Suomen Osuuskauppojen Keskuskunta

SOK Corporation
Annual Report 2006
Suomen Osuuskauppojen Keskuskunta
SOK Corporation

Annual Report 2006

1
Contents

4 CEO’s Review

7 The S Group

13 SOK Corporation

20 Review of Business Areas

20 Supermarket trade
22 Service station stores and fuel sales
24 Department store and speciality store trade
25 Hotel and restaurant trade
28 Automotive trade and accessories
30 Agricultural trade

31 Sourcing and logistics

33 Neighbouring Countries

34 Corporate Governance within SOK Corporation

36 SOK Supervisory Board
38 SOK Executive Board
39 SOK Management Team

40 Accountability
41 Personnel
45 Environment
48 Sponsorship and international contacts

50 Financial Statements 2006

50 Executive Board Report on Operations
57 Consolidated Income Statement
58 Consolidated Balance Sheet
59 Consolidated Cash Flow Statement
60 SOK Income Statement
61 SOK Balance Sheet
62 SOK Cash Flow Statement
63 Accounting Policies
67 Notes to the Consolidated and SOK Income Statement and Balance Sheet
82 Key Ratios and their Method of Calculation
83 Executive Board’s Proposal for the Disposal of SOK’s Profit for the Year
84 Auditors’ Report
84 Statement of the Supervisory Board

3
CEO’s Review

Strong growth in operations and services terms for the Group’s customer-owners. The fuel terminals that
for the benefit of our customer-owners were included in the oy Esso ab deal will give the S Group’s fuel
procurement function greater latitude to operate independently.
The S Group’s mission is to provide services and benefits for its In the agricultural trade, Hankkija Maatalous Oy carried out a
members, its customer-owners. This business idea guides both share purchase transaction at the beginning of the year, whereby
strategic development and practical operations, and it underlies it acquired a 51 per cent holding in Suomen Rehu Oy and Avena
day-to-day service for customer-owners at all our S Group loca- Nordic Grain Oy. This gives the S Group improved and more
tions. The performance of the entire Group can be assessed by how extensive possibilities to serve customer-owners in the agricultural
well we have succeeded in accomplishing this mission. sector.
The S Group achieved strong growth in 2006, with 127,300 In addition to growth through acquisitions, the S Group’s
new customer-owners joining the cooperative enterprises as service offerings grew organically and by expanding our network
members – bringing the total number of customer-owners to over of locations. The capital expenditures made by the cooperative
1.6 million, or nearly 67 per cent of Finnish households. Over enterprises and SOK Corporation in 2006 totalled EUR 532 mil-
878,000 new members have joined the S Group’s cooperative lion, most of which went for enhancing our own locations serving
enterprises during the past six years. People are interested in the customer-owners and other customers.
products and services which the S Group offers. Likewise, the Of particular importance was the decision taken by SOK
S Group’s way of operating as a market economy company with Corporation’s Executive Board to found the S-Bank in order to
a human touch rings true with Finns. provide and develop financing services for customer-owners. The
Thanks to the growing number of customer-owners, both the S-Bank will open at the end of this year. It will make customer-
cooperative enterprises and SOK Corporation have been able to owners’ daily dealings at the locations of the S Group and its
provide jobs for more and more people. At the end of 2006, the partners easier and faster, whilst giving greater scope for use of the
S Group had a payroll of 34,000 employees, 6,000 more than in S Benefit Card.
2005.
Growth endows an enterprise with positive, dynamic momen-
Sourcing and support services help
tum, even if this is not an end in itself. By growing, the S Group is
the S Group’s businesses grow
better able to realise its business concept. This philosophy has been
a motive force behind the investments in growth that the S Group In the report year, the grocery sourcing company Inex Partners Oy
made last year. These inputs have also laid the foundation for ac- became a wholly-owned subsidiary of SOK through a purchase of
complishing the S Group’s fundamental task in future years. shares. The deal was strategically important for the S Group. Hav-
During the report year, we sought to improve our service of- ing our own sourcing company will make it possible to reorganise
ferings for customer-owners and our service network by investing the whole long value chain in the supermarket trade. The inclusion
in new units. Apart from these, the S Group carried out major of Inex Partners Oy in the S Group’s supermarket operational
investments and initiatives with a view to developing sourcing and model has already boosted cost-effectiveness and improved our
support services for the entire Group. service capability in the grocery trade.
Expanding the service network enables us better to take into Another major move was the establishment of a Corporate
account our customers’ changing needs, whilst ensuring the geo- Financial Services unit to handle and develop financial adminis-
graphical coverage of our services. The acquisition of the Holiday tration services for SOK Corporation and Helsinki Cooperative
Club chain of six spa hotels for Sokotel Oy made it possible for Society Elanto. A joint service centre will bring efficiency, broader
the S Group to focus its hotel offerings increasingly on leisure time know-how and an improved operational capability within financial
hotel services, family holidays and well-being services. Over the administration in these two organisations. Placing in use a Group-
next few years, there will be growing demand for travel and hos- wide financial administration information system will provide op-
pitality services that can be offered to customer-owners and other portunities for developing the service centre model for application
customers in these areas. to the S Group’s other units as well. At the same time, it will step
By acquiring the car dealerships of Oy Stockmann Ab in Espoo up the financial control supporting the activities of the S Group’s
and Turku, the Etelä-Suomen Autotalo Oy dealership in Lahti units that operate as a network of companies.
and Vaunula Oy, the S Group was able to add another vehicle We seek to manage the future through knowledge and expertise.
marque, Ford, to its repertoire, especially in the Greater Helsinki Major investments in developing operational information systems
area and southern Finland. The range of vehicles offered by the were made in 2006. The Jollas Institute played a leading part in
S Group expanded significantly in Finland’s best market area for training and developing the entire S Group’s personnel. The future
the automotive trade. success factors of a modern retail and service company like the
The purchase of the shares in oy Esso ab towards the end of the S Group are built upon competent, strongly motivated staff and
year improved our offerings to customer-owners, particularly in the active use of information systems that span all the Group’s
the Greater Helsinki area and southern Finland, by increasing the functions.
number of service station and fuel distribution outlets. The Esso
deal strengthened the procurement volume of SOK’s subsidiary
North European Oil Trade Oy, which supplies fuel to the ABC
chain, thereby creating the potential to purchase fuel on better

4
 CEO’s Review

Ever more services and benefits

for customer-owners par with the market average. The only unit to fall short of the
sales and profit targets set was the automotive and car accessories
More and more, customer-owners are making the bulk of their trade, though it did achieve a substantial increase in sales through
purchases at S Group locations. This is one of the Group’s success acquisitions.
factors. Bonus sales accounted for 64 per cent of the S Group’s The cooperative enterprises’ retail sales amounted to EUR 8,073
domestic retail sales in 2006, up 15 per cent on the previous year. million, up 11.6 per cent on the figure a year earlier.
Bonus sales accounted for 80 per cent of sales in the grocery, ser- In Finland, the S Group’s grocery trade grew by 15.4 per cent
vice station store, fuel and department store trade. Our customer- on the previous year, reaching EUR 4,909 million. The increase
owners have made wide use of the services offered by the S Group, was triple the national average for the grocery trade, bringing a
particularly in these business areas, but the trend in bonus sales has big gain in the S Group’s market share in the grocery trade and
been favourable in other operational areas too. strengthening its position as the market leader. Sales growth in the
Apart from other benefits, patronage yields cash benefits for our ABC service station store and fuel trade also outstripped the na-
customer-owners. Last year, members were paid EUR 232 million tional average, and the chain gained market share in the fuel trade.
in Bonuses. Profits returned as Bonuses rose by 20 per cent on the SOK Corporation had net turnover of EUR 6,634 million, up a
previous year, thanks to the growth in the number of customer- whopping 62.3 per cent on the previous year. The biggest increase
owners and increased customer loyalty. In addition to Bonuses, the in net turnover came from the acquisition of the sourcing com-
cooperative enterprises will distribute to their members, for the pany Inex Partners Oy by SOK Corporation from the beginning
2006 financial year, interest on cooperative capital and a payout of 2006, as well as from the sales growth of North European Oil
from surplus funds to a total amount of about EUR 15–20 mil- Trade Oy, the fuel sourcing subsidiary.
lion. SOK’s businesses in the Baltic countries had sales of EUR 190
The S Group’s cooperative enterprises and SOK Corpora- million, showing an increase of 12.7 per cent on the figure a year
tion have participated in a number of nationwide and regional ago. The supermarket trade as well as the hotel and restaurant
development projects involving business, culture and sports during business saw an especially favourable sales trend.
the report year. They have been a means of developing economic, SOK Corporation’s profit before extraordinary items amounted
social and cultural well-being in different parts of Finland in to EUR 29.9 million, down EUR 39.1 million on the correspond-
accordance with the S Group’s principles of responsible business ing profit figure a year earlier, but higher than the earnings target
operations. Part of the earnings of the cooperative enterprises and set for 2006. The lower earnings were attributable mainly to the
SOK Corporation are used for the benefit of the membership and growth and development investments that were made in 2006 in
local areas via community activities of this kind. line with the Group’s strategy as well as to smaller one-off capital
gains and the weak earnings trend in the automotive trade.
The corresponding profit posted by the cooperative enterprises
Financial performance of the S Group
was EUR 311 million, a decrease of EUR 20 million on the previ-
and SOK Corporation
ous year’s result. This was due to smaller capital gains on the sale
The growth in the number of customer-owners and their increas- of non-current assets. The operational result of the cooperative
ing patronage of the S Group’s service units has lifted the S Group’s enterprises was substantially better than a year ago. In line with the
sales substantially in 2006. Retail sales were up 13.4 per cent to S Group’s operational model, earnings are generated chiefly by the
EUR 9,777 million, representing growth that was nearly double front line units – the cooperative enterprises. The earnings trend in
the average sales increase in recent years. 2006 is in harmony with this strategy.
Sales outpaced the market, particularly in the supermarket The entire S Group generated profit before extraordinary items
trade as well as the service station store and fuel trade. The other and taxes of EUR 341 million. The earnings figure is one of the
business areas also achieved sales growth that was at least on a best in the S Group’s history.

5
CEO’s Review

Onwards together to create People stand behind the success of

customer-owners’ own store the S Group’s operations
The theme of SOK’s centennial in 2004 was “Onwards Together.” The competence of management, supervisors and employees,
It conveyed the essence of the S Group’s cooperative enterprise the ability to pay attention to and understand members’ service
model. One of our symbols, the basket-carriers, depicting a needs as well as a friendly service-mindedness will underpin the
woman and a man together carrying a basket towards a rising sun, S Group’s success in future years too. The S Group has a good
portrays the idea of “being in business together”. and skilled staff. I am convinced of this. I thank all of you most
The S Group’s cooperative operations involve being in busi- warmly for your work on behalf of the S Group.
ness together in many ways. A cooperative is at the same time The owners’ administrative work and decision making within
a business and a member-owned enterprise. It is a very modern the S Group has shown expertise, a deep and broad grasp of mat-
form of business, in which the members – customer-owners – are ters and a far-reaching outlook. The dialogue with management
at the same time both the cooperative enterprise’s customers and has brought a positive dynamism to the Group’s development. Be-
the object of its operations, and they are owners who have a say ing run actively by its owners is one of the strengths of a coopera-
in running it. Correctly implemented, a customer and owner rela- tive enterprise. My thanks go to all those who have been involved
tionship of this kind will give us, as a cooperative retailer, a strong in owner-administration within the S Group for the valuable work
edge in future years. Our customer-owners can truly say: we are you have done.
the cooperative. By putting in place modern management models, My warm thanks go to our bonus partners and to all our busi-
cost-effective operations can be built upon this customer-owner ness partners for your good and constructive co-operation during
relationship, whilst reflecting a spirit of belonging together. 2006.
Across the S Group, Onwards Together also denotes the I wish to express my special gratitude to the S Group’s cus-
co-operation network of companies formed by the cooperative tomer-owners – the members of the cooperative societies – for
enterprises and SOK Corporation. The mission of the coopera- your strong and ever-growing commitment to using the S Group’s
tive enterprises is to be a skilled and strong retail organisation that services. You have taken part in building the ever-developing
offers customer-owners in their own territories the services they S Group. You have been exemplary in carrying out the Your Own
need. The cooperative enterprises know their market, their cus- Store vision in practical everyday dealings as customer-owners of a
tomer-owners, their region’s identity and the needs for developing cooperative enterprise. My heartfelt thanks to all of you.
operations. The role of SOK Corporation, in turn, is to be a know-
how and service centre for the entire S Group, and a provider of
Warm thanks and best wishes for
centralised sourcing and other services. The strategies for the S Group
future success
as a whole are created and decided jointly in SOK’s different
steering and decision-making organisations. This network-type My own term as Chief Executive of Suomen Osuuskauppojen
of business model in which operations and management are both Keskuskunta, SOK, will end on 31 July 2007. I wish to thank
spread across the units and centralised has proved to be efficient every member of our S Group staff for your enthusiastic and
and well functioning in retail and service fields, provided that there skilled work on behalf of the S Group. It has been great to work
is a good spirit of co-operation and trust among its actors and that with you. You have been a knowledgeable and motivated team, of
they understand clearly the part each must play. This has been re- whom a chief executive can well be proud. Together we have done
alised within the S Group over the past years. There is every reason our part in developing the S Group so that it has an ever-improv-
that this good joint spirit will flourish in future years as well. ing capability to realise our mission.
The S Group’s vision – its mindset – that will shape the kind of A special vote of thanks goes to my co-workers in management
corporate entity the S Group wants to be in the future is defined positions at SOK and the cooperative enterprises for your excellent
in the “Your Own Store” concept. The vision underscores the twin co-operation. Your work stands out by virtue of its high level of
elements of efficiency and know-how that go into making a coop- competence and the will to reach and exceed the targets that have
erative enterprise. Apart from this efficiency dimension, the Your been set.
Own Store vision embodies an emotional trait. The customer- In conclusion, I wish to express my best wishes for good luck
owner must also feel that an S Group cooperative enterprise is and success to Managing Director Arto Hiltunen, who will take
their own store. over as the new CEO on 1 August 2007.
Finnish ownership, the regional identity which the cooperative
enterprises foster, the values of the cooperative movement, the
desire to be a responsible company within Finnish society, demo- Helsinki, 15 February 2007
cratic decision-making and passing on the benefits of cooperative
operations to customer-owners are the traits and values inherent in
the Your Own Store vision. It is these values which the companies
in the S Group wish to abide by and respect in every aspect of
their activities. We within the S Group believe that the traits and
values we have described are the kind which our customer-owners
feel are fundamental to a business organisation they can respect. Kari Neilimo

6
The S Group

What is the S Group? tion store and fuel trade; and Sokos and Emotion in the depart-
ment store and speciality store trade.
The S Group is a major Finnish cooperative retail and service Sokos Hotels, Radisson SAS Hotels and Holiday Club Spa
group. It is made up of Suomen Osuuskauppojen Keskuskunta Hotels comprise the S Group’s nationwide hotel chains. The
(SOK) with its subsidiaries, 22 independent regional cooperative nationwide restaurant chains are Rosso, Fransmanni, Amarillo, Se-
enterprises and 16 local cooperative enterprises. The members own villa, Torero, Memphis, New York, Public Corner as well as Night
the regional cooperative enterprises, which in turn own the central and Bepop restaurants for nights out. The café and fast food chains
organisation, SOK. Coffee House, Coffee Bar, Presso, Rosso Express and Buffa round
The purpose of the S Group’s spectrum of operations is to out the range of restaurants. In addition, the Group engages in
provide services and benefits for its members. The backbone of op- extensive co-operation with the Hesburger chain in the hamburger
erations is our core values: a customer focus, partnership, renewal, restaurant business.
excellence and responsibility. The nationwide chains operating in the agricultural trade are
The S Group’s main strategic goal is to offer its members eve- Agrimarket, S-Rautamarket (hardware) and Multasormi (garden-
rywhere in Finland versatile services and an extensive network. In ing store).
line with its strategy, the S Group operates efficiently, working for It was decided to establish the Kodin Terra chain because pilot
the benefit of its members and making the best use of the Group’s testing of the store in Lahti’s Renkomäki district yielded good
information, know-how and co-operation networks. results. Kodin Terra is the S Group’s department store for fitting
out the home. Its assortments include product groups connected
with home interior decorating, renovation and building as well as
The S Group’s businesses
for the care of plants and gardening.
The S Group’s business areas are the supermarket trade, the service In addition to the domestic market, the S Group carries on
station store and fuel trade, the department store and speciality international operations in the Baltic countries in the supermarket
store trade, tourism and hospitality business (former hotel and trade, the tourism and hospitality business and the automotive
restaurant business), automotive trade and accessories sales and trade. In the course of 2007, hotel and restaurant operations will
agricultural trade. be started in Russia with the opening in St Petersburg of three
The S Group’s operations are organised into nationwide chains. hotel units.
Joint support and development services are produced on a central- At the end of the year the S Group had 1,475 locations in Fin-
ised basis. When chain operations are combined with the regional land, and 13 in the Baltic countries.
cooperative enterprises’ good local knowledge of the market and The Group had a payroll of 34,045 employees, of whom 25,482
customers, the result is an efficient business model the S Group were employed by the cooperative enterprises with their subsidiar-
way. ies and 8,563 were SOK Corporation staff.
The S Group’s nationwide chain brands are Prisma, S market,
Sale and Alepa in the supermarket trade; ABC in the service sta-

The S Group is composed of 22

member-owned regional coopera-
tive enterprises and SOK Cor-
poration, which is owned by the
cooperative enterprises. The pri-
mary division of labour is that the
regional cooperative enterprises
handle the practical provision of
goods and services for members
and SOK acts as a development
and steering organisation. SOK
furthermore carries on business
operations through its subsidiar-
ies. In essence, the S Group is a
strategic network of companies.

7
The S Group

Customer-ownership underpins operated in the telecommunications, car rental, furniture sales,

our operations tourist trade, optician services as well as insurance and energy
sectors.
The S Group’s cooperative heritage is reflected today in customer- Another major benefit is that members have a real say in how
ownership. It underpins planning and development in all business their own cooperative society and the S Group are run.
areas and is an overriding success factor.
At the end of 2006, the S Group had 1,621,060 members. Last
The S Group’s earnings in 2006
year 127,352 new members joined.
An extensive and versatile service network everywhere in The S Group posted aggregate profit before extraordinary items of
Finland, good-quality and affordable product and service offer- EUR 341 million (400). The lower level of earnings was attribut-
ings, and highly skilled staff form the foundation for serving our able to smaller gains on the sale of fixed assets than a year ago as
customer-owners and realising the S Group’s business concept. The well as to large investments in development and growth.
regional cooperative enterprises are always close to their customer- The cooperative enterprises’ aggregate result was EUR 311 mil-
owners. lion (331). The operational result of the cooperative enterprises
Bonus sales to customer-owners accounted for 64 per cent was substantially better than a year ago. All the regional coopera-
of the S Group’s sales in Finland. Members were paid purchase tive enterprises reported a profit.
bonuses totalling EUR 232 million for their patronage of the The S Group’s capital expenditures totalled EUR 532 million
S Group’s and its partners’ locations. (315).
Apart from Bonuses, customer-owners benefit from their mem- SOK Corporation’s profit before extraordinary items was EUR
bership in other ways too. For example, they receive a wide range 29.9 million (69.0). The operational result declined on the previ-
of constantly changing product and service benefits and customer- ous year. The decrease in profit was attributable to lower compa-
owner mailings, and Yhteishyvä magazine is delivered to their rable capital gains on fixed assets as well as to the weaker result of
home once a month. certain operating companies, especially of the automotive trade,
The S Group continually develops the spectrum of services it compared with a year ago. This was due in part to the start-up of
offers its customer-owners. The Group’s own operations in Finland new businesses that were acquired in the first part of the year.
and abroad are rounded out by the offerings of carefully chosen SOK Corporation’s capital expenditures in 2006 amounted to
partners in co-operation. In 2006 the S Group’s bonus partners EUR 201.0 million (68.2).

Cooperative
Activities

Customer- A cooperative is based on

ownership the idea of producing services
Members Services for its members. This was
made possible by means of
a company set up in the form
Market economy of a cooperative.
with a human face
Regionality Efficiency

In the Your Benefits in Finland and Your Partner

in Finland visions, the cooperative philosophy was
embodied in the idea of customer-ownership.
Services are produced for members regionally
and efficiently.

Community Successful
of people company

The Your Own Store vision means a cooperative enterprise cluster that stands for market
economics with a human face. The S Group is in business for the long term. It operates
in a way that emphasises both human values and efficiency, whilst also ensuring the
company’s success over the long term. Membership in cooperative enterprises that work
for the good of their local area has also become a matter of pride and commitment:
the cooperative enterprises are taking on an ever-more central role in the community.

8
 The S Group

The S Group’s Your Own Store concept The S Group’s key figures in 2006
In a network-type of company like the S Group, the corporate EUR million Change %
vision plays a big role in steering operations. The S Group’s vision S Group’s retail sales 9 777 +13.4
is Your Own Store. The Your Own Store concept builds on the S Group’s retail sales in Finland 9 587 +13.4
S Group’s previous visions. It deepens the fundamental tenets that S Group’s profit before
have guided cooperative activities across the S Group throughout extraordinary items 341 -14.8
its 100-year history. This logical evolution is portrayed in the Cooperative enterprises’ retail sales 8 073 +11.6
triangle diagram below. Cooperative enterprises’ profit before
extraordinary items 311 -6.0
S Group’s investments 532 +68.9
Regional Cooperative Societies of
S Group’s bonus sales 6 121 +15.0
the S Group
Bonus paid to customer-owners 232 +20.0
Cooperative Society Varuboden, Kirkkonummi
Southern Karelia Cooperative Society, Lappeenranta
Southern Ostrobothnia Cooperative Society, Seinäjoki
Helsinki Cooperative Society Elanto, Helsinki
Cooperative Society Jukola, Nurmes S GROUP RETAIL SALES
Cooperative Society Keskimaa, Jyväskylä BY BUSINESS AREA 2006
Koillismaa Cooperative Society, Kuusamo
Cooperative Society Arina, Oulu
Cooperative Society Hämeenmaa, Lahti
Cooperative Society Keula, Rauma
Cooperative Society KPO, Kokkola
Cooperative Society Maakunta, Kajaani
Cooperative Society Osla, Porvoo
Cooperative Society PeeÄssä, Kuopio
Cooperative Society Suur-Savo, Mikkeli
Cooperative Society Ympyrä, Hamina
Cooperative Society Ympäristö, Kouvola
Pirkanmaa Cooperative Society, Tampere
Northern Karelia Cooperative Society, Joensuu
Satakunta Cooperative Society, Pori
Suur-Seutu Cooperative Society SSO, Salo
Turku Cooperative Society, Turku

S GROUP’S BONUS SALES MEMBERSHIP S GROUP RETAIL TRADE

9
S-ryhmä

10
 The S Group

S Group Key Figures 2002–2006

EUR million 2002 2003 2004 2005 2006 ±%

SOK CORPORATION
Net turnover 2 998 3 112 3 781 4 209 6 834 62.3
Depreciation 35 34 40 43 59 38.6
Operating profit 55 46 53 62 23 -63.0
Financial income and expenses
(without value adjustments) -1 2 3 7 7 -0.2
Profit/loss before extraordinary items,
appropriations and taxes 55 52 54 69 30 -39 €M
Profit/loss for the financial year 44 35 40 57 19 -39 €M

Total assets 1 372 1 449 1 609 1 831 2 161 18.0

Fixed assets 496 473 423 399 416 4.2
Stocks 133 135 137 161 296 84.0
Current assets (without stocks) 742 841 1 049 1 271 1 449 14.0
Capital and reserves (incl. capital loan) 457 445 456 501 521 4.0
Minority interest 17 17 17 14 17 22.3
Provisions for liabilities and charges 12 9 6 2 22 806.9
Creditors 887 978 1 130 1 314 1 601 21.9

Interest-bearing creditors 465 495 555 657 695 5.8

Liquid funds 420 503 658 790 818 3.6
Net interest-bearing creditors 45 -8 -102 -133 -123 10 €M

Personnel at 31 Dec. 4 645 4 949 4 790 5 052 8 563 69.5

SOK
Sales (excl. VAT) 1 669 1 693 2 194 2 536 4 316 70.2
Sales to cooperative enterprises 1 579 1 597 2 086 2 442 4 191 71.6
Operating profit before extraordinary
items, appropriations and taxes 4 28 25 6 6 1 €M
Profit/loss for the financial year 14 23 30 32 11 -21 €M

Personnel at 31 Dec. 505 538 631 696 761 9.3

COOPERATIVE ENTERPRISES + SUBSIDIARIES

Sales 5 640 5 894 6 652 7 244 8 073 11.4
Number of cooperative enterprises 43 43 42 41 39 -4.9
Membership 854 067 1 187 074 1 468 572 1 534 710 1 621 060 5.6

Personnel at 31 Dec. 18 169 18 488 21 563 23 040 25 482 10.6

S GROUP
Retail sales 6 858 7 149 7 929 8 464 9 777 15.5
Locations 1 222 1 252 1 371 1 392 1 488 6.9

Personnel at 31 Dec. 22 814 23 437 26 353 28 092 34 045 21.2

CALCULATION OF KEY RATIOS

Liquid funds = Cash in hand and at bank + investments

Net interest-bearing creditors = Interest-bearing creditors - liquid funds

11
The S Group

The S Group’s retail locations The S Group’s retail sales by

at 31 December 2006 business area 2006

Number Change EUR million Change

Prisma hypermarkets 47 0 Prisma hypermarkets* 2 173 +9.7
S Markets 409 37 S Markets 2 681 +14.4
Sale and Alepa stores 289 29 Sale and Alepa stores 570 +15.6
Supermarket locations 745 66 Supermarket chains* 5 423 +12.6
Kodin Terra stores 1 1 Kodin Terra stores 19 +41.3
Other supermarket locations 20 -3 Other supermarket trade 104 +591.8
Supermarket trade 765 63 Supermarket trade* 5 545 +14.5

ABC service station stores 81 10 ABC service station stores 584 +33.6
ABC unmanned stations 58 4 ABC unmanned stations 411 +22.3
Other service station stores 24 -7 ABC fuel oil service 28 +42.3
Other unmanned stations 3 - Other service station stores 101 -5.1
Service station stores and fuel sales 1) 166 7 Other unmanned stations 10 -13.6
Other service station stores and fuel sales 1 +44.7
Sokos department stores 20 - Service station stores and fuel sales 1 137 +17.8
Emotion speciality stores 12 1
Other speciality stores 15 0 Sokos department stores 333 +6.9
Department stores and speciality stores 47 1 Emotion speciality stores 17 +42.1
Other consumer goods 45 +8.4
Sokos Hotels 38 - Department stores and speciality stores 395 +8.2
Radisson SAS Hotels 7 1
Holiday Club Spa Hotels 6 6 Sokos Hotels* 146 +0.4
Other hotels 3 - Radisson SAS Hotels 42 +8.1
Hotels 54 7 Holiday Club Spa Hotels 19 -
Other hotels 4 -1.7
Restaurants catering to diners 74 3 Hotel operations* 210 +11.8
Drinks and socialising restaurants 96 3
Restaurants providing entertainment 11 1 Restaurant catering to diners 211 +14.3
Other restaurants 24 2 Drinks and socialising restaurants 100 +1.1
Cafes 36 2 Restaurants providing entertainment 24 +3.1
Separate restaurants 241 11 Other restaurants 142 +18.1
Cafes 34 +7.3
Hotels and restaurants 295 18 Restaurants in the Baltic countries* 12 -
Restaurants* 523 +11.2
Car dealerships 46 -
Hotel and restaurant business* 733 +11.4
Agrimarkets 130 -1
Automaa 325 +72.7
Machine Centres 8 - Other car dealerships* 546 -0.6
Other hardware and agricultural locations 9 -4 Automotive trade and accessories sales* 871 +18.8
Hardware and agricultural locations 147 -5
Agrimarkets 787 +3.8
Other locations 9 -1 Machine Centres 130 -0.6
Hardware trade 25 -9.7
S Group locations, total 1 475 83 Grain trade 112 +9.6
Other agricultural trade 26 +2.6
1) The number of locations does not include stores or stations that Agricultural trade 1 043 +3.5
operate at other locations.
Others 16 +2.7
Total number of ABC service station stores 81 10
Total number of ABC unmanned stations 206 15 S Group retail sales, total 9 777* +13.4
Total number of other service station stores 20 -7
Total number of other unmanned stations 13 -2
Total 320 16 * Figures include sales in Baltic

12
SOK Corporation

SOK Corporation comprises Suomen Osuuskauppojen SOK’s operational scope and

Keskuskunta (SOK) and the subsidiaries it owns: strategic positioning
– Sokotel Oy, hotel and restaurant business
– Maan Auto Group, automotive trade and car accessories SOK’s purpose is to create competitive advantage for the S Group’s
– Hankkija Maatalous Oy, agricultural and hardware business businesses. SOK carries out its operational aim by developing and
– Tapiolan Sokos Oy, department store and speciality store trade guiding the S Group’s strategies, value chains and chain operations
– Intrade Partners Oy, sourcing and logistics for consumer goods in co-operation with the cooperative enterprises. SOK provides
– Rainex Yrityspalvelu Oy, hardware and building supplies the joint, competitiveness-enhancing services that the S Group
– North European Oil Trade Oy (NEOT), fuel procurement requires and carries on profitably growing business in line with its
company strategy.
– the subsidiaries AS Prisma Peremarket, AS Sokotel and The S Group sets the framework for the competitive strategies of
the Kommest Auto Group operate in the Baltic countries. the S Group’s business areas and defines the strategies of SOK Cor-
– Spar Finland Ltd became an SOK subsidiary on 12 January poration and the cooperative enterprises. The S Group’s strategic
2006, and SOK’s holding rose to 100 per cent on 18 May business areas are the supermarket trade, the service station store
2006. Spar Finland plc changed from a public limited company and fuel trade, the department store and speciality store trade, the
to a private limited company, Spar Finland Ltd, on 30 June tourism and hospitality business (previously hotel and restaurant
2006. business), the automotive trade and car accessories, and agricul-
– Inex Partners, which provides assortment, sourcing and logistics tural trade. SOK’s chain management functions ensure that the
services, became a wholly-owned subsidiary of SOK as from strategies of the S Group’s business areas are carried out in accord-
March 2006. On 28 February 2006, SOK purchased from ance with the entire organisation’s objectives. SOK Corporation’s
Tradeka (Cooperative Tradeka Corporation) all the shares it strategy sets out the tripartite task described below.
owned in Inex Partners Oy.
– SOK’s Supervisory Board decided in February 2006 to found
Functions and services within SOK’s scope
S-Pankki Oy (S-Bank Ltd), which will carry on deposit banking
operations. At the same time, the Financial Supervision Within the S Group, the following areas of responsibility are
Authority granted S-Bank Ltd a credit institution licence. assigned to SOK:
– S-Etuluotto Oy is specialised in managing the S Group’s Joint development and steering functions
consumer credits. – Strategic development, decision making and management as
– Rekla Oy is a company that is specialised in cash services and well as oversight of the S Group’s operations and best interests
sells them to the entire S Group. – Development and steering of the commercial and service value
chains and new business concepts
– Development and support of customer-ownership and
customer relationships

SOK Corporation’s net turnover SOK Corporation’s operating

by business area profit by business area

EUR million EUR million ± prev. year % EUR million EUR million
1.1.–31.12. 1.1.–31.12. 1.1.–31.12. 1.1.–31.12.
2006 2005 2006 2005
Supermarket trade 375 81 362.3 1.9 2.5
Fuel sales 981 744 31.9 3.3 1.6
Deparment stores and speciality stores 39 36 7.6 -0.7 0.8
Hotel and restaurant business 217 177 22.8 11.5 14.6
Automotive trade and accessories 424 345 22.9 -7.1 4.8
Agricultural trade 856 827 3.5 6.8 8.3
Sourcing 2 374 534 344.7 6.6 0
EDI invoicing 1 619 1 406 15.2 0.1 0.2
Real-estate, rental and other service operations 239 210 14.2 3.2 6.8
Share of associated companies’ profits 1.6 2.4
Eliminations -290 -150 93.8 -4.2 20.3
Total 6 834 4 209 62.3 23.1 62.3

13
SOK Corporation

Services for the value chains SOK Corporation’s service functions

The business areas are responsible for organising and controlling The aim of the service functions provided by SOK Corporation
the expertise, sourcing, logistics and other services for their own is to develop operational models and processes that generate the
value chains in a way that ensures that the strategic objectives of maximum added value for the S Group’s businesses. The task of
the value chains are realised. the service functions is to develop and maintain business models
The S Group’s services and service processes for all the value that increase the competitiveness of the entire S Group, thereby
chains jointly are: the customer relationship, human resources, IT, producing cost-effective services for the S Group. The role speci-
real-estate and business location, finance, communications and fied for joint service functions is to provide for the S Group’s
accounting processes. other units the kinds of service functions that can be organised
The joint services are produced in the most cost-effective and centrally to yield cost savings and/or a qualitative improvement
high-quality manner: on a decentralised basis, at service centres in operations. SOK strives to carry out the tasks defined for it in
and as a combination of the two. a customer-oriented, cost-effective and competitive manner so
as to strengthen the S Group’s operational efficiency, quality and
resources.
SOK’s own operations
To support the S Group’s offerings, SOK carries on profitable busi-
Strategic development and
ness operations – which yield synergy and economic value added
human resources
– in Finland and nearby areas. New business concepts are tried
out on a pilot basis in collaboration with the regional cooperative The purpose of SOK’s strategic development and human resources
enterprises. functions is to generate added value for the business and service
functions by supporting the S Group’s management and units in
developing and implementing strategies as well as by acquiring and
developing the correct know-how and information.
The strategic development and human resources functions work
using a customer-oriented and innovative approach in close co-
operation with the S Group’s management, the chains, the regional
cooperative enterprises and service functions, making effective use
of their own internal synergies. These tasks are organised into five
different units: Strategic Development, eBusiness, HR Adminis-
tration and Development, Occupational Health Services and the
Jollas Institute training unit.

