Add the opportunity to com- bine with our print solutions and there is, quite simply, no match.

You’ll this.

DOWNLOAD THE NEW METRO APP FOR YOUR BLACKBERRY, iPHONE AND iPAD. FREE from the Blackberry App World and the App Store. Our business Annual Report 2010

There are things only the world’s largest newspaper can do

Creative advertising The team delivers a unique centralized solution to interna- Ordinary newspapers simply sell space. At Metro, we take a tional advertisers needs. Hyundai, Aviva and Sex and the City proactive approach that offers advertisers much more, both in 2 are examples of global advertisers which the Global Sales terms of service and results. Our award-winning Global Sales team delivered big campaigns for in 2010. The latter one ran team can provide the expertise to deliver truly international in five markets: France, Italy, Spain, Russia and UK and resulted marketing. Working across each of the 20 Metro countries, in a 100% ad recall, 47% intention to purchase tickets, 48% the Global Sales team drives and coordinates international visits the campaign microsite and 70% enters the campaign campaigns. competition.

Global events Metro Photo Challenge is one of the world’s largest global pho- to competitions. It offers tremendous exposure in publishing the winning images in Metro publications worldwide, reaching over 40 million urbanities in the world. The 2010 edition, which was the third globally, ran in 17 Metro territories. Nigel Barker, fashion photographer and judge on the show “America’s Next Top Model”, chaired the jury panel. The competition attracted 157,000 photo entries and 415,000 unique visitors to the of- ficial website with 7 million pageviews. Its truly international scale and uniqueness in reaching urban audiences have attracted sponsors such as Canon, Fuji, Nikon and Adobe.

6 Our target AUDIENCE Annual Report 2010

Our target audience The Metropolitans

Until quite recently, humans were still predominantly rural dwell- ers. At the beginning of the last century only 1 in 10 humans were living in cities. Today, 1 in 2 people on earth live in cities. As the urban lifestyle becomes the norm, a shared mindset is emerging and it has little to do with nationality. We call it the Metropolitan 70% lifestyle. have a laptop 43% The constant melding of cultures, ideas, races at every level in have a the modern city produces the common Metropolitan mindset: in- smart novative, creative, excited by new challenges. phone It is a matter of lifestyle: Metropolitans likes to be close to eve- rything they need. The Chinese supermarket, the arty cinema, the French café, the all-night pharmacy – all kinds of things you would not find in smaller towns because there is no market for it. For the affluent Metropolitans in the Western world and the growing urban middle-class in emerging markets, increased financial security means they can move up in the hierarchy of needs towards more post-materialistic values. It is not just the money you make; it is how you use it to fulfil your own potential. 40% The emergence of this key global target group has profound goes to the cinema at least implications for employers, politicians and advertisers alike. Met- once a month ropolitans are at the cutting edge, they decide the new trends to follow, they influence the future. No one knows the Metropolitans better than us. Listen and talk to the Metropolitans with Metro! 42% 91% are interested in travelling Metro is no1 with and visiting new places are willing to pay more Metropolitans to get environmentally friendly products Metro reaches more Metropolitans than any other media 60% always keep their eyes Source: NRS (2010), EMS (2010) open on new job 55% opportunities exercise at least once a week

56% 49% use social media are interested at least once a in fashion week

Source: Metropolitan Report (2011)

7 morrispinewood.se Annual Report 2010

The World’s Largest International Newspaper.

fullpage_254x370.indd 1 8 2/14/11 2:23 PM Financial Summary Annual Report 2010

Financial Summary

€’000 FY 2010 FY 2009

Net revenue 222,469 220,232 EBIT 12,070 (20,026) Net profit/(loss) 3,960 (21,650)

2010 highlights

Canada and Sweden have been Canada surpasses Sweden as Metro and the modern free news- the best performers in the Group, Metro’s largest operation paper industry celebrates 15 years improving EBIT by over €7 million each in 2010

Advertising markets were still sluggish in France, Advertising markets in 2010 Holland and Denmark grew by double digits in Sweden, Russia, Canada and Latin America Metro divests shares in South Korea and Greece Metro becomes the biggest newspaper in Russia and Chile and totals 17 million daily readers around the world Metro restructures Headquarter management

Metro expands in Latin America by increasing its stake in Mexico and SubTV Chile, and by launching a new edition in Guatemala and further editions in Brazil

9 CEO Statement Annual Report 2010

Metro’s turnaround continued in 2010

Metro’s turnaround continued in 2010. The full year operating tunities in Latin America and Asia, where we have a good track profit was €12 million, a considerable improvement from the loss record and strong local management. Cautious investments in new of €20 million in 2009. Better results can largely be explained by operations in these regions will be an important component in our stronger operational performance in most of Metro’s markets and strategy to secure future growth. divestments of loss-making operations. All subsidiaries except France were profitable in 2010, where some costly investments Equally important for long term growth is the development of new were made to protect our position on the free newspaper market. revenue streams in existing markets from online and mobile prod- Better performance from the Group has reduced the need for op- ucts. It is a most exciting time in the media industry with online erational support from Headquarters, allowing for downsizing of content exploding with apps, social media, web TV and so on. How- Headquarters in 2011. ever, advertising revenue in these new media is still very low and media owners struggle to find profitable business models. With Operational performance our history of innovation I am convinced we have a big advantage, 2010 passes into history as the year when advertising markets re- namely that the new products target people who are already Metro turned to growth after the financial crises. For Metro, advertising readers; the young, affluent metropolitans. We can thereby explore sales grew by double digits in Sweden, Canada, Russia and Latin verticals in which we are already strong in print, whereas other America, notably some of which are mature markets where Metro newspapers often have to capture new younger readers who have already enjoys a strong position and where internet penetration is no relationship to their brand. high. Advertising markets in the rest of Europe, however, remained sluggish with sales in France, Holland and Denmark still declining. We reiterate our 2012 targets set out in Q3 2010: EBIT growth year- Based on the trend we witnessed towards the end of the year, we on-year, above 15 percent EBIT margin in operations and double are cautiously optimistic that Europe will follow the rest of the digit EBIT margin for the Group. Targets are high and in order to world in 2011. reach them it is crucial that we stay cost conscious in operations and lower Headquarter cost. Canada became the biggest Metro market in terms of sales and profits. It is encouraging to see other markets catching up with We still execute on the path set in the end of 2009 and con- Sweden, confirming the Metro concept as successful elsewhere as tinue to work on the turnaround. There are no short it has been in its home market since the launch of the first Metro cuts; we expect continuous improvements from newspaper in Stockholm in 1995. I am also pleased to see how well our markets, quarter by quarter. We work hard the Metro model works in Russia, where Metro became the largest to create the most relevant newspaper to our newspaper in the country with its two profitable editions in Mos- readers every day and to serve our clients with cow and St Petersburg. the most attractive target audience and creative advertising solutions. We remain commit- Latin America continues to grow in importance to Metro. During ted to the task and loyal to our vision of becom- the year we continued to invest in this region by increasing our ing the most successful media company and stake in Mexico and SubTV Chile, new editions in Brazil, by far the the first choice for urban people and global largest Latin American market, and the launch of Metro Guatemala. brands. Chile and Mexico now represent 13 percent of total revenues, and Brazil, Ecuador and Guatemala are all promising growth markets. To summarize, what will determine There are also interesting opportunities to develop revenues out- our success the coming years, besides side the printed newspaper in Latin America. For example in Chile, the growth in advertising markets, is: 30 percent of revenues come from products other than the newspaper. 1. Continued improvements of operational performance Expectations for the future 2. Zero tolerance towards loss- makers Metro is in a different position today compared with a few years 3. Our ability to develop the ago. Unprofitable operations have been sold or closed. Operations online business in the current portfolio are well positioned for the years ahead. Looking forward we expect growth in advertising markets to con- Per Mikael Jensen tinue in the coming years, albeit more moderately. We also expect President and CEO advertising markets in Denmark and Holland to pick up in 2011. In France, the intensified competition in the free newspaper market is expected to continue into 2011 and the outlook for France is therefore more uncertain.

Sales from emerging markets will become a larger propotion of Metro’s revenues. We will continue to explore investment oppor-

10 Operational Review Annual Report 2010

Operational Review

SWEDEN

€’000 FY 2010 FY 2009 Net revenue 66,962 53,064 EBIT 11,415 4,431 EBIT margin 17% 8%

Metro Sweden publishes four daily editions; Stockholm, Gothen- structure. Metro Sweden’s profit margin of 17 percent is the highest burg, Malmö and a National Edition. To reach the most attractive amongst major dailies in Sweden. target audience, circulation in the largest cities has been increased, whereas circulation in the smaller cities has been reduced in 2010. During the year, investments were made in developing the online offering, with focus on the three verticals recruitment, education With 1.5 million daily readers, Metro is the biggest newspaper in and fashion. Metrojobb.se became the biggest recruitment site in Sweden. In January 2011, Metro took over the position as the most Sweden in terms of number of jobs. The site is profitable and grow- read newspaper also in Stockholm. ing. Allastudier.se, where people can find information about all kinds of education, a market worth €10 million, was rebranded and In 2010, advertising markets in Sweden were amongst the strong- the amount of editorial content increased. A new fashion portal est in Europe. According to ZenithOptimedia, the Swedish newspa- was also launched, with content from star bloggers. Content from per market increased by 9 percent in 2010. Metro Sweden had sales all sites is also used in print to drive traffic. growth of 13 percent for the full year in local currency. Metro owns 65 percent of Metro Sweden. The remaining shares are Metro Sweden reported a full year EBIT profit of €11.4 million. Re- owned by the Schibsted Group. sults improvements were sales driven with a close to flat fixed cost

DENMARK

€’000 FY 2010 FY 2009 Net revenue 26,267 28,444 EBIT 749 (692) EBIT margin 3% (2%)

Metro has two brands in Denmark; MetroXpress and 24Timer. Each The full year EBIT profit was €0.7 million, an encouraging improve- brand publishes two editions; a West and an East edition. With 0.4 ment compared to the €0.7 EBIT loss in 2009. The main reason for million daily readers, MetroXpress is Denmark’s biggest newspa- the EBIT improvement is the full year impact of cost saving meas- per. In 2010, 24Timer took over the position as the fourth biggest ures implemented in late 2009. newspaper. To save costs, the average circulation for the year was 15 percent According to ZenithOptimedia, the total Danish advertising market lower than last year. As the advertising market began to show stopped declining in 2010. However, the newspaper market contin- signs of recovery in late 2010, Metro Denmark implemented a ued to decrease by 5 percent. Towards the end of the year, market growth plan. The first part of the growth plan included a circula- sentiment also in the newspaper industry was cautiously becoming tion increase of 20,000 copies for 24Timer. The second part of the more optimistic. growth plan will include increased circulation of 24Timer as well as MetroXpress. Metro Denmark received a €5.0 million (€4.6 million) government distribution subsidy in 2010. Including the subsidy, full year net On the digital side, investments were made in SaveMyDay, Metro’s revenue in local currency decreased by 8 percent. Excluding the daily deals business. SaveMyDay is showing steady growth and subsidy, full year revenue decreased by 11 percent. promising profit potential.

Amongst the underperforming segments were government and Metro has a 51 precent ownership in Denmark. JP Politiken and A automotive. Financial services and telecom showed positive devel- Pressen each hold a 24,5 percent participation. opment.

11 Operational Review Annual Report 2010

Operational Review

THE NETHERLANDS

€’000 FY 2010 FY 2009 Net revenue 24,797 28,057 EBIT 3,661 3,733 EBIT margin 15% 13%

Metro Netherlands publishes three daily editions; Amsterdam, Rot- year-on-year. The full year EBIT profit was €3.6 million, a minor de- terdam and a National Edition. Since December 2010, a weekly edi- crease from last years’ EBIT profit of €3.7 million. tion is distributed in The Hague. The negative trend in the recruitment segment remained during With 1.7 million daily readers, Metro is the most read newspaper the year. The recruitment segment is the primary explanation for among 20 - 49 year olds. Metro maintains its position as the second the decline in sales. Segments showing some growth were telecom most read newspaper in the country. and retail.

The advertising market in the Netherlands was up by 1 percent in During the summer Metro’s online news site was redesigned and 2010, but the newspaper advertising market was down by 3 per- restructured, and the number of unique visitors has since increased. cent. Metro owns 100 percent of Metro Netherlands. Metro’s full year sales in local currency decreased by 12 percent

FRANCE

€’000 FY 2010 FY 2009 Net revenue 31,991 34,353 EBIT (1,202) 97 EBIT margin (4%) 0%

Metro France publishes 9 editions and covers 15 major cities. To costs have increased as a result of increased circulation, the expan- strengthen the national coverage, this year Metro launched in Tou- sion into three new cities and editorial investments. lon, Nancy and Metz. Metro also increased its distribution in Paris with 60.000 more daily copies in an attempt to become the largest In February 2010, Metro Reporter was launched. Metro Reporter newspaper in Paris. is a website where people can upload and sell photos. In Septem- ber, The Metro Poker Tour, Metro’s in-house poker platform, was With its 2.4 million daily readers, Metro is the second most read relaunched together with Bwin. newspaper in France and the third most read newspaper in Paris. Metro France’s digital audience grew by 50 percent year-on- The advertising market increased by 4 percent in 2010, whereas the year. Metro also launched an Android and iPhone app. The app newspaper advertising market decreased by 3 percent. was downloaded 170.000 times in the first three months and has monthly page views of approximately 2.5 million. The Metro France Metro’s full year local currency sales in France were down by 7 per- app has been on Apple’s iTunes top list in France for several weeks. cent. Full year EBIT result was a loss of €1.2 million, compared to a small profit in 2009. The main explanation for the poor perform- Metro owns 65,7 percent of Metro France. The remaining stake is ance in France is intensified competition among free newspapers. held by TF1, the leading broadcasting company in France. Advertising rates are under pressure at the same time as Metro’s

12 Operational Review Annual Report 2010

Operational Review

RUSSIA (ST PETERSBURG)

€’000 FY 2010 FY 2009 Net revenue 9,870 3,836 EBIT 2,879 937 EBIT margin 29% 24%

Metro has 0.7 milion readers in St Petersburg and 0.9 million read- Metro St Petersburg made a full year EBIT profit of €2.8 million. The ers in Moscow. Adding the two titles together, Metro is the biggest 29 percent EBIT margin is the highest in the Group. newspaper in Russia. During the year, investments were made in rebranding MetroTV, In 2010, advertising markets in Russia were amongst the strongest Metro St Petersburg’s weekly TV guide. The guide received a re- in the world. According to ZenithOptimedia, the Russian print ad- design as well as a new focus on editorial content. Metro Music vertising market grew by 21 percent year-on-year. Challenge, St Petersburg’s yearly music contest, was successful and profitable. Metro is the winner in an expanding advertising market in St Pe- tersburg. Metro has over 20 percent market share of the total print Metro owns 58,5 percent of Metro St Petersburg. advertising market, an increase of 5 percent year-on-year. Retail, food and financial services were three of the strong performing segments.

HUNGARY

€’000 FY 2010 FY 2009 Net revenue 7,710 7,598 EBIT 145 (1,331) EBIT margin 2% (18%)

Metro Hungary or “Metropol” as the local paper is called, publishes Retail was a strong performing segment, whereas automotive was two daily editions; Budapest and a National Edition. weak. Metropol published a number of special editions and execut- ed two online auctions. Metropol is Hungary’s largest newspaper by circulation. This year, its daily readership increased by 118,000, to 560,000. After a weak 2009, Metro Hungary restructured its operation, es- pecially in terms of costs. Contracts were renegotiated, headcount The total Hungarian advertising market was down by 4 percent in decreased and the smaller newspaper format “Half-Berliner” was 2010 according to ZenithOptimedia, but is expected to grow by implemented. 2 percent in 2011. The Hungarian newspaper advertising market, which was down by 5 percent in 2010, is forecast to be down by 2 Metro owns 100 precent of Metro Hungary. We have entered into percent in 2011. a commercial partnership with the leading publisher in Hungary Axel Springer. Metro Hungary’s full year local currency sales were flat year-on- year. Full year EBIT 2010 improved by €1.5 million year-on-year as a result of 18 percent lower costs.

13 Operational Review Annual Report 2010

Operational Review

HONG KONG

€’000 FY 2010 FY 2009 Net revenue 22,371 19,577 EBIT 3,746 2,917 EBIT margin 17% 15%

With its 0.7 million readers, Metro is the fifth largest newspaper in distributed at a greater number of stations. Due to the higher costs Hong Kong. related to the increase in circulation, the profit margin for the year was restrained. In 2010, both the overall advertising market and the newspaper advertising market were up 3 percent, which puts Metro ahead of In 2010, Metro partnered with the advertising firm Universal Mc- the market’s performance. Cann to launch “Future Daily”, an innovative marketing campaign. The campaign was well received from both readers and advertis- In Hong Kong, full year local currency sales increased by 11 percent ers and won a total of 18 media awards. An award was also given in 2010. The sales increase in Hong Kong was primarily driven by Metro Hong Kong from the Green Council as recognition for long higher prices. Strong performing segments were telecoms and fi- term “Go Green” commitment. nancial services, whereas education and travel declined. MetroBox, originally Metro’s bi-weekly lifestyle magazine, was suc- The full year EBIT profit was €3.7 million, an improvement of €0.8 cessfully relaunched in 2010 as a monthly magazine focusing on million compared to 2009. business and finance. The magazine has been rewarded a distribution right along the Airport Express Stations from the operator MTR In late 2010, the subway distribution contract was renewed for an- Corporation. other 3 years and will continue to provide Metro Hong Kong with the exclusive right to distribute in the subway. According to the Metro owns 100 percent of Metro Hong Kong. terms of the agreement, a higher number of copies need to be

CHILE

€’000 FY 2010 FY 2009 Net revenue 13,500 9,903 EBIT 1,766 1,332 EBIT margin 13% 13%

Metro Chile, or “Publimetro” as the paper is called in most of the provement by €0.4 million compared to 2009. Latin America countries, has one National Edition. In early 2010, Chile was hit by a severe earthquake. Sales was ef- With its 0.4 million daily readers, Publimetro is now the most read fected in Q1, but the drop was recovered during the year. newspaper in Chile. Zona Inmobiliara, a multimedia package for the real estate seg- According to ZenithOptimedia , the Chilean advertising market was ment was aquired during the year, and achieved a 20 percent EBIT up by 2 percent year-on-year. The newspaper advertising market margin. Investments were also made in a new updated version of was, however, down by 1 percent. Publimetro outperformed the the website. market. Metro owns 100 percent of Metro Chile. Publimetro Chile had a strong year with local currency sales growth of 17 percent. Full year EBIT profit in Chile was €1.8 million, an im-

14 Operational Review Annual Report 2010

Operational Review

MEXICO

€’000 FY 2010 FY 2009 Net revenue 4,381 - EBIT 1,004 - EBIT margin 23% -

Metro Mexico publishes two editions; Mexico City and Monterrey, Publimetro’s online site was launched in 2009 and has large growth under the brand name Publimetro. Publimetro is the largest news- potential. PubliSport, Publimetro’s sport magazine, originally paper in Mexico City by circulation and has 0.4 million daily read- launched as a brand extension, was re-launched during the year ers. relaunched as a sport supplement in Publimetro. The relaunch has proven PubliSport to be more profitable as a supplement than as According to ZenithOptimedia advertising markets in Mexico grew its own magazine. by 7 percent in 2010. The newspaper advertising market was down by 2 percent. Publimetro outperformed the newspaper advertising Since July 2010, Metro owns 72,5 percent of Metro Mexico and it market. Segments with good performance included retail, financial has been consolidated since. services and education, whereas food, real estate and pharmaceu- ticals declined.

