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“With extended pictures <strong>and</strong> images<br />
that stretch beyond the margins,<br />
we wanted to show that we are exploring<br />
new dimensions <strong>and</strong> turning new pages.<br />
<strong>We</strong> do not believe in the local stereotypes<br />
on the diverse markets<br />
on which the KD Holding Group operates,<br />
but search for the most incisive people<br />
<strong>and</strong> develop the most daring initiatives,<br />
from ways of providing services<br />
to cutting-edge approaches on an individual market.”<br />
Matjaž Gantar<br />
Chief Executive Officer<br />
Piran saltpans, Slovenia
And something else reveals itself: that in our corner of Europe, an extraordinary<br />
history has evolved; a valuable experience for the people, who despite a turbulent<br />
<strong>and</strong> difficult past, have always known how to h<strong>and</strong>le money.<br />
3
Contents<br />
Company profile<br />
Important data on operations in 2007<br />
Activities of the KD Holding Group<br />
Address by the Chief Executive Officer of KD Holding<br />
7<br />
5<br />
8<br />
11<br />
Address by the Chairman of the Supervisory Board<br />
of KD Holding<br />
KD Holding Group organization<br />
KD Holding Group br<strong>and</strong>s<br />
Significant milestones of the KD Holding Group<br />
Events that characterised 2007<br />
Important events following the end of the 2007 financial year<br />
13<br />
21<br />
25<br />
27<br />
28<br />
32<br />
5<br />
1. Business report<br />
35<br />
2. Operations of the Companies within the<br />
Strategic orientations of the KD Holding Group<br />
38<br />
KD Holding Group<br />
103<br />
Shares, dividends <strong>and</strong> ownership structure<br />
41<br />
Asset management<br />
109<br />
Corporate governance report<br />
46<br />
Insurance<br />
148<br />
Operations of the KD Holding Group in 2007<br />
53<br />
Sales of financial services<br />
166<br />
Risk management<br />
64<br />
Capital investments<br />
172<br />
Human resource management<br />
72<br />
Private equity fund<br />
172<br />
Corporate communications<br />
82<br />
Closed-end investment funds<br />
Information support<br />
84<br />
in South Eastern Europe<br />
173<br />
Research <strong>and</strong> development<br />
85<br />
Cinematography <strong>and</strong> entertainment <strong>business</strong><br />
Report on the corporate social responsibility<br />
of the KD Holding Group<br />
175<br />
of the KD Holding Group<br />
90<br />
Real estate<br />
180<br />
Other activities of selected subsidiaries<br />
181<br />
A selection of the most important activities of associated companies<br />
185<br />
3. Financial Statements 193
The values that form the foundation of KD Holding Group<br />
are trust, openness, <strong>and</strong> equality.<br />
<strong>We</strong> are not afraid to look for new angles <strong>and</strong> find new solutions.<br />
But if you want to harvest trust, you must sow responsibly:<br />
to people, nature, <strong>and</strong> time.<br />
Only in this way is it possible to weather the great global tides <strong>and</strong><br />
the smaller local ripples, to take from the sea the salt that enriches the day,<br />
before a new wave comes along <strong>and</strong> carries it away.<br />
6<br />
Piran saltpans, Slovenia
Company profile<br />
Parent company:<br />
KD Holding, finančna družba, d. d.<br />
Abbreviated company name: KD Holding d. d. 1<br />
Registered office:<br />
206 Celovška cesta, Ljubljana 1000, Slovenia<br />
Telephone: +386 1 582 67 00<br />
Fax: +386 1 518 41 00<br />
E-mail: info@<strong>kd</strong>-<strong>group</strong>.com<br />
<strong>We</strong>bsite: www.<strong>kd</strong>-<strong>group</strong>.com<br />
Activity: 64.200 - Activity of holdings 2<br />
Legal status: Public limited company<br />
Company registration number: 1585126<br />
Tax number: 66296374<br />
VAT identification number: SI66296374<br />
Entry in the Company Register: District Court<br />
of Ljubljana, no. 2000/15252 dated 3 January<br />
2001, reg. no. 1/34049/00<br />
Share capital: 98,215,756.97 EUR<br />
Number of no-par-value shares issued:<br />
2,942,053<br />
Number of ordinary registered shares KDHR:<br />
2,675,640<br />
Number of participating preference shares KDHP:<br />
266,413<br />
Date of incorporation: 3 January 2001<br />
Important data on operations in 2007<br />
7<br />
Unit KD Holding Group KD Holding d. d.<br />
Net revenue from sales of goods <strong>and</strong> services in EUR thous<strong>and</strong> 77,232 501<br />
Revenue from insurance premiums in EUR thous<strong>and</strong> 294,759 -<br />
Net finance income in EUR thous<strong>and</strong> 56,687 35,248<br />
Net profit or loss in EUR thous<strong>and</strong> 34,946 17,336<br />
Assets in EUR thous<strong>and</strong> 956,047 402,554<br />
Equity capital in EUR thous<strong>and</strong> 340,264 225,857<br />
Return on equity % 11.2 7<br />
Share book value EUR 116.40 90.46<br />
Earnings per share EUR 12.38 6.36<br />
1 The names of companies in the Annual Report are used with markings of organisational form (e.g. d. d. - PLC) when they are first mentioned <strong>and</strong> when the full or abbreviated official name is given, but they are omitted in the rest<br />
of the text for easier reading.<br />
2 Until 31 December 2007: 74.150 - Activity of holdings.
Activities of the KD Holding Group<br />
The KD Holding Group 3 is one of the largest<br />
<strong>business</strong> <strong>group</strong>s in Slovenia <strong>and</strong> is developing into<br />
one of the largest <strong>group</strong>s in Central<br />
<strong>and</strong> South Eastern Europe.<br />
The Group currently manages 24 mutual funds <strong>and</strong><br />
two investment companies as part of its investment<br />
fund management. KD Skladi d. o. o. 4 is the leading<br />
asset management company in Slovenia, managing<br />
12 mutual funds <strong>and</strong> one investment company. In<br />
The Group’s principal <strong>business</strong> activities are:<br />
asset management:<br />
investment fund management,<br />
private wealth management <strong>and</strong> stockbroking;<br />
insurance:<br />
the region, the Group manages four mutual funds<br />
in Croatia, three in Romania, two mutual funds <strong>and</strong><br />
one investment company in Bulgaria, two mutual<br />
funds in Slovakia <strong>and</strong> one in Serbia. It is planning<br />
to enter the Macedonian market in 2008.<br />
life insurance,<br />
8<br />
property <strong>and</strong> health insurance;<br />
sales of financial services;<br />
capital investments.<br />
The principal <strong>business</strong> activity of the parent<br />
company KD Holding d. d. is the management of<br />
listed <strong>and</strong> non-listed investments <strong>and</strong> the generation<br />
of financial returns in accordance with the structure<br />
of its portfolio. The parent company makes<br />
decisions regarding all the KD Holding Group’s<br />
major strategic investments.<br />
The KD Holding Group has almost 2,000<br />
employees in 12 countries <strong>and</strong> was entrusted with<br />
the management of more than EUR 1 billion of<br />
assets by more than 120,000 clients in 2007.<br />
Asset management<br />
The Group’s asset management is divided into:<br />
investment fund management,<br />
private wealth management <strong>and</strong> stockbroking.<br />
Private wealth management <strong>and</strong> stockbroking<br />
is becoming an increasingly important <strong>business</strong><br />
activity for the Group. It is gaining strength both<br />
in Slovenia <strong>and</strong> abroad, where the Group has<br />
companies in Bulgaria, Croatia <strong>and</strong> Romania.<br />
Insurance<br />
The KD Holding Group’s insurance <strong>business</strong><br />
comprises life, property <strong>and</strong> health insurance.<br />
It has two public limited companies in Slovenia:<br />
KD Življenje d. d., a life insurer, <strong>and</strong> Adriatic<br />
Slovenica d. d., a universal insurer that markets life<br />
insurance <strong>and</strong> non-life insurance, including health<br />
insurance. Adriatic Slovenica was ranked second<br />
among insurers in Slovenia in 2007, while KD<br />
Življenje, was ranked third among life insurers.<br />
The Group has been developing <strong>and</strong> marketing life<br />
insurance in other countries at branches of KD<br />
Življenje <strong>and</strong> at independently established insurance<br />
companies. It is currently present in Bulgaria,<br />
Romania, Ukraine, the Czech Republic <strong>and</strong> Slovakia.<br />
3 Hereinafter: the Group.<br />
4 On 16 January 2008, the company KD Investments, družba za upravljanje, d. o. o. was renamed KD Skladi,<br />
družba za upravljanje, d. o. o. (abbreviated name: KD Skladi, d. o. o.). The company’s English name is KD Funds<br />
– Management Company LLC (abbreviated name: KD Funds LLC).
Sales of financial services<br />
Last year, the Group established KD Finančna<br />
točka, d. o. o. which combines all the financial<br />
services offered within the KD Holding Group. It<br />
is not merely a collective sales channel, but also<br />
represents a tangible upgrade in services for clients,<br />
with the entire range of financial services available<br />
at a single point.<br />
Capital investments<br />
The Group’s capital investments are managed by<br />
the parent company KD Holding <strong>and</strong> the newly<br />
established company KD Kapital, d. o. o. Cinema<br />
<strong>and</strong> entertainment are also included in the Group’s<br />
principal <strong>business</strong> activities <strong>and</strong> last year it was<br />
more active in the area of real estate. Other<br />
principal <strong>business</strong> activities include publishing,<br />
9<br />
the management of closed-end investment funds<br />
in South Eastern Europe <strong>and</strong> private equity<br />
management.
10<br />
Address by the Chief Executive Officer<br />
of KD Holding<br />
The big picture<br />
In 2007, the KD Holding Group proved itself to be strong,<br />
diversified <strong>and</strong> contemporary enough to rise to every<br />
challenge in the interest of its customers, investors <strong>and</strong><br />
policyholders. Such opportunities clearly indicate the<br />
importance of not only the portfolio of investments, but also<br />
the diverse markets on which the globally ambitious regional<br />
financial <strong>group</strong> operates today. Yes, it was a good year.<br />
Those of you who know us will not be surprised that some<br />
of the photographs in this year’s report go beyond the<br />
typical format. With extended pictures <strong>and</strong> images that<br />
stretch beyond the margins, we wanted to show that we are<br />
exploring new dimensions <strong>and</strong> turning new pages. <strong>We</strong> do<br />
not believe in the local stereotypes on the diverse markets<br />
on which the KD Holding Group operates, but search for the<br />
most incisive people <strong>and</strong> develop the most daring initiatives,<br />
from ways of providing services to cutting-edge approaches<br />
on an individual market. It is proven time <strong>and</strong> time again<br />
that there are sometimes more similarities between the<br />
streets of Sofia <strong>and</strong> Bratislava than between two street<br />
corners in one Parisian quarter. And something else reveals<br />
itself: that in our corner of Europe, an extraordinary history<br />
has evolved; a valuable experience for the people, who<br />
despite a turbulent <strong>and</strong> difficult past, have always known<br />
how to h<strong>and</strong>le money.<br />
It is in this that I see the message of our operations in 2007.<br />
<strong>We</strong> are a diverse Group: we respect the environment <strong>and</strong><br />
customs where we operate, but a global society dem<strong>and</strong>s<br />
that we constantly introduce new dimensions. In this way,<br />
new horizons are continually opening before us. <strong>We</strong> grow<br />
<strong>and</strong> exp<strong>and</strong> together with our users, with our customers.<br />
This is growth that they can trust - <strong>and</strong> trust that grows.<br />
Both the mission <strong>and</strong> the vision of the Group are derived<br />
from the intertwining of responsible developmental growth<br />
<strong>and</strong> partnerships with users, employees <strong>and</strong> owners.<br />
Therefore, the Group, as a respected, modern <strong>and</strong> socially<br />
responsible financial <strong>group</strong>, is already helping to shape the<br />
future trends of financial services in Central, Southern <strong>and</strong><br />
Eastern Europe.
When we gathered together at the first strategic conference<br />
of Group companies, we were able to establish, without false<br />
modesty, that we have made great strides in all key areas<br />
of operations: the amount of assets in our investment funds<br />
has risen, insurance revenues are up <strong>and</strong> our investment<br />
activities have strengthened. Internally, the ever increasing<br />
synergy of the Group’s operations can be seen in the<br />
introduction of divisions. Externally, with a uniform corporate<br />
image, the user most directly feels this synergy through the<br />
new br<strong>and</strong> (<strong>and</strong> company!) KD Finančna točka, which has<br />
opened the door to an entirely new, never before experienced<br />
complete service: a unique supermarket of financial services<br />
<strong>and</strong> asset advisory services in one place.<br />
Now let us look in more detail at the bigger picture.<br />
The Group performed extremely well in 2007, as reflected<br />
in the improvement of all key performance indicators. Total<br />
operating revenues were up 25 percent from the previous<br />
year, reaching EUR 455.6 million. Net profit for the year was<br />
EUR 34.9 million, a 67 percent increase from 2006. Total<br />
capital was up 20 percent from the previous year, reaching<br />
EUR 340.3 million. The high growth in net profit was also<br />
evident in our return on equity of 11.2 percent in 2007, a<br />
significant improvement from 2006. The Group is already<br />
present in 12 countries <strong>and</strong> has nearly 2,000 employees.<br />
More than 120,000 customers have demonstrated their trust<br />
in us.<br />
In the area of asset management, the assets in all<br />
investment funds, including those under private wealth<br />
management, exceeded EUR 1 billion for the first time in<br />
2007. <strong>We</strong> were extremely successful in this area, as the<br />
majority of funds (17) exceeded established benchmarks.<br />
The oldest Slovenian mutual fund, KD Galileo, celebrated its<br />
15 th anniversary. In Croatia, marketing of a fourth mutual<br />
fund, KD Nova Europa, began, with nearly EUR 1 million<br />
paid into the fund in its first five days of operations. With<br />
the public subscription of units of the KD Ekskluziv fund in<br />
Belgrade, the Group’s 26 th investment fund was born. All of<br />
the Group’s funds are professionally sound <strong>and</strong> operationally<br />
strong, enabling us to market them outside the countries<br />
in which they were established. <strong>We</strong> are thus becoming<br />
an important channel to global investments for customers<br />
from the region, <strong>and</strong> a key expert in financial <strong>and</strong> <strong>business</strong><br />
opportunities in this part of Europe for the rest of the world.<br />
Our plans for the insurance sector are also clearly ambitious.<br />
<strong>We</strong> have renamed Slovenica Življenje KD Življenje <strong>and</strong><br />
consolidated our life insurance products. As the second<br />
largest insurance company in Slovenia, the universal insurer<br />
Adriatic Slovenica also marketed life <strong>and</strong> property insurance,<br />
including health insurance, in 2007.<br />
The Group also demonstrated its social responsibility in the<br />
insurance sector in 2007, with Adriatic Slovenica putting<br />
forth maximum effort in the hardest hit areas in the Celje<br />
<strong>and</strong> Gorenjska regions following September’s catastrophic<br />
storms. Policyholders were repaid an enormous amount in<br />
property damages. This however had no significant impact<br />
on the company’s operating results due an appropriate level<br />
of reinsurance. The Group’s market share in the area of life<br />
insurance is growing rapidly. Last year, we improved our<br />
market share to 15 percent, placing third amongst life insurers<br />
at the end of the year. In 2008, we are planning further<br />
growth with the aim of achieving second place amongst life<br />
insurance providers. Our life insurance products are present<br />
abroad in the Czech Republic, Slovakia, Romania<br />
<strong>and</strong> Bulgaria, with plans to exp<strong>and</strong> to Ukraine <strong>and</strong> Croatia.<br />
A significant step forward with regard to the sale of financial<br />
services is the aforementioned establishment of KD Finančna<br />
točka, equally owned by the insurer KD Življenje <strong>and</strong> the asset<br />
management company KD Skladi. It is not just Slovenian<br />
users, with access to more than 80 investment funds,<br />
stockbroking services <strong>and</strong> private wealth management, who<br />
benefit from this network of financial supermarkets; the Group<br />
also uses it to develop its contemporary marketing know-how,<br />
which it employs to its advantage on all new markets. KD<br />
Finančna točka has also joined the founding companies of our<br />
prestigious service, Club KD Plus.<br />
In addition to more efficient <strong>and</strong> transparent operations, the<br />
benefits of the Group’s division-based organisation include<br />
the transfer of non-strategic investments to KD Kapital, which<br />
will facilitate improved capital investment management. The<br />
Group is present in a broad range of segments: it manages<br />
a private equity fund; it is active in cinematography <strong>and</strong><br />
entertainment <strong>and</strong> in education <strong>and</strong> publishing. The activities<br />
of its subsidiaries include the design <strong>and</strong> manufacture of<br />
watercraft, retail trade, the food industry <strong>and</strong> others. With the<br />
acquisition of <strong>build</strong>ing rights for the Šumi project in the centre<br />
of Ljubljana <strong>and</strong> the establishment of KD Kvart, the Group’s<br />
real estate division has become increasingly more active.<br />
And what is the Group’s biggest project <strong>and</strong> my greatest wish<br />
for 2008?<br />
Without a doubt the Group’s entry into the banking sector. In<br />
2007, we brought together a team of experienced banking<br />
experts. The realisation of these plans in 2008 will bring the<br />
KD Holding Group’s range of products <strong>and</strong> services full circle<br />
- <strong>and</strong> surely broaden our picture, not merely by a page or two,<br />
but with an entire new chapter. Even as we take this new step<br />
together, we are very conscious of the fact that our growth as<br />
partners is based solely on the values of trust, openness <strong>and</strong><br />
equality.<br />
Only in this way can trust grow - <strong>and</strong> only that growth<br />
stimulates trust.<br />
Matjaž Gantar<br />
11
Address by the Chairman of the<br />
Supervisory Board of KD Holding<br />
In its third year in office, the Supervisory Board continued<br />
to actively monitor the company’s operations. There were<br />
no changes in the Board’s composition. <strong>We</strong> were regularly<br />
informed about the company’s operations at five regular<br />
<strong>and</strong> two correspondence sessions. By being familiar with<br />
the work of the Management Board <strong>and</strong> its decisions <strong>and</strong><br />
through discussions <strong>and</strong> initiatives, the Supervisory Board<br />
performed its corporate governance role consistently <strong>and</strong><br />
responsibly, in accordance with the capacities <strong>and</strong> duties<br />
prescribed by the law.<br />
<strong>We</strong> paid particular attention to the professional<br />
supervision of operations, the risk management system<br />
<strong>and</strong> the realisation of KD Holding’s strategies. <strong>We</strong><br />
regularly monitored the operations of the KD Holding<br />
Group’s companies abroad, focusing primarily on the<br />
expansion of life insurance activities on the markets of<br />
South Eastern Europe. Sustained development plays<br />
an important role in the company’s long-term strategy.<br />
Therefore, the Supervisory Board initiated <strong>and</strong> supported<br />
such development activities. Based on the resolution of<br />
the General Meeting of Shareholders of 30 August 2007,<br />
the Supervisory Board approved the recommendations<br />
regarding the remuneration of its members.<br />
Last year, the company underwent a reorganisation <strong>and</strong><br />
began introducing division-based operations which will<br />
facilitate more efficient <strong>and</strong> transparent operations. Group<br />
companies also took significant steps to improve <strong>and</strong><br />
develop their approach to customers. This is reflected<br />
by the favourable results in key areas of operations,<br />
the management of investment funds, private wealth<br />
management <strong>and</strong> in the life insurance sector. With its<br />
approval, the Supervisory Board demonstrated its full<br />
support for the project to develop banking services. The<br />
Group began actively implementing the project last year.<br />
Banking services will compliment existing insurance<br />
<strong>and</strong> financial products, further spurring the growth <strong>and</strong><br />
development of the KD Holding Group. Real estate<br />
projects will also play an important role in the future.<br />
Our results indicate that the Management Board <strong>and</strong><br />
co-workers fulfilled the company’s plans <strong>and</strong> managed<br />
the company’s operations in accordance with its<br />
long-term strategic policies. The Supervisory Board is<br />
therefore justifiably satisfied with the achievements of KD<br />
Holding <strong>and</strong> the entire Group in 2007.<br />
In the future, the Group will face new challenges such as<br />
penetrating the markets of Central, Southern <strong>and</strong> Eastern<br />
Europe <strong>and</strong> strengthening its market position in Slovenia.<br />
The Supervisory Board will support the Group in these<br />
activities in accordance with its competencies.<br />
13<br />
Aleš Vahčič, PhD
Management Team<br />
14<br />
Janez Bojc, Deputy Chief Executive Officer, KD Holding<br />
The photographs of the KD Holding Group management were taken in the City Museum of Ljubljana
Peter Grašek, Business Director, KD Holding<br />
15
16<br />
Aljoša Tomaž, Assistant to the Chief Executive Officer, KD Holding
Dag Kralj, President of the Management Board, KD Skladi<br />
17
18<br />
Matija Šenk, President of the Management Board, KD Življenje
Who’s who in the KD Holding Group *<br />
Matjaž Gantar<br />
Chief Executive Officer, KD Holding d. d.<br />
Telephone: +386 1 582 67 89<br />
Fax: +386 1 519 28 47<br />
E-mail: matjaz.gantar@<strong>kd</strong>-<strong>group</strong>.si<br />
Mojca Burkelca<br />
Director of Finance <strong>and</strong> Accounting, KD Holding d. d.<br />
Telephone: +386 1 582 68 88<br />
Fax: +386 1 518 41 00<br />
E-mail: mojca.burkelca@<strong>kd</strong>-<strong>group</strong>.si<br />
Janez Bojc<br />
Deputy Chief Executive Officer, KD Holding d. d.<br />
Telephone: +386 1 582 67 96<br />
Fax: +386 1 518 41 00<br />
E-mail: janez.bojc@<strong>kd</strong>-<strong>group</strong>.si<br />
Simona Jamnik<br />
Director of Legal Affairs, KD Holding d. d.<br />
Telephone: +386 1 582 68 88<br />
Fax: +386 1 518 41 00<br />
E-mail: simona.jamnik@<strong>kd</strong>-<strong>group</strong>.si<br />
Peter Grašek<br />
Business Director, KD Holding d. d.<br />
Telephone: +386 1 582 68 88<br />
Fax: +386 1 518 41 00<br />
E-mail: peter.grasek@<strong>kd</strong>-<strong>group</strong>.si<br />
Aljoša Tomaž<br />
Assistant to the Chief Executive Officer,<br />
KD Holding d. d.<br />
Telephone: +386 59 220 000<br />
Fax: +386 1 582 67 20<br />
E-mail: aljosa.tomaz@<strong>kd</strong>-<strong>group</strong>.si<br />
Samo Logar<br />
Director of Human Resource <strong>and</strong> Organisation,<br />
KD Holding d. d.<br />
Telephone: +386 1 582 68 88<br />
Fax: +386 1 518 41 00<br />
E-mail: samo.logar@<strong>kd</strong>-<strong>group</strong>.si<br />
Polona Pergar Guzaj<br />
Director of Internal Audit, KD Holding d. d.<br />
Telephone: +386 1 582 68 88<br />
Fax: +386 1 518 41 00<br />
E-mail: polona.pergar@<strong>kd</strong>-<strong>group</strong>.si<br />
19<br />
Gregor Sluga<br />
Advisor to the Chief Executive Officer,<br />
KD Holding d. d.<br />
Telephone: +386 1 582 67 38<br />
Fax: +386 1 519 28 47<br />
E-mail: gregor.sluga@<strong>kd</strong>-<strong>group</strong>.si<br />
Matjaž Potokar<br />
Director of Corporate Communications,<br />
KD Holding d. d.<br />
Telephone: +386 1 582 68 88<br />
Fax: +386 1 518 41 00<br />
E-mail: matjaz.potokar@<strong>kd</strong>-<strong>group</strong>.si<br />
*As at 1 may 2008
KD Holding Group key divisions<br />
Investment fund management<br />
Mojca Ribič<br />
Director of Marketing, KD Holding d. d.<br />
Telephone: +386 1 582 68 88<br />
Fax: +386 1 582 66 52<br />
E-mail: mojca.ribic@<strong>kd</strong>-<strong>group</strong>.si<br />
Dag Kralj<br />
President of the Management Board, KD Skladi d. o. o.<br />
Telephone: +386 1 58 62 780<br />
Fax: +386 1 518 40 88<br />
E-mail: dag.kralj@<strong>kd</strong>-<strong>group</strong>.si<br />
Pavel Škerlj<br />
Private wealth management <strong>and</strong> stockbroking<br />
Director of Information Technology <strong>and</strong> General<br />
Affairs, KD Holding d. d.<br />
Telephone: +386 1 582 68 88<br />
Fax: +386 1 518 41 00<br />
E-mail: pavel.skerlj@<strong>kd</strong>-<strong>group</strong>.si<br />
Benjamin Jošar<br />
President of the Management Board, KD BPD d. o. o.<br />
Telephone: +386 59 220 000<br />
Fax: +386 1 582 67 20<br />
20<br />
E-mail: benjamin.josar@<strong>kd</strong>-<strong>group</strong>.si<br />
Insurance<br />
Matija Šenk<br />
President of the Management Board, KD Življenje d. d.<br />
Telephone: +386 1 582 65 50<br />
Fax: +386 1 518 19 95<br />
E-mail: matija.senk@<strong>kd</strong>-zivljenje.si
KD Holding Group organisation<br />
KD Holding d. d.,<br />
Ljubljana<br />
KD Investments d. o. o., Ljubljana*<br />
100%<br />
KD Investments d. o. o., Zagreb<br />
100%<br />
KD Investments d. o. o., Belgrade<br />
100%<br />
SAI KD Investments S. A., Bucharest<br />
100%<br />
KD Investments EAD, Sofia<br />
100%<br />
KD Investments, sprav. spol.,a. s., Bratislava<br />
100%<br />
KD Investments, Sp. Z. o. o., Warsaw<br />
100%<br />
KD BPD, d. o. o., Ljubljana<br />
100%<br />
KD Upravljanje imovinom d. o. o., Zagreb<br />
100%<br />
KD Capital Management S. A., Bucharest<br />
100%<br />
KD Securities EAD, Sofia<br />
100%<br />
KD Asset Management B.V., Amsterdam<br />
100%<br />
KD Life jsc, Kiev<br />
100%<br />
KD Življenje d. d., Ljubljana 91.17%<br />
Bratislava Branch<br />
KD Life Asigurari S.A., Bucharest<br />
100%<br />
KD Life a.d., Sofia<br />
100%<br />
SC KD Fond De Pensii SA, Bucharest<br />
99.00%<br />
Adriatic Slovenica d. d., Koper<br />
95.72%<br />
KD Kapital d. o. o., Ljubljana<br />
100%<br />
KD Private Equity d. o. o., Belgrade<br />
100%<br />
Ljubljanski kinematografi d. d., Ljubljana<br />
96.61%<br />
Kinematografi Maribor d. o .o., Maribor<br />
69.99%<br />
75.01%<br />
30.01 %<br />
Kolosej Celje d. o. o., Celje<br />
100%<br />
KD Mark d. o. o., Ljubljana<br />
100%<br />
R.E. Invest d. o. o., Ljubljana<br />
100%<br />
KD Kvart d. o. o., Ljubljana<br />
100%<br />
Coloseum Multiplex Holdings b. v., Amsterdam<br />
100%<br />
Firsthouse Investments ltd., Cyprus<br />
100%<br />
Fontes Group d. o. o., Belgrade<br />
95.00%<br />
GEA College d. d., Ljubljana<br />
63.63%<br />
* Since 16 January 2008 KD Skladi<br />
ABDS d. d., Sarajevo<br />
58.79%<br />
KD Finančna točka d. o. o., Ljubljana<br />
50.00%<br />
KD Funds Advisors, LLC, ZDA<br />
90.00%<br />
KD Finančna točka d. o. o., Ljubljana<br />
50.00%<br />
KD ViFin s. r. o., Bratislava<br />
83.98%<br />
Zap d. o. o., Murska Sobota<br />
100%<br />
ČZD Kmečki Glas d. o. o., Ljubljana<br />
80.08%<br />
KD Mont a. d., Podgorica<br />
80.50%<br />
Vrtnarstvo Celje d. o. o., Celje<br />
50.46%<br />
VIB a.d., Banja Luka<br />
51.00%<br />
Globus Film d. o. o., Koper<br />
100%<br />
KD Kinematografi Funds Advisors, Kolosej LLC, d. o. ZDA o., Tuzla<br />
100%<br />
Kolosej Ljubljana d. o. o., Ljubljana<br />
100%<br />
GEA College PIC d. o. o., Ljubljana<br />
100%<br />
100%<br />
(as at 31 December 2007)<br />
2INVEST s. r. l., Bucharest<br />
70.00%<br />
KD Life s. r. o., Praga<br />
100%<br />
Oklev d. o. o., Ljubljana<br />
100%<br />
Kolosej Maribor d. o. o., Maribor<br />
47.58 % 100%<br />
52.20%<br />
Zabavni Centri d. o. o., Zagreb<br />
100%<br />
Onisac d. o. o., Ljubljana<br />
0.22 % 70.00 %<br />
100%<br />
GEA College CVŠ d. o. o., Ljubljana<br />
100%<br />
30 %<br />
21<br />
*
Companies in the KD Holding Group by division (as at 31 December 2007)<br />
KD Holding d. d., Ljubljana<br />
Investment fund management<br />
KD Investments d. o. o.,<br />
Ljubljana*<br />
KD Investments správ. spol., a. s,<br />
Bratislava<br />
SAI KD Investments S. A.,<br />
Bucharest<br />
KD Investments EAD, Sofia<br />
KD Investments d. o. o., Zagreb<br />
KD Investments a. d., Belgrade<br />
KD Investments Sp. Z. o. o.,<br />
Warsaw<br />
Private wealth management<br />
<strong>and</strong> stockbroking<br />
KD BPD, d. o. o., Ljubljana<br />
KD Upravljanje imovinom,<br />
d. o. o., Zagreb<br />
KD Capital Management S. A.,<br />
Bucharest<br />
KD Securities EAD, Sofia<br />
Insurance Real estate Capital investments<br />
Adriatic Slovenica d. d., Koper<br />
KD Življenje, d. d., Ljubljana<br />
ZAP d. o. o., Murska Sobota<br />
KD Life AD, Sofia<br />
KD Life jsc, Kiev<br />
KD Life Asigurari S. A.,<br />
Bucharest<br />
2INVEST s. r. l., Bucharest<br />
KD ViFin, Bratislava<br />
KD Life s. r. o., Prague<br />
R.E. Invest, d. o. o.,<br />
Ljubljana<br />
KD Kvart, d. o. o.,<br />
Ljubljana<br />
KD Kapital, d. o. o., Ljubljana<br />
Ljubljanski kinematografi<br />
d. d., Ljubljana<br />
Globus Film d. o. o., Koper<br />
Oklev d. o. o., Ljubljana<br />
Kinemtografi Kolosej<br />
d. o. o., Tuzla<br />
Kolosej Ljubljana d. o. o., Ljubljana<br />
Kolosej Maribor d. o. o., Maribor<br />
Zabavni Centri d. o. o., Zagreb<br />
Onisac d. o. o., Ljubljana<br />
Kinematografi Maribor<br />
d. o. o., Maribor<br />
Kolosej Celje, d. o. o.<br />
GEA College d. d., Ljubljana<br />
GEA College PIC d. o. o., Ljubljana<br />
GEA College CVŠ d. o. o., Ljubljana<br />
KD Private Equity d.o.o., Belgrade<br />
22<br />
KD Fund Advisors, LLC, USA<br />
KD Asset Management, b. v.,<br />
Amsterdam<br />
ČZS Kmečki glas d. o. o., Ljubljana<br />
Vrtnarstvo Celje d. o. o., Celje<br />
ABDS d. d., Sarajevo<br />
KD Mont a. d., Podgorica<br />
VIB a. d., Banja Luka<br />
Firsthouse Investments Ltd., Cyprus<br />
Colosseum Multiplex Holdings b.v.,<br />
Amsterdam<br />
Sales of financial services<br />
KD Finančna točka, d. o. o., Ljubljana<br />
KD Mark d. o. o., Ljubljana<br />
Fontes Group d. o. o.,Belgrade<br />
* Since 16 January 2008 KD Skladi, d. o. o.<br />
In addition to subsidiaries, KD Holding Group also has the following associated enterprises owned by KD<br />
Holding or its subsidiaries:<br />
Company Ownership share (in %)<br />
KD Concorde d. o. o. 50.00<br />
Seaway Group d. o. o. 50.00<br />
Zabavna znanost d. o. o. 50.00<br />
Zellner Holdings Limited, Cyprus 48.65<br />
Nama d. d. 48.46<br />
KD Private Equity, b. v. The Netherl<strong>and</strong>s 48.21<br />
* more than 20 percent together with the parent company, KD Group d. d.<br />
Company Ownership share (in %)<br />
Kinematografi Kranj d. o. o. 45.00<br />
Deželna banka Slovenije d. d. 33.68<br />
Semenarna Ljubljana d. d. 29.90<br />
Žičnice Vogel d. d. 21.54<br />
Radio Kranj d. o. o. 20.00<br />
KD ID d. d.* 9.93
KD Holding Group corporate structure<br />
Management<br />
Chief Executive<br />
Officer<br />
Deputy, Assistant, Advisor to CEO<br />
Business<br />
Director<br />
Directors<br />
Finance<br />
<strong>and</strong> Accounting<br />
Divisions<br />
Information<br />
Technology <strong>and</strong><br />
General Affairs<br />
Human Resource<br />
Management<br />
<strong>and</strong> Organisation<br />
Corporate<br />
Comunications<br />
Marketing Legal Affairs Internal Audit<br />
Investment<br />
Fund Management<br />
Private <strong>We</strong>alth<br />
Management <strong>and</strong> Stockbroking<br />
Insurance<br />
Real Estate<br />
Capital<br />
Investments<br />
Core products<br />
<br />
<br />
<br />
<br />
<br />
…<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
extended range of services<br />
<br />
<br />
<br />
<br />
<br />
Major projects<br />
<br />
<br />
new investment<br />
opportunities<br />
in Slovenia <strong>and</strong><br />
the countries<br />
of the former<br />
Yugoslavia<br />
Investments<br />
<br />
<br />
<br />
<br />
<br />
<br />
Slovenije<br />
<br />
<br />
<br />
23<br />
KD Finančna točka - sales of financial services
24<br />
Piran saltpans, Slovenia
KD Holding Group br<strong>and</strong>s<br />
The Group enhances growth by constantly<br />
developing, strengthening <strong>and</strong> upgrading existing<br />
established br<strong>and</strong>s <strong>and</strong> by creating new ones.<br />
into consideration <strong>and</strong> reflects it. The objective was<br />
to create a flexible graphic identity structure to allow<br />
each company to retain its own level of identity,<br />
while contributing to the synergies within the Group<br />
The KD corporate br<strong>and</strong> is not merely a corporate<br />
as a whole.<br />
br<strong>and</strong>, but is above all the most recognisable <strong>and</strong><br />
credible connecting element of the company’s<br />
financial services <strong>and</strong> product br<strong>and</strong>s. These are<br />
the Group’s key <strong>and</strong> most visible element. KD<br />
is synonymous with the effective <strong>and</strong> profitable<br />
management of long-term <strong>and</strong> short-term<br />
investments. Through its strategic management, the<br />
Group ensures the establishment <strong>and</strong> increasing<br />
recognition of the KD corporate br<strong>and</strong> <strong>and</strong> individual<br />
product br<strong>and</strong>s on new markets. Through the<br />
expansion of operations, new management<br />
companies, stockbroking companies, investment<br />
funds <strong>and</strong> other investments <strong>and</strong> with other new<br />
financial corporations <strong>and</strong> products, the Group is<br />
<strong>build</strong>ing a diverse yet solid architecture for the KD<br />
br<strong>and</strong>. It focuses special attention on the consistent<br />
use of its corporate image.<br />
The reasons for the change to KD’s graphical<br />
corporate image lie in the rapid growth <strong>and</strong><br />
expansion of the Group in recent years. The<br />
previous image was launched in 2001, when<br />
the company began operating under the new,<br />
abbreviated name of KD (previously Kmečka<br />
družba). The old image was monolithic <strong>and</strong> no<br />
longer fit the system of the new organisation.<br />
There is a hierarchy of subsidiaries in the KD<br />
system. KD’s new br<strong>and</strong> image takes this hierarchy<br />
In 2007, the Group established the new company,<br />
KD Finančna točka, which is the most important<br />
distribution channel for products <strong>and</strong> services<br />
<strong>and</strong> the main ambassador of KD’s image to the<br />
public. The company offers a unique <strong>and</strong> integrated<br />
concept of points of sale for financial services under<br />
the name Finančna točka, both in its network of<br />
sales offices around Slovenia, <strong>and</strong> via its web portal<br />
at www.financna-tocka.si.<br />
With regard to insurance, Adriatic Slovenica is an<br />
established br<strong>and</strong> <strong>and</strong> one of the most successful<br />
insurers on the Slovenian market. Another major<br />
br<strong>and</strong> in the Group is Kolosej, a byword for<br />
state-of-the-art cinematography in Slovenia, known<br />
for the quality of its film experience. Gea College<br />
also has a rising profile in the area of education in<br />
Slovenia <strong>and</strong> throughout the region.<br />
25
26<br />
Ljubljanica River, Slovenia
Significant milestones of the<br />
KD Holding Group<br />
1994<br />
2001<br />
The KD Holding Group has its origins in 1994<br />
The letters KD replace the name Kmečka družba<br />
when the asset management company Kmečka<br />
družba, družba za upravljanje investicijskih skladov,<br />
d. d, is established.<br />
1996<br />
Kmečka družba becomes the manager of the<br />
oldest Slovenian mutual fund - KD Galileo. Two<br />
more mutual funds, the equity fund KD Rastko <strong>and</strong><br />
the bond fund KD Bond, are established in that<br />
year from the assumed part of four mutual funds of<br />
another asset management company.<br />
Purchase of Slovenica d. d. insurance company.<br />
1997<br />
The total value of assets under management<br />
in the three Kmečka družba mutual funds exceeds<br />
SIT 1 billion (more than EUR 4.1 million).<br />
1998<br />
PID Kmečka družba d. d. shares are listed on<br />
the Ljubljana Stock Exchange.<br />
2000<br />
Kmečka družba becomes the first Slovenian<br />
asset management company to obtain a licence to<br />
invest assets from its mutual funds on foreign stock<br />
markets.<br />
Establishment of the Kmečka družba d. d.<br />
Group (now KD Group d. d.) by spinning off a part<br />
of Kmečka družba.<br />
with the introduction of a new corporate image.<br />
Kmečka družba is renamed KD Investments, družba<br />
za upravljanje, d. d.<br />
PID Kmečka družba is divided into three<br />
companies, one of them being Kmečka družba<br />
Holding d. d. later renamed KD Holding d. d.<br />
Formal opening of Kolosej Ljubljana, the first<br />
cinema multiplex in Slovenia.<br />
With the opening of the first Financial Point<br />
(Finančna točka) in Ljubljana, the development <strong>and</strong><br />
expansion of a network of financial supermarkets<br />
outside the company’s registered office begins in<br />
Slovenia.<br />
2002<br />
Tenth anniversary of the Galileo mutual fund.<br />
The twenty thous<strong>and</strong>th investor makes a<br />
payment into KD mutual funds. Total assets under<br />
management in the three KD mutual funds exceed<br />
SIT 30 billion (more than EUR 125 million).<br />
KD Rastko <strong>and</strong> KD Galileo are the most profitable<br />
Slovenian funds.<br />
2004<br />
Operations of the stockbroking company KD<br />
BPD begin.<br />
The fifty thous<strong>and</strong>th investor makes a payment<br />
into KD mutual funds. Assets under management in<br />
KD mutual funds exceed SIT 90 billion (EUR 375.5<br />
million).<br />
27
2005<br />
Establishment of the first specialised Slovenian<br />
insurance company, Slovenica Življenje d. d.<br />
Events that<br />
characterised 2007<br />
Changes in the composition of the KD<br />
Holding Group<br />
The new insurance company, Adriatic Slovenica<br />
Zavarovalna družba d. d., is entered in the<br />
Company Register.<br />
The Financial Point web portal comes online.<br />
2006<br />
The mutual funds KD Rastko, equity mutual<br />
fund <strong>and</strong> KD Bond, bond mutual fund celebrate<br />
their tenth anniversary.<br />
2 February<br />
Share capital of R.E. Invest is increased to<br />
EUR 2 million with a contribution in kind by<br />
KD Holding.<br />
6 February<br />
Slovenica Življenje increases the capital of the<br />
company Vifin <strong>and</strong> renames it KD Vifin, s. r. o.<br />
Club KD Plus, the first financial club in<br />
28<br />
Slovenia, begins operations.<br />
Establishment of the Private Equity fund, valued<br />
at EUR 70 million, with investments focused in<br />
South Eastern Europe.<br />
8 March<br />
The life insurance company KD Life Bulgaria<br />
is established with the entry into the Company<br />
Register.<br />
9 March<br />
KD Holding receives a decision from the District<br />
Court of Ljubljana whereby the court as of 6 March<br />
2007, entered into the Company Register a change<br />
in share capital due to the transition to the euro<br />
<strong>and</strong> the resulting amendments to the Articles of<br />
Association. Share capital in the amount of<br />
SIT 23,536,424,000 is replaced by the amount<br />
EUR 98,215,756.97.
8 May<br />
KD Holding concludes an agreement with<br />
Slovenska odškodninska družba d. d., Ljubljana for<br />
the acquisition of 195,824 ordinary shares of<br />
Nama d. d., or 20.53 percent of all issued shares.<br />
26 October<br />
Due to the withdrawal from the region of local<br />
partner, SEB Fund Services S. A., an extraordinary<br />
shareholder’s meeting of KD DeLux, SICAV,<br />
Luxembourg adopts a decision to cease operations<br />
<strong>and</strong> begin liquidation proceedings.<br />
1 July<br />
KD Kapital is established.<br />
30 October<br />
KD Življenje in Ukraine receives authorisation as<br />
5 July<br />
a financial institution.<br />
KD Holding successfully carries out a takeover<br />
bid for Nama d. d., resulting in an ownership share<br />
of 48.46 percent following the transaction.<br />
10 December<br />
The General Meeting of Shareholders of Adriatic<br />
Slovenica adopts a decision regarding the exclusion<br />
24 July<br />
of minority shareholders from the company.<br />
The company KD Kvart is established as the<br />
result of the transfer of the Šumi project from R.E.<br />
Invest.<br />
22 August<br />
Slovenica Življenje, življenjska<br />
zavarovalnica, d. d., is officially renamed<br />
KD Življenje, zavarovalnica, d. d. The resolution is<br />
adopted at the General Meeting of Shareholders of<br />
10 July 2007.<br />
25 October<br />
Establishment of a new company within the<br />
KD Holding Group, KD Finančna točka. The<br />
insurance company KD Življenje <strong>and</strong> asset<br />
management company KD Investments (now<br />
KD Skladi) hold equal ownership shares.<br />
24 December<br />
KD Kapital sells its entire share in<br />
Globtour d. o. o.<br />
27 December<br />
The open-end investment fund KD Eksklusiv,<br />
managed <strong>and</strong> marketed by KD Investments,<br />
Belgrade, is entered in the Serbian register of<br />
investment funds. With entry in the register, all<br />
conditions for the official start of operations of the<br />
KD Eksklusiv fund are met.<br />
31 December<br />
The General Meeting of Shareholders of<br />
KD Življenje passes a decision regarding the<br />
exclusion of minority shareholders from the<br />
company.<br />
29
30<br />
Key events in 2007<br />
January<br />
The oldest Slovenian mutual fund, KD Galileo,<br />
celebrates its 15th anniversary of operations. For all<br />
Slovenian babies born on the first day of 2007, KD<br />
Investments, Ljubljana, prepares a special present as a<br />
part of the celebration of the 15th anniversary of the KD<br />
Galileo mutual fund. They all receive, on the basis of an<br />
application form, EUR 200 in units of the mutual fund<br />
which was established on 1 January 1992.<br />
The insurance companies KD Življenje <strong>and</strong><br />
Adriatic Slovenica develop <strong>and</strong> begin marketing<br />
investment package life insurance which provides<br />
a choice between three investment packages:<br />
conservative, balanced <strong>and</strong> dynamic.<br />
Under the sponsorship of KD Investments<br />
from Bratislava <strong>and</strong> Gorenje, a delegation of ten<br />
Slovakian reporters from major media: the daily<br />
SME, the newspaper Hospodárske noviny, the<br />
magazine Trend, two news agencies, a web portal,<br />
the magazine Profit <strong>and</strong> the Slovakian national<br />
television broadcaster, visit Slovenia.<br />
February<br />
The mutual funds KD MM <strong>and</strong> KD Rastko<br />
receive “Gold V” awards, the former awarded as the<br />
best money market mutual fund <strong>and</strong> the latter as<br />
the best equity mutual fund in the <strong>group</strong> of<br />
Europe-oriented funds.<br />
Peter Grašek assumes the role of Business<br />
Director of KD Holding. As <strong>business</strong> director, he is<br />
primarily responsible for the operational execution<br />
of KD Holding transactions <strong>and</strong> for monitoring the<br />
operations of its subsidiaries which operate within<br />
the KD Holding Group.<br />
Vice President of Adriatic Slovenica’s<br />
Management Board, Matija Šenk, assumes<br />
leadership of Slovenica Življenje’s Management<br />
Board. Gabrijel Škof assumes the function of Vice<br />
President of the Management Board at Adriatic<br />
Slovenica, with Milena Georgievski as member of<br />
the Management Board.<br />
Slovenica Življenje receives the ISO 9001:2000<br />
certificate.<br />
March<br />
The number of customers who entrust KD BPD with<br />
funds for private wealth management grows to 250.<br />
Adriatic Slovenica introduces a new feature in<br />
the area of automobile third party liability insurance<br />
that offers the contemporary alternative of renewing<br />
this type of insurance via the internet, <strong>and</strong> vehicle<br />
registration renewal via the same channel.<br />
Start of marketing of the product of Slovenica<br />
Življenje <strong>and</strong> Adriatic Slovenica, life insurance AZIJA<br />
GARANT PLUS, with investments in an index of six<br />
equity hedge funds (dbX-Equity Select Asia Index)<br />
<strong>and</strong> two equity mutual funds - HSBC GIF INDIAN<br />
EQUITY <strong>and</strong> HSBC GIF CHINESE EQUITY.<br />
Deželna banka Slovenije, d. d. in KD BPD, d. o. o.<br />
formally open common <strong>business</strong> premises in the BTC<br />
City shopping centre in Ljubljana.<br />
Slovenica Življenje creates a <strong>group</strong> life insurance product.<br />
KD Investments Zagreb opens a new Financial<br />
Point in Pula.