Strategic Development
The task of Strategic Development is to support the S Group’s
management and other units in developing and implementing
strategies. The unit also reports on the achievement of strategic
objectives.
During the report year, SOK Corporation’s revamped strategy
was drafted. The strategy defines SOK Corporation’s role and tasks
in carrying out the Group strategy as well as the overall strategic
objectives.
Strategic Development took part in overhauling the competi-
tive strategy of the hotel and restaurant business, carried through
a development project for the hardware store and gardening trade
and also ran a project aiming at developing the speciality store
trade. The unit furthermore participated in developing project
operations and the concepts underlying the Electronic Working
Group’s activities. Strategic Development was also responsible for
an extensive feasibility project within the service businesses.
The unit co-ordinates the implementation of, and reporting on,
the S Group’s operational model programme.
Knowledge management as part of the management system has
been defined as a strategic success factor for the S Group. Strategic
Development worked on putting in place the Lighthouse strategic
database to support management’s decision making. The database
brings together realtime strategic information on the S Group’s

14
SOK-yhtymä

15
SOK Corporation

operating environment. The unit furthermore participated in a made up of representatives from the regional cooperative enter-
number of development and research projects in co-operation with prises and SOK Corporation.
other companies and universities. The objective of these is to step The S Group’s employer organisation, Työnantajat SOKTA ry,
up knowledge management across the S Group. operates as part of SOK’s Human Resources unit. SOKTA’s task is
Strategic Development co-ordinated environmental compli- labour market co-operation and the exercise of influence at the
ance at S Group units. The S Group’s environmental policy was S Group level in arriving at labour market settlements in the main
updated at the end of 2005. The analysis furnished the basis for areas of operations.
formulating an environmental compliance model based on value The unit’s priority in 2006 was implementing the HR informa-
chain management, in which the roles and responsibilities of the tion system across the S Group, pilot testing of it and follow-up
different actors are defined. Environmental experts took part in planning of actual installations. The operational Work Shift Plan-
the drafting of environmental legislation both together with the ning System was developed to function as part of the HR system.
authorities and in national and European co-operation organisa- Another central project was the integration of Spar Finland Ltd as
tions in the retail sector. part of the S Group.
Among its many tasks, the Strategic Development unit supports
the regional cooperative enterprises’ strategy process, steers the The Jollas Institute
development of the cooperative enterprise structure, monitors The S Group’s training and career grooming activities are handled
the financial state of the cooperative enterprises and the financial centrally through the Jollas Institute, which also carries out part
performance achieved through the Group strategy and carries out of the training for SOK Corporation’s staff. The Jollas Institute is
the necessary measures. Last year the strategic state of the regional a special vocational institute that provides career grooming and
cooperative enterprises was assessed for the first time on the basis training services for all the chains and personnel groups of the
of the S Group’s benchmarks. Implementation of competition S Group.
strategies was evaluated together with the management and con- Its aim is to use competence development as a way of further-
troller functions of the business areas. ing implementation of the Group’s business idea and boosting
overall competitiveness. Its main focuses are to develop supervisor
eBusiness skills and to reinforce concept-driven ways of operating. Training
The task of the eBusiness unit is to coordinate and develop the courses are designed in co-operation with SOK’s chain manage-
S Group’s electronic business operations. The unit produces the ment units and customer companies. The Jollas Institute further-
main jointly used electronic services. It is in charge of controlling more arranges apprenticeship training that prepares entrants for
electronic services within the S Group. The task of the eBusiness various vocational diplomas.
unit is to promote and plan the utilisation of electronic services
as part of the S Group’s multichannel operations. In addition, S Occupational Health Services
the unit has responsibility for developing the S Channel – the The unit is in charge of carrying out occupational healthcare for
S Group’s consumer portal (www.s-kanava.fi) – and the overall the S Group in the Greater Helsinki area and it guides and sup-
concept for the S Group’s website. ports the development of occupational healthcare in other locali-
The S Channel was developed in 2006 to provide improved sup- ties as well. Over the years, the unit’s priority has shifted from the
port fro customer-owners in online transactions. In the report year, treatment and prevention of accidents and illnesses to promoting
the account balance service was renewed, expansion of its contact and developing health and job well-being. Yet effective medical
was continued and it was made possible to download information care provided at the general practitioner level and with an empha-
on S Group locations to an in-vehicle navigation system. sis on occupational health has gained in interest at the same time.
The number of visitors to the S Channel website has grown In 2006 the development of job well-being at SOK units was
steadily. The service reaches over 300,000 customer-owners supported in co-operation with the human resources functions
monthly and registers over 700,000 unique visits monthly. In an and the Jollas Institute. Active efforts were made to improve job
Online Brand Equity study conducted in 2006 by Taloustutkimus, well-being. Three working groups received Job Verve diplomas and
a market research consultancy, the S Channel rose to 25th place. merit awards. Start-up of occupational healthcare at the S Group’s
new units was a key task.
HR Administration and Development
The Unit’s task is to develop operational models and tools in line
Administrative Division
with the human resources strategy for use by the S Group’s units.
The unit furthermore serves as SOK’s personnel department, and it Accounting
coordinates and issues guidelines for managing SOK Corporation’s SOK Accounting operates as a chain management unit for the S
HR affairs. Group’s accounting functions and provides basic accounting and
Human resources development is guided by the S Group’s HR payroll administration services to SOK Corporation and the co-
strategy, which is based on the S Group’s strategic objectives. operative enterprises. In addition, the unit produces and develops
Human resources management is organised in accordance with the financial administration support services needed in decision
the principles of the chain management model used in running making for the S Group’s businesses.
the businesses. The S Group’s human resources work is guided Under the Accounting unit’s direction, a Development Pro-
and overseen by an HR Board and HR Steering Group, which are gramme for Financial and Accounting Processes (TALKE) has

16
 SOK Corporation

been carried out for a number of years now within the S Group. SOK Takaus Oy grants guarantees on behalf of the S Group
Its objective is to harmonise processes and systems so as to improve companies. During the first part of the year, SOK Takaus Oy’s
cost-effectiveness and support operational decision making. counter-guarantee arrangement was overhauled to be better in line
Renewal of the S Group’s accounting system architecture in line with the guarantee requirements at the present time.
with the new operational model was seen to completion during Rekla Oy is a company that is specialised in cash services and
the report year. The architecture is based on a centralised SAP sells them to the entire S Group. Rekla Oy’s operations expanded
system and a tied-in array of integrated systems that provide other to Turku from the beginning of the year, and at present, it provides
financial administration services. This revamp marks the imple- cash counting services in Vantaa, Turku, Kuopio and Oulu.
mentation within the S Group of unified financial administration
information systems and operational processes. Real Estate
A central element of the new operational model is the effective The overhaul of the S Group’s property and business location strat-
production of services for financial administration processes. An egy that was started in 2005 was completed in 2006. The objective
individual service centre provides financial administration services of the strategy is to deploy chain management as a more effective
for SOK Corporation’s companies. Last year, some of the coopera- operational model for the entire S Group’s property business. To
tive enterprises also became clients of the service centre. Helsinki this end, modelling of different key processes in a property’s life
Cooperative Society Elanto and SOK decided on a form of service cycle was started in conjunction with the regional cooperative
centre co-operation in which Helsinki Cooperative Society Elanto enterprises and the real-estate functions.
will become a client of the service centre operated by the SOK Ac- In the developer business, the priorities were the expansion of
counting unit. It has been decided to start operations of the greatly operations to the Baltic countries and Russia as well as the steering
expanded service centre in Espoo’s Kilo district in spring 2007. and information processes for construction at the Group level. The
Towards the end of 2006, the organisation of the Accounting Real Estate functions were running several dozen different types of
unit was brought into line with the new operational model. The construction projects within the S Group. Property maintenance
objective is to support, as efficiently as possible, the introduction and upkeep services began to be produced with our own person-
of the new financial administration operational model and the nel. In the initial stage, operations got started at the beginning
achievement of the targets set across the entire S Group. of April at 12 hotels in the Greater Helsinki area. Operations are
expanding to cover the entire organisation. The ”Realist” Property
Financing Information System is in use at nearly all the regional cooperative
The Finance unit is made up of SOK’s Finance Department along enterprises.
with SOK’s wholly-owned subsidiaries SOK-Takaus Oy, S-Etu- The planning and feasibility study of different alternatives for
luotto Oy and Rekla Oy, the last of which went into operation on the new Head Office project that was started a year ago continued
1 September 2003. The task of the Finance unit is to ensure that in 2006.
SOK Corporation has access to adequately balanced and affordable
financing in all conditions and to offer the S Group high-quality Legal Affairs
and competitive services in the area of financing, customer finance The task of the Legal Affairs unit is to attend to SOK Corpora-
and the commodities markets. tion’s legal affairs to the highest standards and to maintain good
SOK’s Finance unit exercises a central responsibility for funding contractual practices and procedures. The Legal Affairs unit assists
and relationships with financial institutions, optimising financing and guides SOK Corporation’s units and cooperative enterprises in
costs as well as managing liquidity and financial risks. The unit tasks requiring legal expertise, among other things, by taking part
also manages and develops the S Group’s gift cards. Electricity in negotiations and business unit arrangements.
procurement and related risk management are centralised within Various agreements connected with business operations figure
SOK’s Finance unit. The objective of electricity market trading prominently in the Legal Affairs unit’s activities. Agreements pre-
is to obtain the electrical power required by the S Group cost-ef- pared in the report year included those for the purchase of shares
fectively from the lowest cost procurement source and to even out in Oy Esso Ab, the Spar Finland Ltd acquisition, the purchase of
cost impacts due to price fluctuations in the electricity market. At the business operations of the Holiday Club Spa Hotels and the
the end of 2006, delivery agreements currently in effect accounted businesses in the Baltic countries and St Petersburg. Amendments
for about two thirds of the S Group’s electricity consumption. to SOK’s Statutes were made during the report year.
Apart from SOK Corporation, the service was used by 14 coopera-
tive enterprises. Information Systems
SOK’s Supervisory Board decided in February 2006 to found The objective of Information Systems’ work across the S Group
S-Pankki Oy (S-Bank Ltd), which will carry on deposit banking is to help the businesses make the best use of information and
operations. At the same time, the Financial Supervision Author- to manage processes. The IT strategy links Information Systems’
ity granted S-Bank Ltd a credit institution licence. During 2006, work to business plans and development. Systems projects focus
product specifications were worked out further, information systems on working out solutions that are needed in handling day-to-day
built and tested, and customer service, training and marketing were business tasks and supporting management.
planned. S-Bank will begin operations by the end of 2007. At SOK Corporation, information systems are both centralised
S-Etuluotto Oy is is specialised in managing the S Group’s within the Information Systems unit and are spread across the dif-
consumer credits. ferent business and service units. The needs of the entire

17
SOK Corporation

S Group are taken into account in carrying out these activi- and security management were expanded and business continuity
ties. The task of the centralised unit is not only to coordinate all planning was carried forward at the regional cooperative societies.
information systems, but also to provide a shared IT infrastructure
for the different areas. The sourcing companies and service units
Customer-owner and Marketing Services
provide solutions for their own areas of responsibility. The chain
management units develop and maintain systems and standards for The task of the Customer-owner and Marketing Services unit is
their own business areas, making use of solutions provided by the to see to it that customer-ownership develops and strengthens as a
support units and deriving from the infrastructure. central driver of the S Group’s success. The unit’s task is to see to
Disturbance-free operation of essential systems round the clock it that the mission is realised in the operations of the cooperative
is an important condition for smoothly running customer service. enterprises and the chains, and its strategic objective is to produce
The top priority for information systems work was thus again in for the businesses a decisive competitive advantage through supe-
2006 to ensure disturbance-free and continuous operations. A rior customer relationship management know-how and an effective
main emphasis has been projects required in connection with SOK marketing planning and implementation process.
Corporation’s acquisitions and the good development of business In 2006, the unit devoted most of its development resources to
operations. Important system projects for the infrastructure have a project for revamping the S Group’s financing services, in which
been a new communications system that became operational in the unit participated by implementing the information system
time for Christmas sales at the locations as well as a new shared project and coordinating future changes in the customer-owner
platform for network services. The positive trend in operations, concept.
preparations for launching S-Bank’s activities a well as develop- Stepping up the process for marketing design and implementa-
ment of the rest of the system equipment led to an overhaul tion was continued by adding centralised production of chain-
and beefing up of the computational and storage capacity of wide advertising. During the year, the capability of the chains
the Group’s infrastructure. The continuous maintenance of data and the cooperative enterprises for using information in business
security and a significant worsening of the pervasive spam problem development was also strengthened.
called for an increase in inputs into solutions for the management During the year, progress was made in developing the unity of
of information networks and workstations. the customer-owner concept. Our long-term work on customer-
ownership won recognition when the S-Benefit Card was chosen
Administrative Services as Finland’s most highly respected service brand in the survey
Administrative Services provides, develops and controls centralised which Markkinointi ja Mainonta (Marketing and Advertising)
office, business premises and consumables purchasing services at Magazine commissioned from Taloustutkimus, a market research
both the Ässäkeskus and at other S Group operating units. consultancy.
The service activities cover the following areas: leasing and
administration of office and guest entertainment premises,
Communications and Publications
security and access monitoring, the purchase of office furnishings
and supplies, services for meeting areas and video negotiations, SOK’s Communications and Publications unit supports the
art purchases, telephone switchboard services, the purchase of S Group’s operations and the achievement of its objectives both
mobile phone equipment and supplies, reception and information strategically and operationally. The unit’s objective is to incorpo-
services, mailing and duplication services, working hours control, rate communications in all business processes.
archiving services, personnel canteen lunch, entertainment and Major challenges in 2006 were mobilising the S Group’s new
guest services as well as cleaning services. communications strategy and supporting the Your Own Store
vision through issuing strategic communications materials. In
Corporate Security and Risk Management order to mobilise the vision, training materials were also produced
The unit operates as a chain management unit for the S Group’s for long-term courses at the Jollas Institute, and the For You, Our
risk management. The purpose of operations is to support imple- Customer 2007 training programme was planned in association
mentation of the S Group’s business objectives and the continuity with the Institute. The national media service came into use in the
of operations whilst promoting competitiveness by employing the spring, and it was piloted with the regional cooperative enterprises.
means and methods of integrated risk management. International communications were also launched during the year.
The unit seeks to provide the S Group with a unified way of Communications theme days and a number of training sessions
measuring and managing risks as well as identifying new business for company management and experts put the chain management
opportunities in a cost-effective manner. The main task of the dimension of communications on an even firmer footing. The
unit is to develop and define the principles, rules of the game and conceptualisation of communications services also made progress
objectives of integrated risk management and corporate security during the financial year. At the end of the year, a preliminary
as well as to support, manage and monitor their application and study in preparation for research into the S Brand and S Employer
implementation within the S Group. Brand was conducted with HR functions. The actual study is to be
Important development projects in 2006 included making inte- carried out in 2007, when the starting level for the research-based
grated risk management a seamless part of the S Group’s manage- development of the S Brand is ascertained.
ment process as well as the definition and decision making related Communications concerning company acquisitions that took
to the S Group’s risk management policy and strategy. The func- place throughout the year also posed explicit challenges for the
tionality and use of the information systems for risk management unit.

18
 SOK Corporation

SOK Corporation organisation at 1 January 2007

19
Review of Business Areas

Supermarket trade the opening of the first Prisma in Riga. Sales by the chain came to
EUR 2,173 million, representing an increase of 9.7 per cent. Gro-
The S Group operates within the supermarket trade under four cery sales in Finland amounted to EUR 2,056 million, an increase
store concepts: hypermarkets (Prisma), supermarkets (S Market), of 9.4 per cent on the previous year.
grocery stores (Sale and Alepa) and the home and DIY store The figure does not include restaurant and fuel sales or other
(Kodin Terra). additional services.
At the end of 2006, the supermarket chains comprised a total of The Sale and Alepa chains had aggregate sales of EUR 570 mil-
765 locations in Finland, 5 in Estonia and 1 in Latvia. AS Prisma lion, a rise of 15.6 per cent. The number of locations increased by
Peremarket, a subsidiary of SOK Corporation, is engaged in the 29 to total 289 at the end of the year.
supermarket trade in Estonia and AS Prisma Latvija in Latvia. The decision was made to establish a chain of Kodin Terra stores
based on the positive feedback received from the pilot store in
Operating environment in 2006 Renkomäki, Lahti. Several regional cooperative enterprises have
The competitive situation in the sector remained tough. The fol- plans to open Kodin Terra stores. The next store is to open in
low-up measures taken by the sector as an outcome of the previous Palokka, the Rural Municipality of Jyväskylä. Kodin Terra is the
year’s mergers and acquisitions to adjust to the new situation had S Group’s home and DIY store, and its assortments focus on plants
an impact on the structures of the retail trade and sourcing. and home gardening, interior decorating, home renovations and
Price inflation within the grocery trade remained low on a building.
par with previous years. Demand clearly reflected the improved The projects within the supermarket trade that got underway in
consumer potential of households. This was particularly visible in 2006 aim to more effectively support loyal customers by generat-
sales of electronic entertainment, interior decorating and leisure ing assortment and pricing models, improving cost efficiency and
products as well as in the increase of the proportion of higher-end fine-tuning the future needs of the network. A study of applicable
products sold. information systems also got underway.
Sourcing and logistics planning for the operational model for
2006 in the S Group’s supermarket trade the 2010s also made headway during the financial year. This
The S Group’s supermarket chains continued to press ahead with process was affected by the transfer of Inex Partners Oy to full
developing operational models that enable and bolster overall ownership of SOK. The year also saw the start of work to boost
thrift. This resulted in good price competitiveness and a good the Prisma hypermarkets’ consumer goods trade; this work will
competitive performance. continue through 2007. The objective is to appreciably strengthen
Retail sales by the S Group’s supermarkets in the 2006 financial the S Group’s position within the supermarket trade through the
year amounted to EUR 5,542 million, an increase of 14.5 per cent Prisma and Kodin Terra chains.
on the previous year. Grocery sales in Finland amounted to EUR
5,428 million, an increase of 14.4 per cent on the previous year.
Sales by all the supermarket chains outpaced the general trend
in the market.
The growth in sales of high-end products within various product
groups drove the sound trend in sales within the grocery trade. S GROUP’S MARKET SHARE OF THE SUPERMARKET TRADE
This was borne out by, for instance, a strong market position
in sales of new products and by a successful performance in the
structural change within the grocery trade. The S Group’s market
share of the grocery trade was 39.9 per cent at the end of the year.
The S Group further consolidated its position as the market leader
within the grocery trade.
Sales of consumer goods by the S Group’s supermarkets out-
stripped the market average. The market position of the consumer
goods trade has undeniably strengthened over a period of several
years.
In serving its customer-owners, the supermarket trade occupies
a key position within the S Group. Members’ purchases during the
financial year accounted for 81 per cent of total purchases within
the supermarket trade. Bonus sales rose by 14 per cent.
The S Market chain is the S Group’s largest chain of grocery
stores. At the end of 2006, it had 409 locations, an increase of 37
units over the preceding year. The chain’s aggregate sales, excluding
fuels, amounted to EUR 2,681 million, an increase of 14.4 per
cent on the previous year.
There were 47 Prisma hypermarkets in Finland at year-end. A
fifth Prisma unit opened in Tallinn in October and November saw

20
21
Review of Business Areas

Market Chain Management Service station store and fuel sales

Market Chain Management is the S Group’s management and
development unit for the supermarket business. Its main task is In 2006, the S Group continued its programme of substantial out-
to develop business area strategy and chain operation concepts as lays into the development and extension of its network of service
well as to assist the regional cooperative enterprises and to provide station stores and fuel sales.
guidance in developing the business area. The main services offered by the chain of ABC service station
stores are versatile and moderately priced café, restaurant and su-
permarket services as well as fuels. A significant factor for custom-
Spar Finland Ltd
ers is that ABCs are open for service every day of the year, always
Spar Finland Ltd is engaged in retail activities within the grocery holding to their own agreed opening hours, which are either 24h
trade, and it serves retailers operating under the Spar banner by or 6:00 am-midnight. On a single stop, customers can eat a meal,
providing wholesale grocery supplies and leasing business premises, do some shopping and fill up with fuel.
furnishings and fittings as well as by providing marketing, real At the end of 2006, the chain comprised 81 ABC service station
estate and other support services. stores located along traffic arteries and in urban areas and 206
On 12 January 2006, Spar Finland Plc became a subsidiary of ABC unmanned stations that operate primarily at the Prismas,
SOK. Spar Finland’s Series A and K shares were de-listed from S Markets and Sale grocery stores. The ABC chain of unmanned
the I List of the Helsinki Stock Exchange on 19 May 2006. In an stations specialises in selling fuels.
amendment to the Articles of Association registered on 30 June The ABC network operates in the areas of all the 22 regional
2006, Spar Finland Plc was changed from a publicly listed com- cooperative enterprises as well as 4 local cooperative enterprises.
pany to a private limited company, Spar Finland Ltd. The S Group’s cooperative enterprises had a total of 320 fuel-sell-
SOK and some of the regional cooperative enterprises are co- ing units at the end of the year. Of these, 102 were service station
operating in the corporate restructuring under the terms of which stores and the remaining 219 units were predominantly unmanned
some Spar stores, either owned by Spar Finland or operated by petrol stations. The net increase on the previous year was 16 units.
independent shopkeepers through a co-operation agreement, will The ABC chain is the first company in the service station sector
gradually be integrated into the supermarket trade of the S Group’s in Finland to have been awarded the right to use the Key Flag
regional cooperative enterprises. Spar Finland will sell the stores standard by the Association for Finnish Work.
not included in the merger to other parties or their business opera-
tions will be wound up. Operating environment
The Finnish Competition Authority approved with conditions Despite the positive start to the year, the national trend in the
the acquisition arrangement concerning Spar Finland on 4 January volume of petrol consumption sank into the red following the first
2006. In its decision, the Competition Authority imposed certain months of 2006. In contrast, the volume of diesel oil rose sharply.
restrictions, which included the exclusion from the merger of 30 This was partially attributable to industrial disputes in the forest
Spar stores that were to be offered for sale to suitable competitors industry in 2005, which adversely affected deliveries. Consump-
in the grocery trade. tion was held in check by high consumer prices and by the lower
According to the merger plan, 81 of the 262 Spar stores were to fuel consumption of new vehicles.
be transferred to the supermarket network of the regional coopera- In summer the international oil markets were dogged by
tive enterprises. By the end of 2006, altogether 63 stores had controversy over the nuclear programme in Iran and uncertainty
transferred to regional cooperative enterprises. about its implications on the country’s oil industry. The price for
As the financial year ended, there were 41 (262) Spar stores, crude oil on the world market leapt to a record-breaking level in
8 (94) of which were owned by Spar Finland. On 31 December the spring-summer as a result of the dispute and buoyant forecasts
2006, nine of the stores designated by the Competition Authority for growth in demand. Consumer prices in Finland rose consider-
to be divested had not been sold. ably in the first part of the year. However, it was possible to lower
Tuko Logistics Oy was responsible for handling the company’s consumer prices in the latter part of the year along with the fall in
material flows until 31 October 2006 when goods deliveries to the the price for crude oil.
Spar stores were transferred to Inex Partners Oy. Fierce competition for market shares pushed up the number
The transfers of the stores to the regional cooperative enterprises of service stations. Despite weakened profitability in the sec-
and other parties in accordance with the acquisition arrangement tor, market shares were at times sought through unhealthy price
are to continue according to the schedule dictated by the expira- competition.
tion of the shopkeepers’ co-operation agreements. The majority of In summer the Government approved a Bill on the promo-
these agreements will expire in 2009 and 2010. tion of the use of biofuels for transportation. The ABC chain and
Spar Finland had net turnover in 2006 of EUR 275,8 (529.9) the fuel procurement company North European Oil Trade Oy
million. On 31 December 2006, the company had a payroll of (NEOT) are proceeding with their study on biofuels and their
167 (1,004) people. introduction on to the market.
Despite high petrol prices, leisure mobility and vehicle mileage
continued to rise. The increase in services located along traffic
arteries is one factor that has contributed to this trend. Consum-

22
 Review of Business Areas

ers have relatively high expectations of the services and products million cups of coffee were consumed at ABC service station stores
available to them and they expect them to deliver enriched, new in 2006.
experiences. Eating out has become increasingly popular, particu- In order to promote healthier eating for professional drivers,
larly in the low-end price segment of fast casual dining, in which the Ylipainosta tasapainoon (From overweight to finding the bal-
category ABC is included. The significance of price as a criterion ance) project was launched in the autumn in mutual co-operation
when choosing a service gained strength in the face of toughening between the Finnish Heart Association, the Rahtarit Union of
competition. The sale of Shell’s Simpukka restaurants to Restel Oy Professional Drivers, Finnish Transport and Logistics (SKAL), the
was one factor that brought about change in competition. Transport Workers’ Union AKT r.a. and ABC. The project will run
Buying behaviour varies according to the situation. The versatil- until April 2007.
ity offered by ABC has responded to customer’s needs, which vary On 12 December 2006, SOK announced it was purchasing
throughout the year, by providing services for people on business from ExxonMobil Corporation the shares in oy Esso ab, the corpo-
trips or holidays as well as for local residents. ration’s fuel sales subsidiary in Finland. The Finnish Competition
Shopping at service station supermarkets and convenience stores Authority approved the transaction arrangements for Oy Esso
increased because ABC with its diverse assortment, permanently Ab on 17 January 2007. The decisions apply both to the sale of
moderate prices and long opening hours was in a position to Oy Esso Ab shares to SOK and to the follow-up deal relating to
respond to the demand generated for neighbourhood stores. No the shares, as agreed between SOK and St1 Holding Oy on 18
new decisions concerning shop-opening hours were handed down December 2006. As part of the transaction, Esso’s 44 service sta-
during the year. tions and unmanned stations will be transferred to the S-Group’s
The Finnish Road Administration launched a study on the regional cooperative enterprises, and oy Esso ab’s fuel procurement
impact of service stations on municipalities, the inhabitants in the operations will be sold to SOK’s subsidiary North European Oil
vicinity and road users. Several municipalities have taken the view Trade Oy (NEOT).
that service stations revive sparsely populated areas, create jobs and The transaction will be instrumental in enhancing the service of-
services and get passing traffic to stop in the locality. fering for customer-owners, particularly those in southern Finland.
Environmental requirements have made finding business loca-
tions more of a challenge, and permit application processes have
become lengthier. ABC employs the latest safety technology in
setting up its units.

2006 in the S Group’s service station store

and fuel trade
The service station stores and fuel stations reported retail sales
across the S Group of EUR 1 137 million, which represents
growth of 17.8 per cent on the previous year. Sales passed the one
billion euro mark in November. The figure includes sales by un-
manned petrol pumps at supermarket units. The S Group’s market S GROUP’S MARKET SHARE OF PETROL SALES
share within petrol sales rose by 9.1 per cent to stand at 19.1 per
cent, up 1.6 percentage points on the previous year. The growth
was attributable to the nationwide expansion of the ABC network
and the fact that members made more of their fuel purchases
through the S Group’s units. Bonus sales rose at a good rate as in
previous years.
The fuel procurement company North European Oil Trade Oy
(NEOT) supplied fuels to the cooperative enterprises.
The ABC chain expanded with new units in different parts of
Finland. In addition to the setting up of new units, old ones were
refurbished. Major refurbishments and extensions were carried
out on six ABC service station stores to bring them in line with
current needs.
The good trend in sales by the cafés and restaurants was attribut-
able to increased dining and such factors as the wide popularity of
the buffet. The increased importance placed on ethical and healthy
consumption was behind measures taken towards the end of the
year. In October the decision was made to go over to serving Meira
Reilu Fair Trade coffee at all ABC service station stores by the
beginning of 2007. In December the Association for Promoting
Fair Trade in Finland granted the ABC service station stores the
Fair Trade Award 2006 for having made this move. More than 20

23
Review of Business Areas

The trend in sales and sales structure at ABC service station stores, Department store and speciality store trade
and studies conducted during the year, indicate that ABC has
become a familiar concept to consumers. Half of the sales came The S Group has 20 Sokos department stores and 12 Emotion
from fuel sales, and the other half was divided between café and stores that are specialised in cosmetics and ladies’ lingerie. In addi-
restaurant and supermarket sales. While the trend in all catego- tion, seven Pukumies men’s apparel stores and eight other special-
ries was healthy, sales by ABC supermarkets showed the most ity stores owned by Osuuskauppa Arina round out the S Group’s
robust growth. During the year, 11 service station stores and 15 speciality palette. Cooperative enterprise-owned Sokos department
unmanned stations were opened. The business unit’s strategy is to stores serve members and other customers in 15 regional coopera-
push ahead with its vigorous expansion of the network. tive enterprise areas as do speciality stores in six regional coopera-
tive enterprise areas.
ABC Chain Management Retail sales by the S Group’s department stores and speciality
ABC Chain Management is the development unit for the S stores in 2006 totalled EUR 395 million, representing growth of
Group’s service station store business and fuel trade. Its pivotal task 8.2 per cent on the previous year. Whereas price levels fell for the
is to develop the strategy and chain business ideas for the ABC main product sectors, the volume of overall sales increased. Cus-
business as well as to assist and provide guidance for the regional tomer-owners are by far the largest consumer group of the Sokos
cooperative enterprises in developing the business area. department stores and the S Group’s speciality stores. Purchases
Chain Management operations centred on concept-driven plan- made by members accounted for more than 80 per cent of Sokos
ning, implementation and operations control for the ABC service department store sales.
station stores and ABC unmanned stations and furthermore, it The regional cooperative enterprises own all of the S Group’s
was in charge of acquiring new business locations. Thirteen people speciality stores and 17 of the Sokos department stores. SOK is
worked at ABC Chain Management. responsible for operating the Tapiola Sokos and Helsinki Coop-
erative Society Elanto is responsible for managing its business
operations. In Turku, SOK and Turku Cooperative Society were
engaged in Sokos business operations in the jointly owned Turun
Sokos Oy. SOK had a 90 per cent holding in the above-mentioned
company. Turun Sokos Oy’s business operations were transferred
to Turku Cooperative Society as from the beginning of 2007.
The profitability of the speciality stores and the Sokos depart-
ment stores that operated for the full year remained on a par
with the previous year. Profitability rose in the majority of stores
whereas it declined briefly in some outlets due to inconveniences
resulting from their refurbishment.
Customer satisfaction strengthened. Customers felt that price
levels in the department stores were better suited to their budgets.
They also felt that they received more expert customer service.