ASSOCIATED COMPANIES Associated companies are operations where Metro holds a significant but not controlling interest. The associated companies continue to record impressive sales growth. €’000 FY 2010 FY 2009 Canada increased local currency sales by 22 percent in 2010, there- Net profit/(loss) 2,591 1,386 by overtaking Sweden as Metro’s largest operation in terms of sales. This is a result of Metro’s national reach, fast growing readership and market growth. Local currency sales in Brazil grew by 32 percent year-on-year. Net revenue €’000 FY 2010 FY 2009 Growth was driven by higher sales in Sao Paulo and by the launch of three new editions. Canada 71,191 50,597 Metro’s stake in South Korea was divested in December 2010 to South Korea 21,476 15,538 two of its partners. A franchise agreement was signed which Brazil 17,770 11,307 entitles Metro to franchise fees going forward, based on a percent- Mexico* 7,486 8,033 age of Metro Korea’s sales. Czech Republic 8,764 8,885 This year, Metro acquired controlling interest in SubTV and Metro SubTV* 2,236 2,269 Mexico. Total 128,924 96,629

*Numbers are until the date of acquisition

HEADQUARTERS Revenue recorded at headquarters consists of franchise fees from South Korea, Moscow, Brazil, Ecuador, Italy and Finland, and commission on global advertising campaigns. €’000 FY 2010 FY 2009 Headquarter costs in 2010 were €22.6 million, which is an increase Revenue 5,275 3,987 of €3.4 million over 2009. Costs for the Latin American expansion Shared Services (8,743) (6,655) and investments in online are the main explanations for the in- Management & Administration (10,720) (9,902) crease in cost. Central Online (3,176) (2,673) Cost (22,639) (19,230)

15 Share and Shareholders Annual Report 2010

The Metro Share and Shareholders

Metro International S.A. shares are listed on Nasdaq OMX Stock- Share Price Performance in 2010 (SEK) holm’s Small Cap list through Swedish Depository Receipts (“SDRs”) under the symbols MTROA and MTROB. Metro is a spin-off from 2 MTG and was separately listed in 2000. Metro’s market capitalization, at the close of trading on Nasdaq 1,5 OMX Stockholm on the last business day of 2010, was €67 million. On a fully diluted basis, assuming that all warrants issued by Metro 1 will be exercised, and taking into account shares to be delivered 0,5 by Metro to management and Board members, which have not yet been issued, the market capitalization is €233 million. 0 10-01-01 10-03-31 10-06-30 10-09-30 10-12-31 Share Capital A share B share Debenture Warrant As of 31 December 2010, the total number of shares outstanding amounted to 528,009,231, of which 264,483,532 were Class A shares and 263,525,699 were Class B shares. Ownership Structure by number of shares A shares carry one vote while B shares carry no votes. B shares are entitled to a preferred dividend. As per the terms and condi- Shareholders No of % of share- No of % of tions of the subordinated debentures issued in 2009, no dividend shareholders holders shares capital is payable whilst the subordinated debentures are outstanding, ex- 1-1,000 12,503 66% 3,897,395 1% cept for any minimum dividend distribution the B share holders 1,001-10,000 4,696 25% 18,208,022 3% may be entitled to. 10,001-100,000 1,527 8% 49,700,321 9% 100,001-1,000,000 208 1% 51,621,635 10% Rights Issue 1,000,001 and more 26 0% 404,581,858 77% During 2009, a rights issue was conducted consisting of Total 18,960 100% 528,009,231 100% 1,319,531,478 subordinated debentures with maturity date of 30 December 2013 and 1,319,531,478 warrants exercisable 28 October 2013 to 22 November 2013. Ownership Structure by geographical area The repayment of the debenture in 2013 of €73.3 million will coincide with the exercise of the warrants. If all warrants are exer- Sweden 89% cised, an amount of €58.6 million will be received in cash, and on US 3% balance a residual amount of €14.7 million will be paid out in cash. The subordinated debentures and warrants are traded under the Luxembourg 3% symbols MTRO 1 RTL and MTRO TO 1A. Rest of the world 5%

Top 20 Shareholders

Shareholders Total A shares B shares % of capital % of votes Investment AB Kinnevik 245,921,466 112,122,875 133,798,591 46.58% 42.39% The Fourth Swedish National Pension Fund 35,241,672 20,634,533 14,607,139 6.67% 7.80% Försäkringsaktiebolaget Avanza Pension 31,551,081 17,121,411 14,429,670 5.98% 6.47% Swedbank Robur Funds 20,553,040 11,111,428 9,441,612 3.89% 4.20% State Street Bank A/C Client Omnibus 11,921,710 0 11,921,710 2.26% 0.00% Modern Times Group MTG AB 7,260,584 3,538,242 3,722,342 1.38% 1.34% Dexia Banque Internationale S.A. 5,892,000 5,502,000 390,000 1.12% 2.08% SEB Funds 5,825,189 3,032,184 2,793,005 1.10% 1.15% BNP Paribas Securities S.A. 4,954,778 4,921,889 32,889 0.94% 1.86% Nordnet Pensionsförsäkring AB 4,962,696 2,027,219 2,935,477 0.94% 0.77% Six SIS AG 4,477,650 3,804,730 672,920 0.85% 1.44% JP Morgan Bank 3,345,742 3,278,787 66,955 0.63% 1.24% Banque Invik S.A. 3,133,150 1,559,424 1,573,726 0.59% 0.59% Försäkrings AB Skandia 2,490,353 1,759,729 730,624 0.47% 0.67% Swedbank Försäkring AB 2,455,844 1,635,581 820,263 0.47% 0.62% SEB Enskilda 2,020,021 2,000,000 21 0.38% 0.76% Knutsson Holdings AB 2,000,000 2,000,000 0 0.38% 0.76% Livförsäkrings AB Skandia 1,978,678 1,978,678 0 0.37% 0.75% JP Morgan Chase Bank NA 1,538,781 1,237,022 301,759 0.29% 0.47% BNY Mellon Omnibus A/C 1,475,000 1,475,000 0 0.28% 0.56% Others 129,009,796 63,742,800 65,286,996 24.43% 24.10% Total 528,009,231 264,483,532 263,525,699 100.0% 100.0%

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Corporate Governance Report

Independent in relation to the Independent in relation to major share- Board Member Member since Function company and its executive management holders (>10% of voting rights or capial)

Mia Brunell Livfors May 2006 Chairman of the Board of Directors Yes No Member of the Remuneration Committee Cristina Stenbeck Feb 2003 Non-executive Director Yes No Chairman of the Remuneration Committee Nigel Cooper May 2008 Non-executive Director Yes Yes Chairman of the Audit Committee Mario Queiroz May 2008 Non-executive Director Yes Yes Didier Breton May 2009 Non-executive Director Yes Yes Member of the Remuneration Committee Erik Mitteregger May 2009 Non-executive Director Yes No Michelle Guthrie May 2010 Non-executive Director Yes Yes Patrick Ståhle May 2010 Non-executive Director Yes Yes Member of the Audit Committee Henry Guy May 2004 Previously Non-executive Director Yes No Resigned May 2010 Previously Member of the Audit Committee

The Company the share register on the nominated day and who have notified Metro International S.A. (“Metro” or “the Company”) is a Luxem- their intention to attend may take part in the AGM, either in person bourg public limited liability company (Société Anonyme) listed or via a proxy. For SDR holders in Metro, details on the require- on the Nasdaq OMX Stockholm. The Company reports its results ments to attend will be set out in the notice to the Meeting. in euro and uses the English language as reporting language. The Decisions at the AGM are normally taken by simple majority. corporate governance report has not been audited by the Com- However, on certain matters the Luxembourg legal requirements pany’s external auditors. or Metro’s Articles of Association prescribe that proposals should be supported by a higher proportion of the shares represented or Corporate governance within Metro is based on Luxembourg leg- votes cast at the Meeting. islation, the listing requirements of the Nasdaq OMX Stockholm The AGM is held on the last Thursday of May each year. Matters and the Swedish Code of Corporate Governance (the ’Code’) which considered at the AGM include dividends, approval of the income the Company applies. Metro applies the Code in accordance with statement and balance sheet, discharge from liability of the Board the ’comply or explain’ principle, meaning that deviations from the of Directors and the CEO, the election of Board members, the pro- Code are permissible but must be explained. cedure for the Nomination Committee and, where applicable, auditors, and the fixing of remuneration for the Board and auditors. Deviations from the Code Metro makes the following deviations from the Code: The 2010 Annual General Meeting Cristina Stenbeck has been elected Chairman of the Nomination At the Annual General Meeting held on the 27 May 2010, the fol- Committee. This is a deviation from the Code, section 2.4, since lowing resolutions were approved: Cristina Stenbeck is a member of the Board of Directors. The other a) Approval of the annual accounts and the consolidated accounts members of the Nomination Committee have declared the decision for the financial year ended 31 December 2009; regarding election of the Chairman of the Nomination Committee b) Allocation of the results as of 31 December 2009; to be in the Company’s and shareholders’ best interest and a natu- c) Discharge of the liability of the members of the board of direc- ral consequence of Cristina Stenbeck representing the Company’s tors of Metro International S.A. for the financial year ended 31 De- largest shareholder. cember 2009; The Annual General Meeting of the Company is not conducted in d) Appointment of the members of the board of directors; Swedish and the material submitted to the meeting as well as the e) Appointment of the external auditor; minutes of the meeting, are not available in Swedish but in English. f) Determination of director’s fees; This is a deviation from the Code, section 1.5 and 1.7. The reason is g) Approval of the procedure of the Nomination Committee; that the Company is a Luxembourg public limited liability company, e) Guidelines for renumeration for senior executives; with its Annual General Meeting held in Luxembourg and English f) Termination of two Metro share option plans. as its reporting language. The Company has hence made the assessment that it is sufficient that the material relating to the Annual Nomination Committee General Meeting is made available in English. A Nomination Committee of the major shareholders in Metro has been formed in accordance with the resolution at the 2010 AGM. Annual General Meeting The Nomination Committee is comprised of Cristina Stenbeck on Shareholders’ rights to decide on the affairs of Metro are exercised behalf of Investment AB Kinnevik, Annika Andersson on behalf of at the Annual General Meeting (“AGM”). Shareholders recorded in The Fourth National Swedish Pension Fund, and Marianne Nilsson

17 Corporate Governance Report Annual Report 2010

From left to right: Mia Brunell Livfors, Cristina Stenbeck, Mario Queiroz, Nigel Cooper, Didier Breton, Erik Mitteregger, Michelle Guthrie and Patrick Ståhle on behalf of Swedbank Robur, who together represent more than MTG AB (an international media company and founder of Metro), 50 percent of the voting rights in Metro. Cristina Stenbeck was and becoming its CFO in 2001. Mia is a board member of Modern elected Chairman of the Nomination Committee at the first meet- Times Group MTG AB, Millicom International Cellular S.A., Tele2 AB, ing of the Committee. Transcom WorldWide S.A. and H&M Hennes & Mauritz AB. Mia has undertaken studies in business administration at the Stockholm The composition of the Nomination Committee may be changed University. Shareholding: 24,580 A shares, 24,580 B shares. to reflect changes in the shareholdings of the major shareholders during the nomination process. The Nomination Committee will Cristina Stenbeck (1977) submit a proposal for the composition of the Board of Directors, Non-executive Director the remuneration of the Board of Directors, the appointment of the auditors and the Chairman of the 2011 AGM, that will be presented Cristina Stenbeck has served as a non-executive Director of Metro to the 2011 AGM for approval. since February 2003. Since 2007, Cristina has served as Chairman of Investment AB Kinnevik. She is also non-executive director of Mod- Board of Directors ern Times Group MTG AB and Tele2 AB. Cristina holds a Bachelor of Metro’s Board of Directors are elected every year by the sharehold- Science from Georgetown University. Shareholding: 888,882 class A ers at the AGM. According to Metro’s Articles of Association, the shares, 12,290 class B shares, and 2,191,481 warrants. In addition Board shall consist of a minimum of three members. to her own directly held shares and warrants, Cristina is via Verdere As at 1 January 2010, Metro’s Board of Directors comprised Mia S.à r.l. indirectly owner of a considerable shareholding in Metro’s Brunell Livfors, Cristina Stenbeck, Mario Queiroz, Nigel Cooper, major shareholder, Investment AB Kinnevik. Didier Breton, Erik Mitteregger and Henry Guy. The Company’s shareholders at the May 2010 AGM reelected Mia Brunell Livfors, Mario Queiroz (1966) Cristina Stenbeck, Mario Queiroz, Nigel Cooper, Didier Breton, Erik Non-executive Director Mitteregger and as members of the Board of Directors and elected Mario Queiroz was elected as a non-executive Director of Metro Michelle Guthrie and Patrick Ståhle as new members. Henry Guy in May 2008. Mario has significant experience of the new media resigned as a member of the Board of Directors at the 2010 AGM. sector with considerable expertise in the development and delivery The Board of Directors of the Company comprises eight non- of new strategies on a global scale. He is the California-based Vice executive Directors. The members of the Board of Directors are: President of Product Management at Google, and is currently responsible for product management for the Android platform. Prior Mia Brunell Livfors (1965) to Google, Mario worked at Hewlett-Packard as vice president with- Chairman of the Board of Directors in a global operations function, where he led the development of key elements of HP’s IT infrastructure. Mario holds a Bachelor’s and Mia Brunell Livfors was elected Chairman of the Board at the AGM Master’s degrees in Electrical Engineering from Stanford University. held on the 27 May 2008 and has served as a non-executive Director Shareholding: 12,290 A shares, 12,290 B shares. of Metro since May 2006. Mia is President and CEO of Investment AB Kinnevik and has extensive financial and operating experience from having also held several positions at Modern Times Group

18 Corporate Governance Report Annual Report 2010

Nigel Cooper (1949) Patrick Ståhle (1955) Non-executive Director Non-executive Director Nigel Cooper was elected as a non-executive Director of Metro in Patrick has served as a non-executive director of Metro since May May 2008. Until he left in 2005, Nigel spent 33 years in the account- 2010. Patrick is a Director of Charm Communication Ltd, a TV ad- ing profession, including 21 years as a partner with KPMG in Milan vertising service provider in China. Patrick works part-time with and London. Between 1998 and 2005, Nigel was lead audit advi- Aegis Media Global Solutions which involves oversight of global strategy, product development and work within Aegis’ Executive sory partner in KPMG’s Information, Communications and Enter- Committee. He was until 1 April 2010 the Singapore based Chair- tainment group based in London, specialising in advising leading man and CEO for Aegis Media APAC, part of the media and market global companies across the media sector. Until 31 March 2009, research network Aegis Plc, listed on the London Stock Exchange. Nigel was a non-executive director of Rightmove Group PLC. Nigel Patrick worked for Aegis Media for more than 10 years; as COO is also a non-executive director of Unibet. Shareholding: 12,290 A Carat Scandinavia, CEO Carat Sweden and CEO Aegis Media Nordic. shares, 12,290 B shares. Shareholding: 39,000 A shares.

Didier Breton (1953) The Board’s responsibility and work during 2010 Non-executive Director The Board of Directors is constituted in order to review and decide Didier Breton was elected as a non-executive Director of Metro upon the Company’s strategic development, as well as to provide support to, and control and supervision over, the activities of the in May 2009. Didier is currently a member of the senior team of executive management of the Company. Pamoja Capital, a private equity business founded in 2006 that invests across a number of industry sector. Previously, Didier was The Board of Directors has adopted working procedures for its the COO of Trader Classified Media, one of the largest classified internal activities that include rules pertaining to the number of advertising companies in the world, a position he held from 2000 Board of Directors meetings to be held, the matters to be handled until the company was sold in 2006. Prior to joining Trader, Didier at such regular meetings, and the duties of the Chairman. was president of the Infrastructure and Systems Division at Groupe In order to carry out its work more effectively, the Board of Di- Bull. His previous roles also include managing international opera- rectors has appointed a Remuneration Committee and an Audit tions at Hewlett Packard and Valeo. He holds an MBA from the In- Committee. These committees handle business within their respec- stitut Superieur des Affaires and an Engineering degree from ICAM. tive areas and present recommendations and reports on which the Board of Directors may base its decisions and actions. However, all Shareholding: Nil. members of the Board of Directors have the same responsibility for all decisions made, irrespective of whether the issue in question Erik Mitteregger (1960) has been reviewed by a committee. Non-executive Director Erik Mitteregger has served as a non-executive Director of Metro The Board has also appointed a Finance Committee comprising Mia since May 2009. Erik is a member of the board of Investment AB Brunell Livfors, Mario Queiroz, Erik Mitteregger, Nigel Cooper, Per Mikael Jensen and Anders Kronborg. Throughout 2010 the Finance Kinnevik since 2004 and the board of Tele2 AB since 2010. Erik also Committee met on a monthly basis in between Board and Audit serves as Chairman of the board of Wise Group AB and is a mem- Committee meetings, to monitor results, discuss potential invest- ber of the board of Firefly AB. He has previously been Head of Eq- ments and any other significant items which may have financial uity Research and a member of the management board at Alfred implications. Berg Fondkommission 1989–1995. He was also a founding partner and fund manager at Brummer and Partners Kapitalförvaltning AB The Board of Directors has also adopted procedures for instruc- 1995–2002. Erik holds a Bachelor of Science in Business Adminis- tions and mandates issued to the CEO and senior management. tration and Economics from the Stockholm School of Economics. These procedures include the requirement that the Board of Di- Shareholding: 4,000,000 warrants. rectors approve all significant transactions including new edition launches, acquisitions and closures or disposal of businesses and significant capital expenditure programmes. In addition, the Board Michelle Guthrie (1965) of Directors has also issued written instructions specifying when Non-executive Director and how information, which is required in order to enable the Michelle has served as a non-executive director of Metro since Board of Directors to evaluate the Company and its subsidiaries’ May 2010. Michelle is Chairman of Plan International Hong Kong, financial position, should be reported to the Board of Directors. a global aid agency working on behalf of children in developing countries. Michelle was Managing Director and Senior Advisor of The Board of Directors convened for five ordinary meetings in 2010, Providence Equity Partners, the world’s leading private equity firm in order to discuss and decide upon all current material operating focused on media, entertainment, communications and technol- issues, to review the latest financial results, to review investment ogy, from 2007 to 2010. Michelle began her career at STAR, a media proposals and to consider opportunities for the further develop- and entertainment company in Asia wholly owned by News Corpo- ment of the Company’s business. One of the meetings was a two ration, where she held a number of key executive positions since day session specifically focused on strategy. 2001, finally as CEO from 2003 to 2007. Prior to this, Michelle was Director of Legal and Business Development at FOXTEL in Australia. She began her career within media at BSkyB in the UK. Earlier in her career Michelle was a lawyer at Allen, Allen & Hemsley in Australia and Singapore. Shareholding: Nil.

19 Corporate Governance Report Annual Report 2010

Remuneration Committee stock exchange’s disclosure rules by giving price sensitive infor- Cristina Stenbeck is Chairman of the Remuneration Committee and mation selectively. Metro was fined an amount corresponding Mia Brunell Livfors and Didier Breton are members. to two times the annual fee paid to Nasdaq OMX Stockholm. The Board of Directors commissions the work of the Remunera- Metro has implemented measures to ensure adherence with tion Committee. The responsibilities of the Remuneration Com- the disclosure rules in the future. mittee include issues regarding salaries, pension plans, bonus programmes and other employment terms for the CEO. The Remu- neration Committee also advises the Board of Directors on the de- Table of Attendance velopment and implementation of long-term incentive plans. Number of Meetings Main Audit Remuneration Audit Committee in the year Board Commitee Commitee Nigel Cooper is Chairman of the Audit Committee and Erik Mit- teregger and Patrick Ståhle are also members. The Board of Direc- Mia Brunell Livfors 5 4 tors commissions the work of the Audit Committee. Cristina Stenbeck 5 4 The Audit Committee is responsible for reviewing the Company’s Nigel Cooper 5 7 internal controls, implementing and reviewing the Company’s in- Mario Queiroz 5 ternal audit processes, considering and advising on financial risks, Didier Breton 5 4 determining the consistency of the company’s accounting policies and evaluating management’s estimates and assumptions in the Erik Mitteregger 4 6 preparation of the Company’s consolidated financial statements. Michelle Guthrie (from May 2010) 3 The Audit Committee also maintains the working relationship Patrick Ståhle (from May 2010) 3 3 with the Company’s internal and external auditors and ensures the Henry Guy (until May 2010) 2 1 qualification and independence of these, the Company’s adherence to prevailing rules and regulations and, where applicable, reviews transactions between the Company and related parties. Erik Mitteregger and Patrick Ståhle replaced Henry Guy and Mario Querioz as members in 2010.

Remuneration of the Board Remuneration of the Board is in accordance with decisions taken at the Annual General Meeting. The 2010 AGM decided that fees paid to the Board should comprise a sum of €357,500. The Chairman of the Board was allocated €75,000 with each other member allocated €35,000. In regards to the Audit Committee, €16,000 was allocated to the Chairman and €6,000 to each of the other members. In regards to the Remuneration Committee, €4,500 was allocated to the Chairman and €2,500 to each of the other members.

