Board of Directors Report and Financial Statements. Vuosikertomus. Luottokunta Cash. Board of Directors Report. Auditors Report.

Transcription

1 Vuosikertomus Board of Directors Report and Financial Statements Board of Directors Report Luottokunta Balance Sheet Auditors Report Luottokunta Group Balance Sheet Luottokunta Income Statement Statement of the Executive Board Luottokunta Group Income Statement Luottokunta Group Cash Flow Statement Luottokunta Cash Flow Statement Notes to accounting principles Key Figures Administrative Bodies

2 BOARD OF DIRECTORS REPORT AND FINANCIAL STATEMENTS 2011 Board of Directors Report Business Environment Strong growth in card payments continued. In Finland, the rate of payment card use as a payment method is three times the EU average. SEPA compliant general-purpose debit cards have replaced national debit cards in Finland. In 2011, purchase transactions share of all card transactions rose to 87 per cent and the share of cash withdrawals was 13 per cent. The SEPA migration will boost demand for trans-national payment services. Growing internationalisation among customers and companies providing card services is placing greater demands on the efficiency and range of card payment solutions. Rapid technological progress is bringing new payment channels and players to the markets. This trend emphasises the benefits provided by economies of scale. The market transformation offers new opportunities to Luottokunta for growing globally with its customers. New service solutions and cooperation structures allow Luottokunta to diversify its service selection and improve its cost-efficiency. Luottokunta has seized the opportunities offered by market change. It has decided to revise its company structure by placing business operations in the limited liability company fully owned by the Luottokunta Co-operative. The objective is to generate shareholder value, while offering customers services that are always up to date, efficient and competitive. Luottokunta Group 2011 Luottokunta group operating surplus for the financial year 2011 was EUR 12.4 million. The total surplus for the period was EUR 9.3 million. At period end, Luottokunta s capital adequacy ratio stood at a solid 29.9% per cent. Total sales generated by card services offered by Luottokunta grew by 33%, to EUR 37.9 billion. Luottokunta processed 1.6 billion card payment transactions and authorisations, representing an increase of 39% over the previous year. The chip card management service provided by Luottokunta was adopted in Finland, Sweden and Norway. Since 2011, Luottokunta has been offering acquiring services to banks as well as merchants. At the year end, Luottokunta introduced the luncheon prepaid card to complement the traditional Lounasseteli luncheon voucher. Services for Banks Luottokunta provides banks with a wide range of card-issuing services, as well as administrative and processing services for card schemes. Luottokunta s bank services currently cover over 13 million payment and credit cards, of which around 1.6 million are Visa cards issued jointly by Luottokunta and the banks. Chip card data management and security calculation services were adopted for Nordea s payment cards in Finland, as well as in Sweden and Norway. In 2012, the service will be extended to Denmark, bringing the total number of cards included to more than 7 million. After the completion of the authentication stage of the new issuing card system, preparations for customer-specific introduction were initiated with the objective of reaching the first production stage in autumn The new card system will allow Luottokunta to provide even more flexible and comprehensive services to its customers. Merchant Services Luottokunta offers routing and settlement services to those accepting card payments, as well as payment terminal solutions and services related to distance and self-service sales. At the year end, the network of card payment locations comprised over 100,000 points of sale accepting Visa and MasterCard cards, as well as some 2,000 distance selling locations. Strong growth in Merchant Services continued in The volume of Merchant Services grew by 39% to EUR 31.9 billion. The shift from national bank cards to Visa and MasterCard debit cards contributed to this strong growth. The number of payment transactions received by the acquiring service grew by 36% during the accounting year, to million transactions. During the year, Luottokunta processed million authorisation transactions, showing a year-on-year increase of 53.4%. According to preliminary information, Luottokunta was the second-biggest Visa and MasterCard payment transaction acquirer in the Nordic countries and the seventh-biggest in Europe in Luottokunta revised its merchant pricing in February The objective of this revision was to make card payment a cost-efficient method for all parties involved. It was also aimed at encouraging merchants to adopt a secure payment environment. Good progress was made with the switchover to chip card payment in Finland in 2011; at the year-end, more than 95% of all merchants used a chip terminal to accept card payments. Since late 2011, Luottokunta has also offered banks the so-called co-acquiring service, i.e. card payment acquiring and processing services. Based on this service model, the bank agrees with the merchant on the terms and conditions of the service, and Luottokunta offers its superior competence, backed up by years of experience, in card payment settlement services. Merchants appreciate the high availability of services, flexibility, and cost efficiency, which translates into low prices. Corporate Services Luottokunta offers companies and the public administration sector Business Eurocard payment solutions and prepaid products. Business Eurocard sales increased by 8% to EUR million. Similarly, sales of Lounasseteli luncheon vouchers and Virikeseteli recreational vouchers were strong, showing 8% growth to 23.7 million vouchers and to EUR million. In autumn 2011, Luottokunta introduced the corporate card service provider business model. An account-linked Lunch Card was launched on the markets, to supplement the traditional Lounasseteli luncheon voucher. In addition to an EMV chip, the Lunch Card features a Visa standard-based contactless payment feature. The Lunch Card makes financial administration in companies and organisations easier, simplifies payment processes in restaurants, and offers added convenience to consumers. 2 LUOTTOKUNTA 2011

3 Group Profit Performance and Financial Position Profit Performance Luottokunta Group operating surplus came to EUR 12.4 million (9.5) 1) and the surplus for the period was EUR 9.3 million (7.1). Income Net income from operations was EUR million, which is 15.2% higher than in the previous year (93.4). Interest income was EUR 8.4 million (5.3) and interest expenses EUR 1.0 million (1.4). An increase in interest-bearing receivables from customers boosted the growth of interest income. Income from equity investments totalled EUR 0.1 million (0.1). Commission income amounted to EUR million (163.6). This increase was due to the strong growth in the volume of received payment transactions. The main commission income items were merchant commissions (EUR 125.1million), annual card administration fees (27.0 million) from the banks and cardholders usage charges (12.5 million). Commission expenses totalled EUR 92.7 million (78.4). This increase was also brought on by the strong growth in payment transaction volumes. The main commission expense items were interchange fees paid to card issuers (EUR 75.6 million) and fees paid to international card companies (7.6 million). Other operating income totalled EUR 6.0 million (4.3), and included an EUR 1.0 million income recognition for overdue vouchers. Expenses Administrative expenses, depreciation and other operating expenses totalled EUR 94.0 million (78.8). This increase in expenses resulted from planned investments in the development of operations. Administrative expenses totalled EUR 60.9 million (53.9), of which personnel costs accounted for EUR 28.7 million (27.9) and other administrative expenses for EUR 32.2 million (26.0). Depreciation, amortisation and impairment of Group goodwill and tangible and intangible assets totalled EUR 11.9 million (9.8). Of this, amortisation of Group goodwill accounted for EUR 1.1 million (1.3). Depreciation, amortisation and impairment on tangible and intangible assets totalled EUR 10.7 million (8.5). Other operating expenses came to EUR 21.3 million (15.1). Impairment losses on credits and other receivables Impairment losses on credits and other receivables decreased to EUR 1.2 million (5.1). Gross impairment losses on credit equalled EUR 5.1 million (7.4 million). Credit loss reversals totalled EUR 4.2 million (2.8). This includes non-recurring income of EUR 1.1 million from the sale of receivables undergoing debt collection. Losses from card misuse amounted to EUR 0.3 million (0.5). Balance Sheet and Financing The balance sheet total rose by 15.4 % to EUR million (549.7) through growing business volumes. Assets Claims on credit institutions grew to EUR million (76.9) as the number of payment transactions received grew. Debt securities totalled EUR million (149.8). Claims on the public and public-sector entities increased by 10.3% to EUR million (263.7). At year-end, non-performing receivables totalled EUR 3.4 million (4.2). Capital expenditure totalled EUR 22.0 million (11.6), mainly involving the overhaul of the issuing card system and business model development for card payment settlement services. At year end, the balance sheet value of intangible and tangible assets amounted to EUR 39.2million (30.3). Liabilities Liabilities to credit institutions totalled EUR 21.4 million (30.1), while liabilities to public and public-sector entities increased by 24.1% to EUR million (322.7), due to the growth in the volume of received payment transactions. Other liabilities totalled EUR 8.9 million (5.2), with statutory provisions in other liabilities accounting for EUR 0.3 million (0.3) of this figure. Equity capital The year-end Luottokunta Group equity capital came to EUR million (167.9), co-operative capital accounting for EUR 7.2 million (7.5) of this. Off-Balance-Sheet Items Unused credit and spending limits granted to customers, under off-balance-sheet commitments, decreased to EUR 926.4million (1,161.2). 1) Comparative figures for 2010 are in parentheses. January December figures were used as comparatives for the Income Statement and similar accumulated figures. For balance sheet and other cross-sectional data, the figures of the previous balance sheet date (31 Dec. 2010) were used as comparatives. LUOTTOKUNTA

4 BOARD OF DIRECTORS REPORT AND FINANCIAL STATEMENTS 2011 LUOTTOKUNTA GROUP BALANCE SHEET AND INCOME STATEMENT SUMMARY BALANCE SHEET (EUR million) 2009 Assets Claims on credit institutions Claims on the public and on public-sector entities Debt securities Shares and participations Intangible and tangible assets Other items Total Equity and Liabilities Liabilities to credit institutions Liabilities to the public and public-sector entities Other liabilities Deferred tax liabilities Equity capital Total INCOME STATEMENT (EUR million) 2009 Commission income Net income from operations Personnel costs Other administrative expenses Depreciation and impairment on tangible and intangible assets and goodwill Other operating expenses Impairment losses on credits and other receivables Operating surplus Income taxes Surplus for the period LUOTTOKUNTA 2011