April<br />
Slovenica Življenje creates Group Life Package, a<br />
<strong>group</strong> life insurance product.<br />
Gr<strong>and</strong> opening of Casino Rio, a new gaming centre in<br />
the Arena Vodafone live! entertainment centre.<br />
May<br />
Kolosej receives the Superbr<strong>and</strong>s 2007 mark as<br />
one of the top br<strong>and</strong>s in Slovenia.<br />
KD Life, Bulgaria is officially presented at a press<br />
conference in Sofia.<br />
June<br />
KD Life in Bulgaria launches the new life<br />
insurance product, Fondpolica - “Fund of funds”.<br />
The KD Maximus fund celebrates its third anniversary.<br />
Assets under management of the KD Holding<br />
Group, including all mutual funds <strong>and</strong> private<br />
wealth management, exceed EUR 1 billion.<br />
KD Holding Group successfully participates in the<br />
capital increase of Deželna banka Slovenije d. d.<br />
July<br />
KD Holding launches its new corporate website<br />
at www.<strong>kd</strong>-<strong>group</strong>.com.<br />
August<br />
The Financial Point in Bratislava opens.<br />
Adriatic Slovenica introduces new health<br />
insurance products with three packages of<br />
supplementary health insurance, especially adapted<br />
to three age <strong>group</strong>s: Mladi, Aktivni <strong>and</strong> Senior.<br />
It also introduces a unique new product on the<br />
Slovenian market, becoming the first insurance<br />
company in Slovenia to reward experienced <strong>and</strong><br />
safe drivers with a 55 percent bonus for automobile<br />
third-party liability insurance as part of its new<br />
range of automobile insurance products.<br />
September<br />
KD Življenje <strong>and</strong> Adriatic Slovenica develop Renta<br />
Garant, a life insurance with a lump-sum premium,<br />
linked to composite debt securities <strong>and</strong> with a<br />
guaranteed annuity payment.<br />
The subscription amount for private wealth<br />
management at KD BPD is increased from<br />
EUR 50 thous<strong>and</strong> to EUR 100 thous<strong>and</strong>.<br />
KD Investments in Serbia receives authorisation<br />
to organise <strong>and</strong> manage open-end, closed-end <strong>and</strong><br />
private investment funds.<br />
KD Holding organises the first strategic conference<br />
of Group companies at the Trevisini Palace in Piran.<br />
October<br />
KD Investments in Croatia begins marketing a<br />
fourth mutual fund, KD Nova Europa.<br />
Nearly EUR 1 million is paid into the fund in its first<br />
five days of operation.<br />
KD Life in Bulgaria begins marketing the new life<br />
insurance product, “Fondpolica - Renta Garant”.<br />
Gabrijel Škof assumes the function of President<br />
of the Management Board of Adriatic Slovenica,<br />
with Milena Georgievski as member of the<br />
Management Board.<br />
31
November<br />
KD Investments in Slovenia transfers<br />
authorisation for marketing mutual fund investment<br />
coupons under its management to KD Finančna<br />
Important events<br />
following the end of the 2007<br />
financial year<br />
Changes in the composition of the<br />
KD Holding Group<br />
točka.<br />
KD Investments in Croatia records the ten<br />
thous<strong>and</strong>th investor in its funds.<br />
KD Investments in Serbia receives a licence for<br />
the establishment of the KD Eksklusiv open-end<br />
investment fund from the local regulator <strong>and</strong> begins<br />
15 January<br />
A decision on the transfer of shares of minority<br />
shareholders of KD Življenje to the majority<br />
shareholder, KD Holding, is entered in the Company<br />
Register.<br />
the public subscription of units.<br />
32<br />
The first professional meeting of the Group’s<br />
accountants is organised.<br />
The establishment of Club KD Plus in Slovakia<br />
begins.<br />
KD Kvart receives <strong>build</strong>ing rights for the Šumi<br />
project.<br />
December<br />
Adriatic Slovenica <strong>and</strong> KD Življenje sign an<br />
agreement on the transfer of the life insurance<br />
portfolio to KD Življenje, planned for 2008. The<br />
agreement will enter into force following the receipt of<br />
authorisation from the Insurance Supervision Agency.<br />
KD Življenje sponsors one of the most important<br />
cultural events of the year: a performance of the<br />
RTV Slovenia Symphony Orchestra with piano<br />
virtuoso Ivo Pogorelić.<br />
For the second time in 2007, KD Holding Group<br />
successfully participates in the capital increase of<br />
Deželna banka Slovenije d. d.<br />
16 January<br />
The asset management company KD Investments,<br />
d. o. o. is renamed KD Skladi, d. o. o.<br />
A decision on the transfer of shares of minority<br />
shareholders of Adriatic Slovenica to the majority<br />
shareholder, KD Holding, is entered in the Company<br />
Register.
Other important events<br />
January<br />
Adriatic Slovenica’s personal insurance<br />
marketing network is transferred to KD Življenje.<br />
Adriatic Slovenica begins marketing the life<br />
insurance products of KD Življenje through a<br />
universal marketing network.<br />
Three Bulgarian companies, KD Investments,<br />
KD Securities <strong>and</strong> KD Life, are the exclusive<br />
sponsors of the 15th anniversary of Bulgaria’s<br />
largest private radio station, Darik. The companies<br />
also organise a media event, marking the first joint<br />
appearance of Group companies in Bulgaria.<br />
Premiere of UNICEF’s charity video spot “Some<br />
of Them”, brought about by the financial support of<br />
KD Holding. It is the first charity video spot which<br />
directly appeals for the collection of money for<br />
long-term programmes aimed at helping children.<br />
GEA College presents the results of an<br />
entrepreneurial competition based on innovation<br />
for secondary school students. The company<br />
organised the competition in cooperation with<br />
the Public Agency of the Republic of Slovenia for<br />
Entrepreneurship <strong>and</strong> Foreign Investment, with the<br />
support of the Ministry of the Economy.<br />
February<br />
Adriatic Slovenica’s Management Board<br />
becomes a four-member board comprising President<br />
of the Management Board Gabrijel Škof, member<br />
Milena Georgievski <strong>and</strong> two new members,<br />
Matej Cergolj <strong>and</strong> Marko Rems.<br />
The KD Holding Group introduces a new, more<br />
contemporary corporate image. The reasons for<br />
the change lie primarily in the rapid growth <strong>and</strong><br />
expansion of the Group in recent years.<br />
KD Življenje organises a large family event<br />
at Postojna Cave called Days of Culture <strong>and</strong><br />
Attractions.<br />
March<br />
The asset management company KD Skladi<br />
reassumes the function of providing asset<br />
management services for investment funds. The<br />
stockbroking company KD BPD previously provided<br />
these services.<br />
The stockbroking company KD BPD moves to<br />
new <strong>business</strong> premises at Neubergerjeva 30 in<br />
Ljubljana.<br />
The life insurance company KD Življenje begins<br />
marketing a premium investment life insurance<br />
product in Slovenia - Fondpolica Dirigent,<br />
a life insurance with active management.<br />
Fondpolica with an investment package<br />
from the Bulgarian company KD Life receives an<br />
award as best financial product of 2007 in the life<br />
insurance category.<br />
April<br />
Benjamin Jošar assumes the function of<br />
President of the Management Board of the<br />
stockbroking company KD BPD.<br />
33
34<br />
Old city centre, Ljubljana, Slovenia
1.<br />
KD Holding Group <strong>business</strong> report<br />
Behind every number is an idea, behind every idea a face.
1.<br />
Poslovno poročilo Skupine KD Holding<br />
in finančne družbe KD Holding d. d.<br />
Za vsako številko je misel, za vsako mislijo obraz.<br />
38
Naše poslanstvo je<br />
uspešno poslovanje.<br />
Z učinkovitim, varnim<br />
in donosnim upravljanjem<br />
izkazujemo odgovornost<br />
do finančnega premoženja.<br />
Dober posel je vedno<br />
tudi družbeno odgovorno<br />
partnerstvo zaposlenih<br />
in uporabnikov.<br />
Zato skrbimo za zaposlene,<br />
korporativno komuniciramo,<br />
upravljamo s tveganji in<br />
gradimo blagovne znamke.<br />
39
1.1<br />
Strategic orientations<br />
of the KD Holding Group<br />
Mission, vision <strong>and</strong> values<br />
Trust is the basis of our present <strong>and</strong> future growth.<br />
<strong>We</strong> act responsibly in mutual partnerships <strong>and</strong> take<br />
particular care to respect the individuality of our<br />
customers <strong>and</strong> employees.<br />
The Group‘s operations are best summarised by the<br />
central notion: Trust that grows.<br />
Openness means providing access to all services, as<br />
well as openness to new knowledge <strong>and</strong> solutions.<br />
<strong>We</strong> therefore give a great deal of consideration to<br />
Mission: responsible partnerships with customers,<br />
employees <strong>and</strong> shareholders.<br />
learning, knowledge <strong>and</strong> the recognition of new<br />
development opportunities.<br />
The Group responsibly, efficiently, safely <strong>and</strong><br />
38<br />
profitably manages the financial assets of its<br />
customers. The Group provides its employees the<br />
best working conditions, training, the possibility of<br />
advancement <strong>and</strong> incentives for quality work. The<br />
Group generates expected growth <strong>and</strong> profit for<br />
its shareholders <strong>and</strong> creates socially responsible<br />
partnerships between equals.<br />
Equality does not mean merely abiding by equal<br />
opportunities; it also means actively striving for<br />
respect between genders, nationalities, religions <strong>and</strong><br />
beliefs on a daily basis.<br />
Realisation of strategic objectives <strong>and</strong><br />
orientations<br />
Vision: developmental growth <strong>and</strong> responsive<br />
expansion.<br />
<strong>We</strong> are a respected, dynamic <strong>and</strong> socially<br />
responsible financial <strong>group</strong>. Trustworthy experts<br />
fulfil the expectations of customers with services<br />
that are a step ahead of the times. Accessible in one<br />
location, we shape the trends of financial services in<br />
Southern <strong>and</strong> Eastern Europe.<br />
<strong>We</strong> realise our mission <strong>and</strong> vision by taking into<br />
account values which are the foundation of our<br />
growth <strong>and</strong> development.<br />
Our strategic objectives <strong>and</strong> orientations were<br />
realised again in 2007 by seeking the best solutions<br />
<strong>and</strong> taking advantage of opportunities for the growth<br />
<strong>and</strong> development of all companies in the Group.<br />
Consolidating <strong>and</strong> increasing market share<br />
for activities in target markets<br />
With EUR 107 million in net inflows <strong>and</strong> a 24.5<br />
percent market share, we maintained our leading<br />
position in Slovenia in the area of mutual funds.<br />
<strong>We</strong> also consolidated our position in other markets<br />
by successfully introducing new mutual funds. The<br />
Group currently manages 24 mutual funds <strong>and</strong> two<br />
investment companies throughout the region.
<strong>We</strong> achieve excellence in financial asset<br />
Utilising synergies in the Group<br />
management with our expert approach, long years<br />
of experience in the domestic <strong>and</strong> regional capital<br />
markets <strong>and</strong> through international links. This is<br />
reflected in the operating results of our investment<br />
funds which are, to a great extent, dependent on<br />
developments on individual capital markets.<br />
<strong>We</strong> were extremely successful in this area, as<br />
the majority of funds (17) exceeded established<br />
benchmarks. Several investment funds managed<br />
by management companies within the Group have<br />
received various domestic <strong>and</strong> international awards<br />
for successful asset management.<br />
The Group holds a 15 percent share of the<br />
Slovenian life insurance market, while the Group’s<br />
specialised life insurance company has risen to<br />
second position. The Group successfully markets life<br />
insurance in other markets in the region.<br />
Unit-linked life insurance products, primarily<br />
Fondpolica, st<strong>and</strong> out as the most successful<br />
insurance products in the past year, both in Slovenia<br />
<strong>and</strong> across the entire region. With an 18 percent<br />
market share, the insurance company Adriatic<br />
Slovenica consolidated second position among<br />
composite insurance companies in Slovenia in 2007.<br />
<strong>We</strong> began to actively carry out a project to<br />
develop banking services. The project included a<br />
<strong>group</strong> of experienced banking experts. Banking will<br />
complement other insurance <strong>and</strong> financial products<br />
<strong>and</strong> bring the Group’s range of products <strong>and</strong><br />
services full circle.<br />
<strong>We</strong> accelerated the development of a new real<br />
estate division. Our main project in this regard is the<br />
Šumi <strong>business</strong> complex in Ljubljana.<br />
In the past year, we reorganised the Group<br />
<strong>and</strong> began introducing division-based operations.<br />
Thus the Group operates in the following divisions:<br />
investment fund management, private wealth<br />
management <strong>and</strong> stockbroking, insurance, capital<br />
investments <strong>and</strong> real estate. Division managers are<br />
the presidents of the management boards of the<br />
largest companies within a specific division. The<br />
new arrangement will facilitate more efficient <strong>and</strong><br />
transparent operations.<br />
<strong>We</strong> continued our growth in regional markets<br />
where we are already present by introducing<br />
complementary products to complete our offer of<br />
mutual funds, private wealth management, life<br />
insurance, stockbroking <strong>and</strong> sales of financial<br />
services.<br />
The strengths of several companies within KD<br />
Holding Group both at home <strong>and</strong> throughout the<br />
region were also successfully combined in the area of<br />
financial-insurance products.<br />
39
Continuing along the same path in 2008<br />
40<br />
<strong>We</strong> will continue introducing mutual funds,<br />
classic <strong>and</strong> unit-linked life insurance products,<br />
private wealth management <strong>and</strong> stockbroking<br />
services, other financial products <strong>and</strong> the expansion<br />
of the sales network in the region. <strong>We</strong> will enter the<br />
markets of Macedonia <strong>and</strong> Ukraine <strong>and</strong> consolidate<br />
our position in counties where we are already present.<br />
In the area of investment fund management,<br />
we will maintain our leading position in Slovenia<br />
<strong>and</strong> strengthen our market share in South<br />
Eastern Europe by increasing recognition. <strong>We</strong> will<br />
complement our portfolio of products in accordance<br />
with industry trends, guided by our aim to remain<br />
innovative <strong>and</strong> maintain the customer as the centre<br />
of activities.<br />
In the area of private wealth management<br />
<strong>and</strong> stockbroking, we plan to continue growing<br />
our market shares to become one of the leading<br />
providers of these services in the region. <strong>We</strong> will<br />
improve management processes <strong>and</strong> employee<br />
training <strong>and</strong> enhance private wealth management<br />
services with a broad range of other financial<br />
services.<br />
In the area of life insurance, we plan to<br />
collect more than EUR 100 million in premiums,<br />
representing growth of 35 percent, <strong>and</strong> to continue<br />
consolidating these insurance products at<br />
KD Življenje. Together with the organic growth of<br />
the company, KD Življenje will assume second<br />
position among life insurance companies in 2008.<br />
In the area of property insurance (including health<br />
insurance), we plan to collect more than EUR 252<br />
million in premiums, representing 7.6 percent<br />
growth in property insurance <strong>and</strong> 8.5 percent<br />
growth in health insurance.<br />
<strong>We</strong> will also dedicate a great deal of energy to<br />
the establishment of banking services in 2008.<br />
These will complement the Group’s current range<br />
of products <strong>and</strong> services <strong>and</strong> facilitate further<br />
development <strong>and</strong> growth. <strong>We</strong> will therefore continue<br />
developing banking services, which we will offer to<br />
the market at the beginning of 2009.<br />
<strong>We</strong> will strengthen the uniform approach of<br />
all companies that operate on individual markets.<br />
<strong>We</strong> will improve our position on all markets <strong>and</strong><br />
increase synergies.
1.2<br />
Shares, dividends <strong>and</strong> ownership<br />
structure<br />
Basic information on shares, dividends<br />
<strong>and</strong> equity<br />
KD Holding’s share capital totalled EUR<br />
98,215,756.97 as at 31 December 2007 <strong>and</strong> was<br />
divided into 2,942,053 no-par-value shares (of which<br />
2,675,640 were regular shares of KDHR, while<br />
266,413 were preference participating shares of<br />
KDHP). Share capital is defined in the company’s Articles<br />
of Association, registered with the court <strong>and</strong> fully paid.<br />
During the liquidation of the company, priority<br />
in the payment of residual assets before holders of<br />
ordinary shares in the amount of EUR 33.38.<br />
Authorised capital totalled EUR 49,107,878 as<br />
at 31 December 2007. Pursuant to the resolution<br />
passed at the 8 th General Meeting of Shareholders<br />
on 13 October 2005, the Management Board is<br />
authorised to increase the company’s share capital<br />
by a maximum of EUR 49,107,878 by issuing new<br />
shares for cash or contributions-in-kind within five<br />
years following the entry of the amendment to the<br />
Articles of Association in the companies register (16<br />
November 2005). The Management Board has not<br />
Ordinary shares of KD Holding (KDHR) have been<br />
listed on the OTC market of the Ljubljana Stock<br />
Exchange since 5 February 2001. At incorporation,<br />
all issued shares were defined as ordinary registered<br />
shares with voting rights <strong>and</strong> a nominal value of EUR<br />
33.38 each. The first General Meeting of Shareholders<br />
held in May 2001 passed a resolution converting a<br />
maximum of 595,691 ordinary registered shares into<br />
cumulative preference shares with no voting rights.<br />
Preference shares (KDHP) have been listed on the<br />
OTC market of the Ljubljana Stock Exchange since 12<br />
July 2001. The rights of holders of these shares include:<br />
The right of priority in the payment of dividends<br />
before holders of ordinary shares in the amount of<br />
EUR 1.67, for a cumulative period of five years;<br />
In the event of a dividend payout to holders of<br />
ordinary shares, the right to the payment of additional<br />
dividends of at least EUR 1.67, bringing the total<br />
dividend to a maximum of EUR 3.34;<br />
yet used the authorised capital.<br />
The book value of the KDHR <strong>and</strong> KDHP shares<br />
(KD Holding Group) was EUR 116.4 as at 31<br />
December 2007 (2006: EUR 97.53). The book<br />
value of a share is calculated as the book value of<br />
the equity of majority shareholders as at the end of<br />
the accounting period under the IFRS, divided by the<br />
number of all shares, excluding treasury shares, as at<br />
the end of the accounting period.<br />
Net earnings per share pertaining to the majority<br />
shareholders amounted to EUR 12.38 in 2007, up 78.1<br />
percent compared to 2006, when it stood at EUR 6.95.<br />
Net earnings per share was calculated as the net profit<br />
pertaining to majority shareholders less dividends<br />
paid on preference shares (excluding treasury<br />
shares) for the accounting period, divided by the<br />
average number of all issued ordinary shares,<br />
excluding treasury shares, in the accounting period.<br />
41
Share price movement<br />
There were 3,259 transactions in ordinary<br />
shares of KDHR with a total volume of EUR<br />
16,097,473.19 made on the OTC market of the<br />
Ljubljana Stock Exchange in 2007. The share price<br />
stood at EUR 47.00 at the beginning of the year, its<br />
low for the year. The share price had risen relatively<br />
steadily to around EUR 110 by the middle of the<br />
year. It then leapt to its high of EUR 191.05 in a<br />
the price began to fall, reaching EUR 90.88 by the<br />
end of November, when it underwent an upward<br />
correction. The price stood at EUR 108.37 at the<br />
end of the year. The daily volume of trading in these<br />
shares was relatively low, <strong>and</strong> generally did not<br />
exceed EUR 100,000. The only spike in trading<br />
volume came in June, when it broke the<br />
EUR 1 billion threshold.<br />
single day, on 3 August 2007. After this sharp rise<br />
Basic indicators for ordinary shares of KDHR:<br />
Share details As at 31 December 2007 As at 31 December 2006 Index 2007/2006 (in %)<br />
42<br />
Number of shares 2,675,640 2,675,640 0<br />
Market price (in EUR) 108.37 47.15 129.84<br />
Market capitalisation (in million EUR) 289.96 126.16 129.84<br />
P/E 8.76 6.78 29.20<br />
Source: Ljubljana Stock Exchange, Bloomberg, own calculations of KD Holding<br />
Comparison of changes in SBI20 (in points) <strong>and</strong> the share price of KDHR (in EUR) in 2007:<br />
14,000<br />
12,000<br />
10,000<br />
8,000<br />
6,000<br />
4,000<br />
2,000<br />
SBI20<br />
KDHR<br />
200<br />
180<br />
160<br />
140<br />
120<br />
100<br />
80<br />
60<br />
40<br />
20<br />
SBI20<br />
0<br />
0<br />
KDHR<br />
28. 12. 06<br />
28. 1. 07<br />
28. 2. 07<br />
28. 3. 07<br />
28. 4. 07<br />
28. 5. 07<br />
28. 6. 07<br />
28. 7. 07<br />
28. 8. 07<br />
28. 9. 07<br />
28. 10. 07<br />
28. 11. 07<br />
28. 12. 07<br />
Source: Ljubljana Stock Exchange
There were 949 transactions in preference shares<br />
of KDHP with a total volume of EUR 691,613.10<br />
made on the OTC market of the Ljubljana Stock<br />
Exchange in 2007. The share price began the year<br />
at EUR 32.13, its low for the year. The price rose<br />
moderately in the first half of the year compared<br />
with the rest of the year. The price had risen from<br />
EUR 32.13 to EUR 42.00 by the end of June.<br />
in the price to EUR 100 on 19 February, its high<br />
for the year. The price reached the same level on<br />
12 <strong>and</strong> 15 October 2007. The price rose past<br />
EUR 70 in the second half of the year <strong>and</strong> then<br />
ended the year at EUR 65.60. The volume of<br />
trading in preference shares of KDHP in 2007 was<br />
significantly lower than that of the ordinary shares,<br />
rarely breaking EUR 5,000 per day.<br />
During this period there was a single-day spike<br />
Basic indicators for preference shares of KDHP:<br />
Share details As at 31 December 2007 As at 31 December 2006 Index 2007/2006 (in %)<br />
Number of shares 266,413 266,413 0<br />
Market price (in EUR) 65.60 32.13 104.17<br />
Market capitalisation (in million EUR) 17.48 8.56 104.17<br />
43<br />
Source: Ljubljana Stock Exchange, KD Holding<br />
Comparison of changes in SBI20 (in points) <strong>and</strong> the share price of KDHP (in EUR) in 2007:<br />
14,000<br />
12,000<br />
10,000<br />
8,000<br />
6,000<br />
4,000<br />
2,000<br />
SBI20<br />
KDHP<br />
120<br />
100<br />
80<br />
60<br />
40<br />
20<br />
SBI20<br />
0<br />
0<br />
KDHP<br />
28. 12. 06<br />
28. 1. 07<br />
28. 2. 07<br />
28. 3. 07<br />
28. 4. 07<br />
28. 5. 07<br />
28. 6. 07<br />
28. 7. 07<br />
28. 8. 07<br />
28. 9. 07<br />
28. 10. 07<br />
28. 11. 07<br />
28. 12. 07<br />
Source: Ljubljana Stock Exchange
Ownership structure<br />
The largest shareholder of the company KD Holding<br />
is the company KD Group d. d., owning 1,776,657<br />
registered ordinary shares, or 66.40 percent of all<br />
shares, <strong>and</strong> 60.39 percent of all shares issued.<br />
Ownership structure of KD Holding as at 31 December 2007:<br />
Number of shareholders Number of shares Share (in %)<br />
KDHR - registered ordinary shares<br />
Domestic entities 31,224 2,506,886 85.21<br />
Legal entities 130 2,185,593 74.29<br />
Individuals 31,094 321,293 10.92<br />
Foreign entities 254 168,754 5.74<br />
Legal entities 51 166,534 5.66<br />
Individuals 203 2,220 0.08<br />
Total KDHR 31,478 2,675,640 90.94<br />
44<br />
KDHP - registered participating preference 0<br />
Domestic entities 12,982 265,958 9.04<br />
Legal entities 31 136,844 4.65<br />
Individuals 12,951 129,114 4.39<br />
Foreign entities 52 455 0.02<br />
Legal entities 9 23 0.00<br />
Individuals 43 432 0,01<br />
Total KDHP 13,034 266,413 9,06<br />
Total 44,512 2,942,053 100<br />
Ten largest holders of ordinary shares (KDHR) as at 31 December 2007:<br />
Shares KDHR<br />
Shareholder Location Number of KDHR Share (in %)<br />
1 KD Group d. d. Lljubljana 1,776,657 66.40<br />
2 Auctor d. o. o. Lljubljana 118,168 4.42<br />
3 Caranthania Investments Luxembourg 102,409 3.83<br />
4 KDH Naložbe, d. o. o. Luxembourg 101.409 3.79<br />
5 Avra d. o. o. Lljubljana 91,281 3.41<br />
6 KD Holding d. d. Lljubljana 62,201 2.32<br />
7 Zveza bank reg. z. zo. j. bank und revisions Klagenfurt 32,981 1.23<br />
8 Kingshouse Investments Limited Limassol 15,746 0.59<br />
9 Nordic Investments LLC Cheyenne 8,889 0.33<br />
10 Šifrer Peter Medvode 7,982 0.29<br />
Total of the top ten holders of KDHR shares 2,317,723 86.62<br />
Other 357,917 13.38<br />
Total KDHR 2,675,640 100
Ten largest holders of preference shares (KDHP) as at 31 December 2007:<br />
Shares KDHP<br />
Shareholder Location Number of KDHP Share (in %)<br />
1 KD Holding d. d. Ljubljana 51,306 19.26<br />
2 Spira pet d. o. o. Domžale 41,710 15.66<br />
3 NLB d. d. Ljubljana 28,221 10.59<br />
4 Marles d. d. Maribor 9,636 3.62<br />
5 Vovk Boštjan Ljubljana 7,060 2.65<br />
6 Tomažin Matej Ljubljana 2,050 0.77<br />
7 DBS d. d. Ljubljana 1,298 0.49<br />
8 Goldinar d. o. o. Koper 1,222 0.46<br />
9 Kadič Cirila Koper 1,118 0.42<br />
10 Vahčič Marjan Aleš Ljubljana 985 0.37<br />
Total of the top ten holders of KDHP shares 144,606 54.28<br />
Other 121,807 45.72<br />
Total KDHP 266,413 100<br />
Ten largest holders of regular (KDHR) <strong>and</strong> preference shares (KDHP) jointly as at 31 December 2007:<br />
Shares KDHR <strong>and</strong> KDHP together<br />
Shareholder Location Number of KDHR <strong>and</strong> KDHP Share (in %)<br />
1 KD Group d. d. Ljubljana 1,776,657 60.39<br />
2 Auctor d. o. o. Ljubljana 118,168 4.02<br />
3 KD Holding d. d.<br />
Ljubljana 113,507 3.86<br />
4 Caranthania investments Luxembourg 102,409 3.48<br />
5 KDH Naložbe, d. o. o. Ljubljana 102,298 3.48<br />
6 Avra d. o. o. Ljubljana 91,281 3.10<br />
7 Spira pet d. o. o. Domžale 41,710 1.42<br />
8 Zveza bank reg.z.zo.j.bank und revisions Klagenfurt 32,981 1.12<br />
9 NLB d. d. Ljubljana 28,221 0.96<br />
10 Kingshouse investments limited Limassol 15,746 0.54<br />
Total of the top ten holders of KDHP <strong>and</strong> KDHP shares 2,422,978 82.36<br />
Other 519,075 17.64<br />
Total KDHP <strong>and</strong> KDHP 2,942,053 100<br />
45<br />
Treasury shares<br />
10 percent of the company’s share capital. Pursuant to<br />
the eighth indent of Article 247 of the Companies Act, the<br />
The company KD Holding held 113,507 treasury shares as<br />
at 31 December 2007, as follows: 62,201 ordinary KDHR<br />
shares <strong>and</strong> 51,306 KDHP preference shares, together<br />
representing 3.86 percent of the company’s share capital.<br />
General Meeting of Shareholders defined the minimum<br />
<strong>and</strong> maximum purchase <strong>and</strong> sales price at which the<br />
Management Board may acquire treasury shares. The General<br />
Meeting of Shareholders of KD Holding, as parent company,<br />
extended the authorisation for the purchase of KD Holding<br />
On 30 August 2007, the General Meeting of Shareholders<br />
authorised KD Holding’s Management Board to purchase<br />
treasury shares in a total nominal amount not to exceed<br />
treasury shares to the subsidiaries thereof, to companies in<br />
which KD Holding holds a majority stake <strong>and</strong> to the third<br />
persons set out in Article 251 of the Companies Act.
1.3<br />
Corporate governance report<br />
Responsible corporate governance is the basis for<br />
all the KD Holding Group’s activities. This mission<br />
Supervisory Board of the parent company, which<br />
has a two-tier management system.<br />
is pursued by the Management Board <strong>and</strong> the<br />
Management bodies at KD Holding - tasks <strong>and</strong> responsibilities<br />
General Meeting of Shareholders<br />
Appointing <strong>and</strong> recalling Superisory<br />
Board members<br />
Awarding discharge<br />
Deliberating on Supervisory Board members’ remuneration<br />
Formation of proposals for resolutions<br />
Reporting <strong>and</strong> notifying<br />
Authorisation to convene the General Meeting<br />
Formation of proposals for resolutions<br />
Authorisation to convene the general<br />
meeting<br />
Report on the verification <strong>and</strong><br />
confirmation of the annual report <strong>and</strong><br />
st<strong>and</strong> regarding the auditor’s report<br />
Awarding discharge<br />
Deliberation on remuneration<br />
linked to the appropriation of<br />
undistributed profit<br />
Reporting <strong>and</strong> notifying<br />
46<br />
Supervisory Board<br />
Presenting the annual report<br />
Proposal for the appropriation<br />
of undistributed profits<br />
Appointing <strong>and</strong> recalling<br />
Management Board members<br />
Management Board<br />
Signing contracts with members of the<br />
Management Board <strong>and</strong> deliberation<br />
regarding their remuneration, approvals of<br />
loans to members of the Management Board<br />
Regular monitoring of the Management<br />
Board’s operations<br />
General Meeting of Shareholders<br />
portion of balance sheet profit in the amount of EUR<br />
18,801,026.54 as follows:<br />
The General Meeting of Shareholders of KD Holding adopts<br />
the basic decisions leading to the realisation of the central<br />
economic objective: creating value for shareholders.<br />
A portion of the balance sheet profit in the amount<br />
of EUR 889,819.42 from profit brought forward was<br />
earmarked for payments to holders of preference<br />
cumulative participating KDHP shares.<br />
At the General Meeting of Shareholders held on<br />
30 August 2007, 77percent of shares with voting<br />
rights were represented. The General Meeting of<br />
Shareholders passed a resolution on the use of a<br />
A portion of the balance sheet profit in the amount<br />
of EUR 8,562,048.00 was earmarked for payments of<br />
dividends to holders of ordinary KDHR shares. The gross<br />
dividend per ordinary share of KDHR was EUR 3.20.
Based on a resolution of the General Meeting of<br />
Shareholders, a portion of the balance sheet profit<br />
in the amount of EUR 77,185.00 was used to pay<br />
bonuses to the Supervisory Board <strong>and</strong> the Management<br />
Board, EUR 34,185.00 going to the members of the<br />
Supervisory Board in office on 31 December 2006,<br />
<strong>and</strong> EUR 43,000.00 to the Management Board.The<br />
remainder of the balance sheet profit in the amount of<br />
EUR 9,271,974.12 was unused <strong>and</strong> the decision on its<br />
the Management Board to purchase treasury shares, which:<br />
granted the management board of KD Holding, the<br />
subsidiaries in the Group <strong>and</strong> third parties the power to<br />
purchase treasury shares in the parent company <strong>and</strong><br />
approved the conditions, in line with legislation, under<br />
which purchases <strong>and</strong> disposals can proceed;<br />
set terms under which the Management Board<br />
can acquire or dispose of treasury shares outside the<br />
organised market.<br />
appropriation was deferred until the next year.<br />
For the purpose of complying with the Corporate<br />
At the same General Meeting of Shareholders,<br />
shareholders granted relief to the Management Board <strong>and</strong><br />
the Supervisory Board, confirming <strong>and</strong> approving the work<br />
of their members in the 2006 financial year. They also<br />
appointed an auditor <strong>and</strong> approved a resolution authorising<br />
Governance Code, the General Meeting of Shareholders<br />
also passed a resolution amending the company’s<br />
Articles of Association <strong>and</strong> a resolution defining monthly<br />
payments to Supervisory Board members in place of the<br />
previous session fees.<br />
47<br />
Supervisory Board<br />
Aleš Vahčič, PhD<br />
Aleš Vahčič, PhD, was first appointed member<br />
The <strong>business</strong> of the parent company KD Holding is<br />
supervised by a three-member Supervisory Board. Its<br />
powers <strong>and</strong> responsibilities are set out by its own Rules<br />
of Procedure, the company’s Articles of Association<br />
<strong>and</strong> the applicable legislation. The Supervisory Board’s<br />
current term of office runs from 7 March 2005 to 7<br />
March 2009.<br />
of the Supervisory Board on 6 March 2001 <strong>and</strong><br />
became Chairman of the Supervisory Board on 18<br />
November 2004.<br />
He has a doctorate in economics <strong>and</strong> is a professor at<br />
the University of Ljubljana’s Faculty of Economics. He<br />
has been a member of the Supervisory Board of the<br />
Seaway Group since 2001.<br />
Composition of the Supervisory Board:<br />
Name <strong>and</strong> surname Function in Supervisory Board Profession (company/organisation) Function<br />
Aleš Vahčič, PhD Chairman Faculty of Economics, Ljubljana Full professor<br />
Alojz Penko Deputy Chairman Retired -<br />
Bojan Sekavčnik Member PM&A FA d. d., Ljubljana Member of the Management Board
Alojz Penko<br />
Alojz Penko was first appointed member of the<br />
Supervisory Board on 20 August 2004.<br />
He has been a member or chairman of the<br />
supervisory boards of companies in the KD Group<br />
(the legal predecessors of KD Holding) since 1995,<br />
when he was appointed Chairman of the Supervisory<br />
Board of PID Kmečki sklad 4 d. d., after which he<br />
was a member of the supervisory boards of KD PID<br />
d. d. <strong>and</strong>, between 2001 <strong>and</strong> 2004, KD Naložbe<br />
d. d. Following the latter’s merger with KD Holding,<br />
he was appointed to the Supervisory Board of KD<br />
Holding in November 2004.<br />
Work of the Supervisory Board<br />
KD Holding’s Supervisory Board held five ordinary<br />
sessions <strong>and</strong> two correspondence sessions in 2007.<br />
It passed a total of 25 resolutions. The Supervisory<br />
Board performed its duties responsibly during<br />
the course of the year, <strong>and</strong> gave its unqualified<br />
approval to the company’s annual report for 2007.<br />
The Supervisory Board regularly monitored the<br />
company’s operations, compiled the Supervisory<br />
Board’s report on the review of the annual report,<br />
gave its opinion on the audit report, monitored the<br />
work of the Management Board <strong>and</strong> reviewed the<br />
implementation of resolutions passed.<br />
48<br />
He is an engineer in agronomy <strong>and</strong> was educated<br />
extensively in the field of economics during his<br />
career. He retired in 2000. In the 1980s, he was a<br />
member of the Management Board of the Postojna<br />
Regional Chamber of Industry <strong>and</strong> Commerce <strong>and</strong><br />
was a member of the Executive Council of the<br />
Municipality of Postojna. In the last ten years, he has<br />
served two terms as Chairman of the Supervisory<br />
Board of Zadružna kmetijska družba d. o. o., <strong>and</strong> one<br />
as Chairman of the Supervisory Board of Postojnska<br />
jama d. d., ending in 2003.<br />
The remuneration of the members of the<br />
Supervisory Board in the 2007 financial year was<br />
as follows:<br />
Session fees in the amount of EUR 27,784 gross;<br />
Bonus payments in the total amount of<br />
EUR 32,250 gross.<br />
Bojan Sekavčnik<br />
Bojan Sekavčnik was first appointed member of the<br />
Supervisory Board on 6 March 2001.<br />
He was a member of the Supervisory Board of<br />
R.E. Invest between 2003 <strong>and</strong> 2005, prior to its<br />
transformation to limited liability status.<br />
He is currently a member of the Management Board<br />
of PM&A FA d. d. (previously PM&A BPD d. d.).
Management Board<br />
The Management Board of KD Holding consists<br />
solely of Chief Executive Officer Matjaž Gantar, who<br />
was first appointed on 6 March 2001. His current<br />
four-year term of office began on 7 March 2005.<br />
The CEO holds the following offices on management <strong>and</strong> supervisory bodies of other companies:<br />
Company<br />
Function<br />
KD Group d. d., Ljubljana CEO since 2001<br />
Adriatic Slovenica, d. d., Koper Member of the supervisory board since 2006<br />
Seaway Group, d. o. o., Bled Member of the supervisory board since 2001<br />
Petrol, d. d., Ljubljana Member of the supervisory board since April 2005 (until May 2008)<br />
DRI Naložbe, d. o. o., Ljubljana General Manager since 2005<br />
Vila Vzhod d. o. o., Ljubljana General Manager since 2005 (until May 2008)<br />
Vila Zahod, d. o. o., Ljubljana General Manager since 2005<br />
KDH Naložbe d. o. o., Ljubljana General Manager since 2007<br />
KDH Naložbe d. o. o., Ljubljana General Manager since 2007<br />
The CEO of KD Holding, Matjaž Gantar, received the following gross payments in 2007 (in EUR thous<strong>and</strong>):<br />
49<br />
Name <strong>and</strong> surname Fixed earnings Variable earnings Profit participation Option plan Other earnings Total<br />
Matjaž Gantar 71,255 - 37,037 - - 108,292<br />
Cooperation between the Management Board<br />
<strong>and</strong> the Supervisory Board<br />
Equity stakes of the Management Board <strong>and</strong><br />
Supervisory Board<br />
In performing their respective roles, the<br />
Management Board <strong>and</strong> the Supervisory Board<br />
strictly implement their missions within the<br />
two-tier management system as defined in the<br />
applicable legislation <strong>and</strong> the company’s Articles of<br />
Association. This includes regular communication<br />
to allow the members of the Supervisory Board<br />
to be kept informed of the company’s current <strong>and</strong><br />
planned operations.<br />
As at 31 December 2007, CEO Matjaž Gantar held<br />
2,643 ordinary registered shares of KDHR in the<br />
company. The Chairman of the Supervisory Board,<br />
Aleš Vahčič, PhD, held 594 ordinary registered<br />
shares of KDHR in the company <strong>and</strong> 985 preference<br />
participating shares of KDHP. Deputy Chairman of<br />
the Supervisory Board Aleš Penko held 321 ordinary<br />
registered shares of KDHR in the company <strong>and</strong><br />
Supervisory Board member Bojan Sekavčnik held 5<br />
ordinary registered shares of KDHR.
The members of the Management Board <strong>and</strong> the<br />
Supervisory Board currently hold no stock options in<br />
KD Holding.<br />
In 2007, we conducted an external assessment of<br />
the quality of operations of the KD Holding Group’s<br />
largest internal audit department, in accordance with<br />
international st<strong>and</strong>ards for the professional practice of<br />
internal auditing. The external assessor (the auditing<br />
firm KPMG) issued the opinion that the internal audit<br />
department, in all material aspects, operates costeffectively,<br />
efficiently <strong>and</strong> successfully in accordance<br />
with all st<strong>and</strong>ards for the professional practice of<br />
internal auditing, the code of professional ethics for<br />
internal auditors <strong>and</strong> principles of internal auditing.<br />
Auditing <strong>and</strong> the internal control system<br />
Transparency of the company’s operations<br />
The financial statements of KD Holding Group for<br />
2007 were audited by the independent auditors<br />
PriceWaterhouseCoopers d. o. o. The certified<br />
auditor issued an unqualified opinion on the annual<br />
reports of the Group for 2007.<br />
Transparency of operations is provided primarily by<br />
keeping shareholders <strong>and</strong> the general public informed,<br />
namely by providing regular bulletins <strong>and</strong> information<br />
about particular events. Information regarding<br />
operations, <strong>business</strong> plans <strong>and</strong> other important<br />
At its inception, KD Holding established an internal<br />
control system to protect the company’s assets <strong>and</strong><br />
reputation. In 2006, the company introduced an<br />
activities is published on the company’s website<br />
at www.<strong>kd</strong>-<strong>group</strong>.com <strong>and</strong> on the Ljubljana Stock<br />
Exchange’s SEOnet website at http://seonet.ljse.si.<br />
50<br />
internal audit department at the parent company to<br />
contribute to the generation of added value <strong>and</strong> to<br />
improve the operations of the entire Group.<br />
At the beginning of 2007, the KD Holding Group<br />
adopted a strategy for the functioning of the internal audit<br />
department, as well as uniform rules on the planning<br />
<strong>and</strong> reporting of the internal audit department. <strong>We</strong> thus<br />
established uniform bases for the collective development<br />
of internal auditing activities <strong>and</strong> improved the oversight<br />
of risk management within the Group.<br />
Management of associated companies<br />
Associated companies are actively managed via the<br />
parent company’s representatives on their supervisory<br />
boards. The policy for managing newly established<br />
companies in new markets involves partnership<br />
between experienced senior staff from the Group <strong>and</strong><br />
expert senior staff familiar with the local environment.