Evaluation of the Board The Chairman of the Board makes sure that an annual evaluation of the Board’s work is performed where the board members are given the opportunity to share their views on working methods, Board material, their own and other Board member’s work as well as the extent of their assignment. The evaluation of the Board elected at the 2010 AGM was carried out in December 2010 using a written questionnaire that was presented to all Board members and facili- tated by the Chairman of the Board.

Authorization for the Board of Directors The EGM of Metro held on 24 February 2009 resolved to introduce a new authorized share capital of Metro, which effectively serves as an authorization for the Board of Directors of Metro to issue new shares and warrants. The authorised share capital is limited to €13,454,500 divided into 6,200,000,000 A shares and 899,999,999 B shares. The total number of shares issued and outstanding amounted to 528,009,231, of which 264,483,532 were Class A shares and 263,525,699 were Class B shares. The authorization will expire on 24 February 2014. The authorization is intended to be used to deliver class A shares to warrant holders in Metro and for Metro to fulfill its obligations under its, from time to time, outstanding incentive programs.

Breach of Nasdaq OMX Stocholm Rule Book On 21 December 2010, the Nasdaq OMX Stockholm Disciplinary Committee found that Metro had committed a breach of the

20 Corporate Governance Report Annual Report 2010

From left to right: Per Mikael Jensen, Johanna Öberg, Peter Holmlund, Linda Fors, Anders Kronborg and Maggie Samways (Inset: Pablo Mazzei)

Executive management

The Executive Management team dent responsible for headquarter functions as well as organisa- As at the 31 December 2010, the following executive management tional and business development. In October 2008, Anders was team was in place. appointed CFO for the group. He has 11 years experience in the media sector working as CFO, CEO and COO in the biggest national Shares outstanding but not issued refers to shares that have been TV and newspaper companies in Denmark. Prior to this he spent 10 purchased but not possible to issue due to insider information. years in the Danish Ministry of Finance. Anders holds a Master of Science in Economics from Copenhagen University. Shareholding: Per Mikael Jensen (1962) Nil. Shares outstanding but not issued: 71,677 A shares, 71,677 President and CEO B shares. Per Mikael Jensen commenced as President and CEO of Metro in Pablo Mazzei (1962) November 2007. He has had a 24 year career in the media industry including management positions with the Danish newspapers Executive Vice President Politiken, Jyllands-Posten and MetroXpress (subsidiary of Metro), as and Regional Director Latin America well as Global Editor-In-Chief of Metro, Managing Director of Metro Pablo Mazzei was appointed Executive Vice President in January New York and CEO of TV2 Denmark. Per Mikael holds a degree in 2010. Pablo is responsible for Metro’s interests in Latin America in- journalism from the Denmark School of Journalism. Sharehold- cluding the existing operations in Brazil, Chile, Ecuador, Guatemala ing: Nil. Shares outstanding but not issued: 398,827 A shares, and Mexico, and the development of new markets. At the same 388,214 B shares. time he is the Managing Director of the newspaper operation in Chile, as well as a board member of the associated companies. Anders Kronborg (1964) Pablo has experience from working in the advertising market. He Executive Vice President and CFO joined Metro from a position as Managing Director of Carlson Mar- keting Group, where he was responsible for establishing the opera- Anders Kronborg joined Metro in late 2007 as Executive Vice Presi- tion in Chile. Previous to this, he held a number of positions within

21 Corporate Governance Report Annual Report 2010

the consumer product industry, including Sara Lee, Shell and CCU. Business Administration from the Stockholm School of Economics. He joined Metro in 2001. Pablo holds a degree in business from Shareholding: 20,000 B shares Pontificia Universidad de Chile and an MBA from IESE Barcelona, Spain. Shareholding: 40,738 A shares, 40,738 B shares. Shares out- External auditors standing but not issued: 32,753 A shares, 32,753 B shares. Metro’s external auditors are elected at the AGM of the Company for a period of one year, and can be re-elected for a period not Johanna Öberg (1975) exceeding six years. The AGM held in May 2010 elected Pricewa- Executive Vice President and Group Sales Director terhouseCoopers S.a.r.l (“PWC”), Luxembourg as external auditors. Johanna Öberg joined Metro in 2009 as Sales Director for the Travel Pascal Rakovsky, Luxembourg, and Anna-Clara af Ekenstam, Stock- segment. She was appointed Vice President and Group Sales Direc- holm, are the lead audit partners. The next election of the external tor in April 2010 with responsibility for developing and implement- auditor will take place at the 2011 AGM. ing sales excellence throughout the organisation. In October 2010 The external auditors report their findings to the shareholders by she was appointed Executive Vice President. Johanna has an exten- means of the Auditors’ report, which is presented to the relevant sive media background and has held various management posi- AGM. In addition, the auditors report detailed findings at each of tions within the industry during the last ten years. Prior to joining the ordinary meetings of the Audit Committee. Metro International S.A. she was Sales and Marketing Director at The audit assignment has involved the examination of the An- MTG-owned TV8. Johanna holds a Master of Science in Econom- nual Report, a review of the interim report for the third quarter ics and Business Administration from the Stockholm School of Eco- 2010, other tasks related to the duties of a company auditor, and nomics. Shareholding: 50,000 A shares consultation or other services that may result from observations noted during such examination or implementation of other tasks. Maggie Samways (1981) Executive Vice President and Global Editor in Chief Internal control According to the Swedish Code of Corporate Governance, the Margaret (Maggie) Samways joined Metro in 2003 and worked at Board is responsible for internal control. This report has been pre- the Boston and New York editions, running the combined Metro US pared according to the Swedish Code of Corporate Governance and newsroom in New York City. In 2009 she moved to London to run is accordingly limited to internal control over financial reporting. Metro’s central editorial office as Global Editor in Chief, responsi- This report is not part of the formal financial statements and has ble for editorial policy and compliance in all Metro editions world- not been audited. wide. Maggie was appointed Executive Vice President in October 2010. Prior to moving to London, she worked for the New York Control environment Daily News, and her freelance reporting has appeared in major US In order to ensure efficient management of Metro’s business risk, newspapers, TimeOut magazine and Information Age magazine. the Board has specified a set of instructions and plan of work re- Maggie’s reporting projects have been awarded by the Society for garding the roles and responsibilities of the CEO and the Board Professional Journalists, and Investigative Reporters and Editors. committees. She holds dual Bachelor of Arts degrees, in Journalism and Political The Board also has a number of established guidelines, which Science, from the University of Connecticut. Shareholding: Nil are central to its work on internal control activities. This includes Peter Holmlund (1967) monitoring performance against plans and prior years. The executive management team regularly reports to the Board according Executive Vice President to established routines and in addition to the Audit Committee’s and Managing Director of Global Online Division report. The senior executive management is however responsible Peter Holmlund joined Metro in February 2010 to lead the global for internal controls being in place to manage the risks of Metro‘s online efforts. Peter was appointed Executive Vice President in Oc- daily business operations. Guidelines for other employees are also tober 2010. Prior to Metro Peter worked at Microsoft where he was distributed so that they may understand and appreciate the impor- Executive Producer for MSN Sweden. During those three years MSN tance of their respective roles, and in order to maintain properly became Sweden’s largest portal and more than doubled the rev- functioning internal controls. enue. Previously he was Global Online Editor in Chief for Metro and also spent six years with the Schibsted group in various roles. Peter Risk assessment holds a Bachelor of Arts in Journalism, English and Philosphy from The Audit Committee is responsible for the overall programme for Stockholm University. Shareholding: 100,000 B shares monitoring and managing significant financial risk and any material risks in financial reporting. Internal Audit is maintaining a ’risk Linda Fors (1976) register’ of all significant risks on behalf of the Board and manage- Head of Investor and Public Relations ment at both a group and subsidiary level. The risk register is used Linda Fors has been Head of Investor and Public Relations since Oc- to facilitate the management of potential risks of significance and tober 2009. Linda has been with Metro since 2006 when she joined define mitigating measures. The Board and the Audit Committee as a Management Trainee for the CEO. Linda has since advanced review the risk register at each meeting. In addition to this, Internal through various positions within the company, most recently as Audit carries out periodic risk assessments of the operations by as- Sales Director for Metro Gothenburg, Sweden. Her prior roles in- sessing specific risks for each operation. The latter focuses on spe- clude Head of Business Development at Metro and Sales Controller cific financial risk elements for each operation and estimates the for Metro Sweden. Before joining Metro Linda worked as a Manage- likelihood and materiality of the risks. An internal audit calendar is ment Consultant. Linda holds a Master of Science in Economics and put in place by the Audit Committee at the beginning of each year

22 Corporate Governance Report Annual Report 2010

to ensure accurate and comprehensive evaluation of the internal controls of the entire Metro organisation.

Control activities The Swedish Code of Corporate Governance requires that the Board ensures that the Company has a sound system of internal control and assesses how well it functions. In 2006 an Internal Control project was commenced. The Internal Control project planned its work in consultation with the Audit Committee, Metro’s management and Metro’s external auditors. During 2008, the Internal Con- trol project focused on systematically reviewing and documenting important risk areas to assess how control activities are designed and work, in order to detect and rectify weaknesses and deviations. This documentation of significant risks and the verification of individual control measures was performed at both a group and operational level. The work to update this documentation and verify significant control activities was continued throughout 2010.

Information and communication Metro’s organisation is decentralised, so that operational and editorial teams are close to the local markets. Metro’s operating structure is designed to create the greatest possible transparency to facilitate monitoring and to promote the flow of information through the Group. For all subsidiaries and franchises there is an Executive Vice President who is accountable for internal control matters including accurate financial reporting. All operating units submit their financial results monthly, reported according to the Group’s IFRS accounting principles. The reports are consolidated and form the basis for quarterly reports and monthly operating reviews at eve- rything from operating unit to Group level. The operating reviews conform to a long established annual business planning and budg- eting process, and quarterly forecasts of financial results for the current calendar year structure in which sales, income, cash flow and other key figures and trends are combined and form the basis for analysis and actions by management at different levels. The operating units are compared and ranked each month in relation to other units in the Group. The ranking is in terms of the key performance measures for the Group. This benchmarking provides an effective tool for review and for spreading best practice across the Group. The financial reviews take the form both of regular monthly meetings at divisional level and of more informal analysis work.

Monitoring Metro has an internal audit function responsible for the evaluation of internal control activities and risk management. This work includes reviewing the application of established routines and guidelines. The internal audit function plans its work in co-operation with the Audit Committee and reports its reviews back to the Audit Committee. The Board of Directors regularly evaluates the information provided by Group management and the Audit Committee. The Audit Committee is responsible for arranging follow up audits on internal control activities. The work includes ensuring that measures are taken to deal with any inaccuracies and to implement control improvements emerging from external and internal audits.

23 Corporate Governance Annual Report 2010

Directors’ report

The directors present their Annual Report and the audited financial Employee share scheme statements of the Company and its subsidiaries for the year ended Details of the long term incentive plan for the Group’s key employ- 31 December 2010. ees can be found in note 28 – Long-Term Incentive Plan on page 55 of the consolidated financial statements of this Annual Report. The CEO statement on page 10 and Corporate Governance statement on pages 17 to 23 all form part of this report. Board matters Details of rules governing the appointment and replacement of Business review board members and the amendment of the Articles of Association The CEO statement on page 10 include: as well as the power of the board members can be found in the corporate governance statement on pages 17 to 23. • a fair review of the development of the activities of the Company and its subsidiaries over the year; The powers of the Board to issue shares are outlined in the corpo- • significant events that have occurred since the end of the rate governance statement on page 20. The power of the Board financial year; to increase or reduce the unissued but authorized share capital of • likely future development of the activities. Metro is outlined in the Articles of Association. Any such reduction must be approved by a resolution of shareholders adopted in the Capital structure and shareholding manner required for amending the Articles. Details of the capital structure of the Company can be found in note 19 on page 48 of this Annual Report. Agreements Under current contract terms, no compensation is provided for Restrictions on the transfer of securities employees who resign. In terms of redundancy, contracts do not There are no restrictions in regards to the transfer of shares. specify what the compensation will be, however contractually an employee is entitled to their notice period. By law, the Company is Special control rights and restriction on voting rights normally also required to provide statutory payments depending Information on specific rights of Class A shares and Class B shares is on the length of service. If an employee is made redundant or dis- disclosed in note 19 – Share capital and reserves on page 48 of the missed without a valid reason, there is a risk that the individual can consolidated financial statements of this Annual Report. bring a legal claim against the Company for damages. This is not There are no other classes of shares other than Class A and Class stipulated in the employment contract but is established by law. B shares. None of our contracts stipulate or provide for employment which As per the Articles of Association of Metro there are no restric- has been terminated due to a takeover bid; local law will stipulate tions on the transfer of shares. Therefore, any transfer can be per- the requirements the Company must follow in these circumstances. formed by any shareholder subject to the standard transfer formali- ties applicable for a Luxembourg S.A. Principal risks and uncertainties Management can confirm that there are no shareholders that Details of principal risks and uncertainties can be found in the CEO have any special control rights except for the applicable features statment on page 10 and in note 31 – Estimation uncertainty on of the Class A shares, which are the voting shares, and the Class B page 57 of the consolidated financial statements of this Annual Re- shares, which are the non-voting shares. port. The total number of issued and outstanding shares at 31 Decem- ber 2010 was 528,oo9,231. In terms of going concern, the Group’s own cash flow and the credit facility made available by Nordea should secure the Company’s Agreements between shareholders financing needs for the foreseeable future. Metro is not aware of any agreements between shareholders.

Significant direct and indirect shareholdings Details of significant direct and indirect shareholdings can be found on note 26 on page 54 of the Annual Report.

Approval This report was approved by the Board of Directors on 6 April 2011.

On behalf of the Board

Mia Brunell Livfors Erik Mitteregger 6 April 2011 6 April 2011

24 Management responsibility statement Annual Report 2010

Management Responsibility Statement

We, Per Mikael Jensen, Chief Executive Officer, and Anders Kro- nborg, Chief Financial Officer, confirm, to the best of our knowl- edge, that the consolidated financial statements which have been prepared in accordance with the International Financial Reporting Standards as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit or loss of Metro International and the undertakings included in the consolidation taken as a whole and that the Directors’ report includes a fair review of the development and performance of the business and the position of Metro International and the undertakings included in the consolidation taken as a whole, together with a de- scription of the principal risks and uncertainties that they face.

Luxembourg, 6 April 2011

Per Mikael Jensen Anders Kronborg President and CEO Executive Vice President and CFO

25 Independent auditors’ report Annual Report 2010

Audit report To the Shareholders of Metro International S.A.

Report on the consolidated financial statements

We have audited the accompanying consolidated financial statements of Metro International S.A. and its subsidiaries on pages 27 to 57, which comprise the consolidated statement of financial position as at 31 December 2010, and the consolidated statement of comprehensive income, consolidated statement of changes in shareholders equity and consolidated statement of cash flows for the year then ended and a summary of significant accounting policies and other explanatory information.

Board of Directors’ responsibility for the consolidated financial statements

The Board of Directors is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards as adopted by the European Union, and for such internal control as the Board of Direc- tors determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Responsibility of the “Réviseur d’Entreprises agréé”

Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing as adopted for Luxembourg by the “Commission de Surveillance du Secteur Finan- cier”. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the judgment of the “Réviseur d’Entreprises agréé” including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the “Réviseur d’Entreprises agréé” consider internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Board of Directors, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements set out on pages 27 to 57 give a true and fair view of the consolidated financial position of Metro International S.A. and its subsidiaries as at 31 December 2010, and of its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union.

Report on other legal and regulatory requirements

The consolidated Directors’ report, which is the responsibility of the Board of Directors, is consistent with the consolidated financial statements.

PricewaterhouseCoopers S.à r.l. Luxembourg, 6 April 2011 Represented by

Pascal Rakovsky

PricewaterhouseCoopers S.à r.l., 400 Route d’Esch, B.P. 1443, L-1014 Luxembourg T: +352 494848 1, F:+352 494848 2900, www.pwc.lu Cabinet de révision agréé. Expert-comptable (autorisation gouvernementale n°00123693) R.C.S. Luxembourg B 65 477 - Capital social EUR 516 950 - TVA LU17564447

26 Financial statements Annual Report 2010

Consolidated statement of comprehensive income

€’000 Note 2010 2009

Continuing operations Net sales 217,458 206,815 Other income 5,011 4,624 Net revenue 4 222,469 211,439

Cost of production 5 (120,180) (128,304) Gross income 102,289 83,135

Selling expenses 5 (52,715) (51,491) Administrative expenses 5 (43,192) (43,090) Loss on sale of shares in subsidiaries/associates 6 (2,483) (243) Impairment of goodwill and shares in associated company (1,523) - Revaluation of shares in associated company 8 7,103 - Share of profit/(loss) in associated companies 14, 15 2,591 1,386

Operating profit/(loss), EBIT 12,070 (10,303)

Financial income 595 - Financial expense (6,818) (3,939) Net financial expense 9 (6,223) (3,939)

Profit/(loss) before income tax 5,847 (14,242)

Current tax expense (2,461) (1,816) Deferred tax income/(expense) 575 4,131 Tax income/(expense) 10 (1,887) 2,315

Net profit/(loss) from continuing operations 3,960 (11,927)

Discontinued operations Net profit/(loss) from discontinued operations (net of income tax) 7 - (9,723)

Net gain/(loss) 3,960 (21,650)

Other comprehensive income/(expense) Foreign currency translation differences from foreign operations (806) 4,749

Total comprehensive income/(expense) for the period 3,154 (16,901)

Net gain/(loss) attributable to: Equity holders of the parent 212 (21,117) Non-controlling interest 3,748 (533) Net gain/(loss) 3,960 (21,650)

Total comprehensive income/(expense) attributable to: Equity holders of the parent (1,777) (16,528) Non-controlling interest 4,931 (373) Total comprehensive income/(expense) for the period 3,154 (16,901)

Basic weighted average number of shares outstanding 528,009,231 527,931,113 Diluted weighted average number of shares outstanding 1,856,912,051 527,931,113

Earnings per share Basic earnings per share (€) 12 0.007 (0.040) Diluted earnings per share (€) 12 0.002 (0.040)

Earnings per share – continuing operations Basic earnings per share (€) 12 0.007 (0.022) Diluted earnings per share (€) 12 0.002 (0.022)

27 Financial statements Annual Report 2010

Consolidated statement of financial position

€’000 Note 31 Dec 2010 31 Dec 2009

Non-current assets

Intangible assets 13 Trademarks and licenses 5,269 6,024 Capitalised development costs 2,635 4,342 Goodwill 27,741 11,340 Total intangible assets 35,644 21,706

Property, plant and equipment Office and IT equipment 13 4,692 2,519

Financial assets Shares in associated companies 14 2,351 9,819 Other investments 16 277 277 Receivables from associated companies 15 7,503 8,376 Long-term receivables 2,549 2,127 Total financial assets 12,680 20,599

Deferred tax assets Deferred tax assets 10 4,318 3,205

Total non-current assets 57,334 48,029

Current assets Accounts receivable 17 46,327 38,382 Other current receivables 14,910 12,201 Prepaid expenses and accrued income 5,680 5,583 Cash and cash equivalents 18 29,389 20,165 Total current assets 96,306 76,331

Total assets 153,640 124,360

Equity and liabilities

Equity attributable to the equity holders of the parent 13,997 15,437 Non-controlling interest 2,751 (1,690) Total equity 19, 20 16,748 13,747

Non-current liabilities Liability to non-controlling interests 21 6,397 6,067 Subordinated debentures 20, 21 44,252 32,529 Long-term bank loans 1,367 - Total non-current liabilities 52,016 38,596

Current liabilities Short-term bank loans 21 3,941 2,624 Accounts payable 21,292 18,423 Ad tax Provision 22 8,735 7,695 Other liabilities 22 23,482 19,360 Accrued expenses and deferred income 23 27,427 23,915 Total current liabilities 84,876 72,017