Operating environment in 2006

The overall economic trend was favourable throughout the coun-
try. Consumer confidence remained largely positive and healthy.
The re-openings and expansions of the large shopping centres
in the Greater Helsinki area and Pirkanmaa paved the way for the
arrival in Finland of new international chains, such as in the sport-
ing goods, cosmetics and toy trades. The arrival of new players
on the market will continue, as will the trend in re-opening and
extending shopping centres.
New technology featured prominently last year in new products
and novel approaches to shopping. The household appliances and
electronics trade grew in particular when new technology was
taken into widespread use in televisions and stereos and players.
Customers made full use of information networks when pre-select-
ing and purchasing goods. Advances in technology will continue
to forge ahead.
The changing trend that started in 2005 continued through
2006. Increasing numbers of players and diversifying ways of
doing things are continuing to vie with each other for consumers’
interest, time and money.

24
 Review of Business Areas

2006 in the S Group’s department store

and speciality store trade
Hotel and restaurant trade
(Tourism and Hospitality Business
as from 1 January 2007)
Sokos department stores
Sales of consumer goods by the Sokos department stores (20) The S Group’s hotel and restaurant business comprises a compre-
totalled EUR 333 million, representing growth of 6.9 per cent hensive network of 54 hotels and 545 restaurants located around
compared with the previous year. Finland.
Like-for-like growth in the consumer goods trade in the Sokos Of the hotels, 38 belong to the Sokos Hotels chain in Finland,
department stores reported a substantially better performance than seven to the Radisson SAS chain and six to the Holiday Club Spa
the rate of nationwide growth in trade by department stores and Hotels chain. In addition to these, the S Group has three smaller
hypermarkets compared with a year earlier. hotels that operate outside a chain concept.
The footwear and bag, home interior decorating, giftware and Of the restaurants, 404 operate as stand-alone restaurants, 141
household electrical products trades recorded the best sales trends. in hotels. In addition to these, the S Group also carries on restau-
The cosmetics and women’s apparel trades also turned in healthy rant operations at the ABC service station stores. Of the restaurant
performances. units, 238 belong to nationwide chains.
The Sokos department store in Kotka was completely transferred Outside Finland, the S Group carries on hotel and restaurant
to new premises in the Kauppakeskus Pasaati Shopping Centre. operations in Estonia, where hospitality customers are served by
The Sokos department store in Salo was refurbished, allocated Sokos Hotel Viru with its restaurants, and a food court that oper-
additional floor space and incorporated into the newly extended ates at the Prisma hypermarket in the Sikupilli Shopping Centre.
Kauppakeskus Plaza Shopping Centre. The second floor of the During the course of 2007, the opening of three hotels in St
Helsinki Sokos underwent extensive refurbishment and it was Petersburg will launch the start of hotel and restaurant operations
made over into the women’s apparel floor. Revamps to depart- in Russia.
ments and to product displays were carried out in all the other The S Group’s nationwide restaurant chains are Rosso, Frans-
Sokos department stores to stimulate and attract customers and manni, Amarillo, Sevilla, Torero, Memphis, New York, the Night
make shopping at our locations more convenient. and Bepop nightclubs, Public Corner and in-house licensed
The Sokos chain posted an operating profit on sales of consumer restaurant chains. Regionally operating restaurant chains include
goods, more or less on a par with 2005. The Sokos locations were Chico’s, Mr. Pickwick and Ale-Pub.
similarly in the black (consumer goods + grocery trade) and their The café and fast food chains Coffee House, Coffee Bar, Presso,
result was at the previous year’s good level. Rosso Express and Buffa round out the range of restaurants and
in addition, the Group engages in extensive co-operation with the
Emotion chain Hesburger chain in the hamburger restaurant business.
The units in the Emotion chain are speciality stores that are locat- Ownership of the S Group’s hotel and restaurant business is
ed in large shopping centres and the larger town centres and offer divided between SOK Corporation and the regional cooperative
cosmetics and ladies’ lingerie. The stores round out the S Group’s enterprises. SOK Corporation’s Hotel and Restaurant Division
palette of consumer goods in their localities. There were 12 units at comprises SOK’s operating subsidiaries Sokotel Oy, the Estonian-
year-end. Aggregate sales by the Emotion stores amounted to EUR based AS Sokotel, Sokos Hotels St Petersburg in Russia as well as
17 million, representing an increase of 42.1 per cent. the S Group’s hotel and restaurant management, development and
support unit. The regional cooperative enterprises own hotel and
Trend in the operations of the Sokos companies restaurant operations in several different companies. The hotel and
owned by SOK Corporation restaurant units that are owned by the regional cooperative enter-
The Sokos companies operated three Sokos department stores for prises account for about 70 per cent of the S Group’s aggregate net
the full financial year: Wiklund in Turku, Mylly in Raisio and turnover in the sector.
Tapiola in Espoo. Net turnover by the Sokos companies amounted
to EUR 39 million, representing an increase of 7.7 per cent on the Objectives of the hotel and restaurant trade
previous year. In 2006, the Sokos companies reported an operating The objective of the business area is good profitability, which guar-
loss of EUR 0.6 million (+0.8). The companies had an average antees the resources for the development and controlled growth of
payroll of 297 people (250). operations. Adequate financial resources provide the wherewithal
to secure the best business sites, and they in turn will provide ex-
Sokos Chain Management tensive demand-oriented market coverage both in Finland and to
The tasks of the Sokos Chain Management unit are to define the an increasing extent, in neighbouring countries in the years ahead.
category structure and sales assortment of the Sokos department Within hotel operations, the S Group’s objective is to ensure
stores and the Emotion speciality stores as well as to develop and that customers continue to receive the highest quality products
maintain the chains’ business ideas, concepts and information sys- and services, to deliver offerings for the growing leisure sector and
tems. Chain Management provides the agreed marketing, logistics to maintain clear market leadership in Finland. Outstanding mar-
and information system services and it prepares policy proposals ket leadership in accommodation operations in Finland will call
guiding the operations of the chains for presentation to their deci- for expanding the network in line with the neighbouring country
sion-making bodies. strategy in the years immediately ahead.
In 2006, Chain Management pressed ahead with developing The objective for restaurant operations is to further enhance the
and mobilising the business ideas and concepts for various product service spectrum through diverse product and chain concepts and
areas as well as with developing the composition of the range of thereby to boost market shares in each region.
products and its management systems.
25
Review of Business Areas

Paying due attention to safety factors and responsibility in all tion to develop their efficiency, work productivity and capacity to
activities will continue to be a major part of the S Group’s hotel respond to changes are poised to continue outperforming the rest.
and restaurant business. The value of competent staff is of prime
importance so therefore, the S Group puts a good deal of effort 2006 in the S Group’s hotel and restaurant trade
into fostering staff well-being and initiating training across the Retail sales by the S Group’s hotel and restaurant trade totalled
business. The S Group aims to be the most attractive and desired EUR 733 million, an increase of 11.4 per cent on the figure a year
employer in the sector. earlier. Retail sales in Finland amounted to EUR 709 million, an
The business has several projects underway to secure new increase of 11.8 per cent on the previous year.
business sites in urban areas, leisure centres and the neighbour- Accommodation sales came to EUR 210 million, representing
ing countries. Processes are being developed to enhance cus- growth of 11.8 per cent on the previous year. Accommodation
tomer convenience. New online services and information system sales in Finland amounted to EUR 191 million, up by 8.8 per cent
projects that underpin operations have been introduced alongside on the year before.
traditional channels. All the chains are stepping up the quality of Restaurant sales amounted to EUR 523 million, up by 11.2 per
service and management in keeping with their business concepts cent on the year before. Sales in Finland amounted to EUR 510
through training programmes that span several years. million, an increase of 11.4 per cent on the figure a year earlier.
The S Group’s market share measured in terms of net turnover
Operating environment by hotels was 26 per cent, making the S Group Finland’s largest
The hotel sector in Finland is characterised by internationalisation; individual hotel operator.
offerings are on the increase, customer companies are interna- Along with the leisure units that became part of the Sokos
tionalising and international business travel and the demand for Hotels chain as well as increased demand, the proportion of sales
the leisure sector are on the up. The expanding EU is bringing of leisure services to members showed an increase. The occupancy
to the sector competitors who must be taken seriously, but it is rate of the S Group’s hotels was up on the previous year at 66.2 per
also bringing new customers. People have higher expectations of cent (64.5%), whereas occupancy rates reported by other players
leisure, and short weekend breaks are becoming commonplace. throughout Finland remained at around 51.4 per cent.
Customers are demanding greater individuality. Along with The 19 per cent market share of the S Group’s restaurant
advances in technology, online purchasing is becoming more business was also the largest in Finland. Within its restaurant
widespread and technology is also adding a new slant to business operations, the S Group increased its market share in the beverage,
travel. The changes in the operating environment pose considera- socialising and restaurant meal sectors. There are large differences
ble challenges for the players in the sector: the growth in offerings, between cooperative enterprises in the control of regional and city-
emergence of chains and networking will further heighten price specific market shares. The capacity utilisation of the S Group’s
competition and generate a more diversified spectrum of services. restaurants (sales/customer place) is continuing at a considerably
Professional buying is on the rise and a command of the end-to- higher rate than the levels reported by competitors. The rising
end process is gaining prominence. market share and building closer-knit network coverage has kept
Due to the general economic climate, several international cooperative enterprises busy in their search for business sites in the
events and Finland’s term of EU presidency, demand in the hotel face of toughening competition.
business rose favourably in 2006. In terms of demand, 2007 looks Despite substantial investments, the financial performance by
set to be more difficult than the previous year. the S Group’s hotel and restaurant business maintained an excel-
Within restaurant operations, changes are taking place in lent level of 5 per cent of net turnover.
legislation, consumer behaviour and the competitive situation. The The year 2006 saw the opening of the Marina Palace in Turku
demand for food noticeably outpaced sales of alcoholic beverages as part of the Radisson SAS chain, and Holiday Club’s six spa
along the lines of recent years. The flat trend in sales of alcoholic hotels transferred to ownership of Sokotel Oy in April. Moreover,
beverages and the high rate of value added tax on restaurant meals considerable renovations and extensions were carried out last year
(22%) constitute explicit challenges for the ability of restaurants to on some of the units within the S Group’s hotel network, includ-
make a profit. The tobacco legislation that will enter into force on ing the Sokos Hotels Helsinki and Torni in Helsinki and Ilves in
1 June 2007 will have particular implications on nightclubs and Tampere. As for the Radisson SAS hotels, sizeable investments
dance restaurants. The sector fears the spread of the grey economy. were made on Seaside in Helsinki and the unit in Oulu.
Competition is tightening and demand is becoming increasingly The S Group opened about 29 new chain restaurants. In ad-
fragmented, thus the players in the sector need to either select their dition, several dozen old restaurants were refurbished. The way
target groups or operate across an ever-broadening spectrum. forward to generating an increase in market share is through large
Restaurant operations represent about 70 per cent of the total units that combine several concepts.
volume of the hotel and restaurant business. Consequently, and Several cooperative enterprises developed fast food Food Courts
also due to the size of the markets, the S Group will be focusing featuring varied concept combinations in their areas. The Rosso
increasingly on large, mid-range price units in all four categories Express and café chains chalked up the fastest growth in the past
- beverages, socialising, restaurant meals and fast foods. The aim is year.
to achieve local market leadership through a sound regional struc- Capital expenditure amounting to approximately EUR 40 mil-
ture. Volume within the restaurant and hotel businesses is expected lion was allocated for restaurants.
to grow in the foreseeable future. Those players who are in a posi-

26
 Review of Business Areas

Restaurant and Hotel Chain Management and restaurant. The spa hotel, which is also being built on Vasily
The S Group’s Restaurant and Hotel Chain Management is re- Island, is due to be ready in June-September 2007 and it is the
sponsible for the development of the competitive strategy, business S Group’s third hotel project in the city.
ideas, concepts and chain brands for the Group’s hotel and restau-
rant business. Furthermore, it manages logistics and the develop- Sokotel Oy
ment of information systems and it monitors the profitability and Within SOK Corporation, Sokotel Oy in Finland and AS Sokotel
competitiveness of the chains. Chain management of the Radisson in Estonia operated hotels and restaurants in 2006. SOK Corpo-
SAS hotels is handled from the chain’s headquarters in Brussels. ration’s hotel business operates under the Sokos Hotels, Radisson
In 2006, Chain Management activities put emphasis on drawing SAS and Holiday Club brands. At the end of 2006, the company
up a new competitive strategy, expanding the network, increasing comprised 12 Sokos Hotels, 7 Radisson SAS hotels and 6 Holiday
market shares, securing sales and profitability and on developing Club Spa Hotels.
quality. All of the chains launched or continued service training The hotel network underwent change when Radisson SAS
courses specific to their business concepts and development pro- Marina Palace opened on the banks of the Aurajoki river in Turku
grammes for the day-to-day management of the concepts. on 28 February 2006.
During 2006, the concept for the Coffee Bar café was devel- Sokotel Oy acquired the business operations of six spa hotels
oped and piloted, and several new restaurant and product concept from Holiday Club Resorts Oy on 28 April 2006. The transaction
projects got underway ready for their launch in 2007. An internal involved the business operations of Holiday Clubs Katinkulta,
chain operating model was refined and implemented in the restau- Kuusamo, Saariselkä, Oulu, Turku and Tampere.
rant meal, beverage and nightclub concepts. The business operations of Sokos Hotel Vaakuna in Rovaniemi
The most challenging step within support service processes and were sold to Cooperative Society Arina in June.
systems development has been the adoption and distribution of A new 95-roomed Sokos Hotel will open on the corner of
the Tuhti DW programme and the groundwork for a new hotel Albertinkatu and Uudenmaankatu in Helsinki at the beginning of
system project. August 2007.
Sokotel Oy’s net turnover rose by 24.7 per cent on the figure
SOK Holding Oy and Sokos Hotels St Petersburg a year earlier. Like-for-like net turnover grew by 2.5 per cent.
SOK Holding Oy was established by SOK in January 2006. In The trend in company sales remained favourable in spite of large
June, SOK Holding Oy set up Sokos Hotels St Petersburg LLC, investments, which disrupted operations in some of the Sokos
which is engaged in hotel business operations in St Petersburg. Hotels and Radisson SAS hotels. The occupancy ratio and average
Three hotel projects are currently underway. Sokos Hotel Olympic room rate rose compared with a year ago thus increasing room
Garden being built alongside Moskovskii Prospekt is scheduled yield, which was markedly better than the national average.
to be ready in autumn 2007. Sokos Hotel Vasilievsky, the second The operating profit posted by Sokotel Oy, which carries on the
hotel to be located in the city centre, will open for business on hotel and restaurant business in Finland, exceeded the budgeted
Vasily Island at the end of 2007 or in early 2008. Sokos Hotels St level, but fell short of the previous year’s earnings owing to major
Petersburg LLC acquired the business operations of Holiday Club investments. On a like-for-like basis, the result remained on a par
St Petersburg from Holiday Club Resorts Oy in January 2007. with the previous year.
The transaction involved the business operations of the hotel, spa

S GROUP’S MARKET SHARE OF S GROUP’S MARKET SHARE OF

THE HOTEL BUSINESS THE RESTAURANT BUSINESS

27
Review of Business Areas

Automotive trade and accessories The Maan Auto Group

The Maan Auto Group is a wholly-owned subsidiary of SOK.
Within the S Group, vehicle sales are carried on by SOK Corpora- Maan Auto Oy and Oy Motortrans Ab import Peugeot passenger
tion and 11 regional cooperative enterprises. The services provided and utility vehicles as well as their spare parts and accessories. The
by the regional cooperative enterprises are supplemented by SOK Group’s retail sales companies, Automaa Oy and Auto-Kivitila Oy,
Corporation’s Maan Auto Group in Finland and by AS Kommest are engaged in sales of and provide repair services for passenger
Auto Group in the Baltic countries. At the end of the year, the and utility vehicles.
S Group had a total of 46 (46) car dealerships in Finland. S Group
dealerships represented 14 (13) different makes of vehicles, of Imports
which Peugeot is the S Group’s own imported marque. Maan Auto Oy imports and markets Peugeot vehicles, spare parts
and accessories through its own network of subsidiaries, Automaa
Operating environment in 2006 Oy and Auto-Kivitila Oy, and the rest of its nationwide dealer
The positive trend in the passenger car trade continued for the network.
fourth consecutive year. In 2006, altogether 145,700 new pas- Maan Auto’s distributor network comprised 37 full-service car
senger vehicles were registered, which represented a decline of 1.7 dealerships, 8 of which were owned and operated by the Maan
per cent compared with the previous year. The year was the sixth Auto Group itself, 15 by the regional cooperative enterprises and
all-time best in the automotive trade. The number of new vans 14 were owned by private entrepreneurs. Furthermore, in order to
registered in 2006 was 15,268, which represents an increase of ensure service coverage, authorised Peugeot services were addition-
8.4 per cent on the previous year. A total of 27,625 used cars were ally provided in branch outlets and vehicle service support units
imported into Finland, which was 7.1 per cent less than the year that operate under the auspices of the above-mentioned dealer-
before. ships. The company has a payroll of around 65 people.
The popularity of diesel passenger cars rose in that last year, one A total of 8,049 Peugeot passenger cars were registered, repre-
in every five new passenger cars was a diesel vehicle. Although the senting a decline of 8.3 per cent on the previous year. The market
proportion of diesel vehicles in Finland has risen marginally in share fell from 5.9 per cent to 5.5 per cent. Peugeot’s market share
recent years, we are still far short of the average levels in the EU, declined for the second consecutive year. However, in a compari-
which come to almost 50 per cent. A major factor in the low sales son conducted between marques, Peugeot retained its position of
figures for diesel vehicles in Finland is the heavy taxation levied on sixth. Registration of Peugeot utility vehicles fell by 21 per cent
them. and came to 763 vehicles. The market share of utility vehicles fell
In the years immediately ahead, the possible shift from taxation from 4.5 per cent to 3.7 per cent.
on the purchase of a vehicle to usage taxation that puts stress on Oy Motortrans Ab is responsible for the warehousing and in-
environmental factors will generate uncertainty within the auto- spections of Peugeot passenger cars at the Hanko Free Port as well
motive trade. The possible changeover may have a momentary ef- as for import vehicle servicing and vehicle accessory installations,
fect on the volume of the automotive trade as consumers postpone vehicle storage and deliveries to Peugeot car dealerships. Last year,
vehicle purchases in anticipation of a drop in prices. Volume with- the company performed import vehicle servicing on 9,261 Peugeot
in the automotive trade will subsequently rise because purchase vehicles; Peugeot vehicles accounted for 90.5 per cent of all the
prices for vehicles will be more reasonable than at present. This import vehicle servicing performed by the company. The company
will consequently result in our vehicle population, which currently employs around 60 people.
averages more than ten years of age, becoming newer, thus making
it possible to mitigate their environmental impacts. Retail sales
The good sales trend for new vehicles, which has held for four Automaa Oy has 7 car dealerships in Helsinki (2), Espoo, Vantaa,
years, has also boosted the trade-in vehicle business. Price levels Raisio, Tampere and Hämeenlinna. Automaa units operate as car
for trade-in vehicles have dropped over several years and this dealerships and as authorised repair shops for Peugeot passenger
has underlined the value of the trade-in vehicle business for the and utility vehicles. Automaa’s Konala outlet also operates as a
profitability of all vehicle dealerships. Appropriate purchase pricing Ford passenger and utility vehicle dealership and an authorised
ensures rapid turnaround of trade-in vehicle stocks and the overall repair shop. Furthermore, Automaa dealerships sell and service
profitability of the trade-in vehicle business. quality Leijona Vaihtoautot trade-in vehicles, which are given a
one-year guarantee and are all inspected by an external party.
2006 in the S Group’s automotive trade An S Benefit Service, which provides wear-part change services
The S Group’s retail sales in the automotive trade and accessories and conducts services on all car makes, also operates at the Konala
amounted to EUR 872 million, which is 18.8 per cent up on the outlet.
previous year. In Finland retail sales amounted to EUR 822 mil- The overall market in Automaa’s business area rose by 0.5 per
lion, which is 19.4 per cent up on the previous year cent on the previous year. However, Peugeot registrations fell by
SOK Corporation’s net turnover from vehicle sales was EUR 3.7 per cent and came to 4,046 vehicles. The number of trade-in
424 million (345), which represented an increase of 23.1 per cent vehicles sold came to 5,427.
on the previous year. Operating loss amounted to EUR 7.1 million Automaa employs around 350 people.
(4.8). The average number of employees in the automotive trade Auto-Kivitila Oy has 4 car dealerships in Espoo, Tampere,
was 1,022 (645). Turku and Lahti. The dealerships also operate under Automaa’s

28
Liiketoimintakatsaus

29
Review of Business Areas

marketing name. Auto-Kivitila’s outlets serve as car dealerships and Agricultural trade
authorised repair shops for Ford passenger and utility vehicles. The
Lahti unit also serves as a car dealership and an authorised repair The S Group’s agricultural trade business area comprises agricul-
shop for Peugeot passenger and utility vehicles. Auto-Kivitila tural trade, machinery sales, hardware sales and the gardening/hor-
dealerships also sell and service vehicles in the Henry trade-in ve- ticultural trade.
hicle programme, which are given a one-year or 20,000-kilometre The S Group’s agricultural trade is conducted by 132 Agrima-
guarantee. The company has a payroll of around 300 employees. rkets, 8 Agrimarket Machine Centres and 1 John Deere Centre.
The nation-wide Agrimarket chain comprises Hankkija-Maatal-
Financial performance ous Oy, Southern Ostrobothnia Cooperative Society, Suur-Seutu
The financial performance of the Maan Auto Group did not Cooperative Society SSO and Kymenlaakson Agrimarket Oy. The
come up to expectations. This was attributable to the overall poor Agrimarket chain has 32,000 loyal Agribonus customers.
performance of Peugeot and Ford on the Finnish car market. Fur-
thermore, the result was burdened by sizeable investments in new Operating environment in 2006
business operations and two new business locations. Total demand in the agricultural trade held steady at the EUR
Members were paid Bonuses of EUR 0.9 million from vehicle 1,900 million mark, the level prevalent in Finland for several years.
sales, service and spare parts operations. Trade in production inputs used on farms remained more or less
Maan Auto Group’s net turnover amounted to EUR 370 mil- unchanged. The overall market for tractors declined by 7 per cent
lion. The Group employed 770 people. but sales of farm machinery remained on a par with previous years.
The grain harvest throughout the country came in at 3.8 billion
kilos, around 7 per cent down on the previous year. Grain quality
was by and large good. Total demand in the retail hardware trade
rose by a good 6 per cent, and gardening/horticultural supplies
recorded growth of 11 per cent.

2006 in the S Group’s agricultural trade

In 2006 the S Group retained its market leader position within the
agricultural trade, with a share of 42 per cent of the market. Agri-
cultural tax-inclusive retail sales, including the grain trade, totalled
EUR 1,080 million, representing an increase of 3.5 per cent on the
previous year.
Sales by the Agrimarket chain came to EUR 787 million, an
increase of 3.8 per cent on the previous year. The Machine Centres
reported sales of EUR 130 million, and the grain trade amounted
to EUR 112 million. The Agrimarket chain’s sales of hardware
and interior decorating supplies rose by around 11 per cent and
gardening/horticultural sales were also up by 11 per cent on the
year before.
The hardware and gardening/horticultural assortments and ways
of working were developed to become more customer-focused and
in particular to respond to the needs of the S Group’s members.

Hankkija-Maatalous Oy
Hankkija-Maatalous Oy provides agricultural, machine, hardware
and gardening/horticultural services and benefits for loyal custom-
ers in the agricultural sector as well as for the S Group’s members.
In April, Kemira GrowHow Oyj acquired a 19 per cent minor-
ity shareholding in Hankkija-Maatalous Oy from SOK. Further-
more, Kemira GrowHow Oyj and Hankkija-Maatalous Oy agreed
to combine their forces to develop a new Growth programme
aimed at developing and deploying novel solutions to assist crop
growers increase their yields through better expertise and at lower
unit costs than at present.
In 2006, sales by Hankkija-Maatalous Oy amounted to EUR
777.2 million, representing growth of 4 per cent on the previous
year. Hankkija-Maatalous Oy accounted for about 81 per cent of
sales by the Agrimarket chain.
The company’s market position rose slightly in the agricultural

30
 Sourcing and Logistics

production inputs trade, such as plant nutrients, crop protection Inex Group
substances, feeds and seeds. Within the farm machinery sector,
sales of heavy contracting machinery in particular continued to At the end of 2006, the Inex Group comprised the parent com-
rise. pany Inex Partners Oy (which provides purchasing and logistics
The overall market for tractors fell by 7 per cent from the previ- services for grocery supplies and logistics services for special-
ous year to 4,172 tractors sold. The market share of Hankkija- ity products for retail chains), Meira Nova Oy (which provides
Maatalous Oy’s John Deere tractors rose by 3.1 percentage points purchasing and logistics services for grocery supplies for locations
on the previous year, to its current position of 20.7 per cent. Some in the HoReCa sector) and Canelokiinteistöt Oy (which handles
320 new combine harvesters were supplied throughout the coun- leasing activities for the land and premises it owns).
try for the 2006 threshing season, of these around 60 per cent were The associated company Finnfrost Oy specialises in purchasing
Sampo Rosenlew and John Deere combine harvesters supplied by and logistics services for frozen foods for units in the retail trade
the Agrimarket chain. and the HoReCa sector. Inex Partners Oy has a 50 per cent stake
Capital expenditures in the store and service network in 2006 in the company.
amounted to EUR 5.1 million. The single largest outlay was the Inex Partners Oy became a wholly-owned subsidiary of SOK
Hyvinkää Agricentre. It opened at the beginning of March and as from March 2006.
is the site for an Agrimarket, S Rautamarket, Machine Centre, The Inex Group’s operations developed well last year. Sales
Multasormi gardening store and the John Deere Centre which by the Inex Group increased by 3 per cent on the previous year,
was relocated from Vantaa. The personnel from Hankkija-Maatal- amounting to EUR 2,128.5 million. This was attributable to the
ous Oy’s head office, which had formerly operated out of the S Group’s good performance and to the Inex Group’s own profit-
Ässäkeskus in Vallila, Helsinki, also moved to the site. able operations. The added value generated by its operations has
Stores in the S Rautamarket chain, which supplies a wide range had a direct impact on strengthening the competitiveness of the
of hardware and gardening/horticultural products, were opened in customer chains.
conjunction with the Eura, Hyvinkää, Hamina, Jyväskylä, Kemiö, The financial year was characterised by major changes that took
Kuopio, Nummela and Närpiö Agrimarkets. place in the client structure of Inex Partners Oy. During the finan-
The Agrimarkets in Suonenjoki, Kuusamo, Sysmä, Liminka and cial year, Tradeka Oy’s locations were gradually phased out of the
Teuva were relocated in new premises. The Loimaa, Pihtiputaa, purchasing and logistics services for grocery supplies for which the
Kyrönmaa, Virkkala and Alavus Agrimarkets were revamped. company was responsible. Co-operation within logistics services
The agricultural trade of Malax Handelslag and Kvevlax Han- for speciality products will draw to a close at the end of February
delslag transferred to Hankkija-Maatalous Oy at year-end. 2007. Spar Finland Ltd became a customer of Inex Partners Oy at
The Agrimarkets in Nurmijärvi and Riihimäki were closed the beginning of November 2006.
during the year and integrated into the Hyvinkää Agricentre. The Several development projects to improve cost efficiency and
Punkalaidun store was integrated into the Agrimarket in Huit- enhance competitiveness were implemented by Inex Partners Oy
tinen. during the report year.
Hankkija-Maatalous Oy’s profit before extraordinary items was The voice-controlled order picking system at the Kilo logistics
EUR 6.5 million. In 2006, the company employed an average of centre was expanded, and a new financial information system
960 people. was adopted in March. Other noteworthy projects included the
development of a management system, deepening international
procurement know-how and the development of supplier relations
management models. A new version of the operational manage-
Rainex Yrityspalvelu Oy
ment system was adopted at the end of the year and a project to
Rainex Yrityspalvelu Oy is a wholly-owned subsidiary of SOK. develop a new financial control model was launched in the sum-
Rainex Yrityspalvelu is a hardware and building wholesaler that mer.
also deals in civil defence, security, work clothes, catering products When the Inex Group became a subsidiary of SOK, the opera-
and textiles. tional models for administration, bookkeeping and the planning
The company has six sales outlets in Helsinki, Jyväskylä, process as well as schedules were revised to bring them in line with
Kuopio, Oulu, Tampere and Turku. Its head office and administra- SOK Corporation. The most significant change was to centralise
tion are in Pukinmäki, Helsinki, and its warehouses are located in the Inex Group’s finance and financial risk management in SOK’s
Vantaa (Hakkila and Maantiekylä), Jyväskylä, Oulu, Turku and Finance unit in conformity with SOK Corporation’s principles.
Kuopio, where a new warehouse reached completion in 2006. In 2006, Inex Partners Oy decided to come in line with the
The use of eInvoicing has risen considerably, and the financial Business Social Compliance Initiative (BSCI), the European
year saw the start of pilot ordering systems. The company will con- responsible importer model.
tinue to invest in developing its warehouses and electronic trading. Sales by Inex Partners Oy were up on the previous year, despite
In 2006, the company’s net turnover came to EUR 82.7 million the change in client structure. Company sales came to EUR 1,890
(80.9), up by 2.2 per cent on the previous year. Operating profit million, an increase of 2 per cent on the previous year.
was EUR 0.9 million (1.1). Meira Nova Oy’s extremely healthy trend continued. Sales
At the end of the financial year, the company employed 48 totalled EUR 245 million, up by 10 per cent on the previous year.
people (46). Meira Nova’s share of the delivery wholesale trade in the HoReCa

31
Sourcing and Logistics

sector is in excess of 30 per cent. Construction of the company’s In 2006 the company had net turnover of EUR 599.6 million,
logistics centre in Hyrylä got underway during the report year, and representing growth of 12.3 per cent on the previous year. Operat-
the new centre will come into use in the latter part of 2007. ing profit was EUR 1.0 million (0.0). The company employed an
Finnfrost Oy also reported excellent sales figures of EUR 223 average of 241 people (237).
million, up by 9 per cent.
The healthy trend of the Inex Group and its client chains
North European Oil Trade Oy
will continue predominantly on a sound footing in 2007. The
importance of price competitiveness, cost effectiveness, delivery North European Oil Trade Oy (NEOT) is a fuel procurement
reliability and the efficiency of the value chain as cutting edge company that is jointly owned by SOK and Greeni Oy. Net
factors will be highlighted. Owing to the change in Inex Partners turnover in its second full year of operations amounted to EUR
Oy’s ownership and client structure, sales of goods by the company 981 million, of which the company recorded a profit of EUR 2.8
in early 2007 will likely fall short of the figures in the previous million. The growth in net turnover compared with the previous
year. Nevertheless, sales for the entire year will achieve the levels of year was attributable to the rise in market prices and to increased
2006. sales by customer chains.
Meira Nova’s operations will remain unaffected by the changes The company aims to create a relative competitive edge for its
in the ownership structure of the Inex Group, and the company is customer chains (the S Group’s ABC chain and Greeni Oy’s St1
set to increase its sales. The introduction of the new logistics centre chain). In 2006, joint procurements raised the market share of
at the end of 2007 will enhance the quality, smooth flow and ef- the fuels NEOT Oy delivers to service stations to approximately
ficiency of operations. 27 per cent of the entire Finnish retail fuel market. This puts the
Inex Group had a payroll of 2,185 employees at the end of the company in a strong position to negotiate procurement prices for
year, a reduction of 226 people on the previous year. fuels. Centralising procurements results in significant logistical
advantages for customer chains and keeps the percentage of fixed
Intrade Partners Oy costs for procurement and deliveries at highly competitive rates.
Intrade Partners Oy is the S Group chains’ procurement and Building up NEOT Oy’s organisational structure proceeded
logistics company whose primary responsibility is the apparel, according to plan. The company’s management of its international
cosmetics, leisure and household product areas. Intrade Partners oil trade is at a good level but broadening its knowledge base is
Oy is a wholly-owned subsidiary of SOK. nevertheless one of the company’s prime objectives. This objective
The company’s largest customer chains are the Prisma, Sokos, will be achieved through constant training, recruitment and close
S Market and Agrimarket chains. Other customers include the co-operation with SOK Finance.
Sale, Alepa, Emotion and ABC chains. In addition to consumer At the end of the financial year, the company employed seven
goods, Intrade Partners Oy supplies store furnishings and fittings people.
to the S Group’s locations.
The task of Intrade Partners Oy is to bring added value to its
customer chains through an appropriate product range in line with
their business idea, cost-effective operational processes that are
integrated into the customer chains and by achieving high-volume
advantages through centralised purchases. In 2005 cost-efficiency
made considerable headway in tune with more efficient operations
and increased volume.
Several projects to optimise operational processes were imple-
mented during the report year. Significant progress was made with
respect to supplier integration in particular as well as information
interchange and in the areas of monitoring the quality of suppliers’
operations and reporting.
In addition to providing a competitive range, co-operation
between suppliers emphasised availability and improving other
operational quality as well as assessing suppliers from the perspec-
tive of operational quality. Intrade Partners Oy energetically
implemented the European responsible importer model, the Busi-
ness Social Compliance Initiative (BSCI). BSCI sets out common
social requirements and provides a monitoring system to verify and
improve the social conditions of goods suppliers.
The outlook for 2007 is positive, and Intrade Partners Oy’s
procurement volume is expected to show further growth in the
coming financial period.