STATEMENT OF THE MANAGEMENT BOARD<br />
AND THE SUPERVISORY BOARD OF KD<br />
HOLDING D. D. REGARDING COMPLIANCE<br />
WITH THE CORPORATE GOVERNANCE CODE<br />
this information, being stated <strong>and</strong> available on the<br />
company’s official website.<br />
2. MANAGEMENT BOARD<br />
The Management Board <strong>and</strong> Supervisory Board of<br />
Items 2.3.2 <strong>and</strong> 2.3.3:<br />
KD Holding d. d., finančna družba, Celovška 206,<br />
1000 Ljubljana, Slovenia, hereby declare that the<br />
management of KD Holding d. d. complies with<br />
the Corporate Governance Code (Official Gazette of<br />
the Republic of Slovenia, No. 118/05, amended on<br />
5 February 2007), available on the website of the<br />
Ljubljana Stock Exchange at http://www.ljse.si in<br />
The policy for determining payments,<br />
reimbursements <strong>and</strong> other benefits is not set out<br />
in advance, as the company has a single-member<br />
Management Board.<br />
3. SUPERVISORY BOARD<br />
Slovene <strong>and</strong> English, <strong>and</strong> below disclose <strong>and</strong> explain<br />
the deviations from the individual provisions of the<br />
Items 3.1.7 , 3.1.10 <strong>and</strong> 3.1.11:<br />
Code identified at the time that this statement was<br />
prepared.<br />
1. RELATIONSHIP BETWEEN THE<br />
COMPANY, SHAREHOLDERS AND OTHER<br />
STAKEHOLDERS<br />
Items 1.2.6 <strong>and</strong> 1.3.12:<br />
The Supervisory Board functions as a collective<br />
body <strong>and</strong> usually holds sessions in full composition,<br />
with the participation of all members who at all<br />
times strive for quality work <strong>and</strong> professional<br />
decision-making. The Supervisory Board had not<br />
introduced the evaluation of individual members’<br />
work at the time this statement was issued.<br />
51<br />
KD Holding d. d. did not organise the collection of<br />
proxy forms at the General Meeting of Shareholders<br />
in 2007, either directly or via financial institutions,<br />
other organisations or authorised persons. Nor did it<br />
state on its website that the members of Management<br />
<strong>and</strong> Supervisory Boards or employees at the company<br />
were accepting proxy forms for voting at the General<br />
Meeting of Shareholders. Should the Management<br />
Board judge that there is sufficient interest to organise<br />
the collection of proxy forms, it will provide for
7. AUDITING AND THE SYSTEM OF<br />
INTERNAL CONTROLS<br />
Item 7.1.3:<br />
Item 8.6:<br />
Before appointing the auditor at the General Meeting<br />
of Shareholders, the company did not specifically<br />
inform the shareholders of any other services that<br />
the auditor provides or has provided to the company<br />
in professional areas related to auditing. This<br />
disclosure is expected to be made to shareholders at<br />
the next General Meeting of Shareholders.<br />
To date, the company has not published the<br />
financial calendar for the next financial year<br />
on its official website. The company ensures<br />
that important <strong>business</strong> events are announced<br />
periodically <strong>and</strong> on an ad hoc basis, at the earliest<br />
opportunity, <strong>and</strong> thus endeavours to provide quality<br />
information to investors.<br />
8. DISCLOSURES<br />
Item 8.7.2:<br />
52<br />
Item 8.2:<br />
Given the existing shareholder structure, the cost<br />
burden <strong>and</strong> the fact that most of the company’s<br />
<strong>business</strong> partners are from the Republic of Slovenia<br />
or neighbouring countries, the company feels that<br />
at the time this statement was prepared, there was<br />
no need to make ad hoc public announcements<br />
in English. All principal information about the<br />
company for the English-speaking <strong>business</strong><br />
community is included in the annual report<br />
published in English.<br />
The company does not directly monitor or publish<br />
possible cross-affiliations with other companies<br />
(ownership of a significant share of voting rights in<br />
another company, which also holds a significant<br />
share of the voting rights in KD Holding). The<br />
company discloses notifications regarding changes<br />
to the ownership of a significant share of voting<br />
rights in KD Holding in a transparent manner,<br />
<strong>and</strong> informs other public limited companies about<br />
possible changes to the significant shares of voting<br />
rights in the latter, in accordance with applicable<br />
regulations.<br />
Matjaž Gantar<br />
Chief Executive Officer<br />
Aleš Vahčič, PhD<br />
Chairman of the<br />
Supervisory Board
1.4<br />
Operations of the KD Holding<br />
Group in 2007<br />
The KD Holding Group performed well in 2007, as<br />
all key performance indicators improved compared to<br />
2006:<br />
operating revenue rose 25 percent compared<br />
to the previous year, totalling EUR 455.6 million.<br />
Net revenue from insurance premiums (EUR 294.8<br />
million) represented the largest share of sales, an<br />
increase of 16 percent compared to 2006;<br />
net profit for the financial year was EUR 34.9<br />
total assets stood at EUR 956 million at the end of<br />
the year, an increase of 23 percent compared to<br />
total assets at the end of 2006;<br />
total equity was EUR 340.3 million, up 20<br />
percent compared to the previous year;<br />
high growth in net profit was also reflected in<br />
return on equity, which was 11.2 percent in 2007,<br />
representing a significant improvement compared to<br />
2006.<br />
million an increase of 67 percent compared to 2006;<br />
Important indicators:<br />
Indicator 2007 2006 Index<br />
Net profit / capital (in %) 11.2 7.7 147<br />
Independence rate (capital / total assets) (in %) 35.6 36.5 98<br />
Earnings per share relating to majority shareholders (in EUR) 5 12.38 6.95 178<br />
Share book value (in EUR) 6 116.40 97.53 119<br />
Market capitalisation / capital book value 7 0.90 0.47 191<br />
53<br />
5 Earnings per share relating to majority shareholders:<br />
Net profit of majority shareholders – dividend payout on preference<br />
shares (excluding treasury preference shares)<br />
The average number of total issued shares excluding treasury shares<br />
7 Market capitalisation / capital book value:<br />
Market capitalisation of both share classes<br />
(excluding treasury shares) (as at 31 December 2007<br />
Capital book value of majority shareholders (as at 31 December 2007)<br />
6 Share book value:<br />
Capital book value of majority shareholders (as at 31 December 2007)<br />
The number of total issued shares excluding treasury shares (as at 31<br />
December 2007)<br />
Diluted earnings per share also take into account any granted options,<br />
convertible bonds or other similar financial instruments. As the company<br />
issued no such financial instruments this indicator is identical to earnings<br />
per share relating to majority shareholders.
Highlights from the income statement<br />
Income statement (in thous<strong>and</strong> EUR) 2007 2006 Index 2007 / 2006<br />
Operating revenue 455,642 365,083 125<br />
Net revenue from sales of goods <strong>and</strong> services 77,232 55,464 139<br />
Net revenue from insurance premiums 294,759 253,274 116<br />
Other operating revenue 26,964 15,812 171<br />
Net finance income from investments* 56,687 40,533 140<br />
Operating expenses 412,774 335,220 123<br />
Cost of goods, material <strong>and</strong> services 91,908 80,926 114<br />
Labour costs 59,251 50,057 118<br />
Amortisation/depreciation <strong>and</strong> impairment 8,216 6,918 119<br />
Net expenses for claims 231,813 186,343 124<br />
Other insurance expenses 7,248 4,567 159<br />
Other operating expenses 14,338 6,409 224<br />
Operating profit or loss 42,869 29,863 144<br />
Finance cost 6,553 5,514 119<br />
Accrued profit from associates 11,141 4,373 255<br />
Corporate tax 12,511 7,846 159<br />
Net profit or loss for the year** 34,946 20,877 167<br />
* The share of profits of associated companies is not included.<br />
** Includes the portion of net profit for the financial year relating to minority owners.<br />
54<br />
Highlights from the balance sheet<br />
Balance sheet (in thous<strong>and</strong> EUR) 31. 12. 2007 31. 12. 2006 Index 2007 / 2006<br />
Assets 956,047 775,420 123<br />
Intangible <strong>and</strong> tangible fixed assets 171,764 158,585 108<br />
Investment property 20,602 20,592 100<br />
Financial assets 500,830 378,752 132<br />
Investments in shares <strong>and</strong> participations in associates 71,688 45,120 159<br />
Inventories, loans <strong>and</strong> other receivables 150,761 141,966 106<br />
Reinsurance contracts 11,005 8,632 127<br />
Deferred tax assets 0 1,464 0<br />
Cash <strong>and</strong> cash equivalents 29,398 20,310 145<br />
Liabilities <strong>and</strong> equity 956,047 775,420 123<br />
Equity* 340,264 282,806 120<br />
Liabilities arising from insurance contracts 368,922 295,191 125<br />
Investment contracts 15,604 13,791 113<br />
Financial <strong>and</strong> operating liabilities (excluding insurance contracts) 231,257 183,632 126<br />
Financial liabilities 170,563 117,750 145<br />
Operating <strong>and</strong> other liabilities 58,166 65,882 88<br />
Deferred tax liabilities 2,528 0 -<br />
* Also includes minority interest.
Operating revenue<br />
Structure of operating revenue<br />
Total operating revenue was EUR 455.6 million in<br />
2007, up 25 percent compared to 2006.<br />
Net revenue from insurance premiums represents<br />
the largest share of total revenue (65 percent of<br />
revenue of the entire Group). This revenue was up<br />
16 percent compared to the previous year.<br />
Net finance income from investments recorded even<br />
higher growth (40 percent), as did net revenue from<br />
sales of goods <strong>and</strong> services (39 percent) <strong>and</strong> other<br />
operating revenue (71 percent). Net revenue from<br />
sales of goods <strong>and</strong> services was EUR 77.2 million<br />
in 2007, <strong>and</strong> represents the second highest share of<br />
total revenue. This growth is primarily the reflection<br />
of a large jump in revenue from management <strong>and</strong><br />
subscription fees.<br />
55<br />
Operating revenue <strong>and</strong> changes in 2007 <strong>and</strong> 2006 (in thous<strong>and</strong> EUR):<br />
2007<br />
77,232 294,759 26,964 56,687<br />
Net revenue from sales of goods<br />
Net revenue from indurance premiums<br />
Other operating revenue<br />
Net financial revenue from investments<br />
(The share of profits of associated<br />
companies is not included)<br />
2006<br />
55,464 253,274 15,812 40,533<br />
0 50,000 100,000 150,000 200,000 250,000 300,000 350,000 400,000 450,000 500,000
Sales revenue<br />
Sales revenue 8 amounted to EUR 372 million in<br />
2007. Financial intermediation (insurance <strong>and</strong><br />
financial services in the graph below) represents<br />
the majority (87 percent) of sales revenue of the KD<br />
Holding Group, maintaining a level similar to that<br />
achieved in 2006 when the share was 88 percent.<br />
Structure of sales revenue by <strong>business</strong> segment in 2007 (in %):<br />
Property insurance 35%<br />
Health insurance 24%<br />
Life insurance 20%<br />
Financial services 8%<br />
Cinematography 5%<br />
Other 8%<br />
56<br />
Sales revenue by <strong>business</strong> segment in 2007 <strong>and</strong> 2006 (in thous<strong>and</strong> EUR):<br />
2007<br />
2006<br />
Life insurance<br />
Property insurance<br />
76,083<br />
54,236<br />
131,459<br />
122,691<br />
Health insurance<br />
89,220<br />
77,884<br />
Financial services<br />
28,552<br />
14,902<br />
Cinematography<br />
18,679<br />
16,083<br />
Other<br />
27,998<br />
22,915<br />
ddddddddddddddddddddd<br />
0 20,000 40,000 60,000 80,000 100,000 120,000 140,000<br />
8 Sales revenue: Net revenue from sales of goods <strong>and</strong> services + net sales revenue from insurance premiums
In 2007, the highest relative <strong>and</strong> absolute growth<br />
Net finance income from investments<br />
was achieved in life insurance (40 percent growth)<br />
<strong>and</strong> financial services (92 percent growth). Life<br />
insurance revenue (EUR 76 million) is approaching<br />
the level of health insurance (EUR 89.2 million),<br />
which ranks second, while property insurance (EUR<br />
131.5 million) still ranks first, despite lower growth<br />
of 7 percent compared to the previous year. Growth<br />
was also achieved in cinematography (16 percent).<br />
Finance income from investments recorded 40<br />
percent growth in 2007 compared to the previous<br />
year, totalling EUR 56.7 million. The largest<br />
contribution came from favourable trends in capital<br />
markets which, with successful management of<br />
financial assets, were the biggest contributors to<br />
improved results from financial operations.<br />
A large increase in the net financial result of the<br />
life insurance segment stems from unit-linked<br />
investments. Because of the nature of the product<br />
however, the positive result can be attributed to<br />
premium payments by policyholders.<br />
57<br />
Net finance income from investments by <strong>business</strong> segment in 2007 <strong>and</strong> 2006 (in thous<strong>and</strong> EUR):<br />
2007<br />
2006<br />
Life insurance<br />
Property insurance<br />
27,130<br />
12,986<br />
25,448<br />
11,173<br />
Health insurance<br />
2,479<br />
1,508<br />
Financial services<br />
1,984<br />
14,505<br />
Cinematography<br />
55<br />
-5<br />
Other<br />
-5,000 ddddddddddddddddddddd<br />
0 5,000 10,000 15,000 20,000 25,000 30,000<br />
-409<br />
369
Operating expenses<br />
Operating expenses amounted to EUR 412.8<br />
million in 2007. In 2007, the Group increased<br />
its cost efficiency compared to the previous year,<br />
as operating expenses grew at a slower rate than<br />
operating revenue (operating expenses rose by<br />
23 percent, while operating revenue rose by<br />
25 percent).<br />
The cost structure did not change significantly.<br />
Net expenses for damages paid still account for<br />
the largest share of total operating expenses, <strong>and</strong><br />
remain at the previous year’s level (56 percent).<br />
Labour costs rose by 18 percent compared to 2006,<br />
<strong>and</strong> accounted for 14 percent of operating expenses,<br />
a decrease of 1 percentage point.<br />
58<br />
Structure of operating expenses <strong>and</strong> changes in 2007 <strong>and</strong> 2006 (in thous<strong>and</strong> EUR):<br />
2007<br />
91,908 59,251<br />
231,813 14,33862.966<br />
8,216 7,248<br />
Costs of goods, material <strong>and</strong> services<br />
Labour costs<br />
Amortisation/depreciation <strong>and</strong> impairment<br />
Other insurance costs<br />
Net costs for claims<br />
2006<br />
80,926<br />
50,057<br />
6,918<br />
253.274<br />
186,343<br />
6,409<br />
4,567<br />
Other operating expenses<br />
0 50,000 100,000 150,000 200,000 250,000 300,000 350,000 400,000 450,000
Business performance<br />
Net profit for the financial year was EUR 49.2<br />
million, representing an increase of 44 percent<br />
compared to 2006. The largest contributors to the<br />
profitability of the KD Holding Group were insurance<br />
<strong>and</strong> financial services.<br />
Realised profit by <strong>business</strong> segment in 2007 <strong>and</strong> 2006 (in thous<strong>and</strong> EUR):<br />
Life insurance<br />
-101<br />
2,623<br />
Property insurance<br />
28,124<br />
16,246<br />
Health insurance<br />
4,628<br />
2,146<br />
Financial services<br />
11,269<br />
8,578<br />
Cinematography<br />
151<br />
-736<br />
2007<br />
2006<br />
Other<br />
-1,203<br />
1,006<br />
59<br />
-5,000 ddddddddddddddddddddd<br />
0 5,000 10,000 15,000 20,000 25,000 30,000<br />
Operating margin<br />
Net profit for 2007 was EUR 34.9 million,<br />
demonstrated above-average growth is noteworthy,<br />
up 67 percent compared to the previous year.<br />
while cinematography generated loss.<br />
In terms of margin, property insurance, which<br />
Net profit of the KD Holding Group in 2007 <strong>and</strong> 2006 (in thous<strong>and</strong> EUR):<br />
34,946<br />
2007<br />
2006<br />
20,877<br />
0 ddddddddddddddddddddd<br />
5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000
Net profit by <strong>business</strong> segment in 2007 <strong>and</strong> 2006 (in thous<strong>and</strong> EUR):<br />
Life insurance<br />
71<br />
1,876<br />
Property insurance<br />
22,272<br />
12,368<br />
Health insurance<br />
3,019<br />
1,530<br />
Financial services<br />
14,546<br />
6,394<br />
Cinematography<br />
-2,422<br />
-1,300<br />
2007<br />
2006<br />
Other<br />
-2,540<br />
-5,000 0 5,000 10,000 15,000 20,000 25,000<br />
9<br />
60<br />
Assets<br />
Total assets of the Group stood at EUR 956 million<br />
at the end of the year, an increase of 23 percent<br />
compared to total assets of EUR 775.4 million at<br />
the end of 2006.<br />
Assets <strong>and</strong> changes in 2007 <strong>and</strong> 2006 (in thous<strong>and</strong> EUR):<br />
In the structure of assets, investments in shares <strong>and</strong><br />
participations in associates (59 percent growth) <strong>and</strong><br />
financial assets (32 percent growth) recorded the most<br />
significant increases. Financial assets also account for<br />
the largest share of total assets (52 percent).<br />
The majority of assets were represented by the<br />
insurance segment (58 percent) <strong>and</strong> financial<br />
services (33 percent).<br />
Intangible <strong>and</strong> tangible fixed assets<br />
Investment property<br />
31. 12. 2007<br />
171,764 500,830<br />
71,688<br />
20,602<br />
150,761<br />
29,398<br />
11,005<br />
Financial assets<br />
0<br />
Investments in shares <strong>and</strong> participations<br />
in associates<br />
Inventories, loans <strong>and</strong> other receivable<br />
Reinsurance contracts<br />
Deferred tax receivables<br />
Cash <strong>and</strong> cash equivalents<br />
31. 12. 2006<br />
7.248<br />
158,585 20.592 378,752<br />
45,120 141,966<br />
20,310<br />
8,632<br />
1,464<br />
0 100,000 200,000 300,000 400,000 500,000 600,000 700,000 800,000 900,000 1.000.000
Similar to 2006, the largest increase in assets in 2007<br />
was in the life insurance segment (63 percent growth<br />
compared to 2006), <strong>and</strong> was followed by property<br />
insurance <strong>and</strong> financial services. In terms of volume,<br />
the life insurance segment (EUR 249 million) is<br />
approaching the level of property insurance<br />
(EUR 272 million). One of the primary reasons for<br />
growth in the life insurance segment is strong growth<br />
in premiums collected in Slovenia <strong>and</strong> abroad,<br />
resulting in an increase in premium reserves.<br />
Structure of assets by <strong>business</strong> segment as at 31 December 2007 (in %):<br />
Financial services 33%<br />
Property insurance 28%<br />
Life insurance 26%<br />
Cinematography 6%<br />
Health insurance 4%<br />
Other 3%<br />
61<br />
Assets by <strong>business</strong> segment as at 31 December 2007 <strong>and</strong> 2006 (in thous<strong>and</strong> EUR):<br />
Life insurance<br />
249,388<br />
153,263<br />
Property insurance<br />
272,022<br />
231,675<br />
Health insurance<br />
42,218<br />
42,073<br />
Financial services<br />
308,331<br />
271,659<br />
Cinematography<br />
58,546<br />
61,335<br />
31. 12. 2007<br />
31. 12. 2006<br />
Other<br />
25,542<br />
15,415<br />
0 ddddddddddddddddddddd<br />
50,000 100,000 150,000 200,000 250,000 300,000 350,000
Financing<br />
Due to the high growth in assets in the insurance<br />
segment (primarily in the life insurance segment),<br />
liabilities arising from insurance contracts recorded<br />
significant growth (25 percent) on the liability side.<br />
The expansion of the Group to markets <strong>and</strong> capital<br />
increases in existing companies also required<br />
As a result, the independence level of capital<br />
indicator fell from 36.5 to 35.6. It should be<br />
mentioned here that this indicator is low due to<br />
the specific nature of insurance balance sheets,<br />
which disclose a high level of liabilities arising from<br />
insurance contracts on the liability <strong>and</strong> equity side.<br />
financing in the form of additional equity <strong>and</strong> debt<br />
sources. In this regard, financial liabilities rose by<br />
45 percent, reaching EUR 170.6 million at the end<br />
of 2007 (two issues of KD Holding d. d. bonds<br />
accounted for EUR 79.1 million of this amount),<br />
while equity increased by 20 percent compared to<br />
Finance expenses rose by 19 percent in 2007<br />
compared to the previous year. Interest on<br />
KD Holding d. d. bonds issued <strong>and</strong> interest on<br />
bank loans represent the largest portion of finance<br />
expenses.<br />
2006, totalling EUR 340.3 million.<br />
62<br />
Liabilities <strong>and</strong> equity <strong>and</strong> changes as at 31 December 2007 <strong>and</strong> 2006 (in thous<strong>and</strong> EUR):<br />
31. 12. 2007 340,264 368,922 15,604 170,563 62.966 58,166<br />
2,528<br />
31. 12. 2006<br />
282,806<br />
295,191<br />
13,791 117,750 65,882<br />
7.248<br />
0<br />
0 100,000 200,000 300,000 400,000 500,000 600,000 700,000 800,000 900,000 1,000,000<br />
Equity<br />
Liabilities arising from insurance contracts<br />
Investment contracts<br />
Financial liabilities<br />
Deferred tax liabilities<br />
Operating <strong>and</strong> other liabilities
Ljubljansko barje wetl<strong>and</strong>s, Slovenia<br />
63
1.5<br />
Risk Management<br />
64<br />
The Management Board of KD Holding d. d.<br />
manages risks at the company <strong>and</strong> for the entire<br />
Group. Since the company is a holding company,<br />
it is extremely important that risks at subsidiaries<br />
are also appropriately managed. The controlling<br />
company establishes guidelines regarding the<br />
ratios between risks, return <strong>and</strong> capital, carries<br />
out periodic reviews <strong>and</strong> provides guidelines for<br />
implementing <strong>business</strong> policies <strong>and</strong> strategies for<br />
individual Group companies.<br />
Strategic risk<br />
Strategic risks related to the long-term development<br />
of the Group include the risk of loss arising<br />
from incorrect <strong>business</strong> decisions, inappropriate<br />
implementation of adopted decisions <strong>and</strong><br />
insufficient responsiveness to changes in the<br />
<strong>business</strong> environment. Strategic risks are managed<br />
through the implementation <strong>and</strong> regular review of<br />
the adequacy of defined strategies of the company<br />
<strong>and</strong> its subsidiaries. The adoption of investment<br />
decisions for specific areas <strong>and</strong> activities is of vital<br />
strategic importance given the extremely diverse<br />
activities of the companies owned by KD Holding.<br />
The corporate governance system is adapted to the<br />
development <strong>and</strong> growth of individual areas <strong>and</strong><br />
to achieving expected returns. All projects that are<br />
reasonable in terms of synergy effects are carried<br />
out <strong>and</strong> coordinated at the Group level. These are<br />
primarily development projects, projects introducing<br />
information solutions <strong>and</strong> other projects important<br />
for strategic development. Risks in this area are<br />
mitigated through planning <strong>and</strong> the continuous<br />
monitoring of project progress in accordance with<br />
Project Management Rules.<br />
General <strong>business</strong> risks<br />
Our activities have no direct impact on<br />
developments in economic, legislative <strong>and</strong> other<br />
environments. Thus risks are more difficult to<br />
measure <strong>and</strong> model. <strong>We</strong> manage these risks by<br />
regularly monitoring legislation, capital markets<br />
<strong>and</strong> macroeconomic parameters. Amendments<br />
to legal regulations which significantly affect our<br />
<strong>business</strong> environment are quite frequent. A series of<br />
legislative changes have occurred in Slovenia <strong>and</strong><br />
the countries of South Eastern Europe in the past<br />
year that have affected our key areas of operations<br />
<strong>and</strong> required numerous activities to adapt them.<br />
Financial risks<br />
The primary purpose of financial risk management<br />
is to achieve stable operations <strong>and</strong> reduce exposure<br />
to specific risks to an acceptable level. The Group is<br />
exposed to financial risks through its financial assets<br />
<strong>and</strong> liabilities, reinsurance receivables <strong>and</strong> insurance<br />
liabilities. The possibility that inflows from financial<br />
investments will not be sufficient to cover outflows<br />
from insurance contracts represents the main risk.<br />
Given that most companies in the Group are involved<br />
in regulated activities, this area is already controlled
to a great extent by observing legislative provisions.<br />
The most significant components of financial risk<br />
are changing interest rates <strong>and</strong> securities prices <strong>and</strong><br />
currency <strong>and</strong> credit risk.<br />
acts. Operational risk also includes IT risk, which is<br />
the risk of loss resulting from inadequate information<br />
technology <strong>and</strong> processing, particularly in terms<br />
of manageability, access, integrity, supervision<br />
<strong>and</strong> continuity. Operational risk is managed<br />
The risks related to market risk management are<br />
managed independently by Group companies using<br />
methods linked primarily to the legal aspects of<br />
specific industries <strong>and</strong> may vary significantly by<br />
individual divisions. Group companies monitor<br />
<strong>and</strong> manage market risks from investments in<br />
other issuers of securities by carefully selecting<br />
the industrial <strong>and</strong> geographical composition of<br />
investments. In the asset management activity,<br />
market risks are monitored, measured <strong>and</strong> managed<br />
using quantitative risk measurement methods<br />
compared with selected profitability criteria (beta<br />
parameter values compared to a benchmark,<br />
tracking error <strong>and</strong> relative risk). In accordance with<br />
the Insurance Act, insurance companies are obliged<br />
to match long-term <strong>business</strong> fund investments with<br />
their liabilities arising from insurance contracts, the<br />
amount of which depends on changes in exchange<br />
rates, interest rates <strong>and</strong> securities prices.<br />
Operational risk<br />
Operational risk (including legal risk) is the risk<br />
of loss arising primarily due to inadequate or<br />
incorrect implementation of internal controls, other<br />
inappropriate conduct by personnel involved in<br />
the company’s internal operations, inadequate or<br />
incorrect functioning of systems that relate to the<br />
company’s internal operations <strong>and</strong> external events or<br />
by companies by identifying opportunities <strong>and</strong><br />
threats in their respective areas <strong>and</strong> by managing<br />
<strong>business</strong> processes. The management of these<br />
risks is subordinate to the strategic <strong>and</strong> <strong>business</strong><br />
objectives of individual areas <strong>and</strong> companies. The<br />
Group manages operational risk by introducing<br />
the ISO st<strong>and</strong>ards <strong>and</strong> using st<strong>and</strong>ard software for<br />
accounting <strong>and</strong> investments. Risks are also mitigated<br />
by a st<strong>and</strong>ardised system of annual planning <strong>and</strong><br />
reporting that enable the parent company to be<br />
informed about the operations of subsidiaries in a<br />
timely manner.<br />
Insurance risks<br />
Within the framework of insurance risk the<br />
company’s operations are exposed to underwriting<br />
process risk, product design risk, pricing risk,<br />
economic environment risk, policyholder behaviour<br />
risk, reserving risk <strong>and</strong> claims risk.<br />
Insurance companies in the Group have developed<br />
their own policy for concluding insurance contracts<br />
with the aim of spreading assumed risks. Insurance<br />
risks are managed as follows:<br />
Risks that exceed a predetermined amount are<br />
transferred to a reinsurance company;<br />
Assumed risks are spread <strong>and</strong> we achieve,<br />
within each individual category, a sufficient number<br />
of risks to reduce the variability of expected results;<br />
65
66<br />
Parameters defining the insurance premium are<br />
assessed adequately when new insurance products<br />
are developed.<br />
Human resource risk<br />
The risk in this area is carefully managed at the<br />
Group level, as employees are the key to our<br />
success. To mitigate the risk of excessive employee<br />
turnover, we constantly educate <strong>and</strong> train our<br />
employees, attend to the working environment<br />
<strong>and</strong> general employee satisfaction (by measuring<br />
organisational climate <strong>and</strong> culture), organise<br />
meetings of all employees, stimulate affiliation with<br />
the Group, implement a system of annual interviews<br />
with co-workers <strong>and</strong> strengthen the social security<br />
of employees with additional insurance (accident,<br />
pension, etc.). <strong>We</strong> also give special attention to the<br />
system of remuneration <strong>and</strong> advancement.<br />
Reputation risk<br />
A potential loss due to a negative corporate or Group<br />
image is difficult to measure <strong>and</strong> even more difficult<br />
to correct. <strong>We</strong> maintain <strong>and</strong> augment the Group’s<br />
reputation <strong>and</strong> boost the value of our br<strong>and</strong>s in the<br />
eyes of our customers, <strong>business</strong> partners, owners,<br />
investors <strong>and</strong> regulators through good performance<br />
<strong>and</strong> by managing all other risks. <strong>We</strong> constantly<br />
communicate with the community <strong>and</strong> financially<br />
support numerous cultural <strong>and</strong> sporting events, <strong>and</strong><br />
humanitarian campaigns.<br />
IT-related risk<br />
<strong>We</strong> constantly introduce new information support<br />
(or improve existing support) for work process at all<br />
companies in the Group. <strong>We</strong> manage this process<br />
through an appropriate organisational structure,<br />
the inclusion of specialist departments, internal<br />
auditing, diligent testing <strong>and</strong> project management.<br />
In 2007, the entire information system functioned<br />
practically without interruption in the companies of<br />
KD Holding Group. Group companies also have a<br />
well-structured <strong>business</strong> continuity plan.<br />
Reporting risk<br />
Risk in the areas of information <strong>and</strong> communication<br />
is managed by proactively communicating at<br />
the same level with the media <strong>and</strong> stakeholders.<br />
In doing so, we comply with applicable legal<br />
st<strong>and</strong>ards, rules of supervisory bodies <strong>and</strong><br />
communication requirements of stock exchanges.<br />
Management of this type of risk is indirectly<br />
reflected through the strengthening of the<br />
company’s reputation <strong>and</strong> its br<strong>and</strong>, products <strong>and</strong><br />
services.<br />
Legal risk<br />
Legal risk is the risk of loss arising from the violation<br />
of or improper adherence to laws, implementing<br />
regulations, instructions, recommendations,<br />
contracts, good practices or ethical st<strong>and</strong>ards. These<br />
risks are managed through the adoption of internal
ules of operation aimed at reducing the probability<br />
of harmful consequences <strong>and</strong> preventing actions<br />
caused by such circumstances. The legal function is<br />
integrated into the adoption of <strong>business</strong> decisions,<br />
providing for the timely detection of legal risks.<br />
Incidental risk<br />
Incidental events are quite rare but may have severe<br />
consequences for operations. The company protects<br />
itself against incidental risk through insurance or<br />
reinsurance contracts.<br />
Risk related to securities issued by KD<br />
Holding<br />
The holders of securities issued by KD Holding are<br />
exposed to the following risks:<br />
67<br />
Market risk: shares <strong>and</strong> bonds are sensitive to<br />
changes which the issuer cannot influence such as<br />
changes in the economy or legislation, crises, <strong>and</strong><br />
natural <strong>and</strong> ecological disasters;<br />
Liquidity risk: the risk of a security holder not being<br />
able to sell a security or only being able to sell it at a<br />
lower price owing to insufficient dem<strong>and</strong>;<br />
Credit risk: the risk of the bond issuer failing to pay<br />
interest <strong>and</strong> principal.<br />
KD Holding can only impact the exposure to credit<br />
risk by managing other risks <strong>and</strong> thus influencing the<br />
stability <strong>and</strong> long-term growth of the Group.
68<br />
Bratislava, Slovakia
Sarajevo, Bosnia <strong>and</strong> Herzegovina<br />
69
70<br />
Croatian Istria - portrait
Bratislava, Slovakia - portrait<br />
71
1.6<br />
Human resource management<br />
At the KD Holding Group, we strive for highly committed<br />
<strong>and</strong> motivated personnel. <strong>We</strong> therefore facilitate<br />
Number of employees, educational <strong>and</strong> age<br />
structure<br />
Number of employees<br />
advancement <strong>and</strong> career development at companies in the<br />
Group. <strong>We</strong> will continue to dedicate a great deal of time<br />
to promoting the acquisition of new, quality knowledge<br />
that will provide employees the opportunity to develop<br />
universally. <strong>We</strong> are aware that the success of any company<br />
depends on satisfied, loyal <strong>and</strong> motivated employees <strong>and</strong><br />
The Group has undergone rapid <strong>and</strong> intensive growth<br />
since its establishment. This constant development is<br />
the result of the expansion of operations in Slovenia <strong>and</strong><br />
on foreign markets, the opening of new companies <strong>and</strong><br />
ownership consolidation within the Group.<br />
that they are a key factor in the successful realisation of the<br />
Group’s vision, mission <strong>and</strong> strategic objectives.<br />
The Group had 1,927 full-time employees at the end<br />
of 2007, 1,720 in Slovenia, <strong>and</strong> 207 abroad. This<br />
represents an increase of 6 percent compared to the<br />
previous year. Adriatic Slovenica has the largest number<br />
of employees (1,090) in the KD Holding Group. Adriatic<br />
72<br />
Slovenica is followed by KD Finančna točka, with a staff<br />
of 137 <strong>and</strong> Kolosej kinematografi, with 90 employees.<br />
Number <strong>and</strong> share of employees as at 31 December 2007 compared to 2006 <strong>and</strong> 2005 at individual KD Holding Group companies:<br />
Company 31. 12. 2005 31. 12. 2005 31. 12. 2006 31.12.2006 31. 12. 2007 31. 12. 2007<br />
(share in %) (share in %) (share in %)<br />
ABDS d. d., Sarajevo - - 7 0.39 6 0.31<br />
Adriatic Slovenica d. d., Koper 1,123 63.92 1,106 61.38 1,090 56.56<br />
Arena Film Kft, Budapest 0 0 - - - -<br />
Coloseum Multiplex holdings, b. v.,<br />
Amsterdam<br />
1 0.06 0 0<br />
0 0<br />
ČZD Kmečki glas, d. o. o., Ljubljana 39 2.22 39 2.16 36 1.87<br />
GEA College d. d., Ljubljana - - - - 14 0.73<br />
GEA College - CVŠ d. o. o., Ljubljana - - - - 4 0.21<br />
GEA College - PIC d. o. o., Ljubljana - - - - 3 0.16<br />
Globus Film d. o. o., Koper 0 0 0 0 0 0<br />
Globtour d. o. o., Ljubljana 88 5.01 79 4.38 - -<br />
Firsthouse Investments ltd., Cyprus 0 0 0 0 0 0<br />
Fontes Group d. o. o., Belgrade - - - - 0 0<br />
KD Asset Management d. o. o., Amsterdam 1 0.06 1 0.06 1 0.05<br />
KD BPD, d. o. o., Ljubljana 48 2.73 68 3.77 46 2.39<br />
KD Capital Management S. A., Bucharest 8 0.46 14 0.78 16 0.83<br />
KD Finančna točka, d. o. o., Ljubljana - - - - 137 7.11<br />
KD Found Advisors LLC, Woodl<strong>and</strong>s - - - - 0 0
Number <strong>and</strong> share of employees as at 31 December 2007 compared to 2006 <strong>and</strong> 2005 at individual KD Holding Group companies:<br />
Company 31. 12. 2005 31. 12. 2005 31. 12. 2006 31. 12. 2006 31. 12. 2007 31. 12. 2007<br />
(share in %) (share in %) (share in %)<br />
KD Holding d. d., Ljubljana 51 2.90 62 3.44 60 3.11<br />
KD Investments d. o. o., Ljubljana* 40 2.28 34 1.89 35 1.82<br />
KD Investments a. d., Belgrade 0 0 0 0 12 0.62<br />
KD Investments správ. spol., a. s, Bratislava 8 0.46 8 0.44 9 0.47<br />
KD Investments EAD, Sofia 30 1.71 36 2.00 11 0.57<br />
KD Investments d. o. o., Zagreb 21 1.20 24 1.33 29 1.50<br />
KD Investments b. v., Amsterdam 0 0 0 0 0 0<br />
KD Investments Sp. Z. o. o., Warsaw 0 0 0 0 0 0<br />
KD Kapital d. o. o., Ljubljana - - - - 1 0.05<br />
KD Kvart d. o. o., Ljubljana - - - - 5 0.26<br />
KD Life AD, Sofia - - - - 25 1.30<br />
KD Life, Kiev - - - - 9 0.47<br />
KD Life Asigurari S. A., Bucharest - - 21 1.17 26 1.35<br />
KD Life s. r. o., Prague - - - - 7 0.36<br />
KD Mark d. o. o., Ljubljana 0 0 0 0 1 0.05<br />
KD Mont a. d., Podgorica 4 0.23 4 0.22 6 0.31<br />
KD Private Equity d. o. o., Belgrade - - - - 0 0<br />
KD Securities EAD, Sofia - - - - 15 0.78<br />
KD Upravljanje imovinom d. o. o., Zagreb 5 0.28 6 0.33 8 0.42<br />
KD ViFin s. r. o., Bratislava - - - - 9 0.47<br />
KD Življenje d. d., Ljubljana** 107 6.09 116 6.44 78 4.05<br />
Kinematografi Kolosej d. o. o., Tuzla 0 0 0 0 0 0<br />
Kinematografi Maribor d. o. o., Maribor 1 0.06 1 0.06 0 0<br />
Kolosej kinematografi, d. o. o., Ljubljana 95 5.41 97 5.38 90 4.67<br />
Kolosej Celje d. o. o., Celje 0 0 0 0 0 0<br />
Kolosej Maribor d. o. o., Maribor 5 0.28 3 0.17 2 0.10<br />
Ljubljanski kinematografi d. d., Ljubljana 7 0.40 6 0.33 4 0.21<br />
Oklev d. o. o., Ljubljana - - - - 0 0<br />
Onisac d. o. o., Ljubljana 1 0.06 0 0 27 1.40<br />
R.E. Invest d. o. o., Ljubljana 5 0.28 4 0.22 1 0.05<br />
SAI KD Investments S. A., Bucharest 32 1.82 13 0.72 5 0.26<br />
SC KD Fond De Pensii S. A., Bucharest - - - - 8 0.42<br />
Svet zavarovanj d. o. o., Ljubljana, Bucharest 20 1.14 36 2.00 - -<br />
VIB a. d., Banja Luka - - - - 4 0.21<br />
Vrtnarstvo Celje d. o. o., Celje - - - - 86 4.46<br />
Zabavni Centri d. o. o., Zagreb 0 0 0 0 0 0<br />
ZAP d. o. o., Murska Sobota 17 0.97 15 0.83 0 0<br />
2INVEST s. r. l., Bucharest 0 0 2 0.11 1 0.05<br />
Skupaj 1,757 100 1,802 100 1,927 100<br />
73<br />
* KD Skladi, d. o. o., since 16 January 2007<br />
** Slovenica Življenje d. d. in 2005 <strong>and</strong> 2006
Employee educational structure<br />
More <strong>and</strong> more people with higher educational<br />
levels are employed at the Group every year. At the<br />
end of 2007, 48.78 percent of employees held an<br />
educational level VI or higher, in line with the job<br />
systemisation <strong>and</strong> the requirements of key areas<br />
such as asset management <strong>and</strong> insurance. Level V<br />
The number of employees with Level VII or higher<br />
education was again higher than in the previous<br />
year. Quality, highly educated personnel, continually<br />
searching for new knowledge <strong>and</strong> skills in the<br />
stimulating Group environment, are another reason<br />
for optimism.<br />
education was held by 42.03 percent of employees,<br />
with the remaining 9.19 percent holding Level I to<br />
IV education.<br />
74<br />
Educational structure of employees as at 31 December 2007 compared to 2006 <strong>and</strong> 2005:<br />
0 % 10% 20 % 30% 40% 50% 60%<br />
VIII level<br />
VII/2 level<br />
0.26<br />
0.22<br />
0.29<br />
4.72<br />
3.69<br />
3.23<br />
VII level<br />
31.24<br />
30.41<br />
27.48<br />
VI level<br />
12.56<br />
12.73<br />
12.97<br />
2007<br />
2006<br />
2005<br />
V level<br />
I-IV level<br />
ddddddddddddddddddddd<br />
42.03<br />
45.73<br />
48.95<br />
9.19<br />
7.22<br />
7.08
Employee age structure<br />
The age structure of employees indicates that<br />
three-quarters of the Group’s entire workforce are<br />
less than 45 years of age, although this figure is<br />
down slightly from previous years. The workforce<br />
thus primarily consists of young people. At the end<br />
between 26 <strong>and</strong> 40 years of age. The largest <strong>group</strong><br />
of employees (19.51 percent of the total workforce)<br />
were those between 26 <strong>and</strong> 30 years of age, followed<br />
by those between 31 <strong>and</strong> 35 years of age (17.96<br />
percent) <strong>and</strong> those aged 36 to 40 (16.40 percent).<br />
of the year, more than half of all employees were<br />
Employee age structure as at 31 December 2007 compared to 2006 <strong>and</strong> 2005:<br />
0% 5% 10% 15% 20% 25%<br />
above 56<br />
51-55<br />
3.74<br />
4.03<br />
4.24<br />
8.35<br />
8.48<br />
8.90<br />
75<br />
46-50<br />
12.77<br />
11.29<br />
11.73<br />
41-45<br />
15.15<br />
15.81<br />
15.64<br />
36-40<br />
16.40<br />
15.87<br />
16.37<br />
31-35<br />
17.96<br />
18.40<br />
16.77<br />
26-30<br />
19.51<br />
19.83<br />
19.83<br />
6.07<br />
2007<br />
2006<br />
2005<br />
21-25<br />
under 20<br />
ddddddddddddddddddddd<br />
6.01<br />
6.35<br />
0.05<br />
0.28<br />
0.17
Number <strong>and</strong> educational structure of<br />
KD Holding employees<br />
Employee educational structure in 2007 compared to 2006:<br />
The average number of employees at KD Holding<br />
in 2007 was 57.7, or 9.56 percent less than in<br />
2007 when the average number of employees<br />
0 % 10% 20% 30% 40% 50% 60% 70%<br />
VIII 0.00<br />
0.00<br />
was 63.8.<br />
VII/2<br />
10.00<br />
11.29<br />
76<br />
The educational structure of employees at KD<br />
Holding shows that the majority (60 percent) of<br />
employees had a level VII education in 2007.<br />
Ten percent of employees had level VII/second<br />
cycle education, 5 percent had a level V education<br />
<strong>and</strong> just 1.67 percent of employees had a lower<br />
level of education (levels I to IV). A comparison<br />
with 2006 indicates the largest increase was<br />
recorded by employees with a level V education,<br />
with slight decreases in other educational levels.<br />
VII<br />
VI<br />
V<br />
I-IV<br />
ddddddddddddddddddddd<br />
2007<br />
2006<br />
60.00<br />
61.29<br />
5.00<br />
8.06<br />
23.33<br />
16.13<br />
1.67<br />
3.23<br />
Human capital development<br />
Recruitment process<br />
<strong>We</strong> pursue the Group’s vision <strong>and</strong> mission in the<br />
recruitment processes. In addition to meeting all<br />
requirements of a position, we are particularly<br />
diligent in choosing ambitious, competitive<br />
c<strong>and</strong>idates, with the potential to develop <strong>and</strong> with<br />
values <strong>and</strong> interests in line with the strategy of the<br />
KD Holding Group. In 2007, we again applied our<br />
principle of putting the right people in the right<br />
positions with the expert, high quality selection<br />
of personnel to ensure the best support of all our<br />
activities.<br />
Employee development oriented investing<br />
Investing in employee knowledge is considered<br />
investing in the future of the KD Holding Group.<br />
<strong>We</strong> therefore make planned investments to improve<br />
the professional qualifications <strong>and</strong> general work<br />
competencies of our employees. <strong>We</strong> will continue<br />
to provide this through education <strong>and</strong> training. In<br />
particular, we will strive to establish more<br />
in-house training <strong>and</strong> include all potential in-house<br />
educators in the process of continuous education,<br />
while ensuring the constant transfer of knowledge<br />
between employees.
Employees have undergone training <strong>and</strong> education to<br />
obtain higher degrees of formal education <strong>and</strong> to gain<br />
special expertise <strong>and</strong> soft managerial skills such as<br />
efficient management, communication, motivation <strong>and</strong><br />
teamwork.<br />
Regular annual interviews with employees <strong>and</strong><br />
organisational climate measurements have been<br />
conducted by several companies in the KD Holding<br />
Group. In the future, we intend to further strengthen<br />
such job performance measurements <strong>and</strong> introduce<br />
them to as many companies in the Group as<br />
possible <strong>and</strong> further improve employee satisfaction.<br />
Human resources activities in 2008<br />
The introduction <strong>and</strong> development of tools <strong>and</strong><br />
mechanisms to raise employee performance <strong>and</strong><br />
commitment, applying the principle that only the<br />
best is good enough for our employees;<br />
The continuation of the process of strategic<br />
planning <strong>and</strong> management of the Group. Special<br />
attention will be placed on ensuring that the Group’s<br />
divisional strategies match those of the subsidiaries;<br />
Greater emphasis on the education <strong>and</strong> training<br />
system: particular focus on special programmes for<br />
training sales teams in asset products using<br />
in-house <strong>and</strong> outside trainers;<br />
Health <strong>and</strong> safety at work, social security<br />
Health <strong>and</strong> safety at work is one of our basic<br />
responsibilities. All companies in the Group organise<br />
seminars on safety at work which are attended by<br />
all employees. The principle of social security for<br />
employees is a pillar of HR policy at all companies<br />
in the KD Holding Group. Employees may also opt<br />
for supplementary collective pension <strong>and</strong> accident<br />
insurance.<br />
The development of a system of rewarding<br />
performance in the division, in the Group <strong>and</strong> in<br />
project work;<br />
The continuing organisation of the most diverse<br />
social events for employees.<br />
77<br />
Events for employees in their spare time<br />
The employees of the Group continued to enjoy<br />
social events in 2007. There are a number of<br />
sporting societies at the Group that organise<br />
different sporting activities for the active enjoyment<br />
of employees in their free time. Most of these<br />
societies organise internal social events at the<br />
end of the year for employees <strong>and</strong> presentation of<br />
Christmas gifts for employees’ children.
78<br />
Kalemegdan - Belgrade, Serbia
Kalemegdan - Belgrade, Serbia<br />
79
80<br />
Belgrade, Serbia
Terazije - Belgrade, Serbia<br />
81
1.7<br />
Corporate communications<br />
Internal communications<br />
82<br />
Efficient communication management in the Group<br />
is based on clearly defined long-term communication<br />
objectives that support the operations <strong>and</strong><br />
strategic orientation of the entire Group.<br />
Realisation of communication objectives<br />
Corporate communication is a strategic function<br />
with an emphasis on success, efficiency, soundness<br />
<strong>and</strong> the justification of <strong>relationships</strong> between the<br />
organisation <strong>and</strong> its stakeholders. The Corporate<br />
Communications Department plans, coordinates<br />
<strong>and</strong> implements communication activities that<br />
provide for a professional approach to everyday<br />
communication with employees, the media,<br />
suppliers, customers, the local community,<br />
decision-makers <strong>and</strong> other relevant publics.<br />
Activities in 2007 were focused on the realisation of<br />
the following long-term objectives:<br />
support of operations <strong>and</strong> the strategic<br />
orientation of the Group,<br />
strengthening the reputation of the Group in the<br />
eyes of key publics,<br />
<strong>build</strong>ing a “coalition” of journalists <strong>and</strong><br />
maintaining a positive media image,<br />
enforcing the division-based organisational<br />
structure in the area of corporate communications,<br />
creating a positive organisational climate.<br />
With contemporary, planned internal<br />
communication, our objective is do to more than<br />
inform; we also aim to motivate <strong>and</strong> enthuse<br />
employees <strong>and</strong> stimulate them to increased<br />
productivity while creating a positive atmosphere at<br />
the company. With open, two-way communication<br />
between employees <strong>and</strong> management, we <strong>build</strong><br />
a strong alliance. Employees are informed about<br />
key current events via the intranet. In the weekly<br />
electronic <strong>business</strong> news, we present in detail<br />
the activities of KD Holding Group subsidiaries in<br />
Slovenia. <strong>We</strong> also prepare a bi-weekly publication<br />
in English to inform employees about events at<br />
companies abroad. <strong>We</strong> recognise the importance<br />
of a personal, direct form of communication. <strong>We</strong><br />
therefore prepared a number of conferences <strong>and</strong><br />
consultations last year intended for management<br />
<strong>and</strong> specialist staff within the Group <strong>and</strong> organised<br />
various social events.<br />
External communications<br />
Last year, the Group continued to develop mutually<br />
beneficial <strong>relationships</strong> with important external<br />
publics, such as shareholders, the local community,<br />
decision makers, investors, policyholders <strong>and</strong> other<br />
customers. The different activities of companies<br />
within the Group require a tailored approach to<br />
specific publics. Regular communication with<br />
them has contributed positively to the successful<br />
operations <strong>and</strong> development of the entire Group.