Total lialbilities 136,892 110,613

Total equity and liabilities 153,640 124,360

28 Financial statements Annual Report 2010

Consolidated statement of changes in shareholders equity

Equity attributable to equity holders of the parent company €’000 Share Share Translation Retained Equity holders Non controlling capital premium reserve earnings of the parent interest Total Balance as at 1 January 2009 100,158 139,067 (3,477) (216,651) 19,097 (2,328) 16,769 Total comprehensive income for the year - - 4,589 (21,117) (16,528) (373) (16,901) Rights issue - - - 12,632 12,632 - 12,632 Dividends to non-controlling interest - - - - - (957) (957) Decrease in non-controlling interest - - - - - 1,968 1,968 Reduction in Share Capital (99,158) - - 99,158 - - - Share based payment transactions - - - 236 236 - 236 Balance as at 31 December 2009 1,000 139,067 1,112 (125,742) 15,437 (1,690) 13,747

Balance as at 1 January 2010 1,000 139,067 1,112 (125,742) 15,437 (1,690) 13,747 Total comprehensive income for the year - - (1,989) 212 (1,777) 4,931 3,154 Dividends to non-controlling interest - - - - - (1,340) (1,340) Share based payment transactions - - - 337 337 - 337 Non-controlling interest share of acquired equity (note 8) - - - - - 850 850 Balance as at 31 December 2010 1,000 139,067 (877) (125,193) 13,997 2,751 16,748

29 Financial statements Annual Report 2010

Consolidated statement of cash flows

€’000 Note 2010 2009

Operating activities Profit before income tax 5,847 (23,965)

Adjustments for: Depreciation and amortisation 13 4,338 5,314 Other non-cash items - 257 Financial items, net 9 6,223 3,939 Loss on sale of shares in subsidiaries/associates 6 2,483 243 Impairment of goodwill and shares in associated company 1,523 - Revaluation of shares in associated company 8 (7,103) - Loss on disposal of discontinued operations 7 - 6,363 Share of (profit)/loss in associated companies 14 (2,591) (1,386) Dividends from associated companies 14 565 125 Cash flow before change in working capital 11,285 (9,110)

Changes in working capital: Net working capital increase (3,102) (1,360)

Cash contributed/(used) by operations 8,183 (10,470)

Net interest received/(paid) (30) (661) Income tax paid (1,818) (580) Net cash contributed/(used) by operations 6,335 (11,711)

Investing activities Disposal of shares - net of cash disposed of 6 3,970 (2,543) Investments in shares - net of cash acquired 8 (5,034) (1,319) (Increase)/decrease in long-term receivables 2,770 (136) Investment in intangible assets 13 (558) (914) Investments in office and IT equipment 13 (1,165) (1,043) Net cash contributed/(used) in investing activities (17) (5,955)

Financing activities Long term bank loan paid 21 - (28,691) Long term bank loan proceeds 21 1,367 - Proceeds from issue of debentures and warrants, net of transaction costs 20 - 46,112 Proceeds from short-term bank loans 21 1,317 60 Proceeds from loans from non-controlling interest - 1,234 Capital contribution from minority partner 32 - Dividends paid to non-controlling interest (1,340) (957) Net cash contributed in financing activities 1,376 17,758

Net increase/(decrease) in cash and cash equivalents 7,694 92 Cash and cash equivalents at beginning of period 20,165 19,717 Currency effects on cash 1,530 356 Cash and cash equivalents at end of the period 18 29,389 20,165

30 Financial statements Annual Report 2010

Notes METRO INTERNATIONAL S.A. In thousands of euro

Note 1: Reporting entity in which the estimate is revised and in any future periods affected. Metro International S.A. (“Metro” or “the Group”) was formed in Refer note 31 for further information on use of estimates. December 1999 as a subsidiary of the Modern Times Group MTG AB (MTG) for the purpose of holding all of MTG’s “Metro” newspaper e) Functional and presentation currency publishing operations. On 15 August, 2000, MTG distributed all of These consolidated financial statements are presented in euro, its shares in Metro International S.A. to its shareholders in the form which is the Group’s presentation currency. of a dividend (the “spin-off”). The parent company is domiciled in Functional currency is the currency of the primary economic en- Luxembourg. vironment in which a subsidiary operates. The functional currency Metro International S.A. Class A Shares (“A shares”) and Class B of each subsidiary and associated company is usually its local cur- shares (“B Shares”) are listed on the NASDAQ OMX’s Nordic List, rency. All financial information presented in euros has been round- category Small Cap, under the symbols MTRO SDB A and MTRO SDB ed to the nearest thousand. B. Metro International S.A. also has warrants and debentures listed until end of 2008, the parent company’s functional currency for on the NASDAQ OMX’s Nordic List, under the symbols MTRO TO 1A consolidation purposes was US dollars. The parent company oper- and MTRO 1 RTL respectively. ates and finances its business in several currencies due to its inter- The Group’s revenue is mainly derived from the sale of national activities. In 2009, most of the group functions relocated advertising. from London to Stockholm and the external debt financing in euro The financial statements were approved by the Board of Direc- was replaced by funding in Swedish krona. Also, the parent compa- tors on 6 April 2011. The financial statements are subject to approv- ny’s expenses and cash outflows are predominantly denominated al by the Annual General Meeting of shareholders on 26 May 2011. and settled in Swedish krona. Therefore, the functional currency of the parent company has changed from US dollars to Swedish krona Note 2: Basis of preparation and significant accounting polices from 1 January 2009. a) Compliance statement The consolidated financial statements of the Group have been pre- f) Classification pared in accordance with International Financial Reporting Stand- Non-current assets and non-current liabilities are comprised prima- ards (IFRS) issued by the International Accounting Standards Board rily of amounts that are expected to be realised or paid in periods as adopted by the European Union. The accounting policies set out more than 12 months after the reporting date. Current assets and below have been applied consistently to all periods presented in current liabilities are comprised primarily of amounts expected to these consolidated financial statements, and have been applied be settled within 12 months of the reporting date. consistently by Group entities with the exception of changes in accounting policies described in note (g) below, which only had a g) Changes of accounting policies presentation impact. Presented below are changes to the accounting policies that the Group has applied from 1 January 2010. Other changes in IFRS have b) Measurement basis not had a material effect and are not expected to have any material The consolidated financial statements have been prepared on a his- effect in future periods. torical cost basis, except for the debenture loans and the previously held interest in acquisitions achieved in stages. The debenture i. Recognition of business combinations loans are measured at amortized cost. Refer section n) on finan- As of 1 January 2010, the Group applies IFRS 3 (revised) Business cial instruments and note 20 on the rights issue. In an acquisition Combinations. The revised standard continues to apply the acquisi- that is achieved in stages, any previously held equity interest is re- tion method to business combinations, but with some significant measured at fair value. Refer section g) on changes of accounting changes. policies and note 8 on acquisitions. The revised standard requires goodwill to be determined only at the acquisition date rather than at the previous stages. The deter- c) Going concern mination of goodwill includes the previously held equity interest to The consolidated financial statements have been prepared on the be adjusted to fair value, with any gain or loss recorded in the profit basis of the fundamental assumption of the Group’s ability to oper- or loss. The revised standard applies to the acquisition of control- ate as a going concern. Accordingly, the financial statements do not ling interest in Metro Mexico and SubTV. In the acquisition of Metro include adjustments regarding the recoverability and classification Mexico, the Group recognised a revaluation gain of €6.1 million. In of the carrying amount of assets or the amount and classification the acquisition of SubTV, the Group recognised a revaluation gain of liabilities that might result should the Group be unable to con- of €1.0 million. tinue as a going concern. Refer note 25 for information regarding In measuring goodwill, there is a choice on an acquisition-by- liquidity risk. acquisition basis to measure the non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s pro- d) Use of estimates portionate share of the acquiree’s net assets. In the acquisition of The preparation of financial statements requires management to Metro Mexico, the non-controlling interest has been measured at make estimates and assumptions that affect the reported amounts the non-controlling interest’s proportionate share of the acquiree’s of assets and liabilities and disclosure of contingent liabilities at net assets. SubTV is fully owned by the Group. the date of the financial statements and the reported amounts of All acquisition related costs (“transaction costs”) are expensed. revenues and expenses recognised during the reporting period. These expenses would previously have been included in the con- The actual future outcomes could differ from those estimates. Esti- sideration for the business combination. mates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period

31 Financial statements Annual Report 2010

Notes METRO INTERNATIONAL S.A. In thousands of euro

ii. Transactions with non-controlling interest Group’s interest in the investee. Unrealised losses are eliminated in As of 1 January 2010, the Group applies IAS 27 (revised) Consoli- the same way as unrealised gains, but only to the extent that there dated and Separate Financial Statements. IAS 27 (revised) requires is no evidence of impairment. the effects of all transactions with non-controlling interest to be If subsidiaries are not wholly owned, the shares of equity owned recorded in equity if there is no change in control and these trans- by external shareholders are recorded as non-controlling interest actions will no longer result in goodwill or gains and losses. within equity and the share of the net result is presented in an The standard also specifies the accounting when control is lost. allocation after the Group’s net result. For negative shareholders’ Any remaining interest in the entity is re-measured to fair value, equity, a negative non-controlling interest is reported in equity to and a gain or loss is recognised in the profit or loss. The amend- the extent that minority owners are expected to contribute their ments to IAS 27 have not affected the financial reports for the pe- share of the deficit through a binding commitment and have ability riod. to fulfill this. The parent company accounts for the sale of a subsidiary company, h) New standards and interpretations not yet adopted either in whole or part, directly to profit or loss.

Related party disclosure i. Subsidiaries IAS 24 (revised) Related party disclosures is mandatory for periods Subsidiaries are those enterprises controlled by Metro Internation- beginning on or after 1 January 2011. When the revised standard al S.A. Control exists when Metro International S.A. has the power, is applied, the Group will need to disclose transactions between its directly or indirectly, to govern the financial and operating policies subsidiaries and its associates. of an enterprise so as to obtain benefits from the subsidiaries’ ac- A number of other new standards, amendments to standards tivities. In assessing control, potential voting rights that currently and interpretations are not yet effective for the year ended 31 De- are exercisable are taken into account. All companies in which the cember 2010, and have not been applied in preparing these con- Group holds more than 50 percent of the votes, or in which the solidated financial statements. However, these changes to IFRS Group through agreements solely exercises control are consolidat- are not expected to have a material effect on the Group’s financial ed as subsidiaries. The financial statements of subsidiaries are in- statements. cluded in the consolidated financial statements from the date that control effectively commences until the date that control effectively i) Consolidation policy ceases. All subsidiaries are listed in note 26. The consolidated accounts include the parent company, its subsidiaries and the share of net assets in associated companies. ii. Associated companies The consolidated accounts were prepared based on the pur- Associated companies are those enterprises in which Metro has chase method. The cost of an acquisition is measured as the fair significant influence, but not control, over the enterprise’s financial value of the assets given, equity instruments issued and liabilities and operating policies. Significant influence is presumed to exist incurred or assumed at the date of exchange. Transaction costs are when the Group holds between 20 and 50 percent of the voting expensed when incurred. power of another entity. Identifiable assets acquired and liabilities and contingent liabili- Associated companies are reported based on the equity method ties assumed in a business combination are measured initially at and are initially recognised at cost. The cost of investment is deter- their fair values at the acquisition date, irrespective of the extent of mined based on fair value of net assets including goodwill identi- any non-controlling interest. The excess of the consideration trans- fied on acquisition. Subsequently the investment is adjusted for the ferred, the amount of any non-controlling interest in the acquiree Group’s share of the net income after taxes and equity movements and the acquisition date fair value of any previous equity interest of the associate, recognised and measured according to the ac- in the acquiree over the fair value of the Group’s share of the iden- counting policies of the Group as long as the significant influence tifiable net assets acquired is recorded as goodwill. If the goodwill remains. amount is negative, it is recognised directly in profit or loss. The Group’s share of profit or loss after tax is reported under On an acquisition-by-acquisition basis, the Group recognises any “Operating profit” as “Share of profit/(loss) in associated compa- non-controlling interest in the acquiree either at fair value or at the nies”. Results from the sale of shares in associated companies is non-controlling interest’s proportionate share of the acquiree’s net also reported under “Operating profit” as “Profit/(loss) on sale of assets. shares in associated companies”. The financial statements of subsidiaries are included in the consolidated financial statements from the date control commences iii. Non-controlling interest acquisitions and sales until the date control ceases. The Group applies a policy of treating transactions with non-con- Goodwill arising from the acquisition of a foreign subsidiary and trolling interest as transactions with equity owners of the Group. any fair value adjustments to the carrying amounts of assets and li- For purchases from non-controlling interest, the difference be- abilities arising on the acquisition of that foreign entity are treated tween the consideration paid and the relevant share acquired of as assets and liabilities in the functional currency of the foreign the carrying value of net assets of the subsidiary is recorded in eq- entity and are translated to the Group’s presentation currency at uity. Gains or losses on disposals to non-controlling interests are the exchange rates ruling at the balance sheet date. also recorded in equity. Intra-group balances and any unrealised gains and losses or When the Group ceases to have control or significant influence, income and expenses arising from intra-group transactions, are any retained interest in the entity is remeasured to its fair value, eliminated in preparing the consolidated financial statements. Un- with the change in carrying amount recognised in profit or loss. realised gains arising from transactions with equity accounted in- The fair value is the initial carrying amount for the purposes of vestees are eliminated against the investment to the extent of the subsequently accounting for the retained interest as an associate,

32 Financial statements Annual Report 2010

Notes METRO INTERNATIONAL S.A. In thousands of euro

joint venture or financial asset. In addition, any amounts previously ii. Trademarks recognised in other comprehensive income in respect of that entity Acquired trademarks that have an indefinite useful life are meas- are accounted for as if the group had directly disposed of the re- ured at cost less accumulated impairment losses. These trademarks lated assets or liabilities. This may mean that amounts previously are not amortised, however they are tested annually for impair- recognised in other comprehensive income are reclassified to profit ment. These trademarks consist of “Mempo” and “Metro” in Rus- or loss. sia. These registered trademarks, which are in use, are considered If the ownership interest in an associate is reduced but significant to be indefinite because they are registered rights that can and are influence is retained, only a proportionate share of the amounts intended to be renewed indefinitely. previously recognised in other comprehensive income are reclassi- Acquired trademarks that have a definite useful life are amor- fied to profit or loss where appropriate. tised over the estimated useful life and tested for impairment when there are indications of impairment. The trademark 24Timer in j) Segment reporting Denmark is estimated to have a definite useful life and is amortised Operating segments are reported in a manner consistent with the on a straight-line basis over 10 years. internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocat- iii. Capitalised development costs ing resources and assessing performance of the operating seg- The Group develops software internally for the use in the opera- ments, has been identified as the Group’s Executive Management. tions. Development expenditure is capitalised only if development costs can be measured reliably, the product or process is technically k) Foreign currency transactions and translation of foreign and commercially feasible, future economic benefits are probable, operations and the Group intends to and has sufficient resources to complete Transactions in foreign currencies are translated to the respective development and to use or sell the asset. The expenditure capital- functional currency at the exchange rate ruling at the date of the ised includes the cost of materials and direct labour. Other devel- transaction. Monetary assets and liabilities denominated in foreign opment expenditure is recognised in profit or loss as incurred. currencies at the balance sheet date are translated at the exchange Capitalised development expenditure is measured at cost less ac- rate ruling at that date and any translation difference is recognised cumulated amortisation and accumulated impairment losses. in the profit or loss. Costs relating to the development of the global interactive plat- The financial statements of the Group’s foreign operations are form and the new Group editorial system are treated as capitalised translated from their functional currencies into euro (which is the development costs and are amortised over their estimated useful presentation currency of the Group). The assets and liabilities of life. The Group Editorial system is amortised over five years and the foreign subsidiaries, including goodwill and fair value adjustments development costs in respect of the Global interactive platform is arising on consolidation, are translated to euro at the exchange amortised over three years. Amortisation is charged to the profit or rates ruling at the balance sheet date. The profit or loss is trans- loss on a straight-line basis over the expected life of the capitalised lated at average exchange rates in the month of the transactions. development costs. Foreign exchange differences arising on translation are recognised in other comprehensive income and accumulated in the translation m) Property, plant and equipment reserve in equity. Property, plant and equipment, mainly comprising of office equip- Exchange gains and losses arising on Group internal loans to ment and information technology (IT) infrastructure, are measured subsidiaries are recognised in other comprehensive income when at cost less accumulated depreciation and any impairment losses. the loans form a part of a long-term net investment in the subsidi- Cost includes expenditure that is directly attributable to the acqui- aries. sition of the assets, including preparing the assets for their intend- When a foreign operation is disposed of, in part or in full, the ed use. Depreciation is recognised on a straight-line basis over the relevant amount in the foreign currency reserve is transferred to estimated useful life of each piece of office equipment and IT infra- other comprehensive income. structure. Office equipment and IT infrastructure that is expected to have a residual value is depreciated to that amount. The estimated l) Intangible assets useful lives are between three and five years. i. Goodwill n) Financial instruments In an acquisition of controlling interest, the excess of the consid- Financial instruments comprise investments in equity, trade and eration transferred, the amount of any non-controlling interest in other receivables, cash and cash equivalents, loans and borrow- the acquiree and the acquisition date fair value of any previous ings, and trade and other payables. equity interest in the acquiree over the fair value of the Group’s A financial instrument is recognised when the Group becomes a share of the identifiable net assets acquired is recorded as good- party to the contractual provisions of the instrument. Financial as- will. On an acquisition-by-acquisition basis, the Group recognises sets are derecognised if the Group’s contractual rights to the cash any non-controlling interest in the acquiree either at fair value or at flows from the financial assets expire or when the Group transfers the non-controlling interest’s proportionate share of the acquiree’s the financial asset to another party without retaining control or net assets. substantially all risks and rewards of the asset. In respect of equity accounted investees, the carrying amount Regular purchases and sales of financial assets are accounted for of goodwill is included in the carrying amount of the investment. at trade date, i.e. the date that the Group commits itself to purchase Goodwill has an indefinite useful life and is not amortised. It is test- or sell the asset. Financial liabilities are derecognised if the Group’s ed annually for impairment and whenever there is an indication of obligations specified in the contract expire or are discharged or impairment. cancelled.

