NOTE 42
The Group’s related parties include its key management personnel (the Board of Directors, the President and CEO and the Corporate Management Board), subsidiaries, associates and the Kesko Pension Fund. The subsidiaries and associates are listed in a separate note (note 44).
The related party transactions disclosed consist of transactions with related parties that are not eliminated in the consolidated financial statements.
Among associates consolidated using the equity method, properties owned by Kruunuvuoren Satama Oy and Valluga-Sijoitus Oy has been leased for the Group’s use. Vähittäiskaupan Takaus Oy and Vähittäiskaupan Tilipalvelu Oy sell their services to Kesko’s and K-retailers’ retail companies. The other associates mainly include business property companies which have leased their premises and real estate to the Kesko Group. Associates that operate as mutual real estate companies have been consolidated in the financial statements in proportion to their ownership interests.
The Kesko Pension Fund is a stand-alone legal entity which manages part of the pension assets of the Group’s employees in Finland. The pension assets include Kesko Corporation shares in the amount of €45.3 million. Real estate and premises owned by the Pension Fund have been leased to the Kesko Group.
The following transactions were carried out with related parties:
Sales of goods and services |
||
| € million | 2010 | 2009 |
| Sales of goods | ||
| Board of Directors and management | 35.9 | 37.2 |
| Kesko Pension Fund | 0.0 | 0.2 |
| Total | 35.9 | 37.4 |
| Sales of services | ||
| Associates | 1.5 | 0.9 |
| Board of Directors and management | 4.4 | 4.8 |
| Kesko Pension Fund | 1.1 | 1.5 |
| Total | 7.0 | 7.1 |
Some members of Kesko’s Board of Directors act as K-retailers. The Group companies sell goods and services to enterprises controlled by them.
During the financial year, the management of the statutory pension provision and the related Kesko Group employees’ insurance portfolio was partly transferred from the Kesko Pension Fund to a pension insurance company. Relating to the transfer of the pension insurance portfolio, the Pension Fund returned pension assets to employer companies. The returned assets, with interest, resulted in a €151.6 million cash inflow to the Kesko Group. In 2009, the total amount paid in contributions was €52.5 million.
On 1 July 2010, Kesko sold eight real estate properties to Kruunuvuoren Satama Oy, one of the Group’s associates. The total selling price was €59.9 million. Companies belonging to the Kesko Group leased the properties for use by the Kesko Group companies, mainly under 15-year leases with extension options. The Group’s €13.8 million gain on the disposal has been recorded as a non-recurring item within other operating income.
In March 2009, the Kesko Group sold four store properties to the Kesko Pension Fund. The debt-free selling price was about €50 million. The Group’s €19.7 million gain on the disposal has been included in the non-recurring items within other operating income.
Goods and services are sold to related parties on normal market terms and conditions and at market prices.
Purchases of goods and services |
||
| € million | 2010 | 2009 |
| Purchases of goods | ||
| Board of Directors and management | 2.1 | 1.4 |
| Total | 2.1 | 1.4 |
| Purchases of services | ||
| Associates | 2.9 | 2.6 |
| Board of Directors and management | 0.1 | 0.1 |
| Kesko Pension Fund | 1.6 | 0.0 |
| Total | 4.6 | 2.7 |
Items included in other operating expenses include lease rentals paid by the Kesko Group to the Kesko Pension Fund in a total amount of €32.2 million (€34.7 million), and to associates in a total amount of €4.4 million (€0.2 million).
In December 2010, the Kesko Group acquired the share capital of three real estate companies and one real estate property from the Kesko Pension Fund. The debt-free price was €125.5 million, as the Kesko Group assumed responsibility for the real estate companies’ liabilities to the Kesko Pension Fund.
Finance costs |
||
| € million | 2010 | 2009 |
| Associates | 0.3 | 0.5 |
| Kesko Pension Fund | 0.0 | 0.0 |
| Total | 0.3 | 0.5 |
Trade receivables |
||
| € million | ||
| Associates | 0.0 | 0.1 |
| Board of Directors and management | 2.6 | 2.1 |
| Pension Fund | 0.1 | 0.3 |
| Total | 2.7 | 2.5 |
Some members of Kesko’s Board of Directors act as K-retailers. At the balance sheet date, the receivables resulting from sales by Kesko to enterprises controlled by them totalled €2.6 million (€2.1 million). The receivables are secured by the commercial credit collateral granted by Vähittäiskaupan Takaus Oy, a Kesko associate. The maximum amount of the collateral is always limited to the realisable value of the counter-security from the K-retailer’s enterprise and the K-retailer entrepreneur to Vähittäiskaupan Takaus. At the end of the financial year, the value of the counter-security was €4.8 million (€3.2 million).
Other current liabilities |
||
| € million | 2010 | 2009 |
| Associates | 34.4 | 38.6 |
| Board of Directors and management | 0.9 | 0.8 |
| Pension Fund | 49.3 | 3.4 |
| Total | 84.6 | 42.8 |
Other current liabilities include, among other things, chain rebate liabilities payable to enterprises controlled by three Kesko Board members acting as K-retailers. Chain rebates are paid retrospectively based on criteria related to the amount of actual annual purchases and the quality of operations.
Other current liabilities include the Kesko Group’s real estate companies’ loans from the Kesko Pension Fund.
In addition, Kesko’s non-current receivables from a real estate associate total €1.5 million.
Board of Directors' compensation |
||
| € thousand | 2010 | 2009 |
| Board members | ||
| Heikki Takamäki, Chair | 87.0 | 81.5 |
| Seppo Paatelainen, Deputy Chair | 59.0 | 53.0 |
| Esa Kiiskinen (from 30 March 2009) | 42.0 | 31.8 |
| Ilpo Kokkila | 44.0 | 41.8 |
| Mikko Kosonen (from 30 March 2009) | 44.0 | 33.8 |
| Maarit Näkyvä | 46.0 | 45.3 |
| Rauno Törrönen (from 30 March 2009) | 42.0 | 31.8 |
| Pentti Kalliala (until 30 March 2009) | 8.5 | |
| Keijo Suila (until 30 March 2009) | 12.0 | |
| Jukka Säilä (until 30 March 2009) | 8.5 | |
Remuneration of the President and CEO, |
||
| € thousand | 2010 | 2009 |
| Matti Halmesmäki, President and CEO | 855.2 | 744.6 |
| Corporate Management Board (the other members) | 1,872.2 | 1,621.4 |
At 31 December 2010, the President and CEO held 150,000 option rights. If shares were subscribed for with the President and CEO’s option rights, the option rights would represent 0.15% of shares and 0.04% of all voting rights. At 31 December 2010, the other Corporate Management Board members held an aggregate of 440,000 option rights. The option rights held by the Corporate Management Board members have equal rules and vesting periods with the other option rights included in the management’s option plans.
The retirement age of the President and CEO is 60 years, and his full pension is 66% of his pensionable remuneration. The retirement age of the other Corporate Management Board members is mainly 60–62, and the full pension is 66% of the pensionable remuneration. The retirement benefits of the CFO are determined on the basis of the Employees’ Pensions Act (TyEL).
The notice period of the President and CEO is 6 months. The severance compensation paid in addition to the salaries for the notice period corresponds to 12 months’ salary. The notice period of the other Corporate Management Board members is 6 months and the severance compensation paid in addition to the salaries for the notice period corresponds to 6–12 months’ salary.