Communication of priority projects of the KD<br />
Holding Group<br />
Last year, the Group continued its cooperation with<br />
the media regarding the communication support of<br />
key projects. The companies of the Group operate in<br />
with clear profiles. <strong>We</strong> therefore give a great deal<br />
of attention to the public positioning of experts for<br />
various areas within the Group.<br />
Internet communications<br />
an extremely competitive environment. It therefore<br />
makes sense to continue proactively communicating<br />
key projects in order to consolidate our market<br />
position. Financial <strong>and</strong> insurance services are, to a<br />
great extent, subject to br<strong>and</strong> recognition. At the KD<br />
Holding Group, we treat every large project as an<br />
opportunity to present the project <strong>and</strong> its benefits<br />
for consumers <strong>and</strong> as an opportunity to <strong>build</strong> our<br />
corporate recognition <strong>and</strong> image.<br />
In 2007, we launched our corporate website,<br />
www.<strong>kd</strong>-<strong>group</strong>.com.<br />
In addition to its new look, the updated website<br />
offers comprehensive information. It includes five<br />
major headings: About the Group, Financial Centre,<br />
Press Room, Social Awareness <strong>and</strong> Employees. The<br />
Group’s more visible web approach has only just<br />
begun. <strong>We</strong> are also planning to update the websites<br />
of individual companies, which will present in detail<br />
Building a “coalition” of journalists<br />
<strong>We</strong> have enhanced our cooperation with editors <strong>and</strong><br />
journalists who regularly monitor economic topics <strong>and</strong><br />
the work of the KD Holding Group. The results of these<br />
activities are not necessarily a direct communication<br />
of a specific contribution, but primarily represent<br />
improved journalistic awareness of individual topics.<br />
Thus the Group clearly demonstrates its corporate<br />
value of openness as a readiness to communicate,<br />
which is the basis for <strong>build</strong>ing positive <strong>relationships</strong><br />
with journalists <strong>and</strong> editors.<br />
Public appearances of key representatives of<br />
the Group<br />
Due to the diversification of the Group’s services, it<br />
was vital to <strong>build</strong> <strong>and</strong> maintain a system of speakers<br />
who make appearances for specialist topics. The<br />
individual activities of the Group require speakers<br />
the products <strong>and</strong> services of our key activities. At<br />
the Group, we are fully aware of new trends in web<br />
media. <strong>We</strong> will therefore provide web content with<br />
new dimensions in 2008.<br />
Communication activities in 2008<br />
In 2008, corporate communication as a strategic<br />
function of the Group will continue to emphasis<br />
success, efficiency, soundness <strong>and</strong> the justification<br />
of <strong>relationships</strong> between the organisation <strong>and</strong> its<br />
stakeholders. The enforcement of the division-based<br />
organisational structure in the area of corporate<br />
communication will be one of the Group’s most<br />
important activities. This will entail coordinating<br />
corporate communication at the division or holding<br />
level <strong>and</strong> entrusting product communication to<br />
individual companies.<br />
83
1.8<br />
Information support<br />
using the system to provide service providers with<br />
comprehensive <strong>and</strong> extremely up-to-date information<br />
Behind us is a vibrant year, in which the KD Holding<br />
Group continued to exp<strong>and</strong>. Thus there was no lack<br />
of challenges in the area of information support.<br />
Information technology today uses advanced<br />
solutions to actively contribute to the creation of<br />
high-quality <strong>business</strong> processes within each specific<br />
company, thereby enabling employees to effectively<br />
pursue the company’s established <strong>business</strong><br />
objectives.<br />
about the status <strong>and</strong> details of voluntary health<br />
insurance. The launch of the new INIS integrated<br />
information system has been somewhat slower than<br />
originally planned, <strong>and</strong> an updated version of the<br />
target information system architecture was therefore<br />
prepared with the aim of mitigating the slower launch<br />
of the new system using new approaches such as a<br />
portal solution for service-oriented architecture (SOA).<br />
In 2008, Adriatic Slovenica will move a step closer to<br />
its target architecture, key elements of which will be<br />
One of the most important IT projects in 2007 was<br />
the installation of a single investment monitoring<br />
a personalised multipurpose portal <strong>and</strong> an integrated<br />
working environment.<br />
system. This system meets the current needs of<br />
84<br />
all key companies, while in the coming years we<br />
expect to exp<strong>and</strong> it to meet the needs of companies<br />
abroad. The chosen solution also offers a number<br />
of risk management tools, which will facilitate better<br />
monitoring <strong>and</strong> control of investment risks throughout<br />
the Group.<br />
Worthy of note at KD BPD was the extensive<br />
adaptation to new legislation (the Financial<br />
Instruments Market Act) <strong>and</strong> the further development<br />
of the company’s key information system with<br />
optimised tools for the best possible client asset<br />
management.<br />
Adriatic Slovenica equipped its network of agents<br />
with portable work stations to facilitate data entry<br />
wherever they are located. The central client register<br />
was upgraded <strong>and</strong> is now linked with all the relevant<br />
transaction systems, offering a comprehensive<br />
overview of the insurance portfolios of each client<br />
at the company. Adriatic Slovenica was also actively<br />
involved in a Health Insurance Institute (ZZZS) project<br />
to directly link the information systems of healthcare<br />
service providers with the systems of the Institute <strong>and</strong><br />
insurers. The purpose of such a solution is to make<br />
data exchange as smooth as possible, with insurers<br />
In 2007, KD Investments (now KD Skladi)<br />
carried out the comprehensive transfer of paper<br />
documentation to electronic format <strong>and</strong> installed<br />
an electronic archive of scanned documents, which<br />
offers an immediate view of all a particular client’s<br />
documents at a single site. This makes work faster<br />
<strong>and</strong> more client-friendly. <strong>We</strong> started to develop new<br />
website <strong>and</strong> other modern services for clients.<br />
Comprehensive risk analysis was also conducted at<br />
the company <strong>and</strong> will form the basis for establishing<br />
an integrated plan for <strong>business</strong> continuity <strong>and</strong> the
ongoing mitigation of all relevant risks. An integral<br />
1.9<br />
Research <strong>and</strong> development<br />
information system was installed at the newly<br />
established management company in Serbia to<br />
provide support for the company’s operations.<br />
Research <strong>and</strong> development in a period of stiff<br />
competition on foreign markets <strong>and</strong> on the single<br />
European Union market is extremely important. In<br />
An IT management system was set up at<br />
KD Življenje according to the ITIL st<strong>and</strong>ard. <strong>We</strong><br />
paid particular attention to the system for managing<br />
changes <strong>and</strong> incidents, for which appropriate<br />
the past, this area has played a significant role in the<br />
Group’s development. In the future, we will reorganise<br />
the research <strong>and</strong> development function <strong>and</strong> further<br />
promote such activities.<br />
information support was also established. In the<br />
software support area, a tool for the development<br />
of online applications in a Java environment was<br />
installed. A strict records application was developed<br />
using the tool. An intranet portal was set up <strong>and</strong> a<br />
document system was established in this framework.<br />
An integral information system was set up at the new<br />
insurer in Ukraine <strong>and</strong> the new representative office<br />
in the Czech Republic.<br />
In the future information technology will be<br />
increasingly linked to the <strong>business</strong> processes at the<br />
companies. Underst<strong>and</strong>ing <strong>business</strong> <strong>and</strong> familiarity<br />
with technology are two aspects to new <strong>and</strong><br />
increasingly effective solutions, a permanent guide<br />
that we at KD Holding Group will continue to follow.<br />
In asset management, the Group has established<br />
a new sales concept for marketing mutual funds <strong>and</strong><br />
introduced a new sales channel organisation. <strong>We</strong><br />
have begun developing new websites for KD Skladi<br />
<strong>and</strong> other services for contemporary operations with<br />
investors. A great deal of activity was focused on<br />
the start of marketing of KD Skladi mutual funds on<br />
foreign markets <strong>and</strong> on the development of a new<br />
sales method for wealthier customers <strong>and</strong> acredited<br />
investors. Development activities were carried out in<br />
the area of managing investment fund assets <strong>and</strong> with<br />
regard to acredited investors. <strong>We</strong> were also active in<br />
the development of risk management, information<br />
technology <strong>and</strong> with regard to methodologies <strong>and</strong><br />
organisation due to amendments to related legislation.<br />
85<br />
Last year, the Group developed a number of new<br />
products in the area of insurance. At KD Življenje,<br />
we developed new insurance products adapted to<br />
the needs of specific target <strong>group</strong>s <strong>and</strong> enhanced<br />
life insurance linked to Fondpolica investment<br />
funds, which represent the largest proportion of<br />
underwritten insurance in the company’s portfolio.<br />
<strong>We</strong> introduced a new form of life insurance linked
to Fondpolica investment funds with an investment<br />
package. In cooperation with Deutsche bank AG,<br />
we offered the Slovenian <strong>and</strong> foreign markets the<br />
life insurance products Fondpolica Azija Garant<br />
Plus <strong>and</strong> Fondpolica Renta Garant. <strong>We</strong> were the<br />
first Slovenian insurance company to develop<br />
<strong>group</strong> life insurance (Group Life Package), which<br />
is completely comparable with other contemporary<br />
life insurance products across Europe. <strong>We</strong> also<br />
developed a new life insurance product with active<br />
asset management, Fondpolica Dirigent. In addition<br />
developed the new package insurance products,<br />
Mladi, Aktivni <strong>and</strong> Senior, <strong>and</strong> upgraded our offer<br />
for athletes with the packages Vrhunski športnik <strong>and</strong><br />
Športnik. Adriatic Slovenica also played an active<br />
role in the health insurance card project,<br />
KZZ-Online, in which the Health Institute of<br />
Slovenia (ZZZS) established a new information<br />
system that will directly link the information systems<br />
of healthcare service providers with the systems of<br />
the ZZZS <strong>and</strong> insurance companies which provide<br />
supplementary healthcare insurance.<br />
to the aforementioned, we developed two products,<br />
86<br />
adapted for marketing via the new company,<br />
KD Finančna točka: life insurance linked to the<br />
investments funds of the investment plans KD<br />
Družina <strong>and</strong> KD Pokojnina.<br />
At Adriatic Slovenica, we introduced several new<br />
automobile insurance products <strong>and</strong> supplemented<br />
them with Maxi assistance, completely updated<br />
general liability insurance <strong>and</strong> developed entirely<br />
new credit insurance products, which are based<br />
on insurance for default due to classic insurance<br />
risks <strong>and</strong> cover policyholders against unexpected<br />
events such as death, work disability <strong>and</strong> loss of<br />
employment without fault. Vita Fond investment<br />
packages, Vitafond Azija Garant Plus, Vitafond<br />
Renta Garant in Družinski Paket are new life<br />
insurance products developed in cooperation with<br />
Group members. For borrowers, we prepared<br />
the new Kredit Vita AS, a life insurance product<br />
intended for package sales with new credit<br />
insurance products. In the area of healthcare, we<br />
With regard to sales of financial services, KD<br />
Finančna točka continued developing its own<br />
system for training the sales network. Based<br />
on past experiences <strong>and</strong> needs identified while<br />
conducting training <strong>and</strong> feedback from participants,<br />
we began upgrading the system to a three-level<br />
individual development model in the second half<br />
of 2007: (1) advisor, (2) advisor manager <strong>and</strong> (3)<br />
advisor manager/expert. The objective of training<br />
is to develop <strong>and</strong> strengthen innovative thinking<br />
of the individual in all areas (organisation <strong>and</strong> the<br />
development of people <strong>and</strong> products) to stimulate<br />
the direct contribution of the individual to the<br />
company’s development. KD Finančna točka<br />
also played an active role in the development of<br />
the Fondpolica life insurance products with an<br />
investment package <strong>and</strong> in the development of<br />
Fondpolica Dirigent.
Research <strong>and</strong> development in 2008<br />
rationalisation of operations in the areas of support<br />
services, improving the quality of service with new<br />
In 2008, the KD Holding Group will reorganise its<br />
research <strong>and</strong> development activity through a project<br />
that will be managed by the parent company, KD<br />
Holding. The aim of the project is to increase research<br />
<strong>and</strong> development’s contribution to the future growth<br />
of the company. The main project is divided into<br />
three sub-projects: (1) the introduction of a targeted,<br />
innovative activity, (2) introduction of a so-called<br />
“walking database” system, i.e. a KD Holding Group<br />
knowledge base <strong>and</strong> (3) introduction of a system<br />
of useful proposals. The vision of the research <strong>and</strong><br />
development project is the establishment of a research<br />
<strong>and</strong> development department at the KD Holding Group<br />
which will set the bases for identification <strong>and</strong> work<br />
on key strategic development issues <strong>and</strong> bases for<br />
adequate long-term growth of the Group.<br />
information <strong>and</strong> decision-making tools <strong>and</strong> exp<strong>and</strong>ing<br />
communication with customers in terms of content<br />
<strong>and</strong> form. In the insurance sector, we will continue<br />
developing new products to maintain our leading<br />
position in this area. Regarding sales of financial<br />
services, we plan to introduce new diverse sales<br />
channels. <strong>We</strong> will also develop a system of recruiting<br />
<strong>and</strong> training international mentors to ensure the<br />
effective transfer of tested effective work, training <strong>and</strong><br />
development processes to foreign markets. One of<br />
the Group’s main development projects in 2008 will<br />
undoubtedly be the establishment <strong>and</strong> development of<br />
a new bank. Banking services will compliment other<br />
insurance <strong>and</strong> financial products <strong>and</strong> bring the KD<br />
Holding Group’s range of products <strong>and</strong> services full<br />
circle.<br />
87<br />
Subsidiaries will also continue with projects to develop<br />
new products <strong>and</strong> services tailored to the needs of<br />
consumers, which will facilitate the continued growth<br />
of the Group in Slovenia <strong>and</strong> throughout the region.<br />
In the area of asset management, development<br />
activities will be primarily focused on the development<br />
of methodologies, sales techniques <strong>and</strong> new<br />
sales channels, as well as the modernisation <strong>and</strong><br />
development of information technology. In addition<br />
to the development of funds, in particular the fund<br />
of funds, we intend to give special attention to the<br />
development of asset management services for<br />
acredited investors in Slovenia <strong>and</strong> abroad. <strong>We</strong> will<br />
continue developing the information system for the
88<br />
Belgrade, Serbia
1.10<br />
Report on the corporate social<br />
responsibility of the KD Holding<br />
Group<br />
90<br />
In addition to good performance, one of the Group’s<br />
most important objectives is to create a pleasant but<br />
stimulating work environment for all employees <strong>and</strong><br />
a responsible <strong>and</strong> reliable partnership with its social<br />
environment.<br />
<strong>We</strong> are aware that we are inseparably linked to the<br />
environment in which we operate. Close relations<br />
with the local community represent an opportunity<br />
for development, but also entail responsibility, as<br />
our <strong>business</strong> has far-reaching consequences. Our<br />
concern <strong>and</strong> sensitivity for the social <strong>and</strong> natural<br />
environment is realised in cooperation with the<br />
local <strong>and</strong> the wider community. <strong>We</strong> strive to act<br />
in concert with them to create <strong>and</strong> improve the<br />
environment in which we live <strong>and</strong> work.<br />
Employees<br />
At the KD Holding Group, we are aware that<br />
social responsibility begins with our treatment<br />
of employees. <strong>We</strong> encourage innovation <strong>and</strong><br />
cooperation <strong>and</strong> provide support for education <strong>and</strong><br />
development. Our concern for employees’ social<br />
security needs is reflected in our collective voluntary<br />
supplementary pension insurance, which is offered<br />
to all interested employees. <strong>We</strong> are introducing the<br />
concept of a family-friendly company at the Group,<br />
which will allow parents to take advantage of<br />
shorter hours or shared hours <strong>and</strong> other significant<br />
adaptations. Our focus on our employees is<br />
presented in greater detail in the section on Human<br />
resources management.<br />
Natural environment<br />
The principle activities of KD Holding Group<br />
companies are not directly linked to environmental<br />
impacts. However, in our everyday activities we<br />
act responsibly by saving electricity <strong>and</strong> separating<br />
waste. <strong>We</strong> also consider the environmental aspect<br />
in our investments. Thus in 2006, KD Investments<br />
(today KD Skladi) established KD Nova energija,<br />
an equity mutual fund that primarily invests in<br />
companies in the renewable energy sector.<br />
Social environment<br />
Our concern for the social environment is primarily<br />
reflected in our sponsorship activities <strong>and</strong> donations.<br />
<strong>We</strong> direct our sponsorship towards activities that<br />
contribute to social development, particularly<br />
culture <strong>and</strong> sport. Sponsorship demonstrates <strong>and</strong><br />
communicates a clear link with our corporate values<br />
of trust, openness <strong>and</strong> respect for equality.<br />
Culture <strong>and</strong> education<br />
At the KD Holding Group, we give a great deal of<br />
significance to supporting culture <strong>and</strong> education.<br />
<strong>We</strong> have cultivated long-term partnerships with
cultural institutions <strong>and</strong> with individuals <strong>and</strong> have<br />
invested in a number of educational projects.<br />
KD Holding supported the publication of Vitomil<br />
Zupan’s collection of poetry Pesmi s prostosti, was<br />
involved in the exhibition Delo slovenskih slikarjev<br />
(Works of Slovenian Painters) at the Ljubljana<br />
Town Hall organised by the Institute of Sculpture,<br />
<strong>and</strong> purchased a work by Aleš Lenassi entitled<br />
Oba (Both). <strong>We</strong> were again involved as sponsor<br />
in the P.A.R.A.S.I.T.E. Institute competition for<br />
the OHO Group prize <strong>and</strong> purchased the winning<br />
entry. Other events we supported again were the<br />
Cerkno Jazz Festival <strong>and</strong> the Days of Comedy at the<br />
cooperation with Ljubljana’s University Medical<br />
Centre <strong>and</strong> the Zveza prijateljev mladine<br />
(Association of Friends of Youth), they are actively<br />
stimulating children’s interest in the art of puppetry<br />
<strong>and</strong> opening the doors to hospitals, institutions<br />
<strong>and</strong> foundations where children live far from the<br />
joys of a carefree childhood. <strong>We</strong> are aware that<br />
for most children, puppets are their first contact<br />
with theatre. Numerous kindergartens <strong>and</strong> primary<br />
schools from all over Slovenia were taken to puppet<br />
performances, many of them enjoying shows in<br />
their own local area, particularly those in the more<br />
remote parts of the country.<br />
Celje Public Theatre. <strong>We</strong> supported the permanent<br />
exhibition about Oton Župančič at the City Museum.<br />
In cooperation with the Slovenian Bralna značka<br />
(Reading Badge) project, we purchased books<br />
to allow first <strong>and</strong> second grade students in<br />
less-wealthy<br />
regions to get their first picture book,<br />
Levstik’s Martin Krpan, with illustrations by Hinko<br />
Smrekar, thus helping to spread the culture of<br />
reading among the young.<br />
<strong>We</strong> also helped the <strong>group</strong> Želve, which operates<br />
under the aegis of the Third Age University, to<br />
publish a collection of works, thus confirming our<br />
commitment to <strong>and</strong> underst<strong>and</strong>ing of the older<br />
members of society.<br />
<strong>We</strong> assumed the role of central sponsor of the EFA<br />
<strong>and</strong> EISB conferences at the Faculty of Economics<br />
in Ljubljana.<br />
The insurance company KD Življenje has been<br />
working with the Ljubljana Puppet Theatre on<br />
strategy <strong>and</strong> <strong>business</strong> for three years now. In<br />
<strong>We</strong> are continuing our work with the RTV Slovenija<br />
Symphony Orchestra as its general sponsor in the<br />
2007/2008 season, a sign of our appreciation of<br />
its artists, mission <strong>and</strong> immense cultural relevance.<br />
Our support went to an exceptional concert season,<br />
which featured numerous distinguished soloists <strong>and</strong><br />
conductors, including the piano virtuoso Ivo Pogorelić.<br />
In 2007, KD Življenje organised a major family<br />
event at the Postojna Cave called Day of Culture<br />
<strong>and</strong> Attractions. Together with our partners, the<br />
Ljubljana Puppet Theatre, RTV Slovenija, Slovenske<br />
Novice <strong>and</strong> Postojnska jama, we arranged a fun,<br />
family day for more than 2,000 visitors. Children<br />
<strong>and</strong> their parents were able to watch a puppet show<br />
<strong>and</strong> a performance by Romana Kranjčan, while<br />
the caves hosted the RTV Slovenija Big B<strong>and</strong> <strong>and</strong><br />
Alenka Gotar. There was also a rich programme of<br />
accompanying attractions.<br />
91
Adriatic Slovenica cooperates with the Ljubljana<br />
Festival, Koper Theatre, Koper School of Music, <strong>and</strong><br />
the University of Primorska in the area of culture<br />
<strong>and</strong> education. The Ljubljana Festival’s excellent<br />
programme is making it one of Europe’s prime<br />
cultural destinations, while the Koper Theatre <strong>and</strong><br />
Koper School of Music are established institutions<br />
in the company’s home town <strong>and</strong> long-st<strong>and</strong>ing<br />
partners of the insurer that offer a real quality of<br />
culture. Our long-term support of the University<br />
of Primorska since its very inception has been<br />
aimed at establishing high-quality, competitive<br />
<strong>and</strong> advanced education programmes, <strong>and</strong> at<br />
contributing to education projects at the University.<br />
100,000 copies of four issues of a newspaper with<br />
the same name, with the campaign reaching a total<br />
of 270,000 people.<br />
Humanitarian activities<br />
<strong>We</strong> organise blood drives at the KD Holding Group,<br />
as we want our employees to get actively involved<br />
in humanitarian projects. Last year also saw the<br />
Let’s Show Solidarity campaign, in which employees<br />
collected money for their fellow citizens in Železniki<br />
who were affected by the disastrous weather in<br />
September. KD Holding doubled the money<br />
collected by its employees.<br />
92<br />
Adriatic Slovenica has been working on two major<br />
new projects in road safety education since 2007.<br />
Their main purpose is to increase driver awareness<br />
of the importance of safe driving, with drivers<br />
invited to test their knowledge of safe driving on<br />
the internet. The Z glavo na zabavo (Party Smart)<br />
foundation is a project that the company first<br />
supported in 2007. It focuses on warning of the<br />
dangers of alcohol consumption among the young,<br />
<strong>and</strong> the incompatibility of alcohol with safe driving.<br />
More than 40 events have been held as part of the<br />
project, calling for better health <strong>and</strong> a more active<br />
approach to free time among the young. <strong>We</strong> have<br />
also been actively involved in NE-ODVISEN.SI, a<br />
campaign to raise awareness of the consequences<br />
of different forms of dependence in the Primorska<br />
region supported by 23 local municipalities.<br />
The project covered more than 140 primary <strong>and</strong><br />
secondary schools <strong>and</strong> kindergartens, <strong>and</strong> produced<br />
Adriatic Slovenica showed maximum engagement<br />
in the worst-affected areas in the Celje <strong>and</strong><br />
Gorenjska regions. The money was earmarked for<br />
the municipality of Vojnik for repairing damaged<br />
roads, the aid coming as a joint contribution from<br />
the company <strong>and</strong> its employees, who volunteered to<br />
take part in the campaign.<br />
KD Holding also works with UNICEF, helping<br />
children in some of the world’s poorest regions. <strong>We</strong><br />
supported Some of Them, a music video project<br />
aimed at collecting money for long-term programmes<br />
for helping children. In cooperation with its Bosnian<br />
subsidiary ABDS, KD Holding organised holidays<br />
at Debeli Rtič for a <strong>group</strong> of Bosnian children from<br />
under-privileged families via BH4, the<br />
Bosnia-Herzegovina student society in Slovenia.
The main focus at Adriatic Slovenica remains<br />
the support of healthcare. The company works<br />
closely with health service providers <strong>and</strong> supports<br />
education <strong>and</strong> initiatives contributing to the progress<br />
<strong>and</strong> st<strong>and</strong>ing of the medical profession. As the<br />
Federation for many years now. KD Holding also<br />
supported societies <strong>and</strong> individuals from the worlds of<br />
gymnastics, motor sports <strong>and</strong> football (including ŠD<br />
Trnovo, AMD Šentvid pri Stični, NK Ormož <strong>and</strong> NK<br />
Kolpa).<br />
principal sponsor, it again supported the national<br />
My Doctor campaign, in which more than 14,000<br />
health service users were involved in selecting the<br />
best, most respected physicians in the country.<br />
At the end of the year, the money that had been set<br />
aside for holiday gifts was donated to institutions<br />
with a social mission, particular in the healthcare<br />
sector. Gifts were presented to the general hospital<br />
in Novo Mesto, the kindergarten in Kranj, a welfare<br />
KD Skladi has continued to work with the Tacen<br />
Kayak-Canoe Club <strong>and</strong> also provided support to the<br />
Federation of Skating Sports <strong>and</strong> the AŠD water polo<br />
club in Koper. Together with the Biosfera society, we<br />
sponsored a project aimed at revitalising the Ljubljanica<br />
River. In the spring <strong>and</strong> summer months, the project<br />
organised free canoe hire for <strong>group</strong>s accompanied by a<br />
guide, as well as a number of fun competitions.<br />
work centre in Stara Gora, medical centres in<br />
Sežana, Murska Sobota <strong>and</strong> Hrastnik, the University<br />
Medical Centre in Ljubljana, under-privileged<br />
inhabitants of the City of Maribor, <strong>and</strong> the Elvira<br />
Vatovec Training Centre in Strunjan.<br />
<strong>We</strong> continued UNICEF Slovenia’s Safe Points project<br />
in 2007, thus contributing to greater safety for<br />
children <strong>and</strong> adolescents in major urban areas. In<br />
its second year of support for the project, all the<br />
offices of Adriatic Slovenica <strong>and</strong> their employees<br />
were involved as safe points.<br />
Sport<br />
Our support for a variety of sporting activities is aimed at<br />
spreading the idea of the active <strong>and</strong> sociable enjoyment<br />
of free time. <strong>We</strong> work with sports clubs throughout<br />
Slovenia. KD Holding, KD Življenje <strong>and</strong> Adriatic<br />
Slovenica have been supporting the Slovenian Chess<br />
KD Življenje supported the Rog Cycling Society <strong>and</strong><br />
is a major sponsor of the family marathon as part of<br />
the Barcaffe Franja Marathon. <strong>We</strong> also supported the<br />
children’s race at the Ljubljanica Triathlon, a major<br />
sporting event.<br />
Adriatic Slovenica’s support for sport is diverse, but<br />
since 1993 the majority of its assistance has gone to<br />
top athletes <strong>and</strong> Olympic representatives, in cooperation<br />
with the Slovenian Olympic Committee. One recipient of<br />
its support is Vasilij Žbogar,<br />
a sailor from Izola who won a gold medal at the Athens<br />
Olympic games. It also provided significant support to<br />
national sporting federations, including the Slovenian<br />
FA <strong>and</strong> the Horseracing Federation <strong>and</strong> a number of<br />
different sports, societies <strong>and</strong> clubs.<br />
These include the Cimos Koper H<strong>and</strong>ball Club, Koper<br />
Basketball Club, Triglav Kranj Skiing Club, Izola Sailing<br />
Club <strong>and</strong> the Portorož Sporting Society.<br />
93
94<br />
Eastern Orthodox priest, Macedonia
Corporate social responsibility in 2008<br />
The Group will continue to provide sponsorship for<br />
culture, education <strong>and</strong> sport in 2008, in keeping<br />
with our established policies.<br />
In the area of donations <strong>and</strong> humanitarian activities,<br />
our aims are even higher in 2008. The Group<br />
established the AJDA Foundation back in 1995 to<br />
support the financially <strong>and</strong> socially disadvantaged.<br />
The purpose of the Foundation was to fund the<br />
education of children of farmers <strong>and</strong> investors in<br />
KD funds or their children <strong>and</strong> those with aboveaverage<br />
results, but an under-privileged social<br />
background. Careful monitoring of the situation<br />
revealed that the Foundation’s original purpose<br />
had become too narrow. <strong>We</strong> will continue to<br />
support education, but with the establishment of<br />
the KD Fundacija Foundation in 2008 we intend<br />
95<br />
to <strong>build</strong> on our previous objectives <strong>and</strong> set a wider<br />
approach. The Foundation will fund talented youth<br />
in various areas of schooling, science <strong>and</strong> sport who<br />
have made progress in the aforementioned fields.<br />
It will provide financial support for young people<br />
from under-privileged families, providing them better<br />
conditions for education. Via material <strong>and</strong> financial<br />
donations, the Foundation will help less wealthy<br />
regions of Slovenia to encourage <strong>and</strong> provide<br />
education. In the event of natural disasters or other<br />
extensive catastrophes, the Foundation will quickly<br />
respond with financial support or other resources<br />
in keeping with the needs of those affected. The<br />
KD Fundacija Foundation will also be active in the<br />
organisation of charitable campaigns for mobilising<br />
material <strong>and</strong> financial resources.
96 Bratislava, Slovakia
Kalemegdan - Belgrade, Serbia<br />
97
98 Sarajevo, Bosnia <strong>and</strong> Herzegovina
Slovenija - solinar<br />
Fisherman, isl<strong>and</strong> of Brač, Croatia<br />
99
100<br />
Slovenia, portrait
Celica Hostel, Ljubljana, Slovenia<br />
101
102
2.<br />
Operations of the companies within the KD Holding Group<br />
The sun never sets<br />
on a truly global company.<br />
Kalemegdan - Belgrade, Serbia
Confluence of the Sava <strong>and</strong> Danube, Belgrade, Serbia<br />
106
107
It is the meeting of two currents - supply <strong>and</strong> dem<strong>and</strong>,<br />
that creates an even stronger flow,<br />
bringing water to the field, energy to the city <strong>and</strong> journey to the people.<br />
106<br />
Confluence of the Sava <strong>and</strong> Danube, Belgrade, Serbia
In asset management <strong>business</strong>,<br />
our imagination always exp<strong>and</strong>s<br />
toward the horizons that are most promising,<br />
<strong>and</strong> our view reaches the farthest.<br />
It is here where our experience <strong>and</strong> knowledge<br />
intersect with the greatest expectations of our clients,<br />
<strong>and</strong> this confluence provides<br />
the best image of <strong>and</strong> the best metaphor for our <strong>business</strong>.<br />
107
108<br />
Confluence of the Sava <strong>and</strong> Danube, Belgrade, Serbia
2. 1<br />
Asset management<br />
The Group’s asset management is divided into:<br />
investment fund management,<br />
private wealth management <strong>and</strong> stockbroking.<br />
which included 24 investment funds <strong>and</strong> two<br />
investment companies at year-end within the KD<br />
Holding Group.<br />
The Group currently manages 24 funds <strong>and</strong> two<br />
Operations in 2007<br />
investment companies as part of its investment<br />
fund management. KD Investments (now KD<br />
Skladi) is the leading asset management company<br />
in Slovenia, managing 12 mutual funds <strong>and</strong> one<br />
investment company. In the region, the Group<br />
manages four mutual funds in Croatia, three in<br />
Romania, two mutual funds <strong>and</strong> one investment<br />
company in Bulgaria, two mutual funds in Slovakia<br />
<strong>and</strong> one in Serbia. <strong>We</strong> are planning to enter the<br />
Macedonian market in 2008.<br />
Private wealth management <strong>and</strong> stockbroking<br />
is becoming an increasingly important <strong>business</strong><br />
activity for the Group. It is gaining strength both<br />
in Slovenia <strong>and</strong> abroad, where the Group has<br />
companies in Bulgaria, Croatia <strong>and</strong> Romania.<br />
Investment fund management<br />
Mutual funds remain the key product for the<br />
KD Holding Group. Our core strategy is to offer<br />
investors, primarily from South Eastern Europe,<br />
the widest possible selection of investment<br />
opportunities, while also providing comprehensive<br />
investment opportunities in the region to investors<br />
from around the world. This is also the guiding<br />
principle for growth in the investment fund portfolio,<br />
Assets under management in all mutual funds<br />
grew by nearly 50 percent, or by over EUR 333<br />
million, exceeding the magic billion euro threshold<br />
(EUR 1,002.4 million) by the end of the year.<br />
At year-end, our investment funds had over 93<br />
thous<strong>and</strong> investors.<br />
<strong>We</strong> again confirmed our acknowledged<br />
management excellence, with the majority of funds<br />
(17) exceeding benchmark indices <strong>and</strong> all but one<br />
closing the year with positive returns.<br />
In the key region of South Eastern Europe, we<br />
opened a new asset management company, KD<br />
Investments in Belgrade, Serbia.<br />
Two new funds were added to our global<br />
product range - KD Nova Europa (in Croatia) <strong>and</strong><br />
KD Ekskluziv (in Serbia).<br />
The start-up of operations in the life insurance<br />
division abroad (Romania, Bulgaria, <strong>and</strong> Slovakia)<br />
has provided a significant distribution channel.<br />
Due to the withdrawal of a partner company<br />
(SEB Fund Services) from the region <strong>and</strong> the<br />
subsequent end to our cooperation <strong>and</strong> the<br />
assessment that our investment funds offer<br />
customers a sufficiently broad selection of quality<br />
products, we decided to liquidate the company KD<br />
DeLux <strong>and</strong> its four sub-funds.<br />
109
110 Slovenia
Challenges in 2008:<br />
Maintaining our leading position in Slovenia<br />
<strong>and</strong> strengthening market shares in South Eastern<br />
Europe by increasing recognition;<br />
Upgrading our product portfolio in line with<br />
industry trends, while maintaining innovation <strong>and</strong><br />
customer-orientation as the main guides;<br />
Strengthening the range of funds in Slovakia,<br />
Romania <strong>and</strong> Bulgaria, where we are already<br />
present <strong>and</strong> this is permitted by law, by registering<br />
Slovenian funds for local sales;<br />
Registering an asset management company <strong>and</strong><br />
investment funds in Macedonia;<br />
Transferring the asset management function<br />
back to KD Skladi, Ljubljana, in order to<br />
consolidate, manage <strong>and</strong> continue to achieve<br />
excellence in asset management;<br />
Strengthening our presence on the Slovenian<br />
111<br />
market by consolidating retail sales knowledge<br />
<strong>and</strong> activities in Slovenia within the company KD<br />
Finančna Točka <strong>and</strong> exp<strong>and</strong>ing the concept abroad<br />
in line with capacities;<br />
Incorporating asset management companies<br />
abroad more closely into the divisional model of<br />
our corporate governance, via the Ljubljana parent<br />
company;<br />
Continuing to achieve the highest possible<br />
level of satisfaction for current <strong>and</strong> future investors<br />
in accordance with new regulatory guidelines<br />
<strong>and</strong> opportunities to adapt the operations of<br />
management companies, investment funds <strong>and</strong><br />
investor relations.
112<br />
Bled, Slovenia
Slovenia<br />
KD Investments, družba za upravljanje, d. o. o.,<br />
Ljubljana<br />
in the future, we are continuing to develop information<br />
technology <strong>and</strong> strengthening the company’s<br />
personnel. Our objective is to further consolidate our<br />
On 16 January 2008, the company was renamed<br />
KD Skladi, družba za upravljanje, d. o. o.<br />
(abbreviated name: KD Skladi, d. o. o.).<br />
position as the leading investment asset management<br />
company in Slovenia by providing competitive<br />
terms for existing <strong>and</strong> new investors.<br />
The company’s English name is KD Funds<br />
– Management Company LLC (abbreviated name:<br />
Operations in 2007<br />
KD Funds LLC).<br />
By the end of the year the company was<br />
Address: 206 Celovška cesta, Ljubljana, Slovenia<br />
Telephone: +386 1 582 67 80<br />
Fax: +386 1 582 40 88<br />
E-mail: <strong>kd</strong>-skladi@<strong>kd</strong>-<strong>group</strong>.si<br />
<strong>We</strong>bsite: www.<strong>kd</strong>-skladi.si<br />
Management Board (31 December 2007):<br />
Roman Androjna, President of the Management<br />
Board<br />
Dušanka Malerič, Member of the Management<br />
Board (term expired 31 December 2007)<br />
Management Board (1 May 2008):<br />
Dag Kralj, President of the Management Board<br />
Roman Androjna, Member of the Management Board<br />
The volume of the company’s assets rose<br />
significantly in 2007 as the result of new payments<br />
by investors to mutual funds, particularly for<br />
professional asset management. The number of<br />
investors also rose significantly. A great deal of the<br />
company’s attention was focused on sales activities,<br />
including the co-founding of a new sales company.<br />
In order for the company to operate more efficiently<br />
managing 12 mutual funds <strong>and</strong> the investment<br />
company, KD ID delniška investicijska družba, d. d.<br />
The total net value of assets under management<br />
(all mutual funds <strong>and</strong> KD ID) rose by 49 percent,<br />
from EUR 594.6 million at the end of 2006 to<br />
EUR 884.1 million by the end of 2007. <strong>We</strong> thus<br />
maintained our position as the leading investment<br />
asset management company in Slovenia.<br />
The total number of investors in the company’s<br />
mutual funds rose by 20 percent, from 69,651 at<br />
the end of 2006 to 83,918 by the end of 2007.<br />
Net payments into mutual funds managed by<br />
the company totalled EUR 107.6 million in 2007.<br />
At the end of 2007, we acquired a 50 percent<br />
stake in KD Finančna točk <strong>and</strong> signed an agreement<br />
on the marketing of mutual fund investment<br />
coupons.<br />
113
Challenges in 2008:<br />
114<br />
To consolidate our position as the leading<br />
investment asset management company in<br />
Slovenia;<br />
To supplement our existing range of mutual fund<br />
products <strong>and</strong> services with various geographic <strong>and</strong><br />
sector-oriented investment policies;<br />
To continue the diligent management of the<br />
company’s mutual fund br<strong>and</strong>s <strong>and</strong> increase<br />
activities to raise the awareness thereof;<br />
To increase activities related to the marketing of<br />
products to acredited investors;<br />
To focus a great deal of attention on aligning<br />
the company’s operations, investment funds <strong>and</strong><br />
<strong>relationships</strong> with investors due to legislative<br />
changes;<br />
Pursuant to the KD Holding Group’s mission,<br />
our primary objective remains the satisfaction of<br />
investors. <strong>We</strong> will achieve this through efficient<br />
operations, a professionally trained sales network<br />
<strong>and</strong>, above all, a competitive <strong>and</strong> high-quality range<br />
of products <strong>and</strong> services that will be of interest to<br />
existing <strong>and</strong> new investors.<br />
At the end of 2007, investments in Slovenia<br />
(52 percent), the United Kingdom (10 percent),<br />
Germany (8 percent) <strong>and</strong> Croatia (8 percent)<br />
represented the largest proportion of the mutual<br />
fund’s assets.<br />
Two factors resulted in an increase in the<br />
proportion of Slovenian securities in 2007: the<br />
above-average returns of securities compared to<br />
other key investment regions (the Slovenian stock<br />
exchange index, the SBI20, rose by 78.1 percent<br />
in 2007), <strong>and</strong> due to new, favourable purchase<br />
opportunities.<br />
In the autumn, KD Galileo took part in a public<br />
tender of Nova kreditna banka Maribor shares,<br />
acquiring the most shares of any mutual fund.<br />
Due to more favourable conditions on the debt<br />
securities market of the EU15, the proportion of<br />
bonds from Slovenian issuers fell in 2007, while the<br />
proportion of bonds of issuers from the EU15 rose.<br />
Due to positive changes in equity security<br />
prices, the proportion thereof rose in 2007 in<br />
comparison with the proportion of debt securities.<br />
KD Galileo<br />
- a flexible asset structure mutual fund<br />
The KD Galileo flexible investment structure<br />
mutual fund is the oldest mutual fund in Slovenia.<br />
On 1 January 2007, the fund celebrated its 15th<br />
anniversary.<br />
KD Galileo’s investment structure is<br />
continuously adapted to market conditions in<br />
accordance with its flexible asset structure policy.<br />
Data regarding the fund as at 31 December 2007<br />
Unit price (in EUR) 17.20<br />
Net value of the fund (in EUR) 359,004,014.96<br />
Number of units in circulation<br />
20,876,044.40<br />
Number of investors 34,989
KD Rastko<br />
- an equity mutual fund<br />
At the end of 2007, 63 percent of the KD<br />
Rastko equity mutual fund’s assets were invested<br />
in Slovenian securities, followed by 9 percent in<br />
German securities, 6 percent in Croatian securities<br />
<strong>and</strong> 5 percent in securities from UK issuers.<br />
In 2007, the SBI20, the Slovenian stock market<br />
index, gained 78.1 percent, while the DAX30, the<br />
core German stock market index, <strong>and</strong> the Croatian<br />
CROBEX share index rose by 22.3 percent <strong>and</strong><br />
63.2 percent, respectively. This had a positive<br />
impact on growth in the fund’s unit price.<br />
Contributing to the growth in the proportion<br />
of Slovenian securities in KD Rastko compared to<br />
2006 were the purchase of Nova kreditna banka<br />
Maribor shares <strong>and</strong> favourable developments on the<br />
Slovenian stock exchange.<br />
In February 2007, the KD Rastko mutual fund<br />
received the “Zlati V” (Gold V) award from the<br />
magazine Kapital as the best European-oriented<br />
equity mutual fund of 2006.<br />
KD Bond<br />
- a bond mutual fund<br />
The KD Bond mutual fund is intended for<br />
investors looking for a safer investment with a<br />
better (or at least equal) return than classic forms of<br />
savings. Fixed-yield securities represent the majority<br />
of the fund’s investments.<br />
Growth in interest rates on key capital markets<br />
slowed in 2007, resulting in improved conditions on<br />
the debt security market. As a consequence, mood<br />
on the bond market improved compared to 2006.<br />
At the end of 2007, investments in Slovenian<br />
debt securities (56 percent), followed by<br />
investments in UK (21 percent) <strong>and</strong> German (11<br />
percent) debt securities, represented the most<br />
significant proportion of the mutual fund’s portfolio.<br />
The proportion of bonds rose by 4 percentage<br />
points compared to 2006 to 73 percent of the<br />
fund’s portfolio. The proportion of shares rose 5<br />
percentage points to 12 percent.<br />
115<br />
Data regarding the fund as at 31 December 2007<br />
Unit price (in EUR) 42.86<br />
Net value of the fund (in EUR) 172,171,606.39<br />
Number of units in circulation 4,017,132.13<br />
Number of investors 19,798<br />
Data regarding the fund as at 31 December 2007<br />
Unit price (in EUR) 13.21<br />
Net value of the fund (in EUR) 11,300,196.44<br />
Number of units in circulation 855,392.64<br />
Number of investors 3,835
116<br />
KD Prvi izbor<br />
- a mutual fund of equity funds<br />
The KD Prvi izbor mutual fund of equity funds<br />
invests in a wide range of selected investment funds<br />
of well-known fund managers to ensure optimal<br />
diversification of investments. Thus the fund is<br />
appropriate for first-time investors in mutual funds.<br />
Investments in other equity funds were<br />
predominant in 2007, while investments in equity<br />
securities represented slightly less than 5 percent<br />
of assets. The most significant proportion of assets<br />
was invested in the US, <strong>We</strong>stern Europe, emerging<br />
markets <strong>and</strong> Japan in accordance with the mutual<br />
fund’s MSCI World reference index.<br />
Driven by positive expectations regarding future<br />
developments on the Russian capital market,<br />
the proportion of investments in Russian equity<br />
securities rose in the second half of 2007.<br />
Data regarding the fund as at 31 December 2007<br />
Unit price (in EUR) 6.16<br />
Net value of the fund (in EUR) 36,307,369.06<br />
Number of units in circulation 5,889,949.93<br />
Number of investors 4,797<br />
KD MM<br />
- a money market mutual fund<br />
The KD MM money market mutual fund is a<br />
low-risk mutual fund with no subscription fee <strong>and</strong><br />
a low management fee. It is an alternative to bank<br />
deposits intended primarily for investors looking for<br />
a short-term <strong>and</strong> extremely safe investment.<br />
In 2007, 99 percent of the fund’s assets were<br />
allocated to deposits at the nine largest commercial<br />
banks based in Slovenia, as deposits represented<br />
more favourable investments than money market<br />
instruments.<br />
In February 2007, the KD MM mutual fund<br />
received the “Zlati V” (Gold V) award from the<br />
magazine Kapital as the best money market mutual<br />
fund of 2006.<br />
Data regarding the fund as at 31 December 2007<br />
Unit price (in EUR) 46.51<br />
Net value of the fund (in EUR) 8,641,443.67<br />
Number of units in circulation 185,788.98<br />
Number of investors 599<br />
KD Balkan<br />
- an equity mutual fund<br />
In accordance with its regional investment<br />
policy, the KD Balkan equity mutual fund invested<br />
in the markets of South Eastern Europe. At the end<br />
of 2007, investments were primarily focused on the<br />
capital markets of Croatia (35 percent), Romania<br />
(14 percent), Slovenia (12 percent), Bulgaria (10<br />
percent) <strong>and</strong> Serbia (10 percent).<br />
In the first half of 2007, securities prices on key<br />
Balkan capital markets rose significantly,<br />
as reflected by inflows into mutual funds. In the
second half of the year, prices began falling on<br />
Balkan markets, driven to a great extent by the<br />
worsening political situation in that area of South<br />
Eastern Europe, resulting in a decrease in inflows of<br />
investors’ assets towards the end of the year.<br />
Data regarding the fund as at 31 December 2007<br />
Unit price (in EUR) 7.70<br />
Net value of the fund (in EUR) 76,293,062.22<br />
Number of units in circulation 9,902,223.13<br />
Number of investors 10,408<br />
KD Novi trgi<br />
- an equity mutual fund<br />
The capital markets of Russia, China, Hong Kong<br />
<strong>and</strong> Brazil dominated the geographic investment structure<br />
of the KD Novi trgi equity mutual fund in 2007.<br />
The fund increased investments in the securities<br />
of Russian <strong>and</strong> Chinese companies in the second<br />
half of 2007. By the end of the year, this decision<br />
proved to be correct.<br />
A significant amount of assets were invested<br />
in emerging global markets in 2007. In the largest<br />
developing countries, earnings growth continued,<br />
while the st<strong>and</strong>ard of living <strong>and</strong> internal purchasing<br />
power rose, making investments in these countries<br />
even more attractive. Expectations <strong>and</strong> forecasts<br />
for future years regarding the continued economic<br />
growth <strong>and</strong> development of these countries remain<br />
positive, indicating great hidden potential.<br />
KD Severna Amerika<br />
- an equity mutual fund<br />
KD Severna Amerika is an equity mutual fund<br />
with a regionally-oriented investment policy. Its<br />
objective is to achieve long-term returns on assets<br />
invested in US, Canadian <strong>and</strong> Mexican companies.<br />
At the end of 2007, 72 percent of the fund’s<br />
assets were invested in shares, 17 percent in other<br />
funds <strong>and</strong> 11 percent in liquid forms of deposits.<br />
In terms of geographical structure, investments<br />
in the securities of US-based companies were<br />
predominant, with investments in the shares of<br />
Mexican <strong>and</strong> Canadian companies representing a<br />
smaller proportion.<br />
The value of the US dollar fell 10.5 percent<br />
versus the euro in 2007, as reflected in the fund’s<br />
returns. Most of the fund’s investments in securities<br />
are denominated in dollars, while its unit price is<br />
calculated in euros.<br />
Data regarding the fund as at 31 December 2007<br />
Unit price (in EUR) 3.65<br />
Net value of the fund (in EUR) 980,705.08<br />
Number of units in circulation 269,019.65<br />
Number of investors 194<br />
117<br />
Data regarding the fund as at 31 December 2007<br />
Unit price (in EUR) 5.97<br />
Net value of the fund (in EUR) 21,798,900.44<br />
Number of units in circulation 3,651,527.34<br />
Number of investors 3,813
118<br />
KD Surovine in energija<br />
- an equity mutual fund<br />
Ever increasing dem<strong>and</strong> for limited inventories<br />
of raw materials <strong>and</strong> energy is the reason that<br />
the sector-oriented KD Surovine in energija is a<br />
perspective equity mutual fund in the long-term.<br />
At the end of the year, 59 percent of the fund’s<br />
assets were invested in the securities of energy<br />
sector companies, while 28 percent were invested<br />
in securities from the raw materials sector.<br />
In 2007, KD Surovine in energija’s proportion of<br />
investments in the equity securities of issuers from<br />
developing countries rose.<br />
A sharp rise in the prices of oil, gold, silver<br />
<strong>and</strong> other energy <strong>and</strong> raw materials in 2007 had a<br />
positive effect on growth in the fund’s unit price.<br />
Data regarding the fund as at 31 December 2007<br />
Unit price (in EUR) 5.62<br />
Net value of the fund (in EUR) 7,111,761.39<br />
Number of units in circulation 1,264,717.77<br />
Number of investors 1,268<br />
KD Tehnologija,<br />
- an equity mutual fund<br />
KD Tehnologija is a sector-oriented equity<br />
mutual fund. Its objective is to achieve long-term<br />
growth driven by technological progress, solutions<br />
<strong>and</strong> innovations.<br />
At the end of the year, the fund’s assets were<br />
widely diversified: equity securities <strong>and</strong> mutual<br />
funds represented 83 percent <strong>and</strong> 4 percent of<br />
assets, respectively, while the remaining assets were<br />
invested in bonds, cash <strong>and</strong> deposits.<br />
At the end of the year, most of the fund’s<br />
assets (36 percent) were invested in the<br />
telecommunications sector, followed by information<br />
technology (31percent) <strong>and</strong> companies from<br />
the healthcare sector (20 percent). The mutual<br />
fund’s investments in securities from the<br />
telecommunications sector rose by 9 percent<br />
compared to 2006, driven by favourable<br />
assessments <strong>and</strong> expectations on the market.<br />
Data regarding the fund as at 31 December 2007<br />
Unit price (in EUR) 5.15<br />
Net value of the fund (in EUR) 2,499,514.55<br />
Number of units in circulation 485,126.20<br />
Number of investors 427<br />
KD Vitalnost,<br />
- an equity mutual fund<br />
The KD Vitalnost equity mutual fund is a<br />
sector-oriented mutual fund that invests in the<br />
shares of companies whose products <strong>and</strong> services<br />
directly or indirectly prolong longevity, preserve life<br />
<strong>and</strong> improve the quality thereof.<br />
The fund’s medium <strong>and</strong> long-term objective is to<br />
encompass global demographic <strong>and</strong> lifestyle changes<br />
linked to the ageing of the population <strong>and</strong> increased<br />
expenditure for healthcare <strong>and</strong> consumer goods.<br />
Following a transition period, the composition<br />
of the fund’s investments was aligned with its<br />
investment policy at the beginning of 2007.<br />
At the end of 2007, 90 percent of the fund’s<br />
assets were invested in shares. Investments in the<br />
healthcare sector represented 41 percent of assets,<br />
followed by the manufacturing sector (37 percent)<br />
<strong>and</strong> the consumer goods sector (17 percent).