33 Financial statements Annual Report 2010

Notes METRO INTERNATIONAL S.A. In thousands of euro

Cash and cash equivalents comprise cash balances and deposits. q) Impairment of non-financial assets excluding deferred Bank overdrafts are repayable on demand and form an integral part tax assets of the Group’s cash management. The carrying amount of Metro’s non-financial assets is reviewed at Financial instruments are recognised initially at fair value plus each reporting date to determine whether there is any indication any directly attributable transaction costs. Subsequent to initial rec- of impairment. If any such indication exists the asset’s recoverable ognition financial instruments are measured as described below. amount is estimated. The recoverable amounts of goodwill and trademarks, which have indefinite useful lives, are not only esti- i. Investments in unquoted equity instruments/available-for-sale mated upon indication of impairment, but also once per year. financial assets An impairment loss is recognised if the carrying amount of an The Group’s investments in equity securities are unquoted and asset or its cash-generating unit exceeds its recoverable amount. their fair value cannot be measured reliably. These securities are A cash-generating unit is the smallest identifiable asset group that measured at cost. The Group has no other assets that are available- generates cash flows that are largely independent from other as- for-sale financial assets. As a consequence no financial instruments sets and groups. Impairment losses are recognised in profit or loss. are measured in accordance with the principles for available for Impairment losses recognised in respect of cash-generating units sale financial assets; i.e. measured at fair value with changes in fair are allocated first to reduce the carrying amount of any goodwill value recognised in other comprehensive income. allocated to the unit and then to reduce the carrying amount of other assets in the unit on a pro rata basis. ii. Loans and receivables The recoverable amount of an asset or cash-generating unit is Loans and receivables are measured at amortised cost using the the greater of its value in use and its fair value less costs to sell. In effective interest method, less any impairment losses. Accounts re- assessing value in use, estimated future cash flows are discounted ceivable are measured at nominal amount less an allowance for to their present value using a discount rate that reflects current doubtful accounts. market assessments of the time value of money and the risks specific to the asset. An impairment loss in respect of goodwill is never reversed. In iii. Liabilities respect of other assets, an impairment loss is reversed if there is Non-derivative liabilities, including accounts payable, are initially an indication that the loss has decreased or no longer exists and measured at fair value less attributable transaction cost and are if there has been a change in the estimates used to determine the subsequently measured at amortised cost using the effective inter- recoverable amount. An impairment loss is reversed only to the ex- est method. tent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or iv. Compound financial instruments (subordinated debentures amortisation, if no impairment loss had been recognised. and warrants) Compound financial instruments issued by the Group comprise r) Impairment of financial assets convertible notes that can be converted to share capital at the op- A financial asset is considered to be impaired if objective evidence tion of the holder, and the number of shares to be issued does not indicates that one or more events have had negative effect on the vary with changes in their fair value. The liability component of estimated future cash flows of that asset. a compound financial instrument is recognised initially at the fair An impairment loss in respect of ‘loans and receivables’ is cal- value of a similar liability that does not have an equity conversion culated as the difference between its carrying amount, and the option. The equity component is recognised initially at the differ- present value of the estimated future cash flows discounted at the ence between the fair value of the compound financial instrument original effective interest rate. Assets with a short time to matu- as a whole and the fair value of the liability component. Any di- rity are not discounted. Impairment of unquoted equity securities rectly attributable transaction costs are allocated to the liability and measured at cost is calculated by reference to the present value of equity components in proportion to their initial carrying amounts. estimated future cash flows, discounted at the current market rate Subsequent to initial recognition, the liability component of a com- of return for a similar financial asset. pound financial instrument is measured at amortised cost using the All impairment losses are recognised in profit or loss. An impair- effective interest method. The equity component of a compound ment loss for ‘loans and receivables’ is reversed if the reversal can financial instrument is not re-measured subsequent to initial recog- be related objectively to an event occurring after the impairment nition. Interest, dividends, losses and gains relating to the financial loss was recognised. The reversal is recognised in profit or loss. For liability are recognised in profit or loss. Distributions to the equity unquoted equity securities measured at cost, impairment losses holders are recognised in equity, net of any tax benefit. are never reversed. o) Provisions s) Tax A provision is recognised if, as a result of a past event, the Group Income tax on the income or loss for the year comprises current has a present legal or constructive obligation that can be estimated and deferred tax. Income tax expense is recognised in profit or loss reliably, and it is probable that an outflow of economic benefits will except to the extent that it relates to items recognised directly in be required to settle the obligations. equity or other comprehensive income. Current tax is the expected tax payable on the taxable income p) Accounting for transaction fees on equity transactions for the year, using tax rates enacted or substantially enacted at the Transaction fees incurred in connection with capital increases are reporting date, and any adjustment to tax payable in respect of deducted directly from equity. previous years. Deferred tax is provided using the balance sheet method, pro-

34 Financial statements Annual Report 2010

Notes METRO INTERNATIONAL S.A. In thousands of euro

viding for temporary differences between the carrying amounts carrying amount of the financial asset or financial liability on initial of assets and liabilities for financial reporting purposes and the recognition. amounts used for taxation purposes. Temporary differences arising Borrowing costs are recognised as an expense in the period in from goodwill not deductible for tax purposes are not provided which they are incurred. The Group, currently and does not expect for. The amount of deferred tax provided is based on the expected to in the foreseeable future acquire, construct or produce any qual- manner of realisation or settlement of the carrying amount of as- ifying assets which would require capitalisation of borrowing costs. sets and liabilities, using tax rates enacted or substantially enacted by the reporting date. w) Employee benefits A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which i. Defined contribution plans the asset can be utilised. Deferred tax assets are reviewed each Obligations for contributions to defined contribution pension plans reporting date and are reduced to the extent that it is no longer are recognised as an expense in profit or loss when they are due. probable that the related tax benefit will be realised. Previously un- recognised deferred tax assets are reviewed at each reporting date ii. Termination benefits and are recognised to the extent that it is probable that future tax- Termination benefits are recognised as an expense when the Group able profit will be available to recover the tax asset. is demonstrably committed, without realistic possibility of with- drawal, to a formal detailed plan to terminate employment before t) Accounting for leases the normal retirement date. Termination benefits for voluntary re- Leases in terms of which the Group assumes substantially all the dundancies are recognised if the Group has made an offer encour- risks and rewards of ownership are classified as finance leases. An aging voluntary redundancy, it is probable that the offer will be operating lease is an agreement in terms of which the substantial accepted and the number of acceptances can be estimated reliably. risks and rewards of ownership of the leased asset are not transferred to the Group. iii. Short-term benefits Payments made under operating leases are recognised in profit Short-term employee benefit obligations are measured on an un- or loss on a straight-line basis over the term of the lease. Lease in- discounted basis and are expensed as the related service is pro- centives received are recognised in profit or loss as an integral part vided. A liability is recognised for the amount expected to be paid of the total lease expense over the term of the lease. under short-term cash bonus or profit-sharing plans if the Group has a present legal or constructive obligation to pay this amount as u) Revenue recognition a result of past service provided by the employee and the obliga- Advertising revenues are recognised based on the publication date tion can be estimated reliably. of the newspaper containing the customer’s advertisement. Franchise fees are recognised based on the terms defined in the x) Share-based payment transactions franchise agreement. Grants of equity-settled equity instruments of the Group as con- Revenue from barter transactions involving dissimilar services is sideration for services are measured based on the fair value of the measured at the fair value of the advertising services provided by instruments at the grant date. The fair values are recognised as an the Group to the customer. Revenue is not recognised on barter employee expense with a corresponding increase in equity over transactions involving exchange of similar services (i.e. advertising the vesting period, which is from grant date to the date when the in another newspaper in exchange for advertisements in Metro edi- right to the instruments becomes unconditional. Social security tions). Barter revenues and costs are recognised at the time when charges are to be paid in certain countries on the fair value of the goods are received or services are rendered. share-based employee benefit. The fair value of the employee ben- Other income referable to distribution subsidy is initially recog- efit is generally based on the market value of the instruments on nised as deferred income at fair value when there is reasonable the date of exercise. During the vesting period, estimated social assurance that it will be received and the Group will comply with security charges are accrued based on the obligation’s fair value at the conditions associated with the subsidy. each reporting date. v) Finance income and expenses y) Contingent liabilities Finance income comprises interest income on receivables and A contingent liability is a possible or a present obligation arising funds invested, gains on the disposal of available-for-sale financial from past events that is not reported as a liability or provision, assets, and net foreign currency gains. Interest income is recog- due to either being unlikely that an outflow of resources will be nised as it accrues, using the effective interest method. Dividend required to settle the obligation, or that a sufficiently reliable cal- income is recognised on the date that the Group’s right to receive culation of the amount cannot be made. payment is established. Finance expenses comprise interest expense on borrowings, net z) Statement of cash flows foreign currency losses and impairment losses recognised on finan- For the purpose of the consolidated statements of cash flows, the cial assets. Interest expenses are recognised in profit or loss using Group considers all highly liquid investments with original matu- the effective interest method. rities of three months or less at the time of purchase to be cash Interest income and interest expense includes amortised equivalents. amounts of transaction costs and any discounts and premiums. The effective interest rate is the rate that discounts the estimated future aa) Discontinued operations cash payments or receipts over the expected life of the financial A discontinued operation is a component of the Group’s business instrument or to the next market-based re-pricing date, to the net that represents a separate major line of business or geographical

35 Financial statements Annual Report 2010

Notes METRO INTERNATIONAL S.A. In thousands of euro

area of operations that has been disposed of or is held for sale, or 2010 2009 is a subsidiary acquired exclusively with a view to resale. Classifi- Net revenue €’000 €’000 cation as a discontinued operation occurs upon disposal or when the operation meets the criteria to be classified as held for sale, if Sweden 66,962 53,064 earlier. When an operation is classified as a discontinued opera- Denmark 26,267 28,444 tion, the comparative statement of comprehensive income is re- The Netherlands 24,797 28,057 presented as if the operation had been discontinued from the start France 31,991 34,353 of the comparative period. Greece 742 3,438 Russia 9,870 3,836 ab) Basic and diluted earnings per share Hungary 7,710 7,598 Basic earnings per share is calculated by dividing profit or loss at- Hong Kong 22,371 19,577 tributable to the equity holders of the parent by the weighted aver- Chile 13,500 9,903 age number of shares outstanding during the year. For the calcula- Mexico 4,381 - tion of diluted earnings per share, the weighted number of shares SubTV 974 - is adjusted for effects of potential ordinary shares (refer note 12). Spain - 465 Dilution is calculated only if the profit per share is reduced or the Italy - 11,236 loss per share increased. Options and restricted shares are consid- Portugal - 1,853 ered dilutive only when their exercise price is lower than the pe- Total operating segments 209,566 201,824 riod’s average share price; dilution increases with the difference between exercise price and share price. The exercise prices of op- Other 12,903 9,615 tions and restricted shares are adjusted to include their respective Total continuing operations 222,469 211,439 value of future share-based payment services yet to be recognised in accordance with IFRS 2. Discontinued operations - 8,793 Total 222,469 220,232

Note 3: Liquidity and capital resources Sale of advertising is the main source of income for the Group. The Other net revenue includes franchise fees from non-consolidated Group also has royalty income from non-controlled operations. operations and various other income from headquarter operations. Other income comprises a distribution subsidy in Denmark. There are no inter-segmental sales. 3 percent (5 percent) of the Group’s net revenue from continuing operations are serviced from barter transactions. 2010 2009 Net revenue €’000 €’000

Rendering of services 214,571 204,794 Royalty 2,887 2,021 Net sales 217,458 206,815

State subsidies 5,011 4,624 Other income 5,011 4,624

Total revenue 222,469 211,439

Note 4: Operating segments The segment reporting is based on country level. The Group’s executive management reviews internal reports on net revenue and operating result for the segments monthly. In June 2009, the Group sold its operations in the United States. The segment was separated from continuing operations and classified as discontinued operations. In the past two years, the Group has also closed or divested its operations in Spain, Portugal, Italy and Greece. These operations have not been classified as discontinued operations. Therefore, net revenue and operating result up to the date of closure or disposal have been included in continuing operations. For details on profit or loss on sale of shares in Portu- gal, Italy and Greece, refer to notes 6.

36 Financial statements Annual Report 2010

Notes METRO INTERNATIONAL S.A. In thousands of euro

2010 2009 Depreciation and amortisation for other mainly relates to the cen- Operating profit/(loss) €’000 €’000 tral online platform and group editorial systems at headquarters.

Sweden 11,415 4,431 2010 2009 Denmark 749 (692) Capital expenditure €’000 €’000 The Netherlands 3,661 3,733 France (1,202) 97 Sweden 434 566 Greece (641) (595) Denmark 51 68 Russia 2,879 937 The Netherlands 346 58 Hungary 145 (1,331) France 77 149 Hong Kong 3,746 2,917 Greece 0 61 Chile 1,766 1,332 Russia 19 72 Mexico 1,004 - Hungary 88 44 SubTV 246 - Hong Kong 98 18 Spain - (4,787) Chile 105 67 Italy - (1,655) Mexico 115 - Portugal - (525) SubTV - - Total operating segments 23,768 3,862 Spain - 1 Italy - 20 Other (14,795) (13,922) Portugal - - Sale of shares in subsidiaries (2,483) (243) Total operating segments 1,333 1,124 Impairment of goodwill and shares (1,523) 0 Revaluation of shares in associate 7,103 0 Other 390 833 Total continuing operations 12,070 (10,303) Total continuing operations 390 833

Discontinued operations - (9,723) Discontinued operations - - Total 12,070 (20,026) Total 1,723 1,957

Other operating result includes corporate headquarters and share Capital expenditure for other mainly relates to investments in the of results in associated companies. Other operating result include central online platform and group editorial systems at headquar- a loss of €17.4 million (€15.3 million) from headquarter operations ters. and a profit of €2.6 million (€1.4 million) from share of results in associated companies. Geographical information Information about assets shown below is based on the geographi- Other material items cal location. Non-current assets represent trademarks and licences, 2010 2009 capitalised development costs, goodwill and office and IT equip- Depreciation and amortisation €’000 €’000 ment.

Sweden 506 463 2010 2009 Denmark 759 809 Non-current assets €’000 €’000 The Netherlands 277 407 France 229 263 Luxembourg 3,049 3,848 Greece 15 39 Hungary 1,679 1,897 Russia 21 21 Sweden 7,330 6,030 Hungary 95 73 Denmark 4,221 4,938 Hong Kong 161 114 Holland 3,849 3,909 Chile 84 73 Russia 1,106 2,209 Mexico 30 - Mexico 10,017 - SubTV 43 - Chile 8,418 322 Spain - 364 Other countries 667 1,072 Italy - 713 Total 40,336 24,225 Portugal - 28 Total operating segments 2,220 3,367

Other 2,118 1,792 A significant share of the non-current assets relate to goodwill. Total continuing operations 4,338 5,159 Goodwill amounted to €27.7 million (€11.3 million). For further information, refer note 13. Discontinued operations - 155 The assets in Luxembourg mainly relate to trademarks and capi- Total 4,338 5,314 talized development costs for the online platform and the editorial system.

37 Financial statements Annual Report 2010

Notes METRO INTERNATIONAL S.A. In thousands of euro

Note 5: Expenses by nature and breakdown of cost of South Korea production In December 2010, Metro sold its entire holding of 30 percent shares in Metro South Korea for a net amount after capital gains The breakdowns below relates to continuing operations. tax of €4.4 million, which corresponds to the cash inflow from the sale. The book value of the shares was €5.0 million at the time of 2010 2009 the sale and thus a loss of €0.6 million has been recorded on this Breakdown of cost of production €’000 €’000 sale. Prior to the sale, the shares in Metro Korea were written down by €1.1 million. Paper and print 60,845 63,203 Distribution 38,096 39,892 ii. Loss on sale of shares in subsidiaries 2009 Editorial 18,504 22,551 2009 Other 2,735 2,658 Profit/(loss) on sale of shares in subsidiaries €’000 Total 120,180 128,304 Metro Italy 62 Metro Portugal (305) Metro US (6,363) 2010 2009 Total (6,606) Breakdown of cost by nature €’000 €’000

Goods and services 146,385 154,731 Employee remuneration 65,364 62,995 Italy Depreciation and amortisation 4,338 5,159 In July 2009, the Group divested Metro Italy to New Media. New Total 216,087 222,885 Media acquired Metro Italy for a purchase price of €1.4 million. The sale of Metro Italy resulted in a net gain after transaction costs of €0.1 million.

Portugal For further information on employee remuneration, refer to note In June 2009, Metro Portugal was divested to two local media com- 11. panies at a purchase price of €0.2 million. The sale of Metro Por- tugal resulted in a net loss after transaction costs of €0.3 million.

Metro US Note 6: Profit/(loss) on sale of shares in subsidiaries and In May 2009, Metro US was divested to Seabay Media. The sale of associates Metro US resulted in resulted in a net loss after transaction costs of €6.4 million. i. Loss on sale of shares in subsidiaries and associates in 2010 Metro US has been classified as a discontinued operation. For further information, refer note 7. Profit/(loss) on sale of 2010 shares in subsidiaries/associates €’000

Metro Greece (1,843) Metro South Korea (641) Total continuing operations (2,484)

Greece In June 2010, Metro Greece was divested to Voisins Limited. The operating results of Metro Greece have therefore only been consolidated until May 2010. The net loss on disposal amounted to €1.8 million and the cash outflow related to this transaction was €0.2 million. 2010 Cash inflow/(outflow) €’000

Disposal proceeds 2 Transaction costs (80) Cash disposed of in operations (155) Total cash impact (233)

38 Financial statements Annual Report 2010

Notes METRO INTERNATIONAL S.A. In thousands of euro

Note 7: Discontinued operation 2009 The following divestment has been reported separately as a discon- Cash outflow €’000 tinued operation in profit or loss, according to IFRS 5 Non-current assets held for sale and discontinued operations. Disposal proceeds (74) Transaction costs (1,176) Metro US Cash disposed of in operations (833) In May 2009, Metro in the US was divested to Seabay Media Hold- Cash impact (2,082) ings LLC (“Seabay Media”). Seabay Media will continue to publish Metro in the US under a franchise agreement with Metro. Disposal proceeds include receivable of US$1.7 million from the purchaser representing positive working capital in the US opera- 2010 2009 tions at the time of disposal. Results from discontinued operations €’000 €’000 Note 8: Acquisition of subsidiaries Net sales - 8,793 Cost of production - (6,781) i. Acquisitions in 2010 Gross income - 2,012 Selling expenses - (3,289) Metro Mexico Administrative expenses - (2,083) In 2006, the Group acquired 35 percent in Publicaciones Metropoli- Result from operating activities - (3,360) tanas S.A. de C.V. (“Metro Mexico”). An additional 14 percent inter- Loss on sale of shares in subsidiaries - (6,363) est was acquired in 2008. The cash consideration for the 49 percent Net loss - (9,723) interest amounted to €1.8 million. In September 2010, the Group acquired 23.54 percent of the Basic earnings/(loss) per share - (0.02) shares for a cash consideration of €3.8 million. The Group thus has Diluted earnings/(loss) per share - (0.02) an interest of 72.54 percent and consolidates Metro Mexico. The details of the net assets acquired are shown in the table below:

Acquired net assets €’000 The discontinued operations and the sale of operations did not affect the tax income/(expense). Property, plant and equipment 161 Accounts receivable and other receivables 4,032 Of the net loss in 2009, €9.5 million was attributable to the Group Cash and cash equivalents 1,427 and €0.2 million was attributable to non-controlling interest. Accounts payable and other liabilities (2,530) Net assets 3,090 2010 2009 Cash flow from discontinued operations €’000 €’000 The fair value of the receivables is estimated to equal the carrying Net cash used in operating activities - (2,133) value. The trade receivables comprise gross contractual amounts Net cash used in investing activities - (2) due of €2.5 million, of which €0.7 million was expected to be uncol- Cash contributed/(used) in investing activities - - lectible at the acquisition date. Net change in cash and cash equivalents - (2,135) Prior to the acquisition, the carrying value of the Group’s 49 percent interest in Metro Mexico amounted to €1.8 million. Based on the consideration paid in September 2010, the fair value of the 49 2009 percent interest was estimated at €7.9 million. As a result of re- Net loss on disposal €’000 valuation of the 49 percent interest, the Group recognised a gain of €6.1 million: Disposal proceeds (74) Direct transaction costs (1,176) Gain on revaluation €’000 Write off (586) Net assets disposed of (4,527) Fair value of 49 percent interest 7,885 Total net loss (6,363) Less: Carrying value of 49 percent interest (1,757) Gain on revaluation 6,128

The acquisition of Metro Mexico resulted in goodwill of €9.4 million. In estimating goodwill, the 27.46 percent non-controlling interest was valued at the non-controlling interest’s proportionate share of the acquiree’s net assets. The goodwill amount was mainly attributable to human capital.

39 Financial statements Annual Report 2010

Notes METRO INTERNATIONAL S.A. In thousands of euro

Goodwill €’000 Goodwill €’000

Consideration for 23.54 percent interest 3,788 Total consideration transferred 5,228 Fair value of 49 percent interest 7,885 Fair value of 35 percent interest 2,815 Non-controlling interest 848 Less: Fair value of identifiable assets (2,235) Less: Fair value of identifiable assets (3,090) Goodwill 5,809 Goodwill 9,432

The Group incurred acquisition related costs of €0.1 million in le- The Group incurred an immaterial amount of legal fees and due gal fees and due diligence costs. The transaction costs have been diligence costs relating to the acquisition. The transaction costs included in administrative expenses in the Group’s consolidated have been included in administrative expenses in the Group’s con- statement of comprehensive income. solidated statement of comprehensive income. For the period from 7 September to 31 December, Metro Mexico For the period from 18 October to 31 December, SubTV contrib- contributed net revenue of €4.4 million and an EBIT profit of €1.0 uted revenue of €0.9 million and an EBIT profit of €0.3 million. If million. If the acquisition had occurred on 1 January 2010, manage- the acquisition had occurred on 1 January 2010 management es- ment estimates that the effect on the Group’s revenues and EBIT timates that the effect on the Group’s revenues and profit would profit would have amounted to €11.4 million and €2.3 million re- have been €3.2 million and €0.8 million respectively, for the twelve spectively, for the twelve months ending 31 December 2010. months ending 31 December 2010.

ii. Acquisitions in 2009 SubTV In 2008, the Group acquired 35 percent interest in SubTV for a con- Metro St Petersburg sideration of €1.4 million. On 18 October 2010, the Group acquired In June 2009, the Group exercised its option to acquire 58.5 percent the remaining 65 percent holding for a cash consideration of €5.2 of the capital and votes in its franchise operation in St Petersburg, million. The details of net assets acquired are shown below: Russia. The Group paid a consideration of €1.0 million for the 58.5 percent interest. Acquired net assets €’000 Publimetro Magazine Group and Diario Pyme In June 2009, the Group acquired the remaining 60 percent equity Property, plant and equipment 2,187 interest in the company that publishes the monthly luxury mag- Accounts receivable and other receivables 1,902 azines Golf Digest and El Grafico and formed a new entity, Pub- Cash and cash equivalents 16 limetro Magazines Group (“PMG”). In October 2009, the Group also Accounts payable and other liabilities (2,014) acquired a controlling interest in its associate entity, Diario Pyme. Net assets 2,091 The net cash outflow referable to the acquisition of Publimetro Magazine Group and Diario Pyme amounted to €0.1 million.