32
Neighbouring Countries

The S Group operates in the Baltic countries within the supermar- AS Kommest Auto Group
ket, hotel and restaurant and automotive trades.
The Baltic region saw the continuance of the investment plan AS Kommest Auto is SOK’s wholly-owned subsidiary that has
in the supermarket, hotel and restaurant and automotive trades. dealership rights for Peugeot vehicles in Estonia and Latvia. AS
Agreements were made in 2006 concerning the opening of the Kommest Auto’s subsidiary Oü Kommest Autokeskused operates
first Prisma hypermarket in the Lithuanian capital of Vilnius in as a sales company in Estonia. AS Lauva Auto is the importer in
2008 and the opening of a second Prisma hypermarket in Riga in Latvia and SIA Lauva Autocentrs is the sales company.
autumn 2008. The overall market for vehicles in Estonia in 2006 was 28,757
Business operations in the Baltic countries achieved the objec- new cars and vans, representing growth of 30.6 per cent on the
tives set for them in the financial year and showed a profitable previous year. Latvia’s total market was 28,119 cars and vans, an
result. increase of 70.3 per cent compared with the previous year.
Kommest Auto sold a total of 1,698 Peugeot vehicles in Estonia
and 817 in Latvia. The market share of Peugeot passenger cars in
AS Prisma Peremarket
Estonia was 4.9 per cent and in Latvia 2.5 per cent.
AS Prisma Peremarket, a wholly-owned subsidiary of SOK, is In 2006, the Kommest Auto Group’s net turnover came to EUR
engaged in the retail trade in Tallinn at Prisma hypermarkets in 53.9 million (61.5) and it posted operating profit of EUR 0.6
the Sikupilli, Kristiine, Mustamäe and Haabersti town districts. million (0.8).
Tallinn’s fifth Prisma opened for business in the Lasnamäe town At the end of 2006, the company had a payroll of 250 people
district in October 2006. Developments during the financial (236).
year within such spheres as logistics, electronic ordering and data
systems took the company’s preparedness for the future a major
step forward.
The company also carries on restaurant operations in line with
the Rosso, Rosso Express, Coffee House and Hesburger concepts
in a food court that operates within the Prisma in Sikupilli.
In 2006, the net turnover for AS Prisma Peremarket came to
EUR 96.9 million (81.1) and it reported operating profit of EUR
3.3 million (2.5).
At the end of 2006, the company had a payroll of 664 employees.

AS Prisma Latvija
Prisma hypermarket operations spread to Latvia in 2006 with the
opening of the first Prisma in the capital Riga in November 2006.
The Prisma is located in the attractive Domina Shopping Centre
two kilometres from the centre of the city.
At the end of 2006, the company had a payroll of 120 employees.

AS Sokotel
AS Sokotel is SOK’s wholly-owned subsidiary that operates Sokos
Hotel Viru in Tallinn. The largest hotel in Estonia, Viru and its
restaurants serve the S Group’s members, business travellers and
other customers. The hotel has 516 rooms, six restaurants and
modern conference facilities.
The hotel’s suites and lobby areas were revamped during the
financial year, and a street-level Public Corner restaurant opened
for business in the hotel. In addition, joint benefits with AS Prisma
Peremarket were sought by transferring AS Sokotel’s bookkeeping
functions to SOK Baltic’s service centre.
AS Sokotel’s net turnover in 2006 amounted to EUR 19.3 mil-
lion (18.4) and its operating result was EUR 3.2 million (3.1).
At the end of 2006, the company had a payroll of 242 employees.

33
Corporate Governance within SOK Corporation

Applicable regulations meetings of the Committee of Presiding Officers. In addition,

the Committee of Presiding Officers decides on such matters as
SOK is a Finnish cooperative whose decision-making and adminis- the chief executive’s compensation. The Supervisory Board has
tration complies with the Cooperatives Act, other relevant regula- appointed a permanent Compensation Committee and a Nomina-
tions and SOK’s Statutes. The activities of its subsidiary companies tion Committee.
are regulated by the Finnish Companies Act and Corporation-wide The Cooperative Meeting elects the members of the Supervisory
principles which are based on various regulations and guidelines. Board on the basis of proposals made by the cooperative enterpris-
The Corporation’s administration seeks to comply with the es. The Supervisory Board has 12–25 members. A person elected
recommendation on the corporate governance of publicly traded to the Supervisory Board must be a Finnish citizen, a member of a
companies issued by the Helsinki Stock Exchange, the Central cooperative enterprise and less than 65 years of age. The Coopera-
Chamber of Commerce and the Confederation of Finnish Indus- tive Meeting decides the emoluments of the chairman, vice chair-
try and Employers. Owing to the form of the cooperative enter- men and members as well as the auditors’ fees.
prise and the structure of the Group, not all the recommendations The Supervisory Board had 22 members in 2006 as well as two
have been considered applicable. personnel representatives. The Supervisory Board met 6 times.
The special remuneration for the chairman of the Supervisory
Board in 2006 came to EUR 1,500 per month and the monthly
General Meetings
remuneration for the vice chairmen amounted to EUR 470.
The Cooperative Meeting is SOK’s highest decision-making body. In 2006, the fee paid to the chairmen and members of the
Each cooperative enterprise is entitled to send to a Cooperative Supervisory Board per meeting and per day taken up with carrying
Meeting a number of representatives equal to its votes. The rep- out their duties was EUR 360.
resentatives have the right to speak but only one of them has the
right to vote on behalf of the cooperative enterprise. The exercise
Executive Board
of owners’ rights is based on the cooperative’s Statutes.
The task of the Annual Cooperative Meeting is to deal with Election and composition
matters that are defined in the Statutes, such as adopting the fi- In accordance with SOK’s Statutes, the Supervisory Board elects
nancial statements, considering the profit/loss, discharge of officers the members of the Executive Board for a term of one year based
from liability, the election of the Supervisory Board and the audi- on a proposal by the Committee of Presiding Officers. Under the
tors and their remuneration. Extraordinary cooperative meetings Statutes, the Executive Board is comprised of the cooperative en-
may be convened as necessary. terprise’s chief executive, who serves as chairman, and a minimum
of three and a maximum of eight other members. The Execu-
tive Board of SOK in 2007 has eight members, six of whom are
Supervisory Board
managing directors of cooperative enterprises and two of whom
The Cooperatives Act does not require the appointment of a Su- are employed by SOK.
pervisory Board, but SOK’s Statutes define the Supervisory Board In accordance with the Statutes, a person elected must be a
as part of the Corporation’s corporate governance model. The role Finnish citizen and less than 65 years of age. The aim is to ensure
of the Supervisory Board is to represent the owners at large and to sufficient rotation while preserving sufficient continuity.
serve as a forum for taking a common stand on central strategic
questions. Its task is to decide on major policies and to oversee Tasks of the Executive Board
the best interests of members. Upon a proposal by the Executive The activities of the Executive Board are guided by the coopera-
Board, the Supervisory Board confirms all the central strategic tive enterprise’s Statutes, the Corporation-wide principles and the
policies of the S Group and SOK Corporation. The matters within Board’s rules of procedure. The Executive Board confirms matters
the scope of line management fall within the competence of the such as the objectives of the subsidiaries, the operational plans
cooperative enterprise’s Executive Board and line management. and the allocation of resources and oversees the implementation
The Supervisory Board oversees that the administration of the of related decisions. The Executive Board oversees the operations
cooperative enterprise and SOK Corporation is attended to in of the associated companies to ensure the best interests of SOK
accordance with the law, the Statutes, decisions of the Cooperative Corporation and the S Group. The Executive Board also monitors
Meeting and the Supervisory Board as well as the cooperative en- the building society activities of the cooperative enterprises.
terprise’s best interests. The Supervisory Board accepts and expels Upon a proposal by the chief executive, the Executive Board
members of the cooperative enterprise and appoints and dismisses decides on setting up a Management Team, on the appointments
the chief executive and other members of the Executive Board as and compensation of members of the Management Team who do
well as decides on the remuneration of Executive Board members not belong to the Executive Board as well as on other management
other than those who are employed by the cooperative enterprise. appointments.
In addition, the Supervisory Board decides on the principles of A member of the Executive Board who is an employee of the
co-operation for the S Group’s operations and on long-term plans. cooperative enterprise or exercises a position of trust within one
The Supervisory Board has duly confirmed rules of procedure. does not participate in the preparation of decisions concerning the
The chairman and two vice chairmen of the Supervisory Board audit and auditors of cooperative enterprises or in decision mak-
form a Committee of Presiding Officers which assists the Super- ing or in monitoring the cooperative enterprises’ building society
visory Board with its tasks. The chief executive participates in the activities.

34
 Corporate Governance within SOK Corporation

Meetings of the Executive Board The Chain Boards are made up of the managing directors and
The Executive Board met 21 times during 2006 and the rate business area directors of the cooperative enterprises as well as
of attendance by its members was 94.6 per cent. The Executive members of the Executive Board or Management Team who are
Board of SOK annually appraises its activities using a system of employed by SOK. SOK’s Executive Board decides on the compo-
self-evaluation. The members of the Executive Board were paid sition of the Chain Boards.
emoluments totalling EUR 79,200 in 2006. Those members of the
Executive Board who are employed by SOK received no compen-
Profit-related bonus scheme
sation for working on the Executive Board.
for management
All staff within SOK Corporation come under a profit-related
Chief Executive Officer
bonus scheme. The principles of the profit-related bonus scheme
The duty of the chief executive officer is to direct the activities of for management (Management Team) are approved annually by
the Executive Board and the cooperative enterprise in accordance the Supervisory Board. The criteria for the bonus scheme include
with the relevant acts, SOK’s Statutes and the decisions of the profit, process efficiency, and customer and personnel satisfaction.
governing bodies. The chief executive officer of SOK is Professor Profit-related bonus gauges are defined from the perspective of
Kari Neilimo, D.Sc. (Econ.). one’s own unit as well as from the wider perspective of SOK and
the S Group as a whole.
The Supervisory Board has set up a Compensation Committee
Management Team
to determine the principles of the bonus scheme.
The task of the Management Team is to assist the chief executive
officer and the Executive Board in accordance with the framework
General and administrative audit
determined by the Executive Board. The Management Team
prepares matters for presentation to the Executive Board which re- General audit
quire co-ordination, such as the S Group’s and SOK Corporation’s The Annual Cooperative Meeting elects a minimum of one and
business strategies, target levels, operational plans and budgets. a maximum of three auditors and two deputy auditors to audit
The Management Team met ten times in 2006. In 2006, the the financial statements of the cooperative enterprise and the
members of the SOK Management Team were paid salaries and Corporation as well as the accounting records and administration.
profit-related bonuses amounting to EUR 2,795,945. The sum The auditors and deputy auditors must have the legally required
includes remuneration in kind. qualification.

Administrative audit, Audit Committee

Executive Boards of the subsidiaries
The aim of establishing an Audit Committee and electing Man-
The chairman of the Executive Board of a subsidiary is, as a rule, agement Auditors is to facilitate the participation in the audit of
a member of the Executive Board or Management Team who is persons who exercise a position of trust within the cooperative
responsible for the subsidiary’s operations and is employed by enterprises that own SOK Corporation. The Audit Committee
SOK. The subsidiary’s Executive Board decides on the compa- is part of corporate owner-oversight. The Committee comprises
ny’s strategy, operational plans and budget as well as the hiring, two Management Auditors and the SOK auditors elected by the
terms of employment and dismissal of the managing director. The Cooperative Meeting.
decisions of the Executive Board take into account the Corpora- The Audit Committee is an oversight body and a link between
tion-wide principles and the decisions of SOK’s Executive Board the auditors and the owners. A special task of the Committee and
concerning the company’s objectives, operational plans and alloca- of the Management Auditors is to bring the point of view of the
tion of resources. owner administration and basic membership into the audit. The
Audit Committee compiles a report for the Annual Cooperative
Meeting. The report is submitted to the Supervisory Board chair-
Chain Management
man and the Executive Board and is entered as received and at-
The business area-specific Chain Management organisation man- tached as an appendix to the minutes of the Cooperative Meeting.
ages and co-ordinates chain operations under the supervision of The Audit Committee’s report is distributed to the Supervisory
SOK’s Executive Board. The Chain Management organisation Board, the Executive Board and to other units as necessary.
comprises the Chain Board, the Chain Management unit and the The Management Auditors are paid an emolument according
Steering Group that assists it. The Chain Management organisa- to the same principles as apply to the members of the Supervisory
tion is the central commercial joint organisation of the cooperative Board. The emolument paid to the chairman is raised by 50 per
enterprises and SOK Corporation. cent.
The Chain Management organisation is independently responsi-
ble for managing, developing and monitoring strategic and tactical 2006
chain operations within its own business area. It functions in co- The Cooperative Meeting held on 26 April 2006 elected as SOK’s
operation with the cooperative enterprises and various professional regular auditors for 2007 Tomi Englund M.Sc. (Econ.), LL.M.,
organisations. The Chain Board makes the central decisions con- Authorised Public Accountant (APA), of Helsinki, Tapani Ro-
cerning its own business area and chains within the framework of tola-Pukkila, Managing Director, APA, of Kauhajoki and Juhani
its authority. Its decisions are binding under the Chain Agreement.

35
Corporate Governance within SOK Corporation

Heiskanen D.Sc. (Econ.), APA, of Huittinen. The deputy auditors SOK Supervisory Board 2006
elected were Ernst & Young Oy and Eero Huusko M.Sc. (Econ.),
APA, of Kajaani. The Management Auditors elected to the Audit
Committee for 2007 were Matti Suokas, M.Sc. (Econ.), Approved Otto Mikkonen (born 1949) Jouko Härkönen (born 1939)
Auditor, of Kotka, Pekka Kantanen, Managing Director of Kuopio Joensuu Kajaani
and their deputies, Risto Tuori, lawyer, of Vammala and Seppo Titular Industrial Counsellor Farmer
Ehanti, Senior Consultant, of Porvoo. M.Sc. (Tech.) Chairman, Supervisory Board,
Chairman 2002– Cooperative Society Maakunta
Auditing fees for SOK Corporation companies amounting to
Former Managing Director, KM- Member of the Supervisory Board
EUR 917,875 and fees for consultancy services amounting to
Yhtymä Oy from 2003 to 26 April 2006
EUR 380,018 were paid in Finland and the Baltic countries in Chairman, Supervisory Board, North
2006. The Management Auditors received payment totalling EUR Karelia Cooperative Society Heikki Ikonen (born 1943)
20,280 for their work. Member of the Supervisory Board Nurmes
2001– Honorary Counsellor
Retiring in 2007 Farmer
Internal control, internal audit and Chairman, Supervisory Board,
risk management Jouko Vehmas (born 1956) Cooperative Society Jukola
SOK’s Executive Board is responsible for organising operations in Kouvola Member of the Supervisory Board
M.Sc. (Econ.) 1985–
an appropriate manner, corporate management and for the legal-
First Vice Chairman 2004– Retiring in 2008
ity and reliability of the accounting records, finance and routine
Managing Director, Cooperative
management. In addition, the chief executive officer, SOK’s unit Society Ympäristö Jorma Ipatti (born 1948)
directors and the Executive Boards of the subsidiaries and their Member of the SOK Executive Board Kajaani
managing directors carry out the management and control of busi- 2001–2003 LL.M.
ness activities in day-to-day operations within their own areas of Member of the Supervisory Board Attorney-at-Law
responsibility. 1994–2000, 2004– Asianajotoimisto Jorma Ipatti Tmi
SOK Corporation’s Controller functions constitute the strategic Retiring in 2007 Member of the Executive Board,
body which is responsible for implementing the internal audit Cooperative Society Maakunta
of the Corporation and for assessing strategic profitability. Their Max van der Pals (born 1945) Member of the Supervisory Board 26
Lohja April 2006–
activities cover all business operations and support services within
Farmer Retiring in 2009
the Corporation. SOK’s Executive Board annually deliberates on
Second Vice Chairman 2003–
the focal points of internal control and the Controller functions Chairman, Supervisory Board, Suur- Aarto Jalava (born 1947)
perform an assessment of the functionality and adequacy of inter- Seutu Cooperative Society SSO Rauma
nal auditing as well as internal control within a set framework. Member of the Supervisory Board M.Soc.Sc
The Controller functions report regularly to the CEO, the 2001– Financial Manager
Executive Board and to the Committee of Presiding Officers of the Retiring in 2007 City of Rauma
Supervisory Board on matters concerning risk management. The Chairman, Supervisory Board,
Corporation has adopted an integrated risk management model. Jorma Bergholm (born 1954) Cooperative Society Keula
Based on the results, the most significant risks with respect to Helsinki Member of the Supervisory Board
Managing Director 2005–
the Corporation’s operations and the achievement of its strategic
Helsingin Työväenyhdistys ry Retiring in 2008
objectives have been identified. In addition to the integrated risk
Chairman, Supervisory Board,
management model, selected functions employ more detailed risk Helsinki Cooperative Society Elanto Simo Kutinlahti (born 1957)
management models (including finance and the accountancy func- Member of the Supervisory Board Keuruu
tion). Insurance policies have been taken out in order to address 2005– Farmer
the risks concerning assets, disruption of operations and business Retiring in 2008 Chairman, Supervisory Board,
liability. Cooperative Society Keskimaa
Marcus H. Borgström (born 1946) Member of the Supervisory Board
Financial reporting Sipoo 1998–
SOK Corporation and the S Group use a wide-ranging method of Titular Agricultural Counsellor Retiring in 2007
M.Sc. (Agr. and For.)
reporting on financial key figures, trends and forecasts to monitor
Farmer
financial objectives. In addition to comprehensive internal report-
Chairman, Supervisory Board,
ing, the Corporation regularly publishes information on financial Cooperative Society Varuboden
performance and the trend in net turnover. Member of the Supervisory Board
2004–
Information Retiring in 2007
SOK Communications and Publications ensures that custom-
ers and stakeholders have sufficient correct information at their
disposal concerning the company and its operations. Information
in written form is available upon request as well as through SOK’s
website.

36
 Corporate Governance within SOK Corporation

Leo Laukkanen (born 1947) Arto Piela (born 1960) Juha Vuorenhela (born 1944)
Mikkeli Porvoo Pori
Titular Commercial Counsellor LL.M. LL.M.
Managing Director, Cooperative Society Managing Director, Cooperative Society Lakiasiaintoimisto Juha Vuorenhela Ky
Suur-Savo Osla Chairman, Supervisory Board, Satakunta
Member of the SOK Executive Board Member of the Supervisory Board 2005– Cooperative Society
1998–2002 Retiring in 2009 Member of the Supervisory Board 2004–
Member of the Supervisory Board Retiring in 2009
1987–97, 2003– Matti Pikkarainen (born 1953)
Retiring in 2009 Oulu Personnel Representatives
Th.D.
Maija-Liisa Lindqvist (born 1951) Director of Christian Education Tapani Tikkala (born 1947)
Lahti Oulu Evangelical Lutheran Parishes Helsinki
Member of Parliament Chairman, Supervisory Board, Project Manager, SOK Member Services
Chairman, Supervisory Board, Cooperative Cooperative Society Arina Member of the Supervisory Board 2001–
Society Hämeenmaa Member of the Supervisory Board 2004– Retiring in 2007
Member of the Supervisory Board 1997– Retiring in 2007
Retiring in 2008 Annikki Heikkinen (born 1942)
Timo Sonninen (born 1948) Helsinki
Seppo Linjakumpu (born 1958) Iisalmi Assistant, SOK Real Estate Maintenance
Kuusamo Entrepreneur Member of the Supervisory Board 1997–
Agronomist Chairman, Supervisory Board, Retiring in 2007
Secretary General Cooperative Society PeeÄssä
Kuusamon Eräveikot Member of the Supervisory Board 1985–
Chairman, Supervisory Board, Cooperative Retiring in 2008
Society Koillismaa
Member of the Supervisory Board 2001– Antero Taanila (born 1941)
Retiring in 2009 Kokkola
Provincial Counsellor
Ahti Manninen (born 1950) Former Administrative Director,
Lappeenranta Boliden Kokkola Oy
Titular Commercial Counsellor Chairman, Supervisory Board,
Managing Director, South Karelia Cooperative Cooperative Society KPO
Society Member of the Supervisory Board 1991–
Member of the Supervisory Board Retiring in 2008
1989–91, 2000–
Retiring in 2009 Hanna Valtari (born 1949)
Seinäjoki
Jorma Niiniaho (born 1945) Training Director
Hamina Seinäjoki Vocational Education
Titular Commercial Counsellor Centre – Sedu
M.Sc. (Econ.) Chairman, Supervisory Board, South
Managing Director, Cooperative Society Ostrobothnia Cooperative Society
Ympyrä Member of the Supervisory Board
Member of the Supervisory Board 2001–03, 26 April 2006–
1991–97, 2002– Retiring in 2007
Retiring in 2009
Matti Vanto (born 1945)
Klaus Pentti (born 1943) Raisio
Hämeenkyrö Senior Judge
Titular Agricultural Counsellor LL.M.
Member of Parliament Lawyer, City of Naantali
Chairman, Supervisory Board, Pirkanmaa Chairman, Supervisory Board, Turku
Cooperative Society Cooperative Society
Member of the Supervisory Board 2005– Member of the Supervisory Board 1998–
Retiring in 2008 Retiring in 2007

37
Corporate Governance within SOK Corporation

SOK Executive Board 2006–2007

Kari Neilimo (born 1944) Esko Hakala (born 1952) Taavi Heikkilä (born 1962) Arto Hiltunen (born 1958)
Chief Executive Officer 1 August Titular Commercial Counsellor M.Sc. (Econ.) M.Sc. (Econ.)
2002–31 July 2007 Managing Director, Managing Director, Cooperative Managing Director, Helsinki
D.Sc. (Econ.) Cooperative Society Maakunta Society Hämeenmaa Cooperative Society Elanto
Professor of Business Member of the Executive Board Member of the Executive Board 2007– Member of the Executive Board
Administration, University of 2003– With the S Group since 1987 2000–2001, 2003–
Tampere With the S Group since 1975 With the S Group since 1980
University of Lapland and SOK’s Chief Executive Officer
Lappeenranta University of as from 1 August 2007
Technology, 1983–2002
Managing Director of
Neiconsulting Oy, 1991–2002
Member of the Executive Board
of Pirkanmaa Cooperative Society,
1988–1991 and
Chairman of the Supervisory
Board, 1992–2002
Chairman of SOK’s Supervisory
Board, 1991–2002
With the S Group since 1988

Kuisma Niemelä (born 1958) Veli-Matti Puutio (born 1961) Jukka Salminen (born 1947)
M.A. M.Sc. (Econ.) M.Sc. (Econ.)
Managing Director, Cooperative Managing Director, Cooperative Titular Commercial Counsellor
Society Keskimaa Osk Society Arina Executive Vice President,
Member of the Executive Board Member of the Executive Board SOK Administrative Division
2002– 2004– 1993–
With the S Group since 1983 With the S Group since 1986 Member of the Executive Board
1988–
With the S Group since 1974

Kimmo Simberg (born 1959) Ulla-Maija Tolonen (born 1951)

Bachelor of Hospitality Management M. Sc. (Econ.), Titular Commercial
Managing Director, Southern Counsellor Managing Director, Pirkanmaa
Ostrobothnia Cooperative Society Cooperative Society (up to 7 February 2007)
Member of the Executive Board Member of the Executive Board 2005–2006
2006– With the S Group from 1974
With the S Group since 1986 to 7 February 2007

38
 Corporate Governance within SOK Corporation

SOK Management Team

Kari Neilimo (born 1944) Ensio Hytönen (born 1952) Reijo Kaltea (born 1946) Suso Kolesnik (born 1961)
Chairman and CEO up to Managing Director, Senior Vice President, Senior Vice President,
31 July 2007 Hankkija-Maatalous Oy SOK Customer-ownership and SOK Communications and
D.Sc. (Econ.) Licentiate in Agriculture and Specialty Store Division Publications
M.Sc. (Econ.), University of Forestry B.Sc. (Econ.) M.Soc.Sc
Tampere Titular Agricultural Counsellor Member of the Management Team Member of the Management
Member of SOK’s Executive Member of the Management from 2002 to 30 April 2007 Team 2003–
Board 2002– Team 2003–
Member of the Management Team
2002–
Main positions of trust:
Confederation of Finnish
Industries EK, member of
the Member Associations’
Representative Council 2004–
Tapiola Mutual Pension Insurance
Company, member of the
Supervisory Board 2003–
Central Chamber of Commerce
2003–
Luottokunta, Vice Chairman of
the Executive Board 2003–
Federation of Finnish Commerce, Harri Miettinen (born 1962) Matti Pulkki (born 1947 Jukka Salminen (born 1947)
member of the Board 2004–, Senior Vice President, Senior Vice President, Executive Vice President,
Chairman of the Board 2005– SOK Strategic Development SOK Tourism and Hospitality SOK Administrative Division
University of Tampere, member of and Human Resources Business M.Sc. (Econ.)
the University Governing Board M.Sc. (Econ.) B.Sc. (Econ.), MBA Titular Commercial Counsellor
2004– Member of the Management Titular Tourism Counsellor Member of SOK’s Executive
Team 2004– Member of the Management Team Board 1988–
2002– Member of the Management
Team 1998–, Deputy CEO

Antti Sippola (born 1955) Heikki Strandén (born 1954) Markku Viljanen (born 1948) Reino Ylä-Autio (born 1948)
Senior Vice President, Senior Vice President Senior Vice President Managing Director
SOK Supermarket Trade SOK ABC Service Station Store SOK Legal Affairs Maan Auto Oy
M.Sc. (Econ.) Business and Fuel Trade General Secretary M.Sc. (Agriculture)
Member of the Management Member of the Management Team Member of the Management Team Member of the Management
Team 2003– 2003– 2006– Team 2006–

39
Accountability

Accountability is one of the fundamental values of the S Group. The observance of international agreements, legislation as well as
The scope of accountability within the S Group is wide-rang- regulations and guidelines sets the standard within the S Group
ing due to the Group’s broadly based business. For the S Group and this is supplemented with inter-company agreements and
accountability means that members can rely on the quality of the good business practices. Responsible business is furthered by
products they purchase and that they can be equally confident taking the initiative and being at the forefront in line with the
that employees are content in their jobs and that fuel sales cause principle of continuous improvement.
no harm to the local environment. The accountability of corporate Result-oriented operations ensure long-term profitability and
activities is viewed as a natural part of the S Group’s operations sufficient resources to develop responsible business practices.
and of a people-first market economy. The aim is to provide added The S Group makes innovative use of the best available tech-
value for the S Group’s business operations and in turn for its nology and expertise on the market. This enables the Group to
members by developing economic, social and environmental data minimise hazardous and adverse situations and the risks they cause
management. to people and the environment. Matters related to customers’
In November 2002, SOK’s Executive Board endorsed the prin- health and safety as well as to ethical product procurement play a
ciples of social responsibility for the S Group that had been drafted prominent role in planning product and service assortments.
on the basis of the S Group’s environmental policy, which was The S Group communicates openly about the effect of its
approved in 1999 and amended in December 2005. The principles operations on the economy, the environment and people as well as
encompass the economic, social and environmental dimensions of regional vitality. To this end, the S Group draws up indicators for
accountability. measuring, describing and comparing the results of the develop-
A synopsis of data concerning S Group-wide accountability will ment work carried out in the various sub-areas.
be published on the S Group’s website (S-kanava) at the end of The Group strives for interactive corporate communications
spring 2007. with different stakeholders.
It is the task of the management of the S Group’s business units
to ensure that employees are familiar with these principles and
Principles of the S Group’s
committed to observing them in their daily work.
social responsibility
Social responsibility is viewed as a natural part of the S Group’s
The S Group provides services and benefits for its committed set of core values, and the principles are applied in practice by
members, responsibly and in accordance with the principles of sus- means of action plans carried out by the operating units. The aim
tainable development. Responsibility means regionally, economi- is to provide added value for the S Group’s business operations
cally, ecologically and socially responsible business operations over and in turn for its members by developing economic, social and
the long term. environmental data management.
Operations are developed in co-operation with members,
personnel, suppliers of goods and services, local communities, the
authorities, partners in co-operation and other stakeholders.