5 LUOTTOKUNTA GROUP KEY FIGURES AND RATIOS (EUR million) 2009 Net sales Operating surplus Operating surplus, % of net sales ROE % ROA % Equity ratio % Capital adequacy % Gross capital expenditure Income/Expense ratio FORMULAS FOR KEY FIGURES AND RATIOS Net sales Sum total of interest income, income from equity investments, commissions, net income from available-for-sale financial assets and other operating income Operating surplus Operating surplus shown in the Income Statement ROE % Operating surplus - Income taxes Equity capital + Accrued appropriations less deferred tax liability (average of opening and closing Balance Sheet) x 100 ROA % Operating surplus - Income taxes Average Balance Sheet total (average of opening and closing Balance Sheet) x 100 Equity ratio % Equity capital + Accrued appropriations less deferred tax liability Balance Sheet total x 100 Capital adequacy % Total capital base Total minimum capital requirement x 8% Gross capital expenditure Capitalised gross capital expenditure for the period Income/Expense ratio Administrative expenses + Depreciation + Other operating expenses Net income from operations LUOTTOKUNTA

6 BOARD OF DIRECTORS REPORT AND FINANCIAL STATEMENTS 2011 Risk Management and Capital Adequacy The purpose of risk management is to systematically manage threats and opportunities which might affect Luottokunta s achievement of its business goals. Risk management helps Luottokunta to meet its business goals and ensure the continuity of its business operations, by ensuring that operational risks are within its risk-bearing capacity. Capital adequacy management is a continuous process, closely linked to Luottokunta s risk management system and internal control. Capital adequacy assessment comprises identifying, measuring and evaluating risks. Assessment of capital adequacy and capital requirements form an important part of Luottokunta s yearly business planning and target-setting processes. Risk Management Organisation Luottokunta s Board of Directors is in charge of organising and maintaining internal control and risk management, and it confirms the general principles for internal control and risk management on an annual basis. Furthermore, the Board annually approves Luottokunta s strategy, business and capital management plans and risk-bearing capacity, as well as the plan for maintaining a capital adequacy position proportioned to said risk-bearing capacity. The Board of Directors appoints a Risk Management Steering Group, which is responsible for developing and maintaining procedures compliant with the risk management principles adopted by the Board of Directors, as well as reporting risks to the Board. This Steering Group is tasked with maintaining Luottokunta s risk management principles, supervising the company s risks and ensuring the viability and practical implementation of its risk management activities. The Steering Group appoints the necessary task forces, whose roles and responsibilities are specified in Luottokunta s Risk Management System. Risk-Bearing Capacity and Capital Adequacy Management Luottokunta s risk-bearing capacity is determined by the size and quality of its capital base, and its profitability level. Risk-bearing capacity also depends on qualitative factors such as the reliability and functionality of its administration, internal audit, risk management and capital adequacy management. The capital adequacy management process is based on the identification, measurement and evaluation of risks, as well as a capital adequacy assessment based on these. The management process is used to determine the desired level of capital adequacy and the required quality and quantity of capital. Risk-based capital requirement evaluations are based on Luottokunta s risk management system, which allows the company to systematically and comprehensively identify risks arising from, and fundamentally linked to, its operations, and to assess their causes, scope and consequences. The most significant risks associated with Luottokunta s operations in terms of capital adequacy are credit, operational, market, financing and strategic risks. The evaluation results in a capital plan, which specifies the targeted capital adequacy level and the objectives for capital quantity and quality for the following three years. The Board of Directors approves the capital plan as part of annual planning. Luottokunta publishes its capital adequacy data at least once a year, in the annual report. Luottokunta Group Capital Base and Capital Adequacy Ratio Luottokunta Group s capital adequacy is calculated following the same principles as the Luottokunta Group Financial Statements. At the end of 2011, the Luottokunta Group s capital adequacy ratio was 29.88% (32.01). The capital adequacy ratio of Tier 1 capital was 28.29% (31.32). With regard to credit risk, the minimum capital requirements of Pillar 1 are calculated using the standardised approach, and with regard to operational risk using the basic indicator approach. Since Luottokunta bears no commercial stock, exchange rate or asset risk, no account is taken of the capital requirement for market risk in accordance with Pillar 1. The Group s capital base was EUR million (144.3), of which Tier 1 capital accounted for EUR million (141.1). The surplus for the financial year is included in the capital base for capital adequacy calculations. Risk-weighted receivables from credit and counterparty risk rose by 10.4% to EUR million (287.6). Total risk-weighted items came to EUR million (450.6). 6 LUOTTOKUNTA 2011

7 Group Capital Adequacy Summary (EUR million) Tier 1 capital Tier 2 capital Total capital base Risk-weighted credit and counterparty risk Risk-weighted operational risk* Total risk-weighted items Capital adequacy ratio % Tier 1 capital adequacy ratio % Minimum capital requirement Capital buffer (regulatory capital ratio minimum capital requirment) * Capital requirement 15% calculated on the basis of the three previous years average gross income multiplied by risk-weighting factor 12.5 (= 1 / 0.08). Total Capital Base (EUR million) Tier 1 capital Equity capital Co-operative capital Total funds Retained surplus Reserve fund Contingency reserve Surplus for the period Deductions from Tier 1 capital Intangible assets Consolidated goodwill Total Tier 1 capital Tier 2 capital Superior Tier 2 capital Fair value reserve Total Tier 2 capital Other capital Total capital base LUOTTOKUNTA

8 BOARD OF DIRECTORS REPORT AND FINANCIAL STATEMENTS 2011 Minimum Capital Base Requirement Risk-weighted receivables Minimum capital base requirement (EUR million) Capital adequacy requirement for credit and counterparty risk Credit risk standardised approach liability groups Claims on governments and central banks Claims on credit institutions Claims on companies Retail receivables Overdue receivables Other items Total credit risk standardised approach Off-balance-sheet commitments Capital adequacy requirement for operational risk Basic indicator approach Total capital adequacy requirement Capital adequacy ratio % Tier 1 capital adequacy ratio % Capital Adequacy Formulas Capital adequacy ratio: Total capital base Total minimum capital requirement x 8 % Tier 1 capital adequacy ratio: Total Tier 1 capital Total minimum capital requirement x 8 % 8 LUOTTOKUNTA 2011

9 Credit Risk The purpose of credit risk management is to ensure that credit risks negative effects on profit are kept at an acceptable level. This process is guided by the limits set by the Management Team and acceptance authorisations and operating guidelines approved by the CEO. Application and credit granting processes play a key role in credit risk management. Luottokunta grants unsecured credit, mainly to individual and corporate cardholders. The company has no client or merchant specific risk concentrations that would prove significant in regard to the scope of its business, because credit risk is spread on the basis of its large number of customers and client-specific liability. Client-specific credit risks are restricted by setting specific credit limits for each account. In order to control merchant- or sector-specific risk clusters, Luottokunta also monitors credit risk in relation to merchants accepting card payments in lines of business where customers pay advance fees for products or services delivered only after payment. Credit risk management is based on prudent processing of applications, credit granting processes and customer relationship management. Credit-granting decisions are made within the framework of unit-specific credit-granting and approval authorisations defined by the CEO. Using deviating data, Luottokunta monitors the status of customer credit balances daily. The objective of such monitoring is to identify at-risk customers whose solvency has declined. The necessary risk management measures are determined on the basis of an assessment of the credit and credit rating of at-risk customers. Assessment of credit risk arising from merchant customers begins with an assessment of the merchant customer s line of business and the nature of its business, the number of customer complaints, and changes in the merchant s settlements. The credit risk indicator is derived from non-performing receivables and impairment losses proportion of total liabilities and of the total credit portfolio. Total liabilities refer to the sum total of the credit portfolio and unused credit and spending limits. The management receives credit risk reports on a monthly basis. The basis for calculating credit risk capital requirements is the minimum capital requirement in accordance with Pillar 1, which is calculated using the standardised approach. The capital requirement for counterparty risk is calculated using the historical cost method. The credit portfolio is properly diversified and simple in structure, with liabilities unlinked to one another. Because Luottokunta does not use credit risk reduction techniques, and its credit portfolio does not contain securitised items, there is no need to correspondingly supplement Pillar 1 calculations when calculating capital adequacy. For credit risk, Pillar 1 calculations are supplemented with an assessment of changes in capital requirement when receivables grow materially. CREDIT RISK INDICATORS LUOTTOKUNTA GROUP Non-performing loans (EUR million) % of total liabilities % of credit portfolio Net impairment loss on credits (EUR million) % of total liabilities % of credit portfolio LUOTTOKUNTA

10 BOARD OF DIRECTORS REPORT AND FINANCIAL STATEMENTS 2011 GENERAL CREDIT RISK INFORMATION Total Liabilities (EUR million) during the year average of which domestic foreign impaired Credit Risk Liabilities by Group Claims on governments and central banks Claims on credit institutions Claims on companies Retail receivables Overdue receivables Other items Total Liability Exercise Period (EUR million) Less than 3 months 3-12 months 1-5 years 5-10 years Over 10 years Credit Risk Liabilities by Group Claims on governments and central banks 18.6 Claims on credit institutions Claims on companies Retail receivables Overdue receivables 3.5 Other items 35.6 Total Operational Risk Operational risk refers to the risk of loss, or otherwise being unable to meet business goals due to inadequate or ineffective internal processes, poor staff performance, inappropriate systems or external factors. Operational risks materialise, for example, in the form of expenses, compensation, incorrect information on operations, or business interruptions. They can also materialise as loss of reputation. Operational risk management is based, for example, on maintaining and developing processes, staff competences and regular reporting. It requires that operational risks associated with Luottokunta s products, services, processes and IT systems, as well as any major changes in them, are constantly monitored, identified and assessed in line with its risk management processes. On the basis of risk assessments, Luottokunta decides on the measures required by said risks, controlling the practical implementation and efficiency of these measures. Once a risk has been identified, Luottokunta assesses its probability and the seriousness of any threat it may pose to attaining business goals. Operational risks detected but not materialised, as well as realised risks, are reported in accordance with the procedure designed for observed and realised risks. The objective of the reporting is to support risk control and to further develop Luottokunta s operations. Realised operational risks and near miss situations are documented. The minimum capital requirement specified in Pillar 1 is used as a basis for evaluating operational risk capital requirements. It is calculated using the basic indicator approach (BIA). If materialised, almost all operational risks would have an impact on Luottokunta s net income from operations, which is used for calculating the BIA income indicator (sum of the previous three years net income from operations / 3 * 15%). With regard to identified operational risks, Luottokunta regards the capital requirement according to Pillar 1 as covering all actual risks. Pillar 1 calculations are supplemented with scenario calculations. 10 LUOTTOKUNTA 2011