The structure of the portfolio, comprising<br />
investments in the healthcare <strong>and</strong> consumer goods<br />
sector, exceeds the scope of similar funds on the<br />
market which only invest in healthcare. With its<br />
diversification of investments, the fund is less exposed<br />
to fluctuations <strong>and</strong> has tremendous growth potential.<br />
Data regarding the fund as at 31 December 2007<br />
Unit price (in EUR) 1.01<br />
Net value of the fund (in EUR) 2,171,020.38<br />
Number of units in circulation 2,154,158.21<br />
Number of investors 436<br />
KD Nova energija,<br />
- an equity mutual fund<br />
The KD Nova energija equity mutual fund is the<br />
only Slovenian mutual fund that invests the majority<br />
KD ID, delniška investicijska družba, d. d.<br />
Address: 206 Celovška cesta, Ljubljana, Slovenia<br />
Telephone: +386 1 582 67 80<br />
Fax: +386 1 518 40 88<br />
E-mail: <strong>kd</strong>-skladi@<strong>kd</strong>-<strong>group</strong>.si<br />
<strong>We</strong>bsite: www.<strong>kd</strong>-skladi.si<br />
The principle activities of the investment company<br />
KD ID were focused on the timely alignment of<br />
the company’s portfolio to market conditions.<br />
Investments in the financial sector fell, as did the<br />
proportion of non-listed investments (from 14.9<br />
percent at the end of 2006 to 12.7 percent at the<br />
end of 2007). A gross dividend of EUR 1 per share<br />
was paid in October 2007.<br />
of its assets in companies that produce alternative<br />
<strong>and</strong> renewable sources of energy. Due to increasing<br />
global dem<strong>and</strong> for new, cleaner energy sources, this<br />
119<br />
sector is considered by some analysts to be one of<br />
the most promising.<br />
The fund’s assets are globally diversified <strong>and</strong><br />
cover the most important <strong>and</strong> perspective forms of<br />
producing alternative sources of energy. In 2007,<br />
investments in companies that produce energy with<br />
wind-driven power stations <strong>and</strong> solar panels were<br />
predominant.<br />
Data regarding the fund as at 31 December 2007<br />
Unit price (in EUR) 1.49<br />
Net value of the fund (in EUR) 18,834,394.82<br />
Number of units in circulation 12,670,201.32<br />
Number of investors 3,351
120<br />
Isl<strong>and</strong> of Brač, Croatia
Croatia<br />
KD Investments d. o. o., Zagreb<br />
Adress: 39 Radnička cesta, Zagreb, Croatia<br />
Telephone: +385 1 6274 555<br />
Fax: +385 1 6274 510<br />
E-mail: info@<strong>kd</strong>-<strong>group</strong>.hr<br />
<strong>We</strong>bside: www.<strong>kd</strong>-<strong>group</strong>.hr<br />
Management Board (31 December 2007):<br />
Hrvoje Japunčić, President of the Management<br />
Board<br />
Branko Gladović, Member of the Management<br />
Board<br />
Challenges in 2008:<br />
Growth in volume of assets under management,<br />
which will exceed the level of market growth, <strong>and</strong><br />
further increase of the company’s market share;<br />
Ensuring attractive returns for investors;<br />
Exp<strong>and</strong>ing the range of funds with two new<br />
open-ended investment funds;<br />
Further strengthening of cooperation <strong>and</strong><br />
partnerships with local institutional investors <strong>and</strong><br />
brokers;<br />
Increasing access to our range of products <strong>and</strong><br />
further expansion of sales channels;<br />
Operations in 2007<br />
Transforming the Financial Point network into a<br />
financial supermarket;<br />
The volume of assets managed in all four KD<br />
Generating positive financial returns for owners.<br />
funds in Croatia more than doubled (to EUR 82.9<br />
million) in 2007, while our share of the Croatian<br />
121<br />
market exceeded 2 percent.<br />
The number of active investors increased by 63<br />
percent, from 3,626 at the beginning of the year to<br />
5,936 at the end of the year. The investor base is<br />
becoming increasingly local.<br />
The new KD Nova Europa, an equity mutual<br />
fund, started operating in October.<br />
All four funds generated attractive returns in the<br />
local currency (Croatian kuna - HRK); returns were<br />
even higher in euros, given the slight increase in the<br />
value of the HRK against the euro.<br />
In general, the Croatian investment fund sector<br />
developed significantly during the year in every<br />
category (volume of assets under management, net<br />
value of assets <strong>and</strong> share of the financial market).
KD Victoria<br />
- an equity mutual fund<br />
KD Victoria, established in 1999, is the first<br />
equity mutual fund in Croatia. In 2001, 2002 <strong>and</strong><br />
2004, the fund received the “Zlati udjel” (Golden<br />
Share) award as the best performing <strong>and</strong> fastest<br />
growing (in terms of the volume of assets under<br />
management) equity mutual fund in Croatia.<br />
In 2007, the fund’s assets were primarily<br />
invested in the equity securities of companies<br />
from Croatia, the European Union, Bosnia <strong>and</strong><br />
KD Balanced<br />
- a balanced mutual fund<br />
In accordance with the mixed structure of<br />
investments in the portfolio, the proportion of equity<br />
securities never exceeded the 70 percent limit.<br />
The fund’s assets are primarily invested in<br />
equity <strong>and</strong> debt securities issued by Croatian,<br />
Slovenian, Bosnian <strong>and</strong> Macedonian companies.<br />
In terms of geographical structure, the largest<br />
share of investments is in Croatia, followed by<br />
Bosnia <strong>and</strong> Herzegovina.<br />
Herzegovina <strong>and</strong> Macedonia.<br />
In accordance with expectations regarding<br />
the development of regional capital markets, the<br />
geographical structure of assets was similar to<br />
2006.<br />
122<br />
Data regarding the fund as at 31 December 2007<br />
Unit price (in HRK*) 61.40<br />
Net value of the fund (in HRK*) 501,805,704<br />
Number of units in circulation 8,172,214.71<br />
Number of investors 4,939<br />
* HRK - Croatian kuna<br />
Data regarding the fund as at 31 December 2007<br />
Unit price (in HRK*) 14.48<br />
Net value of the fund (in HRK*) 39,928,792<br />
Number of units in circulation 2,757,121.88<br />
Number of investors 479<br />
* HRK - Croatian kuna
KD Adria Bond,<br />
- a bond mutual fund<br />
The fund’s assets are invested primarily in the<br />
equity <strong>and</strong> debt securities of Croatian, Slovenian,<br />
Bosnian <strong>and</strong> Macedonian issuers.<br />
In accordance with the fund’s investment<br />
policy, the proportion of debt securities must be at<br />
least 80 percent of the mutual fund’s total assets at<br />
all times.<br />
In terms of geographic structure, the largest<br />
share of assets is invested in the securities of<br />
Croatian <strong>and</strong> Bosnian issuers.<br />
KD Nova Europa,<br />
- an equity mutual fund<br />
The KD Nova Evropa equity mutual fund was<br />
established in October 2007. In accordance with<br />
the fund’s investment policy, assets are primarily<br />
invested in the countries of Central, Eastern <strong>and</strong><br />
South Eastern Europe.<br />
The fund will invest at least 60 percent of its<br />
assets in equity securities.<br />
At the end of 2007, the fund’s assets were<br />
invested in the securities of issuers from Russia,<br />
Serbia, Bosnia <strong>and</strong> Herzegovina, Macedonia <strong>and</strong><br />
the European Union.<br />
Data regarding the fund as at 31 December 2007<br />
Unit price (in HRK*) 12.03<br />
Net value of the fund (in HRK*) 6,335,918<br />
Number of units in circulation 526,699.81<br />
Number of investors 27<br />
* HRK - Croatian kuna<br />
Data regarding the fund as at 31 December 2007<br />
Unit price (in HRK*) 10,98<br />
Net value of the fund (in HRK*) 59,416,826<br />
Number of units in circulation 5,411,982.70<br />
Number of investors 969<br />
* HRK - Croatian kuna<br />
123
124<br />
Bratislava, Slovakia
Slovakia<br />
KD Investments, správ. spol., a. s., Bratislava<br />
Address: 3 Laurinská, Bratislava, Slovakia<br />
Telephone: +421 2 5910 49 00<br />
Fax: +421 2 5910 49 10<br />
E-mail: info@<strong>kd</strong>-<strong>group</strong>.sk<br />
<strong>We</strong>bsite: www.<strong>kd</strong>-<strong>group</strong>.sk<br />
Management Board (31 December 2007):<br />
Borut Gorjup, President of the Management Board<br />
Gabriel Hinzeller, Member of the Management Board<br />
Rastislav Podhorec, Member of the Management Board<br />
Management Board (1 May 2008):<br />
Borut Gorjup, President of the Management Board<br />
Gabriel Hinzeller, Member of the Management Board<br />
Feasibility study on using the Slovak legal<br />
framework to register additional funds that could be<br />
distributed outside of the Slovak registered office.<br />
KD Prosperita<br />
- an equity-bond mutual fund<br />
The KD Prosperita equity-bond mutual fund was the<br />
best performing balanced mutual fund in Slovakia in<br />
2007.<br />
The fund’s assets are primarily invested in the<br />
shares, bonds <strong>and</strong> other financial instruments of<br />
companies from Central <strong>and</strong> Eastern Europe. The<br />
fund’s flexible investment policy permits the proportion<br />
of shares, bonds <strong>and</strong> other financial instruments to fall<br />
Operations in 2007<br />
to 50 percent, making it easier to achieve investment<br />
KD Prosperita ranked among most successful<br />
balanced funds on the Slovak market.<br />
Distribution to the Czech market, which started in<br />
2006, began to increase.<br />
The volume of assets under management in our<br />
funds increased by more than 2.5 times (to over EUR<br />
16.5 million), while the number of investors more<br />
than doubled.<br />
Challenges in 2008:<br />
Feasibility study on distribution to neighbouring<br />
Central European markets;<br />
Addition of new distribution channels, with<br />
special emphasis on banks, brokerage houses <strong>and</strong><br />
agent <strong>networks</strong>;<br />
Cooperation with the KD Life fund <strong>and</strong> support<br />
of its efforts for cross-border sales of unit-linked life<br />
insurance in Slovakia;<br />
objectives.<br />
The fund generated very positive returns in 2007.<br />
Following negative developments on international<br />
financial markets, the fund rebounded at the end of<br />
the year. Central, Southern <strong>and</strong> Eastern Europe remain<br />
attractive for investors, as the countries in the region are<br />
still achieving solid economic growth, while companies<br />
are favourably valued.<br />
Data regarding the fund as at 31 December 2007<br />
Unit price (in SKK*) 1.30<br />
Net value of the fund (in SKK*) 310,531,886<br />
Number of units in circulation 238,575,797<br />
Number of investors 887<br />
* SKK - Slovak crown<br />
125
KD Russia<br />
- an equity mutual fund<br />
The assets of the KD Russia mutual fund are<br />
primarily invested in equity securities <strong>and</strong> other financial<br />
instruments traded on the markets of the Russian<br />
Federation <strong>and</strong> the former Soviet Union.<br />
The Russian stock market achieved several record<br />
highs in 2007 <strong>and</strong> ended the year close to record<br />
levels, as evidenced by the fund’s operations.<br />
Despite international conditions still affected by<br />
the US market, our expectations for 2008 are positive.<br />
There are no shocks on the political stage, as the<br />
presidential election in March 2008 went smoothly,<br />
according to expectations. Although the prices of energy<br />
<strong>and</strong> other commodities remain high, the country is<br />
experiencing solid economic growth.<br />
Data regarding the fund as at 31 December 2007<br />
Unit price (in SKK*) 1.14<br />
Number of units in circulation 213,224,752<br />
Net value of the fund (in SKK*) 243,793,737<br />
Number of investors 409<br />
* SKK - Slovak crown<br />
126
Bratislava, Slovakia<br />
127
128<br />
Romanian fields
Romania<br />
SAI KD Investments Romania, S.A., Bucharest<br />
Address: 5 Gheorghe Manu, Bucharest, Romania<br />
Telephone: +40 21 650 04 44<br />
Fax: +40 21 650 04 42<br />
<strong>We</strong> transferred the management of the Financial<br />
Point network to the local brokerage house KD Asset<br />
Management in Bucharest, which will allow the<br />
network to be reorganised as a financial supermarket.<br />
E-mail: info@<strong>kd</strong>-<strong>group</strong>.ro<br />
<strong>We</strong>bsite: www.<strong>kd</strong>-<strong>group</strong>.ro<br />
Management Board (31 December 2007):<br />
George Alberts, President of the Management Board<br />
Peter Groznik, Member of the Management Board<br />
Katja Kraškovic, Member of the Management Board<br />
Challenges in 2008:<br />
The “import” of other KD funds (mainly Slovenian)<br />
into the EU for distribution in Romania, continuing<br />
expansion <strong>and</strong> strengthening of our product range for<br />
Bulgarian investors;<br />
Exp<strong>and</strong>ing distribution channels, particularly<br />
Operations in 2007<br />
third-party channels;<br />
Continued strengthening of cooperation <strong>and</strong><br />
<strong>We</strong> generated attractive returns for our fund<br />
investors, including the best annual return on the local<br />
open-end fund market, achieved by our own equity<br />
fund KD Maximus.<br />
With two additional open-ended funds introduced<br />
to the market at the end of 2006 (the balanced<br />
mutual fund KD Optimus <strong>and</strong> KD MultiFond, the<br />
first fund of funds on the Romanian market), the<br />
Romanian KD Investments now covers a range of<br />
investment strategies for investing in Romania, <strong>and</strong><br />
therefore offers the widest range of funds of any local<br />
fund provider in Romania.<br />
<strong>We</strong> considerably extended our distribution<br />
channel network.<br />
<strong>We</strong> increased focus on local institutional investors<br />
that have contributed significantly to increasing the<br />
total volume of assets under management by almost<br />
80 percent (to over EUR 13 million).<br />
partnerships with local institutional investors <strong>and</strong><br />
brokers;<br />
Increased cooperation with two Group companies<br />
registered in Romania - KD Capital Management <strong>and</strong><br />
KD Life - to further enhance recognition of KD Holding<br />
Group as a major player on Romanian financial<br />
markets.<br />
129
KD Maksimus<br />
- an equity mutual fund<br />
In 2007, the fund received an award from the<br />
Romanian financial daily newspaper, Ziarul Financiar,<br />
as best equity fund on the Romanian capital market.<br />
Assets under management reached EUR 12.06<br />
million. Assets rose by more than 65 percent<br />
compared to 2006. The fund had 1,436 investors in<br />
2007, of which 947 were active.<br />
In 2007, the fund’s investment policy was<br />
exp<strong>and</strong>ed, together with the range of financial<br />
instruments in which its assets are invested.<br />
At the beginning of 2007, the fund was not yet<br />
aligned in terms of investments, but had achieved the<br />
KD Optimus<br />
- a balanced mutual fund<br />
At the end of 2007, the fund celebrated its first<br />
year of operations.<br />
Assets under management nearly doubled in<br />
2007, reaching EUR 487,835.<br />
Due to a transition period at the beginning of<br />
2007, the fund was not yet aligned in terms of<br />
investments. By the end of the year, it had achieved<br />
the desired structure.<br />
The proportion of equity securities at the end of<br />
2007 was 55.79 percent, followed by deposits <strong>and</strong><br />
cash (31.28 percent) <strong>and</strong> debt securities (12.93<br />
percent).<br />
desired structure by year end. The proportion of equity<br />
<strong>and</strong> balanced funds was 80.31 percent, followed by<br />
130<br />
deposits <strong>and</strong> cash (16.69 percent).<br />
Data regarding the fund as at 31 December 2007<br />
Unit price (in RON*) 20.22<br />
Net value of the fund (in RON*) 43,532,076<br />
Number of units in circulation 2,152,858.44<br />
Number of investors 926<br />
* RON - Romanian lei<br />
Data regarding the fund as at 31 December 2007<br />
Unit price (in RON*) 11.25<br />
Net value of the fund (in RON*) 1,761,182<br />
Number of units in circulation 156,500.69<br />
Number of investors 18<br />
* RON - Romanian lei
KD Multifond<br />
- a fund of funds<br />
At the end of 2007, the fund celebrated its first<br />
year of operations.<br />
Assets under management nearly doubled in<br />
2007, reaching EUR 251,146.<br />
At the beginning of 2007, the fund was not yet<br />
aligned in terms of investments, but had achieved the<br />
desired structure by year end. The proportion of equity<br />
<strong>and</strong> balanced funds was 80.31 percent, followed by<br />
deposits <strong>and</strong> cash (16.69 percent).<br />
Data regarding the fund as at 31 December 2007<br />
Unit price (in RON*) 10.53<br />
Net value of the fund (in RON*) 906,687<br />
Number of units in circulation 86,088.87<br />
Number of investors 2<br />
* RON - Romanian lei<br />
131
132<br />
Church of St. Nicholas – Russian church in Sofia, Bulgaria
Bulgaria<br />
KD Investments EAD, Sofia<br />
Address: 9 Frityof Nansen Blvd., Sofia, Bulgaria<br />
Telephone: +359 2 810 26 51<br />
Fax: +359 2 981 21 65<br />
E-mail: info@<strong>kd</strong>-<strong>group</strong>.bg<br />
<strong>We</strong>bsite: www.<strong>kd</strong>-<strong>group</strong>.bg<br />
Management Board (31 December 2007):<br />
Yanko Nikolov, Executive Director <strong>and</strong> President of<br />
Management Board<br />
Krasimir Mishlakov, Executive Director<br />
Katja Kraškovic, Member of the Management Board<br />
Aleš Oražem, Member of the Management Board<br />
Roman Androjna, Member of the Management<br />
Challenges in 2008:<br />
The “import” of other KD funds (mainly<br />
Slovenian) into the EU for distribution in Bulgaria,<br />
continuing expansion <strong>and</strong> strengthening of the<br />
product range for Bulgarian investors;<br />
Continuing to strengthen cooperation <strong>and</strong><br />
partnership with local institutional investors <strong>and</strong><br />
brokers;<br />
Cooperation with two other Group companies<br />
registered in Bulgaria - KD Securities <strong>and</strong> KD Life -<br />
to further enhance recognition of KD as major player<br />
on the Bulgarian financial market;<br />
Increasing market share.<br />
Board<br />
Operations in 2007<br />
133<br />
The number of investors in our funds almost<br />
doubled, while the volume of assets under<br />
management more than doubled (to over EUR 7<br />
million).<br />
Our funds are ranked among the most<br />
successful funds on the Bulgarian market, while<br />
the KD Equity fund achieved the best results of any<br />
Group company fund.<br />
The customers we attracted included pension<br />
funds.
KD Pelikan<br />
- a balanced investment company, AD<br />
KD Pelikan’s portfolio is balanced in accordance<br />
with its investment policy. Equity securities represent<br />
48.66 percent of assets, 1.5 percent of which are<br />
invested in Romania, while the rest are invested on the<br />
Bulgarian securities market.<br />
Bonds <strong>and</strong> deposits represent 17.91 percent <strong>and</strong><br />
25.67 percent of the fund, respectively, while cash<br />
KD Bonds Bulgaria<br />
- a bond mutual fund<br />
The fund celebrated its first anniversary in the<br />
middle of 2007.<br />
By the end of 2007, assets under management had<br />
reached EUR 396 thous<strong>and</strong>.<br />
Bonds represented 48.4 percent of assets, followed<br />
by deposits (29.9 percent), equity securities (19.3<br />
percent) <strong>and</strong> cash (2.4 percent).<br />
accounts for the remaining 7.76 percent.<br />
Assets under management totalled EUR 3.47<br />
million at the end of the year, an increase of 31 percent<br />
compared to 2006.<br />
134<br />
Podatki o skladu na dan 31 December 2007<br />
Market price per share (in BGN*) 23.07<br />
Net value of the fund (in BGN*) 6,788,748<br />
Number of shares in circulation 294,293<br />
Number of investors 229<br />
* BGN - Bulgarian lev<br />
Data regarding the fund as at 31 December 2007<br />
Unit price (in BGN*) 125.22<br />
Net value of the fund (in BGN*) 774,906<br />
Number of units in circulation 6,188.42<br />
Number of investors 22<br />
* BGN - Bulgarian lev
KD Equity Bulgaria<br />
- an equity mutual fund<br />
The fund celebrated its first anniversary in the middle<br />
of 2007.<br />
Assets under management reached EUR 3.367<br />
million by the end of 2007, or 6.4 times more than at<br />
the end of 2006.<br />
In 2007, the investment region was exp<strong>and</strong>ed from<br />
just the Bulgarian market to include markets of Eastern<br />
<strong>and</strong> Southern Europe.<br />
At the end of 2007, the Bulgarian market still<br />
represented the primary investment region (63.27<br />
percent), followed by investments in Croatia (16.78<br />
percent), Romania (4.5 percent) <strong>and</strong> Serbia (3.10<br />
percent). Equity securities represent 87.65 percent of<br />
total assets under management. Cash (2.58 percent)<br />
<strong>and</strong> deposits (8.78 percent) represent the remaining<br />
assets.<br />
135<br />
Data regarding the fund as at 31 December 2007<br />
Unit price (in BGN*) 2.00<br />
Net value of the fund (in BGN*) 6,585,687<br />
Number of units in circulation 3,292,892.77<br />
Number of investors 493<br />
* BGN - Bulgarian lev
136<br />
Kalemegdan, Belgrade, Serbia
Serbia<br />
KD Investments, a. d., Belgrade<br />
Address: 13 Zmaj Jovina, Belgrade, Serbia<br />
Telephone: +381 11 263 59 18<br />
Fax: +381 11 328 23 31<br />
E-mail: info@<strong>kd</strong>-investments.co.yu<br />
Generation of investment returns that will be among<br />
the best in Serbia to the benefit of our customers;<br />
Participation in the establishment of an association<br />
of asset management companies;<br />
Improvement of local recognition of the KD br<strong>and</strong>.<br />
<strong>We</strong>bsite: www.<strong>kd</strong>-investments.co.yu<br />
Management Board (31 December 2007):<br />
Dušan Lahe, Director <strong>and</strong> President of Management Board<br />
Dag Kralj, Member of the Management Board<br />
Aleks<strong>and</strong>er Sekavčnik, Member of the Management Board<br />
KD Ekskluziv<br />
- an equity mutal fund<br />
The KD Ekskluziv equity mutual fund was<br />
established at the end of December 2007 to achieve<br />
returns with an investment of a minimum of 75 percent<br />
Operations in 2007<br />
of assets in equity securities <strong>and</strong> shares of the largest<br />
Serbian companies.<br />
At the beginning of September, KD Investments<br />
was registered as a company for the establishment,<br />
organisation <strong>and</strong> management of investment funds.<br />
At the end of November, the company issued a<br />
public call for payments of units in the prestigious<br />
investment fund KD Ekskluziv.<br />
The public call for payments of units in the<br />
open-end equity fund KD Ekskluziv was successfully<br />
concluded on 20 December 2007, <strong>and</strong> on 27<br />
December the fund was registered in the Securities<br />
Commission’s fund register, <strong>and</strong> was able to start<br />
operations on the Serbian financial market.<br />
Through Serbian <strong>group</strong> member, KD Investments<br />
Belgrade, KD Holding has exp<strong>and</strong>ed its operations<br />
to a capital market with tremendous growth <strong>and</strong><br />
development potential in the coming years.<br />
Data regarding the fund as at 31 December 2007<br />
Unit price (in RSD*) 1,000.32<br />
Net value of the fund (in RSD*) 24,354,173<br />
Number of units in circulation 25,920.79<br />
Number of investors 58<br />
* RSD - Serbian dinar<br />
137<br />
Challenges in 2008:<br />
Registration of a second open-ended investment<br />
fund;<br />
Development of new financial products in<br />
cooperation with banks;<br />
Development of sales, particularly via agencies,<br />
banks <strong>and</strong> stockbroking companies;
Private wealth management <strong>and</strong> stockbroking<br />
Operations in 2007<br />
Challenges in 2008:<br />
To continue growth in market shares for private<br />
138<br />
In a very successful 2007, we gained the trust of<br />
90 new customers in Slovenia, introduced an increased<br />
minimum initial investment of EUR 100 thous<strong>and</strong> to<br />
the market <strong>and</strong> increased payments into funds by 29<br />
percent compared to the previous year.<br />
In terms of the number of customers <strong>and</strong> volume of<br />
assets entrusted for management, we are one of the top<br />
Slovenian brokerage houses <strong>and</strong> banks providing these<br />
services.<br />
Private wealth management has been established<br />
as a key product abroad as well: at the end of the year<br />
we were managing the assets of almost 350 customers<br />
in three countries, with a total value of approximately<br />
EUR 11 million.<br />
<strong>We</strong> successfully maintained <strong>and</strong> improved private<br />
wealth management services as the basic pillar of our<br />
services.<br />
All companies abroad involved in stockbroking<br />
services successfully increased their market share.<br />
In terms of human resources <strong>and</strong> organisation<br />
we have adapted to new regulatory guidelines <strong>and</strong><br />
directives in all countries <strong>and</strong> strengthened the<br />
foundations for continued growth.<br />
wealth management services <strong>and</strong> stockbroking to<br />
become one of the leading providers of these services in<br />
the region;<br />
To improve management processes, staff training<br />
<strong>and</strong> upgrade individual management services to include<br />
a wide range of other financial services;<br />
Closer integration between companies abroad (via<br />
the Ljubljana-based company KD BPD) in a divisional<br />
model of corporative governance;<br />
To begin calculating new return indices for markets<br />
where we invest, which will better reflect <strong>and</strong> indicate<br />
the liquidity of these markets <strong>and</strong> the performance of<br />
assets invested;<br />
To intensify cooperation between KD Holding Group<br />
companies <strong>and</strong> implement joint actions to increase<br />
recognition of the KD br<strong>and</strong>.
Slovenia<br />
KD BPD, borznoposredniška družba, d. o. o.,<br />
Ljubljana<br />
Address: 206 Celovška cesta, Ljubljana, Slovenia<br />
Telephone: +386 1 582 67 30<br />
Fax:+386 1 582 67 20<br />
management department also manages foreign<br />
m<strong>and</strong>ates from institutional investors. Last year,<br />
exceptional growth was recorded in this sector, as<br />
the value of assets under management increased by<br />
15 times.<br />
E-mail: info@<strong>kd</strong>-<strong>group</strong>.si<br />
<strong>We</strong>bsite: www.<strong>kd</strong>-bpd.si<br />
Management Board (31 December 2007):<br />
Milena Zrnec, President of Management Board<br />
Management Board (1 April 2008):<br />
Benjamin Jošar, President of Management Board<br />
In 2007, we placed a great deal of focus on the<br />
continued improvement of management processes.<br />
Group management, introduced in 2006, was<br />
further strengthened <strong>and</strong> enhanced last year.<br />
<strong>We</strong> also began selecting <strong>and</strong> testing programme<br />
solutions for management support <strong>and</strong> continued<br />
Asset management<br />
CFA training.<br />
KD BPD managed in 2007 the funds of the asset<br />
Private wealth management<br />
management company KD Investments (now KD<br />
Skladi). In 2007, 12 mutual funds <strong>and</strong> the KD ID<br />
investment company were managed in this manner.<br />
The past year was successful for our investors.<br />
Assets under management grew by 48.7 percent<br />
in 2007, which can be attributed to the returns<br />
generated, as well as net inflows. In the second half<br />
of the year, the sub-prime mortgage crisis in the<br />
USA increased volatility on global capital markets.<br />
The increased political uncertainty regarding the<br />
resolution of Kosovo’s status also had an impact<br />
on Balkan markets. In 2008, we expect the<br />
cooling of global economic growth to lead to more<br />
difficult conditions on capital markets. <strong>We</strong> believe<br />
however that these conditions will provide further<br />
opportunities for our management team to prove<br />
their level of professionalism <strong>and</strong> expertise.<br />
In addition to the funds of KD Skladi, the asset<br />
Private wealth management is becoming a more<br />
desirable <strong>and</strong> sought-after way of investing available<br />
surplus assets. This reflects changing savings<br />
habits, investment decisions <strong>and</strong> a more<br />
capital-oriented investment approach from investors<br />
in the future. In the three years since private wealth<br />
management was first provided by the company, we<br />
have ensured that investment opportunities offered<br />
have been continually updated. <strong>We</strong> are introducing<br />
new investment policies, more closely tailored to<br />
clients in terms of risk, as they are adapted to their<br />
investment <strong>and</strong> savings habits.<br />
139
Operations in 2007<br />
Challenges in 2008:<br />
To further improve management processes <strong>and</strong> the<br />
In a very successful 2007, we gained the trust<br />
of 90 new customers, successfully introduced an<br />
increased minimum initial investment of EUR 100<br />
professional development of analysts <strong>and</strong> managers;<br />
To attract new global <strong>and</strong> regional institutional<br />
investors;<br />
thous<strong>and</strong> to the market <strong>and</strong> increased payments into<br />
140<br />
funds by 29 percent compared to the previous year.<br />
In terms of the number of customers <strong>and</strong><br />
volume of assets entrusted for management, we<br />
are one of the top Slovenian brokerage houses <strong>and</strong><br />
banks providing these services.<br />
<strong>We</strong> successfully maintained <strong>and</strong> improved<br />
private wealth management services as the basic<br />
pillar of our services.<br />
Investment performance <strong>and</strong> vision<br />
Despite poorer returns on global capital markets at<br />
the end of 2007 (due to the mortgage crisis <strong>and</strong><br />
liquidity shocks), we successfully achieved a 15.40<br />
percent return on assets in 2007, as we managed<br />
to invest primarily in developing markets that were<br />
not directly affected by the negative consequences<br />
of the mortgage crisis. The economies of these<br />
countries are achieving above-average growth,<br />
which permits an optimistic view of growth <strong>and</strong><br />
development for these markets in the future.<br />
To begin calculating new return indices for<br />
markets in which we invest, which will better reflect<br />
<strong>and</strong> indicate the liquidity of these markets <strong>and</strong> the<br />
performance of assets invested;<br />
To increase emphasis on personal contact <strong>and</strong><br />
communication with customers;<br />
To provide a more favourable <strong>and</strong> wider selection<br />
of fees to facilitate the optimisation of product costs;<br />
To actively integrate with new local colleagues in<br />
regions where Group companies operate;<br />
To achieve a leading position in the region for<br />
private wealth management;<br />
To strengthen <strong>and</strong> make better use of private<br />
wealth management as a market niche within the<br />
sector;<br />
To upgrade private wealth management services<br />
with a wide range of financial services.<br />
Stockbroking<br />
Operations in 2007<br />
<strong>We</strong> employed a new stockbroker, improving the<br />
responsiveness <strong>and</strong> quality of stockbroking services.<br />
<strong>We</strong> introduced investment consultancy services<br />
for major customers, offering useful information to<br />
facilitate investment decision-making.
<strong>We</strong> successfully responded to Slovenia’s first year<br />
with the euro <strong>and</strong> increased the number of customers<br />
on the growing domestic market <strong>and</strong> on all foreign<br />
markets. <strong>We</strong> formed a new partnership in Romania,<br />
started discussions in Serbia, <strong>and</strong> renewed our<br />
partnership with the Bank of New York Group.<br />
As part of the derivates portfolio, we offered<br />
warrants <strong>and</strong> turbo-certificates listed on the Stuttgart<br />
stock exchange.<br />
Croatia<br />
KD Upravljanje imovinom, d. o. o., Zagreb<br />
Naslov: 39 Radnička cesta, Zagreb, Croatia<br />
Telephone: +385 1 627 44 44<br />
Fax: +385 1 627 44 08<br />
E-mail: <strong>kd</strong>am@<strong>kd</strong>-<strong>group</strong>.hr<br />
<strong>We</strong>bsite: www.<strong>kd</strong>-<strong>group</strong>.hr<br />
Management Board (31 December 2007):<br />
Zvonimir Marić, Member of the Management Board<br />
Boštjan Tancer, Member of the Management Board<br />
The majority of our trading continued to be on<br />
the domestic <strong>and</strong> Balkan markets <strong>and</strong> increasingly on<br />
Operations in 2007<br />
other foreign markets, primarily Hong Kong, the US<br />
<strong>and</strong> Germany.<br />
<strong>We</strong> offered customers investments on the new<br />
markets of Estonia, Latvia, Lithuania, South Africa <strong>and</strong><br />
South Korea.<br />
<strong>We</strong> successfully adapted to the new Financial<br />
Instruments Market Act, <strong>and</strong> notified customers of the<br />
new European MIFID directive.<br />
Challenges in 2008:<br />
To continue our successful cooperation with<br />
existing customers <strong>and</strong> offer them additional<br />
services (the provision of information with the help<br />
of a strengthened analytical department);<br />
To offer quality services to those new customers<br />
wishing to be more active on all stock markets;<br />
To successfully participate in a project of<br />
establishing a bank.<br />
<strong>We</strong> established ourselves as a new provider on<br />
the private wealth management services market,<br />
with assets under management totalling EUR 2.5<br />
million <strong>and</strong> a market share at the end of 2007 of<br />
over 2 percent (as at 31 December 2007).<br />
<strong>We</strong> attracted a significant number of new<br />
individual customers with the initial public offering<br />
of a large Croatian telecommunications company.<br />
In 2007, we almost doubled our revenues from<br />
stockbroking, increased our market share on the<br />
Zagreb Stock Exchange (ZSE) to over 2 percent,<br />
while increasing the relative volume of transactions<br />
outside the Group.<br />
At the end of the year, we witnessed a<br />
major crisis on the market, which constricted the<br />
investment fund <strong>and</strong> private wealth management<br />
market.<br />
141
Challenges in 2008:<br />
Operations in 2007<br />
To strengthen the reputation of the company as<br />
142<br />
a high-quality provider of private wealth management<br />
services, which we believe will continue to develop<br />
despite dem<strong>and</strong>ing conditions on the market;<br />
To complete the infrastructure <strong>and</strong> international<br />
individual portfolio management services;<br />
To strengthen private wealth management<br />
services <strong>and</strong> internet-supported stockbroking;<br />
To implement new distribution methods for private<br />
wealth management (in addition to own employees);<br />
To <strong>build</strong> the KD br<strong>and</strong> in Croatia.<br />
Romania<br />
SSIF KD Capital Management S. A., Bucharest<br />
Address: 5 Gheorghe Manu, Bucharest, Romania<br />
Telephone: +40 21 650 04 47<br />
Fax: +40 21 650 04 48<br />
<strong>We</strong>bsite: www.<strong>kd</strong>-capital.ro, www.<strong>kd</strong>-<strong>group</strong>.ro<br />
E-mail: office@<strong>kd</strong>-capital.ro<br />
Management Board (31 December 2007):<br />
Silviu Enache, President of the Management Board<br />
Uroš Gorišek, Member of the Management Board<br />
Dag Kralj, Member of the Management Board<br />
In March 2007, KD Capital Management<br />
received trading licence from the National Securities<br />
Commission. <strong>We</strong> achieved our objective to offer a<br />
comprehensive range of services to KD customers in<br />
Romania.<br />
The number of private wealth management<br />
customers increased by 125 percent compared to<br />
2006, reaching 181, while assets under management<br />
reached nearly EUR 5 million. Our most important<br />
customers are from Romania, Slovenia, France, Greece<br />
<strong>and</strong> Croatia.<br />
<strong>We</strong> increased stockbroking revenues in 2007 by<br />
more than six times, <strong>and</strong> achieved a position in the top<br />
half of all stockbroking companies in Romania.<br />
Through seminars, at which our analysts <strong>and</strong><br />
portfolio managers presented KD products <strong>and</strong> markets,<br />
we improved recognition of the KD br<strong>and</strong>.<br />
Challenges in 2008:<br />
Our primary objective is to increase our portfolio of<br />
private wealth management customers <strong>and</strong> to invest in<br />
foreign markets in accordance with customers’ profiles<br />
<strong>and</strong> expert management;<br />
<strong>We</strong> will consolidate activities by attracting new<br />
foreign investors, promoting KD products on foreign<br />
markets <strong>and</strong> structuring new products such as initial<br />
public offering projects;<br />
Since the KD br<strong>and</strong> is already familiar to the<br />
Romanian market, we will focus on increasing our<br />
market share <strong>and</strong> developing a competitive advantage<br />
on the capital market.