The fair value of the receivables is estimated to equal the carrying value. The trade receivables comprised gross contractual amounts due of €1.0 million. Prior to the acquisition, the carrying value of the Group’s 35 percent interest in SubTV amounted to €1.8 million. Based on the consideration paid in October 2010, the fair value of the 35 percent interest was estimated at €2.8 million. As a result of revaluation of the 35 percent interest, the Group recognised a gain of €1.0 million:

Gain on revaluation €’000

Fair value of 35 percent interest 2,815 Less: Carrying value of 35 percent interest (1,840) Gain on revaluation 975

The acquisition of SubTV resulted in goodwill of €5.8 million. The goodwill amount was mainly attributable to human capital.

40 Financial statements Annual Report 2010

Notes METRO INTERNATIONAL S.A. In thousands of euro

Note 9: Financial income and expense Reconciliation of 2010 2009 tax income/(expense) €’000 €’000 2010 2009 Financial income/(expenses) €’000 €’000 Profit /(Loss) after financial items and before income tax 5,847 (14,242) Financial income Income tax using the Swedish corporate tax rate (1,538) 3,746 Interest income on bank deposits 153 148 Tax loss carry forwards not recognised as Interest on receivables from associates 442 384 deferred tax asset (3,285) (7,272) Net foreign exchange gain 710 - Tax rate differential between Swedish tax rate and other jurisdictions 413 (178) Financial expenses Recognition of previously not recognised Interest expense on financial liabilities (7,076) (3,546) deferred tax losses 3,131 5,182 Net foreign exchange loss - (426) Other (608) 838 Other financial expenses (452) (499) Tax income / (expense) (1,887) 2,315

Financial income / (expenses) (6,223) (3,939)

The Group is paying income tax in Metro Holland, Metro St Peters- burg, Metro Mexico, Metro Hong Kong and Metro Chile. The Group has a debenture loan with a carrying amount of €44.3 Metro Sweden has tax loss carry forwards of €12.6 million and million (€32.5 million). Interest expense on financial liabilities of is not expected to pay income tax until 2012. Metro Denmark (tax € 7.1 million mainly relates to interest on the debenture loan. For loss carry forwards of €10.7 million), Metro France (tax loss carry further information on the debenture loan, refer note 20. The inter- forwards of €24.7 million) and Metro Hungary (tax loss carry for- est expenses for 2009 relate to a bank loan for the period before wards of €2.8 million) are not expected to pay taxes in the near the rights issue, and to the debenture loan for the period after the term future. rights issue. The Group incurred income tax losses for the headquarters in Luxembourg. The losses are not expected to be utilised and have not been recognised as deferred tax assets.

Note 10: Taxes Deferred tax assets are recognised to the extent that realisation of 2010 2009 the tax benefit is probable. Recognised deferred tax assets relate Current tax €’000 €’000 to Metro Sweden, Metro Denmark and Metro France. All of the tax losses in Metro Sweden are expected to be utilised in 2011. The fol- Current period (2,461) (1,816) lowing movements occurred in deferred tax assets: Total (2,461) (1,816) Movement in tax loss carry forwards €’000 2010 2009 Deferred tax €’000 €’000 Balance as at 1 January 2009 4,125 Recognised in profit or loss 4,131 Recognised tax value in tax losses 3,131 5,182 Exchange rate difference 131 Utilisation of previously Recognised in equity - recognised tax losses (2,393) (1,049) Set-off tax (5,182) Temporary differences (165) (2) Balance as at 31 December 2009 3,205 Total 573 4,131 Recognised in profit or loss 738 Exchange rate difference 375 Tax income / (expense) (1,887) 2,315 Balance as at 31 December 2010 4,318

The reconciliation below is based on the Swedish tax rate of 26.3 percent. The effective tax rate is 24.0 percent.

41 Financial statements Annual Report 2010

Notes METRO INTERNATIONAL S.A. In thousands of euro

The Group’s total tax loss carry forwards were €550.5 million Salaries and remuneration - 2010 2009 (€552.1 million) of which €16.1 million (€11.9 million)) has been Group €’000 €’000 recorded as a deferred tax assets. The remaining tax losses have not been recognized. Board of Directors, CEO and other Total tax losses carried forward expire as follows: senior executives

Companies in Sweden 2,886 - 2010 2009 Companies outside Sweden 1,749 3,469 Expiration of tax loss carry forwards €’000 €’000 Total 4,635 3,469

Within one year 1,809 1,817 Other employees Within two years 2,401 1,809 Companies in Sweden 13,209 8,514 Within three years 2,365 2,401 Companies outside Sweden 36,918 40,247 Within four years 5,491 1,290 Total 50,127 48,761 Within five years 38 - Later than five years 26,708 26,695 Total salaries and other remuneration 54,762 52,230 No expiration date 511,702 518,060 Total 550,515 552,072 Social security expenses 10,602 10,765 of which, pension costs 2,532 2,590

The Group has income tax losses in Luxembourg and the Nether- lands for the corporate headquarters of €433 million. The Group 2010 2009 also has tax in Spain and Italy related to closed and divested opera- Discontinued operations - Group €’000 €’000 tions of €67 million. These tax losses are not expected to be utilised and have not been recognised as deferred tax assets. Salaries and other remuneration - 3,316 The remaining €50 million of tax losses relate to Metro Sweden, Social security expenses - 336 Metro Denmark, Metro France and Metro Hungary. All of the tax of which, pension costs - - losses in Metro Sweden and part of the tax losses in Metro Den- mark and Metro France have been recognised as deferred tax assets, whereas the tax losses in Metro Hungary have not been recognised as deferred tax assets. Refer note 31 for information on Salaries and remuneration - 2010 2009 estimation uncertainty relating to deferred tax assets. Parent company €’000 €’000

Board of Directors, CEO and other senior executives 4,635 3,469 Note 11: Personnel expenses, pensions, share based payments of which, variable salary 1,613 547 and remuneration to senior executives Other employees 4,839 5,282 Total salaries and other remuneration 9,474 8,751 In January 2010, the company moved some corporate functions which were formally based in London to Stockholm. Social security Social security expenses 1,674 1,252 is 31.42 percent in Sweden and 12.80 percent in the United King- of which, pension costs 423 361 dom, which has significantly increased social security expenses at the corporate headquarters.

Remuneration to senior executives consists of a combination of an annual base salary, a variable salary, pension, long-term incentive programmes and other customary benefits. Other senior executives include the CFO and Executive Vice Presidents. The variable salary is based on the performance in relation to established objectives. The objectives are connected to Metro’s result and individual performance. The variable salary can amount to a maximum of 90 percent of the annual base salary. Pension to executives is between 5 and 20 percent of base salary. The remuneration of the President and CEO is approved by the Board of Directors’ remuneration committee, whilst the remuneration of other senior executives is set by the President and CEO. Amounts included as salary remuneration under parent company includes recharges supported by the parent company.

42 Financial statements Annual Report 2010

Notes METRO INTERNATIONAL S.A. In thousands of euro

Remuneration and other benefits during the year

As at 1 January 2010, the Group’s Board of Directors comprised of Erik Mitteregger as members of the Board of Directors and elected Mia Brunell Livfors, Cristina Stenbeck, Henry Guy, Mario Quiroz, Michelle Guthrie and Patrick Ståhle as new members. Mia Brunell Nigel Cooper, Didier Breton, and Erik Mitteregger. The Group’s Livfors was re-elected as Chairman of the Board of Directors. Henry shareholders at the May 2010 AGM re-elected Mia Brunell Livfors, Guy resigned as member of the Board of Directors. Cristina Stenbeck, Mario Quiroz, Nigel Cooper, Didier Breton and

Fee or Variable Share-based 2010 base salery renumeration Redundancy payment Other benefits Pension costs Total

Mia Brunell Livfors, Non-executive Chairman 60 - - 14 - - 73 Cristina Stenbeck, Non-executive Vice Chairman 32 - - 7 - - 38 Didier Breton, Non-executive Director 30 - - 7 - - 36 Mario Quirez, Non-executive Director 29 - - 7 - - 36 Michelle Guthrie, Non-executive Director 20 - - - - - 20 Nigel Cooper, Non-executive Director 43 - - 7 - - 50 Henry Guy, Non-executive Director 9 - - 7 - - 15 Erik Mitteregger, Non-executive Director 31 - - 7 - - 37 Patrick Stahle, Non-executive Director 24 - - - - - 24 Per Mikael Jensen, President & CEO 770 693 - 145 38 154 1,800 Other Senior Executives (5 persons) 1,359 920 292 64 23 123 2,781 Total 2,406 1,613 292 264 60 277 4,913

Fee or Variable Share-based 2009 base salery renumeration Redundancy payment Other benefits Pension costs Total

Mia Brunell Livfors, Non-executive Chairman 35 - - 33 - - 68 Cristina Stenbeck, Non-executive Vice Chairman 20 - - 16 - - 36 Didier Breton, Non-executive Director 11 - - 9 - - 20 Mario Queiroz, Non-executive Director 21 - - 16 - - 37 Nigel Cooper, Non-executive Director 36 - - 16 - - 53 Henry Guy, Non-executive Director 21 - - 16 - - 37 Erik Mitteregger, Non-executive Director 9 - - 9 - - 19 Joshua Berger, Former Non-executive Director 7 - - 7 - - 14 Patrick Byng, Former Non-executive Director 9 - - 7 - - 15 Per Mikael Jensen, President & CEO 677 315 - 43 112 112 1,259 Other Senior Executives (8 persons) 1,247 232 716 - 38 101 2,334 Total 2,093 547 716 172 150 213 3,891

The 2010 AGM approved the fees for the members of the Board ed he continues to be employed in his role as President and CEO. of Directors of Metro (including remuneration for the work in the 462,990 shares vested in July 2010, 462,990 shares will vest in July committees of the Board of Directors) for the period until the end 2011 and 1,851,961 shares will vest in July 2012. €92 thousand (€43 of the 2011 AGM to be a total of €357,500 (€294,000) and with such thousand) has been expensed for the year. The shares will be set- amount to be split as follows: the Chairman of the Board of Direc- tled in equity. tors, fees in an amount of €75,000 (€65,000); each of the seven (six) The President and CEO, and other senior executives are entitled ordinary directors of the Board of Directors, fees in an amount of to pension benefits. Pension benefits are secured through premi- €37,500 (€32,500); and in total €37,500 (€34,500) as remuneration ums paid to third party insurance companies. In the event that the for the work within the Audit Committee and the Remuneration Group terminates the employment of these senior executives, sala- Committee. ries will be paid during the period of notice, which is between 6 As set out in the contract of employment, President and CEO Per and 12 months. Mikael Jensen has been granted 2,777,942 shares for his role as The 2004 and 2005 long term incentive programs (LTIP) have CEO and President of Metro International S.A. The shares will be been terminated. A new long-term incentive plan was approved issued to the President and CEO over a three year period, provid- by the shareholders at an Ordinary General Meeting held on 30 September 2009, refer note 28.

43 Financial statements Annual Report 2010

Notes METRO INTERNATIONAL S.A. In thousands of euro

Note 12: Earnings per share Potential dilutive shares as at 31 December 2010 No of shares The calculations of basic and diluted earnings per share are both based on net profit attributable to the equity holders of the parent Warrants 1,319,531,478 company as shown in the table below: CEO shares 2,777,942 Directors shares 2,361,488 2010 2009 LTIP 2010 5,316,714 €’000 €’000 Total 1,329,987,622

Net profit/(loss) Attributable to the equity shareholders The warrant are related to the rights issue, refer note 20. of the parent company 212 (21,117) 462,990 of the CEO shares have already vested, but have not yet of which continuing operations 212 (11,618) been issued, refer note 11. The LTIP 2010 program comprises 905,052 investment shares and Basic weighted average number of 4,411,662 matching shares. The investment shares are due to the shares outstanding 528,009,231 527,931,113 participants in the LTIP 2010 program, but have not yet been is- Diluted weighted average number sued. Refer note 28. of shares outstanding 1,856,912,051 527,931,113

Earnings per share Basic earnings/(loss) per share (€) 0.01 (0.04) Diluted earnings/(loss) per share (€) 0.00 (0.04)

Earnings per share - continuing operations Basic earnings/(loss) per share (€) 0.01 (0.02) Diluted earnings/(loss) per share (€) 0.00 (0.02)

For the calculation of diluted earnings per share, the weighted average number of shares is adjusted for effects of potential ordinary shares for:

• share based payments to the Board of Directors for the period June 2009–May 2010; • share based payments to the CEO; • share based payments for long term incentive programs; and • warrants that at the end of 2013, if exercised, require the parent company to issue A shares.

Dilution is calculated only for potential ordinary shares that reduce the profit per share from continuing operations or increase the loss per share from continuing operations, i.e. for potential ordinary shares that are dilutive. Net result attributable to equity holders of the parent company has been adjusted for all profit and loss amounts that depend on the existence of the debentures/warrants including consequential effects. The potential dilutive shares as at 31 December 2010 aggregated as shown below:

44 Financial statements Annual Report 2010

Notes METRO INTERNATIONAL S.A. In thousands of euro

Note 13: Intangibles assets and office and IT equipment

Capitalised Total intangble Office an IT €‘000 Trademark developent Goodwill assets equipment Total

Cost Balance as at 1 January 2009 6,739 5,666 10,027 22,431 17,503 39,934 Additions 226 914 - 1,140 817 1,957 Additions through business combinations - - 2,007 2,007 96 2,103 Disposals (33) (447) - (480) (5,569) (6,049) Disposals through sale of shares in subsidiaries - (165) (934) (1,099) (2,318) (3,417) Reclassifications ------Effect of movements in exchange rates 124 472 240 836 455 1,291 Balance as at 31 December 2009 7,056 6,440 11,340 24,835 10,984 35,819

Balance as at 1 January 2010 7,056 6,440 11,340 24,835 10,984 35,819 Additions - 558 - 558 1,165 1,723 Additions through business combinations - - 15,241 15,241 2,504 17,745 Disposals (289) (398) - (687) (746) (1,433) Disposals through sale of shares in subsidiaries - - (65) (65) (962) (1,027) Reclassifications ------Effect of movements in exchange rates (38) 80 1,225 1,267 650 1,917 Balance as at 31 December 2010 6,729 6,680 27,741 41,149 13,595 54,744

Amortisation/depreciation and impairment losses Balance as at 1 January 2009 (436) (571) - (1,007) (12,379) (13,386) Amortisation/depreciation for the year (627) (1,926) - (2,553) (2,761) (5,314) Disposals 33 389 - 422 5,402 5,824 Disposals through sale of shares in subsidiaries - 56 - 56 1,605 1,661 Effect of movements in exchange rates (2) (46) - (48) (332) (380) Balance as at 31 December 2009 (1,032) (2,098) - (3,130) (8,465) (11,595)

Balance as at 1 January 2010 (1,032) (2,098) - (3,130) (8,465) (11,595) Amortisation/depreciation for the year (595) (2,058) - (2,653) (1,685) (4,338) Disposals 165 137 - 302 653 955 Disposals through sale of shares in subsidiaries - - - - 795 795 Effect of movements in exchange rates 2 (26) - (24) (201) (225) Balance as at 31 December 2010 (1,460) (4,045) - (5,505) (8,903) (14,408)

Carrying amounts As at 1 January 2009 6,303 5,095 10,027 21,424 5,124 26,548 As at 31 December 2009 6,024 4,342 11,340 21,705 2,519 24,224 As at 31 December 2010 5,269 2,635 27,741 35,644 4,692 40,336

Office and IT equipment primarily consists of IT infrastructure. De- for impairment together with goodwill for the cash-generating unit preciation and amortisation expenses are presented within admin- Metro Russia (St Petersburg). There is no indication that the carry- istrative expenses in the profit or loss. ing value needs to be impaired. The carrying amount of the Group’s goodwill is allocated to the In the acquisition of the Danish title 24Timer, the trademark was following cash-generating units: taken over at a fair value of € 5.5 million. The trademark is amortised over its estimated useful life of 10 years. The net value of the Danish trademark was €4.1 million (€4.6 million). Amortisation cost is reported in “administrative expenses” in the consolidated statement of comprehensive income. Trademarks also include the trademarks “Mempo” and “Metro” in Russia at a book value of €1.2 million (€1.2 million). The trademarks in Russia are in use and have indefinite life since they are registered rights that can, and are, intended to be renewed indefinitely at a cost that is not significant. The trademarks have been tested

45 Financial statements Annual Report 2010

Notes METRO INTERNATIONAL S.A. In thousands of euro

2010 2009 Note 14: Shares in associated companies Goodwill €’000 €’000 2010 2009 Metro Mexico 9,775 - Receivables from associated companies €’000 €’000 SubTV 5,807 - Metro Sweden 5,571 4,844 Carrying amount at beginning of the year 9,819 7,361 Metro Holland 3,636 3,578 Reclassified from receivables from associated Metro Hungary 1,693 1,706 companies (114) - Metro Russia (St Petersburg) 1,070 987 Share of results for the year 2,591 1,076 Metro Chile 189 160 Share of results in associates netted against Metro Greece - 65 receivables (393) - Total 27,741 11,340 Share of results in associates netted against payables 318 - Dividends (565) (125) The estimation of the recoverable amount for the cash-generating Impairment (1,145) - units is based on value in use. Similar key assumptions have been Investment during the year - 114 used to estimate the value of all cash-generating units. Sale of shares during the year (8,318) (38) Forecast sales growth and operating margins are based on his- Receivables converted into equity - 555 torical data and expectations regarding industry trends and market Translation differences 158 876 conditions. Net book value at end of the year 2,351 9,819 The value in use calculation is based on the following assumptions per country:

Other assumptions: The increase in share of results from associated companies is main- • The terminal growth has been assumed at 2–3 percent ly the effect of improved profitability in Metro Canada. Dividends • The cash flows for the cash-generating units have been dis- have been received from Metro Mexico, Metro Korea and SubTV counted based on weighted average cost of capital (WACC) during the year. Impairment represents the write-down of the val- computed using regional inflation and risk profiles after tax. ue of Metro Korea prior to the sale. Sale of shares represents the sale of Metro Korea and the acquisition of Metro Mexico and SubTV. Metro Mexico and SubTV are now WACC Forecast Growth rate after consolidated in the Group. Assumptions 2010 pre tax period forecast period The Group’s operation in French Canada incurred losses in the initial phase of the business. The profits in recent years do not Metro Mexico 18% 5 years 3% cover the losses from the initial phase. Therefore, shares in associ- SubTV (Chile) 14% 5 years 3% ated companies for the operation in French Canada is negative. The Metro Sweden 12% 5 years 2% Group also has a receivable from the operation in French Canada. Metro Holland 12% 5 years 2% The negative share of earnings has been netted against the receiva- Metro Hungary 14% 5 years 2% bles on the operation in French Canada. Metro Russia (St Petersburg) 20% 5 years 3% The value of the Group’s shares in the associated company in Metro Chile 14% 5 years 3% Czech Republic is negative. Therefore, the value of the shares in the Metro Greece - - - operation in Czech Republic has been classified as a liability. The liability related to the shares in Czech Republic has been increased by the net loss incurred in 2010. WACC Forecast Growth rate after Below are the entities where the Group had an equity interest at Assumptions 2009 pre tax period forecast period year end.