11 Management of Market Risk for Shareholdings Since Luottokunta bears no commercial stock, exchange rate or asset risk, no account is taken of the capital requirement for market risk in accordance with Pillar 1. However, Luottokunta bears some market risk related to shareholdings, because it owns shares classed as available-for-sale financial assets set at market value. Changes in market value are recorded in the Balance Sheet s fair value reserve, which is classified as Tier 2 capital. Valuation of these shares poses a market risk when market prices change. Interest Rate Risk Luottokunta bears a structural interest rate risk originating from the financing of operations. Interest rate risk is measured by the effect of interest-rate changes on net financial income and the present value of funds linked to interest rates. Gap analysis is used to calculate interest rate risk associated with net financial income. On this basis, receivables and liabilities are classed according to maturity, depending on their revaluation dates. This evaluation method is static, i.e. the basic assumption is an unchanged financial position. Based on the net financial position indicated by the gap analysis, the average effect is calculated of a point change in interest rates on 12-month net financial income. Similarly, the change in the present value of funds linked to interest rates is monitored through a point change in interest rates. Luottokunta has set limits for its interest rate risks, confirmed by the Board of Directors as part of the market risk strategy. The management receives risk reports on a monthly basis. Equity Not Held for Trading (EUR million) Other investments Book value Fair value Sales Profit during the period Total Profit in Balance Sheet of which included in Tier 2 capital Interest Rate Risk (EUR million) Effect of a 1 % decrease in interest rates on net financial income on annual basis on the current value of items tied to interest rates Effect of a 2% increase in interest rates on net financial income on annual basis on the current value of items tied to interest rates LUOTTOKUNTA

12 BOARD OF DIRECTORS REPORT AND FINANCIAL STATEMENTS 2011 Liquidity Risk Due to the short duration of Luottokunta s receivables and liabilities, short-term liquidity risk is its most significant financial risk element. The differences in the maturities of short-term receivables and liabilities constitute liquidity risk. The purpose of liquidity risk management is to ensure the Luottokunta can manage its daily cash flows without any negative effects on the company s operations or its financial standing. Liquidity risk is measured by forecasting future cash flows and evaluating their probability. Cash flow forecasts are used to monitor daily liquidity. On the basis of the forecasts, the company seeks to optimise the amount of liquid assets. To monitor liquidity risk, a gap analysis is used in which receivables and liabilities are classified according to maturity, depending on their due dates. Such an analysis is used to keep track of any imbalances in cash flows and to assess the probability of a funding shortage and the associated costs. Any off-balance-sheet commitments are also taken into account in the analysis. In stress testing of liquidity risk, various scenarios are used to depict key threats to liquidity. These threats have to do with Luottokunta s operations, changes in the markets, and combinations of the two. To prepare for a sudden and unexpected decline in liquidity, a liquidity reserve based on the results of stress tests is maintained. This reserve consists of cash and cash equivalents included in investment assets, which are invested so as to permit quick access to the reserve if liquidity starts to decline. Limits approved by the Board of Directors as part of the liquidity strategy have been set for the liquidity risk and the size and composition of the liquidity reserve. The management receives liquidity risk reports on a monthly basis. Longer-term structural financial risk and the costs of refinancing are regularly monitored as part of business planning. Strategic Risks At Luottokunta, strategic risk is defined as a general business risk associated with the company s operational prerequisites, such as the business environment, market structures and stakeholders. Management of strategic risks is based on monitoring changes in operating conditions and revising the business plan accordingly. The capital requirement for strategic risks is assessed as part of the annual strategy and operational planning. Other Risks Since risks other than those mentioned above have very little significance in terms of Luottokunta s capital adequacy, no capital requirement is calculated for them. Such risks include fraud risk, implying the misuse of card data with criminal intent. Events after the Balance Sheet Date No events have occurred after the balance sheet date that would have an impact on the Financial Statements. Prospects for 2012 Transfer of business operations to the limited liability company included in the Luottokunta Group is expected to take place during spring The name of this company will be Luottokunta Oy, and the name of the co-operative will be Suomen Luotto-osuuskunta. Luottokunta Oy will be responsible for all business operations, i.e. issuing, acquiring, payment terminal and voucher operations, as well as for ICT and administration. Suomen Luotto-osuuskunta is the sole owner of Luottokunta Oy. It will provide some administrative services to the parent company and the subsidiary, and will be responsible for activities related to the ownership of real estate and some other assets. Luottokunta is exploring alternative ways of renewing the company s ownership structure. The objective is to build a stronger platform for future business growth and to offer customers efficient and competitive cutting-edge services. Profit performance is expected to be weaker than a year earlier, due to investments made in the introduction of the new issuing card system and the development of business models for card payment settlement services, and in PCI requirement-compliant data security. 12 LUOTTOKUNTA 2011

13 Luottokunta Parent Company Merger of Subsidiary Screenway Oy, Luottokunta s wholly-owned subsidiary, was merged with the parent cooperative on 31 May Corporate Governance General Meeting of the Co-operative General Meetings of the Co-operative constitute Luottokunta s highest decision-making body. These meetings decide on issues in accordance with the co-operative s rules and regulations, including the adoption of the financial statements and the distribution of any surplus. General Meetings of the co-operative are summoned by the Executive Board. The General Meeting exercises its authority to amend the Co-operative s bylaws and elect Executive Board members and auditors. Executive Board The Executive Board supervises Luottokunta s administration, which is the responsibility of the Board of Directors and the CEO, and ensures that the co-operative s mission is optimally implemented. The Executive Board elects the members of the Board of Directors, and provides the Annual General Meeting with a statement on the financial statements. Luottokunta s Executive Board consists of a minimum of 16 and a maximum of 23 members, elected by the Annual General Meeting of the co-operative for a three-year term of office. If possible, four to eight Members of the Executive Board should represent the banks, and 12 to 15 should represent other members of the co-operative. The Executive Board elects a Chairman and Vice Chairman for one year at a time. The General Meeting decides on Executive Board emoluments. Board of Directors The Board acts as Luottokunta s representative and manages the company s operations by attending to its administration and the proper organisation of its activities. It also elects the CEO and the deputy CEO, and determines their remuneration, and the division of duties between the CEO and the Board of Directors. The Board of Directors consists of a minimum of eight and a maximum of 13 members, half of whom (if possible) are representatives of member banks and half representatives of other members, so that the banks and other member organisations have equal representation. The CEO of Luottokunta may be a member of the Board of Directors. Members of the Board of Directors are elected for three years at a time, and the Board of Directors elects a Chairman and a Vice Chairman from among its own members for one year at a time. The Executive Board determines Board emoluments. CEO The CEO is responsible for the direct management of Luottokunta in accordance with the instructions and decisions of the Executive Board and the Board of Directors. Luottokunta s Management Team, appointed by the Board of Directors, assists the CEO in the company s day-to-day management. In addition to its regular weekly meetings, the Management Team convenes once a month to consider issues related to development, monitoring and decision making. Organisation Luottokunta has two business units: Issuing and Acquiring. These units are responsible for profitability, growth and risk management in their own business area. Both business units are also responsible for the management of their own business processes, including customer relationship management, service life cycle management, and service production. Both units run development programmes to support their business; these include projects, customer deliveries and minor development operations. In addition, Luottokunta has three support units: ICT, Administration and Corporate Development and Risk Management as a separate function. All three support units run their own processes and development programmes. Remuneration and Rewarding System Luottokunta s defined remuneration system, with an incentive system linked to approved, specified targets is applied to all personnel. The key objective of the incentive system is to support the deployment of Luottokunta s strategy and fulfilment of objectives, to promote compliance with Luottokunta s values, culture and core competence, and to reward personnel for fulfilment of challenging targets and for excellent performance. The incentive scheme is drawn up for one year at a time. The incentive scheme is based on targets specified in employee appraisal discussions and on the level of achievement with respect to these targets. Depending on the remuneration group, targets may be set for a combination of the company level, the next organisational level, and personal level. The Board of Directors determines the general rewarding criteria, which may be linked to Luottokunta s financial results or main operational development goals. Luottokunta s management is included in the long-term incentive scheme approved by the Board of Directors. The key objective of the incentive scheme is to encourage the management to pursue strategic objectives and to increase their commitment. The scheme consists of one three-year earning period Any payments under the scheme will be made over the four years following the close of the earning period. Payment is conditional to certain terms and conditions regarding the validity of employment. Luottokunta s remuneration and rewarding system meets the requirements of good corporate governance, the decree of the Ministry of Finance regarding rewarding systems in credit institutions and in investment service companies, and complies with other regulations in effect. Luottokunta s Board of Directors approves the Luottokunta rewarding policy, which specifies the key principles to be applied to employee rewarding in general. The remuneration and rewarding system is consistent with the company s business strategy, objectives and values, and is designed to ensure the company s longterm interests. The remuneration and rewarding system promotes good and efficient risk management, and does not encourage risk-taking that would exceed a risk level specified on the basis of the company s risk-bearing capacity, or an otherwise sustainable risk level. Audit and Control Luottokunta appoints one auditor, which must be an accounting firm approved by the Central Chamber of Commerce. The Board of Directors decides on internal audit tasks and the general principles applied to audit planning and the reporting of audit observations. The Board annually approves the internal audit plan and reviews the Annual Report. Internal Audit is outsourced. LUOTTOKUNTA