SOK CORPORATION’S PERSONNEL PER BUSINESS UNIT

40
 Accountability

Personnel delineated and guidelines for reward practices were issued during
the financial year.
The staff are managed in accordance with the S Group’s core Within SOK Corporation, an employee’s salary is determined
values and a common personnel strategy. The personnel strategy by the nature of the task and task qualification as well as the
was revised in 2006 in response to current and future challenges. person’s experience, competence, training and performance of the
Personnel work will continue to concentrate on four focal points: task. The criteria for evaluating job qualification apply equally to
– The S Group’s competitiveness as an employer and ensuring all employees.
the availability and permanence of a labour force Bonus schemes within SOK Corporation have applied to all
– Strategic leadership and quality management that generate staff since 2004. The aggregate amount of incentives and perform-
cutting-edge business operations ance-related bonuses on the basis of operations in 2006 amounted
– The development of core competence to boost the competitive- to EUR 4,813,000 (excluding the Inex Group).
ness of business operations
– Business-oriented and efficient HR processes Co-operation with educational establishments
and recruitment
The year 2006 saw the establishment by the Finnish Chamber of
SOK Corporation’s personnel
Commerce of the Kaupan Koulutuksen Kehittämiskeskus (Train-
At the end of 2006, a total of 8,563 people (5,052) were in the ing Development Centre for Trade and Commerce), which aims
employ of SOK Corporation, of whom 761 (8.9%) worked within at furthering commercial training to be able to respond to the
SOK and 7,802 (91.1%) were employed by subsidiaries. Alto- growing need for a labour force. The S Group is an active member
gether 1,282 people (15.0%) worked abroad. of the network.
The number of SOK Corporation staff rose by 3,511 people Two field training groups were recruited during the financial
(69.5%) on the previous year due to several company acquisi- year. Twenty-three trainees were recruited for the university-level
tions, such as the transfer to SOK Corporation of Inex Partners commercial field training group that started out in February 2006
Oy and the spa business operations of Holiday Club Resorts Oy and twenty-two trainees started in the polytechnic group launched
in Finland. in April.
The personnel structures shown here were calculated based on Field training groups are the S Group’s approach to ensuring
people in active employment relationships in Finland. The number sufficient future key resources for managerial and specialist tasks in
of staff does not include people on unpaid leave or holiday or different sectors and units.
people who are called in to work when necessary.
Excellence
Compensation and reward Good leadership and management ensure profitable operations,
The idea behind comprehensive reward is that within the organisa- where social relations between personnel groups work with ease.
tions, the focus is on the co-ordination of work and development Leadership and management are rooted in profitable activities,
while ensuring that financial reward is in the right ratio to the by people and with people.
work accomplished and profit achieved. Reward practices were

AGE BREAKDOWN DISTRIBUTION OF MALE AND FEMALE EMPLOYEES

41
Vastuullisuus

42
 Accountability

The Jollas Institute is where supervisors receive training; numerous that serve a preventative purpose and promote occupational well-
supervisors from SOK Corporation and from across the S Group being. Over the years, the emphasis of occupational healthcare has
attended its courses. The courses on offer ranged from day-to-day shifted from treating accidents and illnesses and preventative care
supervisor work to management in the future. An extensive course to promoting and sustaining health and well-being.
was also arranged for the S Group’s senior management under the The results of the annual workplace survey conducted among
theme The Success of the S Group in the 2010s. Themes included SOK Corporation’s personnel were for the most part relatively
changes in the operational environment, strategic thinking, suc- positive. Staff are satisfied with their jobs, they cope well in their
cessful management in the 2010s and increasing internationalisa- work and they are able to put their competence to good use. The
tion. The course is continuing in 2007. atmosphere in the workplace is good and they are satisfied with
the way in which equality is achieved. However, staff expressed the
Well-being at work wish for improvements in the way work is organised, more effec-
In 2006, the principles of the S Group’s job well-being activities tive co-operation and flow of information.
were worked out. These principles aim at highlighting the impor-
tance of developing job well-being and the various forms it can Training and development
take as part of the S Group’s management culture and day-to-day The continual development of personnel ensures that SOK
supervisor work. Applying the principles in practice and incorpo- Corporation’s staff are equipped with adequate tools to give them
rating them in training courses will get underway in 2007. the competence to do their work both now and in the future. The
The background to the principles is the concept of job well-be- Jollas Institute provides the majority of training courses within the
ing as a changing phenomenon, which requires the constant atten- S Group.
tion of management and supervisors. Above all, a constructive ap- As an outcome of the expansion of the retail group, the Jollas
proach to working generates job well-being. The clear organisation Institute enjoyed a brisk and eventful year. The Institute chalked
of work and the delineation of responsibilities are the cornerstones up around 1,650 training days (15 per cent more than in 2005),
for experiencing that work is controllable and that objectives are which were attended by about 18,200 students. Long-term
achievable. The Jollas Institute is responsible for providing courses supervisor training programmes continued to gain in popularity.
along the theme of personnel and supervisor job well-being. During the financial year, the Institute arranged courses for senior
Appraisal discussions within the S Group constitute an essential and financial management and launched workplace instructor
aspect of the management system. Engaging in appraisal discus- training funded by the European Social Fund, and an HR course
sions is the agreed approach to supporting and developing supervi- to support the implementation of the S Group’s personnel strategy.
sor work and personnel. Appraisal discussions mutually delineate Online training and courses to promote the use of information
responsibilities, expectations and objectives as well as the factors systems were also taken a stage further.
relating to reward. Within the S Group, particular attention has The S Group’s Shopkeeper Days in September were the single
been focused on appraisal discussions, especially their quality. major event arranged at the Jollas Institute. The gathering was at-
Occupational health, which is primarily arranged through tended by nearly 1,500 S Group supervisors.
SOK’s own and joint company occupational health units, serves as A key aspect of co-ordinating personnel resources is to ensure
SOK Corporation’s key support function in promoting well-be- that correct and adequate resources are in the right place at the
ing at work. Activities comprise general practitioner care, with the right time. This calls for meticulous expertise on the part of the
emphasis on occupational health, alongside Job Verve activities people who are responsible for personnel affairs as well as supervi-

PERMANENT EMPLOYEES / TEMPORARY EMPLOYEES FULL-TIME EMPLOYEES / PART-TIME EMPLOYEES

43
Accountability

sors. Autumn 2006 saw the start-up of HR courses on themes out at the Sokos hotels owned by the regional cooperative enter-
related to the new personnel strategy, which aim to update com- prises.
petence in the S Group’s HR network and the outlook in order to Safety Passport courses were arranged in collaboration with
respond to future challenges. the Red Cross, the Jollas Institute, SOK’s Corporate Security and
Work on developing the electronic tools to support supervisors Risk Management unit and the fire and police authorities. These
in handling personnel affairs proceeded a stage further during the courses aim at enhancing the safety of customers and personnel
financial year. Piloting the new HR system got underway in the at the S Group’s locations. By the end of 2006, altogether 4,325
autumn, after which the introduction of the system continued S Group employees had completed the Safety Passport training.
according to schedule. SOK is to get the system up and running as Other security training was arranged as part of the Jollas Institute’s
from the beginning of 2007. The HR system serves as a person- basic and store opening courses as well as on security courses
nel data bank that supplies supervisors with up-to-the-minute arranged at the initiative of staff within the organisation. A total
information and facilitates performing basic personnel procedures of 3,358 students had completed the E-jollas online induction
electronically. security module by the end of the year. During the report year, the
The system that supports work shift planning was further Corporate Security and Risk Management unit arranged security
developed during the financial year, and courses on themes such as training totalling 329 hours for S Group staff.
“Supervisor Competence in Employment Relations” were arranged SOK’s Corporate Security and Risk Management unit and the
in regional cooperative enterprises and SOK Corporation units insurer Tapiola Group commissioned an inspection of the security
with particular attention focused on supervisor competence with levels at 140 of the S Group’s locations.
regard to employment relations. The S Group continued co-operation with G4S Security
Services Oy (Falck Security Oy) by pilot-testing a bonus partner
Corporate security and risk management agreement on home protection and security systems at Coopera-
Integrated risk management supports the implementation of the S tive Society Keskimaa.
Group’s business concept. The aim is to safeguard the achievement As part of the Safety-Protected campaign organised by the Fed-
of objectives and continuity of operations. Competitiveness is eration of Finnish Commerce, locations were being reviewed with
improved through systematic and cost-effective risk management. the aim of stepping up their security level. By the end of the year,
Risk management assists in providing customers with correctly- 365 locations had been approved.
priced products and services that are safe and of high-quality.
Continuous efforts are devoted to making the locations safe and Outlook for the future
comfortable. The systematic implementation of the personnel strategy is set to
The S Group pays particular attention to the occupational safety continue in 2007. Development projects include formulating the
and well-being of its own and its stakeholders’ personnel. This personnel policy that applies across SOK Corporation, processing
is done by identifying the risks in the work environment and by HR affairs related to internationalisation, and putting co-operation
implementing the agreed risk management measures. Risk man- with educational establishments on a firmer footing.
agement is made a part of daily business through ensuring that New courses at the Jollas Institute will include the For You, Our
everyone working with the S Group recognises his or her part in it. Customer 2007 programme, which applies to all the S Group’s
The S Group identifies and prevents risks jeopardising its cus- personnel and focuses on putting the Your Own Store vision into
tomers’ or its personnel’s health as thoroughly as possible. practice. The beginning of the year also heralds the start of training
The company has prepared for unexpected situations threaten- courses in readiness for the S Bank as well as courses in prepara-
ing its operations by developing crisis management and making tion for the adoption of the HR information system. A key aspect
plans for ensuring the continuity of operations. of the courses in 2007 is to meet the mounting need for S Group
Developing integrated risk management was continued in supervisors by providing a varied supervisor training programme.
2006. In December 2006, SOK’s Executive Board approved a risk
management policy and strategy for the S Group. Identifying stra-
tegic business risks and defining the measures for managing them
were made part of the SOK Corporation’s management process.
Identifying and analysing operational risks as well as defining the
measures for managing them were carried out in connection with
the bank project.
Crisis management and crisis communications training was
arranged for the managers of the regional cooperative enterprises
in order to secure unhindered continuity of business operations.
In addition, contingency plans were drawn up to prepare for bird
flu and a possible pandemic, and procedures related to them were
rehearsed. Data security reviews of the key suppliers of goods and
services were continued and drawing up data system continuity
and recovery plans were started. Data security audits were carried

44
 Accountability

Environment tions has taken on new dimensions with each passing year. SOK
is actively involved in pioneering programmes in the property and
Fundamentals construction field. The PromisE system, which is used for classify-
This report focuses on SOK Corporation’s environmental manage- ing and comparing the environmental characteristics of properties,
ment, the environmental competence of employees, real estate, has been in pilot use since 2002. The year 2005 saw the launch of
energy and water consumption, sourcing and logistics, ecolabelling the Kiinteistö-PromisE Prisma Project, which is examining for the
and Fair Trade products, packaging, waste management, recycling first time the environmental characteristics and energy efficiency
services for customers, environmental communications and co- at all the Prisma hypermarkets; the work will reach conclusion in
operation with interest groups. 2007.
Detailed information about the environment will be presented Developer construction across the S Group has progressively
in the S Group’s Accountability Report that is to be published in adopted technical environmental targets that serve as a design
late spring 2007 on the S Group’s website at www.s-kanava.net/ac- tool in planning. Targets are defined for a construction site, the
countability. building itself and for the operations planned for that building.
Scheduled to open for business in autumn 2007, Suur-Seutu Co-
Environmental management operative Society SSO’s Prisma in Lohja is a pilot for supermarket
The most important objective of environmental management construction.
is to apply in practice the S Group’s environmental policy. An Radisson SAS Seaside Hotel was the first hotel in Helsinki to
operational model for the S Group’s environmental compliance, receive the Nordic Swan ecolabel in recognition of good environ-
which serves to implement value chain management approved mental management. In Finland, the Swan ecolabel is granted
across the S Group, was devised for this purpose in 2006. From by SFS-Ympäristömerkintä. There are 122 hotels with the Swan
the perspective of management across the entire value chain, chain ecolabel in the Nordic countries, five of them in Finland. A hotel
management plays a key role in incorporating practical aspects with Swan ecolabelling operates systematically in order to reduce
into business processes. The steering group appointed by SOK’s environmental loading.
Executive Board is responsible for the overall development of
environmental compliance. Energy and water consumption
Knowledge-based management, which made strides in 2006, is Extending joint electricity procurement, or bulk electricity, for
closely linked to the operational model. Indicators and com- use by the entire retail group calls for monitoring consumption
parative data are indispensable as the basis for decision making. readings at individual sites. Providing information on electricity
Consequently, the S Group employs environmental indicators to consumption on a centralised basis directly from the S Group’s
monitor environmental performance in the field. Development locations serves not only joint procurement objectives but also the
work on environmental auditing concentrated on the introduction use and maintenance of real estate and the requirements of the en-
of indicators of environmental responsibility and integrated audit- ergy efficiency directive. Bulk electricity accounts for approximate-
ing rules as well as on automating access to data from numerous ly half the S Group’s annual electricity consumption. The S Group
source systems. uses around one per cent of Finland’s entire annual electricity.
As part of the renovation carried out on Sokos Hotel Ilves in
Environmental competence of employees Tampere, all the hotel rooms were fitted out with their own cool-
Increasing and maintaining the environmental skills of personnel ing systems, which utilise the Tammerkoski rapids that flow past
is an important part of day-to-day environmental work. Informa- the hotel.
tion was supplied to employees through training, communications, The S Group’s first natural gas distribution station opened in
reporting and pilot projects. Training in environmental compli- conjunction with the ABC Amiraali service station store in Kotka
ance is carried out in co-operation between the Jollas Institute and in June 2006.
the S Group’s units. The Jollas Institute includes environmental The S Group held its first energy seminar in October 2006. The
compliance in store opening training, management training days, seminar dealt extensively with topics relating to energy production,
commercial field training and in vocational degrees in sales and procurement and usage. Emphasis was placed on measures con-
service station store sales. cerning energy efficiency as part of cost effectiveness management.
The units have also carried out their own internal training Drawing up the S Group’s energy policy in 2007 rose to the fore.
with, for instance, goods suppliers and other interest groups. The SOK is involved in the project to draw up guidelines for the
environmental message is put across to employees in the S Group’s internal control of energy and waste launched by the Finnish Food
Ässä professional magazine and on the Internet. Trade magazines, Marketing Association. The work will reach completion by the end
guidebooks, brochures, concepts, fairs and working groups also of 2007.
serve as important sources of information.
Sourcing and logistics
Real estate Finland is a sparsely populated country with long distances
The prominence given to environmental compliance at new build- between towns and cities; it is both economically and environ-
ing and renovation sites set up by the S Group’s real-estate arm as mentally sound to deliver goods to consumers in as rational a
well as in the development of maintenance and servicing func- manner as possible, avoiding unnecessary transport, packaging and

45
Accountability

unloading. Co-operation between trade and industry enhances from the obligations arising from the Animal By-products regula-
information management and provides improved opportunities for tion. The EU directive on batteries and accumulators and waste
planning logistics functions. batteries and accumulators was approved in autumn 2006; it
Over half of the grocery products sold by the S Group’s chains obliges stores to accept used batteries and accumulators returned
are transported to stores by means of the sourcing, warehousing by customers. A government decree based on the directive will
and distribution services provided by Inex Partners Oy. Environ- enter into force in autumn 2008.
mental co-operation between the S Group and Inex Partners is an
important aspect of the entire logistics chain. Recycling services for customers
Intrade Partners Oy acts as the S Group chains’ procurement The bottle and can recycling system is the best-known recy-
and logistics company for consumer goods. In the financial year, cling service for customers. Collection is mainly handled using
78 per cent of the consumer goods sourced by Intrade Partners for automated bottle and can collection machines. Over 95 per cent
the S Group were delivered via centralised distribution. of glass and plastic deposit bottles and more than 90 per cent of
Packaging requirements stress the need to avoid excess packag- aluminium cans are returned. The S Group has also made provi-
ing and the importance of using packaging materials that can be sions in preparation for the abolishment of the environmental tax
recycled or utilised in other ways. Packaging materials and their on beverage containers. This will call for investments to modify
recyclability must be marked in accordance with EU practices. automated bottle and can collection machines. The environmental
Products that place a lower burden on the environment must tax on disposable plastic bottles and metal cans will be abolished at
feature a nationally or internationally approved ecolabel. The com- the start of 2008. The S Group’s other recycling services are related
pany’s instructions specify environmental and ethical requirements to recyclable waste collection points, end-of-life vehicle and tyre
for goods suppliers. These guidelines are taken into consideration recycling.
when evaluating a new supplier.
The S Group’s procurement companies are responsible for en- Environmental communications
suring that purchased goods and the information provided about Environmental information targeted at interest groups has been
them comply with environmental legislation and requirements. disseminated through the environmental pages of SOK Corpora-
Both Inex Partners Oy and Intrade Partners Oy are involved in the tion’s Annual Report and on the S Group’s website through the S
Business Social Compliance Initiative (BSCI) co-operation model Group’s Accountability Report. The Yhteishyvä magazine’s website
that seeks to streamline and standardise monitoring the working is also a valuable source of current environmental information for
conditions and social responsibility of goods suppliers. In addition, consumers.
the procurement companies are both active members of the Re- The Yhteishyvä magazine has also been a channel for conveying
sponsible Importer network, which is co-ordinated by the Central the environmental message to households. The regional coopera-
Chamber of Commerce. tive enterprises have disseminated environmental information
through operational reviews, accountability reports, brochures,
Ecolabelling and Fair Trade products ecological experts, bulletin boards and various events. The S Group’s
At the end of 2006, supermarket stores stocked more than 600 internal communications tools are the Ässä magazine and the
organic products and 31 Fair Trade products. S Intranet.
Ecolabelled non-food consumer goods comprise products
marked with the Nordic Swan (189), the EU Flower (16) and the Co-operation with interest groups
FSC Forest Certificate (25). In 2006, around 400 products in the SOK has continued actively to contribute to the dialogue relating
textile assortments bore the “Confidence in Textiles: tested for to international environmental co-operation within Euro Coop’s
harmful substances” product safety label in accordance with the Environmental Working Group. Central themes have been mat-
Oeko-Tex Standard 100. It has been common practice for building ters concerning the EU chemicals legislation, Fair Trade, organic
materials to display the relevant environmental specifications. production and energy efficiency. SOK has actively headed the
Fair Trade products have featured in supermarket store assort- Environmental Committee of the Federation of Finnish Com-
ments since 1999. Sales of Fair Trade products have soared in the merce and it has participated in the work of both the Logistics
S Group’s supermarket trade; the S Group was a leading trader in and Purchasing Division of the Finnish Food Marketing Associa-
Fair Trade products in Finland in 2006. tion as well as the environmental committee of the Confederation
The Fair Trade Award 2006 was granted to the ABC chain of of Finnish Industries EK. SOK has also been represented in the
service station stores. In October 2006, the chain decided to go following working groups: the Ministry of the Environment’s
over to serving Fair Trade coffee in all of its cafés and restaurants. Co-operation Group of the Waste Branch, the Ministry of Trade
As an outcome of this decision, the consumption of Fair Trade and Industry’s environmental labelling steering group, the steering
coffee in Finland is expected to double in 2007. group for the Finnish Oil and Gas Federation’s SOILI soil-reme-
diation programme and Finfood’s organic food strategy working
Waste management group.
Changes in waste disposal legislation mean stricter local regula-
tions and therefore new challenges for the S Group. During last
year, the S Group’s grocery sector prepared to assess the impacts

46
Vastuullisuus

47
Accountability

Sponsorship and international contacts and thus gain additional resources for helping at the local level.
The patron project of the co-operation between the S Group and
Sponsorship the Finnish Red Cross is drumming up membership. The number
Sponsorship and other co-operation with interest groups are con- of Finnish Red Cross members has risen steadily throughout the
ducted in line with a sponsorship strategy throughout SOK Cor- period of co-operation. Moreover, Finnish Red Cross products
poration and the S Group. The strategy ensures that investments are sold in the S Group’s chains. The agreement includes extensive
are allocated to appropriate targets in a co-ordinated manner. It local co-operation between Red Cross districts and local branches
is important that sponsorship investments are made in line with and the S Group’s regional cooperative enterprises.
objectives. Sponsorship is one of the ways in which the S Group The S Group’s nationwide co-operation with the Mannerheim
seeks to build and maintain its image as a responsible actor. The League for Child Welfare got underway in 2000. Prior to this,
aim is to allocate investments to targets that support the S Group’s the regional cooperative enterprises had already co-operated with
values, that in one way or another touch on the life of each and local associations within the framework of projects such as the ”A
every member and produce distinct benefits for members. Good Start to Schooldays” campaign. In honour of SOK’s centen-
The priorities of SOK’s sponsorship and financial support have nial, the S Group presented the Mannerheim League for Child
shifted towards endorsing children’s and young people’s sports Welfare with EUR 200,000 in January 2004. The sum covers the
activities. One such example are the S Group’s Freestyle schools, years 2004-2006 and it has been allocated for the development of
which are gaining in popularity from year to year. Youngsters have an Internet service to support parents and for arranging regional
risen through the ranks of the Freestyle schools right up to the ”Parents Together” events. These events, which have achieved
national team. The investments traditionally made in top sports tremendous popularity, have been arranged in the regional coop-
have in turn been reduced. The scope of cultural sponsorship has erative enterprises’ areas up and down the country and they have
also widened to embrace different target groups. Overall, there has covered a number of themes relating to parenthood. The events
been a considerable shift across the S Group to giving prominence have been well attended and, due to pressure of demand, more of
to activities that support children and young people. these gatherings have been arranged than was originally planned.
SOK Corporation’s sponsorship co-operation in 2006 strongly They are to continue through spring 2007.
emphasised social responsibility and targets suited to families with
children, as directed by the sponsorship strategy. The major agree- The Finnish Cooperative Union, SOKL r.y.
ments concluded with the Finnish Red Cross and the Manner- The Executive Board of the Finnish Cooperative Union, SOKL
heim League for Child Welfare serve as good illustrations of our r.y., focuses its activities on developing and examining the mission,
sponsorship policies. Co-operation also continued with the Finn- values and vision of the S Group. The Board analyses, puts forward
ish Freestyle national team, Raumanmeri Midsummer Festival, and presents policies and views related to the implementation of
Svenska Teatern, the Helsinki Festival, Circus Finlandia, Art Cen- cooperative principles and values to the various decision-making
tre Salmela, Pori Jazz, Moominworld and the Kuhmo Chamber bodies of the S Group and it oversees their practical implementa-
Music Festival. The Espoo Museum of Modern Art EMMA, which tion. The Union does not participate in the management and
opened to the public in October and surpassed all its goals set for decision making of business operations.
numbers of visitors, came on board as a new partner in 2006. At the end of 2005, SOKL’s Executive Board launched a project
Circus Finlandia, our partner of many years, celebrated its 30th that seeks to clarify SOKL’s position, role and tasks, particularly
anniversary. More than 160,000 members attended the celebration with regard to decision-making across the S Group. The work
shows. culminated in the completion of SOKL’s service strategy, which
Besides focused Group-wide activities, regional cooperative was approved by the Board in February 2007.
enterprises have actively engaged in co-operation with local organi- SOKL is the S Group’s representative in international coopera-
sations, associations and events. tive activities, especially in the International Cooperative Alliance
(ICA) and Euro Coop.
The Finnish Red Cross and the Mannerheim SOK’s Strategic Development unit is responsible for the practi-
League for Child Welfare – a true partnership cal activities of SOKL. The Union has no clerical staff of its own.
The S Group is continuing its programme of co-operation with the The members of the Union are all of the S Group’s cooperative
Finnish Red Cross and the Mannerheim League for Child Welfare. enterprises and SOK.
The national agreements cover nationwide co-operation and the SOKL’s Executive Board comprised representatives of regional
regional cooperative enterprises co-operate with local organisa- cooperatives with Jukka Huiskonen, LL.M., Senior Judge, as
tions. chairman, Raili Palmi, office manager, as vice chairman as well as
The S Group has brought to the table its network of regional members Ulla Karvo, LL.M., Simo Kutinlahti, farmer, Professor
cooperative enterprises, grocery markets and department stores, Kauko Mikkonen, Jorma Niiniaho, Titular Commercial Counsel-
hotels and restaurants, service station stores, car dealerships and lor, Leena Pelkonen, Chief Financial Officer, Jorma Sieviläinen,
hardware and agricultural outlets. Through its co-operation, the Managing Director, Hanna Valtari, Training Director, and
S Group aims to bring the Red Cross into closer touch with its Juha Vuorenhela, LL.M., as well as SOK representatives Jorma
member families and its personnel. This provides the opportunity Koistinen, Director of Strategic Development and Kari Neilimo,
for the Finnish Red Cross to reach out to over 2 million Finns Chairman and CEO.

48
 Accountability

National-level training for management personnel took place The name of the new organisation is Cooperatives Europe and its
in co-operation with the Jollas Institute. A good 50 participants activities were ratified at the organisation’s General Meeting held
from cooperative enterprises who are members of the Supervisory in Manchester in November 2006. The organisation’s headquarters
Board or Executive Board attended the management training are in Brussels.
programmes Cooperatives Europe is the largest organisation in Europe with
Elections of representatives were arranged in three cooperative members in 37 countries. It represents 267,000 cooperative busi-
enterprises. Voter turnout averaged about 18 per cent; the cus- nesses. It has 163 million citizens as members and it provides jobs
tomer-owners of Cooperative Society Keula were the most active. for 5.4 million employees.
The cooperative enterprises received assistance in conducting the Cooperatives Europe’s task is to promote and strengthen the
elections, and all of them arranged a training and induction event position of cooperative enterprises, to create a strong cooperative
for the new representatives. identity and image in Brussels as well as to increase membership
In response to the plans to expand the S Group’s finance ser- throughout the European region.
vices, the local cooperative enterprises that belong to the customer- Founded in 1957, the goal of Euro Coop’s activities is to sustain
owner system and which are engaged in building society activities and nurture the intensity and values of consumer cooperative
modified the regulations governing their building society activities activities in a changing Europe. Actively functioning work-
at their cooperative meetings held in the autumn. The regional ing groups, who work in close association with the European
cooperative enterprises carried out corresponding amendments in Commission, are one of the most important tools for fulfilling
2005. As in previous years, the cooperative enterprises received this goal. The working groups get to grips with the up-to-the-
assistance in matters connected with the amendments to Statutes minute changes that have a bearing on consumers and consumer
and Trade Register filings. Furthermore, clerical staff from the Stra- cooperatives. Working groups have been set up for product safety,
tegic Development unit took part in a variety of sessions that were foodstuffs safety and environmental matters. One of Euro Coop’s
arranged by the cooperative enterprises for administrative staff and primary objectives is to influence legislation at EU level to ensure
stakeholders. that the interests of consumers and consumer cooperatives are
safeguarded and taken into due consideration when new legislation
Cooperative Advisory Board is being drafted.
The S Group is a party to the Cooperative Advisory Board The consumer cooperative enterprises of 17 European countries
established by cooperative companies. Its purpose is to act as the are members of Euro Coop. They represent 3,200 cooperative
body of co-operation for Finnish cooperative organisations and societies and their 22 million members.
companies. The Advisory Board acts as the overall lobbyist and Euro Coop has EU status, and it carries significant prestige as a
discussion forum for cooperative activities, and it co-ordinates and body that issues statements and exercises influence in Brussels.
implements projects that improve the common conditions for the Anne Santamäki, SOK’s director for contacts with organisa-
activities of cooperative companies. In 2006, the Board’s activities tions, was elected as chairman of Euro Coop at its General Meet-
focused on issues related to researching cooperative activities. ing in Brussels on 1 June 2006.
The members of the Advisory Board are the Pellervo Confedera-
tion of Finnish Cooperatives, the Cooperative Tradeka Corpora- www.ica.coop
tion, the Finnish Cooperative Union, SOKL r.y., and the OP Bank www.eurocoop.org
Group Central Cooperative. Jukka Huiskonen, Senior Judge, Otto www.coopseurope.coop
Mikkonen, Titular Industrial Counsellor, Managing Director,
and Professor Kauko Mikkonen serve on the Advisory Board as
representatives of the S Group.

International contacts
SOK Corporation’s contacts with international cooperative
organisations are handled in the name of SOKL r.y., the Finnish
Cooperative Union. The Union is a member of the International
Cooperative Alliance (ICA) and Euro Coop, a Brussels-based
lobby organisation for consumer cooperatives.
The ICA is an impartial independent organisation, which brings
together, represents and serves its member cooperatives throughout
the world. ICA has 223 member societies in 89 countries and the
member societies have a total membership of over 800 million.
It is the world’s second largest such body immediately after the
United Nations.
ICA’s European regional organisation has reinforced its opera-
tions by combining its resources with the Coordination Commit-
tee of European Cooperative Associations (CCACE).

49
Executive Board Report on Operations

Retail operating environment in 2006 The European Central Bank continued raising the main lending
rate last year. A move was made from a stimulatory level of interest
The global economy has grown rapidly for four straight years. rates to a neutral 3.5 per cent level by the end of the year. A slight
Total output has increased at an annual rate of 4–5 per cent. In the further rise in rates is expected during the current year. Interest
United States, growth remained at the previous year’s level. Asia’s rate hikes are set to end some time this year and the level of inter-
emerging economies, led by China, have nevertheless become the est rates will probably fall next year. Although interest rates are still
real engine of global economic growth. The robust growth of the relatively low compared with the last decade, the change is fairly
Chinese economy will spur the expansion of the world’s economy large for households, who have got used to the exceptionally low
over the next few years as well. level of interest rates prevailing during the first half of this decade.
In the eurozone, growth last year was markedly better than the However, the level of interest rates does not stand in the way of
previous year and also beat expectations. There was strong growth Finland’s economic growth.
in Finland’s nearby areas last year. Of the Baltic countries, Estonia According to advance information released by Statistics Finland,
and Latvia reported growth of over ten per cent, and Lithuania too the value of retail sales, excluding the automotive trade, grew by
reached growth of nearly eight per cent. The Russian economy has 5.3 per cent in 2006, increasing at a stronger pace than a year ago.
grown by 6–7 per cent in 2006. Ongoing growth in these nearby Growth in automotive sales by the end of November was 8.2 per
areas also offers scope for the Finnish economy to expand. cent. Nonetheless, 1.7 per cent fewer new cars were registered than
Finland’s gross domestic product showed exceptionally buoyant a year earlier. The good momentum of the economy was reflected
growth last year, up by over five per cent. To be sure, part of the by the strong growth in all segments of the retail trade, except for
increase stems from the previous year’s comparative figures, which sales of drugs and photographic supplies. The differences in growth
were weakened by the stoppage of work in the paper industry. The from segment to segment were also smaller than previously. The
very high rate of growth is also attributable in part to the reformed fastest growth was seen, just as last year, in sales of home appli-
method of calculation used in the System of National Accounts. ances and consumer electronics, where sales were up 12.5 per
Yet even considering these factors, Finland’s growth is still faster cent in value by the end of October. The price level in the sector
than the average in the eurozone. The stronger-than-forecast continued to decline, and in volume terms, sales growth was a
growth was fuelled by higher exports, increased investments and whopping 18.0 per cent. In the hardware trade, prices were on an
also the good trend in private consumption. ascending curve, and the value of sales increased by 8.0 per cent,
Consumer confidence was quite firm all year long. In the early with volume growth coming in at 3.1 per cent. Grocery sales by
spring 2006, news of large redundancies weakened confidence the member companies of the Finnish Food Marketing Association
in the direction of the Finnish economy and at the same time increased by 4.1 per cent last year. According to Statistics Finland,
jolted expectations of receding unemployment. The good trend in the grocery trade grew by 5.3 per cent by the end of November.
employment nonetheless quickly restored consumer confidence. Statistics Finland reported that department stores registered sales
Consumer sentiment underwent a change in regard to spending. growth of over five per cent in the same period. The exception-
Towards the end of the year, saving was felt to be clearly more ally warm weather late in the year hampered sales in December,
advantageous than making a purchase or taking out a loan. In especially for apparel. Department stores boasted full-year growth
the early part of the year, saving was the least favoured of these of 4.7 per cent, according to the Finnish Food Marketing Associa-
alternatives. The change in the attitude to spending did not, how- tion.
ever, feed through into consumption intensions. Major projected Total demand in the agricultural trade remained at the EUR 1.9
outlays remained for the most part above the long-term average. billion level of previous years. The grain harvest was 3.8 billion
Consumer confidence and consumption intensions created a good kilos, down seven per cent on the previous year owing to the dry
foundation for growth in the retail trade in 2006. growth season. Total unit demand in tractor sales declined by
Consumer prices rose by 1.6 per cent. The biggest rise in the seven per cent.
price level came from the higher cost of housing and related items, The number of overnight stays at hotels in Finland reached 13.5
which was due to a number of factors including higher mortgage million by the end of November, up 5.7 per cent. The hotel oc-
interest in line with the general level of interest rates and a further cupancy ratio rose by 2.4 per centage points to 52.1 per cent. Sales
rise in house prices. A rise in the price of electricity and rent by licensed restaurants increased by about five per cent by the end
increases also affected general housing costs. Food prices, after a of September, registering a marked increase in meal sales.
long period of declining prices, headed upwards slightly in 2006. The number of people employed in the retail trade remained at
The rise in consumer prices was damped most by the cheaper price the previous year’s level during the first three quarters of the year.
of consumer electronics, computers, clothing and reimbursable In the hospitality sector, employment improved somewhat. In
prescription drugs compared with a year ago. both the hotel and restaurant segment, the wage bill rose by about
five per cent.