Metro Mexico - - - SubTV (Chile) - - - Metro Sweden 7% 5 years 2% Metro Holland 8% 5 years 2% Metro Hungary 12% 5 years 2% Metro Russia (St Petersburg) 15% 5 years 2% Metro Chile 8% 5 years 2% Metro Greece 11% 5 years 2%

Sensitivity analysis Regarding the cash-generating units, management expects that no reasonably possible changes in key assumptions on which the recoverable amounts have been based would cause the carrying amount to exceed the recoverable amount.

46 Financial statements Annual Report 2010

Notes METRO INTERNATIONAL S.A. In thousands of euro

Ownership Ownership As a result of improved cash flow and profitability, Metro Canada Shareholding Country 2010 2009 has increased repayment of the loans. The Group’s operation in French Canada incurred losses in the Free Daily News Group Inc Canada 25 25 initial phase of the business. The profits in recent years do not cov- Publications Metropolitaines Inc Canada 25 25 er the losses from the initial phase. Therefore, shares in associated Atlantic Free Daily News Group Inc Canada 16 16 companies for the operation in French Canada, refer note 14. Is SP Publimetro S.A. Brazil 30 30 negative. The Group also has a receivable from the operation in Metro Publicações do Brasil S.A. Brazil 30 30 French Canada. The negative share of earnings has been netted Metro Ceska Republika A.S. Czech Republic 40 40 against the receivables on the operation in French Canada. Metro Seoul Holdings Inc South Korea - 30 The Canadian dollar has strengthened significantly during the year, and therefore the euro value of the shareholder loans has increased. Translation differences are mainly attributable to the shareholder loans to Metro Canada. The Group acquired controlling interest in Metro Mexico and Sub- TV during the year, refer note 8. The Group also sold its shares in Metro Korea, refer note 6. The shares in Metro Korea were impaired Note 16: Other investments prior to the sale. Summary of the financial performance and position of the associ- Other investments comprise a 15 percent stake in Metro Ecuador ates is presented below. and a 0.81 percent stake in Metro Moscow (Russia). The Group has a call option to increase the ownership in Metro 2010 2009 Moscow (Russia) to 40 percent. The call option in Metro Moscow Financial performance of associates €’000 €’000 (Russia) has a strike price of €4.4 million. The Group also has a call option to increase the ownership in Asset 36,126 52,506 Metro St Petersburg from current 58.5 percent to 100 percent. The Liabilities 39,269 48,629 strike price for the call option in Metro St Petersburg (Russia) is Revenues 128,924 96,629 €6.4 million. Net profit 9,622 5,090 Exercising the option in Metro Moscow (Russia) triggers a put option to sell 51 percent of the Group’s ownership in Metro St Pe- tersburg (Russia). The put option in Metro St Petersburg (Russia) has a strike price of €7.8 million. Metro Mexico, SubTV and Metro Korea has been included in rev- If all three options are exercised, the Group would end up with enue and net profit. However, as these entities are no longer classi- an interest of 40 percent in Metro Moscow (Russia) and an interest fied as associated companies at year end, assets and liabilities have of 49 percent in Metro St Petersburg (Russia). If all three options not been included for these entities. This explains the trend of in- are exercised, the Group will have a cash outflow of €3.0 million. creasing revenue, and decreasing assets and liabilities.

Note 17: Accounts receivables Note 15: Receivables from associated companies Accounts receivables consist of a large number of customers in Receivables from associated companies mainly comprise of different industries and geographical areas, none of whom are by shareholder loans to Metro Canada. themselves material in size. The top 10 customers of 2010 accounted for approximately 6.3 percent (6.4 percent) of the Group’s total advertising revenues. 2010 2009 Receivables from associated companies €’000 €’000 2010 2009 €’000 €’000 Net book value, beginning of the year 8,376 5,368 Reclassified to shares in associates 114 - Gross accounts receivable 51,633 44,410 Receivables - (555) Less allowance for doubtful accounts (5,306) (6,028) Increased investment in Canadian debentuers - 1,570 Total 46,327 38,382 Repayment of loans to Canada (2,650) (627) Loans to associates - 10 Share of results in associates netted against receivables 393 310 Translation differences 1,270 1,287 Other - 1,012 Net book value, end of the year 7,503 8,376

47 Financial statements Annual Report 2010

Notes METRO INTERNATIONAL S.A. In thousands of euro

Note 18: Cash and cash equivalents Note 20: Rights issue

2010 2009 In 2009, the Group issued units composing of: Cash and cash equivalents €’000 €’000 • 1,319 million debentures with an aggregate nominal amount Unrestricted cash 29,389 20,024 of €73.3 million; and Restricted cash - 141 • 1,319 million warrants with an aggregate strike price of €58.6 Total 29,389 20,165 million entitling the holder to subscribe for one new A share in Metro International S.A.

Cash and cash equivalents consists of balances on bank accounts. Through the rights issue, the Group received €48.5 million, before transaction costs. The subordinated debentures and warrants are now being traded on NASDAQ OMX Stockholm.

Note 19: Share capital and reserves The total nominal value of the debentures is €73.3 million with a maturity date at 30 December 2013. The warrants are exercisable Capital management into A Shares during the period 28 October 2013 to 22 November The Board’s policy is to maintain and improve the capital base for 2013. If all warrants outstanding were to be exercised, the Group a sustainable future development of the business and to maintain would receive €58.6 million at the aggregate strike price. Thus, if the confidence of investors, creditors and markets. The Board mon- all warrants are exercised, the Group will pay a net amount of €14.7 itors the level of the Group’s equity. million for the debentures and the warrants in December 2013. The nominal amount of the debentures and the exercise price for Translation reserve the warrants is denominated in Swedish krona. The translation reserve comprises accumulated foreign exchange The debentures and the warrants were issued as units consisting differences from the translation of the financial statements of for- of one debenture and one warrant. The initial issue price for the eign operations from their functional currencies to the presenta- units was split and accounted for as a financial liability component tion currency of the Group. (the debenture) and an equity component (the warrants). Transac- On disposal of a foreign entity, the cumulative translation differ- tion costs were allocated to the two components in proportion to ence relating to the entity is reclassified from other comprehensive the initial split of the unit receipts into the liability component and income to net profit or loss and included in the gain or loss on sale. the equity component.

Share capital Liability component The authorized share capital of the parent company is €13,454,500 On initial recognition, the fair value of the liability component divided into 6,200,000,000 A shares (voting) and 899,999,999 B at the time of issue was calculated by discounting future payment shares (non-voting) with no par value. The issued and outstanding flows (the nominal value of the debenture) at the estimated current share capital of the parent company amounts to €1,000,372.64 di- market yield for similar liabilities without any warrants vided into 264,483,532 A shares and 263,525,699 B shares.

Right issue proceeds and transaction costs €’000 Metro International S.A. A Shares B Shares Total Proceeds from the issue 48,498 1 January 2009 264,385,212 263,427,379 527,812,591 Transaction costs (2,386) Issued 98,320 98,320 196,640 Net proceeds 46,112 1 January 2010 264,483,532 263,525,699 528,009,231 31 December 2010 264,483,532 263,525,699 528,009,231 of which recognised as: -equity component 17,651 -debt component 28,461 A shares carry one vote and B shares carry no vote. Dividends may be paid in euros or in shares of the parent company or otherwise as the Board of Directors may determine in accordance with the connected to the initial issue. provisions of the Luxembourg Companies Act. B shares are enti- Subsequent to the initial recognition, the debenture is measured tled to the greater of a cumulative preferred dividend correspond- at amortised cost. In an amortised cost measurement, the differ- ing to 0.5 percent of the accounting par value of the B shares in ence between initial value and nominal value is amortised in the the parent company or 2 percent of the overall dividend distribu- profit or loss as interest expense over the remaining term using tions made in a given year. Any balance of dividends must be paid the effective rate method including transaction costs attributable equally on each A and B shares. As per the terms and conditions of to the liability component. the subordinated debentures, the Group may not pay out any dividends or any other distribution to its shareholders during the term Equity component of the loan, except for any dividend distribution that the B share The equity component, i.e. the warrant, was measured at the differ- holders maybe entitled to. ence between the total initial receipts from the unit issue and the fair value of the financial liability at the time of issue. Transaction

48 Financial statements Annual Report 2010

Notes METRO INTERNATIONAL S.A. In thousands of euro

costs attributable to the equity component are deducted from eq- The tax provision is booked following notification in 2007 from the uity. Subsequently, the equity component is not re-measured. Swedish Tax Authority for tax being imposed on the Group’s publishing entity in Sweden, Tidnings AB Metro. While the majority of the provision is based upon the actual notification received, estima- Note 21: Long term and short term loans tion has been used in respect of accumulated interest. On the 11th of March 2010, the Swedish Supreme Administra- The Group has a zero coupon debenture loan. The loan has a face tive Court (Swedish: “Högsta förvaltningsdomstolen”) decided not value of €73.3 million and is denominated in Swedish krona. The grant the Group leave to appeal in the advertising tax case. As a loan is carried at amortized cost and had a value of €44.3 million result, Metro will be required to pay the advertising tax within four (€32.5 million) at year end. The loan is due for repayment in De- weeks from notice. For further information, refer note 32. cember 2013. For further details on the debenture loan, refer note The provision has increased mainly as a result of the strengthen- 20. ing of the Swedish krona. The Group has drawn €3.9 million (€2.6 million) on an overdraft facility in France. The facility bears interest at EURIBOR plus 0.9 percent. The Group has also drawn €1.4 million (€0 million) on a revolving loan in Sweden. The revolving loan bears interest at STIBOR Note 23: Accrued expenses and deferred income plus 3.0 percent. The Group has an interest bearing loan from the minority shareholders in Metro Denmark of €6.4 million (€6.1 million). The share- 2010 2009 holder loan bears interest of a fixed 5.5 percent. €’000 €’000

Accrued personnel costs 10,259 8,498 2010 2009 Accrued professional fees 2,060 2,152 Long term and short term loans €’000 €’000 Accrued printing costs 1,802 691 Accrued distribution costs 2,112 2,481 Within one year 3,941 2,624 External Commissions 2,194 3,083 Between one and two years 1,367 - Accrued interest expenses 53 - Between two and three years 44,252 - Other 8,947 7,010 Between three and four years - 32,529 Total 27,427 23,915 Between four and five years - - Between five and ten years - - No maturity 6,397 6,067 Professional fees include amounts paid in respect of agency Total 55,957 41,220 commissions, consultants, lawyers and freelance journalists.

Note 22: Other liabilities and provisions

2010 2009 Other liabilities €’000 €’000

VAT payable 4,962 3,718 Advertising tax 3,312 2,914 Employee withholding tax 702 625 Other tax payables 2,013 2,652 Payable for acquisition of SubTV 2,484 - Other 10,009 9,451 Total 23,482 19,360

Other consists of liabilities relating to legal claims and other operating liabilities.

2010 2009 Provisions €’000 €’000

Advertising tax 8,735 7,695 Total 8,735 7,695

49 Financial statements Annual Report 2010

Notes METRO INTERNATIONAL S.A. In thousands of euro

Note 24: Financial assets and liabilities For short term receivables and payables, the carrying amount is deemed to be equal to fair value. As these receivables and payables Other investments are short term, discounting of cash flows does not cause any ma- Other investments represents unquoted equity instruments, in Ec- terial differences in the fair value. Fair value is estimated to equal uador and Russia, refer note 16. Carrying value is measured at cost, carrying value. since fair value cannot be measured reliably. Subordinated debentures Receivables from associated companies and long term receiva- The subordinated debentures are quoted debt instruments. Fair bles value is estimated based on the quoted market price on the report- For receivables from associated companies and long term receiva- ing date. bles, fair value is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of Loans from non-controlling interest interest at the reporting date. Receivables from associated com- Loans from non-controlling interest represent loans from the own- panies and long term receivables carry floating interest rate. Fair ers of non-controlling interest in Denmark. The loans carry fixed value is estimated to equal carrying amount. interest of 5.5 percent. Fair value is calculated based on the present value of future principal and interest cash flows, discounted at the Accounts receivables, other current receivables, cash and cash market rate of interest on the reporting date. There is no quoted equivalents, short term interest bearing loans, accounts payables market price available for the loans from non-controlling interest. and other liabilities

Loans and Available for Other Carrying 2010 receivables sale liabilities amount Fair value

Other Investments - 277 - 277 - Receivables from associated companies 7,503 - - 7,503 7,503 Long term receivables 2,549 - - 2,549 2,549 Accounts receivable 46,327 - - 46,327 46,327 Other current receivables 14,910 - - 14,910 14,910 Cash and cash equivelants 29,389 - - 29,389 29,389 Total 100,678 277 - 100,955 100,678

Subordinated debentures - - 44,252 44,252 54,624 Loan from non-controlling interest - - 6,397 6,397 6,423 Short-term interest-bearing loans - - 5,308 5,308 5,308 Accounts payable - - 21,292 21,292 21,292 Other liabilities - - 12,493 12,493 12,493 Total - - 89,742 89,742 100,140

Loans and Available for Other Carrying 2009 receivables sale liabilities amount Fair value

Other Investments - 277 - 277 - Receivables from associated companies 8,376 - - 8,376 8,376 Long term receivables 2,127 - - 2,127 2,127 Accounts receivable 38,382 - - 38,382 38,382 Other current receivables 12,201 - - 12,201 12,201 Cash and cash equivelants 20,165 - - 20,165 20,165 Total 81,251 277 - 81,528 81,251

Subordinated debentures - - 32,529 32,529 32,529 Loan from non-controlling interest - - 6,067 6,067 6,067 Short-term interest-bearing loans - - 2,624 2,624 2,624 Accounts payable - - 18,423 18,423 18,423 Other liabilities - - 9,451 9,451 9,451 Total - - 69,094 69,094 69,094

Available for sale financial assets represents unquoted equity instruments, mainly in Ecuador, refer note 16. The carrying value is measured at cost, since the fair value cannot be measured reliably.

50 Financial statements Annual Report 2010

Notes METRO INTERNATIONAL S.A. In thousands of euro

Note 25: Financial risk management Net sales Net sales EBIT Translation exposure 2010 €’000 % €’000 Finance Committee The Board has appointed a Finance Committee comprising of Mia EUR 83,797 38% 2,567 Brunell Livfors, Nigel Cooper, Erik Mitteregger, Mario Queiroz, Per SEK 66,962 30% 809 Mikael Jensen and Anders Kronborg. The Finance Committee meets USD 22,371 10% 3,746 on a monthly basis to monitor results and to discuss significant CLP 14,474 7% 2,012 items that may have financial implications. RUB 9,870 4% 2,879 GBP - 0% (4,916) Currency risk Other 24,995 11% 1,876 As a result of the Group’s geographical spread, the Group deals in Operating result 222,469 100% 8,973 a variety of currencies and is therefore exposed to currency risk. The Group has a policy not to hedge translation and transaction Sale of shares in subsidiaries - - (2,483) exposure. Impairment of goodwill and shares - - (1,523) Revaluation of shares in associates - - 7,103 Transaction exposure Total 222,469 - 12,070 Transaction exposure is associated with payment flows in foreign currency. Sales and purchases are denominated in the functional currency of the subsidiaries, with few exceptions. Therefore, the Net sales Net sales EBIT Group does not have significant transaction exposure on sales and Translation exposure 2009 €’000 % €’000 purchases that will affect the profitability of the operations. The Group also has a debenture loan. The debenture loan is the EUR 111,833 53% (4,285) result of the rights issue in 2009, when the Group issued warrants SEK 53,064 25% (2,589) and debentures. The debenture loan is denominated in Swedish USD 19,577 9% 2,174 krona and due for repayment in December 2013. The euro value of CLP 9,903 5% 1,267 the amount to be paid is €73.3 million (€62.1 million). The warrants GBP - - (7,512) that were issued as part of the rights issue matures can be exer- Other 17,062 8% 885 cised from the 28 October to 22 November 2013. The warrants are Operating result 211,439 100% (10,060) currently in the money and denominated in Swedish krona. If all warrants are exercised, the Group will receive €58.6 million (€49.4 Sale of shares in subsidiaries - - (243) million). Thus, given that all warrants are exercised, the Group has Discontinued operations (USD) 8,793 (9,723) a net exposure of €14.7 million (€12.7 million) from the debentures Total 220,232 - (20,026) and the warrants. If the euro depreciates by 10 percent against the Swedish krona, the net exposure would increase by €1.5 million. A 10 percent change in the exchange rate between the Swedish The Danish krona is pegged to the euro and has therefore been krona and the euro is relevant given that the euro depreciated ap- grouped as euro in the tables above. The Hong Kong dollar is simi- proximately 13 percent against the Swedish krona in 2010. The cash larly pegged to the USD and has been grouped as USD in the tables inflows from the Swedish operation functions like a natural hedge above. against the future outflows from the debenture loans. Revenue denominated in euro has decreased mainly as a result The Group also have loans receivable from the associated com- of the closure and divestment of the operations in Spain, Italy and pany in Canada of €7.5 million (€8.4 million). A 10 percent depre- Portugal in 2009; and as a result of the divestment of the operation ciation of the euro would increase the amount receivable from in Greece in 2010. The divestment of these operations has also im- Canada by 0.8 million. The euro depreciated 12 percent against the proved the operating result denominated in euro. Canadian dollar in 2010. In January 2010, the company relocated some corporate functions from London to Stockholm. As a result of the relocation, the Translation exposure operating loss in British pounds has decreased. The relocation has Translation exposure arises from the conversion of the income implied higher costs in Swedish krona, but the cost increase has statements and balance sheets from the functional currency of the been off-set against improved profitability in the Swedish opera- Group companies to euro. tion. Group net sales and operating results (EBIT) are distributed among the following currencies: If the euro depreciates by 10 percent against all other currencies, given all other things constant, net sales would increase by €13.9 million (€10.0 million). If the euro depreciated by 10 percent against all other currencies, given all other things constant, EBIT would be affected positively by €0.6 million (negatively by €0.6 million).

51 Financial statements Annual Report 2010

Notes METRO INTERNATIONAL S.A. In thousands of euro

Interest rate risk The Group believes that the current cash position will suffice for the The Group’s main source of funding is a zero coupon debenture foreseeable future (at least for the 12 months period from the date loan. Thus, the Group does not pay interest during the maturity of of signing of the financial statements) and that the Group will be the debenture loan. The amount to be paid when the debenture in a position to meet its commitments as and when they fall due. loan matures in December 2013 is fixed. Long term liquidity risk will be managed through improved prof- The Group has a policy not to hedge interest rate risk. itability. Future payments on non cancellable distribution and printing contracts due within one year amounted to €17.1 million (€24.7 2010 2009 million) at year end. Refer to note 27 for further information on Variable rate instruments €’000 €’000 non cancellable contracts. Financial liabilities 5,308 2,624 At year end, the Group had the following credit facilities: Total 5,308 2,624

The Group’s financial liabilities with variable interest rate relates to Currency Facility Used Available a bank loan and an overdraft facility. Credit facilities, 2010 €’000 €’000 €’000 If interest rates increased by 1 percent, with all other variables constant, interest expenses would increase by €53 thousand (€26 Revolving credit facility SEK 8,331 1,367 6,964 thousand). Overdraft creditfacility SEK 2,777 - 2,777 Overdraft creditfacility EUR 4,000 3,941 59 Liquidity risk Total 15,108 5,308 9,800 Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always has sufficient liquidity to meet its liabili- Currency Facility Used Available ties when due, under both normal and stressed conditions, with- Credit facilities, 2009 €’000 €’000 €’000 out incurring unacceptable losses or risking damage to the Group’s reputation. The Group maintains a strong focus on its liquidity posi- Overdraft creditfacility EUR 4,000 2,624 1,376 tion with close monitoring of cash projections throughout the year. Total 4,000 2,624 1,376 The Group has in the past relied upon debt and equity financing from Investment AB Kinnevik, Modern Times Group MTG AB (MTG) and other related companies in order to fund Metro’s operations and expansion. The Group is dependent upon continuing finan- At year end, the Group had the following contractual maturities of cial support from principal shareholders as well as financing from financial liabilities: external banks. If the Group’s current financing proves insufficient and the financial support from above sources ceases, then certain of the Group’s publications might have to be discontinued. Any such action could have a materially adverse effect on the Group’s business, financial condition and results of operations.