14 BOARD OF DIRECTORS REPORT AND FINANCIAL STATEMENTS 2011 Human Resources At the year end, Luottokunta employed a full-time equivalent staff of 465 (424). The number of employees averaged 451 (443) during the year, of whom 384 (363) worked on a permanent, full-time basis. Permanent part-time employees equalled 28 (26) fulltime staff. Temporary employees equalled 39 (52) full-time staff. At the end of the review period, 34 (36) employees were on statutory leave of absence. Members At the end of 2011, the number of members totalled (23 072). Administrative Decisions General Meeting of the Co-operative The co-operative s Annual General Meeting (AGM) of 26 April 2011 adopted the Financial Statements for 2010, discharged those accountable from liability, and decided not to pay out interest on the co-operative capital. The number of Executive Board members was confirmed as 19. The AGM elected KPMG Oy Ab, Firm of Authorised Public Accountants, as Luottokunta s auditors, with Raija-Leena Hankonen, Authorised Public Accountant, as the chief auditor. The AGM re-elected the outgoing members Ilkka Hallavo, Matti Halmesmäki, Kuisma Niemelä and Heikki Suutala, and elected Jussi Laitinen to serve out the remaining term of Pasi Kämäri, who resigned at his own request. At the extraordinary meeting of the co-operative held on 14 November 2011, a decision was made, as proposed by the Executive Board, to transfer Luottokunta s business to a subsidiary fully owned by Luottokunta. The subsidiary s company name will be changed to Luottokunta Oy. A decision was also made at the meeting, as proposed by the Executive Board, to amend the bylaws of the co-operative, and for Luottokunta to voluntarily surrender its credit institution licence in connection with the business transfer. Decisions concerning amendments to the bylaws and the credit institution licence will not enter into force until the implementation of the business transfer has been registered. Number of Personnel 2009 Average number of personnel Executive Board and Board of Directors At its meeting on 4 May 2011, the Executive Board elected Kuisma Niemelä as its Chairman and Hannu Penttilä as its Vice Chairman. The Executive Board meeting confirmed the number of members of the Board of Directors at nine, re-elected the outgoing members Jari Annala and Pekka Nuuttila as Board members, and elected Kasperi Saari to replace the outgoing member Ralf Sandström. In its meeting on 5 October 2011, the Executive Board decided to call an Extraordinary General Meeting of the co-operative on 14 November 2011 to discuss the transfer of Luottokunta s business to a subsidiary, an amendment to Luottokunta s rules, and the surrender of a credit institution licence. The latter two proposals require the registration of the business surrender before they can be implemented. The Executive Board approved the Board of Directors proposal not to accept new members to the co-operative, except in accordance with succession. The Supervisory Board held four meetings during the accounting period. At its meeting of 17 May 2011, the Board of Directors elected Pekka Nuuttila as its Chairman and Tony Vepsäläinen as its Vice Chairman. The Board of Directors convened 13 times during the year. BOARD PROPOSAL FOR PROFIT DISTRIBUTION Luottokunta Equity Capital at 31 Dec of which non-distributable Co-operative capital Reserve fund Fair value reserve Contingency reserve Total Luottokunta distributable surplus The total retained surplus available for the co-operative s Annual General Meeting amounted to EUR 63,659, The Board of Directors proposes that the surplus for 2011 be retained on the surplus account. 14 LUOTTOKUNTA 2011

15 Luottokunta group balance sheet Notes (EUR 1 000) ASSETS Liquid assets 1, Claims on credit institutions Repayable on demand Other Total claims on credit institutions 1,12,13, Claims on the public and on public-sector entities Other 2,12,13, Debt securities Other 3,12,13, Shares and participations 4,13, Intangible assets Consolidated goodwill Other long-term expenditure Total intangible assets 5,7, Tangible assets Other properties Other tangible assets Total tangible assets 6,7, Accrued income and prepayments 8, Deferred tax assets 9, ASSETS EQUITY AND LIABILITIES LIABILITIES Liabilities to credit institutions Credit institutions Other 12,13, Liabilities to the public and public-sector entities Other liabilities Other 12,13, Other liabilities Other liabilities 10, Statutory provisions Total other liabilities Accrued expenses and deferred income 11, Deferred tax liabilities TOTAL LIABILITIES EQUITY CAPITAL Co-operative capital Other restricted reserves Reserve fund Fair value reserve Fair value reserve Total other restricted reserves Non-restricted reserves Other reserves Retained surplus Surplus for the period TOTAL EQUITY CAPITAL EQUITY AND LIABILITIES OFF-BALANCE-SHEET COMMITMENTS Unused spending limits/credit lines granted to customers LUOTTOKUNTA

16 BOARD OF DIRECTORS REPORT AND FINANCIAL STATEMENTS 2011 LUOTTOKUNTA GROUP INCOME STATEMENT Notes (EUR 1 000) Interest income Interest expenses Income from equity investments Commission income Commission expenses Other operating income NET INCOME FROM OPERATIONS Administrative expenses Wages, salaries and fees Pension costs Other social expenses Total social expenses Total personnel costs Other administrative expenses Total administrative expenses Depreciation and impairments 21 On consolidated goodwill On tangible and intangible assets Total depreciation and impairments Other operating expenses TOTAL EXPENSES Impairment losses on credits and other receivables OPERATING SURPLUS Income taxes Current tax and tax for previous periods Change in deferred tax Total income tax OPERATING SURPLUS AFTER TAX SURPLUS FOR THE PERIOD LUOTTOKUNTA 2011

17 LUOTTOKUNTA GROUP CASH FLOW STATEMENT (EUR 1 000) Cash flow from operating activities Operating surplus before tax Depreciation according to plan Other non-cash income and expenses Financial income and expenses Other adjustments Cash flow before change in working capital Increase (-) / Decrease (+) in current non-interest-bearing trade receivables Increase (+) / Decrease (-) in current non-interest-bearing trade payables Change in working capital Cash flow from operations before financial items and taxes Interest paid and other financial expenses Dividends received from business operations Interest received from business operations Income taxes paid Cash flow from operating activities Cash flow from investing activities Purchase of tangible and intangible assets Proceeds from sale of tangible and intangible assets Investments in subsidiaries shares Other investments Proceeds from other investments Cash flow from investing activities Net cash used in financing activities Change in co-operative capital Proceeds from short-term borrowings Repayments of short-term borrowings Proceeds from long-term borrowings Repayments of long-term borrowings Dividends paid and other profit distribution Net cash used in financing activities Net increase (+) / decrease (-) in cash and cash equivalents Cash and cash equivalents at period start Cash and cash equivalents at period end LUOTTOKUNTA

18 BOARD OF DIRECTORS REPORT AND FINANCIAL STATEMENTS 2011 LUOTTOKUNTA BALANCE SHEET Notes (EUR 1 000) ASSETS Liquid assets 1, Claims on credit institutions Repayable on demand Other Total claims on credit institutions 1,12,13, Claims on the public and on public-sector entities Other 2,12,13, Debt securities Other 3,12,13, Shares and participations 4,13, Holdings in Group companies 4,13, Intangible assets Other long-term expenditure Total intangible assets 5,7, Tangible assets Other properties Other tangible assets Total tangible assets 6,7, Accrued income and prepayments 8, Deferred tax assets 9, ASSETS LUOTTOKUNTA 2011

19 Notes (EUR 1 000) EQUITY AND LIABILITIES LIABILITIES Liabilities to credit institutions Credit institutions Other 12,13, Liabilities to the public and public-sector entities Other liabilities Other 12,13, Other liabilities Other liabilities 10, Statutory provisions Total other liabilities Accrued expenses and deferred income 11, Deferred tax liabilities TOTAL LIABILITIES APPROPRIATIONS Voluntary provisions EQUITY CAPITAL Co-operative capital Other restricted reserves Reserve fund Fair value reserve Measuring at fair value Total other restricted reserves Non-restricted reserves Other reserves Retained surplus Surplus for the period TOTAL EQUITY CAPITAL EQUITY AND LIABILITIES OFF-BALANCE-SHEET COMMITMENTS Unused spending limits/ credit lines granted to customers LUOTTOKUNTA

20 BOARD OF DIRECTORS REPORT AND FINANCIAL STATEMENTS 2011 LUOTTOKUNTA INCOME STATEMENT Notes (EUR 1 000) Interest income Interest expenses Income from equity investments Commission income Commission expenses Other operating income NET INCOME FROM OPERATIONS Administrative expenses Wages, salaries and fees Pension costs Other social expenses Total social expenses Total personnel costs Other administrative expenses Total administrative expenses Depreciation and impairments 21 On tangible and intangible assets Total depreciation and impairments Other operating expenses TOTAL EXPENSES Impairment losses on credits and other receivables OPERATING SURPLUS Appropriations Income taxes Current tax and tax for previous periods Change in deferred tax Total income tax OPERATING SURPLUS AFTER TAX SURPLUS FOR THE PERIOD LUOTTOKUNTA 2011