50
 Financial Statements

Changes in the Group structure the Sokos Hotel Vaakuna business in Rovaniemi to Cooperative
Society Arina.
Changes during the financial year In April, SOK sold to Kemira GrowHow Oyj a 19 per cent
At the beginning of 2006, SOK purchased all the shares in stake in Hankkija-Maatalous Oy. Following the transaction, SOK’s
Suomen Spar Oyj that were owned by Axfood AB along with other holding in Hankkija-Maatalous Oy is 81 per cent. Hankkija-
shares, whereby SOK’s holding of Suomen Spar shares and the vot- Maatalous Oy’s subsidiary Agribalt Oy was dissolved in August.
ing rights conferred by all the shares rose to over 90 per cent. The company’s operations had ended.
In January SOK’s subsidiary Maan Auto Oy purchased the A number of real-estate deals were completed in 2006. In Janu-
entire shares outstanding in the Ford dealerships Auto-Kivitila ary, SOK sold the shares in Kiinteistö Oy Imatran Koskenhelmi,
Oy and Auto-Kivitila Metro Oy. During 2006, Maan Auto and which is located in Imatra, to HS-Välitys Oy. SOK sold the shares
its subsidiaries purchased a number of Ford dealerships: those of in Kiinteistö Oy Tullintori in Tampere to Citycon Oyj in February.
Stockmann Auto Oy Ab in Espoo and Turku, the dealerships of In March, SOK sold the entire shares outstanding in the real-estate
Etelä-Suomen Autotalo Oy and Etelä-Suomen Autoleasing Oy company Kiinteistö Oy Hämeenlinnan Paroistentie to Cooperative
in the Päijät-Häme economic area and those of Vaunula Oy in Society Hämeenmaa. In May, SOK sold the entire shares outstand-
Vantaa. At the beginning of 2006, Automaa Oy opened a Peugeot ing in Kiinteistö Oy Savonlinnan City to Cooperative Society
outlet in Helsinki in the former premises of Laakkosen Autotalo, Suur-Savo. In August, Kiinteistö Oy Turun Brahenkatu 8 and
and the Lahti outlet of Hämeen Leijona Auto Oy was transferred Kiinteistö Oy Taikarumpu merged into SOK. In December, SOK
to Auto-Kivitila in September through a sale of business opera- sold the shares in the company’s Kiinteistö Oy Päiväläisentie 1–6,
tions. At the end of 2006, Hämeen Leijona Auto Oy merged into which it had founded (the property was purchased from Veljekset
Automaa Oy, and Auto-Kivitila Metro Oy merged into Auto- Laakkonen at the beginning of the year and served as a car dealer-
Kivitila Oy. In addition, in April, SOK purchased a ten per cent ship for the Corporation) and Kiinteistö Oy Peltokuumolantie 4
minority stake in AS Kommest Auto, which operates in Estonia. to Nordisk Renting Oy. Kiinteistö Oy Peltokuumolantie 4 is the
In January, SOK established the company A/S Prisma Latvija to site of an Agrimarket Centre in Hyvinkää, where Hankkija-Maata-
carry on the Prisma business in Latvia. The first Prisma unit was lous Oy moved its premises in the early part of 2006.
opened in Riga in November in the Domina Shopping Centre, In January 2006, SOK’s subsidiary S-Bank Ltd purchased shares
and another hypermarket will be completed in 2008. In Janu- in S-Crosskey Ab. The company is an associate in which S-Bank
ary, SOK established SOK Holding Oy as well as the real-estate Ltd has a 40 per cent holding. The company’s operations are con-
company Kiinteistö Oy Tampereen Tornihotelli. In June, SOK nected with the arranging of financing services provided by S-Bank
Holding Oy and SOK founded Sokos Hotels St. Petersburg Ltd for customer-owners. S-Bank Ltd will start operations at the
LLC to carry on hotel operations in St Petersburg. Sokos Hotel end of 2007.
Olympic Garden, which is to be built along Moskovsky Prospect, On 12 December 2006, SOK announced it was purchasing
will be completed in autumn 2007, and a second hotel to be sited from ExxonMobil Corporation the shares in oy Esso ab, the corpo-
in the heart of town, Sokos Hotel Vasilyevsky on Vasily Island will ration’s fuel sales subsidiary in Finland. The Finnish Competition
be opened towards the end of 2007 or the beginning of 2008. The Authority approved the transaction arrangements for oy Esso
spa hotel that is to be completed stage by stage in June-September ab on 17 January 2007. The decisions apply both to the sale of
in accordance with the agreement on the purchase of hotel, spa oy Esso ab shares to SOK and to the follow-up deal relating to
and restaurant operations that was made with Holiday Club Re- the shares, as agreed between SOK and St1 Holding Oy on 18
sorts Oy in January 2007 will be the third of the S Group’s hotel December 2006. As part of the transaction, Esso’s 44 service sta-
projects in St Petersburg. tions and unmanned stations will be transferred to the S Group’s
In February, SOK purchased from Tradeka Oy all the shares it regional cooperative enterprises, and oy Esso ab’s fuel procurement
owned in Inex Partners Oy. After the deal closed, Inex Partners operations will be sold to SOK’s subsidiary North European Oil
Oy became a wholly-owned subsidiary of SOK. As part of the Trade Oy (NEOT).
deal, the Inex Partners Oy subsidiaries Meira Nova Oy and the
Canelokiinteistöt Oy property operations will also become a part Changes after the close of the report period
of SOK Corporation. SOK sold the business operations of Turun Sokos Oy in Turku
SOK’s subsidiary Sokotel Oy purchased from Holiday Club and the shares in the real-estate company Kiinteistö Oy Turun
Finland Oy in March the businesses of six Holiday Club spa hotels Valtakulma to Turku Cooperative Society on 1 January 2007.
(Turun Caribia, Vuokatin Katinkulta, Kuusamon Tropiikki, Oulun In January, Sokos Hotels St. Petersburg LLC purchased the busi-
Eeden, Tampereen Kylpylä and Saariselkä). The Sokotel spas will ness operations of the Holiday St. Petersburg Hotel that is to be
continue to operate as part of the Holiday Club brand and form a built in St Petersburg from Holiday Club Resorts Oy. The transac-
chain named Holiday Club Spa Hotels. In June, Sokotel Oy sold tion relates to hotel, spa and restaurant operations. The spa hotel,

51
Financial Statements

which is to be completed stage by stage in June-September 2007 increased and was clearly better than the average for the country as
will be the S Group’s third hotel project in St Petersburg. a whole. AS Sokotel, which carries on the Sokos Hotel Viru hotel
On 19 January 2007, SOK’s subsidiary Hankkija-Maatalous and restaurant operations in Tallinn, Estonia, generated net turno-
Oy signed an agreement with Lännen Tehtaat Oyj under which ver of EUR 19.3 million, clearly exceeding both the targets set and
51 per cent of the shares in Suomen Rehu Oy and Avena Nordic the figure realised a year ago. The good trend in net turnover was
Grain Oy will be transferred to Hankkija-Maatalous Oy. The deal attributable to strong restaurant and conference sales and to the
encompasses Suomen Rehu Oy and Avena Nordic Grain Oy with growth in accommodation sales.
their subsidiaries. In addition, as part of the deal it was agreed on Net turnover derived from the automotive trade and accessories
sale and purchase options according to which Lännen Tehtaat Oyj business increased by 22.9 per cent compared with the level in
has the right to elect to sell the remaining 49 per cent of its shares 2005, rising to EUR 424 million. Net turnover generated by the
in Suomen Rehu Oy and Avena Nordic Grain Oy to Hankkija- Maan Auto Group, which operates in Finland, grew substantially
Maatalous Oy after the purchase of the majority stake has been owing to acquisitions, rising to EUR 370 million. Net turnover
completed. Hankkija-Maatalous Oy, in turn, has the right to generated by the Kommest Auto Group, which operates in Estonia
purchase the remaining shares no earlier than 15 months after the and Latvia, was down on the previous year, at EUR 54 million.
completion of the majority stake transaction. Final completion of The market share of Peugeot cars in Finland declined from 5.9 per
the deal calls for approval by the Finnish Competition Authority, cent to 5.5 per cent and the market share of vans fell from 5.1 per
and is expected during spring 2007. cent to 4.1 per cent. The market share of Peugeot cars declined
from 6.0 per cent to 4.3 per cent in the Baltic countries.
Net turnover from the agricultural trade, including hardware
Net turnover
sales, increased by 3.5 per cent. Hankkija-Maatalous Oy had net
SOK Corporation had net turnover of EUR 6,834 million, up turnover in 2006 of EUR 773.7 million, representing growth of
62.3 per cent on the previous year. The growth in net turnover 3.6 per cent on the previous year. Hardware and gardening sales
by EUR 2,625 million was attributable mainly to the purchase of developed favourably in step with store enlargements. Sales of
the shares in Inex Partners Oy, as a consequence of which the Inex grain and agricultural supplies likewise grew. Demand for seed
Group has been consolidated as an SOK subsidiary as from declined owing to the good grain harvest in autumn 2005, and
1 March 2006 (Jan.–Feb. 2006: an SOK associated company). pesticide sales diminished slightly as a result of the dry summer in
International operations accounted for 3.1 per cent of net turno- 2006.
ver, or EUR 213 million. Sourcing consists of the assortment, sourcing and logistics serv-
The supermarket trade includes the Spar Group’s net turnover in ices for groceries and speciality goods carried on by the Inex Group
addition to the net turnover from the supermarket trade in Tallinn along with Intrade Partners Oy’s sourcing and logistics services for
and Latvia. Net turnover from the supermarket trade has been consumer goods. The Inex Group’s net turnover increased by 3.4
increased through the acquisition of Suomen Spar in January. The per cent on the previous year, to EUR 2,097 million, despite the
purpose of acquiring the Spar Group is to develop the S Group’s stage-by-stage removal during the report period of Tradeka Oy’s lo-
operations and competitiveness by strengthening the service net- cations from the scope of Inex Partners Oy’s grocery deliveries. The
work. In line with plans, the acquired business has been transferred growth in the Inex Group’s sales was spurred by the S Group’s mar-
for the most part to the S Group’s regional cooperative enterprises. ket share gains and by increased loyal customer purchases. Intrade
Net turnover for fuel sales by the procurement company North Partners Oy’s net turnover was up 12.3 per cent on the previous
European Oil Trade Oy soared 32.6 per cent on the previous year, year. All the customer chains delivered growth fairly evenly.
and was attributable to the rise in market prices and higher sales EDI invoicing for the cooperative enterprises’ procurement of
by the customer chains. goods increased by EUR 213 million on the previous year, prima-
SOK Corporation ran Sokos operations through the companies rily because of the growth in sales by the cooperative enterprises.
which it owns jointly with the regional cooperative enterprises, EDI invoicing does not comprise intra-group EDI invoicing of
these being located in Espoo, Turku and Raisio. The companies EUR 2,486 million (EUR 956 million in 2005).
had net turnover of EUR 39.0 million, an increase of 7.6 per cent
on the previous year. The trend in net turnover was above budget.
Profit
In 2006, hotels and restaurants within SOK Corporation were
operated by Sokotel Oy in Finland and AS Sokotel in Estonia. SOK Corporation’s profit before extraordinary items and taxes was
SOK Corporation’s hotel business operates under the brands Sokos EUR 29.9 million. The corresponding profit in the previous year
Hotels, Radisson SAS and Holiday Club. At the end of 2006, was EUR 69.0 million. Profit before extraordinary items includes
the company owned 12 Sokos Hotels, 7 Radisson SAS Hotels other operating income, a share of the associated companies’ prof-
and 6 Holiday Club Spa Hotels. The trend in the company’s sales its, write-downs on non-current assets and investments, including
was positive. The occupancy ratio and average room rate rose reversals on them, and the change in obligatory provisions. The de-
compared with a year ago. This meant that the room yield also crease in profit was attributable to lower comparable capital gains

52
 Financial Statements

on fixed assets as well as to the weaker result of certain operating operating profit did not reach the budgeted figure or the level of
companies, especially of the automotive trade, compared with a earnings achieved in 2005.
year ago. The decrease was also due in part to the start-up of new Hankkija-Maatalous Oy’s operating profit from the agricultural
businesses that were acquired. trade came in below both budget and the previous year’s figure,
The Corporation’s return on investment, including wholesale owing mainly to the fall in the tractor and thresher market that has
operations that serve the cooperative enterprises and are part of persisted for several years now.
financing and sourcing operations, was 4.2 per cent (7.6%). The The Inex Group’s operating profit came in ahead of budget and
return on investment from SOK’s ordinary operations was 7.5 the previous year’s figure. The good earnings trend was attributable
per cent (17.0 %). The decrease in the return on investment was to better-than-planned sales growth and to good cost control as
attributable mainly to the growth in total assets in step with invest- well as to systematic development activities. Intrade Partners Oy
ments and other resource allocations and to the weakening in the posted operating profit that was above budget and higher than the
operational result. previous year.
Write-downs of EUR 7.2 million were made on non-current The property business and other service units reported operating
assets. These were primarily write-downs on machinery and equip- profit that was above budget but weaker than a year ago. This was
ment as well as impairment of goodwill. due in particular to the projects connected with preparations for
SOK Corporation’s net financial income and expenses resulted the start-up of the S-Bank as well as other development projects
in a gain of EUR 6.9 million and were up EUR 0.1 million on the for service functions.
year-ago figure. Eliminations had a negative effect on earnings, owing mainly
The supermarket trade includes the supermarkets in Tallinn and to the eliminations of minority interests related to the Hankkija-
those of Suomen Spar Oy. The financial effects of the acquisi- Maatalous Oy shares that were sold. In the previous year, elimina-
tion and ownership of the Spar Group were transferred under tions had a marked positive effect on earnings, largely due to the
agreements to the regional cooperative enterprises that took over unrecorded capital gains within the Group, which were realised
the businesses. SOK will receive interest income on the capital when the fixed assets were sold outside the Group.
invested in carrying out the arrangement. This income is stated in
financial income. The Spar Oy arrangements will have no other
Operations of SOK
impact on SOK Corporation’s profit and loss. The still unpaid
portion of the transfers of operations and other liabilities as well SOK is the parent company of SOK Corporation. In accordance
as the adjustment of SOK Corporation’s earnings for the result of with its Statutes, SOK acts as the central organisation of the S
the Spar Group have been stated as a long-term receivable from Group, promoting and developing the operations of the coopera-
the regional cooperative enterprises. Operating profit generated tive enterprises and other organisations belonging to the S Group
by the supermarket trade was above budget but weaker than the and attending to the management and supervision of the Group’s
previous year, owing to the start-up costs of the new Prisma that overall resources for maximum efficiency, whilst also monitoring
was opened in Latvia. the operations and seeing to the interests of the S Group and its
Thanks to the good growth in operations, operating profit from different constituent organisations.
fuel trade was both considerably above budget and better than SOK is in charge of the S Group’s strategic management. Its
the figure a year ago. The operating profit reported by the Sokos tasks are to provide the S Group’s companies with services related
companies, which are engaged in the department store and special- to chain management, customer-ownership and marketing along
ity trade, weakened compared with the previous year owing to the with general chain and corporate services, including development
price adjustments that were required to cope with the change in activities connected with these services and the S Group’s other op-
the competitive situation. The operating profit posted by Sokotel erations. Other important services for the S Group’s operations are
Oy, which carries on hotel and restaurant business in Finland, was purchasing, rental services and assortment and invoicing services
ahead of budget, but fell slightly short of the previous year’s earn- for goods delivered directly from manufacturers to the chain units.
ings owing to large investments. On a like-for-like basis, profits Via its nationwide and regional subsidiaries, SOK is able to offer
were on a par with the previous year. AS Sokotel, which carries its members a wider spectrum of services in accordance with the
on hotel and restaurant operations in Tallinn, Estonia, generated decisions taken within the S Group. In addition, in the Baltic area
operating profit that exceeded both the target and the previous SOK, via its subsidiaries, operates in the supermarket and automo-
year’s figure. tive trade as well as the hotel business.
The automotive trade and accessories dealer Maan Auto Group SOK had net turnover of EUR 4,284 million, up 69.6 per
reported operating profit that was below budget and weaker than a cent on the previous year. The increase in net turnover was due
year ago. The weak earnings trend was attributable to the generally mainly to the above-mentioned inclusion in SOK’s net turnover
poor sales of both Peugeot and Ford in the Finnish vehicle market. of EDI invoicing by Inex Partners Oy via SOK to the cooperative
In addition, earnings were burdened by large investments in enterprises. When Inex Partners Oy was an affiliate, EDI invoicing
new businesses and in two new locations. The Kommest Group’s through SOK was not included in SOK’s net turnover.

53
Pääjohtajan
Financial Statements
katsaus

SOK reported an operating loss of EUR 8.9 million, as against a cilities. In June, SOK signed a new EUR 200.0 million syndicated
loss in the previous year of EUR 4.6 million. The greater operat- credit facility.
ing loss was due, among other things, to the expansion of service Cash flow before financial items according to SOK Corpora-
operations and to the outlays for development projects. Because of tion’s cash flow statement was EUR 42.0 million. At the turn of
the higher gain on net financial income and expenses, SOK’s profit the financial year, financial assets exceeded interest-bearing liabili-
before extraordinary items was EUR 6.3 million, whereas it was ties by EUR 121.8 million, a decrease on the previous year of EUR
EUR 5.6 million a year earlier. 11.5 million. Net gearing at 31 December 2006 was -22.8. SOK
The rents included in other operating expenses consist primarily Corporation’s financial income and expenses, excluding write-
of the rental expenses of SOK Corporation or are for premises that downs on non-current investments were at nearly the previous
have been sublet to other S Group companies. year’s level, representing a net gain of EUR 6.9 million.
SOK Corporation’s equity ratio fell to 25.5 per cent from 28.8
per cent in the previous financial period. The decline in the equity
Extraordinary expenses
ratio was due mainly to the increase in total assets of EUR 330
Extraordinary expenses of EUR 5.1 million consist of the interest million.
expenses and court costs on the basis of the judgement deliv-
ered by the Helsinki Court of Appeal on 14 February 2006. The
Personnel
judgement concerns a dispute arising from a contract agreement
concluded by SOK and YIT Corporation in 1998 in connection The average number of SOK Corporation employees, converted to
with construction works on SOK’s old head office located on full-time staff, was 7,096 during the financial year (4,346).
Vilhonkatu in Helsinki. The Court of Appeal assessed the evidence SOK Corporation had a payroll of 8,563 employees at the end
presented in the case in a substantially different way than did the of 2006 (5,052), of whom 761, or 8.9 per cent were SOK person-
Helsinki District Court, which delivered a judgement that was nel (696 and 13.8%) and 7,802, or 91.1 per cent, were employed
partly in favour of SOK. The Court of Appeal ruled that YIT by the subsidiaries (4,356 and 86.2%). The increase in the number
Corporation has the right to receive compensation for part of the of employees compared with the previous year was 3,511 people
demands for additional and conversion works which it presented or 69.5 per cent. The total number of employees abroad was 1,282
as well as compensation for additional costs incurred. SOK has people. During the year the number of employees was increased by
appealed the judgement of the Helsinki Court of Appeal to the a number of acquisitions, such as that of Inex Partners Oy and the
Supreme Administrative Court. transfer of Holiday Club Finland Oy’s spa operations in Finland
to SOK Corporation’s ownership. Particular attention has been
directed at integrating the personnel into the S Group.
Capital expenditures and disposals of fixed
assets
SOK’s management and auditors
SOK Corporation’s purchases booked in non-current assets, i.e.
capital expenditures on fixed assets, amounted to EUR 201.0 mil- CEO Kari Neilimo has served as chairman of SOK’s Executive
lion in 2006. The most important outlays were for the purchases Board. In addition to the CEO, the other members of the Execu-
of shares in Suomen Spar Oy and Inex Partners Oy. Considerable tive Board in 2006 were Managing Director Esko Hakala, Manag-
investments were also made in the hotel and restaurant business, ing Director Arto Hiltunen, Managing Director Kuisma Niemelä,
most importantly through the purchase of the business operations Managing Director Veli-Matti Puutio, Jukka Salminen, Director
in Finland of the Holiday Club chain. In the automotive trade, of SOK’s Administrative Division, Managing Director Kimmo
SOK Corporation purchased the shares in Auto-Kivitila Oy and Simberg and Managing Director Ulla-Maija Tolonen.
acquired Stockmann Auto’s locations in Turku and Espoo as well The Corporation’s auditors in 2006 were the Authorised Public
as the Ford businesses of Etelä-Suomen Autotalo Oy and Vaunula Accountants Tomi Englund, Juhani Heiskanen and Tapani Rotola-
Oy. Pukkila.
By contrast, disposals of non-current assets and businesses to- SOK’s Supervisory Board appointed to seats on SOK’s Execu-
talled EUR 137.8 million. The most important asset disposals were tive Board for the term of office beginning on 1 January 2007
the divestments of the Spar business operations to the cooperative the following directors: CEO Kari Neilimo, chairman, Managing
enterprises, the sale of a minority stake in Hankkija-Maatalous Oy Director Esko Hakala, Managing Director Taavi Heikkilä (new
and disposals of real estate, the largest of which was the sale of the member), Managing Director Arto Hiltunen, Manager Director
shares outstanding in the condominiums KOy Päiväläisentie 1–6 Kuisma Niemelä, Managing Director Veli-Matti Puutio, Jukka
and Peltokuumolantie 4 to Nordisk Renting Oy. Salminen, Director of SOK’s Administrative Division and Manag-
ing Director Kimmo Simberg.
SOK’s Chief Executive has been assisted in the strategic manage-
Financing
ment of SOK Corporation and the S Group by SOK’s Manage-
SOK Corporation’s liquidity remained good throughout 2006. ment Team, whose members during 2006 were Managing Director
Liquid cash assets and money market investments totalled EUR Ensio Hytönen; Reijo Kaltea, Senior Vice President, Customer-
817.9 million at the end of the year. In addition, the Corporation ownership and Speciality Stores Division; Suso Kolesnik, Director
had EUR 327.5 million of undrawn long-term binding credit fa- of Corporate Communications; Harri Miettinen, Vice President,

54
54
 FinancialFinancial
Statements
Statements

Strategic Development and Human Resources; Matti Pulkki, Outlook for the current financial year
Senior Vice President, Hotels and restaurants; Jukka Salminen,
Director of SOK’s Administrative Division; Antti Sippola, Vice The outlook for the Finnish economy in the current year is good.
President, Retail; Heikki Strandén, Director, ABC Service Station Growth will be more subdued but will remain clearly better than
Store Business and Fuel Trade; Markku Viljanen, SOK’s General the eurozone average. Inflation will remain moderate. It is forecast
Counsel (as from 1 June 2006) and Managing Director Reino Ylä- that the good employment trend will continue in the current year.
Autio (as from 1 June 2006). The growth in real income will slow slightly, as it did last year,
SOK’s Chief Executive, Professor Kari Neilimo, will retire on but the wage bill will continue to grow in step with improving
31 July 2007. On 7 November 2006, SOK’s Supervisory Board employment. Consumer confidence is at a good level at the start
appointed Mr Arto Hiltunen, Managing Director of Helsinki Co- of the year, but is likely to falter somewhat as a consequence of
operative Society Elanto, as his successor, effective 1 August 2007. dismissals announced in January.
According to forecasts, growth in the retail trade will continue
in the current year, but at a slower rate than a year ago. The biggest
Risks and factors of uncertainty
slowdown will be in the consumer durables owing to the higher
SOK Corporation is fully cognisant of the need for strategy-driven level of interest rates, which are still on a gently ascending curve,
and integrated risk management. Particular attention has been a factor that will dampen credit demand. The growth in private
paid to managing risks to the achievement of strategic objec- consumption expenditure will slow further from the previous year
tives. Within SOK Corporation, risk management is viewed as a and come in at slightly under three per cent.
strategic competitive factor. Risk management has been made an Net turnover generated by SOK Corporation’s business units is
integral part of the management process. The steering and control estimated to continue outpacing the overall growth in the retail
of integrated risk management is carried out by the Corporation’s trade this year. The largest growth expectations are for automotive
Corporate Security and Risk Management unit. sales in Finland and for supermarket sales in the Baltic countries.
SOK’s Finance unit has central responsibility for managing SOK In addition, three hotel units will be opened in St Petersburg in
Corporation’s treasury operations and financial risks. The SOK the latter half of the year. The growth in the domestic hotel and
Executive Board has confirmed SOK Corporation’s guidelines for restaurant trade as well as the hardware and agricultural trade is
financial policy, strategy and the management of financial risks. expected to be close to the general trend. Net turnover derived
These guidelines define the principles of managing financial risks from the agricultural trade will nevertheless increase significantly,
and the maximum amounts of financial risks. Furthermore, nu- provided the Finnish Competition Authority approves the transac-
merical targets have been set for the different subareas of treasury tions for acquiring a majority holding in Suomen Rehu Oy and
operations in order to assure the adequacy, balance and affordabil- Avena Nordic Grain Oy. In the department store trade, net turno-
ity of financing under all circumstances. The company’s manage- ver will decline, following the transfer of the operations of Turun
ment of price, credit, liquidity and cash flow risks is described in Sokos to Turun Osuuskauppa from the beginning of the year. The
the accounting policies applied in the financial statements. operational result of SOK Corporation’s operating companies will
Environmental risks connected with SOK Corporation’s busi- be burdened by the start-up of the hotel business in St Petersburg.
ness operations are identified and analysed annually as part of The volume of the S Group’s sourcing, chain management and
the analysis of business risk. The most important environmental service activities for which SOK has overall responsibility, will in-
aspects and the measures connected with them are described in the crease in 2007. This year SOK will again continue making strong
environment section of SOK Corporation’s Annual Report. In ad- inputs into development projects that boost the efficiency of the
dition, an Accountability Report covering the entire S Group will S Group’s processes and services. SOK Corporation’s operational
be published on the Internet in spring 2007. The main key ratios result is estimated to be lower than in the previous year.
describing SOK Corporation’s business operations, financial posi-
tion and result are presented in the key ratios table in the Notes to
SOK Corporation’s Annual Report.
Helsinki
Adoption of IFRS
15 February 2007
SOK made the transition from Finnish Accounting Standards
(FAS) to IFRS as from the beginning of 2007. The account- SUOMEN OSUUSKAUPPOJEN KESKUSKUNTA
ing policies in compliance with IFRS as well as the comparative
information and reconciliations with Finnish financial statement Executive Board
practice for 2006 will be published before the release of the figures
in accordance with IFRS.
The most important effects of the adoption of IFRS are related
to the treatment of finance leases, the treatment of lease and hire
purchase agreements in the automotive trade and agricultural
trade, the recording of financial instruments and segment report-
ing.