Bulgaria<br />
KD Securities EAD, Sofia<br />
Naslov: 9 Frityof Nansen, Sofia, Bulgaria<br />
Telephone: +359 2 810 26 95<br />
Fax: +359 2 981 01 08<br />
E-mail: <strong>kd</strong>s.office@<strong>kd</strong>-<strong>group</strong>.bg<br />
KD Securities became the only investment agent<br />
offering the mutual funds of foreign management<br />
companies via our Financial Points (currently Sofia<br />
<strong>and</strong> Plovdiv). The sales volume at these points<br />
increased ten-fold compared to 2006.<br />
<strong>We</strong>bsite: www.<strong>kd</strong>-<strong>group</strong>.bg<br />
Management Board (31 December 2007):<br />
Uroš Gorišek, President of Management Board<br />
Desislava Petkova, Member of Management Board<br />
Dag Kralj, Member of Management Board<br />
Challenges in 2008:<br />
To exp<strong>and</strong> <strong>and</strong> further improve private wealth<br />
management services <strong>and</strong> continue growth in assets<br />
under management <strong>and</strong> the number of customers;<br />
To strengthen the interest <strong>and</strong> loyalty of KD<br />
Operations in 2007<br />
Securities’ customers, <strong>and</strong> extend that interest to<br />
other services within the KD Holding Group;<br />
In 2007, KD Securities succeeded in steadily<br />
increasing assets under management. Results at the<br />
end of year significantly exceeded plans. Individually<br />
managed assets exceeded EUR 3.5 million<br />
(a four-fold increase), while the number of private<br />
wealth management customers exceeded 100<br />
(an increase of more than three times).<br />
Stockbroking revenues increased by more than<br />
eight times in 2007. <strong>We</strong> were ranked in the top half<br />
of all stockbroking companies in Bulgaria <strong>and</strong> in the<br />
top quarter of all non-banking investment agents by<br />
transaction volume on the Bulgarian stock market.<br />
KD Securities established itself as one of the<br />
leading local investment agents, offering services on<br />
the regional market via associated companies <strong>and</strong><br />
other partners. KD Securities became a recognised<br />
player on the local market. The company can thus<br />
legitimately strive to improve <strong>and</strong> exp<strong>and</strong> services.<br />
To improve private wealth management services<br />
on foreign markets by strengthening cooperation<br />
between local KD branches in the region, especially<br />
at the portfolio management level;<br />
To begin offering foreign KD funds in Bulgaria to<br />
increase our competitive advantage;<br />
To exp<strong>and</strong> the services on offer at Financial<br />
Points <strong>and</strong> develop them into “fund supermarkets”<br />
with a wide range of mutual funds from own<br />
<strong>and</strong> foreign management companies <strong>and</strong> expert<br />
consultancy services <strong>and</strong> to exp<strong>and</strong> the Financial<br />
Point network.<br />
143
144<br />
Ljubljanica River, Slovenia
Our insurance activities embody<br />
the values of the company:<br />
openness to the new, contemporary models,<br />
<strong>and</strong> the equality of each <strong>and</strong> every client.<br />
This is how we <strong>build</strong> trust.<br />
When nature conspires against us,<br />
we also help each other<br />
on an individual level.<br />
The employees <strong>and</strong> companies added<br />
charitable contribution to victims of misfortune.<br />
145
146<br />
Ljubljanica River, Slovenia
147
2.2<br />
Insurance<br />
The insurance-related activities of the Group include<br />
life, property <strong>and</strong> health insurance. The Group<br />
has two public limited companies in Slovenia: KD<br />
Življenje, a life insurer, <strong>and</strong> Adriatic Slovenica, a<br />
universal insurance company that is marketing<br />
life insurance <strong>and</strong> property insurance, including<br />
Market position<br />
The Group’s two insurance companies achieved<br />
a market share of 17 percent in Slovenia, firmly<br />
establishing it in second position on the Slovenian<br />
insurance market. In 2007, the Group collected<br />
EUR 307.9 million in premiums.<br />
health insurance. The Group has been developing<br />
<strong>and</strong> marketing life insurance in other countries<br />
at branches of KD Življenje <strong>and</strong> at independently<br />
established insurance companies.<br />
In 2007, the Group actively operated abroad<br />
through the life insurance companies KD Life<br />
Asigurari in Romania <strong>and</strong> KD Life in Bulgaria.<br />
KD Življenje operated in the Czech Republic <strong>and</strong><br />
148<br />
The Group achieved its objectives for the insurance<br />
sector in 2007. The insurance companies increased<br />
total premiums collected by 34.5 percent, while<br />
the Group also strengthened its position in property<br />
insurance, including health insurance, where total<br />
premiums rose by 8 percent.<br />
through a branch in Slovakia. In 2007, these<br />
insurance companies collected over a million EUR<br />
in total premiums.<br />
The Group’s share of the Slovenian insurance market:<br />
The insurance companies within the Group made<br />
major expansions <strong>and</strong> improvements to their range<br />
of products <strong>and</strong> services, developed new packages<br />
<strong>and</strong> more specialised products for individual<br />
target <strong>group</strong>s, modernised sales channels <strong>and</strong><br />
introduced new ones. One of the most important<br />
developments was the establishment of the sales<br />
company, KD Finančna točka, while the past year<br />
was also marked by the expansion of life insurance<br />
operations abroad.<br />
KD Holding Group 17%<br />
Other 83%
Structure of insurance within KD Holding Group by<br />
insurance type:<br />
The Group’s share of life insurance on the Slovenian<br />
insurance market:<br />
Property insurance 47%<br />
Life insurance 29%<br />
Helth insurance 24%<br />
The Group has a 15.3 percent market share in<br />
life insurance <strong>and</strong> an 18.2 percent market share<br />
in property insurance (including health insurance)<br />
among universal insurance companies on the<br />
Slovenian insurance market.<br />
KD Holding Group 15.3%<br />
Other 84.7%<br />
The Group’s share of property insurance on the Slovenian<br />
insurance market:<br />
149<br />
KD Holding Group 18.2%<br />
Other 81.8%
Features of the Slovenian insurance market in<br />
2007<br />
Structure of property insurance premiums (excluding<br />
health insurance) within the Group by insurance type:<br />
Legislative changes, which followed adaptations to<br />
EU guidelines, characterised 2007, while the year<br />
was also marked by loss events.<br />
In health insurance, a number of legislative<br />
amendments came into force, which led to Adriatic<br />
Slovenica paying out EUR 11.8 million in old-age<br />
provisions to 276 thous<strong>and</strong> policyholders. The<br />
collection of these provisions was terminated by the<br />
law <strong>and</strong> included in full in supplementary health<br />
insurance equalisation schemes on 30 September<br />
2007, as the legally-defined transition period for<br />
150<br />
equalisation ended at that time.<br />
Catastrophic storms <strong>and</strong> floods in September<br />
characterised loss events in the area of property<br />
insurance. These caused extensive property<br />
damage, exceeding EUR 200 million, including<br />
EUR 2.9 million from Adriatic Slovenica claimants,<br />
although adequate reinsurance meant there was no<br />
significant impact on the company’s results.<br />
Motor liability insurance 40%<br />
L<strong>and</strong> motor vehicle insurance 25%<br />
Accident insurance 14%<br />
Fire <strong>and</strong> natural disaster insurance 7%<br />
Other insurance against loss <strong>and</strong> damage 6%<br />
General liability insurance 4%<br />
Kredit <strong>and</strong> surety insurance 1%<br />
Other 3%<br />
Property insurance<br />
Within the Group, property insurance is marketed in<br />
Slovenia by Adriatic Slovenica. Collected premiums<br />
totalled EUR 114.3 million, representing growth of 4.35<br />
percent compared to 2006.<br />
Health insurance<br />
Health insurance is offered within the Group by<br />
Adriatic Slovenica, which recorded premium growth of<br />
14.3 percent in 2007 compared to the previous year,<br />
collecting EUR 89.5 million in premiums. Adriatic<br />
Slovenica has achieved an almost 24 percent share of<br />
the Slovenian supplementary health insurance market,<br />
while its share of the above-st<strong>and</strong>ard health insurance<br />
market is over 50 percent.
Structure of health insurance premiums within the Group<br />
by insurance type:<br />
collected EUR 74.1 million in premiums. Life<br />
insurance was marketed abroad by KD Življenje<br />
in the Czech Republic <strong>and</strong> through a branch in<br />
Slovakia <strong>and</strong> by KD Life Romania <strong>and</strong> KD Life<br />
Bulgaria in their respective countries.<br />
Structure of life insurance within the Group by insurance<br />
type on the Slovenian market:<br />
Suplementary health insurance 95%<br />
Health insurance abroad with CORIS assistance 3%<br />
Above-st<strong>and</strong>ard insurance 2%<br />
151<br />
Life insurance<br />
Gross life insurance premiums have been growing<br />
for a number of years. Last year, total premiums<br />
collected by insurance companies were 16.3<br />
percent higher than the previous year. The main<br />
Unit-linked life insurance 79%<br />
Mixed <strong>and</strong> risk-cover life insurance 20%<br />
Voluntary supplementary pension insurance 1%<br />
reason is the considerable success in the marketing<br />
of new life insurance products, primarily insurance<br />
in which policyholders assume the investment risk.<br />
Given the 13.7 percent growth in life insurance<br />
in Slovenia in 2007 <strong>and</strong> the 16.3 percent rise<br />
in 2006, the Slovenian life insurance market is<br />
growing at a faster pace than in other EU Member<br />
States (growth in the EU-15 was 12.8 percent).<br />
In 2007, life insurance was marketed within the<br />
Group by two insurance companies in Slovenia:<br />
KD Življenje <strong>and</strong> Adriatic Slovenica, which together
152<br />
Challenges in 2008:<br />
To grow <strong>and</strong> consolidate the market position of the<br />
Group’s insurance companies, <strong>and</strong> maintain a leading<br />
role in the development of new insurance products;<br />
To upgrade existing insurance products, particularly<br />
the development of cross-sales of insurance, offering<br />
policyholders additional services;<br />
To continue specialisation of KD Holding Group<br />
insurance companies in life <strong>and</strong> property insurance;<br />
To collect life insurance premiums of over EUR 100<br />
million, meaning growth of 35 percent;<br />
In property insurance (including health insurance),<br />
we plan to collect over EUR 252 million in premiums,<br />
with 7.9 percent growth in property <strong>and</strong> 8.5 percent<br />
growth in health insurance;<br />
Transfer of the life-insurance portfolio from Adriatic<br />
Slovenica to KD Življenje;<br />
To develop <strong>and</strong> upgrade the existing network of<br />
specialist agents;<br />
To modernise existing property insurance,<br />
particularly by developing new st<strong>and</strong>ardised <strong>and</strong><br />
supplementary insurance packages, developing<br />
supplementary <strong>and</strong> enhanced assistance services,<br />
<strong>and</strong> developing new after-sales activities.<br />
Slovenia<br />
ADRIATIC SLOVENICA<br />
Zavarovalna družba, d. d., Koper<br />
Address: 3a Ljubljanska cesta, Koper, Slovenia<br />
Telephone: +386 5 664 31 00<br />
Fax: +386 5 664 31 09<br />
E-mail: info@adriatic-slovenica.si<br />
<strong>We</strong>bsite: www.adriatic-slovenica.si<br />
Management Board (31 December 2007):<br />
Gabrijel Škof, President of the Management Board<br />
Milena Georgievski, Member of the Management Board<br />
Management Board (11 February 2008):<br />
Gabrijel Škof, President of the Management Board<br />
Milena Georgievski, Deputy President of the<br />
Management Board<br />
Matej Cergolj, MSc., Member of the Management Board<br />
Marko Rems, Member of the Management Board<br />
Adriatic Slovenica is the only universal insurance<br />
company where policyholders can find all types<br />
of insurance: health, property, life <strong>and</strong> pension<br />
insurance. In 2007, the company achieved a<br />
solid second position on the Slovenian insurance<br />
market, with a market share of 14.7 percent <strong>and</strong><br />
EUR 250.8 million in collected premiums. The<br />
company has an extensive marketing network,<br />
with 149 points-of-sale, <strong>and</strong> 109 complementary<br />
marketing channel points-of-sale, making a total of<br />
258. It offers the widest range of property <strong>and</strong> life<br />
insurance on the market. The “Company Reputation<br />
2007” (Kline & Partner) research indicates that<br />
the company achieves above-average recognition<br />
among the general public <strong>and</strong> <strong>business</strong> community,
was above average in terms of reputation <strong>and</strong><br />
investment attractiveness <strong>and</strong> was an impressive<br />
36th position on the list of the top-108 Slovenian<br />
companies in 2007, according to the <strong>business</strong><br />
community, <strong>and</strong> second place among Slovenian<br />
insurance companies.<br />
Structure of premiums by insurance type:<br />
Development of key insurance areas <strong>and</strong><br />
continued development of the sales network,<br />
providing policyholders with better access <strong>and</strong><br />
higher quality services, as well as development of<br />
new sales channels.<br />
Higher quality insurance services <strong>and</strong><br />
development of new, additional assistance services.<br />
Property insurance 57%<br />
Life insurance 36%<br />
Health insurance 7%<br />
Operations in 2007<br />
The company continued with the full integration<br />
of the merged insurance companies in the areas of<br />
insurance products, st<strong>and</strong>ardised operations <strong>and</strong> the<br />
modernisation <strong>and</strong> st<strong>and</strong>ardisation of the internal<br />
organisation.<br />
Projects relating to the new organisation, job<br />
systemisation <strong>and</strong> the pay system (completed at<br />
end of March 2007) <strong>and</strong> the upgrading of the<br />
information system were carried out.<br />
Start of procedures for the transfer of the life<br />
insurance network to KD Življenje.<br />
Development of new products: new motor<br />
vehicle insurance, new Vita Fond life insurance<br />
investment packages, Vitafond Azija Garant<br />
Plus <strong>and</strong> Vitafond Renta Garant, a new Family<br />
Package <strong>and</strong> Kredit Vita AS, new health insurance<br />
packages aimed at the young, active <strong>and</strong> seniors<br />
(Mladi, Aktivni <strong>and</strong> Senior) <strong>and</strong> the upgrade of<br />
two packages for athletes, Top Athlete <strong>and</strong> Athlete<br />
(Vrhunski Športnik <strong>and</strong> Športnik).<br />
Life insurance<br />
In 2007, the insurance company offered a broad,<br />
flexible <strong>and</strong> attractive range of all types of life<br />
insurance products that meet the need <strong>and</strong> desire<br />
for security or savings throughout life.<br />
The insurance company achieved 4.8 percent<br />
growth in premiums collected compared to the<br />
previous year.<br />
153
Life insurance products<br />
Structure of life insurance premiums by insurance type:<br />
Vita AS - mixed life insurance for endowment or<br />
death,<br />
Vita AS Plus - mixed life insurance with critical<br />
illness coverage,<br />
Kredit Vita AS - decreasing term life insurance<br />
according to an amortisation schedule <strong>and</strong> an optional<br />
restriction on transferability in favour of a lender,<br />
VitaFin AS za vse življenje - life insurance for the<br />
entire life span,<br />
VitaFin AS za določen čas - term life insurance,<br />
VitaFin AS with a decreasing insurance amount<br />
(linked to a loan contract),<br />
154<br />
Vitafond AS - unit-linked life insurance,<br />
Vitafond AS investment package - life insurance<br />
with investments in three different investment<br />
packages,<br />
Vitafond Azija Garant - a unique unit-linked<br />
life insurance with a guaranteed principal upon<br />
endowment,<br />
Vitafond Azija Garant Plus - new version differing<br />
from AG in terms of investments (investment in sharebased<br />
mutual funds in addition to hedge funds),<br />
Additional accident insurance,<br />
Term annuities,<br />
Pension annuity - annuity insurance for life.<br />
Voluntary supplementary pension insurance:<br />
Pokojninski temelj AS - a voluntary supplementary<br />
pension insurance.<br />
Mixed <strong>and</strong> risk-cover life insurance 50%<br />
Unit-life insurance 46%<br />
Voluntary supplementary pension insurance 4%<br />
Property insurance<br />
Insuring property <strong>and</strong> services is the largest<br />
area of operations for Adriatic Slovenica. It offers<br />
policyholders a comprehensive, contemporary<br />
range of products with effective management of<br />
accumulated premiums used to generate new<br />
assets. Measured by premiums collected in 2007,<br />
the largest insurance type was automobile<br />
third-party liability insurance, followed by motor<br />
vehicle hull insurance, accident insurance, fire<br />
insurance <strong>and</strong> other damage insurance.
In 2007 Adriatic Slovenica’s work in this field<br />
included:<br />
Eight types of accident insurance,<br />
Legal expense <strong>and</strong> assistance insurance.<br />
Intense modernisation of st<strong>and</strong>ardised insurance<br />
products <strong>and</strong> the upgrading of existing insurance <strong>and</strong><br />
the adaptation of insurance underwriting to the new<br />
information system <strong>and</strong> modern marketing channels;<br />
Offering a new comprehensive motor vehicle<br />
insurance <strong>and</strong> enabling the renewal of automobile<br />
third-party liability insurance via the internet;<br />
Introducing a 55 precent bonus for careful drivers<br />
<strong>and</strong> increasing the minimum insurance amount by five<br />
times, in accordance with the law;<br />
In credit insurance, offering a completely new<br />
product, as new credit insurance is based on insuring<br />
non-payment due to traditional insurance risks (death<br />
of the insured, work disability, non-culpable loss of<br />
employment);<br />
In the field of housing insurance, the company<br />
started preparing for a new, st<strong>and</strong>ardised product with<br />
enhanced assistance, which will be introduced to the<br />
market in 2008 <strong>and</strong> is also planning a st<strong>and</strong>ardised<br />
<strong>and</strong> updated range of accident insurance.<br />
Property insurance products:<br />
Insurance of l<strong>and</strong> motor vehicles <strong>and</strong> motor<br />
vehicle hull insurance,<br />
Automobile third-party liability insurance,<br />
Transport insurance, including the insurance of<br />
vessels,<br />
Fire <strong>and</strong> natural disaster insurance,<br />
Fifteen other types of damage insurance,<br />
Fourteen types of general liability insurance,<br />
Credit <strong>and</strong> surety insurance,<br />
Miscellaneous financial loss insurance,<br />
Health insurance<br />
The company has developed its health insurance<br />
in line with legislative possibilities, formulating its<br />
products to meet policyholders’ needs <strong>and</strong> offering<br />
the option of individual supplementary <strong>and</strong> parallel<br />
insurance as well as packages supplemented with<br />
new coverage <strong>and</strong> designed for specific target<br />
<strong>group</strong>s. Adriatic Slovenica offered its customers new<br />
packages of above-st<strong>and</strong>ard insurance aimed at<br />
the young, active, <strong>and</strong> seniors (Mladi, Aktivni <strong>and</strong><br />
Senior) with additional coverage for<br />
top-quality diagnostic tests <strong>and</strong> special new<br />
packages for athletes in the national <strong>and</strong> youth<br />
categories (Vrhunski Športnik <strong>and</strong> Športnik - Top<br />
Athlete <strong>and</strong> Athlete).<br />
Health insurance products:<br />
Supplementary health insurance,<br />
Parallel health insurance - insurance for private<br />
payment of specialist outpatient services,<br />
Additional health insurance:<br />
Health insurance for increased rights<br />
or higher st<strong>and</strong>ard of services,<br />
Health insurance for additional rights,<br />
Health insurance abroad with<br />
CORIS assistance.<br />
155
Challenges in 2008:<br />
Achieving a 18.7 percent market share <strong>and</strong><br />
consolidating second position among Slovenian<br />
insurance companies, maintaining the company’s<br />
share of the supplementary health insurance market<br />
<strong>and</strong> its leading position as provider of above-st<strong>and</strong>ard<br />
health insurance;<br />
Focusing on satisfying customers’ needs <strong>and</strong><br />
desires, particularly in the field of high quality advice<br />
during the sale of services <strong>and</strong> settlement of claims;<br />
Implementing projects to develop new<br />
KD Življenje, zavarovalnica, d. d., Ljubljana<br />
Address: 206 Celovška cesta, Ljubljana, Slovenia<br />
Telephone: +386 1 582 65 50<br />
Fax: +386 1 518 19 95<br />
E-mail: info@<strong>kd</strong>-zivljenje.si<br />
<strong>We</strong>bsite: www.<strong>kd</strong>-zivljenje.si<br />
Management Board (31 December 2007):<br />
Matija Šenk, President of Management Board;<br />
Mateja Keržič, Member of the Management Board,<br />
Darko Medved, PhD, Member of the Management<br />
Board<br />
insurance <strong>and</strong> financial products <strong>and</strong> sales channel<br />
156<br />
diversification;<br />
Optimising <strong>and</strong> st<strong>and</strong>ardising all <strong>business</strong><br />
processes, primarily by introducing contemporary<br />
marketing channels, <strong>and</strong> modernising back office<br />
information support;<br />
Developing the most up-to-date, price-competitive<br />
insurance <strong>and</strong> financial services, particularly assistance<br />
services;<br />
Specialising in property <strong>and</strong> health insurance <strong>and</strong><br />
winding down life insurance operations;<br />
Start up of the newly-established insurance<br />
subsidiary in Serbia, AS Osiguranje <strong>and</strong> expansion in<br />
South Eastern Europe.<br />
The life insurer KD Življenje, zavarovalnica, d. d.,<br />
began operations on 3 January 2005 under the<br />
name Slovenica Življenje d. d., as the first specialised<br />
insurance company in Slovenia. It was established<br />
as a spin-off from the insurance company Slovenica d. d.<br />
The newly-established insurance company offered<br />
policyholders a full range of life insurance products,<br />
with its central product line being life insurance<br />
linked to KD investment funds. Customers can<br />
choose from among sixteen KD investment funds,<br />
both Slovenian <strong>and</strong> foreign.
Structure of KD Življenje premiums by insurance type:<br />
Unit-linked life insurance for borrowers,<br />
Additional insurance products (additional<br />
accident insurance, additional insurance for critical<br />
diseases).<br />
Operations in 2007<br />
On 22 August 2007, Slovenica Življenje d. d.<br />
was officially renamed KD Življenje,<br />
zavarovalnica, d. d. with an entry in the court register<br />
of companies. The change in name was accompanied<br />
by the redesign of the company’s visual identity to<br />
Unit-linked life insurance 89%<br />
Mixed <strong>and</strong> risk-cover life insurance 11%<br />
match the visual identity of the KD Holding Group.<br />
A full range of life insurance products was<br />
available; the main products in 2007 were again<br />
Life insurance products:<br />
Fondpolica, unit-linked life insurance,<br />
Fondpolica with an investment package,<br />
Fondpolica <strong>We</strong>llness, unit-linked life insurance,<br />
including preventive services,<br />
Fondpolica Azija Garant, unit-linked life<br />
insurance with a lump-sum premium payment <strong>and</strong><br />
guaranteed principal upon endowment,<br />
Fondpolica Azija Garant Plus, enhanced version<br />
of Fondpolica Azija Garant (investment in sharebased<br />
mutual funds in addition to hedge funds),<br />
Fondpolica Renta Garant, unit-linked life<br />
insurance with a guarantee,<br />
Mixed life insurance,<br />
Entrepreneur’s life insurance package, <strong>group</strong> life<br />
insurance,<br />
Seniorplus,<br />
Whole of life insurance,<br />
Whole of life insurance for borrowers,<br />
unit-linked life insurance, led by Fondpolica.<br />
At the end of October, KD Življenje d. d.<br />
participated as 50 percent owner in the<br />
establishment of the largest sales company in the<br />
Group, KD Finančna točka.<br />
The company closed the year as number three<br />
among Slovenian insurance companies by gross life<br />
insurance premiums collected <strong>and</strong> number two in<br />
unit-linked life insurance.<br />
<strong>We</strong> collected EUR 57.6 million in gross<br />
premiums, an increase of 49.3 percent compared to<br />
the previous year. Claims paid in 2007 amounted to<br />
over EUR 5 million, up 5.6 percent from last year.<br />
The company actively developed its products<br />
<strong>and</strong> engaged in activities related to corporate social<br />
responsibility.<br />
157
On the last day of 2007, the company’s General<br />
Meeting of Shareholders approved a proposal from<br />
its main shareholder, KD Holding <strong>and</strong> passed a<br />
resolution excluding minority shareholders from the<br />
company.<br />
At the end of the year, the company prepared<br />
all procedures required for the transfer of the life<br />
insurance <strong>business</strong> from Adriatic Slovenica to KD<br />
Življenje.<br />
Challenges in 2008:<br />
Growth in operations: 33.1 percent growth in<br />
gross insurance premiums in 2008;<br />
To increase market share in Slovenia: we plan<br />
to achieve a 14.1 percent market share among life<br />
insurance companies by the end of 2008;<br />
158<br />
To increase EEV (European embedded value) by<br />
16 percent compared to 2007;<br />
To exp<strong>and</strong> operations abroad: conclusion of<br />
preparations to enter the Ukrainian <strong>and</strong> Croatian<br />
markets;<br />
To maintain the company’s leading position in<br />
the area of new product development;<br />
To introduce new, diverse sales channels;<br />
To utilise synergies with other members of the<br />
KD Holding Group;<br />
To consolidate the division of KD Holding Group<br />
life insurance activities.
Romania<br />
KD Life Asigurari S. A., Bucharest<br />
Operations in 2007<br />
Address: 5 Gheorghe Manu Street, Bucharest,<br />
Romania<br />
Telephone: +40 21 650 55 06<br />
Fax: +40 21 650 55 04<br />
E-mail: office@<strong>kd</strong>-life.ro<br />
<strong>We</strong>bsite: www.<strong>kd</strong>-<strong>group</strong>.ro<br />
Board of Directors (31 December 2007):<br />
Matija Šenk, Chairman of the Board of Directors<br />
Ian Harrocks, Deputy Chairman of the Board of<br />
Directors<br />
Carmen Radu, Member of the Board of Directors <strong>and</strong><br />
Executive Director<br />
Lilijan Belšak, Member of the Board of Directors<br />
Zefir Castris, Member of the Board of Directors.<br />
The company successfully continued life insurance<br />
sales <strong>and</strong> consolidated its reputation <strong>and</strong> market<br />
position.<br />
Focus was placed on sales of unit-linked life<br />
insurance, which represented 92 percent of sales in<br />
2007.<br />
Despite pension system reforms, the company<br />
managed not only to maintain, but to increase life<br />
insurance sales.<br />
The company collected EUR 1.4 million in annual<br />
premiums <strong>and</strong> concluded more than 4 thous<strong>and</strong><br />
insurance policies, which the company markets<br />
through insurance agents.<br />
The life insurance company KD Life Asigurari S. A.<br />
began operations on 21 June 2006 <strong>and</strong> was the<br />
first life insurance company established abroad by<br />
the Group. The insurance company’s long-term<br />
objective is to achieve an 8.5 percent share of<br />
the Romanian life insurance market in ten years.<br />
Products: Rentabilis - unit-linked life insurance,<br />
Prudentis - mixed life insurance, Probabilis - whole<br />
of life insurance <strong>and</strong> Medicalis - additional accident<br />
insurance. In 2007, the insurance company also<br />
marketed a guaranteed life insurance product with a<br />
fixed-term premium collection - ProfitabilUno (Azija<br />
Garant Plus).<br />
Challenges in 2008:<br />
To exp<strong>and</strong> the sales network <strong>and</strong> introduce<br />
innovative products to the life insurance market (joint<br />
life insurance, health insurance).<br />
159
Bulgaria<br />
KD Life AD, Sofia<br />
Address: 5 Stara Planina, Sofia, Bulgaria<br />
Telephone: +357 2 933 79 11<br />
Fax: +357 2 933 79 19<br />
E-mail: office@<strong>kd</strong>-life.bg<br />
<strong>We</strong>bsite: www.<strong>kd</strong>-life.bg<br />
Challenges in 2008:<br />
To exp<strong>and</strong> own sales network to cover all of<br />
Bulgaria;<br />
To present innovative forms of unit-linked life<br />
insurance that will increase the recognition <strong>and</strong><br />
presence of KD Življenje on the Bulgarian market.<br />
Board of Directors (31 December 2007):<br />
Matija Šenk, Chairman of the Board of Directors<br />
Lilijan Belšak, Member of the Board of Directors <strong>and</strong><br />
Executive Director<br />
Stefan Stefanov, Member of the Board of Directors<br />
Galabin Galabov, Member of the Board of Directors<br />
KD Life AD is one of the rare companies to offer<br />
unit-linked life insurance on the market, <strong>and</strong> even<br />
life insurance with investment packages, which<br />
160<br />
is completely new to the Bulgarian market. It is<br />
therefore justified in marketing itself as a<br />
“unit-linked expert”. Products: Fondpolica - unitlinked<br />
life insurance, Život classic insurance - mixed<br />
life insurance, additional accident insurance <strong>and</strong><br />
additional accident insurance for children. Special<br />
product: Renta Garant.<br />
Operations in 2007<br />
KD Life AD built recognition of the company <strong>and</strong><br />
br<strong>and</strong> by using innovative sales methods, supported by<br />
specialists from KD Življenje.<br />
The company began sales activities in retail<br />
centres, schools <strong>and</strong> through a call centre.
Slovakia<br />
KD LIFE, Insurance company plc, pobočka<br />
zahraničnej poisťovne, Bratislava<br />
Address: 3 Laurinská, Bratislava, Slovakia<br />
Telephone: +421 2 5910 49 06<br />
Fax: +421 2 5910 49 10<br />
E-mail: info@<strong>kd</strong>-life.sk<br />
<strong>We</strong>bsite: www.<strong>kd</strong>-life.sk<br />
Challenges in 2008:<br />
To exp<strong>and</strong> own sales network to cover all of<br />
Slovakia;<br />
To present the Fondpoistka (Fondpolica)<br />
product <strong>and</strong> other innovative forms of unit-linked<br />
life insurance that will increase the recognition <strong>and</strong><br />
presence of KD Življenje on the Slovak market.<br />
Management Board (31 December 2007):<br />
Henrich Kelenyei, Branch Director<br />
In accordance with the Third Life Insurance<br />
Directive, which permits cross-border sales of life<br />
insurance, KD Življenje sold life insurance indirectly<br />
in the Slovak Republic in 2007 through a number<br />
of sales channels. The branch was established on 1<br />
August 2007, with insurance sales beginning on 1<br />
January 2008. Products: Fondpoistka - unit-linked<br />
161<br />
life insurance, Kapitálpoistka - mixed life insurance,<br />
Investprogram - unit-linked life insurance <strong>and</strong><br />
additional accident insurance, as well as additional<br />
accident insurance for children. Special products:<br />
Ázia Garant Plus <strong>and</strong> Renta Garant.<br />
Operations in 2007<br />
The branch was established on 1 August 2007.<br />
The marketing of insurance products commenced.
Czech Republic<br />
KD LIFE s. r. o., Prague<br />
Address: 1699/5 Doudlebská, Prague, Czech<br />
Republic<br />
Telephone: +420 2 3302 67 40<br />
Fax: +420 2 3302 67 49<br />
E-mail: www.<strong>kd</strong>-life.cz<br />
Contact person (31 December 2007):<br />
Ukraine<br />
KD Life jsc, Kiev<br />
Address: 17 Lineynaya, Kiev, Ukraine<br />
Telephone: +380 44 499 59 99<br />
Fax: +380 44 499 59 90<br />
E-mail: office@<strong>kd</strong>-life.com.au<br />
Contact person (31 December 2007):<br />
Kevin Phillips, Executive Director<br />
Prof. Ing. Jaroslav Vostatek, CSc.<br />
Operations in 2007<br />
After receiving authorisation to perform cross-border<br />
operations in the Czech Republic, KD Življenje<br />
started life insurance sales in September 2007 with<br />
The requisite authorisation for a financial institution<br />
was obtained on 30 October 2007.<br />
support from a local company. Products: Renta<br />
Garant, under the name Fondpojistka Renta 2<br />
Garance.<br />
Challenges in 2008:<br />
To establish a sales network to ensure the<br />
162<br />
Operations in 2007<br />
company’s presence in major Ukrainian cities;<br />
To begin life insurance sales.<br />
Marketing of the Renta Garant product under the<br />
name Fondpojistka Renta 2 Garance began. Very good<br />
sales results were achieved in a short period.<br />
Challenges in 2008:<br />
To start active operations of a branch in Prague in<br />
June 2008.
Eastern Orthodox priest, Macedonia<br />
163
In one place, clients can find the amazing variety of services offered<br />
by the whole KD Holding Group,<br />
from investments funds to insurance policies,<br />
while also benefiting from the expert professional services of our financial consultants.<br />
164<br />
Adriatic Sea
Do you think it is possible to combine<br />
in one company the variety offered<br />
in a modern shopping mall<br />
<strong>and</strong> the quality of services of a distinguished boutique?<br />
This is precisely what KD Finančna točka offers -<br />
a financial supermarket with personalised services.<br />
165
2.3<br />
Sales of financial services<br />
At the Group, we value the expectations of our customers<br />
above all else. <strong>We</strong> therefore pursue their wishes <strong>and</strong><br />
needs when developing financial services. These efforts<br />
do not end with the development of services, but<br />
continue in the search for the best distribution channels<br />
through which these services are offered.<br />
products of the Group in Slovenia <strong>and</strong> one of the<br />
leaders in selected countries, with the largest range<br />
of products <strong>and</strong> services in one location <strong>and</strong> the<br />
highest st<strong>and</strong>ard of service. At the company, we<br />
have combined three powerful sales chains: the<br />
agent network of the life insurer KD Življenje, its<br />
own agency Svet zavarovanj <strong>and</strong> the existing KD<br />
Back in 2006, we created Club KD Plus, which<br />
offers customers a number of benefits. In 2007, we<br />
realised one of the Group’s most important strategic<br />
objectives with the establishment of KD Finančna<br />
točka, a common sales channel that brings<br />
BPD branch network of the Financial Points, which<br />
to date has marketed all KD investment funds with<br />
authorisation for marketing <strong>and</strong> the complementary<br />
mutual funds of other management companies with<br />
authorisation for marketing <strong>and</strong> stockbroking.<br />
together our entire range of financial services within<br />
166<br />
the Group. Since that time, complete financial<br />
services are available to customers in one location,<br />
accessible through a single entry point.<br />
KD Finančna točka,<br />
premoženjsko svetovanje, d. o. o., Ljubljana<br />
Address: 206 Celovška cesta, Ljubljana, Slovenia<br />
Telephone: +386 1 582 67 51<br />
Fax: +386 1 582 66 52<br />
E-mail: info@<strong>kd</strong>-financnatocka.si<br />
<strong>We</strong>bsite: www.financna-tocka.si<br />
Management Board (31 December 2007):<br />
Gregor Jelerčič, President of the Management Board<br />
Darja Gabrovšek Polajnar, Member of the<br />
Management Board<br />
On 23 October 2007, the Group established the<br />
company KD Finančna točka, whose objective is<br />
to become the leading sales company of financial<br />
The main advantages of KD Finančna točka are its<br />
offer of complete financial services in one location<br />
<strong>and</strong> a powerful sales network that includes 20<br />
regional branches, a mobile network with 100<br />
market representatives <strong>and</strong> 520 contracted sales<br />
representatives as at 31 December 2007. Additional<br />
support is also offered through the website,<br />
www.financna-tocka.si, <strong>and</strong> a call centre.<br />
KD Finančna točka’s range of products <strong>and</strong> services<br />
includes life insurance through KD Življenje <strong>and</strong><br />
information, consultancy <strong>and</strong> entry to the investment<br />
funds of KD Skladi <strong>and</strong> other management companies<br />
that have met conditions for the marketing of<br />
investment funds. In 2008, the company’s offer will<br />
be supplemented by the marketing of property <strong>and</strong><br />
health insurance, while intermediary services relating<br />
to bank loans <strong>and</strong> leasing as well as other financial<br />
services will be offered in the future.
Operations in 2007<br />
To increase sales of all financial <strong>and</strong> insurance<br />
products of companies within the KD Holding<br />
Sales channels were merged in October:<br />
Finančna točka branches, the Svet zavarovanj<br />
agency <strong>and</strong> the mobile network of KD Življenje.<br />
Group;<br />
To achieve synergies with other members of the<br />
KD Holding Group.<br />
By the end of the year, we had recorded inflows<br />
of EUR 140 million by more than 45 thous<strong>and</strong><br />
Plan in numbers<br />
2008<br />
investors at financial points throughout Slovenia.<br />
<strong>We</strong> underwrote 23 thous<strong>and</strong> new insurance<br />
policies, with total premiums written of<br />
EUR 30 million.<br />
Amount of direct inflows to investment funds (in EUR million) 153<br />
New insurance premiums paid (in EUR million) 30.2<br />
Number of new declarations of accession 20,800<br />
Number of new insurance policies underwritten 35,450<br />
Number of employees 155<br />
In January 2007, more than 31 thous<strong>and</strong><br />
different users visited the website<br />
www.financna-tocka.si. By December 2007, the<br />
number had risen to more than 51 thous<strong>and</strong>.<br />
During 2007, more than 309 thous<strong>and</strong> different<br />
users visited the website, 21 thous<strong>and</strong> of which<br />
were registered.<br />
Challenges in 2008:<br />
To develop innovative, high-quality products;<br />
To offer the widest range of financial products at<br />
one location, supplemented by health <strong>and</strong> property<br />
insurance <strong>and</strong> other financial services;<br />
To provide a high st<strong>and</strong>ard of sales accompanied<br />
by a high level of professionalism of financial advisors;<br />
To exp<strong>and</strong> the fixed <strong>and</strong> mobile sales <strong>networks</strong>;<br />
To assume a leading role in the distribution of<br />
investment funds <strong>and</strong> life insurance products;<br />
To increase sales (with 15 percent annual growth<br />
in inflows in Slovenia);<br />
To actively exp<strong>and</strong> operations abroad: to become<br />
one of the top three marketing companies in specific<br />
countries;<br />
KD Mark, Storitveno podjetje, d. o. o.,<br />
Ljubljana<br />
Address: 206 Celovška cesta, Ljubljana, Slovenia<br />
Telephone: +386 1 582 67 12<br />
Fax: +386 1 58 26 652<br />
E-mail info@<strong>kd</strong>plus.si<br />
<strong>We</strong>bsite: www.<strong>kd</strong>plus.si<br />
Management Board (31 December 2007):<br />
Špela Klun, Director<br />
The company’s main activity is the operations of<br />
Club KD Plus. The Club was established in response<br />
to the KD Holding Group companies’ awareness of<br />
the importance of customer satisfaction. The Club’s<br />
services represent additional benefits for members.<br />
The company’s primary task is to acquire new<br />
<strong>and</strong> interesting benefits for loyal customers <strong>and</strong><br />
to link the services of companies within the KD<br />
Holding Group, thus establishing <strong>and</strong> strengthening<br />
synergies among companies.<br />
167
The benefits the company offers are permanent.<br />
Members receive additional benefits during the<br />
purchase of products <strong>and</strong> services which include<br />
the entire financial pillar: mutual <strong>and</strong> investment<br />
funds, stockbroking, banking <strong>and</strong> insurance services<br />
<strong>and</strong> the services provided by all associated partners,<br />
including members of the Group <strong>and</strong> external<br />
Initially, Club KD Plus was joined by Adriatic<br />
Slovenica, Deželna banka Slovenije, KD BPD, KD<br />
Investments (now KD Skladi) in Slovenica Življenje.<br />
In December 2007, these companies were joined by KD<br />
Finančna točka.<br />
In 2007, we began establishing a Club KD Plus in<br />
Slovakia.<br />
partners of the Club. All benefits are updated on<br />
the website www.<strong>kd</strong>plus.si. Members also receive<br />
regular notifications regarding services <strong>and</strong> new<br />
products <strong>and</strong> information regarding their providers<br />
via electronic news <strong>and</strong> mailings.<br />
Challenges in 2008:<br />
To exceed 55 thous<strong>and</strong> Club members;<br />
To establish clubs in other countries where KD is<br />
present with its products;<br />
To adapt the range of benefits to the wishes of<br />
Operations in 2007<br />
At the beginning of 2007, the company took over<br />
the operations of Club KD Plus.<br />
members;<br />
To increase cross-sales <strong>and</strong> adapt services for the<br />
easier creation of benefits.<br />
14.<br />
168<br />
The Club’s 14 thous<strong>and</strong> existing members were joined<br />
by 23 thous<strong>and</strong> new members, substantially exceeding<br />
expectations (an increase of more than 53 percent).<br />
Realized <strong>and</strong> projected growth in Club KD Plus membership<br />
100,000<br />
90,000<br />
95,000<br />
80,000<br />
70,000<br />
75,000<br />
60,000<br />
50,000<br />
40,000<br />
30,000<br />
37,123<br />
55,000<br />
20,000<br />
10,000<br />
0<br />
14,175<br />
25,000<br />
10,000<br />
May 2006 2006 2007 2008 2009 2010<br />
Actual<br />
Plan
Terazije, Belgrade, Serbia<br />
169
<strong>We</strong> <strong>build</strong> <strong>business</strong> <strong>networks</strong> <strong>and</strong> <strong>relationships</strong> among people.<br />
170<br />
Pokonji dol, off the isl<strong>and</strong> of Hvar, Adriatic Sea
But we also <strong>build</strong> literally:<br />
we have made capital investments<br />
in cinemas that project global blockbusters<br />
on to the screens of multiplex theatres.<br />
And we are successfully <strong>build</strong>ing sailing boats<br />
that sail out on the world’s seas<br />
in search of new winds <strong>and</strong> friends.<br />
Two kinds of journey, millions of people,<br />
<strong>and</strong> countless emotions.<br />
Pokonji dol, off the isl<strong>and</strong> of Hvar, Adriatic Sea<br />
171
2.4<br />
Capital investments<br />
The Group’s capital investments are managed by<br />
the parent company KD Holding <strong>and</strong> the newly<br />
established company KD Kapital. Cinema <strong>and</strong><br />
KD Kapital will invest proceeds <strong>and</strong> debt funds in<br />
new, typically controlling shares in companies in<br />
Slovenia <strong>and</strong> South Eastern Europe.<br />
entertainment are also included in the Group’s<br />
principal <strong>business</strong> activities <strong>and</strong> last year it was<br />
more active in the area of real estate. Other<br />
principal <strong>business</strong> activities include publishing,<br />
the management of closed-end investment funds<br />
in South Eastern Europe <strong>and</strong> private equity<br />
management.<br />
In the first capital increase, 26 investments totalling<br />
EUR 44.8 million were made. During the next<br />
capital increase in December 2007, KD Kapital’s<br />
capital was increased up to the investment value<br />
of assets of EUR 72.1 million (a total of 31<br />
investments) <strong>and</strong> by certain receivables linked to<br />
investments. Thus the total value of assets as at 1<br />
January 2008 was EUR 77.7 million, while equity<br />
KD Kapital, finančne storitve, d. o. o., Ljubljana<br />
totalled EUR 74.3 million.<br />
172<br />
Address: 206 Celovška cesta, Ljubljana, Slovenia<br />
Telephone: +386 1 582 67 70<br />
Faks: +386 1 582 41 00<br />
E-mail: info@<strong>kd</strong>-<strong>group</strong>.si<br />
<strong>We</strong>bsite: www.<strong>kd</strong>-<strong>group</strong>.com<br />
Management Board (31 December 2007):<br />
Janez Bojc, President of the Management Board<br />
Mira Koporčič Veljič, Member of the Management<br />
Board<br />
KD Kapital was established on 1 July 2007 <strong>and</strong><br />
its capital increased on 27 July 2007 with a 100<br />
percent contribution in kind from KD Holding.<br />
In 2007, KD Kapital generated net profit from<br />
operations of EUR 1.217 million. The company had<br />
8 employees as at 1 January 2008.<br />
Private equity fund<br />
The fund’s investment policy will involve the<br />
purchase of majority stakes in fast-growing<br />
companies not yet identified by strategic <strong>and</strong><br />
large financial investors but which could become<br />
interesting to such investors with adequate growth.<br />
With the establishment of KD Kapital, we separated<br />
the management of non-listed investments <strong>and</strong><br />
specific significant shares of listed investments from<br />
strategic <strong>and</strong> net portfolios of listed investments.
Investment strategy<br />
The amount invested in selected fast-growing<br />
companies will be between EUR 2 <strong>and</strong> EUR 10<br />
million.<br />
The fund’s geographic structure is focused on<br />
Slovenia, Croatia, Bosnia <strong>and</strong> Herzegovina, Serbia,<br />
Macedonia, Romania, Bulgaria, Moldavia <strong>and</strong><br />
Albania, with an emphasis on the countries of the<br />
former Yugoslavia.<br />
The fund will strive to gain access to companies with<br />
the ability to become leaders in a specific niche or on a<br />
particular market through their products <strong>and</strong> services.<br />
Investments will be focused on companies from<br />
the fields of financial services, distribution <strong>and</strong><br />
logistics, communications <strong>and</strong> media, healthcare<br />
Challenges in 2008:<br />
To make at least three investments;<br />
To attract additional investors to the fund.<br />
Closed-end investment funds in South<br />
Eastern Europe<br />
KD Kapital owned two subsidiaries among<br />
management companies established in the<br />
privatisation process in the Federation of Bosnia <strong>and</strong><br />
Herzegovina, the Republic of Srpska <strong>and</strong> Montenegro:<br />
A stake of 80.5 percent in KD Mont a. d.,<br />
Podgorica which manages the investment fund MIG;<br />
A stake of 51.0 percent in VIB a. d., Banja Luka<br />
which manages the investment fund VIB.<br />
<strong>and</strong> environmental protection. Investments will<br />
focus on small <strong>and</strong> medium-sized enterprises with<br />
annual revenues of between EUR 5 <strong>and</strong> EUR 75<br />
million.<br />
By providing capital <strong>and</strong> maintaining an active<br />
management policy, the fund’s managers aim to<br />
increase the value of these companies <strong>and</strong> prepare<br />
them for sale to strategic investors.<br />
Operations in 2007<br />
The fund began operating in 2007 <strong>and</strong> acquired<br />
liabilities in the amount of EUR 31 million.<br />
The largest investor is KD Holding while other<br />
investors are primarily Slovenian banks <strong>and</strong> the Swiss<br />
fund SECO. In 2007, the fund established an office in the<br />
area of investing <strong>and</strong> reviewed more than 120 potential<br />
investments.<br />
As at 31 December 2007, the company<br />
ABDS d. d. was managed by KD Kapital on behalf<br />
of KD Investments (now KD Skladi) which owned a<br />
58.79 percent stake. ABDS manages the investment<br />
fund BIG. KD Kapital purchased ABDS from KD<br />
Skladi in 2008 (15 February 2008).<br />
KD Kapital also holds direct investments in the<br />
following privatisation funds:<br />
A 12.13 percent stake held directly in BIG <strong>and</strong><br />
17.01 percent of shares of MIG.<br />
Significant stakes in these management companies<br />
enable KD Kapital to actively participate in their<br />
management. The total value of the three investment<br />
funds was EUR 126 million as at 31 December 2007.<br />
Based on the management companies’ reports, the<br />
net value of the funds was EUR 220 million.<br />
173
174<br />
Investment fund MIG AD,<br />
Podgorica, Montenegro<br />
With the transformation of the privatisation<br />
investment fund MIG into Fond zajedničkih ulaganja<br />
MIG AD, Podgorica, a number of investment<br />
opportunities have been open since 2005. The fund<br />
continued its successful operations in 2007.<br />
The fund can invest, without restrictions, in foreign<br />
or domestic markets, in securities listed on organised<br />
stock markets, in real estate <strong>and</strong> deposits.<br />
In 2007, the fund sold 27 investments (or stakes<br />
from investments) from its portfolio for EUR 9.6 million<br />
<strong>and</strong> purchased 37 investments in shares totalling EUR<br />
10.5 million <strong>and</strong> three investments in real estate valued<br />
at EUR 2.8 million.<br />
Investments in securities represented 92.3 percent.<br />
Of this amount, 92.6 percent of investments were in<br />
Montenegro. Investments in real estate <strong>and</strong> deposits<br />
represented 6.8 percent <strong>and</strong> 0.8 percent, respectively.<br />
Data regarding the fund as at 31 December 2007<br />
Net share price (in EUR) 0.37<br />
Number of shares 109,685,100<br />
Net value of the fund (in EUR million) 39.99<br />
Market price per share (in EUR) 0.25<br />
Closed-end investment fund VIB a. d.,<br />
Banja Luka, Republic of Srpska<br />
In 2007, the privatisation fund VIB a. d. from Banja<br />
Luka was successfully transformed into a closed-end<br />
investment fund in accordance with local legislation.<br />
Consolidation of the ownership structure has facilitated<br />
the quality management of investments within the fund,<br />
together with the execution of investment activities. The<br />
investment structure of the fund is appropriately adapted<br />
to the requirements for transforming the privatisation<br />
fund into a closed-end investment fund.<br />
The fund sold four investments valued at more than<br />
EUR 1 million. The value of purchases in 2007 was<br />
EUR 0.8 million.<br />
The proportions of investments in securities<br />
<strong>and</strong> deposits were 94.3 percent <strong>and</strong> 5.7 percent,<br />
respectively.<br />
In accordance with the transformation from a<br />
privatisation fund to a closed-end investment fund,<br />
the fund will begin taking advantage of investment<br />
opportunities in countries of the region (Croatia,<br />
Montenegro, Serbia <strong>and</strong> Macedonia) <strong>and</strong> countries of<br />
the European Union.<br />
Data regarding the fund as at 31 December 2007<br />
Net share price (in EUR) 5.64<br />
Number of shares 1,987,956<br />
Net value of the fund (in EUR million) 11.2<br />
Market price per share (in EUR) 3.68
Closed-end Investment fund BIG d. d.,<br />
Sarajevo, Federation of Bosnia <strong>and</strong><br />
Herzegovina<br />
In 2007, the fund sold or divested ownership shares<br />
in 17 issues valued at more than EUR 10 million. The<br />
fund continued its policy of strengthening the portfolio in<br />
2007, with purchases valued at EUR 3.6 million.<br />
The alignment of the investment structure <strong>and</strong><br />
Cinematography <strong>and</strong> entertainment<br />
<strong>business</strong> of the KD Holding Group<br />
Seven Group companies are involved in cinematography.<br />
The following companies play a central role:<br />
Ljubljanski kinematografi,<br />
Kolosej kinematografi <strong>and</strong><br />
Onisac.<br />
start of adaptations to the new framework legislation<br />
for management companies <strong>and</strong> investment funds in<br />
Bosnia <strong>and</strong> Herzegovina will continue in 2008. Until<br />
the new law is adopted, the company can only invest in<br />
securities listed on stock exchanges in the Federation of<br />
Bosnia <strong>and</strong> Herzegovina <strong>and</strong> the Republic of Srpska.<br />
Data regarding the fund as at 31 December 2007<br />
Net share price (in EUR) 15.00<br />
Number of shares 10,633,509<br />
Net value of the fund (in EUR million) 159.5<br />
Market price per share (in EUR) 8.66<br />
Motion picture distribution<br />
Ljubljanski kinematografi, d. d.<br />
Address: 152 Šmartinska, Ljubljana, Slovenia<br />
Telephone: +386 1 520 55 02<br />
Fax: +386 1 520 56 00<br />
E-mail: info@kolosej.si<br />
Management Board (31 December 2007):<br />
Tevž Tavčar, President of the Management Board<br />
175<br />
The core activity of Ljubljanski kinematografi in 2007<br />
was the distribution of Warner Bros motion pictures<br />
<strong>and</strong> independent films from Slovenia <strong>and</strong> other<br />
European <strong>and</strong> Asian countries. In addition to its core<br />
activity, the company also leased halls <strong>and</strong> catering<br />
establishments. The Kino Komuna <strong>and</strong> Kinoklub Vič<br />
theatres were leased to Kolosej kinematografi.<br />
Operations in 2007<br />
In 2007, the motion picture distribution department<br />
recorded 572 thous<strong>and</strong> viewers, almost 7,500 of<br />
which were viewers of own motion pictures.