21 LUOTTOKUNTA CASH FLOW STATEMENT (EUR 1 000) Cash flow from operating activities Operating surplus before tax Depreciation according to plan Other non-cash income and expenses Financial income and expenses Other adjustments Cash flow before change in working capital Increase (-) / Decrease (+) in current non-interest-bearing trade receivables Increase (+) / Decrease (-) in current non-interest-bearing trade payables Change in working capital Cash flow from operations before financial items and taxes Interest paid and other financial expenses from business operations Dividends received from business operations Interest received and other financial income from business operations Income taxes paid Cash flow from operating activities Cash flow from investing activities Purchase of tangible and intangible assets Proceeds from sale of tangible and intangible assets Other investments Proceeds from other investments Loans granted Cash flow from investing activities Net cash used in financing activities Increase in co-operative capital (paid issue) Proceeds from short-term borrowings Repayments of short-term borrowings Proceeds from long-term borrowings Repayments of long-term borrowings Dividends paid and other profit distribution Net cash used in financing activities Net increase (+) / decrease (-) in cash and cash equivalents Cash and cash equivalents at period start Cash and cash equivalents at period end LUOTTOKUNTA

22 BOARD OF DIRECTORS REPORT AND FINANCIAL STATEMENTS 2011 Notes to Accounting Principles Basis of preparation The financial statements are prepared in accordance with the provisions of the Finnish Accounting Act and the Credit Institutions Act, the decree on the financial statements and consolidated financial statements of credit institutions issued by the Ministry of Finance, and the regulations issued by the Financial Supervisory Authority. Owing to the nature of its operations, Luottokunta does not present net interest income separately, but states income after other operating income, as net income from operations. Notes to the Financial Statements are given in accordance with Standard on Financial Statements and Annual Report, issued by the Financial Supervisory Authority, numbered consecutively. In compliance with this standard, Luottokunta does not provide information on Notes to the Financial Statements on which there is nothing to report. Consolidated accounts The consolidated financial statements include the financial statements of Luottokunta (the parent company) and its fully-owned subsidiary Eurocard Oy. Screenway Oy, Luottokunta s wholly-owned subsidiary, was merged into the parent co-operative on 31 May Intragroup shareholdings are eliminated using the acquisition cost method. Intra-group transactions, receivables and liabilities, as well as profit distribution are eliminated when preparing the consolidated financial statements. Foreign currency items Transactions in foreign currency are translated into euros and recorded at the exchange rate prevailing on the date of the transaction. Any exchange rate differences are recorded in the income statement. On the balance sheet date, balance sheet items in foreign currency are translated into euros using the average exchange rate quoted by the European Central Bank on the balance sheet date. Financial instruments Under the Financial Supervisory Authority s Standard on Financial Statements and Annual Report, financial instruments are classified according to their purpose of use and measurement. Items at fair value through profit or loss Items held for trading, as well as items under fair value option are recorded at fair value through profit and loss. Items held for trading consist of financial assets and liabilities that are acquired or created, mainly for the purpose of being resold or repurchased within a short period of time, or that are expected to generate short-term income. Items under the fair value option comprise financial assets and liabilities that can be classified as such, under certain conditions, when they are recorded. Items are recognised at fair value and any fair value changes are recognised as net income from securities trading and currency operations through profit or loss. Luottokunta has no items at fair value through profit or loss. Held-to-maturity investments Held-to-maturity investments are financial assets other than derivative instruments with fixed or determinable cash flows and fixed maturities, which an entity has the positive intention and ability to hold to maturity. They do not include items classed as held for trading, available-forsale or other liabilities or receivables. Held-to-maturity investments are measured at amortised cost. Luottokunta has no held-to-maturity invest ments. Loans and other receivables Loans and other receivables are financial assets with fixed or determinable payments, which are not quoted on the general market, excluding items classed as held for trading or available-for-sale. Loans and other receivables are measured at amortised cost. If, on the balance sheet date, an item s value is lower than the amortised acquisition cost, it is valued at amortised cost with impairment loss. Income or losses from loans and other receivables are recorded through profit and loss, once the receivable is written out of the balance sheet or its value has been impaired. The impairment of loans and other receivables is valued in two stages: first individually by receivable, and then by group of receivables. Impairment loss of a receivable item is recognised if there is objective evidence of the impairment and its effect can be reliably determined. In per-receivable evaluations, a circumstance in which no transactions are allocated to the receivable item under collection for six months is regarded as objective evidence. In such a case, the receivable is recorded entirely under impairment loss. In group-specific impairment, collection proceedings being initiated for the receivable is regarded as objective evidence. The amount of recognised group-specific impairment loss is based on historical data on the success of collection. In cases of card fraud, impairment loss is recognised as soon as the fraud is detected, and the loss becomes the liability of the card issuer. Available-for-sale financial assets Available-for-sale financial assets are nonderivative financial assets designated as available for sale or not classified as other financial assets stated above. Available-for-sale financial assets include equity securities and holdings in entities other than subsidiary and associated companies. Available-for-sale assets are primarily measured at fair value. If available-for-sale assets include equity instruments which do not have a quoted market price in an active market and whose fair value cannot be reliably measured, these are measured at cost. The change in fair value is recorded directly in the fair value reserve under equity capital, until the asset item is written off the balance sheet. Interest income from available-for-sale financial assets is recorded as interest income and dividends under income from equity investments in the income statement. The difference between the nominal value and cost of certificates of deposit included in this class is accrued over the receivable s maturity, using the effective interest rate method. The amount corresponding to the acquisition cost is recorded under debt securities and the amount of accrued interest is stated under accrued income and prepayments in the balance sheet. 22 LUOTTOKUNTA 2011

23 Luottokunta has also defined its Series B shares in MasterCard Incorporated and its Series A shares in Visa Incorporated as availablefor-sale financial assets. The Series B share of MasterCard Incorporated is not publicly quoted, therefore shares are valued at the closing rate on the balance sheet date of the Series A share quoted on the New York Exchange. Series A share of Visa Incorporated is quoted on the New York Exchange, and shares are valued at the closing rate on the balance sheet date. Cash and cash equivalents Cash and cash equivalents include money that an entity holds, money deposited with financial institutions that can be withdrawn without notice and highly liquid receivables from financial institutions. Other financial assets Other financial assets include subsidiary shares measured at cost and included in Luottokunta s separate balance sheet. Other financial liabilities Other financial liabilities include financial liabilities other than those valued at fair value through profit or loss. Other financial liabilities are recorded at nominal value. The difference between the liability s nominal value and cost is accrued over the liability s maturity. After the initial entry, financial liabilities are measured at amortised cost. Financial derivatives Derivatives refer to financial or other instruments whose value changes if the underlying instrument s value changes. At the time of making the contract, no net investment is required or the net investment is lower than for other types of contracts. The derivative s value becomes realised on a future date. Derivative contracts held for hedging purposes are classified as financial derivatives. Other derivative contracts are included under items held for trading. Luottokunta has no financial derivatives. Offsetting of financial assets and liabilities Financial assets and liabilities are offset and the net amount recognised in the balance sheet only if an entity has a legally enforceable right to set off the amounts and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously. Intangible assets Consolidated goodwill Goodwill is measured as the excess of the cost of the business combination over the acquirer s share of the net fair values of the acquiree s identifiable assets, liabilities, and contingent liabilities on the acquisition date. It is presented under intangible assets. Consolidated goodwill, arising from the acquisition of Eurocard Oy shares, will be amortised over a useful life of ten years. This period is based on the expected long-term return on investment. Consolidated goodwill is tested annually. Eurocard Oy has offered Business Eurocard payment solutions to corporate customers since Business Eurocard is the leading business card scheme in Finland. Its customers represent an extensive range of businesses and public-sector organisations in this country. It is anticipated that the number of Business Eurocard cards and travel accounts, as well as card sales, will continue to grow over the next few years. The company s growth expectations for business and profitability are based on the expanding business card market for business and public organisations, and on investments in electronic services. Such services designed for travel and financial management are boosting the competitiveness of the Business Eurocard scheme. Goodwill Goodwill is measured as the excess of the acquisition cost over the acquirer s share of the net fair values of the acquiree s identifiable assets, liabilities, and contingent liabilities on the acquisition date. It is presented under intangible assets. The goodwill recorded in Luottokunta s balance sheet arises from the acquisition of the payment terminal business and will be amortised over a useful life of ten years. This period is based on the expected long-term return on investment. Goodwill is tested annually. The Group acquired the payment terminal business in connection with the acquisition of Screenway Oy shares. When Screenway Oy merged into the parent co-operative, the remaining goodwill was capitalised in Luottokunta Co-operative s balance sheet. A marked increase in the number of payment terminals is expected in the next few years. Business and profitability growth expectations are based on a growing need for efficient, secure payment solutions. Other intangible assets Intangible assets include IT software and other intangible assets, from which an entity expects to gain financial benefits in the future. Intangible assets are valued at cost less accrued depreciation and any impairment losses. Intangible assets are amortised on a straight-line basis over their expected useful lives as follows: IT software Other intangible assets Tangible assets 3-7 years 3-10 years. Tangible assets are valued at cost less accrued depreciation and any impairment losses and depreciated on a straight-line basis over their expected useful lives as follows: Buildings Machinery Equipment IT hardware Payment terminals Land is not depreciated years 3 years 5 years 3-5 years 3 years. LUOTTOKUNTA

24 BOARD OF DIRECTORS REPORT AND FINANCIAL STATEMENTS 2011 Statutory provisions Statutory provisions include deferred, itemised expenses and losses for the report or previous financial year which are likely or certain to be incurred, but whose amounts and dates are not yet certain Appropriations Voluntary provisions include voluntary appropriations recorded as permitted by tax legislation. Under the Business Income Tax Act, a credit institution may deduct a credit loss provision recorded for the tax year, accounting for a maximum of 0.6% of the total amount of receivables at the end of the tax year. The total amount of credit loss provisions not released in the tax year or previous years may account for a maximum of 5% of the total amount of receivables at the end of the tax year. Increases and decreases in voluntary provisions are entered in appropriations in the income statement. The amount of, and change in, voluntary provisions do not describe the Group s anticipated risks. In the consolidated financial statements, voluntary provisions are cancelled and recognised under equity capital and deferred tax liabilities. Income taxes Income taxes are calculated and recognised using the tax statement based on taxable income. Changes in deferred taxes are recorded in the income statement and recognised as deferred tax assets and liabilities in the balance sheet. Deferred tax assets and liabilities are calculated on temporary differences between the carrying amounts of assets and liabilities according to taxation and the accounts, using the tax rate confirmed for the coming years on the balance sheet date. The balance sheet includes deferred tax liabilities in full and deferred tax assets to the estimated probable realisable amount. Off-balance-sheet commitments Off-balance-sheet commitments include unused credit and spending limits granted to customers. 24 LUOTTOKUNTA 2011