55 55
Financial Statements

PROFIT BEFORE EXTRA-

SOK CORPORATION NET TURNOVER ORDINARY ITEMS PERSONNEL AT 31 DEC.
2002–2006 RETURN ON INVESTMENT, % 2002–2006

OPERATING PROFIT NET INTEREST PAYABLE 2002–2006 GROSS INVESTMENT IN FIXED

2002–2006 (% of net turnover) ASSETS 2002–2006

INTEREST-BEARING NET LIABILITIES CAPITAL AND RESERVES* AT 31 DEC. GEARING, %

AT 31 DEC. 2002–2006 2002–2006 (equity ratio, %) 2002–2006

* Excluding capital loan

56
 Financial Statements

Consolidated Income Statement

EUR million Ref. 1.1.–31.12.2006 1.1.–31.12.2005

Net turnover (1) 6 834.0 4 209.4

Other operating income (2) 48.6 36.2

Materials and services

Raw materials and consumables (3) 6 081.8 3 702.7
External services 150.0 6 231.7 98.1 3 800.8

Staff costs
Wages and salaries 224.0 125.1
Social security costs (4) 54.2 278.2 30.5 155.6

Depreciation and value adjustments (5) 59.4 42.8

Other operating expenses

Rents 123.4 68.0
Other expenses (6) 168.4 291.8 118.6 186.6
Share of associated companies’ profits (+/-) 1.6 2.4

Operating profit (1) 23.1 62.3

Share of associated companies’ profits (+/-) -0.1 -0.0

Financial income and expenses (+/-) (8) 6.9 6.8

Profit before extraordinary items 29.9 69.0

Extraordinary items (+/-) (9) -5.1

Profit before taxes 24.8 69.0

Direct taxes (+/-) (11) -3.5 -11.3

Minority interest (+/-) -2.4 -0.3

Profit for the financial year 18.9 57.4

57
Financial Statements

Consolidated Balance Sheet

ASSETS EUR million Ref. 31.12.2006 31.12.2005

NON-CURRENT ASSETS
Intangible assets (12) 98.0 63.6
Group goodwill (12) 5.1
Tangible assets (12) 252.0 239.2
Shares in associated companies (13) 20.6 52.6
Other investments (13) 39.9 415.7 43.4 398.9

CURRENT ASSETS
Stocks (15) 295.7 160.7
Long-term debtors (16) 40.0 0.3
Deferred tax assets (17) 17.3 6.4
Short-term debtors (18) 574.3 474.6
Securities (19) 697.5 688.8
Cash in hand and at bank 120.3 1 745.2 101.0 1 431.7

2 160.9 1 830.6

LIABILITIES EUR million 31.12.2006 31.12.2005

CAPITAL AND RESERVES (20)

Cooperative capital 95.0 86.9
Supplementary cooperative capital 16.8 16.8
Fair value reserve 0.8 0.5
Legal reserve 16.9 15.3
Supervisory Board’s disposal fund 0.1 0.1
Profit brought forward 372.6 323.9
Profit for the financial year 18.9 521.1 57.4 500.8

MINORITY INTEREST 16.7 13.7

PROVISIONS (22) 22.2 2.5

CREDITORS
Long-term creditors (23) 43.0 30.9
Deferred tax liability (24) 17.0 8.8
Short-term creditors (25) 1 540.8 1 600.8 1 273.9 1 313.6

2 160.9 1 830.6

58
 Financial Statements

Consolidated Cash Flow Statement

EUR million Ref. 1.1.–31.12.2006 1.1.–31.12.2005

BUSINESS OPERATIONS
Operating profit 23.1 62.3
Adjustments to operating profit (1) 34.4 2.4
Change in working capital (2) -27.2 -25.6
Cash flow from business operations before financing and taxes 30.3 39.1
Interest paid and other financial expenses -9.9 -13.6
Interest received and other financial income 25.1 16.8
Dividends received from business operations 0.2 1.1
Direct taxes paid -7.7 -13.3
Cash flow before extraordinary items 38.1 30.1
Cash flow from the extraordinary items of business operations -5.1
Cash flow from business operations 33.0 30.1

INVESTMENTS
Subsidiary shares purchased -89.4 -6.1
Acquisition of other fixed assets -114.8 -62.1
Subsidiary shares sold 54.1 18.1
Sale of other fixed assets 83.7 38.8
Change in other long-term investments -0.4 -0.3
Adjustment of items booked on accrual basis 0.0 0.0
Liquid assets of divested and acquired subsidiaries 74.2 1.1
Dividends received from investments 1.6 1.2
Cash flow from investments 9.0 -9.2

FINANCING
Increase in long-term creditors 10.1 8.7
Decrease in long-term creditors -7.3 -6.5
Increase (+) / decrease (-) in short-term creditors 15.1 103.6
Increase (-) / decrease (+) in short-term debtors -36.6 0.8
Change in short-term investments -41.0 3.1
Minority interests in subsidiaries 0.0 -0.3
Increase in cooperative capital and supplementary cooperative capital 8.2 15.8
Interest paid on the cooperative capital and supplementary cooperative capital -7.0 -10.8
Decrease in capital and reserves -0.1 -0.1
Cash flow from financing -58.6 114.3

Increase (+) / decrease (-) in liquid funds -16.7 135.1

Liquid funds at the beginning of the year 768.4 633.3

Liquid funds at the end of the year 751.8 768.4

Adjustments to operating profit (1)

Gains (-) and losses (+) from the sale of fixed assets -43.8 -34.9
Depreciation and value adjustments 59.4 42.8
Income and expenses which do not involve payment 18.8 -5.5
34.4 2.4
Change in working capital (2)
Change in trade debtors -8.2 -86.5
Change in stocks -45.7 -23.3
Change in short-term interest-free creditors 26.7 84.2
-27.2 -25.6
The change in cash and cash equivalents differs from the change in cash and cash equivalents calculated from the change
in the balance sheet such that measurement gains and losses due to the measurement at fair value of marketable securities have
been eliminated from the change in cash and cash equivalents in the Cash Flow Statement.
59
Financial Statements

SOK Income Statement

EUR million Ref. 1.1.–31.12.2006 1.1.–31.12.2005

Net turnover (1) 4 283.7 2 525.7

Other operating income (2) 17.3 6.0

Materials and services

Raw materials and consumables (3) 4 112.3 2 361.5
External services 44.9 4 157.3 43.0 2 404.6

Staff costs
Wages and salaries 33.8 29.9
Social security costs (4) 9.8 43.6 8.5 38.4

Depreciation and value adjustments (5) 2.9 7.5

Other operating expenses

Rents 56.6 52.2
Other expenses (6) 49.5 106.1 33.5 85.7

Operating profit (loss) (1) -8.9 -4.6

Financial income and expenses (+/-) (8) 15.2 10.2

Profit before extraordinary items 6.3 5.6

Extraordinary items (+/-) (9) 3.9 29.2

Profit before appropriations and taxes 10.2 34.8

Appropriations (+/-) (10) 0.2 3.5

Direct taxes (+/-) (11) 0.2 -6.3

Profit for the financial year 10.7 32.0

60
60
 Financial Statements

SOK Balance Sheet

ASSETS EUR million Ref. 31.12.2006 31.12.2005

NON-CURRENT ASSETS
Intangible assets (12) 9.0 10.4
Tangible assets (12) 11.5 19.3
Shares in Group companies (13) 343.6 243.1
Other investments (13) 221.2 585.4 233.8 506.6

CURRENT ASSETS
Stocks (15) 0.3 2.4
Long-term debtors (16) 1.7 0.2
Short-term debtors (18) 482.3 398.0
Securities (19) 678.1 688.8
Cash in hand and at bank 92.1 1 254.6 84.6 1 174.0

1 840.0 1 680.6

LIABILITIES EUR million 31.12.2006 31.12.2005

CAPITAL AND RESERVES (20)

Cooperative capital 95.0 86.9
Supplementary cooperative capital 16.8 16.8
Fair value reserve 1.1 0.7
Legal reserve 16.9 15.3
Supervisory Board’s disposal fund 0.1 0.1
Profit brought forward 362.2 338.9
Profit for the financial year 10.7 502.8 32.0 490.6

ACCUMULATED APPROPRIATIONS (21) 1.6 1.8

PROVISIONS (22) 1.9 1.7

CREDITORS
Long-term creditors (23) 24.0 15.4
Short-term creditors (25) 1 309.6 1 333.6 1 171.0 1 186.5

1 840.0 1 680.6

61
Financial Statements

SOK Cash Flow Statement

EUR million Ref. 1.1.–31.12.2006 1.1.–31.12.2005

BUSINESS OPERATIONS
Operating profit -8.9 -4.6
Adjustments to operating profit (1) -9.3 -0.1
Change in working capital (2) 8.7 1.3
Cash flow from business operations before financing and taxes -9.5 -3.4
Interest paid and other financial expenses -19.5 -13.5
Interest received and other financial income 37.1 22.7
Dividends received from business operations 1.0
Direct taxes paid -2.9 -9.5
Cash flow before extraordinary items 5.2 -2.5

INVESTMENTS
Acquisition of fixed assets -116.5 -50.3
Sale of fixed assets 58.7 41.4
Change in other long-term investments -3.6 4.9
Dividends received from investments 3.9 1.3
Cash flow from investments -57.5 -2.8

FINANCING
Increase in long-term creditors 10.0 8.7
Decrease in long-term creditors -3.0
Increase (+) / decrease (-) in short-term creditors 46.8 106.3
Increase (-) / decrease (+) in short-term debtors -27.4 4.2
Change in short-term investments -41.0 3.1
Increase in cooperative capital and supplementary cooperative capital 8.2 15.8
Interest paid on the cooperative capital and supplementary cooperative capital -7.0 -10.8
Other decrease in capital and reserves -0.1 -0.1
Group contributions received 20.0 33.7
Group contributions paid -2.0 -22.1
Liquid funds from merger 0.0 0.5
Cash flow from financing 4.4 139.3

Increase (+) / decrease (-) in liquid funds -47.9 134.0

Liquid funds at the beginning of the year 751.7 617.7

Liquid funds at the end of the year 703.8 751.7

Adjustments to operating profit (1)

Gains (-) and losses (+) from the sale of fixed assets -15.6 -5.8
Depreciation and value adjustments 2.9 7.5
Income and expenses which do not involve payment 3.4 -1.8
-9.3 -0.1
Change in working capital (2)
Change in trade debtors -73.7 -82.2
Change in stocks 0.8 0.0
Change in short-term interest-free creditors 81.6 83.5
8.7 1.3
The change in cash and cash equivalents differs from the change in cash and cash equivalents calculated from the change
in the balance sheet such that measurement gains and losses due to the measurement at fair value of marketable securities have
been eliminated from the change in cash and cash equivalents in the Cash Flow Statement.

62
 Financial Statements

Notes to the Income Statement and Balance Sheet

Accounting Policies

In accordance with SOK’s Statutes, the name SOK Corporation sponding to the Group’s holding in them. The shareholders’ equity
is used for the SOK Group. SOK Corporation comprises Suomen of subsidiaries acquired also includes accelerated depreciation less
Osuuskauppojen Keskuskunta (SOK) and its subsidiaries. the deferred tax liability as well as voluntary provisions. Differ-
SOK’s financial statements and consolidated financial state- ences arising in the eliminations, to the extent that they are due to
ments have been prepared in the manner prescribed by Finnish differences between the current and book values of properties, have
legislation governing the preparation of financial statements (Finn- been allocated to the relevant fixed assets and the remaining part is
ish Accounting Act). The cash flow statement has been prepared stated as Group goodwill in the balance sheet.
in accordance with the general recommendations of the Finnish Group goodwill attributable to buildings has been amortised in
Accounting Standards Board, applying the indirect form of cash line with the depreciation plan for the building in question. Group
flow statement. goodwill is amortised over a period of 5 years on a straight-line
basis.
Scope of the consolidated financial
Intra-Group transactions and margins
statements
When preparing the consolidated financial statements, all intra-
The consolidated financial statements include the parent coopera- Group income and expenses, distribution of profits, receivables
tive and all the companies in which the parent cooperative held, at and liabilities as well as unrealised profit margins from intra-Group
the close of the financial year, either directly or through its subsidi- transactions have been eliminated.
aries, more than half of the voting rights conferred by the shares.
Of the above-mentioned companies, four subsidiaries operate in Minority interests
Estonia, two in Latvia and one in Russia. Minority interests in the profit for the financial year is shown as
The financial statement information of the associated compa- a separate item in the income statement. The minority interest in
nies (voting rights of 20–50%) are included in the consolidated capital and reserves is also shown as a separate item in the consoli-
financial statements. dated balance sheet.
Of the subsidiaries, one dormant company has been excluded
from the consolidated financial statements. In addition, five as- Translation differences
sociated companies whose area of operations is the leasing and pos- The financial statements of foreign subsidiaries have been trans-
session of properties have been left unconsolidated. The exclusion lated into euros at the exchange rate on the balance sheet date.
of the above-mentioned subsidiary and associated companies does Translation differences arising from the elimination of sharehold-
not have a material effect on the Group’s result and shareholders’ ers’ equity have been entered under profit brought forward in the
equity. consolidated balance sheet.

Principles of consolidation Associated companies

The consolidated financial statements have been prepared by Associated companies have been consolidated using the equity
combining the Group companies’ income statements and balance method. The Group’s share of the associated companies’ profit for
sheets as well as the notes to them. The financial statements of the the financial year, in accordance with the Group’s proportional
Group companies are for the period 1 January – 31 December holdings and adjusted for any amortisation of goodwill and
2006. Companies acquired or formed during the financial year dividends received, is shown in the consolidated income statement
have been consolidated from the date of acquisition or formation. after operating profit. By contrast, the result of the associated com-
Divested subsidiaries or associated companies have been consoli- panies that carry on the Group’s mainline business are included in
dated up to the date of sale. the operating profit calculations and stated on the previous line.
In the consolidated balance sheet, the acquisition cost of as-
Intra-Group holdings sociated companies and the Group’s shareholders’ equity includes
Intra-Group holdings in subsidiaries have been eliminated using the Group’s post-acquisition share of an associated company’s
the acquisition cost method. The intra-Group shareholding has accumulated net assets, inclusive of total appropriations less the
been eliminated by subtracting their acquisition cost as well as, deferred tax liability.
from the shareholders’ equity of the subsidiaries, an amount corre-

63
Pääjohtajan
Financial Statements
katsaus

Intra-Group profit margins arising in transactions between Group Bonds and notes as well as other domestic and foreign securities
companies and associated companies have been eliminated in that are traded actively and have been acquired for short-term gain
proportion to each party’s holdings. Such margins have been sub- as well as all derivative contracts regardless of their usage purpose
tracted from the Group’s profit brought forward and from the cost are recorded in financial assets and liabilities held for trading.
of acquiring the shares in associated companies. Eliminated capital Financial assets and liabilities held for trading are measured at
gains are recognised as income in step with depreciation. their fair value. The change in fair value is entered in the income
statement, whereby the difference between the carrying amount at
the balance sheet date and previous balance sheet dates of financial
Financial instruments
instruments recorded at fair value in the income statement is en-
SOK Corporation applies settlement date practice in entering tered as revenue or expense for the financial period. If the financial
financial assets in the balance sheet. Transactions in foreign cur- instrument to be recorded at fair value has been purchased during
rency are recorded at the exchange rate quoted by the European the financial period, the difference between the value of the finan-
Central Bank (ECB) on the settlement date. Foreign currency cial instrument at the balance sheet date and its cost is entered as
receivables and liabilities that are open at the end of the financial revenue or expense for the financial period.
year have been translated into euros at the exchange rate quoted Bonds and notes as well as shares and participations which are
by the European Central Bank on the closing day of the finan- not held for trading or to maturity are recorded in available-for-
cial year, and the exchange rate differences have been booked as sale financial assets. Financial assets held for trading are measured
a credit or charge to income. Interest income and expenses have at their fair value. The change in fair value is recorded directly in
been calculated on the basis of effective interest for the maturity of equity in the Fair value reserve. When the financial instrument
the contract. is sold, the cumulative change in fair value is recorded in equity
As from 1 January 2006, financial instruments have been together with accrued interest and capital gains or losses through
measured at fair value in compliance with the alternative method profit and loss. Any impairment loss is nevertheless recorded im-
permitted under the Accounting Act, Chapter 5, Section 2a. As mediately through profit and loss, at the same time adjusting the
a result of the change in accounting policies, the changes in the Fair value reserve.
fair values of financial assets and liabilities held for trading which Bonds and notes and other non-derivative financial assets that
have accrued by 31 December 2005, less deferred taxes, to a total are held to maturity are recorded in held-to-maturity investments.
amount of EUR 2.3 million, have been entered in equity under Held-to-maturity investments are measured at amortised cost us-
the heading Profit brought forward. Similarly, owing to the change ing the effective interest method. Any impairment loss is recorded
in accounting policies, the changes in the fair values of avail- through profit and loss, and the accrual of interest is continued
able-for-sale financial assets, which have accrued by 31 December on the lowered balance at the original effective interest rate of the
2005, less deferred taxes, to a total amount of EUR 0.5 million, contract.
have been entered in the Fair value reserve. The 2005 balance sheet Financial assets and liabilities that do not belong to the previ-
has been adjusted to a comparable basis. ously mentioned classes are recorded in other financial assets and
The fair value of a financial instrument is determined on the liabilities. They are measured at amortised cost using the effective
basis of prices quoted in active markets or using measurement interest method. Any impairment loss is recorded through profit
methods that are generally used in the markets. Financial assets and loss, and the accrual of interest is continued on the lowered
and liabilities at fair value include certificates of deposit, corporate balance at the original effective interest rate of the contract.
paper and interest rate swaps, the fair value of which has been
determined by discounting future cash flows to the present value
Fixed assets and depreciation
using the market interest rates at the balance sheet date. The fair
value of forward contracts has been calculated by discounting In the balance sheet, fixed assets have been valued at cost less ac-
future cash flows to the present value and translating the foreign cumulated planned depreciation.
currency amounts thus obtained into euros using the foreign Depreciation according to plan has been calculated on the
exchange rates quoted by the ECB at the balance sheet date. The original acquisition cost of the fixed assets in accordance with an
fair value of interest rate options is determined on the basis of advance schedule and on a straight-line basis. Depreciation has
the Black-Scholes pricing model. Bonds and notes, mutual funds been calculated from the beginning of the month after the asset
and stock exchange shares have been measured at market prices. was placed in use. Depreciation periods, which are based on the
Financial assets and liabilities at fair value have been measured expected useful life of the assets, are shown in the notes to the
using middle rates. income statement under “Depreciation.”
Derivative contracts are taken out primarily for hedging, but
hedge accounting is not applied to them. Owing to these changes,
Stocks
the financial result includes items which previously did not appear
in it: measurement gains and losses on hedging derivatives as well Stocks are entered in the balance sheet on a FIFO basis at the
as measurement gains on the trading portfolio. acquisition cost or repurchase price or probable market price,
whichever is the lowest.

64
 Financial
Pääjohtajan
Statements
katsaus

Leasing deferred tax assets as the estimated and probable amount. The
deferred tax liabilities and assets were calculated applying the
Leasing payments are shown as rent expenses in the income state- confirmed tax rate, which is 26%.
ment. A deferred tax liability or tax asset is not presented in the
income statements and balance sheets of SOK and its subsidiaries,
but instead, a deferred tax liability or tax asset that is material in
Future expenses and losses
amount is presented in the Notes to the Financial Statements of
Future expenses and losses representing a commitment of the the company in question in connection with the itemisation
company or which are likely to materialise are charged as expenses of taxes.
under the relevant expense item. In the balance sheet these provi-
sions for expenses are stated in the item “Compulsory provisions”
Pension arrangements
or “Accruals and deferred income”.
The statutory and voluntary pension security for SOK Corpora-
tion’s employees is handled through external pension insurance
Deferred taxes
companies.
Deferred taxes are recorded in accordance with the general guide-
lines issued by the Accounting Board on 12 September 2006. As a
new item in accordance with the general guidelines, a tax asset has
been recorded on write-downs on shares and capital loans as well
as land areas that have been made but not deducted in taxes, to the
extent that the corresponding tax effect can be considered prob-
able. In connection with intra-Group capital gains on the sale of
property, plant and equipment, a tax asset has been recorded on its
probable materialisation to the extent that a part of the acquisition
cost corresponding to the original taxable capital gain has not been
depreciated or amortised. Deferred taxes have been recorded on
write-downs made on shares in Group and associated companies
and capital loans that have been deducted in tax filings but have
been reversed in the consolidated accounts. Deferred taxes have
been recorded on undistributed profits of foreign subsidiaries and
associated companies insofar as a resolution on leaving the profits
in said country has not been made. The deferred taxes for the
above-mentioned items as well as for depreciation on buildings,
which have not been deducted in taxation by 31 December 2005,
to a total of EUR 5.9 million, have been recorded in equity owing
to the change in accounting policies.
In the consolidated balance sheet, the accumulated appropria-
tions shown in individual financial statements have been divided
into a deferred tax liability, shareholders’ equity and minority in-
terest, and changes in them are shown in the consolidated income
statement. Depreciation not deducted in taxation has been taken
into account as a reducing factor in calculating the above-men-
tioned deferred tax liability. Deferred tax assets arising from Group
companies’ compulsory provisions and confirmed losses are shown
in the balance sheet, whereas the change in the deferred tax assets
is shown in the consolidated income statement. Deferred taxes
have been recorded on the temporary differences resulting from
the measurement at fair value of financial instruments.
The deferred tax liabilities and assets arising on consolidation
are included in the deferred tax liabilities and assets shown in the
consolidated balance sheet, and any change therein is included
in the change in deferred tax liabilities and assets shown in the
consolidated income statement.
In line with conservative accounting practice, the consolidated
balance sheet shows the deferred tax liability in its entirety and

65
Pääjohtajan
Financial Statements
katsaus

Management of financial risks and electricity price risk in 2006

SOK’s Finance unit has central responsibility for managing SOK Credit risk
Corporation’s treasury operations and financial risks. The SOK The management of credit risks connected with commercial
Executive Board has confirmed SOK Corporation’s guidelines for activities is part of the business units’ operations. Investments and
financial policy, strategy and the management of financial risks. trade in derivatives can only be undertaken with counterparties
These guidelines define the principles of managing financial risks approved by SOK’s Executive Board, within the limits approved by
and the maximum amounts of financial risks. Furthermore, nu- the Executive Board.
merical targets have been set for the different subareas of treasury
operations in order to assure the adequacy, balance and affordabil- Electricity price risk
ity of financing under all circumstances. The objective of electricity market trading is to obtain the electrical
Derivatives are used mainly to hedge the Corporation’s financial power required by the S Group cost-effectively from the lowest
risks and the price risks associated with commodities. The Corpo- cost procurement source and to even out cost impacts due to price
ration engages in non-hedging derivatives trading only within the fluctuations in the electricity market. At the end of 2006, delivery
risk limits approved by SOK’s Executive Board. In the accounts, agreements currently in effect accounted for about two thirds of
all derivatives are measured at fair value, and changes in value are the S Group’s electricity consumption. Apart from SOK Corpo-
recorded through profit and loss. ration, the service was used by 14 cooperative enterprises. SOK
Corporation evaluates the price risks of electricity for a five-year
Liquidity risk period. The minimum hedging degrees for the following years are
SOK Corporation seeks to minimise liquidity and refinancing risks defined in the guidelines for managing electricity price risk, which
by means of a balanced distribution of loan maturities and suf- have been approved by SOK’s Executive Board. At 31 December
ficient financial reserves. Adequate liquidity is maintained through 2006, 100 per cent of the estimated consumption and binding
cash, overdraft accounts, liquid money-market investments and electricity deliveries for 2007 had been hedged as well as 59.0 per
long-term binding credit facilities. In accordance with its financing cent for 2008, 41.4 per cent for 2009 and 25.3 per cent for 2010.
strategy, SOK Corporation strives to maintain an amount of liquid The hedging instruments that can be used are fixed-price delivery
funds and undrawn long-term binding credit facilities that is at contracts, futures, forward contracts, options or other similar
least 10% of its total assets plus the amount of the undrawn credit electricity derivatives.
facilities. Liquid funds at the end of the year totalled EUR 817.9
million and undrawn long-term binding credit facilities amounted Price risk in fuel trading
to EUR 327.5 million, for a total of 46.0 per cent. The quick ratio The S Group’s fuel procurements are handled by SOK’s subsidiary
target has been set at more than 1, including long-term undrawn North European Oil Trade Oy (NEOT). In procuring fuels, the
credit facilities. At the end of the year the quick ratio calculated in company incurs price risk for its fuel stocks, and this is managed
the above manner was 1.19. in the manner defined in the company’s risk management policy.
To manage price risk, the company makes use of hedging instru-
Interest rate risk ments such as futures and options that are traded on the London
SOK Corporation’s interest rate risk is reviewed over 12-month and New York oil exchanges as well as swaps made on the OTC
and three-year periods. A linear change of one percentage point market.
in the level of market interest rates must not cause an increase of
more than 0.5 percentage point in the interest rate level of SOK Price risk in grain trading
Corporation’s average interest-bearing net liabilities. To hedge the price risk of oats-based trading, SOK’s subsidiary
Hankkija-Maatalous Oy employs oats-related derivatives as well as
Foreign exchange risk oilseed derivatives to hedge the price risks of rapeseed trading.
SOK Corporation’s net turnover is still generated largely in
Finland. The Group’s commercial foreign exchange risks are the
responsibility of the unit closing the business deal. The extent of
the foreign exchange risk for the balance sheets of the Baltic sub-
sidiaries is examined on the basis of balance sheet source-applica-
tion analysis. The foreign exchange risk is reduced by financing the
companies’ operations in the same currency in which the money is
spent and by means of derivatives. At the end of the financial year,
SOK and its Finnish subsidiaries did not have loans in foreign cur-
rency outside the Corporation.

66
66
 Financial Statements

Notes to the Accounts

SOK CORPORATION SOK

EUR million 2006 2005 2006 2005

NOTES CONCERNING THE INCOME STATEMENTS

1a. Net turnover by business area

Supermarket trade *) 375.1 81.1
Fuel sales 981.0 743.6
Deparment stores and speciality stores 39.0 36.3
Hotel and restaurant business 217.0 176.7
Automotive trade and accessories 423.8 344.9
Agricultural trade 856.5 827.5
Sourcing 2 373.5 533.7
EDI invoicing **) 4 105.4 2 362.0 4 105.4 2 362.0
Real-estate, rental and other service operations 239.4 209.7 178.3 163.6
Eliminations **) -2 776.6 -1 106.1
Total 6 834.0 4 209.4 4 283.7 2 525.7

*) Includes net turnover generated by supermarket sales in Tallinn as well as the net turnover of the Spar Group
**) includes EUR 2 486 million of intra-Group EDI invoicing (prev. year EUR 956 million)

Domestic business operations constitute 96.9 % of turnover.

1b. Operating profit by business area

Supermarket trade 1.9 2.5
Fuel sales 3.3 1.6
Deparment stores and speciality stores -0.7 0.8
Hotel and restaurant business 11.5 14.6
Automotive trade and accessories -7.1 4.8
Agricultural trade 6.8 8.3
Sourcing 6.6 -0.0
EDI invoicing 0.1 0.2 0.1 0.2
Real-estate, rental and other service operations 3.2 6.8 -9.0 -4.8
Share of associated companies’ profits 1.6 2.4
Eliminations -4.2 20.3
Total 23.1 62.3 -8.9 -4.6

2. Other operating income

Profits on sale of fixed assets 17.4 30.9 17.2 5.8
Goodwill income 30.1 4.1
Other operating income 1.1 1.2 0.0 0.2
Total 48.6 36.2 17.3 6.0

3. Raw materials and consumables

Purchases during the financial year 6 141.3 3 725.0 4 110.2 2 361.5
Change in stocks (+/-) -59.5 -22.3 2.1 0.0
Total 6 081.8 3 702.7 4 112.3 2 361.5

4. Staff costs
Wages and salaries 224.0 125.1 33.8 29.9
Pension costs 37.4 21.1 6.9 6.0
Other social security costs 16.9 9.5 2.9 2.5
Total 278.2 155.6 43.6 38.4

Information concerning the staff and members of the Boards is presented under item 26.

67
Financial Statements

SOK CORPORATION SOK

EUR million 2006 2005 2006 2005

5. Depreciation and value adjustments

Depreciation according to plan 52.2 37.9 2.9 7.5
Value adjustments on non-current assets 7.2 4.9 0.0 0.0
Total 59.4 42.8 2.9 7.5

The itemised specifications of the change in depreciation and accelerated depreciation are included under fixed assets
and accumulated appropriations in the notes to the balance sheet.

Planned depreciation is calculated on a straight-line basis so as to write off the cost of fixed assets over their expected useful lives.
Revaluations have not been written down. Planned depreciation is as follows:
Year
Buildings 30–35
Light constructions and building equipment 10–15
Office and warehouse fixtures 10
Warehouse, servicing and processing machinery 7
Restaurant and hotel furnishings 5–10
Shop furnishings 5–7
Motor vehicles and computer hardware (other than PCs) 5
Goodwill 5–10
Other tangible and intangible assets as permitted by taxation laws

6. Other operating expenses

Losses on sale of fixed assets 3.7 0.1 1.6 0.0
Other operating expenses 164.7 118.5 47.8 33.5
Total 168.4 118.6 49.5 33.5

Rents are presented as a separate item in the income statement.

7. Increase (-) / decrease (+) in provisions for liabilities and charges

Increases related to partially vacant premises -18.1
Decreases related to partially vacant premises 1.8 1.7 1.2 1.7
Increase in other future expenses and losses -2.9 -0.3 -1.5
Decrease in other future expenses and losses 1.0 1.7 0.0 0.2
Total -18.2 3.1 -0.2 1.8

8. Financial income and expenses

Dividend income from Group companies 2.4 0.1
Dividend income from participating interest companies 1.0
Dividend income from others 1.6 1.2 1.5 1.2
Total dividend income from investments in non-current assets 1.6 1.2 3.9 2.3

Interest income from other non-current assets

From Group companies 8.1 8.6
From others 1.1 1.0 1.0 0.8

Other interest and financial income

From Group companies 3.5 2.4
From others 24.8 18.9 19.4 13.9
Total interest and financial income 25.8 20.0 32.0 25.7

Value adjustments of investments in non-current assets 0.0 3.1

Value adjustments of other securities held in current assets 0.1 0.1

Interest and other financial expenses

To Group companies 3.9 2.5
To others 20.5 14.2 16.7 12.1
Total interest and other financial expenses 20.5 14.2 20.7 14.6

Total financial income and expenses 6.9 6.8 15.2 10.2

68
 Financial Statements

SOK CORPORATION SOK

EUR million 2006 2005 2006 2005

9. Extraordinary items
Extraordinary income
Group contributions received
Profit on merger 4.1 25.0
Other 11.3
Total 4.1 36.2

Extraordinary expenses
Group contributions given 6.9
Loss on merger 0.2 0.1
Other 5.1
Total 5.1 0.2 7.0

Total extraordinary items -5.1 3.9 29.2

10. Appropriations
Increase (-) / decrease (+) in accelerated depreciation 0.2 3.5

11. Direct taxes

Income taxes on ordinary operations for the year 6.0 11.0 -1.1 1.7
Income taxes on ordinary operations for the previous year -0.1 -0.3 -0.2 -0.1
Income taxes on extraordinary items -1.3 -0.0 1.1 4.7
Effect of consolidation 0.8 -0.0
Change in deferred tax liability / assets -1.9 0.7
Total 3.5 11.3 -0.2 6.3

NOTES CONCERNING ASSETS IN THE BALANCE SHEETS

12. SOK Corporation’s intangible and tangible assets, EUR million

Intangible assets
Intangible Goodwill Other Advance Total Group Group
rights capitalised payments intangible goodwill reserve
expenditure assets
Acquisition cost at 1.1.2006 64,6 29,9 37,1 8,3 140,0 19,9 1,6
Increase 23,6 20,2 22,2 27,1 93,0 19,4 0,3
Decrease -1,1 -0,6 -6,3 -5,5 -13,5 -11,5
Transfers 5,7 6,5 -12,6 -0,4
Acquisition cost at 31.12.2006 92,8 49,5 59,4 17,3 219,1 27,8 1,9

Accumulated depreciation at 1.1.2006 33,6 20,0 22,7 76,3 19,9

Companies acquired 15,8 0,0 11,4 27,2 7,8
Accumulated depreciation on decreases and transfers -0,7 0,0 -4,8 -5,5 -9,8
Depreciation for the financial year 12,1 4,4 5,6 22,1 1,3
Value adjustments 0,2 0,8 1,0 3,5
Accumulated depreciation at 31.12.2006 61,0 24,4 35,6 121,1 22,6

Accumulated income entries at 1.1.2006 1,6

Accumulated income entries for the financial year 0,3
Accumulated income entries at 31.12.2006 1,9

Book value at 31.12.2006 31,8 25,1 23,8 17,3 98,0 5,1 0,0

Book value at 31.12.2005 31,0 9,9 14,4 8,3 63,6 0,0 0,0

69
Financial Statements

Tangible assets
Land Buildings Machinery Other Advance Total
and and and tangible payments and tangible
water constructions equipment assets construction assets
in progress
Acquisition cost at 1.1.2006 29.3 271.4 82.1 4.1 18.7 405.5
Increase 11.9 43.0 113.9 0.6 30.0 199.5
Decrease -8.5 -77.2 -44.1 -0.6 -16.1 -146.7
Transfers 0.2 12.1 9.7 -0.6 -20.9 0.4
Acquisition cost at 31.12.2006 32.8 249.2 161.5 3.4 11.6 458.7

Accumulated depreciation and

value adjustments at 1.1.2006 2.4 111.1 50.9 1.8 166.3
Companies acquired 11.5 61.5 0.3 73.3
Accumulated depreciation on decreases and transfers -0.6 -33.2 -29.9 -1.0 -64.7
Depreciation for the financial year 10.0 18.9 0.2 29.1
Value adjustments 0.4 2.2 2.7
Accumulated depreciation at 31.12.2006 1.8 99.8 103.6 1.4 206.6

Book value at 31.12.2006 31.0 149.4 57.9 2.1 11.6 252.0

Book value at 31.12.2005 26.9 160.3 31.2 2.3 18.7 239.2

Share of machinery in the book value of machinery and equipment: EUR 0.3 million (prev. year EUR 0.3 million)