Harry Potter <strong>and</strong> the Order of the Phoenix was<br />
top foreign film in terms of viewers (74 thous<strong>and</strong>),<br />
while Petelinji zajtrk topped Slovenian films with<br />
122 thous<strong>and</strong> viewers.<br />
The company’s market share in Slovenia as motion<br />
picture distributor was nearly 24 percent.<br />
last year. Kolosej owned or managed four cinema<br />
multiplex centres in 2007: Kolosej in Ljubljana<br />
(12 theatres), Koper (3 theatres), Celje (5 theatres)<br />
<strong>and</strong> in Maribor with 10 theatres, as well as Kino<br />
Komuna in Kinoklub Vič in Ljubljana <strong>and</strong> Kino<br />
Center Kranj.<br />
Top five movies in 2007 distributed by Ljubljanski<br />
kinematografi:<br />
Operations in 2007<br />
Place Movie Gross revenue<br />
(in EUR)<br />
Number of<br />
viewers<br />
1 Petelinji zajtrk 478,510 122,431<br />
2 Harry Potter <strong>and</strong> the 304,542 122,431<br />
Order of the Phoenix<br />
3 Ocean’s 13 195,911 47,228<br />
4 Rush Hour 3 173,194 40,753<br />
5 300 143,78 33,923<br />
In conjunction with Osinac, the company opened<br />
the Arena Vodafone live! entertainment centre in March<br />
2007. Casino Rio, a new gaming centre which will<br />
complement the offer <strong>and</strong> spice up activities in the<br />
Arena Vodafone live! entertainment centre, was opened.<br />
The existing theatre at the Koper cinema centre was<br />
176<br />
Presentation of motion pictures <strong>and</strong><br />
entertainment activities<br />
Kolosej kinematografi, d. o. o., Ljubljana<br />
Address: 152 Šmartinska, Ljubljana, Slovenia<br />
Telephone: +386 1 520 55 00<br />
Fax: +386 1 520 56 00<br />
E-mail: info@kolosej.si<br />
<strong>We</strong>bsite: www.kolosej.si, www.arenalive.si<br />
upgraded with XpanD technology, including digital 3D<br />
projection <strong>and</strong> special effects on seats <strong>and</strong> in the hall.<br />
The company received a Superbr<strong>and</strong>s award,<br />
confirming the Kolosej br<strong>and</strong> as one of the best in Slovenia.<br />
In July 2007, the company opted to close the<br />
Celje cinema centre, as it did not achieve the desired<br />
operating results.<br />
Top five movies in 2007 in the Kolosej network:<br />
Management Board (31 December 2007):<br />
Sergej Racman, President of the Management Board<br />
Movie<br />
Revenue<br />
(in EUR)<br />
Number of<br />
viewers<br />
Number<br />
of shows<br />
Kolosej, with a number of cinema centres <strong>and</strong> by<br />
providing the high-quality presentation of a wide<br />
selection of movies <strong>and</strong> through its additional offers,<br />
has been the largest company showing motion<br />
pictures in Slovenia since 2001, with a market<br />
1<br />
2<br />
Pirates of the<br />
Caribbean:<br />
At World’s<br />
Petelinji<br />
zajtrk<br />
3 Mr Bean’s<br />
Holiday<br />
4 Shrek the<br />
Third<br />
352,5667 79,812 1,330<br />
337,071 78,845 821<br />
311,492 70,663 1,115<br />
257,903 60,666 1,654<br />
share of 65.7 percent. The Kolosej cinema network<br />
5 Ratatouille 236,703 56,284 1,546<br />
was visited by approximately 1.6 million people
Challenges in 2008:<br />
The company’s greatest challenge in 2008 will<br />
be the internal restructuring <strong>and</strong> modernisation of<br />
the Kranj cinema centre, which by the middle of<br />
2008 will offer visitors from the Gorenjska region<br />
new forms of entertainment <strong>and</strong> a larger selection<br />
of movies in three contemporarily equipped movie<br />
theatres, pool hall <strong>and</strong> lounge;<br />
only organiser in Ljubljana <strong>and</strong> the surrounding area<br />
with the progressive Fort Knox system on twelve IGT<br />
gaming machines. In addition to gaming machines,<br />
guests of the gaming centre may visit the Copacabana<br />
catering facility. More than 100 thous<strong>and</strong> guests<br />
visited the Casino Rio gaming centre in 2007.<br />
Operations in 2007<br />
The company plans to sell the Kolosej property<br />
in Celje;<br />
In the area of cinematography, the company’s<br />
aim is to increase the efficiency of operations <strong>and</strong><br />
maximise revenue-generating sources with existing<br />
cinema multiplex centres <strong>and</strong> the Arena Vodafone<br />
live entertainment centre.<br />
The Casino Rio gaming centre with 200 gaming<br />
positions opened on 31 March 2007 in the Arena<br />
Vodafone live! entertainment centre.<br />
Advertising for the gaming centre <strong>and</strong> the<br />
organisation of prize competitions in 2007 were<br />
extremely successful, as the centre attracted a large<br />
Onisac, igre na srečo in gostinstvo d. o. o.,<br />
Ljubljana<br />
Address: 152 Šmartinska, Ljubljana, Slovenia<br />
Telephone: +386 1 520 55 02<br />
Fax: +386 1 520 56 00<br />
E-mail: info@casino-rio.si<br />
<strong>We</strong>bsite: http://www.arenalive.si/si/casino-rio<br />
Management Board (31 December 2007):<br />
Sergej Racman, Director<br />
The Casino Rio gaming centre is located in the<br />
Arena Vodafone live! entertainment centre <strong>and</strong> offers<br />
games of chance at 200 gaming positions, including<br />
168 gaming machines from internationally known<br />
manufacturers IGT; Aristocrat <strong>and</strong> Novomatic, as<br />
well as 32 gaming positions on 4 electronic roulette<br />
systems from internationally known Slovenian<br />
manufacturers Elektronček <strong>and</strong> ICIT. Casino Rio is the<br />
number of new guests.<br />
Challenges in 2008:<br />
In 2008, the company will begin converting games<br />
(10 games in April <strong>and</strong> 10 games in September),<br />
with the aim of increasing the frequency of visits <strong>and</strong><br />
maintaining the interest of the centre’s visitors through<br />
new, attractive games;<br />
The organisation of a VIP area for special guests,<br />
where they will feel better <strong>and</strong> more relaxed;<br />
Following the successful opening <strong>and</strong> start-up of<br />
the gaming centre, the company will continue to ensure<br />
the 24/7 availability of the system <strong>and</strong> implement the<br />
necessary measures to comply with the requirements of<br />
the Office for Gaming Supervision;<br />
Introduction of EZ-Pay Playable tickets;<br />
Purchase of the Ancient Chinese Secret progressive<br />
system which will increase the company’s competitive<br />
advantage over other games of chance organisers.<br />
177
178<br />
Village in Notranjska, Slovenia
179
Real estate<br />
Real estate represents a new division of the Group,<br />
which we began to actively develop last year at R.E.<br />
Invest <strong>and</strong> KD Kvart. The Šumi <strong>business</strong> complex in<br />
Ljubljana is currently the main project in this area.<br />
KD Kvart, nepremičninska in holdinška<br />
dejavnost, d. o. o., Ljubljana<br />
Address: 14 Levstikova, Ljubljana, Slovenia<br />
Telephone: +386 1 244 50 50<br />
Fax: +386 1 244 50 55<br />
E-mail: <strong>kd</strong>kvart@<strong>kd</strong>-<strong>group</strong>.si<br />
<strong>We</strong>bsite: www.<strong>kd</strong>-<strong>group</strong>.com<br />
R.E. Invest, promet z nepremičninami in<br />
investicije, d. o. o., Ljubljana<br />
Management board (31 December 2007):<br />
Sergej Racman, Director<br />
Address: 14 Levstikova, Ljubljana, Slovenia<br />
180<br />
Telephone: +386 1 244 50 50<br />
Fax: +386 1 244 50 55<br />
E-mail: reinvest@re-invest.si<br />
<strong>We</strong>bsite: www.<strong>kd</strong>-<strong>group</strong>.com<br />
Management board (31 December 2007):<br />
Anton Škrlj, Director<br />
The company’s core activities are trade in real<br />
estate <strong>and</strong> investment engineering. The company<br />
also manages <strong>and</strong> implements investments for<br />
companies of the KD Holding Group. The liquidation<br />
of the company is foreseen in 2008.<br />
Operations in 2007<br />
The company prepared a distribution plan <strong>and</strong><br />
carried out all necessary activities for transfer of the<br />
Šumi project to a newly established company.<br />
The company continued preparatory work<br />
for the Šumi project, including the transfer of<br />
employees with the registration of KD Kvart.<br />
The company provided technical support <strong>and</strong><br />
advice on the expansion of the KD Finančna točka<br />
network throughout Slovenia.<br />
KD Kvart was established on 24 July 2007 through<br />
the division of R.E. Invest as the sole legal successor<br />
for the construction of the commercial-residential<br />
<strong>build</strong>ing Šumi. The company’s core activities are<br />
trade in real estate <strong>and</strong> investment engineering. The<br />
company also manages <strong>and</strong> implements investments<br />
for companies of the KD Holding Group.<br />
Operations in 2007<br />
Acquisition of project documentation <strong>and</strong> necessary<br />
approvals <strong>and</strong> authorisations for the Šumi project.<br />
Continued archaeological research at the Šumi site.<br />
The start of construction of public utilities <strong>and</strong><br />
water supply.<br />
The purchase of new properties on Soteska <strong>and</strong><br />
Slovenska streets due to the expansion of the Šumi project.<br />
Technical support <strong>and</strong> consulting on the<br />
expansion of the KD Finančna točka network<br />
throughout Slovenia.
Challenges in 2008:<br />
To obtain the requisite <strong>build</strong>ing permit for the<br />
Šumi project;<br />
To begin excavating the construction pit;<br />
To search for new investment opportunities in<br />
Slovenia <strong>and</strong> the countries of the former Yugoslavia;<br />
To provide appropriate information support for<br />
the monitoring of projects;<br />
To begin marketing activities <strong>and</strong> the sale <strong>and</strong>/or<br />
rent of apartments <strong>and</strong> <strong>business</strong> premises;<br />
To design <strong>and</strong> establish a new website to<br />
seminars to postgraduate studies. The GEA College<br />
system includes education, from the acquisition<br />
of level VI education via higher education <strong>and</strong><br />
college programmes to postgraduate studies,<br />
where students advance a level at a time. Study<br />
programmes at the Business College are in line with<br />
the Bologna Declaration (3+2 system). The system<br />
is supplemented by functional programmes for our<br />
graduates <strong>and</strong> other university students.<br />
Operations in 2007<br />
present the Šumi project to potential customers.<br />
Other activities of selected subsidiaries<br />
GEA College Group<br />
The GEA College Group comprises the parent<br />
company GEA College, the Business College, the<br />
Centre for Higher Education <strong>and</strong> the PIC - Business<br />
Education Centre.<br />
GEA College d. d., Ljubljana<br />
Address: 156 Dunajska, Ljubljana, Slovenia<br />
Telephone: +386 1 588 13 00<br />
Fax: +386 1 588 13 33<br />
E-mail: info@gea-college.si<br />
<strong>We</strong>bsite: www.gea-college.si<br />
Management Board (31 December 2007):<br />
Andrej Baričič, President of the Management Board<br />
GEA College continued to rationalise operations in<br />
2007. In the scope of the reorganisation of operations,<br />
a portion of common functions, performed by the<br />
company for the Business College, were transferred<br />
to the latter. In addition to revenue generated by GEA<br />
College, revenue was also generated by the leasing of<br />
<strong>business</strong> premises in 2007.<br />
GEA College - Visoka šola za podjetništvo, Piran<br />
Address: 2 Kidričevo nabrežje, Piran, Slovenia<br />
Telephone: +386 1 588 13 00<br />
Fax: +386 1 568 82 13<br />
E-mail: info@gea-college.si<br />
<strong>We</strong>bsite: www.gea-college.si/vsp<br />
Management Board (31 December 2007):<br />
Andrej Baričič, President of the Management Board<br />
Operations in 2007<br />
181<br />
GEA College’s mission is to educate entrepreneurs.<br />
Today, GEA College’s organisational units provide<br />
lifelong educational opportunities, from one-day<br />
In the scope of the Business College, undergraduate<br />
<strong>and</strong> postgraduate <strong>business</strong> studies were carried out<br />
in accordance with the Bologna Declaration (3+2
system). Full-time studies are carried out in Piran <strong>and</strong><br />
Ljubljana, while part time studies are held in Ljubljana<br />
<strong>and</strong> Slovenske Konjice. New locations in Maribor<br />
<strong>and</strong> Radovljica were accredited in 2007 to carry out<br />
part-time undergraduate <strong>and</strong> postgraduate studies. A<br />
all necessary study material via the internet. Further<br />
development of new programmes <strong>and</strong> the expansion<br />
of operations are in the planning stage. The<br />
company, whose capital was increased in 2007, is<br />
100 percent owned by GEA College.<br />
department for international undergraduate <strong>business</strong><br />
studies, which enrolled its fourth class of students in<br />
2007, operates within the scope of part-time studies.<br />
Further development of new programmes <strong>and</strong> the<br />
expansion of operations are in the planning stage. To<br />
that end, GEA College increased cooperation with two<br />
foreign universities in 2007.<br />
GEA College CVŠ, Družba za višješolsko<br />
izobraževanje - Center višjih šol, d. o. o., Ljubljana<br />
GEA College PIC poslovnoizobraževalni<br />
center, d. o. o., Ljubljana<br />
Address: 156 Dunajska, Ljubljana, Slovenia<br />
Telephone: +386 1 588 13 11<br />
Fax: +386 1 588 13 33<br />
E-mail: pic@gea-college.si<br />
<strong>We</strong>bsite: www.gea-college.si/pic<br />
Management Board (31 December 2007):<br />
Andrej Baričič, President of the Management Board<br />
182<br />
Address: 156 Dunajska, Ljubljana, Slovenia<br />
Telephone: +386 1 588 13 00<br />
Fax: +386 1 568 82 13<br />
E-mail: cvs@gea-college.si<br />
<strong>We</strong>bsite: www.gea-college.si/cvs<br />
Management Board (31 December 2007):<br />
Andrej Baričič, President of the Management Board<br />
Operations in 2007<br />
In 2007, CVŠ (Centre for Higher Education) carried<br />
out part-time higher-education study programmes to<br />
obtain the titles of sales officer, <strong>business</strong> secretary<br />
<strong>and</strong> accountant. All programmes were carried out<br />
in Ljubljana, while the accountant programme<br />
was also carried out in Piran <strong>and</strong> in the form of<br />
open study in Ptuj. In 2007, the Centre for Higher<br />
Education introduced E-College, a flexible study<br />
programme which provides students with access to<br />
Operations in 2007<br />
In 2007, PIC (Business Education Centre) carried out<br />
one-day seminars <strong>and</strong> seminars lasting several days,<br />
workshops, programmes lasting several months, oneyear<br />
professional education programmes for obtaining<br />
level 5 education (economics <strong>and</strong> management) <strong>and</strong><br />
<strong>business</strong> <strong>and</strong> specialised education for small <strong>group</strong>s at<br />
companies. The company, whose capital was increased<br />
in 2007, is 100 percent owned by GEA College.<br />
Challenges in 2008:<br />
In 2008, Higher Education Centre will continue<br />
to increase the quality of its educational process.<br />
In the 2008/2009 academic year, we will<br />
begin implementing an updated higher education<br />
<strong>business</strong> secretary programme <strong>and</strong> a new higher<br />
education economic programme, where students
may choose between the following majors:<br />
sales officer,<br />
accountant,<br />
tourism organiser,<br />
real estate agent,<br />
banking assistant,<br />
insurance specialist.<br />
<strong>We</strong> therefore expect a greater financial effect<br />
at the Centre for Higher Education in 2008 <strong>and</strong> an<br />
increased market share in area of higher education.<br />
The objectives of the Business College are primarily<br />
an increase in the quality of the educational<br />
process, development of new programmes <strong>and</strong><br />
the intensification <strong>and</strong> expansion of international<br />
cooperation.<br />
ČZD Kmečki glas d. o. o., Ljubljana<br />
Address: 14 Železna cesta, Ljubljana, Slovenia<br />
Telephone: +386 1 473 53 50<br />
Fax: +386 1 473 53 77<br />
E-mail: info@czd-kmeckiglas.si<br />
<strong>We</strong>bsite: www.kmeckiglas.com<br />
Management Board (31 December 2007):<br />
Peter Zadel, Director<br />
Operations in 2007<br />
In addition to the Kmečki glas weekly, the company<br />
also publishes the magazines Moj mali svet, Svet in<br />
ljudje <strong>and</strong> Revijo o konjih. Subscribers to the Kmečki<br />
glas weekly received 25 supplements in addition to the<br />
newspaper. Some supplements were included in other<br />
monthlies. In accordance with planned activities, the<br />
company published an exclusive calendar called Traktorji<br />
183<br />
<strong>and</strong> a special supplement entitled. The magazine<br />
is not linked to the weekly in terms of the contents;<br />
it represents fresh programme content, as it covers<br />
contemporary trade <strong>and</strong> consumer topics.The publication<br />
programme in 2007 was further supplemented by 14<br />
book titles, issued in 30 thous<strong>and</strong> copies.<br />
Challenges in 2008:<br />
This year, the company is again planning new<br />
projects from journalistic-informative activities linked<br />
to agriculture, the modernisation of the company’s<br />
websites <strong>and</strong> the issue of more supplements than<br />
last year. A year-long campaign will be carried out<br />
to promote the company <strong>and</strong> its publications <strong>and</strong> to<br />
increase the number of readers <strong>and</strong> subscribers to the<br />
newspaper <strong>and</strong> magazine.
184
A selection of the most important<br />
activities of associated companies<br />
KD Concorde<br />
Operations in 2007<br />
KD Concorde successfully continued its work<br />
in all areas <strong>and</strong> increased revenues by one-third<br />
Deželna banka Slovenije<br />
Deželna banka Slovenije is a universal<br />
medium-sized bank present throughout Slovenia,<br />
primarily focused on <strong>business</strong> with retail customers<br />
<strong>and</strong> small <strong>and</strong> medium-sized enterprises, as well as<br />
all forms of securities. It has traditionally cooperated<br />
with the food processing industry, which will receive<br />
even greater attention in the future.<br />
compared to the previous year as a result.<br />
The company recruited 82 new consultants.<br />
Due to legislative changes, we were able to<br />
re-establish contractual cooperation at the end of<br />
the year with KD Skladi in the area of marketing<br />
funds (cooperation was suspended in 2004).<br />
The company concluded a new cooperation<br />
agreement on the trading of precious metals with<br />
new partner Elementum d. o. o.<br />
Challenges in 2008:<br />
To attract new consultants;<br />
To increase support of active consultants <strong>and</strong><br />
reduce the number of inactive consultants;<br />
To adapt the consultant training system;<br />
To introduce asset consulting as an<br />
independent profession through an asset academy<br />
<strong>and</strong> other activities;<br />
To update informative material <strong>and</strong> online<br />
support;<br />
To restart sales of funds due to legislative<br />
changes.<br />
The bank manages a branch network with 90<br />
outlets throughout Slovenia, placing it number three<br />
among Slovenian banks. The bank provides all<br />
basic banking services, from loans to various forms<br />
of savings, payment card operations, e-banking <strong>and</strong><br />
payment transactions to investment banking <strong>and</strong><br />
leasing. The latter is performed by the subsidiary<br />
DBS Leasing d. o. o., forming the DBS banking<br />
<strong>group</strong> together with the parent company Deželna<br />
banka Slovenije.<br />
Operations in 2007<br />
In 2007, Deželna banka Slovenije operated in<br />
accordance with the bank’s strategy <strong>and</strong> its guidelines<br />
<strong>and</strong> adopted <strong>business</strong> policy <strong>and</strong> exceeded established<br />
objectives in the most important areas of operations.<br />
Through its successful operations, the bank<br />
maintained a 1.8 percent market share. Total assets<br />
as at 31 December 2007 totalled EUR 756.9<br />
million, a nominal increase of EUR 147.1 million,<br />
or 24 percent, matching the growth of the banking<br />
system. Thus the bank nearly achieved planned<br />
growth <strong>and</strong> total assets. Total assets per employee<br />
185
(productivity) rose 21 percent in 2007, totalling EUR<br />
1.8 million as at 31 December 2007.<br />
The bank made significant progress in terms of<br />
achieving return on equity in 2007. The return on<br />
equity of 18.8 percent was more than double that<br />
achieved the previous year.<br />
The bank generated gross profit (pre-tax<br />
profit) of EUR 9.1 million in 2007. Thus the<br />
bank exceeded 2006 gross profit <strong>and</strong> planned<br />
profit for 2007 by 158 percent <strong>and</strong> 184 percent,<br />
respectively. Net profit from ordinary operations was<br />
more than EUR 7 million.<br />
To increase the efficiency of operations by<br />
strengthening the commercial banking function<br />
in the area of corporate customers, by enhancing<br />
marketing <strong>and</strong> sales in retail banking, by increasing<br />
cooperation with customers engaged in agriculture<br />
<strong>and</strong> food processing <strong>and</strong> by increasing the number of<br />
customers in securities operations;<br />
To begin introducing transactions with derivatives<br />
<strong>and</strong> obtain a license to perform transactions relating<br />
to the sale of insurance products.<br />
Seaway Group<br />
In 2007, the bank successfully carried out two<br />
186<br />
capital increases by issuing new shares, resulting in<br />
EUR 36 million in fresh capital. The basic ownership<br />
structure remained unchanged following both capital<br />
increases. This was necessary for the continued<br />
successful operation of the bank given the ambitious<br />
objectives set for 2007 <strong>and</strong> to achieve the strategic<br />
objectives set out by the bank until 2009. With<br />
the aforementioned capital increases <strong>and</strong> given<br />
technical <strong>and</strong> substantive factors, the bank was able<br />
to meet capital requirements at the end of 2007 in<br />
accordance with Basel II capital st<strong>and</strong>ards.<br />
Challenges in 2008:<br />
To increase total assets by 16 percent to EUR<br />
864 million;<br />
To achieve a market share of 2 percent;<br />
To generate pre-tax profit of EUR 12.1 million;<br />
To provide appropriate risk management <strong>and</strong><br />
the prescribed liquidity level <strong>and</strong> maintain capital<br />
adequacy at a minimum of 10 percent;<br />
In 2007, Seaway Group continued its creative path<br />
in both its areas of operations: the development of<br />
new sailboats <strong>and</strong> motorboats for series ship<strong>build</strong>ers<br />
<strong>and</strong> the development <strong>and</strong> <strong>build</strong>ing of its own br<strong>and</strong><br />
boats - Shipman carbon-fibre sailboats <strong>and</strong> Skagen<br />
motor boats. Unfortunately, 2007 was marked by a<br />
fire in which Seaway lost three Shipman sailboats<br />
<strong>and</strong> its entire workshop for the manufacture of<br />
carbon-fibre boats, including all equipment.<br />
Two-thirds of the year was characterised by<br />
tremendous efforts to re-establish the company’s<br />
work <strong>and</strong> <strong>business</strong> processes. This was also<br />
reflected in the company’s operating results: while<br />
income rose by 25 percent, profit <strong>and</strong> EBITDA<br />
remained at the previous year’s level.<br />
Operations in 2007<br />
The company designed <strong>and</strong> developed two<br />
motor boats, Windy 44 <strong>and</strong> 48 for the Norwegian<br />
shipyard Windy.
The company designed, developed <strong>and</strong> built a<br />
prototype motor boat Commuter 11 for Askeladden.<br />
It is the first boat in Europe equipped with the new<br />
Zeus propulsion system.<br />
Seaway Group designed <strong>and</strong> developed a new<br />
line of sailboats (31, 34, 38 <strong>and</strong> 40) <strong>and</strong> two motor<br />
boats (34 <strong>and</strong> 37) for its largest customer, the<br />
German company Bavaria.<br />
The Swedish factory Marex took possession<br />
of the new motor boat Marex 37, a completely<br />
innovative design.<br />
At the same time, the company purchased<br />
additional l<strong>and</strong> measuring 43,000 m 2 , with 260<br />
metres of coast line, intended for the manufacture of<br />
motor boats.<br />
The company purchased l<strong>and</strong> in a newly<br />
established industrial zone in Puconci pri Murski<br />
Soboti where the company will <strong>build</strong> a workshop<br />
for developing <strong>and</strong> manufacturing products from<br />
composite materials.<br />
At the end of the year, orders for Shipman <strong>and</strong><br />
Skagen exceeded EUR 50 million.<br />
The fire on 11 April 2007, caused by welding<br />
work on the roof, resulted in EUR 9 million in<br />
direct damages <strong>and</strong> several million euros in indirect<br />
material damages. The new workshop (located on<br />
the site of the old workshop) began operating in<br />
December 2007.<br />
The company launched the work boat Atlas 50,<br />
based on the hull of the Skagen 50. The boat was<br />
completed at the shipyard in Oglej <strong>and</strong> delivered to<br />
the buyer in Portorož.<br />
In the last quarter of the year, the company’s<br />
Shipman 72 <strong>and</strong> 80 sailboats (22 <strong>and</strong> 24 metres in<br />
length, respectively) were launched. They represent<br />
the most expensive Slovenian products on global<br />
markets <strong>and</strong> are distinguished by a completely new<br />
scheme, design <strong>and</strong> technology. They open the way<br />
for the large boats the company intends to <strong>build</strong> on<br />
the coast.<br />
At the end of the year in Tržič (Friuli - Julian<br />
region), Seaway signed an agreement on the<br />
construction of a new shipyard, with a deadline of<br />
one year <strong>and</strong> an investment of approximately EUR<br />
22 million.<br />
Challenges in 2008:<br />
The company is looking forward to 2008 with<br />
optimism, as the overcoming of difficulties posed by<br />
the fire has given the company additional strength<br />
<strong>and</strong> enthusiasm. The company’s plans include the<br />
increased manufacturing of Shipman sailboats <strong>and</strong><br />
the start-up of the new workshop on the coast.<br />
187
188<br />
Sofia, Bulgaria
Sofia, Bulgaria<br />
189
3.<br />
Consolidated Financial Statements for the year ended<br />
31 December 2007 of KD Holding Group<br />
The more attentive we are to the small differences between people,<br />
the easier to underst<strong>and</strong> the words of each of them - <strong>and</strong> the better the bottom line.<br />
191<br />
Wooden icons, Bulgaria<br />
Fibula from the late Iron Age, 1 st century B. C., Ljubljanica River,<br />
Slovenia<br />
Venecian Lion, the city of Korčula, Brač, Croatia
KD Holding Group<br />
Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
CONTENT<br />
STATEMENT OF MANAGEMENT’S RESPONSIBILITIES<br />
CONSOLIDATED INCOME STATEMENT<br />
CONSOLIDATED BALANCE SHEET<br />
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY<br />
CONSOLIDATED CASH FLOW STATEMENT<br />
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS<br />
1. General information<br />
2. Summary of Significant Accounting Policies<br />
3. Critical accounting estimates <strong>and</strong> judgements<br />
4. Comparatives<br />
5. Risk management<br />
6. Reporting by Business Segment <strong>and</strong> Geographical Segment<br />
7. Property, plant <strong>and</strong> equipment<br />
8. Investment property<br />
9. Intangible assets<br />
10. Investments in associated companies<br />
11. Financial assets<br />
12. Loans <strong>and</strong> other receivables<br />
13. Inventories<br />
14. Cash <strong>and</strong> cash equivalents<br />
15. Capital<br />
16. Other reserves <strong>and</strong> retained earnings<br />
17. Borrowings<br />
18. Insurance contracts<br />
19. Derivative financial instruments<br />
20. Trade <strong>and</strong> other payables<br />
21. Deferred income taxes<br />
22. Revenue<br />
23. Expenses<br />
24. Investment income<br />
25. Net realised gains on financial assets available for sale<br />
26. Net fair value gains on assets at fair value through profit <strong>and</strong> loss<br />
27. Finance costs<br />
28. Income tax expense<br />
29. Earnings per share<br />
30. Dividends per share<br />
31. Acquisitions <strong>and</strong> disposals<br />
32. Related-party transactions<br />
33. Events after the balance sheet date<br />
196<br />
197<br />
198<br />
199<br />
200<br />
202<br />
202<br />
202<br />
230<br />
235<br />
236<br />
279<br />
283<br />
284<br />
285<br />
288<br />
291<br />
295<br />
297<br />
297<br />
297<br />
299<br />
300<br />
301<br />
304<br />
304<br />
305<br />
307<br />
308<br />
310<br />
310<br />
311<br />
311<br />
311<br />
312<br />
313<br />
313<br />
315<br />
317<br />
193
KD Holding Group<br />
Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
Independent Auditor’s Report<br />
194
KD Holding Group<br />
Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
195
KD Holding Group<br />
Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
Statement of management’s responsibilities<br />
The Management of the Company confirms the<br />
consolidated financial statements of KD Holding<br />
d.d. for year ended 31 December 2007, the<br />
applied accounting policies, <strong>and</strong> the notes to the<br />
prepared under the assumption of a going concern<br />
<strong>and</strong> in compliance with the relevant legislation<br />
<strong>and</strong> International Financial Reporting St<strong>and</strong>ards as<br />
adopted by the EU.<br />
financial statements.<br />
The Management is also responsible for proper<br />
The Management of the Company is responsible for<br />
the preparation of the annual report so that it gives<br />
a true <strong>and</strong> fair view of the financial position of the<br />
Group as at 31 December 2007 <strong>and</strong> the results of<br />
management of accounting, for taking appropriate<br />
measures to protect the Group's assets <strong>and</strong> to<br />
prevent <strong>and</strong> discover fraud, other irregularities or<br />
illegal acts.<br />
its operations for the year then ended.<br />
The tax authorities may at any time inspect the<br />
196<br />
The Management of the Company confirms that the<br />
accepted accounting policies have been used on a<br />
consistent basis <strong>and</strong> that the accounting estimates<br />
have been made in compliance with the principle<br />
of prudence. The Management of the Company also<br />
confirms that the financial statements have been<br />
books <strong>and</strong> records within 5 years subsequent to<br />
the reported tax year, <strong>and</strong> may impose additional<br />
tax assessments <strong>and</strong> penalties. The Company's<br />
Management is not aware of any circumstances<br />
which may give rise to a potential material liability<br />
in this respect.<br />
Ljubljana, 23 May 2008<br />
Chief Executive Officer<br />
Matjaž Gantar
KD Holding Group<br />
Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
Consolidated income statement<br />
(in EUR) Note 2007 2006<br />
Insurance premium revenue 305,052,580 262,823,197<br />
Insurance premium ceded to reinsurers (10,293,797) (9,549,683)<br />
Net insurance premium revenue 22 294,758,783 253,273,514<br />
Investment income 24 13,844,863 14,401,754<br />
Net gains on available-for-sale financial assets 25 24,197,926 17,339,348<br />
Impairment of available-for-sale financial assets 25 (2,596,286) (9,633,386)<br />
Net gains / (losses) on assets at fair value through profit <strong>and</strong> loss 26 21,240,218 18,425,773<br />
Net financial income 56,686,721 40,533,489<br />
Sales of goods <strong>and</strong> services 22 77,232,270 55,463,925<br />
Other operating income 22 26,964,325 15,812,224<br />
Other income 104,196,595 71,276,149<br />
Insurance contracts benefits <strong>and</strong> claims 23 (243,398,171) (190,394,487)<br />
Insurance contracts benefits <strong>and</strong> claims, recovered from reinsurers 11,584,697 4,051,152<br />
Net insurance contracts benefits <strong>and</strong> claims (231,813,474) (186,343,335)<br />
Raw materials <strong>and</strong> consumables used 23 (7,184,227) (5,038,503)<br />
Costs of services (84,724,041) (75,887,790)<br />
Employee benefits expense 23 (59,250,777) (50,056,653)<br />
Depreciation <strong>and</strong> amortisation expense 23 (8,215,555) (6,917,704)<br />
Other insurance expenses 23 (7,248,001) (4,567,005)<br />
Other expenses 23 (14,337,515) (6,408,821)<br />
Other costs (180,960,116) (148,876,476)<br />
197<br />
Operating profit 42,868,509 29,863,341<br />
Finance costs 27 (6,552,633) (5,513,800)<br />
Share of profit of associates 10 11,141,024 4,372,830<br />
4,588,391 (1,140,970)<br />
Profit before income tax 47,456,900 28,722,371<br />
Income tax expense 28 (12,511,316) (7,845,602)<br />
Net profit for the year 34,945,584 20,876,769<br />
Attributable to:<br />
Equity holders of the Company 33,059,887 18,569,269<br />
Minority interest 1,885,697 2,307,500<br />
34,945,584 20,876,769<br />
Earnings per share for profit attributable to the equity holders<br />
of the Company during the year (expressed in EUR per share)<br />
- basic <strong>and</strong> diluted 29 12,38 6,95
KD Holding Group<br />
Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
Consolidated balance sheet<br />
(in EUR) Note 2007 2006<br />
ASSETS<br />
Property, plant <strong>and</strong> equipment 7 83,867,010 71,220,402<br />
Investment property 8 20,601,521 20,592,116<br />
Intangible assets 9 87,896,641 87,364,290<br />
Investments in associates 10 71,687,821 45,119,877<br />
Financial assets:<br />
- at fair value through profit or loss 11 176,025,625 115,622,983<br />
- held to maturity 11 7,590,164 6,987,877<br />
- available for sale 11 317,214,328 256,141,399<br />
500,830,117 378,752,259<br />
Loans <strong>and</strong> other receivables 12 135,690,971 132,080,595<br />
Reinsurance contracts 18 11,004,824 8,631,597<br />
Deferred income tax assets 21 - 1,463,913<br />
Income tax receivable 2,870,170 1,765,148<br />
Inventories 13 12,200,210 8,120,189<br />
Cash <strong>and</strong> cash equivalents 14 29,398,117 20,309,729<br />
Total assets 956,047,402 775,420,115<br />
198<br />
EQUITY<br />
Capital <strong>and</strong> reserves attributable to equity holders of the Company<br />
Share capital 15 198,758,114 198,758,114<br />
Other reserves 16 54,078,273 24,371,950<br />
Retained earnings 16 76,416,444 52,739,049<br />
329,252,831 275,869,113<br />
Minority interest 11,011,536 6,936,747<br />
Total equity 340,264,367 282,805,860<br />
LIABILITIES<br />
Insurance contracts 18 368,921,813 295,190,504<br />
Investment contracts 15,604,274 13,791,387<br />
Financial liabilities 17 164,250,682 117,749,922<br />
Derivative financial instruments 19 6,312,735 -<br />
Trade <strong>and</strong> other payables 20 50,869,018 54,020,158<br />
Income tax liability 7,296,627 11,862,284<br />
Deferred income tax liabilities 21 2,527,886 -<br />
Total liabilities 615,783,035 492,614,255<br />
Total equity <strong>and</strong> liabilities 956,047,402 775,420,115
KD Holding Group<br />
Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
Consolidated statement of changes in equity<br />
Attributable to equity holders<br />
Minority<br />
Note<br />
Retained<br />
Total equity<br />
Share capital Other reserves<br />
interest<br />
(in EUR)<br />
earnings<br />
Balance at 1 January 2006 199,553,094 20,005,855 34,594,554 8,697,816 262,851,319<br />
Fair value gains <strong>and</strong> losses, net of tax<br />
– available for sale financial assets<br />
16 - 4,147,441 - 559,902 4,707,343<br />
Currency translation differences - 218,654 - - 218,654<br />
Net income recognised directly in equity - 4,366,095 - 559,902 4,925,997<br />
Profit for the year - - 18,569,269 2,307,500 20,876,769<br />
Total recognised income of equity holders - 4,366,095 18,569,269 2,867,402 25,802,766<br />
Transactions with equity holders:<br />
- issue of share capital - - - 29,899 29,899<br />
- purchase of treasury shares 15 (1,472,959) - - (172,429) (1,645,388)<br />
- disposal of treasury shares 15 677,979 - - - 677,979<br />
Dividends <strong>and</strong> other payments relating to 2005 - - (424,774) (342,605) (767,379)<br />
Minority interest arising on <strong>business</strong><br />
combinations<br />
- - - 1,237,310 1,237,310<br />
Increase in equity share of subsidiaries - - - (5,380,646) (5,380,646)<br />
Total (794,980) - (424,774) (4,628,471) (5,848,225)<br />
Balance at 31 December 2006 198,758,114 24,371,950 52,739,049 6,936,747 282,805,860<br />
Balance at 1 January 2007 198,758,114 24,371,950 52,739,049 6,936,747 282,805,860<br />
Fair value gains <strong>and</strong> losses, net of tax<br />
– available for sale financial assets<br />
16 - 31,402,685 - 775,281 32,177,966<br />
Currency translation differences - (1,696,362) - (733) (1,697,095)<br />
199<br />
Net income recognised directly in equity - 29,706,323 - 774,548 30,480,871<br />
Profit for the year - - 33,059,887 1,885,697 34,945,584<br />
Total recognised income of equity holders - 29,706,323 33,059,887 2,660,245 65,426,455<br />
Issue of share capital to minority shareholders - - - 107,551 107,551<br />
Dividends <strong>and</strong> other payments relating to 2006 - - (9,382,492) (743,642) (10,126,134)<br />
Minority interest arising on <strong>business</strong> combinations<br />
- - - 2,402,190 2,402,190<br />
Increase in equity share of subsidiaries - - - (351,555) (351,555)<br />
Total - - (9,382,492) 1,414,544 (7,967,948)<br />
Balance at 31 December 2007 198,758,114 54,078,273 76,416,444 11,011,536 340,264,367
KD Holding Group<br />
Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
Consolidated cash flow statement<br />
(in EUR) Note 2007 2006<br />
CASH FLOWS FROM OPERATING ACITIVITIES<br />
Profit before income tax 53,736,363 28,722,371<br />
Adjustments for:<br />
- Depreciation of PPE 7 6,120,831 5,178,423<br />
- Depreciation of investments property 8 621,363 647,193<br />
- Amortisation 9 1,473,361 1,092,088<br />
- (Profit)/loss on sale of PPE (34,334) 103,088<br />
- (Profit)/loss on sale of intangible assets (3,617) 24,420<br />
- (Profit)/loss on sale of investments property (162,014) 4,027<br />
- Impairment of goodwill 9 - 1,569,005<br />
- Net movements in provisions for liabilities <strong>and</strong> charges 18,1 71,358,082 43,008,662<br />
- Net movements in investments contracts 1,812,887 1,276,824<br />
- Net movements in employee benefits 20 2,268,096 300,371<br />
- Excess on acquisition of subsidiary 22,2 (3,564,250) (120,535)<br />
- Gain from increase the share capital of subsidiary 22,2 (1,069,808) (1,308,354)<br />
- Investments income 24 (13,411,214) (14,401,754)<br />
- Net fair value gains on available-for-sale securities 25 (24,197,926) (17,339,348)<br />
- Impairment of AFS 25 2,596,286 9,633,386<br />
- Net fair value gains on assets at fair value through P&L 26 (27,519,681) (18,425,774)<br />
200<br />
- Impairment of trade receivables 10,613,355 4,014,664<br />
- Finance cost 27 6,552,633 5,513,800<br />
- Share of profit of associates 10 (11,141,024) (4,372,830)<br />
Changes in working capital<br />
- Inventories 13 (2,950,518) (1,324,261)<br />
- Trade <strong>and</strong> other receivables (19,051,870) (21,226,602)<br />
- Trade <strong>and</strong> other payables (2,495,722) 17,576,598<br />
Net (purchase)/proceeds of operating assets 11<br />
- Available-for-sale financial assets 3,511,162 13,241,262<br />
- Financial assets at fair value through profit or loss (32,893,866) (36,617,989)<br />
- Investments held-to-maturity (239,781) (81,844)<br />
Dividends received 4,976,014 2,973,393<br />
Cash generated from operations 26,904,808 19,660,284<br />
Interest paid (6,772,376) (5,625,875)<br />
Income tax paid (19,756,407) (3,211,759)<br />
NET CASH GENERATED FROM OPERATING ACTIVITIES 376,025 10,822,650
KD Holding Group<br />
Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
(in EUR) Note 2007 2006<br />
CASH FLOWS FROM INVESTING ACTIVITIES<br />
Acquisition of subsidiary, net of cash acquired 31 (223,875) (385,278)<br />
Increase in equity share of subsidiaries (232,997) (4,178,856)<br />
Acquisition of associates 10 (23,412,841) (24,324,775)<br />
Disposals of associates 10 4,129,768 3,029,540<br />
Purchases of property, plant <strong>and</strong> equipment 7 (16,530,617) (13,884,138)<br />
Proceeds from sale of property, plant <strong>and</strong> equipment 2,633,737 156,819<br />
Purchases of intangible assets 9 (1,801,679) (3,231,260)<br />
Proceeds from sale of intangible assets 237,746 146,870<br />
Purchases of investment property 8 (197,384) (653,622)<br />
Proceeds from sale of investment property 209,888 586,355<br />
Loans granted to related parties (18,142,104) (24,356,581)<br />
Loans repayment received from related parties 24,615,492 26,013,149<br />
Loans <strong>and</strong> deposits granted (175,019,809) (383,812,757)<br />
Loans <strong>and</strong> deposits payment received 171,226,358 419,295,018<br />
Interest received 3,123,927 4,816,579<br />
Dividends received from associates 10 2,487,951 129,473<br />
NET CASH USED IN INVESTING ACTIVITIES (26,896,439) (653,464)<br />
CASH FLOWS FROM FINANCING ACTIVITIES<br />
Proceeds from issuance of ordinary shares – minority interest 107,551 29,899<br />
Purchase of treasury shares - (1,472,959)<br />
Disposals of treasury shares - 677,979<br />
Proceeds from borrowings 53,785,083 17,216,784<br />
Repayments of borrowings (8,210,747) (19,074,771)<br />
Dividends paid to Company's shareholders 16 (9,382,490) (424,774)<br />
Dividends paid to minority interest (743,642) (342,605)<br />
NET CASH USED IN FINANCIAL ACTIVITIES 35,555,755 (3,390,447)<br />
NET INCREASE IN CASH AND CASH EQUIVALENTS 9,035,341 6,778,739<br />
CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR 20,309,729 13,527,658<br />
Exchange gains on cash <strong>and</strong> cash equivalents 53,047 3,332<br />
CASH AND CASH EQUIVALENTS AT END OF THE YEAR 29,398,117 20,309,729<br />
201
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
Notes to the Consolidated Financial Statements<br />
1. General information<br />
liabilities at fair value through profit or loss <strong>and</strong><br />
available for sale financial assets.<br />
The principal activities of KD Holding d. d. (‘‘the<br />
Company’’) <strong>and</strong> its subsidiaries (‘‘the Group’’) are<br />
quite diversified, namely, from insurance to asset<br />
management financial services, cinematography <strong>and</strong><br />
many others (tourism, publishing, etc.).<br />
The preparation of consolidated financial statements in<br />
conformity with the IFRS as adopted by the European<br />
Union requires the use of certain critical accounting<br />
estimates. It also requires management to exercise<br />
its judgement in the process of applying the Group’s<br />
KD Holding d.d. is a public limited company with its<br />
registered office in Ljubljana, Celovška 206, Slovenia.<br />
Its shares are listed on the OTC market of the Ljubljana<br />
Stock Exchange. The Company’s ultimate parent entity<br />
is KD Group d.d., with its registered office in Ljubljana,<br />
Celovška 206, Slovenia.<br />
accounting policies. The areas involving a higher degree<br />
of judgement or complexity, or areas where assumptions<br />
<strong>and</strong> estimates are significant to the consolidated<br />
financial statements are disclosed in Note 3.<br />
a) Amendments <strong>and</strong> interpretations to published<br />
st<strong>and</strong>ards effective in 2007<br />
202<br />
These consolidated financial statements have been<br />
approved for issue by the Chief Executive Officer on<br />
23 May 2008 <strong>and</strong> can be obtained at the Company’s<br />
registered office in Ljubljana, Celovška 206, Slovenia.<br />
2. Summary of Significant Accounting Policies<br />
2.1 Basis for the preparation of financial statements<br />
According to Regulation (EC) No 1606/2002 of the<br />
European Parliament <strong>and</strong> of the Council of 19 July<br />
2002 on the application of International Accounting<br />
St<strong>and</strong>ards, the consolidated financial statements<br />
of the Group are prepared in accordance with the<br />
International Financial Reporting St<strong>and</strong>ards (IFRS)<br />
as adopted by the European Union.<br />
The consolidated financial statements have been<br />
prepared under the historical cost convention as<br />
modified by the revaluation for financial assets <strong>and</strong><br />
Amendments <strong>and</strong> interpretations to published<br />
st<strong>and</strong>ards effective in 2007 which are presented<br />
below do not have a material impact on the financial<br />
statements of the Group:<br />
- IFRIC 7, Applying the Restatement Approach<br />
under IAS 29 - Financial Reporting in<br />
Hyperinflationary Economies (effective from<br />
periods beginning on or after 1 March 2006).<br />
None of the companies in the Group operates in a<br />
hyperinflationary economy.<br />
- IFRIC 8, Scope of IFRS 2 (effective from periods<br />
beginning on or after 1 May 2006). The<br />
interpretation applies to transactions in which<br />
unidentifiable goods <strong>and</strong> services are received in a<br />
share-based payment transaction. The Group has<br />
no such trasactions.<br />
- IFRIC 9, Reassessment of Embedded Derivatives<br />
(effective from periods beginning on or after 1 June
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
2006). Subsequent reassessment of embedded<br />
derivatives is prohibited, unless there is a change in<br />
the terms of the contract that significantly modifies<br />
b) St<strong>and</strong>ards, amendments <strong>and</strong> interpretations that are<br />
not yet effective <strong>and</strong> have not been early adopted by<br />
the Group<br />
the cash flows that otherwise would be required<br />
under the contract. The Group assesses it will be<br />
able to comply with the amendment.<br />
- IFRIC 10, Interim Financial Reporting <strong>and</strong><br />
Impairment (effective from periods beginning on<br />
or after 1 November 2006). The interpretation<br />
prohibits the impairment losses recognised in an<br />
interim period on goodwill <strong>and</strong> investments in<br />
equity instruments <strong>and</strong> in financial assets carried<br />
at cost to be reversed at a subsequent balance<br />
sheet date. The Group does not expect this to<br />
have any impact on its financial statements.<br />
- IFRS 1 (Amendment), First-time Adoption of IFRS<br />
<strong>and</strong> IFRS 6 - Exploration for <strong>and</strong> Evaluation of Mineral<br />
Resources. There are no companies in the Group that<br />
these amendments could have an impact on.<br />
- IFRIC 4, Determining whether an Asset Contains a<br />
Lease. This interpretation specifies the conditions<br />
under which assets not classified as leases must be<br />
accounted in accordance with the IAS 17 Leases.<br />
There are no assets in the Group that should be<br />
considered in accordance with these interpretations.<br />
- IFRIC 5, Rights to Interests arising from<br />
Decommissioning, Restoration <strong>and</strong> Environmental<br />
Rehabilitation Funds. The interpretation is not<br />
relevant to the Group’s operations.<br />
- IFRIC 6, Liabilities arising from Participating in a<br />
Specific Market – Waste Electrical <strong>and</strong> Electronic<br />
Equipment. There are no companies in the Group<br />
that would be affected by this interpretation.<br />
Certain new st<strong>and</strong>ards, amendments <strong>and</strong> interpretations<br />
to existing st<strong>and</strong>ards have been published that are<br />
m<strong>and</strong>atory for the Group’s accounting periods beginning<br />
on or after 1 January 2008 but which the Group has<br />
not adopted early, as follows:<br />
- IAS 1, Presentation of financial statements, (effective<br />
for annual periods beginning on or after 1 January<br />
2009). IAS 1 prohibits the presentation of items<br />
of income <strong>and</strong> expenses (that is “non-owner<br />
changes in equity”) in the statement of changes in<br />
equity, requiring “owner changes in equity” to be<br />
presented separately from “non-owner changes in<br />
equity”. In addition, entities making restatements or<br />
reclassifications of comparative information will be<br />
required to present a restated balance sheet as at<br />
the beginning of the comparative period.<br />
- IFRS 8, Operating Segments (effective from periods<br />
beginning on or after 1 January 2009). This<br />
st<strong>and</strong>ard replaces IAS 14 Segment Reporting.<br />
- IAS 23 (Amendment), Borrowing Costs (effective<br />
1 January 2009). It requires an entity to<br />
capitalise borrowing costs directly attributable<br />
to the acquisition, construction or production of<br />
a qualifying asset (one that takes a substantial<br />
period of time to get ready for use or sale) as part<br />
of the cost of that asset. The option of immediately<br />
expensing those borrowing costs will be removed.<br />
The <strong>group</strong> will apply IAS 23 (Amended) from 1<br />
January 2009.<br />
203
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
- IAS 27, Consolidated <strong>and</strong> Separate Financial<br />
Statements (effective from annual periods beginning<br />
2.2 Consolidated Financial Statements<br />
2.2.1 Subsidiaries<br />
on or after 1 July 2009). IAS 27 (revised) requires<br />
204<br />
the effects of all transactions with non-controlling<br />
interests to be recorded in equity if there is no change<br />
in control. They will no longer result in goodwill or<br />
gains <strong>and</strong> losses. The st<strong>and</strong>ard also specifies the<br />
accounting when control is lost. Any remaining<br />
interest in the entity is remeasured to fair value <strong>and</strong> a<br />
gain or loss is recognised in profit or loss.<br />
- IFRIC 11, IFRS 2, Group Treasury Share<br />
Transactions (effective from periods beginning on<br />
or after 1 March 2007). The Group does not grant<br />
shares or share options to employees, consequently<br />
the interpretation will not affect the Group’s financial<br />
statements.<br />
- IFRIC 12, Service Concession Agreements (effective<br />
from periods beginning on or after 1 January<br />
2008). The interpretation will not affect the Group’s<br />
financial statements.<br />
- IFRIC 13, Customer Loyalty Programmes (effective<br />
from 1 January 2008). IFRIC 13 clarifies that where<br />
goods or services are sold together with a customer<br />
loyalty incentive (for example loyalty points or<br />
free product). IFRIC 13 will not affect the Group’s<br />
financial statement because none of the Group’s<br />
companies operate any loyalty programmes.<br />
- IFRIC 14, IAS 19, The Limit on a Defined Benefit<br />
Asset, Minimum Funding Requirements <strong>and</strong> their<br />
Interaction (effective from 1 January 2008).<br />
Subsidiaries are those companies in which the<br />
Company <strong>and</strong> its subsidiaries hold, directly or indirectly,<br />
more than one half of voting rights. Subsidiaries are<br />
fully consolidated from the date on which control is<br />
transferred to the Group. They are de-consolidated from<br />
the date on which control of the Company ceases.<br />
The purchase method of accounting is used to<br />
account for the acquisition of subsidiaries. The<br />
cost of an acquisition is measured as the fair value<br />
of the assets given, equity instruments issued<br />
<strong>and</strong> liabilities incurred or assumed at the date of<br />
exchange, plus costs directly attributable to the<br />
acquisition. Identifiable assets acquired <strong>and</strong> liabilities<br />
<strong>and</strong> contingent liabilities assumed in a <strong>business</strong><br />
combination are measured initially at fair values<br />
at the acquisition date. The excess of the cost of<br />
acquisition over the fair value of the Group’s share<br />
of the identifiable assets, liabilities <strong>and</strong> contingent<br />
liabilities is recorded as goodwill. If the cost of<br />
acquisition is less than the fair value of the Group’s<br />
share of net assets acquired, the difference is<br />
recognised directly in the income statement.<br />
Inter-company transactions, balances <strong>and</strong> unrealised<br />
gains on transactions as well as income, expenses <strong>and</strong><br />
dividends between <strong>group</strong> companies are eliminated.<br />
Subsidiaries’ accounting policies have been changed<br />
or adequately adjusted where necessary to ensure<br />
consistency with the policies adopted by the Group.