25 Notes to the Luottokunta Group Financial Statements NOTES TO THE BALANCE SHEET (eur 1 000) 1. Claims on credit institutions 2011 Total Repayable on demand Other than those repayable on demand Central bank Domestic credit institutions Total claims on credit institutions Total Repayable on demand Other than those repayable on demand Central bank Domestic credit institutions Total claims on credit institutions Claims on the public and on public-sector entities Companies and housing corporations Households Foreign Total claims on the public and on public-sector entities claims not generating recognised interest income Impairment losses on receivables for the period Impairment losses at beginning of period Impairment losses for period by receivable Impairment losses for period by group Cancelled impairment losses for period by receivable 0 0 Impairment losses at end of period LUOTTOKUNTA

26 BOARD OF DIRECTORS REPORT AND FINANCIAL STATEMENTS Debt securities 2011 Issued by other than public-sector entities Publicly quoted Others Total Available-for-sale assets Certificate of deposit issued by banks Total debt securities Issued by other than public-sector entities Publicly quoted Others Total Available-for-sale assets Certificate of deposit issued by banks Total debt securities Shares and participations Balance sheet item Publicly quoted Others Total 2011 In financial institutions Shares and participations Held-for-trading Available-for-sale Total of which at acquisition cost Balance sheet item Publicly quoted Others Total 2010 In financial institutions Shares and participations Held-for-trading Available-for-sale Total of which at acquisition cost LUOTTOKUNTA 2011

27 5. Intangible assets IT expenses Consolidated goodwill Goodwill Other intangible assets Total intangible assets Tangible assets Real property In own use Land Buildings Total real property LUOTTOKUNTA

28 BOARD OF DIRECTORS REPORT AND FINANCIAL STATEMENTS Changes in tangible and intangible assets during the period 2011 Tangible assets Total Intangible Other properties and shares Other tangible tangible assets in property companies assets assets Purchase price 1 Jan * Increases Decreases Transfers between items Purchase price 31 Dec Depreciation/amortisation and impairment 1 Jan Depreciation/amortisation on decreases and transfers Depreciation/amortisation for the period Impairment Accumulated depreciation/amortisation 31 Dec Revaluations Book value 31 Dec Book value 1 Jan * This amount includes the payment terminals obtained in the merger with Screenway Oy EUR 1,848 thousand Tangible assets Total Intangible Other properties and shares Other tangible tangible assets in property companies assets assets Purchase price 1 Jan Increases Decreases Transfers between items 35 Purchase price 31 Dec Depreciation/amortisation and impairment 1 Jan Depreciation/amortisation on decreases and transfers Depreciation/amortisation for the period Impairment Accumulated depreciation/amortisation 31 Dec Revaluations Book value 31 Dec Book value 1 Jan LUOTTOKUNTA 2011

29 8. Accrued income and prepayments Interest receivables and advance interest paid Other accrued income and advances paid Total accrued income and prepayments Deferred tax assets and liabilities Tax assets on timing differences Based on confirmed losses for taxation Other, due to timing differences Total deferred tax assets Tax liabilities on other temporary differences Due to fair value reserve Based on appropriations Total deferred tax liabilities LUOTTOKUNTA

30 BOARD OF DIRECTORS REPORT AND FINANCIAL STATEMENTS Other liabilities Other liabilities Statutory provisions Pension provisions Total other liabilities Pension provisions Other statutory provisions Total Book value 1 Jan Increase for the period Amount used during period 0 Amount cancelled during period Book value 31 Dec Pension provisions Other statutory provisions Total Book value 1 Jan Increase for the period Amount used during period 0 Amount cancelled during period Book value 31 Dec Accrued expenses and deferred income Interest payable and advances received Other accrued expenses and advances received Total accrued expenses and deferred income LUOTTOKUNTA 2011

31 12. Distribution of maturity of credit institution s financial assets and liabilities 2011 Less than 3 months 3-12 months 1-5 years Over 5 years Claims on credit institutions Claims on the public and on public-sector entities Debt securities Total Liabilities to credit institutions Liabilities to the public and public-sector entities Total Less than 3 months 3-12 months 1-5 years Over 5 years Claims on credit institutions Claims on the public and on public-sector entities Debt securities Total Liabilities to credit institutions Liabilities to the public and public-sector entities Total LUOTTOKUNTA

32 BOARD OF DIRECTORS REPORT AND FINANCIAL STATEMENTS Breakdown of balance sheet items into domestic currency and foreign currency amounts 2011 Domestic currency Foreign currency Total Claims on credit institutions Claims on the public and on public-sector entities Debt securities Other assets Total Liabilities to credit institutions Liabilities to the public and public-sector entities Other liabilities Total Domestic currency Foreign currency Total Claims on credit institutions Claims on the public and on public-sector entities Debt securities Other assets Total Liabilities to credit institutions Liabilities to the public and public-sector entities Other liabilities Total LUOTTOKUNTA 2011

33 14. Fair values and book values of financial assets and liabilities Financial assets Book value Fair value Cash Claims on credit institutions Claims on the public and on public-sector entities Debt securities Shares and participations Financial liabilities Book value Fair value Liabilities to credit institutions Liabilities to the public and public-sector entities Financial assets Book value Fair value Cash Claims on credit institutions Claims on the public and on public-sector entities Debt securities Shares and participations Financial liabilities Book value Fair value Liabilities to credit institutions Liabilities to the public and public-sector entities LUOTTOKUNTA

34 BOARD OF DIRECTORS REPORT AND FINANCIAL STATEMENTS Equity capital 2011 Beginning Increases Decreases End of of period during period during period period Co-operative capital Other restricted reserves Reserve fund Fair value reserve Non-restricted reserves Contingency reserve Retained surplus Surplus for the period Total equity capital ) 2) 1) Since 1998, the co-operative has raised a contingency fund which the Executive Board can use for the benefit of the co-operative, as proposed by the Board of Directors. 2) The retained surplus includes EUR 13,620 thousand in depreciation difference and voluntary provision items Beginning Increases Decreases End of of period during period during period period Co-operative capital Other restricted reserves Reserve fund Fair value reserve Non-restricted reserves Contingency reserve Retained surplus Surplus for the period Total equity capital ) 2) 1) Since 1998, the co-operative has raised a contingency fund which the Executive Board can use for the benefit of the co-operative, as proposed by the Board of Directors. 2) The retained surplus includes EUR 23,992 thousand in depreciation difference and voluntary provision items. 34 LUOTTOKUNTA 2011

35 Notes to the Income Statement (eur 1 000) 16. Breakdown of interest income and expenses by balance sheet item Interest income Claims on credit institutions Debt securities Claims on the public and on public-sector entities Other interest income 2 2 Total interest income Interest expenses Liabilities to credit institutions Liabilities to the public and public-sector entities 1 Other interest expenses 1 Total interest expenses Income from equity investments Dividend income from available-for-sale financial assets Dividend income received Total income from equity investments Commission income and expenses Payment transactions Other operations Total commission income Other operations Total commission expenses LUOTTOKUNTA

36 BOARD OF DIRECTORS REPORT AND FINANCIAL STATEMENTS Other operating income Other income Total other operating income Other operating expenses Rental expenses Expenses due to property in own use Other expenses Total other operating expenses Depreciation/amortisation and impairment on tangible and intangible assets Intangible Tangible Intangible Tangible assets assets assets assets Depreciation/amortisation according to plan Impairment 70 Total LUOTTOKUNTA 2011

37 22. Impairment losses on credits, other commitments and other financial assets 2011 Claims on the public and public-sector entities Other operations Total Impairment losses by contract, gross Impairment losses by group, gross Deductions Recognised in income statement Claims on the public and public-sector entities Other operations Total Impairment losses by contract, gross Impairment losses by group, gross Deductions Recognised in income statement Business and market segment information 2011 Credit card operations Prepaid product operations Total Total income Operating surplus Assets Liabilities Human resources Credit card operations Prepaid product operations Total Total income Operating surplus Assets Liabilities Human resources LUOTTOKUNTA

38 BOARD OF DIRECTORS REPORT AND FINANCIAL STATEMENTS 2011 Notes on collateral and other contingent liabilities (eur 1 000) 24. Pension liabilities The personnel s statutory pension cover is managed by Ilmarinen Mutual Pension Insurance Company. A direct pension liability of EUR 311 thousand is included in statutory provisions. 25. Lease and other rental liabilities Lease and other rental liabilities Contractual minimum rental payments: No later than one year Later than one year and no later than five years Later than five years The term of the contracts varies between 1 year and 10 years. 26. Off-balance-sheet commitments Unused spending limits granted to customers Unused credit lines granted to customers LUOTTOKUNTA 2011