13. SOK Corporation’s financial assets, EUR million

Shares in Other Total

participating shares and shares
interest member-
companies ships
Acquisition cost at 1.1.2006 55.9 9.3 65.2
Increase 10.5 3.3 13.9
Decrease -37.1 -0.4 -37.5
Change in the fair value 0.4 0.4
Transfers -6.7 -6.7
Acquisition cost at 31.12.2006 22.6 12.6 35.2

Accumulated value adjustments at 1.1.2006 3.4 0.0 3.4

Accumulated value adjustments on decreases
and transfers -1.3 -1.3
Value adjustments 0.6 0.6
Accumulated value adjustments at 31.12.2006 2.1 0.6 2.7

Book value at 31.12.2006 20.6 11.9 32.5

Book value at 31.12.2005 52.6 9.3 61.8

Undepreciated part of Group goodwill due to associated companies: EUR 0.1 million (prev. year EUR 1.1 million)
Unentered part of Group reserves due to associated companies: EUR 0.0 million (prev. year EUR 0.0 million)

70
 Financial Statements

Capital loan Debtors Capital loan Other Total other

debtors from from debtors debtors financial
participating participating from others from assets
interest interest others
companies companies
Amount at 1.1.2006 0.8 0.7 0.9 31.8 34.2
Increase 1.0 1.0
Decrease -0.6 -0.1 -6.6 -7.2
Transfers 0.0 0.0
Amount at 31.12.2006 0.3 0.6 0.9 26.2 28.0

Accumulated value adjustments at 1.1.2006 0.0 0.0

Accumulated value adjustments at 31.12.2006 0.0 0.0

Book value at 31.12.2006 0.3 0.6 0.9 26.2 28.0

Book value at 31.12.2005 0.8 0.7 0.9 31.8 34.2

Total financial assets of SOK Corporation at 31.12.2006 60.5

Total financial assets of SOK Corporation at 31.12.2005 96.0

12. SOK’s intangible and tangible assets, EUR million

Intangible assets
Intangible Other Advance Total
rights capitalised payments intangible
expenditure assets
Acquisition cost at 1.1.2006 17.5 6.6 3.8 27.9
Increase 0.6 0.0 5.6 6.3
Decrease -5.5 -5.5
Transfers 0.9 0.6 -1.7 -0.1
Acquisition cost at 31.12.2006 19.1 7.2 2.3 28.6

Accumulated depreciation at 1.1.2006 12.6 5.0 17.5

Accumulated depreciation on decreases and transfers 0.0
Depreciation for the financial year 1.8 0.3 2.0
Accumulated depreciation at 31.12.2006 14.3 5.2 19.6

Book value at 31.12.2006 4.8 2.0 2.3 9.0

Book value at 31.12.2005 5.0 1.6 3.8 10.4

Tangible assets
Land Buildings Machinery Other Advance Total
and and and tangible payments and tangible
water constructions equipment assets construction assets
in progress
Acquisition cost at 1.1.2006 2.6 10.5 12.0 0.4 11.2 36.7
Merged companies 2.9 5.2 8.1
Increase 0.0 0.3 0.1 5.4 5.7
Decrease 0.0 -0.1 -16.1 -16.2
Transfers 0.2 0.0 0.1
Acquisition cost at 31.12.2006 5.5 15.9 12.2 0.5 0.5 34.5

Accumulated depreciation and

value adjustments at 1.1.2006 0.1 7.5 9.8 0.0 17.4
Merged companies 1.2 3.6 4.8
Accumulated depreciation on decreases and transfers 0.0 -0.1 -0.1
Depreciation for the financial year 0.3 0.5 0.8
Value adjustments 0.0 0.0
Accumulated depreciation at 31.12.2006 1.3 11.4 10.3 0.0 22.9

Book value at 31.12.2006 4.2 4.5 1.9 0.5 0.5 11.5

Book value at 31.12.2005 2.5 3.0 2.2 0.4 11.2 19.3

71
Financial Statements

13. SOK’s financial assets, EUR million

Shares Shares in Other Total
in Group participating shares and shares
companies interest member-
companies ships
Acquisition cost at 1.1.2006 264.0 43.9 10.8 318.7
Merged companies 0.0 0.0
Increase 107.3 0.5 0.0 107.8
Decrease -20.4 -11.2 -0.4 -32.0
Change in the fair value 0.4 0.4
Transfers 6.7 -6.7 0.0
Acquisition cost at 31.12.2006 357.7 26.4 10.8 394.9

Accumulated value adjustments at 1.1.2006 20.9 9.8 0.0 30.7

Merged companies 0.0 0.0
Accumulated value adjustments on decreases
and transfers -6.8 -1.3 -8.1
Accumulated value adjustments at 31.12.2006 14.1 8.6 0.0 22.6

Book value at 31.12.2006 343.6 17.9 10.8 0.0 372.3

Book value at 31.12.2005 243.1 34.1 10.8 288.0

Capital loan Debtors Capital loan Debtors Capital Other Total

debtors from debtors from from loan debtors other
from Group participating participating debtors from financial
Group companies interest interest from others assets
companies companies companies others
Amount at 1.1.2006 5.6 152.5 0.8 0.7 0.9 30.2 190.7
Increase 31.7 1.0 32.7
Decrease -21.9 -0.6 -6.6 -29.0
Amount at 31.12.2006 5.6 162.3 0.3 0.7 0.9 24.7 194.4

Accumulated value adjustments at 1.1.2006 1.8 0.0 1.8

Accumulated value adjustments at 31.12.2006 1.8 0.0 1.8

Book value at 31.12.2006 3.8 162.3 0.3 0.7 0.9 24.7 192.6

Book value at 31.12.2005 3.8 152.5 0.8 0.7 0.9 30.2 188.9

Total financial assets of SOK at 31.12.2006 564.9

Total financial assets of SOK at 31.12.2005 476.9

Liabilities to secure Group companies loans: EUR 17.8 million

72
 Financial Statements

14. Companies owned by SOK Corporation and SOK at 31.12.2006

Corporation’s SOK’s
Registered share- voting share-
Group companies office holding % rates % holding %

Commercial
AS Kommest Auto Group Estonia 100.0 100.0 100.0
AS Prisma Latvija Latvia 100.0 100.0 100.0
AS Sokotel Estonia 100.0 100.0 100.0
Hankkija-Maatalous Oy Group Helsinki 81.0 81.0 81.0
Inex Partners Oy Group Helsinki 100.0 100.0 100.0
Intrade Partners Oy Helsinki 100.0 100.0 100.0
Jollas-Opisto Oy Helsinki 100.0 100.0 100.0
Maan Auto Oy Group Helsinki 100.0 100.0 100.0
North European Oil Trade Oy Helsinki 66.0 66.0 66.0
Prisma Peremarket AS Estonia 100.0 100.0 100.0
Rainex Yrityspalvelu Oy Helsinki 100.0 100.0 100.0
Rekla Oy Helsinki 100.0 100.0 100.0
S-Etuluotto Oy Helsinki 100.0 100.0 100.0
S-Bank Ltd Helsinki 100.0 100.0 100.0
SOK-Business Oy Helsinki 100.0 100.0 100.0
SOK-Holding Oy Helsinki 100.0 100.0 100.0
SOK-Invest Oy Helsinki 100.0 100.0 100.0
Sokos Hotels St Petersburg LLC St Petersburg 100.0 100.0 1.0
Sokotel Oy Group Helsinki 100.0 100.0 100.0
SOK-Takaus Oy Helsinki 99.9 99.9 99.9
Suomen Spar Oy Group Helsinki 100.0 100.0 100.0
Tapiolan Sokos Oy Helsinki 100.0 100.0 100.0
Turun Sokos Oy Turku 90.0 90.0 90.0
Real-estate companies (18 companies)
Real-estate companies under stock (5 companies)
Total Group companies: 55 companies

Participating interest companies

Associated companies
Asunto Oy Kauniaisten Kirkkomäki Kauniainen 38.6 38.6 38.6
Elielin Pysäköinti Oy Helsinki 22.2 22.2 22.2
Finnfrost Oy Helsinki 50.0 50.0
Hotelli Joensuun Kimmel Oy Joensuu 33.0 33.0
Hotellipankki Oy Helsinki 33.3 33.3
Kauppakeskus Mylly Oy Turku 50.0 50.0 50.0
Keskuskorttelin Huolto Oy Vaasa 31.5 31.5 31.5
Movere Oy Lahti 33.3 33.3
Oy Realinvest Ab Group Helsinki 21.9 21.9 21.9
S-Crosskey Ab Maarianhamina 40.0 40.0
Total associated companies: 10 companies

Other shares owned by the parent company

Sato-Yhtymä Oyj Helsinki 8.7 8.7

73
Financial Statements

SOK CORPORATION SOK

EUR million 2006 2005 2006 2005

15. Stocks
Goods 294.5 158.9
Other stocks 0.2 0.3 0.3 2.4
Advance payments 1.0 1.4
Total 295.7 160.7 0.3 2.4

16. Long-term debtors

Trade debtors 0.1 0.0 0.0
Loan receivables 38.0 0.2 0.2 0.2
Other receivables 0.5 0.0
Prepayments and accrued income 1.5 0.1 1.5
Total long-term debtors 40.0 0.3 1.7 0.2

17. Deferred tax assets

Temporary differences 7.9 2.8
From consolidation 3.8 3.6
Included in Group companies’ own balance sheets 5.6
Total 17.3 6.4

At 31 December 2006, the Group had a deferred tax asset of EUR 5.3 million that relates to the internal margins on fixed assets and
has not been recorded in the consolidated financial statements as its realisation is improbable.

18. Short-term debtors

Trade debtors 492.0 395.4 361.9 315.1

Amounts owed by Group companies

Trade debtors 10.6 3.3
Loan receivables 24.1 8.3
Other receivables 34.6 26.0
Prepayments and accrued income 22.3 9.6
Total 91.5 47.2

Amounts owed by participating interest companies

Trade debtors 3.8 0.6 0.2 0.4
Loan receivables 0.0 0.0
Prepayments and accrued income 0.0 15.2 15.1
Total 3.9 15.8 0.2 15.5

Loan receivables 19.2 17.0

Other receivables 24.3 15.5 8.8 1.5
Prepayments and accrued income 35.0 30.9 19.9 18.6
Total short-term debtors 574.3 474.6 482.3 398.0

Specification of prepayments and accrued income

Financial items 7.1 7.9 6.8 7.7
Other 29.4 38.3 36.9 35.6
Total prepayments and accrued income 36.5 46.2 43.7 43.3

19. Securities
Other shares and participations 63.8 21.3 63.8 21.3
Money market securities 633.7 667.5 614.3 667.5
Total 697.5 688.8 678.1 688.8

A fair value specification by financial instrument group is given in a separate table.

74
 Financial Statements

SOK CORPORATION

Fair value by financial instrument group and changes in value entered directly in the income statement as well as
changes entered in the Fair value reserve, EUR million
Fair value at Cumulative change Change in value Cumulative change
31 Dec. 2006 in value entered in the entered in the in value entered
income statement and income statement for in the Fair value reserve
profit brought forward the past financial year

Available-for-sale financial assets 15.7 1.1

Deferred tax liabilities -0.3
Total, including deferred tax liability 0.8

Financial assets held for trading 682.8 4.4 1.7

Financial liabilities held for trading 4.4 -3.3 -1.4

The change in value of available-for-sale financial assets has been entered in the Fair value reserve less deferred taxes.
The changes in value recorded in the income statement and profit brought forward include only the changes in fair value
due to changes in market prices, whereas accumulated interest is periodised in the income statement.

SOK

Fair value by financial instrument group and changes in value entered directly in the income statement as well as
changes entered in the Fair value reserve, EUR million
Fair value at Cumulative change Change in value Cumulative change
31 Dec. 2006 in value entered in the entered in the in value entered
income statement and income statement for in the Fair value reserve
profit brought forward the past financial year

Available-for-sale financial assets 1.7 0.0 0.0 1.1

Financial assets held for trading 683.1 4.7 1.6

Financial liabilities held for trading 4.5 -3.4 -1.4

The change in value of available-for-sale financial assets has been entered in the Fair value reserve less deferred taxes.
The changes in value recorded in the income statement and profit brought forward include only the changes in fair value
due to changes in market prices, whereas accumulated interest is periodised in the income statement.

75
Financial Statements

NOTES CONCERNING LIABILITIES IN THE BALANCE SHEETS

SOK CORPORATION SOK

EUR million 2006 2005 2006 2005

20. Capital and reserves

Cooperative capital at 1 Jan. 86.9 71.1 86.9 71.1
Increase 8.2 15.8 8.2 15.8
Decrease -0.0 -0.0
Cooperative capital at 31 Dec. 95.0 86.9 95.0 86.9

Cooperative capital consists of the cooperative payments which the cooperative enterprises make to Suomen Osuuskauppojen Keskuskunta (SOK)
for cooperative shares. The number of a cooperative enterprise’s shares is determined on the basis of the cooperative enterprise’s total
membership and annual purchases.

Supplementary cooperative capital at 1 Jan. 16.8 16.8 16.8 16.8

Supplementary cooperative capital at 31 Dec. 16.8 16.8 16.8 16.8

The supplementary cooperative capital consists of voluntary investments which the cooperative enterprises make to Suomen Osuuskauppojen
Keskuskunta (SOK). The cooperative enterprises have the right to a return on their supplementary cooperative capital contributions in the manner
and subject to the conditions specified in the Cooperative Societies Act and SOK’s Statutes.

Revaluation reserve at 1 Jan. 25.4

Decrease -25.4
Revaluation reserve at 31 Dec. 0.0

All of SOK Corporation’s revaluations were reversed in 2005 when going over to the principle of measurement of property, plant and equipment at cost.

Fair value reserve at 1 January 0.5 0.7

Changes in accounting policies *) 0.5 0.7
Change in value **) 0.3 0.4
Fair value reserve at 31 December 0.8 0.5 1.1 0.7

*) Owing to the change in accounting policies, the amount entered in the Fair value reserve less deferred taxes, to a total of EUR 0.5 million
is due to the changeover to the measurement at fair value of financial instruments as from 1 January 2006.
**) Deferred taxes or tax assets are not as a rule presented in the income statements and balance sheets of SOK Corporation’s subsidiaries
but only as a Note to the Financial Statements if the item is material in amount.

Legal reserve at 1 Jan. 15.3 14.8 15.3 14.8

Increase 1.6 0.5 1.6 0.5
Legal reserve at 31 Dec. 16.9 15.3 16.9 15.3

Supervisory Board’s disposal fund at 1 Jan. 0.1 0.0 0.1 0.0

Increase 0.1 0.1 0.1 0.1
Decrease -0.1 -0.1 -0.1 -0.1
Supervisory Board’s disposal fund at 31 Dec. 0.1 0.1 0.1 0.1

Profit brought forward at 1 Jan. 381.3 327.9 370.9 347.6

Changes in accounting policies *) 8.2 2.8
Transfer to legal reserve -1.6 -0.5 -1.6 -0.5
Transfer to Supervisory Board’s disposal fund -0.1 -0.1 -0.1 -0.1
Interest on cooperative capital and supplementary
cooperative capital -7.0 -10.8 -7.0 -10.8
Revaluations: reversal from profit brought forward -0.8
Translation difference -0.0 0.0
Profit brought forward at 31 Dec. 372.6 323.9 362.2 338.9

Profit for the financial year 18.9 57.4 10.7 32.0

Total capital and reserves 521.1 500.8 502.8 490.6

*) Owing to the change in accounting policies, the amount entered directly in equity, to a total of EUR 8.2 million, is due to the changeover of
recording deferred taxes in accordance with the Accountg Board’s general guidelines at 12 September 2006 as well as to the measurement at fair
value of financial instruments as from 1 January 2006.

76
 Financial Statements

SOK CORPORATION SOK

EUR million 2006 2005 2006 2005

Distributable funds at 31 Dec.

Profit brought forward 372.6 315.7 362.2 336.2
Profit for the financial year 18.9 57.4 10.7 32.0
Minimum amount to be transferred to the reserve fund
in accordance with the company statutes -1.5 -1.5 -1.5 -1.5
Proportion transferred to shareholders’ equity from
accumulated appropriations -35.3 -31.2
Total 354.7 340.4 371.3 366.6

21. Accumulated appropriations

Accelerated depreciation
Intangible rights 1.1 1.0
Other capitalised expenditure 0.3 0.3
Buildings and constructions 0.2 0.3
Machinery and equipment -0.0 0.2
Total 1.6 1.8

22. Provisions
Includes EUR 1.6 million of compulsory provisions incurred in purchases of subsidiaries.
Partially vacant premises 18.6 1.6 0.4 1.6
Other future expenses 3.7 0.9 1.6 0.1
Total 22.2 2.5 1.9 1.7

23. Long-term creditors

Loans from financial institutions 17.9 15.2
Trade creditors 0.4 0.3 0.0
Other long-term creditors 24.7 15.4 24.0 15.4
Accruals and deferred income 0.0
Total long-term creditors 43.0 30.9 24.0 15.4

24. Deferred tax liability

Appropriations 11.7 9.7
Temporary differences 0.6 -2.6
Arising on consolidation 2.7 1.7
Included in Group companies’ own balance sheets 2.0
Total 17.0 8.8

25. Short-term creditors

Loans from financial institutions 9.7 3.3 0.4 0.3

Advances received 48.5 46.1 9.8 7.9
Trade creditors 605.8 344.4 192.3 155.0

Amounts owed to Group companies

Trade creditors 190.0 61.1
Other short-term creditors 179.0 149.4
Accruals and deferred income 11.9 4.6
Total 380.9 215.2

Amounts owed to participating interest companies

Trade creditors 12.5 103.9 0.8 101.2
Other short-term creditors 0.3 1.8 0.3 1.8
Accruals and deferred income 0.0
Total 12.8 105.7 1.0 103.0

77
Financial Statements

SOK CORPORATION SOK

EUR million 2006 2005 2006 2005

Other short-term creditors 707.1 662.7 654.8 632.3

Accruals and deferred income 156.9 111.6 70.5 57.3
Total short-term creditors 1 540.8 1 273.9 1 309.6 1 171.0

Specification of accruals and deferred income

Staff costs 48.8 26.5 8.5 8.3
Financial items 20.4 5.8 19.2 4.3
Other 87.7 79.3 54.7 49.4
Total accruals and deferred income 156.9 111.6 82.4 61.9

NOTES CONCERNING INCOME TAXES

See Note 11 above.

NOTES CONCERNING THE STAFF AND BOARD MEMBERS

26a. Average staff numbers by group

Supermarket trade 882 578

Fuel sales 20 17
Deparment stores and speciality stores 361 336
Hotel and restaurant business 2 182 1 583
Automotive trade and accessories 1 008 642
Agricultural trade 936 933
Sourcing 2 474 247
Real-estate, rental and other service operations 707 592
Divested and discontinued operations 0 0
Total 8 570 4 928

SOK 760 681

Subsidiaries 7 810 4 247
Total 8 570 4 928

The average number of employees has been calculated as the average of the number of personnel counted at the end of each month.
The number of staff at sites abroad at 31 Dec. 2006 was 1,282.

26b.
Salaries and remuneration:
CEO and members of the Executive Board 4.9 3.0 1.0 0.7
Members of the Supervisory Board 0.1 0.1 0.1 0.1

Management pension liabilities:

For those members of the Executive Board in the employ of SOK and for certain of the subsidiaries’
managing directors, the retirement age is 60–63 years.

SECURED ASSETS AND CONTINGENT LIABILITIES

27. Contingent liabilities

Pledges and contingent liabilities

Loans secured by pledges

Other creditors 1.9 1.7 1.9 1.7

Book value of pledged shares 1.9 1.9 1.9 1.9
Total pledges given as security 1.9 1.9 1.9 1.9

78
 Financial Statements

SOK CORPORATION SOK

EUR million 2006 2005 2006 2005

Loans secured by guarantees

Loans from financial institutions 8.5 11.1

Guarantees given 8.5 11.1
Guarantees given, total 8.5 11.1

General security for liabilities

Mortgages 34.4 18.9

Other security given

Pledges 4.4 0.8 4.4 0.8
Mortgages 13.8 0.3
Guarantees 96.5 87.0
Total 101.0 101.6 4.4 1.2

Security given on behalf of Group companies

Guarantees 75.8 83.6

Security given on behalf of others’ liabilities

Guarantees given on behalf of associated companies’ liabilities 1.7
Guarantees given on behalf of cooperative enterprises’ liabilities 4.1 5.8
Guarantees given on behalf of others’ liabilities 2.2 0.2 0.2 0.2
Total 6.3 7.6 0.2 0.2

Security given on behalf of others

Guarantees for liabilities of the cooperative enterprises 0.8 0.1

Other contingent liabilities

Repurchasing liabilities:
Hire purchase repurchasing liabilities 104.9 101.4
Other repurchasing liabilities 67.6 69.3 32.4 32.4
Total 172.6 170.7 32.4 32.4

Leasing liabilities:
Payable next year 12.4 5.7 1.5 1.4
Payable in more than one year 13.5 12.2 0.9 0.8
Total 25.9 17.9 2.5 2.3

In addition, SOK has provided supporting letters for the guarantees granted by SOK-Takaus Oy to an amount
of EUR 28,602,259.10 at December 2006.

Rental liabilities:
Rented business facilities used by the S Group are regularly secured with long-term contracts, for which
the SOK Corporation bears rental liabilities.

Other financial liabilities:

The basic improvements and new structures in respect of the properties of Group companies involve a reduced value added
tax return liability in accordance with Section 33 of the Value Added Tax Act. The return liability materialises if the premises for which
reductions have been made are removed from the use entitling them to said reduction within the 5-year period specified by said act.

79
Financial Statements

SOK CORPORATION

Liability under derivative contracts,

value of underlying assets, EUR million Of which value Of which value
Value of of underlying Value of of underlying
underlying instruments of underlying instruments of
assets open agreements assets open agreements
31.12.2006 31.12.2006 31.12.2005 31.12.2005
Interest rate derivatives
Forward contracts 40.0 40.0
Option contracts
Purchased 86.2 75.2
Written 86.2 75.2
Interest rate swaps 195.1 30.5 246.8 101.0

Currency derivatives
Forward contracts 55.1 49.0 30.3 25.8

Electricity derivatives
Forward contracts 81.2 40.7 22.6 11.4
Option contracts
Purchased 9.3 9.3
Written 3.7 3.7

Oil product derivatives

Future contracts 40.9 35.5 24.3 24.3
Option contracts
Written 2.9 2.9 3.1 3.1

Oat derivatives
Future contracts 0.1 0.1 1.1 1.1

Liability under derivative contracts,

fair value, EUR million Fair value Fair value
of open of open
Fair value agreements Fair value agreements
31.12.2006 31.12.2006 31.12.2005 31.12.2005

Interest rate derivatives

Forward contracts -0.0 -0.0
Option contracts
Purchased 0.2 0.1
Written -0.2 -0.1
Interest rate swaps -0.1 -0.1 -1.0 -1.0

Currency derivatives
Forward contracts -0.3 -0.3 0.2 0.1

Electricity derivatives
Forward contracts -0.0 -2.8 2.9 2.2
Option contracts
Purchased 0.1 0.1
Written -0.0 -0.0

Oil product derivatives

Future contracts 1.0 1.0 0.4 0.4
Option contracts
Written -0.0 -0.0 -0.1 -0.1

Oat derivatives
Future contracts -0.0 -0.0 0.1 0.1

80
 Financial Statements

SOK

Liability under derivative contracts,

value of underlying assets, EUR million Of which value Of which value
Value of of underlying Value of of underlying
underlying instruments of underlying instruments of
assets open agreements assets open agreements
31.12.2006 31.12.2006 31.12.2005 31.12.2005
Interest rate derivatives
Forward contracts 40.0 40.0
Option contracts
Purchased 86.2 75.2
Written 86.2 75.2
Interest rate swaps 195.1 30.5 246.8 101.0

Currency derivatives
Forward contracts 105.4 4.7 59.2 1.3

Electricity derivatives
Forward contracts 80.8 40.3 22.6 11.4
Option contracts
Purchased 9.3 9.3
Written 3.7 3.7

Liability under derivative contracts,

fair value, EUR million Fair value Fair value
of open of open
Fair value agreements Fair value agreements
31.12.2006 31.12.2006 31.12.2005 31.12.2005
Interest rate derivatives
Forward contracts -0.0 -0.0
Option contracts
Purchased 0.2 0.1
Written -0.2 -0.1
Interest rate swaps -0.1 -0.1 -1.0 -1.0

Currency derivatives
Forward contracts -0.0 -0.0 0.0 -0.0

Electricity derivatives
Forward contracts -0.1 -3.0 2.9 2.2
Option contracts
Purchased 0.1 0.1
Written -0.0 -0.0

In examining the overall risk position, the position of the balance sheet items that are to be hedged must be taken
into account in addition to derivatives.

The derivative contracts that were open at the end of the financial year have been used primarily to manage
the Group’s foreign exchange, interest rate and price risks. The changes in value of all derivatives have been
recorded through profit and loss since hedge accounting is not applied.

The open interest rate swaps are from one month to eight years in length.
Open foreign currency and electricity forwards will fall due within the next four years.
Other open derivative contracts are under a year in length.

The fair values of derivatives are based on market values or the present values of future cash flows.

81
Financial Statements

SOK Corporation Key Ratios 2002– 2006

2002 2003 2004 2005 2006

Net turnover 2 998 3 112 3 781 4 209 6 834

Operating profit
EUR million 55 46 53 62 23
% of net turnover 1,8 1,5 1,4 1,5 0,3

Profit/loss before extraordinary items

EUR million 55 52 54 69 30
% of net turnover 1,8 1,7 1,4 1,6 0,4

Profit/loss before appropriations and taxes

EUR million 55 52 54 69 25
% of net turnover 1,8 1,7 1,4 1,6 0,4

Return on equity, % 9,9 7,0 9,0 11,7 5,0

Return on investment, % 8,4 6,9 7,2 7,6 4,2

Equity ratio, % 34,1 32,9 30,2 28,8 25,5

Gross investment in fixed assets

EUR million 43 56 53 68 204
% of net turnover 1,4 1,8 1,4 1,6 3,0

Gearing, % 10 -2 -22 -26 -23

The average number of employees during

the financial year converted to full-time staff 4 126 4 557 4 494 4 346 7 096

CALCULATION OF KEY RATIOS

Profit/loss after financial items + value adjustments on investments (net) - income taxes
Return on equity, % = x 100
Capital and reserves + minority interest, average

Return on Profit/loss after financial items + interest and other financial expenses + value adjustments on investments (net)
= x 100
investment, % Total assets - non-interest-bearing liabilities - provisions, average

2002 2003 2004 2005 2006

Non-interest-bearing liabilities, EUR million
442 483 575 656 906

Capital and reserves + minority interest

Equity ratio, % = x 100
Total assets - advances received

Gross investment
= Acquisition costs of subsidiary shares and other fixed assets
in fixed assets

Interest-bearing liabilities - liquid assets

Gearing, % = x 100
Capital and reserves + minority interest

The average number of employees during the financial year converted to full-time staff
Calculated as an average of the number of full-time equivalent employees at the end of each month

82
 Financial
Pääjohtajan
Statements
katsaus

Executive Board’s Proposal

for the Disposal of SOK’s Profit for the Year

Surplus indicated in the income statement EUR 10,655,436.41

Surplus from the previous financial years EUR 362,217,609.13
Total EUR 372,873,045.54

The Executive Board proposes that the profit for the financial
year of EUR 10 655 436,41 be used as follows:

– to be transferred to the reserve fund in

accordance with the company Statutes EUR 1,600,000.00

– paid as interest on the suplementary cooperative capital EUR 798,284.90

– distributed as interest on cooperative contributions

paid by the cooperative enterprises by the beginning
of the financial period EUR 7,816,725.00

– transferred to the Supervisory Board’s disposal fund EUR 50,000.00

– left in the retained earnings account EUR 390,426.51

Providing that the Cooperative Meeting approves

the above proposal SOK’s capital and reserves will be:

Cooperative capital EUR 95,049,500.00

Supplementary cooperative capital EUR 16,830,000.00
Legal reserve EUR 18,473,154.85
Supervisory Board’s disposal fund EUR 117,634.97
Retained earnings account EUR 362,608,034.64
Total EUR 493,078,325.46

Helsinki, 15 February 2007

Kari Neilimo

Jukka Salminen Esko Hakala Taavi Heikkilä

Arto Hiltunen Kuisma Niemelä Veli-Matti Puutio

Kimmo Simberg

83
83
Financial Statements

Auditors’ Report

To the members of Suomen the lawfulness of the activities of the members of the Supervisory
Osuuskauppojen Keskuskunta Board and the Executive Board in accordance with the regulations
of the Cooperative Societies’ Act.
We have audited the accounting records, the financial statements, In our opinion the financial statements and the report on
the report on operations and the corporate governance of Suomen operations have been prepared in accordance with the Accounting
Osuuskauppojen Keskuskunta for the financial year 1 January Act and other rules and regulations concerning the preparation
– 31 December 2006. The Executive Board has prepared a report of financial statements and a report on operations. The financial
on operations and the financial statements, including the income statements and the report on operations provide correct and
statement, balance sheet, and cash flow statement of both the sufficient information, as intended in the Accounting Act, on
Corporation and the Cooperative as well as the notes to them. the operational results of the Corporation and the Cooperative
Based on our audit we express an opinion on the financial state- and their financial standing. The report on operations is fully
ments, the report on operations and the Cooperative’s corporate consistent with the financial statements. The financial statements
governance. including the consolidated financial statements can be approved
The audit has been conducted in accordance with sound audit- and the members of the Supervisory Board and Executive Board
ing procedure. The accounting records as well as the accounting can be discharged from liability for the period audited by us. The
policies, content and presentation of the financial statements and proposal made by the Executive Board on the disposal of retained
the report on operations have been examined to an extent suf- earnings is in compliance with the Cooperative Societies’ Act and
ficient to determine that there are no material errors or deficien- the Cooperative’s Statutes.
cies. In auditing the corporate governance, we have examined

Helsinki, 8 March 2007

Tomi Englund
Authorised Public Accountant

Tapani Rotola-Pukkila Juhani Heiskanen

Authorised Public Accountant Authorised Public Accountant

Statement of the Supervisory Board

In accordance with Item 2, Paragraph 1 of Section 13 of the The members whose term of office on the Supervisory Board
Statutes of Suomen Osuuskauppojen Keskuskunta SOK, the Su- expires are Marcus H. Borgström, Simo Kutinlahti, Otto Mik-
pervisory Board has today examined the financial statements and konen, Matti Pikkarainen, Hanna Valtari, Max van der Pals, Matti
consolidated financial statements prepared by the Executive Board Vanto and Jouko Vehmas. In place of the above-listed persons, it is
for the 2006 financial year and acquainted itself with the Auditors’ proposed that at the Annual Cooperative Meeting a corresponding
Report. number of members be elected for the next three-year term of of-
The Supervisory Board proposes as its statement to the Annual fice. In addition, Leo Laukkanen has requested to resign from the
Cooperative Meeting that the financial statements and consolidat- membership of the Supervisory Board.
ed financial statements be adopted and that the Executive Board’s
proposal concerning the profit for the financial year and sharehold-
ers’ equity be approved.

Helsinki, 16 March 2007

SUOMEN OSUUSKAUPPOJEN
KESKUSKUNTA

For the Supervisory Board

Otto Mikkonen
Chairman
Markku Viljanen
Secretary

84
 Photos: Lauri Mannermaa. Printed by MIKTOR 2007

Suomen Osuuskauppojen Keskuskunta (SOK)

Fleminginkatu 34, Helsinki, Finland
P.O.Box 1, FIN-00088 S GROUP, FINLAND
Tel. +358 10 76 8011, telefax +358 10 76 82390
www.s-kanava.fi