52 Financial statements Annual Report 2010

Notes METRO INTERNATIONAL S.A. In thousands of euro

Carrying amount Contractual cash flow Due within Due within Due in 5 years 2010 €’000 €’000 1 year 1–5 year or more

Non-derivative financial liabilities Subordinated debentures (44,252) (73,291) - (73,291) - Revolving credit facility (1,367) (1,367) - (1,367) - Unsecured overdraft facility (3,941) (3,941) (3,941) - - Liability to non controlling interest (6,397) (6,397) - - (6,397) Accounts Payable (21,292) (21,292) (21,292) - - Other liabilities (12,493) (12,493) (12,493) - - Accrued expenses (23,915) (23,915) (23,915) - - Total (113,657) (142,696) (61,641) (74,658) (6,397)

Carrying amount Contractual cash flow Due within Due within Due in 5 years 2009 €’000 €’000 1 year 1–5 year or more

Non-derivative financial liabilities Subordinated debentures (1) (32,529) (62,117) - (62,117) - Unsecured overdraft facility (2,624) (2,624) (2,624) - - Liability to non controlling interest (6,067) (6,067) - - (6,067) Accounts Payable (18,423) (18,423) (18,423) - - Other liabilities (9,451) (9,451) (9,451) - - Accrued expenses (23,915) (23,915) (23,915) - - Total (93,009) (122,597) (54,413) (62,117) (6,067)

The subordinated debentures are zero coupon bonds carried at Ageing analysis, past due but not impaired receivables, is pre- amortised cost. The contractual cash flow of the subordinated de- sented below: bentures, which is due for payment in December 2013, is €73.3 million. The difference in the contractual cash compared to last year 2010 2009 is currency related, as the debentures are denominated in Swedish Ageing analysis €’000 €’000 krona. For further information, refer note 20. Accounts payable terms vary between countries but are generally Not due 26,906 33,765 between 30 days and 90 days. Overdue less than 90 days 16,144 2,783 Overdue more than 90 days 3,278 1,834 Credit risk Total 46,328 38,382 The credit risk is the risk that the counterparty in a transaction will not fulfil its contractual obligations, which can lead to a loss for the Group. The carrying amount of financial assets represents the maximum credit exposure. The average credit period given to customers is generally 30 days. However, the generally accepted payment terms are higher in cer- Credit risk in loans to associates tain countries depending on the general market conditions. Credit risk arises mainly from loans given to associated companies. The Group does not require collateral in respect of trade receiva- Probable impairments on loans are assessed regularly. bles.

Credit risk in trade receivables 2010 2009 Trade receivables account for the majority of the Group’s credit risk. Allowance for doubtful accounts €’000 €’000 The Group’s credit risk in trade receivables is diversified among a large number of customers and agencies. To maintain a controlled Balance at the beginning of the year 6,028 9,281 level of credit risk, the process of issuing credit is supported by a Allowance in companies divested during the year (517) (3,045) credit policy as well as credit instructions. The Group regularly as- Allowance in companies acquired during the year 60 - sesses its credit risk arising from accounts receivable. Each opera- Allowance and recovery of doubtful debts (266) 1,738 tion determines the amount of impairment on trade receivables Reserves written off - (1,946) and makes provisions for expected credit losses. Individually sig- Balance at the end of the year 5,305 6,028 nificant exposures are provided for on a case-by-case basis. There is also a collective provision for less significant exposures in accordance with the Group’s bad debt provision policy. It cannot be excluded, however, that the Group’s customers will not settle their As per reporting date, no client represented more than 10 percent commitments, which could negatively affect the Group’s profits and of the Group’s trade receivables. financial position.

53 Financial statements Annual Report 2010

Notes METRO INTERNATIONAL S.A. In thousands of euro

Note 26: Subsidiaries Ownership % Ownership % Country 2010 2009

Metro International Luxembourg Holdings S.A.1) Luxembourg 100 100 Metro International UK Ltd United Kingdom 100 100 Metro International Sweden AB Sweden 100 100 Metro International AB 1) Sweden 100 100 Rally Television AB 1) Sweden 100 100 Metro Sweden Holding AB Sweden 65 100 Metro Nordic Sweden AB Sweden 65 65 Tidnings AB Metro Sweden 65 65 Metro Goteborg Forsaljnings AB 3) Sweden 65 65 Tidnings AB Metro Goteborg 3) Sweden 65 65 Metro Modern Media AB 4) Sweden - 100 Dawn 2 Dusk AB Sweden 32.5 32.5 MetroXpress Denmark A.S. Denmark 51 51 Distributionskompagniet ApS Denmark 51 51 MTG Metro Gratis Kft Hungary 100 100 TPP Sp.zo o. 4) Poland - 100 Clarita B.V. 1) Netherlands 100 100 Metro Holland B.V. Netherlands 100 100 M. I. Advertising Services 2) Greece 100 100 Metrorama Publishing Ltd 5) Greece - 100 Edizione Metro Sarl 3) Italy 100 100 Metro Publicita Sarl 3) Italy 100 100 Metronews S.L. 3) Spain 100 100 Publication Metro France S.A.S. France 65.7 65.7 Russian Press Services Ltd 1) Cyprus 58.5 58.5 CJSC Publishing House Russia 58.5 58.5 Metro USA Inc 1) USA 100 100 Publimetro S.A. Chile 100 100 Inversiones Pro Medios Limitida 1) Chile 100 100 Publimetro Magazine Group S.A. Chile 100 100 Diario Pyme S.A. Chile 100 60 SubTV S.A. Chile 100 35 Publicaciones Metropolitanas S.A. de CV Mexico 72.5 49 Metro Do Participacoes Ltda 1) Brazil 100 100 Metro Argentina 3) Argentina 100 100 512261 Metro Publications (Canada) Inc. 1) Canada 100 100 514767 NB Ltd (‘’Toronto Sales Co’’) Canada 80 80 512262 NB Ltd (‘’Montreal Sales Co’’) Canada 80 80 Metro Investment Holding Ltd 1) Hong Kong 100 100 Metro Publishing Hong Kong Limited Hong Kong 100 100 Metro Logistic Ltd Hong Kong 100 100 Metro Gift Box Company Ltd Hong Kong 100 60 Metro Print Advertising Limited Hong Kong 100 - Metro Interactive Advertising Limited Hong Kong 100 - P4L Limited Hong Kong 100 -

The table shows the parent company’s, Metro International S.A., effective ownership in each company. SubTV S.A. and Publica- ciones Metropolitanas S.A. de CV were recognised as associated companies in the annual report for 2009.

1) Holding company 2) Under liquidation 3) Inactive 4) Liquidated 5) Divested

54 Financial statements Annual Report 2010

Notes METRO INTERNATIONAL S.A. In thousands of euro

Note 27: Operating leases and long term obligations amount to 4,411,662 shares. The matching shares will be settled in equity. In 2010, an amount of €187 thousand (€0 thousand) has been Future payments on non-cancellable 2010 2009 expensed with respect to the LTIP program. operating leases €’000 €’000 CEO shares Within one year 3,915 4,278 As set out in the contract of employment, the President and CEO is Between one and two years 6,512 3,469 entitled to 1,420,809 A shares and 1,357,133 B shares, to be vested Between two and three years 1,810 1,922 over a three year period. For further information please refer to Between three and four years 1,043 64 note 11. Between four and five years 778 - More than five years 577 - Total 14,635 9,733 Note 29: Contingent liabilities Legal proceedings in Spain Metro Spain is party to a lawsuit from a third party sales agency Operating leases are mainly related to office premises and leases for termination of a contract without notice and breach of the on delivery trucks. non-compete clause, demanding damages of €6.4 million. Metro Spain has contested the claims. Advice from legal counsel is that the amount of any adverse judgment cannot be reliably estimated. Future payments on non-cancellable 2010 2009 The Group has not made any provision in the financial statements distribution and printing contracts €’000 €’000 for the claim made. The closure of the Group’s operations in Spain in January 2009 has not resulted in any change in the status of the Within one year 13,187 24,706 case. Between one and two years 12,306 5,697 No provision has been made with respect to the legal proceed- Between two and three years 4,781 4,790 ings in Spain. Between three and four years 3,392 1,563 Between four and five years 2,861 1,517 Legal proceedings in Italy and France More than five years 6,338 8,608 Lawsuits have been filed in France and Italy requesting that the Total 42,864 46,881 Group is prohibited to use the trademark Metro for newspapers in these countries, including claims for damages for the infringing use that has already occurred. If these lawsuits are successful, the Group must cease its use of the trademark Metro in France and The Group has entered into distribution and printing contracts in Italy, which may negatively affect the business operations in these the countries where the newspaper is published. The contracts are countries. The Group may also be liable for damages for infringe- of different lengths and in most cases the Group has the option to ment, currently amounting to a maximum of approximately €0.8 terminate the contract with less than one year’s notice. In some million in France and approximately €0.3 million in Italy. It should instances there are non-cancellable contractual commitments ex- be noted, however, that the claims for damages could increase the tending beyond 12 months. longer infringement continues. Future payments more exceeding 5 years mainly relate to Metro No provision has been made with respect to the legal proceed- Holland, where the Group has entered into a 10 year contract with ings in Italy and France. NS, the Dutch rail operator.

Note 28: Long-Term Incentive Plan

LTIP program At the ordinary general meeting September 2009, the shareholders approved the Long Term Incentive Plan (LTIP) for the period January 2010 to December 2012 for 9 senior executives in the Metro group. The eligible executives have subsequently invested between four and seven percent of their base salary for subscribing for the investment shares. For each investment share, the senior executives have been granted the right to between four and six matching shares. Awards of matching shares is contingent on achievement of performance conditions. For the shares to vest, targets for EBIT and Total Shareholder Return (“TSR”) must be achieved. The EBIT target for full vesting is 5 percent average EBIT over the three year period. The TSR target is achieved if TSR at the end of the performance period is greater or equal to TSR at the beginning of the performance period. The maximum number of matching share granted

55 Financial statements Annual Report 2010

Notes METRO INTERNATIONAL S.A. In thousands of euro

Note 30: Related party transactions The Group has utilised services from a number of related parties. In the case of each related party service agreement, terms were first compared with the corresponding terms offered by independent suppliers, in order to ensure that all contracts are at arms-length. The table below shows Group’s sales and purchases with related parties during the year and receivables from and liabilities to related parties:

2010 €’000 2009 €’000 Related party sales and costs Sales Costs Sales Costs

Investment AB Kinnevik 46 30 18 769 MTG 946 1,074 927 970 Tele2 1,303 587 847 377 Audit Value International - 169 - 170 Relevant Traffic - 133 - - Total 2,295 1,994 1,792 2,286

2010 €’000 2009 €’000

Accounts Accounts Accounts Accounts Related party receivables and payables receivables payables receivables payables

Investment AB Kinnevik 13 1 - - MTG 92 255 406 68 Tele2 86 90 - 94 Audit Value International - 12 - 29 Relevant Traffic - 56 - - Total 191 415 406 191

Investment AB Kinnevik and MTG are defined as related parties since these companies own shares in the Group and have a significant influence over the Group. Related parties to the Group hold a significant amount of shares in Tele2, Audit Value International and Relevant Traffic. The 2009 costs for Investment AB Kinnevik mainly relate to the commitment fee for guaranteeing the rights issue. The Group also procures treasury, insurance brokerage and capital markets advi- sory services from Investment AB Kinnevik. The Group sells and purchases advertising to MTG. The Group also rents office space and procures accounting services from MTG. The Group sells advertising to Tele2. The Group purchases communications services from Tele2. The Group purchases internal audit services from Audit Value In- ternational. The Group purchases online search engine optimization services from Relevant Traffic. Associated companies and the Group’s directors and executives are also related parties. Information on these can be found in notes 11, 14 and 26.

56 Financial statements Annual Report 2010

Notes METRO INTERNATIONAL S.A. In thousands of euro

Note 31: Estimation uncertainty Note 32: Subsequent events On the 11th of March 2011, the Swedish Supreme Administrative Key sources Court (Swedish: “Högsta förvaltningsdomstolen”) decided not Key sources of estimation uncertainty are those which have a signif- grant the Group leave to appeal in the advertising tax case. As a re- icant risk of causing a material adjustment of the carrying amount sult, Metro will be required to pay approximately €10 million within of assets and liabilities within the following financial year. The judg- four weeks from notice. ment about which amounts are associated with a significant risk to The case concerns additional advertising tax levied on the change materially during the following twelve months is based on Group’s publishing entity in Sweden, Tidnings AB Metro, following facts known before issuance of this annual report. If circumstances a decision by the Swedish Tax Authorities in 2007. The additional change in an unexpected way, other amounts than those presented advertising tax amounts to approximately €10 million including in- may change materially. terest. The additional tax was fully provided in the Group’s accounts for 2007. i. Legal proceedings in Spain Metro Spain is party to a lawsuit from a third party sales agency for There are no other material events after the reporting period. termination of a contract without notice and breach of the non- compete clause. Metro Spain has contested the claims and as such no provision has been recorded. Advice from legal counsel is that there is a possible exposure and the amount of any adverse judgment cannot be reliably estimated. The closure of Metro Interna- tional’s operations in Spain in January 2009 has not resulted in any change in the status of the case. ii. Legal proceedings in France and Italy – trademark Suits have been filed in France and Italy requesting that the Group is prohibited to use the trademark Metro for newspapers in these countries, including claims for damages for the infringing use that has already occurred. If these suits are successful, the Group must cease its use of the trademark Metro in France and Italy, which may negatively affect the business operations in these countries. The Group may also be liable for damages for infringement, currently amounting to a maximum of approximately €0.8 million in France and approximately €0.3 million in Italy. It should be noted, however, that the claims for damages will increase the longer infringement continues. The Group has not made any provisions in the financial statements regarding these amounts. iii. Deferred taxes The Group individually evaluates all legal entities tax position and has recognised deferred tax assets to the extent that it is probable that future taxable profits will be available against which temporary difference can be utilised. This assessment is based on forecasts and business plans. The net deferred tax asset amounted to €4.3 million (€3.2 million). Refer note 10 for further information on taxes. iv. Impairment of goodwill Goodwill is subject to annual tests for impairment. The tests comprise assumptions to estimate future cash flows. The estimations are based on management’s forecasts and business plans. Manage- ment believes that no reasonably possible changes in key assumptions would cause the values in use to be lower than the carrying amounts of the cash-generating unit including goodwill. Goodwill amounted to €27.7 million (€11.3 million). This increase is mainly the result of the acquisitions of Metro Mexico and SubTV. v. Capitalised development costs Capitalised development costs relate to the Group editorial system and global interactive platform and are amortised over their estimated useful life. The estimation of the useful life is dependent on the evolution of the underlying business and of the achievement of the benefits initially expected.

57 Contact details Annual Report 2010

Contact details

Metro International Metro Toronto France Italy Sweden Metro International 625 Church Street, 6th floor Metro Paris Metro Rome Metro Stockholm Ringvägen 52 Toronto, ON M4Y 2G1 35 rue Greneta Via Carlo Pesenti 130 Ringvägen 52 118 67 Stockholm, Sweden +1 416 486 4900 75002 Paris 00156, Rome 118 67 Stockholm +46 (0)8 120 570 00 +33 (0)1 55 34 45 00 +39 064 924 1200 +46 (0)8 402 99 00 Metro Vancouver Metro International 1190 Homer Street, Suite 250 Metro Lille Mexico Metro Gothenburg 62-65 Chandos Place Vancouver, BC V6B 2X6 11 Rue Bartholomew Masurel Publimetro Mexico City Drottninggatan 36 2nd Floor +1 604 602 1002 59000 Lille Insurgentes Sur No. 716 411 14 Gothenburg London WC2N 4HG, England +33 (0)1 55 34 45 00 piso 10 +46 (0)31 743 8100 +44 (0)20 7016 1300 Metro Halifax Colonia del Valle 3260 Barrington Street, Metro Lyon C.P. 03100, Mexico D.F. Metro Malmö Metro International Suite 102 25 Rue Paul Chenavard +52 (55) 5340 0700 Bergsgatan 20 2–4 Avenue Marie Thérèse Halifax, NS B3K 0B5 69001 Lyon 214 22 Malmö +1902 444 4444 L-2132 Luxembourg +33 (0)1 55 34 45 00 Metro Monterrey +46 (0)40 6600 750 + 352 27 751 350 Humboldt No.1122, Pte. Canada (French) Metro Marseille L8y9 Col. Mirador Nuevo León US Metro Montreal Brazil 60 Course Pierre Puget C.P. 64000 Monterrey, N.L. Metro New York 625 President Kennedy, Metro São Paulo 13006 Marseille +52 (81) 8342 1924 44 Wall Street, 8th Floor Bureau 700, Montreal SP Publimetro S/A +33 (0)1 55 34 45 00 New York, NY 10005 H3A 1K2, Quebec Rua Tabapuã, 81. 14° andar Netherlands +1 212 952 1500 Itaim, C.P. 04533-010 +1 514 286 1066 Metro Nice Metro Amsterdam São Paulo - SP 30 Avenue Jean Médecin Nachtwachtlaan 20, 8th Floor Metro Boston +55 (0)11 35 28 8555 Chile 06000 Nice 1058 EA Amsterdam 320 Congress Street Publimetro +33 (0)1 55 34 45 00 +31(0)20 511 4000 5th Floor Avenida Kennedy 5735, Metro Campinas Boston, MA 02210 Rua Eng. Antonio F. Paula de Oficina 701, Torre Poniente Metro Toulouse Metro Rotterdam +1 617 210 79 05 Souza 2799 Las Condes, Santiago 12 Rue Gabriel Péri Westblaak 224 CEP 13045-541, São Gabriel, +56 (2) 421 5900 31000 Toulouse 3012 KP Rotterdam Campinas Metro Philadelphia +31 (0)10 206 0320 Phone +55 (11) 3528 8500 Czech Republic +33 (0)1 55 34 45 00 The Graham Building Suite 1400 30 South, Metro Prague Portugal 15th Street 14th Floor Metro Rio de Janeiro Kováků 24 Greece Philadelphia, PA 19102 Rua Alvaro Ramos 350 Praha 5 - Smíchov Metro Athens Metro Lisbon +1 215 717 2600 4º andar 150 00 1 Davaki Str & 116 Kifissias Estrada da Outurela, 118 CEP 22280-110, Botafogo, Rio +420 22 506 5111 Avenue, 115 26 Athens Parque Holanda, Edificio de Janeiro +30 210 6901 400 Holanda 2740-114 Carnaxide +55 (11) 3528 8500 Denmark +351 214 241 430 MetroXpress/24Timer Guatemala Metro Santos Bygmestervej 61 Publinews Av. Ana Costa 141, 5º andar 2400 Kobenhavn NV Avenida La Reforma 9-55 Russia – CJ. 51 +45 77 30 57 57 zona 10 Metro Moscow CEP 11060-002, Gonzaga, Edificio Reforma 10, Nivel 8, Gazeta Metro Santos Ecuador Oficina 806 125040 Skakovaya 36 Guatemala City Moscow +55 (11) 3528 8500 Metro Quito +7 (495) 787 12 11 Avenida Mariscal Sucre +502 231 279 00 Canada (English) OE6-116 y Caton Cárdenas, Metro Ottawa El Condado, Quito Hong Kong Metro St. Petersburg 130 Slater Street, Suite 300 +59 (32) 249 1840 Metro Hong Kong 2 Avtovskaya Street Ottawa, Ontario K1P 6E2 25/F 148 Electric Road, St Petersburg, 198096 +1 613 236 5058 Metro Guayaquil North Point, Hong Kong +7 812 459 4848 9 de Octubre 2202 y Tungu- +852 3196 1600 Metro Calgary rahua South Korea 120, 3030 - 3 Avenue NE Guayaquil Hungary Metro Seoul Calgary, AB, T2A 6T7 +59 (04) 2295 925 Metropol 1-141,142 Sinmunno 2(i)-ga +1 403 444 0136 MTG Metro Gratis Kft. Jongno-gu Finland H-1138 Budapest Seoul 110-062, Metro Edmonton Metro Helsinki Madarász Office Park +82 2 721 9800 2070, 10123 - 99 Street NW, Martinkylantie 11 A Madarász Viktor Str. 47-49. Edmonton, AB, PL 300 01620 Vantaa 5th floor Metro Busan T5J 3H1 +358 9122 4362 +36 1431 6400 Dongseong Building (3F) +1 780 702 0592 1145-11 Choryang 3-Dong Donggu, Busan 601-836 +82 51 959 2000