39 Notes on staff and management (eur 1 000) 27. Staff and members of governing and supervisory bodies Average Change in no. Average Change in no. Number of employees number during period number during period Group Permanent full-time staff Permanent part-time staff Fixed-term staff Total Wages, salaries and fees (eur 1 000) Executive Board members Board members Management Team, of whom CEO and Deputy CEO The amount of variable remuneration paid to the Management Team in 2011 was EUR 261 thousand. Cash loans, guarantees and off-balance sheet commitments No cash loans have been granted to the above mentioned bodies or auditors, nor have any guarantees or other off-balance sheet commitments been made for their benefit. Pension commitments The CEO s retirement age is 60 years. His pension is covered by pension insurance and the resulting pension liability of EUR 311 thousand is included in statutory provisions. Board and Executive Board members are not covered by pension commitments. Holdings Board and Executive Board members and the CEO and the Deputy CEO hold neither shares in the credit institution, nor stock options nor convertible bonds issued by the credit institution. LUOTTOKUNTA

40 BOARD OF DIRECTORS REPORT AND FINANCIAL STATEMENTS 2011 Notes on shareholdings (eur 1 000) 28. Subsidiaries Eurocard Oy, Helsinki Holding: 100% of shares Equity on 31 Dec EUR 9,053 thousand. Profit for the period: EUR 971 thousand. Notes on auditors fees (eur 1 000) 29. Auditors fees Audit Tax advisory services Other services Total auditors fees Other notes (eur 1 000) 30. Outstanding co-operative fees and number of members Number of co-operative members Total outstanding co-operative fees 0 0 Total sum of recalled co-operative fees of which to be refunded in year of which to be refunded in year LUOTTOKUNTA 2011

41 Notes to Parent Company Financial Statements Notes to the Balance Sheet (eur 1 000) 1. Claims on credit institutions 2011 Repayable Other than those Total on demand repayable on demand Central bank Domestic credit institutions Total claims on credit institutions Repayable Other than those Total on demand repayable on demand Central bank Domestic credit institutions Total claims on credit institutions Claims on the public and on public-sector entities Companies and housing corporations Households Foreign Total claims on the public and on public-sector entities claims not generating recognised interest income subordinated claims Impairment losses on receivables for the period Impairment losses at beginning of period Impairment losses for period by receivable Impairment losses for period by group Cancelled impairment losses for period by receivable Impairment losses at end of period LUOTTOKUNTA

42 BOARD OF DIRECTORS REPORT AND FINANCIAL STATEMENTS Debt securities 2011 Issued by other than public-sector entities Publicly quoted Other Total Available-for-sale Certificate of deposit issued by banks Total debt securities Issued by other than public-sector entities Publicly quoted Other Total Available-for-sale Certificate of deposit issued by banks Total debt securities Shares and participations 2011 In financial Balance sheet item Publicly quoted Other Total institutions Shares and participations Held-for-trading Available-for-sale Shares and participations in Group companies Total of which at acquisition cost In financial Balance sheet item Publicly quoted Other Total institutions Shares and participations Held-for-trading Available-for-sale Shares and participations in Group companies Total of which at acquisition cost LUOTTOKUNTA 2011

43 5. Intangible assets IT expenses Other intangible assets Total intangible assets Tangible assets Real property In own use Land Buildings Total real property LUOTTOKUNTA

44 BOARD OF DIRECTORS REPORT AND FINANCIAL STATEMENTS Changes in tangible and intangible assets during the period 2011 Tangible assets Total Intangible Other properties and shares Other tangible tangible assets in property companies assets assets Purchase price 1 Jan * Increases Decreases Transfers between items 1 Purchase price 31 Dec Depreciation/amortisation and impairment 1 Jan Depreciation/amortisation on decreases and transfers Depreciation/amortisation for the period Impairment Accumulated depreciation/amortisation 31 Dec Revaluations Book value 31 Dec Book value 1 Jan * This amount includes the payment terminals obtained in the merger with Screenway Oy EUR 1,848 thousand Tangible assets Total Intangible Other properties and shares Other tangible tangible assets in property companies assets assets Purchase price 1 Jan Increases Decreases Transfers between items 35 Purchase price 31 Dec Depreciation/amortisation and impairment 1 Jan Depreciation/amortisation on decreases and transfers Depreciation/amortisation for the period Impairment Accumulated depreciation/amortisation 31 Dec Revaluations Book value 31 Dec Book value 1 Jan LUOTTOKUNTA 2011

45 8. Accrued income and prepayments Interest receivables and advance interest paid Other accrued income and advances paid Total accrued income and prepayments Deferred tax assets and liabilities Tax assets on timing differences Based on confirmed losses for taxation Other, due to timing differences Total deferred tax assets Tax liabilities on other temporary differences Due to fair value reserve Total deferred tax liabilities LUOTTOKUNTA

46 BOARD OF DIRECTORS REPORT AND FINANCIAL STATEMENTS Other liabilities Other liabilities Other Statutory provisions Pension provisions Other statutory provisions Total other liabilities Pension provisions Other statutory provisions Total Book value 1 Jan Increase for the period Amount used during period Amount cancelled during period Book value 31 Dec Pension provisions Other statutory provisions Total Book value 1 Jan Increase for the period Amount used during period Amount cancelled during period Book value 31 Dec Accrued expenses and deferred income Interest payable and advances received Other accrued expenses and advances received Total accrued expenses and deferred income LUOTTOKUNTA 2011

47 12. Distribution of maturity of credit institution s financial assets and liabilities 2011 Less than 3 months 3-12 months 1-5 years Over 5 years Claims on credit institutions Claims on the public and on public-sector entities Debt securities Total Liabilities to credit institutions Liabilities to the public and public-sector entities Total Less than 3 months 3-12 months 1-5 years Over 5 years Claims on credit institutions Claims on the public and on public-sector entities Debt securities Total Liabilities to credit institutions Liabilities to the public and public-sector entities Total LUOTTOKUNTA

48 BOARD OF DIRECTORS REPORT AND FINANCIAL STATEMENTS Breakdown of balance sheet items into domestic currency and foreign currency amounts 2011 Domestic currency Foreign currency Total From Group companies Claims on credit institutions Claims on the public and on public-sector entities Debt securities Other assets Total Liabilities to credit institutions Liabilities to the public and public-sector entities Other liabilities Total Domestic currency Foreign currency Total From Group companies Claims on credit institutions Claims on the public and on public-sector entities Debt securities Other assets Total Liabilities to credit institutions Liabilities to the public and public-sector entities Other liabilities Total LUOTTOKUNTA 2011

49 14. Fair values and book values of financial assets and liabilities 2011 Book value Fair value Financial assets Cash Claims on credit institutions Claims on the public and on public-sector entities Debt securities Shares and participations Shares and participations in Group companies Financial liabilities Liabilities to credit institutions Liabilities to the public and public-sector entities Book value Fair value Financial assets Cash Claims on credit institutions Claims on the public and on public-sector entities Debt securities Shares and participations Shares and participations in Group companies Financial liabilities Liabilities to credit institutions Liabilities to the public and public-sector entities LUOTTOKUNTA

50 BOARD OF DIRECTORS REPORT AND FINANCIAL STATEMENTS Equity capital 2011 Beginning Increases Decreases End of of period during period during period period Co-operative capital Other restricted reserves Reserve fund Fair value reserve Non-restricted reserves Contingency reserve * Retained surplus Surplus for the period Total equity capital Beginning Increases Decreases End of of period during period during period period Co-operative capital Other restricted reserves Reserve fund Fair value reserve Non-restricted reserves Contingency reserve * Retained surplus Surplus for the period Total equity capital * Since 1998, the co-operative has raised a contingency fund which the Executive Board can use for the benefit of the co-operative, as proposed by the Board of Directors. 50 LUOTTOKUNTA 2011

51 Notes to the Income Statement (eur 1 000) 16. Breakdown of interest income and expenses by balance sheet item Interest income Claims on credit institutions Debt securities Claims on the public and on public-sector entities Other interest income 9-13 Total interest income from Group companies Interest expenses Liabilities to credit institutions Liabilities to the public and public-sector entities Other interest expenses 1 Total interest expenses to Group companies Income from equity investments Dividend income from available-for-sale financial assets Dividend income received Dividend income from Group companies Total income from equity investments LUOTTOKUNTA

52 BOARD OF DIRECTORS REPORT AND FINANCIAL STATEMENTS Commission income and expenses Payment transactions Other operations Total commission income Other operations Total commission expenses Other operating income Other income Total other operating income Other operating expenses Rental expenses Expenses due to property in own use Other expenses Total other operating expenses Depreciation/amortisation and impairment on tangible and intangible assets Intangible Tangible Intangible Tangible assets assets assets assets Depreciation/amortisation according to plan Impairment 70 Total depreciation and impairment LUOTTOKUNTA 2011

53 22. Impairment losses on credits, other commitments and other financial assets 2011 Claims on the public and public-sector entities Other operations Total Impairment losses by contract, gross Impairment losses by group, gross Deductions Recognised in income statement Claims on the public and public-sector entities Other operations Total Impairment losses by contract, gross Impairment losses by group, gross Deductions Recognised in income statement Business and market segment information 2011 Credit card operations Prepaid product operations Total Total income Operating surplus Assets Liabilities Human resources Credit card operations Prepaid product operations Total Total income Operating surplus Assets Liabilities Human resources LUOTTOKUNTA

54 BOARD OF DIRECTORS REPORT AND FINANCIAL STATEMENTS 2011 Notes on collateral and other contingent liabilities (eur 1 000) 24. Pension liabilities The personnel s statutory pension cover is managed by Ilmarinen Mutual Pension Insurance Company. A direct pension liability of EUR 311 thousand is included in statutory provisions. 25. Lease and other rental liabilities Lease and other rental liabilities Contractual minimum rental payments: No later than one year Later than one year and no later than five years Later than five years The term of the contracts varies between 1 year and 10 years. 26. Off-balance-sheet commitments Unused spending limits granted to customers Unused credit lines granted to customers LUOTTOKUNTA 2011

