The Group’s related parties include its directors (the Board of Directors, the Managing Director and the Corporate Management Board), subsidiaries, associates, joint ventures and the Kesko Pension Fund.
Subsidiaries, joint ventures and associates are listed in a separate note. The related party transactions disclosed include those transac- tions with related parties that are not eliminated in the consolidated fi - nancial statements.
The following transactions were carried out with related parties:
Sales of goods and services
€ million 2006 2005 Sales of goods
Associates 0.3 0.2
Board of Directors and management 25.9 38.9
26.2 39.1
€ million 2006 2005 Sales of services
Associates 1.6 3.2
Board of Directors 3.0 6.3
the Kesko Pension Fund 1.2 1.1
5.8 10.6
Among associates consolidated using the equity method, a property owned by Valluga-Sijoitus Oy has been leased for the Group’s use. Vähit- täiskaupan Takaus Oy and Vähittäiskaupan Tilipalvelu Oy sell their services to Kesko’s and K-retailers’ retail companies. The other associ- ates 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 fi nancial statements in proportion to their ownership interest.
Three members of Kesko’s Board of Directors act as K-retailers. Group companies sell goods and services to enterprises controlled by them.
The Kesko Pension Fund id a separate legal entity which manages and holds in trust part of the pension assets of the Group’s employees in Finland. Pension assets include Kesko Corporation shares in the amount of €132.2 million. Real estate and premises owned by the Pen- sion Fund have been leased to the Kesko Group, which has subleased most of them to retailers. In 2006, the Kesko Group paid a total amount of €18.8 million (€23.2 million) in contributions to the Pension Fund.
The sales of goods and services to related parties have been carried out on general market terms and conditions and at market prices.
Purchases of goods and services
€ million 2006 2005 Purchases of goods
Associates 14.2 11.5
Board of Directors and management 2.4 1.7
Total 16.6 13.2
€ million 2006 2005 Purchases of services
Associates 7.2 26.8
Board of Directors and management 0.1 0.1
Pension Fund 0.1 -
Total 7.4 26.9
In addition, other operating expenses include rents paid by the Kesko Group to the Kesko Pension Fund in a total amount of €15.6 million.
Board of Directors’ remuneration
€ thousands 2006 2005 Members of the Board of Directors
Heikki Takamäki, Chairman 61.2 51.9 Keijo Suila, Deputy Chairman 43.4 29.9 Matti Kavetvuo, Deputy Chairman
(until 27 March 2006) 8.0 36.8
Pentti Kalliala 33.3 30.3
Eero Kasanen (until 27 March 2006) 6.8 31.6 Ilpo Kokkila (from 27 March 2006) 25.5 -
Maarit Näkyvä 35.8 31.6
Seppo Paatelainen (from 27 March 2006) 27.5 - Kari Salminen (from 30 March 2005) 6.8 21.8 Jukka Säilä (from 27 March 2006) 25.5 - Jukka Toivakka (until 30 March 2005) 7.3
Matti Honkala, Kesko Corporation’s Managing Director until 28 February 2005, was a member of the Board of Directors until 28 February 2005. He received no fees for Board membership.
Salaries and fees of Managing Director, Deputy Managing Director and Corporate Management Board
€ thousands 2006 2005
Matti Honkala, Managing Director
(until 28 February 2005) - 330.1
Matti Halmesmäki, Managing Director
(from 1 March 2005) 598.2 424.8
Kalevo Haapaniemi, Deputy Managing
Director (until 17 March 2005) - 133.1 Juhani Järvi, Deputy Managing Director
(from 17 March 2005) 254.3 220.8
Corporate Management Board
(other members) 1,397.0 1,174.6
Other top management employee benefi ts Share-based payments
At 31 December 2006, the Managing Director held 52,000 share options and the Deputy Managing Director held 21,000 share options. At 31 December 2006, the other Corporate Management Board members held a total of 159,999 share options In 2006, they were granted a total of 6,000 2003F options. The options held by the Corporate Management Board have equal rules and vesting periods with the other options included in the management’s option plans.
Retirement benefi ts
The retirement age of the Managing Director is 60 years and his full retirement benefi t is 66% of his pensionable salary. The retirement age and pensionable salary of the Deputy Managing Director are deter- mined on the basis of the Employees’ Pensions Act (TyEL). The retire- ment benefi ts of the other Corporate Management Board members are determined on the basis of the Employees’ Pensions Act (TyEL), or based on a separate agreement, in which case the retirement age varies between 60 and 62 years, and the full retirement benefi t is 66% of the pensionable salary.
Termination benefi ts
The notice period of Managing Director and Deputy Managing Director is 6 months. 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 severance compensation paid in addition to the salaries for the notice period corresponds to 6-12 months’ salary.
Financial income € million 2006 2005 Associates 0.0 0.2 0.0 0.2 Financial expenses € million 2006 2005 Associates 1.0 0.0
Board of Directors and management 0.0 0.3
1.0 0.3
Trade receivables
€ million 2006 2005
Associates 0.3 0.6
Board of Directors and management 1.9 3.0
Pension Fund 0.1 0.0
2.3 3.6
Three 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 €2.1 million (€3.0 million). The receivables are covered 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- guaranteee granted by the K-retailer’s enterprise and the K-retailer en- trepreneur. At the end of the period, the value of the counter-guarantee was €6.0 million (€5.8 million).
Other current liabilities
€ million 2006 2005
Associates 37.0 36.4
Board of Directors and management 0.8 0.5
Pension Fund 2.6 3.3
40.4 40.2
Other current liabilities include €0.3 million (€0.5 million) in chain reimbursement liabilities payable to enterprises controlled by the three Kesko Board members acting as K-retailers. Chain reimbursements are paid on criteria related to the amount of realised annual sales and the quality of operations.