55 Notes on staff and management 27. Staff and members of governing and supervisory bodies Average Change in no. Average Change in no. Number of employees number during period number during period Group Permanent full-time staff Permanent part-time staff Fixed-term staff Total Wages, salaries and fees (eur 1 000) Executive Board members Board members Management Team, of whom CEO and Deputy CEO The amount of variable remuneration paid to the Management Team in 2011 was EUR 261 thousand. Cash loans, guarantees and off-balance sheet commitments No cash loans have been granted to the above mentioned bodies or auditors, nor have any guarantees or other off-balance sheet commitments been made for their benefit. Pension commitments The CEO s retirement age is 60 years. His pension is covered by pension insurance and the resulting pension liability of EUR 311 thousand is included in statutory provisions. Board and Executive Board members are not covered by pension commitments. Holdings Board and Executive Board members and the CEO and the Deputy CEO hold neither shares in the credit institution, nor stock options nor convertible bonds issued by the credit institution. LUOTTOKUNTA

56 BOARD OF DIRECTORS REPORT AND FINANCIAL STATEMENTS 2011 Notes on shareholdings (eur 1 000) 28. Subsidiaries Eurocard Oy, Helsinki Holding: 100% of shares Equity on 31 Dec EUR 9,053 thousand Profit for the period: EUR 971 thousand Notes on auditors fees (eur 1 000) 29. Auditors fees Audit Tax advisory services Other services Total auditors fees Other notes (eur 1 000) 30. Outstanding co-operative fees and number of members Number of co-operative members Total outstanding co-operative fees 0 0 Total sum of recalled co-operative fees of which to be refunded in of which to be refunded in LUOTTOKUNTA 2011

57 AUDITOR S REPORT To the members of Luottokunta We have audited the accounting records, the financial statements, the report of the Board of Directors and the administration of Luottokunta for the year ended 31 December, The financial statements comprise both the consolidated and the parent company s balance sheet, income statement, cash flow statement and notes to the financial statements. Responsibility of the Board of Directors and the CEO The Board of Directors and the CEO are responsible for the preparation of financial statements and report of the Board of Directors that give a true and fair view in accordance with the laws and regulations governing the preparation of the financial statements and the report of the Board of Directors in Finland. The Board of Directors is responsible for the appropriate arrangement of the control of the company s accounts and finances and the CEO shall see to it that the accounts of the company are in compliance with the law and that its financial affairs have been arranged in a reliable manner. Auditor s Responsibility Our responsibility is to express an opinion on the financial statements, on the consolidated financial statements and on the report of the Board of Directors based on our audit. The Auditing Act requires that we comply with the requirements of professional ethics. We conducted our audit in accordance with good auditing practice in Finland. Good auditing practice requires that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and the report of the Board of Directors are free from material misstatement, and whether the members of the Board of Directors of the parent company or the CEO are guilty of an act or negligence which may result in liability in damages towards the company or have violated the Co-operatives Act or the rules of the Co-operative. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements and the report of the Board of Directors. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation of financial statements and report of the Board of Directors that give a true and fair view 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 company s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements and the report of the Board of Directors. 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 financial statements and the report of the Board of Directors give a true and fair view of both the consolidated and the parent company s financial performance and financial position in accordance with the laws and regulations governing the preparation of the financial statements and the report of the Board of Directors in Finland. The information in the report of the Board of Directors is consistent with the information in the financial statements. Other opinions We support the adoption of the financial statements. The proposal by the Board of Directors regarding the use of profits for the financial period is in compliance with the Co-operatives Act and the rules of the Cooperative. We support that the members of the Executive Board and Board of Directors as well as the CEO be discharged from liability for the financial period audited by us. Helsinki, 2 March, 2012 KPMG Oy Ab Raija-Leena Hankonen Authorized Public Accountant Statement of the Executive Board The Executive Board has examined the Board of Directors report and the financial statements for 2011, as well as the Auditor s Report, and approves of the Board of Directors proposal for the distribution of profits. Helsinki, 26 March 2012 Executive Board LUOTTOKUNTA

58 BOARD OF DIRECTORS REPORT AND FINANCIAL STATEMENTS 2011 KEY FIGURES LUOTTOKUNTA GROUP Clearing sales of card schemes, EUR million* Number of Cards Visa Business Eurocard Number of outlets accepting cards in Finland Visa/MasterCard Voucher business Sales, EUR million Sales, no. of vouchers No. of accepting outlets** Personnel (Full-time equivalents) Key financial figures, EUR million Operating surplus Net income from operations Impairment lossess on credits Balance Sheet Non-performing receivables Luottokunta Group Capital Adequacy, % * Clearing sales of card schemes refers to the aggregate sales of Issuing and Acquiring. ** Number of previous years accepting outlets has been calculated by using same method as now. 58 LUOTTOKUNTA 2011

59 BOARD OF DIRECTORS REPORT AND FINANCIAL STATEMENTS 2011 Board of Directors ( ) Pekka Nuuttila Chairman b. 1956, M.Sc. (Forestry) Board Member since 2009 Executive Vice President, Nordea Bank Finland Plc Positions of trust: Nordea Finance: Board Member, Realia Group: Board Member, Central Chamber of Commerce: Board Member, Helsinki Region Chamber of Commerce: Delegation Member Tony Vepsäläinen Vice Chairman b. 1959, Master of Laws, emba Board Member since 2007 Chief Business Development Officer, OP-Pohjola Group Positions of trust: OP-Pohjola Group Central Cooperative: Vice Chairman of the Executive Board, Pohjola Bank Plc: Vice Chairman of the Board of Directors, OP-Services Ltd: Chairman of the Board, Helsinki OP Bank Plc: Chairman of the Board, OP Life Assurance Company Ltd: Chairman of the Board, Finnish Cultural Foundation: Member of the Board, Housing Fair Finland Co-op: Member of the Supervisory Board Jari Annala b. 1964, M.Sc. (Econ.) Board Member since 2007 Executive Vice President, CFO, SOK Corporation Positions of trust: Board Member of several SOK Corporation Companies, S-Bank Ltd: Chairman of the Board, S-Voima Oy: Chairman of the Board, S-ryhmän logistiikkakeskukset Oy: Chairman of the Board, Realinvest Oy: Member of the Board, Fennovoima Oy: Member of the Board, Voimaosakeyhtiö SF: Member of the Board Pasi Kämäri b. 1959, M.Sc. (Econ.), MBA Board Member since 2010 Managing Director, Savings Banks Association Positions of trust: Duo Life Insurance Company Ltd: Chairman of the Board, Samlink Ltd: Member of the Board, Nooa Savings Bank Ltd: Member of the Board, Aktia Real Estate Mortgage Bank plc: Member of the Board, Federation of Finnish Financial Services: Member of the Board Kasperi Saari b. 1952, BSc Board Member since 2011 Managing Director, Royal Restaurants Ltd Positions of trust: Finnish Hospitality Association: Board Member, Tapiola General: Member of the Supervisory Board Arja Talma b. 1962, M.Sc. (Econ.), emba Board Member since 2008 President, Rautakesko Ltd. Positions of trust: VR-Group Ltd: Member of the Board of Directors and Chairman of the Audit Committee, Sponda Plc: Member of the Board of Directors and Chairman of the Audit Committee Sakari Toivola b. 1953, M.Sc. (Eng.) Board Member since 2008 Executive Vice President, Oil Retail, Neste Oil Oyj Positions of trust: Finnish Petroleum Federation: Member of the Board of Directors Risto Tornivaara b Board Member in and since 2008 Deputy CEO, Head of Business Development, Sampo Bank Plc Positions of trust: Sampo Fund Management Ltd: Member of the Board, Realty World Ltd: Chairman of the Board Heikki Kapanen b. 1958, LL.M Board Member since 2000 Chief Executive Officer, Luottokunta Positions of trust: Eurocard Oy: Chairman of the Board 59 LUOTTOKUNTA 2011

60 Management Team ( ) From left: Pentti Unkuri Executive Vice President ICT, s. 1961, M.Sc. (Tech.) Employeed by Luottokunta since 2011 Maisa Hyrkkänen, Chief Financial Officer Administration, b. 1964, M.Sc. (Econ.), Employed by Luottokunta since 2003 Anton Helander, Executive Vice President Corporate Development, b. 1974, D.sc. (Econ.), Employed by Luottokunta since 2008 Heikki Kapanen, Chief Executive Officer b. 1958, LL.M., Employed by Luottokunta since 1998 Petri Carpén, Deputy CEO Acquiring Services, b. 1958, LL.M., Employed by Luottokunta since 1989 Mikko Pilkama, Executive Vice President Issuing Services, b. 1972, M.Sc. (Econ.), Employed by Luottokunta since 2008 Executive Board ( ) Kuisma Niemelä Chairman and CEO, SOK Corporation Chairman Hannu Penttilä CEO, Stockmann Plc Vice Chairman Jukka Alho President and CEO, Itella Corporation Catarina Fagerholm CEO, Instru optiikka Oy Lars Finér CEO, Sodexo Oy Ilkka Hallavo Country Manager, Danske Bank Finalnd Seppo Halme Managing Director, Muotitalo Jokinen Oy Matti Halmesmäki President and CEO, Kesko Corporation Ari Kaperi Executive Vice President, Nordea Bank AB (publ) Reijo Karhinen Executive Chairman, OP-Pohjola Group Jussi Laitinen CEO, Aktia Plc Heli Lehtonen CFO, VR-Group Ltd Peik Martin General Manager, Oy Finnmatkat Ab Harri Nummela CEO, OP-Services Ltd Ari Rajala Managing Director, AL-Services Ltd Jukka M. S. Salonen Executive Vice President, Nordea Bank Finland Plc Heikki Suutala CEO, POP Bank Alliance Jaana Tammisto Managing Director, Finland Travel Bureau Ltd Jaakko Uotila President, CEO, Alko Inc. AUDITOR Raija-Leena Hankonen Authorised Public Accountant KPMG Oy Ab LUOTTOKUNTA