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
2.2.2 Transactions <strong>and</strong> minority interests<br />
The Group’s share of its associates’ post-acquisition<br />
profits or losses is recognised in the income statement.<br />
The Group applies a policy of treating transactions<br />
with minority interests as transactions with parties<br />
external to the Group. Purchases from minority<br />
The Group’s share of post-acquisition movements in<br />
associate’s reserves is recognised as a movement in the<br />
Group’s reserves.<br />
interests result in goodwill (excess), being the<br />
difference between any consideration paid <strong>and</strong> the<br />
relevant share acquired of the carrying value of<br />
net assets of the subsidiary. Disposals to minority<br />
interests result in gains <strong>and</strong> losses for the Group<br />
that are recorded in the income statement. Minority<br />
interests are disclosed as a separate item of the<br />
Group’s equity. Net profit or loss is divided into net<br />
profit (loss) of the majority owner <strong>and</strong> net profit<br />
(loss) of the minority owner.<br />
If the Group’s share of losses of an associate equals or<br />
exceeds its interest in the associate, including unsecured<br />
receivables to the associate, the Group discontinues<br />
recognising its share of further losses unless the Group<br />
has any legal or other liabilities assumed on behalf of<br />
the associate. If the associate subsequently reports<br />
profits, the Group resumes recognising its share of those<br />
profits only after its share of the profits equals the share<br />
of losses not recognised.<br />
2.2.3 Associates<br />
Associates are all entities over which the Group has<br />
a significant influence but not control, generally<br />
accompanying a direct or indirect shareholding of<br />
between 20.00% <strong>and</strong> 50.00% of the voting rights.<br />
Investments in associates are accounted by the<br />
equity method of accounting according to which such<br />
investments are initially recognised at cost <strong>and</strong> are<br />
subsequently increased or decreased by the Group’s<br />
share of the associate’s profit or loss. Dividends<br />
received from an associate reduce the carrying<br />
amount of the investment.<br />
Unrealised gains on transactions between the Group<br />
<strong>and</strong> its associates are eliminated to the extent of<br />
the Group's interest in the associates. Accounting<br />
policies of associates have been changed where<br />
necessary to ensure consistency with the policies<br />
adopted by the Group.<br />
The Group’s investments in the internally managed<br />
mutual funds, where the Group has a significant<br />
influence are treated as investments in the associated<br />
companies <strong>and</strong> are accounted by the equity<br />
method. The investment-linked insurance funds are<br />
categorised as financial assets designated at fair<br />
value through profit or loss at inception as permitted<br />
by IAS 28, Investments in Associates (see Note 10).<br />
205
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
2.2.4 Subsidiaries of the Group<br />
Registered office<br />
Percentage of ownership<br />
Members of the Group – direct:<br />
KD Investments d. o. o. Ljubljana<br />
KD Investments d. o. o. Zagreb<br />
KD Investments a.d. Belgrade<br />
SAI KD Investments s. a. Bucharest<br />
KD Investments plc Sofia<br />
KD Investments a. s. Bratislava<br />
Slovenia<br />
Croatia<br />
Serbia<br />
Romania<br />
Bulgaria<br />
Slovakia<br />
100.00%<br />
100.00%<br />
100.00%<br />
100.00%<br />
100.00%<br />
100.00%<br />
206<br />
KD Investments d. o. o. Varshaw<br />
KD BPD d. o. o. Ljubljana<br />
KD Upravljanje imovinom d. o. o. Zagreb<br />
KD Capital Management s. a. Bucharest<br />
KD Securities EAD, Sofia<br />
KD Asset Management b. v. Amsterdam<br />
KD Life d.d. Kiev<br />
KD Življenje d.d. Ljubljana<br />
KD Life Asigurari S.A., Bucharest<br />
KD Life a.d., Sofia<br />
SC KD Fond De Fond SA Bucharest<br />
Adriatic Slovenica d. d. Ljubljana<br />
KD Kapital d.o.o. Ljubljana<br />
KD Private Equity d.o.o., Belgrade<br />
Ljubljanski kinematografi d.d. Ljubljana<br />
Kolosej Ljubljana d.o.o.<br />
Kinematografi Maribor d.o.o.<br />
Kolosej Celje d.o.o.<br />
KD Mark d.o.o. Ljubljana<br />
R.E. Invest d.o.o. Ljubljana<br />
Pol<strong>and</strong><br />
Slovenia<br />
Croatia<br />
Romania<br />
Bulgaria<br />
Netherl<strong>and</strong>s<br />
Ukraine<br />
Slovenia<br />
Romania<br />
Bulgaria<br />
Romania<br />
Slovenia<br />
Slovenia<br />
Serbia<br />
Slovenia<br />
Slovenia<br />
Slovenia<br />
Slovenia<br />
Slovenia<br />
Slovenia<br />
100.00%<br />
100.00%<br />
100.00%<br />
100.00%<br />
100.00%<br />
100.00%<br />
100.00%<br />
91.17%<br />
100.00%<br />
100.00%<br />
99.00%<br />
95.72%<br />
100.00%<br />
100.00%<br />
96.61%<br />
100.00%<br />
75.01%<br />
100.00%<br />
100.00%<br />
100.00%<br />
KD Kvart d.o.o. Ljubljana<br />
Coloseum Multiplex Holdings b.v., Amsterdam<br />
Firsthouse Investments Itd., Cyprus<br />
Fontes Group d.o.o., Belgrade<br />
Gea College d.d., Ljubljana<br />
Asistance Coris d.o.o. Ljubljana<br />
Slovenia<br />
Netherl<strong>and</strong>s<br />
Cyprus<br />
Serbia<br />
Slovenia<br />
Slovenia<br />
100.00%<br />
100.00%<br />
100.00%<br />
95.00%<br />
63.63%<br />
37.94%<br />
Members of the Group through subsidiaries:<br />
ABDS d.d. Sarajevo<br />
KD Finančna točka d.o.o. Ljubljana<br />
KD Fund Advisors, LLC<br />
2Invest s.r.l. Bucharest<br />
KD Vifin s.r.o. Bratislava<br />
KD Life s.r.o. Prague<br />
ZAP d.o.o. Murska Sobota<br />
ČZD Kmečki Glas d.o.o. Ljubljana<br />
KD Mont a.d., Podgorica<br />
Vrtnarstvo Celje d.o.o. Celje<br />
VIB a.d. Banja Luka<br />
Globus Film d.o.o. Koper<br />
Oklev d.o.o. Ljubljana<br />
Kinematografi Kolosej d.o.o. Tuzla<br />
Kolosej Maribor d.o.o.<br />
Zabavni centri d.o.o. Zagreb<br />
Onisac d.o.o. Ljubljana<br />
Gea College PIC d.o.o. Ljubljana<br />
Gea College CVŠ d.o.o. Ljubljana<br />
FBIH<br />
Slovenia<br />
USA<br />
Romania<br />
Slovakia<br />
Chech Republic<br />
Slovenia<br />
Slovenia<br />
Montenegro<br />
Slovenia<br />
FBIH<br />
Slovenia<br />
Slovenia<br />
FBIH<br />
Slovenia<br />
Croatia<br />
Slovenia<br />
Slovenia<br />
Slovenia<br />
58.79%<br />
50.00%<br />
90.00%<br />
70.00%<br />
83.98%<br />
100.00%<br />
100.00%<br />
80.08%<br />
80.50%<br />
50.46%<br />
51.00%<br />
100.00%<br />
100.00%<br />
100.00%<br />
100.00%<br />
100.00%<br />
100.00%<br />
100.00%<br />
100.00%
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
2.3 Segment reporting<br />
in compliance with Council Regulation (EU) No.<br />
1086/2006 <strong>and</strong> Article 123(5). The official exchange<br />
Business <strong>and</strong> geographical segments are parts of the<br />
Group’s operations that are subject to different rates of<br />
profitability, opportunities for growth, future prospects,<br />
rate was used as the basis for the calculation of items<br />
in financial statements for 2006 (comperative year)<br />
from tolar to euro.<br />
<strong>and</strong> risks. A <strong>business</strong> segment is a distinguishable<br />
component of the Group that is engaged in providing<br />
a <strong>group</strong> of related products or services <strong>and</strong> that is<br />
subject to risks <strong>and</strong> returns that are different from<br />
those of other <strong>business</strong> segments. A geographical<br />
segment is a distinguishable component of the Group<br />
that is engaged in providing products or services within<br />
a particular economic environment <strong>and</strong> that is subject<br />
to risks <strong>and</strong> returns that are different from those of<br />
segments operating in other economic environments.<br />
Transactions <strong>and</strong> balances<br />
Foreign currency transactions are translated into the<br />
functional currency using the exchange rates prevailing<br />
at the dates of the transactions. Foreign exchange<br />
gains <strong>and</strong> losses resulting from the settlement of such<br />
transactions <strong>and</strong> from the translation of<br />
year-end exchange rates of monetary assets <strong>and</strong><br />
liabilities denominated in foreign currencies are<br />
recognised in the income statement.<br />
2.4 Foreign currency translation<br />
Functional <strong>and</strong> presentation currency<br />
Items included in the financial statements of each of<br />
the Group’s entities are measured using the currency of<br />
the primary economic environment in which the entity<br />
operates (the “functional currency”). The consolidated<br />
financial statements are presented in Slovenian tolars,<br />
which is the Group’s presentation currency.<br />
The functional <strong>and</strong> presentation currency of the Group<br />
was the Slovenian tolar until 31 December 2006,<br />
while on 1 January 2007 the Group introduced the<br />
euro as the functional <strong>and</strong> presentation currency,<br />
following the changes in legislation in the Republic<br />
of Slovenia introducing the euro as the legal local<br />
currency. The official exchange rate of 239.64<br />
tolars for one euro was appointed on 11 July 2006<br />
Foreign currency monetary items are translated on the<br />
balance sheet date using the reference rate of the ECB<br />
or the Bank of Slovenia exchange rates (for currencies<br />
for which the ECB does not publish reference rates)<br />
on the last day of the year. Non-monetary items that<br />
are measured in terms of historical cost in a foreign<br />
currency are translated using the mean exchange<br />
rate of the Bank of Slovenia applicable at the date of<br />
transaction <strong>and</strong> non-monetary items that are measured<br />
at fair value in a foreign currency are translated using<br />
the reference rate of the ECB applicable at the date<br />
when the fair value was determined.<br />
Changes in the fair value of monetary securities<br />
denominated in foreign currency classified as available<br />
for sale are analysed between translation differences<br />
resulting from changes in the amortised cost of the<br />
207
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
security <strong>and</strong> other changes in the carrying amount<br />
of the security. Translation differences related to<br />
changes in the amortised cost are recognised in profit<br />
or loss, <strong>and</strong> other changes in the carrying amount are<br />
recognised in equity.<br />
On consolidation, exchange differences arising<br />
from the translation of the net investment in foreign<br />
entities are taken to shareholders’ equity. When a<br />
foreign operation is sold, such exchange differences<br />
are recognised in the income statement as part of<br />
the gain or loss on sale.<br />
Translation differences on non-monetary financial<br />
assets <strong>and</strong> liabilities are reported as part of the fair<br />
2.5 Property, plant <strong>and</strong> equipment<br />
208<br />
value gain or loss. Translation differences on nonmonetary<br />
financial assets <strong>and</strong> liabilities such as<br />
equities held at fair value through profit or loss are<br />
recognised in profit or loss as part of the fair value<br />
gain or loss. Translation differences on non-monetary<br />
financial assets such as equities classified as available<br />
for sale are included in the available-for-sale reserve in<br />
equity.<br />
Group companies<br />
The financial statements of all <strong>group</strong> entities (none<br />
of which has the currency of a hyperinflationary<br />
economy) that have a functional currency different<br />
from the presentation currency of the Group are<br />
translated into the presentation currency as follows:<br />
- assets <strong>and</strong> liabilities for each balance sheet<br />
presented are translated at the reference rate of<br />
the ECB or the Bank of Slovenia exchange rates<br />
on the date of the balance sheet,<br />
- income <strong>and</strong> expenses for each income statement<br />
are translated at the average annual reference rate<br />
of the ECB or the Bank of Slovenia exchange rates,<br />
- all resulting exchange differences are recognised<br />
as a separate component of equity (reserves).<br />
After initial recognition, property <strong>and</strong> equipment<br />
are carried at historical cost less accumulated<br />
depreciation <strong>and</strong> accumulated impairment losses, if<br />
any (cost model). Historical cost includes expenditure<br />
that is directly attributable to the acquisition of the<br />
items. Subsequent costs are included in the asset’s<br />
carrying amount or recognised as a separate asset,<br />
as appropriate, only when it is probable that future<br />
economic benefits associated with the item will flow to<br />
the Group <strong>and</strong> the cost of the item can be measured<br />
reliably. All other repairs <strong>and</strong> maintenance are charged<br />
to the income statement during the financial period in<br />
which they are incurred.<br />
Property <strong>and</strong> equipment is derecognised upon<br />
disposal or when no further economic benefits are<br />
expected from the item. The gain or loss arising<br />
from the derecognition of an item of property <strong>and</strong><br />
equipment is determined as the difference between<br />
the disposal proceeds <strong>and</strong> the carrying amount<br />
of the item <strong>and</strong> is recognised in other operating<br />
income.
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
Depreciation<br />
The Group systematically allocates to profit or loss<br />
the cost less residual value (depreciable amount)<br />
over the useful life of each individual item of property<br />
<strong>and</strong> equipment. The Group uses the straight-line<br />
depreciation method. L<strong>and</strong> is not depreciated.<br />
The recognition <strong>and</strong> derecognition policies <strong>and</strong><br />
methods of accounting for depreciation are defined<br />
under property, plant <strong>and</strong> equipment (Note 2.5).<br />
The cost of day-to-day servicing of the investment<br />
property are repairs <strong>and</strong> maintenance <strong>and</strong> are<br />
expensed.<br />
Useful lives are as follows:<br />
2.7 Intangible assets<br />
Property, plant <strong>and</strong> equipment:<br />
Buildings<br />
Vehicles <strong>and</strong> machinery<br />
Furniture, fittings <strong>and</strong> equipment<br />
20 to 59 years<br />
3 to 10 years<br />
2 to 7 years<br />
After initial recognition, an intangible asset shall be<br />
carried at its cost less any accumulated amortisation<br />
<strong>and</strong> any accumulated impairment losses (cost<br />
Assets’ residual values <strong>and</strong> useful lives are reviewed at<br />
each balance sheet date <strong>and</strong> adjusted if appropriate.<br />
If an asset’s recoverable amount is lower than its<br />
book value, the asset is written down immediately<br />
to its recoverable amount <strong>and</strong> the impairment loss is<br />
recognised in the income statement. The recoverable<br />
amount is the higher of an asset´s value in use <strong>and</strong><br />
fair value less costs to sell (see Note 2.9.2).<br />
2.6 Investment property<br />
Investment property is property (l<strong>and</strong> or a <strong>build</strong>ing<br />
- or part of a <strong>build</strong>ing - or both) held to earn<br />
rentals <strong>and</strong>/or for capital appreciation or both,<br />
rather than for administrative purposes or sale<br />
in the ordinary course of <strong>business</strong>. Investment<br />
property is initially measured at cost. After initial<br />
recognition, investment property of the Group is<br />
carried at its cost less accumulated depreciation <strong>and</strong><br />
accumulated impairment losses, if any (cost model),<br />
i.e. the same as property, plant <strong>and</strong> equipment.<br />
model). An entity shall assess whether the useful<br />
life of an intangible asset is finite or indefinite. If<br />
finite, it is amortised on the basis of its useful life.<br />
An intangible asset with an indefinite useful life is<br />
not amortised.<br />
Goodwill<br />
Goodwill represents the excess of the cost of an<br />
acquisition over the fair value of the Group’s share of<br />
the net identifiable assets, liabilities <strong>and</strong> contingent<br />
liabilities of the acquired subsidiary <strong>and</strong> is disclosed<br />
under intangible assets with an indefinite useful life.<br />
Goodwill on acquisition of subsidiaries is included in<br />
intangible assets <strong>and</strong> carried at cost less accumulated<br />
impairment losses. Goodwill on acquisitions of<br />
associates is included in investments in associates.<br />
Separately recognised goodwill is tested annually <strong>and</strong><br />
any impairment is recognised in the income statement.<br />
Impairment losses on goodwill are not reversed. Gains<br />
<strong>and</strong> losses on the disposal of an entity include the<br />
carrying amount of goodwill relating to the entity sold.<br />
209
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
Excess of fair value of the acquired identifiable<br />
assets, liabilities <strong>and</strong> contingent liabilities above the<br />
cost of their acquisition is reassessed <strong>and</strong> any excess<br />
remaining after the reassessment is recognised as<br />
income in the income statement.<br />
following categories:<br />
- financial assets at fair value through profit or loss;<br />
- loans <strong>and</strong> receivables;<br />
- held-to-maturity investments;<br />
- available-for-sale financial assets.<br />
Management determines the classification of its<br />
Goodwill is allocated to cash generating units for the<br />
investments at initial recognition.<br />
purpose of impairment testing. Goodwill is allocated to<br />
the Group’s cash-generating units that are expected to<br />
2.8.1 Financial assets at fair value through profit or loss<br />
benefit from the synergies of the combination.<br />
This category has two sub-categories: financial<br />
Other intangible assets<br />
The Group’s intangible assets with a definite useful<br />
assets held for trading, <strong>and</strong> those designated at fair<br />
value through profit or loss at inception.<br />
life include computer software <strong>and</strong> licences. The<br />
210<br />
cost of acquired software comprises the costs<br />
of acquisition <strong>and</strong> preparation of the asset for<br />
its intended use, <strong>and</strong> for licences it is the cost<br />
of acquisition. Throughout the useful life of an<br />
individual item of an intangible asset the Group<br />
consistently allocates the amount of its amortisation<br />
to individual accounting periods as depreciation<br />
at that time. Amortisation is calculated using the<br />
straight-line method.<br />
Amortisation is charged individually. The periods of<br />
amortisation of intangible assets with a finite useful life<br />
are the following:<br />
A financial asset is classified as held for trading if it<br />
is acquired or incurred principally for the purpose<br />
of selling or repurchasing in the near term or if it is<br />
part of a portfolio of identified financial instruments<br />
that are managed together <strong>and</strong> for which there is<br />
evidence of a recent actual pattern of short-term<br />
profit-taking.<br />
Financial assets <strong>and</strong> financial liabilities are<br />
designated at fair value through profit or loss when:<br />
- doing so significantly reduces measurement<br />
inconsistencies that would arise if the related<br />
derivatives were treated as held for trading <strong>and</strong><br />
the underlying financial instruments were carried<br />
Intangible assets:<br />
Licences<br />
Computer Software<br />
2.8 Financial assets<br />
3 to 5 years<br />
3 to 5 years<br />
at amortised cost for loans <strong>and</strong> advances to<br />
customers or banks <strong>and</strong> debt securities in issue;<br />
- Certain investments, such as equity investments,<br />
are managed <strong>and</strong> evaluated on a fair value<br />
The Group classifies its financial assets in the<br />
basis in accordance with a documented risk
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
management or investment strategy <strong>and</strong> reported<br />
2.8.4 Available-for-sale financial assets<br />
to key management personnel on that basis are<br />
designated at fair value through profit <strong>and</strong> loss.<br />
Available-for-sale investments are those intended to<br />
be held for an indefinite period of time, which may<br />
2.8.2 Held-to-maturity financial assets<br />
be sold in response to needs for liquidity or changes<br />
in interest rates, exchange rates or equity prices.<br />
Held-to-maturity investments are non-derivative<br />
financial assets with fixed or determinable payments<br />
<strong>and</strong> fixed maturities that the Group’s management has<br />
the positive intention <strong>and</strong> ability to hold to maturity.<br />
If the Group were to sell other than an insignificant<br />
amount of held-to-maturity assets, the entire category<br />
Regular-way purchases <strong>and</strong> sales of financial assets<br />
at fair value through profit or loss, held to maturity<br />
<strong>and</strong> available for sale are recognised on trade-date<br />
– the date on which the Group commits to purchase<br />
or sell the asset.<br />
would be reclassified as available for sale.<br />
Financial assets are initially recognised at fair value<br />
2.8.3 Loans <strong>and</strong> receivables<br />
plus transaction costs for all financial assets not<br />
Loans <strong>and</strong> receivables are non-derivative financial<br />
assets with fixed or determinable payments that are<br />
not quoted in an active market, other than: (a) those<br />
that the entity intends to sell immediately or in the<br />
short term, which are classified as held for trading,<br />
<strong>and</strong> those that the entity upon initial recognition<br />
designates as at fair value through profit or loss;<br />
(b) those that the entity upon initial recognition<br />
designates as available for sale; or (c) those for<br />
which the holder may not recover substantially all<br />
of its initial investment, other than because of credit<br />
deterioration.<br />
carried at fair value through profit or loss. Financial<br />
assets carried at fair value through profit <strong>and</strong> loss<br />
are initially recognised at fair value, <strong>and</strong> transaction<br />
costs are expensed in the income statement.<br />
Financial assets are derecognised when the rights<br />
to receive cash flows from the financial assets<br />
have expired or where the Group has transferred<br />
substantially all risks <strong>and</strong> rewards of ownership.<br />
Financial liabilities are derecognised when they<br />
are extinguished − that is, when the obligation is<br />
discharged, cancelled or expires.<br />
Available-for-sale financial assets <strong>and</strong> financial<br />
assets at fair value through profit or loss are<br />
subsequently carried at fair value. Loans <strong>and</strong><br />
receivables <strong>and</strong> held-to-maturity investments are<br />
carried at amortised cost using the effective interest<br />
method. Gains <strong>and</strong> losses arising from changes in<br />
211
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
the fair value of the “financial assets at fair value<br />
through profit or loss” category are included in<br />
the income statement in the period in which they<br />
2.9 Impairment of assets<br />
2.9.1 Impairment of financial assets<br />
arise. Gains <strong>and</strong> losses arising from changes in<br />
212<br />
the fair value of available-for-sale financial assets<br />
are recognised directly in equity, until the financial<br />
asset is derecognised or impaired. At this time,<br />
the cumulative gain or loss previously recognised<br />
in equity is recognised in profit or loss. However,<br />
interest calculated using the effective interest<br />
method <strong>and</strong> foreign currency gains <strong>and</strong> losses on<br />
monetary assets classified as available for sale are<br />
recognised in the income statement. Dividends on<br />
available-for-sale equity instruments are recognised<br />
in the income statement when the entity’s right to<br />
receive payment is established.<br />
The fair values of quoted investments in active<br />
markets are based on current bid prices. If there<br />
is no active market for a financial asset, the Group<br />
establishes fair value using valuation techniques.<br />
These include the use of recent arm’s length<br />
transactions, discounted cash flow analysis <strong>and</strong><br />
other valuation techniques commonly used by<br />
market participants.<br />
a) Financial assets carried at amortised cost<br />
The Group assesses at each balance sheet date whether<br />
there is objective evidence that a financial asset or<br />
<strong>group</strong> of financial assets is impaired. A financial asset or<br />
a <strong>group</strong> of financial assets is impaired <strong>and</strong> impairment<br />
losses are incurred if, <strong>and</strong> only if, there is objective<br />
evidence of impairment as a result of one or more events<br />
that occurred after the initial recognition of the asset<br />
(a “loss event”) <strong>and</strong> that loss event (or events) has an<br />
impact on the estimated future cash flows of the financial<br />
asset or <strong>group</strong> of financial assets that can be reliably<br />
estimated. Objective evidence that a financial asset or<br />
<strong>group</strong> of assets is impaired includes observable data that<br />
comes to the attention of the Group about the following<br />
loss events:<br />
- significant financial difficulty of the issuer;<br />
- a breach of contract, such as a default or<br />
delinquency in interest or principal payments;<br />
- the Group granting to the borrower, for economic<br />
or legal reasons relating to the borrower’s financial<br />
difficulty, a concession that the lender would not<br />
otherwise consider;<br />
- it becoming probable that the borrower will enter<br />
bankruptcy or other financial reorganisation;<br />
- the disappearance of an active market for that<br />
financial asset because of financial difficulties; or<br />
- observable data indicating that there is a<br />
measurable decrease in the estimated future cash<br />
flows from a <strong>group</strong> of financial assets since the
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
initial recognition of those assets, although the<br />
decrease cannot yet be identified with the individual<br />
financial assets in the Group, including:<br />
- adverse changes in the payment status of<br />
borrowers in the Group, or<br />
- national or local economic conditions that<br />
correlate with defaults on the assets in the Group.<br />
investment has a variable interest rate, the discount<br />
rate for measuring any impairment loss is the<br />
current effective interest rate determined under the<br />
contract. As a practical expedient, the Group may<br />
measure impairment on the basis of an instrument’s<br />
fair value using an observable market price. The<br />
calculation of the present value of the estimated<br />
future cash flows of a collateralised financial<br />
The Group first assesses whether objective evidence<br />
of impairment exists individually for financial<br />
assets that are individually significant. If the Group<br />
asset reflects the cash flows that may result from<br />
foreclosure less costs for obtaining <strong>and</strong> selling the<br />
collateral, whether or not foreclosure is probable.<br />
determines that no objective evidence of impairment<br />
exists for an individually assessed financial asset,<br />
whether significant or not, it includes the asset in<br />
a <strong>group</strong> of financial assets with similar credit risk<br />
characteristics <strong>and</strong> collectively assesses them for<br />
impairment. Assets that are individually assessed<br />
for impairment <strong>and</strong> for which an impairment loss is<br />
or continues to be recognised are not included in a<br />
collective assessment of impairment.<br />
If there is objective evidence that an impairment<br />
loss on loans <strong>and</strong> receivables or held-to-maturity<br />
investments carried at amortised cost has been<br />
incurred, the amount of the loss is measured as the<br />
difference between the asset’s carrying amount <strong>and</strong><br />
the present value of estimated future cash flows<br />
(excluding future credit losses that have not been<br />
incurred) discounted at the financial asset’s original<br />
effective interest rate. The carrying amount of the<br />
asset is reduced through the use of an allowance<br />
account <strong>and</strong> the amount of the loss is recognised in<br />
the income statement. If a loan or held-to-maturity<br />
For the purposes of a collective evaluation of<br />
impairment, financial assets are <strong>group</strong>ed on the basis of<br />
similar credit risk characteristics. Those characteristics<br />
are relevant to the estimation of future cash flows<br />
for <strong>group</strong>s of such assets by being indicative of the<br />
debtors’ ability to pay all amounts due according to the<br />
contractual terms of the assets being evaluated.<br />
Future cash flows in a <strong>group</strong> of financial assets that are<br />
collectively evaluated for impairment are estimated on the<br />
basis of the contractual cash flows of the assets in the<br />
Group <strong>and</strong> historical loss experience for assets with credit<br />
risk characteristics similar to those in the Group. Historical<br />
loss experience is adjusted on the basis of current<br />
observable data to reflect the effects of current conditions<br />
that did not affect the period on which the historical loss<br />
experience is based <strong>and</strong> to remove the effects of conditions<br />
in the historical period that do not exist currently.<br />
Estimates of changes in future cash flows for <strong>group</strong>s of<br />
assets should reflect <strong>and</strong> be directionally consistent with<br />
213
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
changes in related observable data from period to period<br />
(for example, changes in unemployment rates, property<br />
prices, payment status, or other factors indicative of<br />
changes in the probability of losses in the <strong>group</strong> <strong>and</strong> their<br />
magnitude). The methodology <strong>and</strong> assumptions used<br />
for estimating future cash flows are reviewed regularly<br />
by the Group to reduce any differences between loss<br />
estimates <strong>and</strong> actual loss experience.<br />
If, in a subsequent period, the amount of the<br />
impairment loss decreases <strong>and</strong> the decrease can<br />
be related objectively to an event occurring after the<br />
impairment was recognised (such as an improvement<br />
in the debtor’s credit rating), the previously recognised<br />
impairment loss is reversed by adjusting the allowance<br />
account. The amount of the reversal is recognised in the<br />
income statement.<br />
considered in determining whether the assets are<br />
impaired. If any such evidence exists for availablefor-sale<br />
financial assets, the cumulative loss –<br />
measured as the difference between the acquisition<br />
cost <strong>and</strong> the current fair value, less any impairment<br />
loss on that financial asset previously recognised<br />
in profit or loss – is removed from equity <strong>and</strong><br />
recognised in the income statement. Impairment<br />
losses recognised in the income statement on equity<br />
instruments are not reversed through the income<br />
statement. If, in a subsequent period, the fair value<br />
of a debt instrument classified as available for sale<br />
increases <strong>and</strong> the increase can be objectively related<br />
to an event occurring after the impairment loss was<br />
recognised in profit or loss, the impairment loss is<br />
reversed through the income statement.<br />
214<br />
When an asset is uncollectible, it is written off against<br />
2.9.2 Impairment of non-financial assets<br />
the allowance account for the asset. Such assets are<br />
written off after all the necessary procedures have<br />
been completed <strong>and</strong> the amount of the loss has<br />
been determined. Subsequent recoveries of amounts<br />
previously written off decrease the amount of the<br />
impairment charge in the income statement.<br />
Intangible assets which are not subject to<br />
amortisation are tested annually for impairment.<br />
Assets that are subject to amortisation are reviewed<br />
for impairment whenever events or changes in<br />
circumstances indicate that the carrying amount<br />
may not be recoverable. An impairment loss is<br />
(b) Financial assets classified as available-for-sale<br />
recognised for the amount by which the asset’s<br />
carrying amount exceeds its recoverable amount.<br />
The Group assesses at each balance sheet date<br />
whether there is objective evidence that a financial<br />
asset or a <strong>group</strong> of financial assets is impaired.<br />
In the case of equity investments classified as<br />
available-for-sale, a significant or prolonged decline<br />
in the fair value of the security below its cost is<br />
Recoverable amount is determined for an individual<br />
asset, unless the asset does not generate cash<br />
inflows that are largely independent of those from<br />
other assets or <strong>group</strong>s of assets. In such case,<br />
the recoverable amount is established for a cashgenerating<br />
unit i.e. the smallest identifiable <strong>group</strong>
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
of assets that generates cash inflows that are largely<br />
independent of the cash inflows from other assets<br />
receipts or payments, <strong>and</strong> items of income or expense<br />
associated with investing or financing cash flows.<br />
or <strong>group</strong>s of assets. The criterion for determining the<br />
cash-generating units are individual <strong>business</strong> areas<br />
2.13 Share capital <strong>and</strong> dividend distribution<br />
of the Group. The recoverable amount of an asset or<br />
a cash-generating unit is the higher of its fair value<br />
less costs to sell <strong>and</strong> its value in use.<br />
Ordinary <strong>and</strong> preference-shares are equity.<br />
Incremental costs directly attributable to the issue<br />
of new shares or options or to the acquisition of a<br />
2.10 Offsetting financial instruments<br />
<strong>business</strong> are shown in equity as a deduction, net of<br />
tax, from the proceeds.<br />
Financial assets <strong>and</strong> liabilities are offset <strong>and</strong> the net<br />
amount reported in the balance sheet only when there<br />
is a legally enforceable right to offset the recognised<br />
amounts <strong>and</strong> there is an intention to settle on a net<br />
basis, or to realise the asset <strong>and</strong> settle the liability<br />
simultaneously.<br />
2.11 Inventories<br />
Dividends on ordinary <strong>and</strong> preference-shares are<br />
recognised as liability in the period in which they<br />
are approved by the Company’s shareholders.<br />
Dividends for the year that are declared after<br />
the balance sheet date <strong>and</strong> before the financial<br />
statements are authorised for issue are disclosed in<br />
the subsequent events note (see Note 30).<br />
215<br />
Inventories are stated at the lower of cost <strong>and</strong><br />
net realisable value. Cost is determined using the<br />
weighted average cost method. Net realisable<br />
value is the estimated selling price in the ordinary<br />
course of <strong>business</strong>, less applicable variable selling<br />
expenses.<br />
Where the Company or other members of the<br />
Group purchases the Company’s equity share<br />
capital, the consideration paid is deducted from<br />
total shareholders’ equity. Where such shares are<br />
subsequently sold or reissued, any consideration<br />
received is included in shareholders’ equity.<br />
2.12 Cash <strong>and</strong> cash equivalents<br />
2.14 Insurance <strong>and</strong> investment contracts<br />
Cash <strong>and</strong> cash equivalents include cash in h<strong>and</strong><br />
<strong>and</strong> deposits held at call with banks. The Group<br />
report cash flows from operating activities using the<br />
indirect method, whereby profit or loss is adjusted for<br />
the effects of transactions of a non-cash nature, any<br />
deferrals or accruals of past or future operating cash<br />
The Group issues contracts that transfer insurance<br />
risk or financial risk or both. Insurance contracts are<br />
those contracts that transfer significant insurance<br />
risk. Such contracts may also transfer financial<br />
risk. As a general guideline, the Group defines as
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
significant insurance risk the possibility of having to<br />
pay benefits on the occurrence of an insured event<br />
that are at least 10% more than the benefits payable<br />
if the insured event did not occur.<br />
profits in the segments of life insurance <strong>and</strong><br />
annuity insurance at the end of the financial period<br />
<strong>and</strong>/or with regard to the profitability of assets<br />
if higher than the pre-calculated amounts. The<br />
basis for determining the amounts of discretionary<br />
Investment contracts are those contracts that<br />
transfer financial risk with no significant insurance<br />
risk.<br />
participation of the insured <strong>and</strong> the % vary between<br />
individual insurance products, <strong>and</strong> are defined in<br />
the insurance terms.<br />
216<br />
Traditional life insurance contracts <strong>and</strong> investment<br />
contracts include the possibility of discretionary<br />
participation in the positive result realized through<br />
management of assets from the said contracts<br />
(hereinafter referred to as DPF). The possibility of<br />
discretionary participation is a contractual right to<br />
additional benefits supplementary to guaranteed<br />
benefits, namely:<br />
- benefits which are likely to represent a significant<br />
share of the total contract benefits;<br />
- benefits whose amount or timeframe is specified<br />
by the insurer; <strong>and</strong><br />
- benefits which are contractually based on:<br />
- the success of a given category of contracts or<br />
certain types of contracts;<br />
- realized <strong>and</strong>/or unrealized investment returns on<br />
a specified pool of assets held by the issuer; or<br />
- the profit of the company, fund or other entity<br />
that issues the contract.<br />
Traditional life insurance contracts with DPF <strong>and</strong><br />
investment contracts with DPF contain an agreed<br />
insurance sum or annuity (calculated under the<br />
premise of achieving a certain rate of return on<br />
accumulated assets) <strong>and</strong> additional possibility of<br />
the insured's participation in the Group's realised<br />
Insurance <strong>and</strong> financial life insurance contracts are<br />
defined as contracts with DPF because the interest<br />
rate used at the time of preparing the product <strong>and</strong><br />
calculating the agreed insurance sum or annuity<br />
was lower than the expectations at the time with<br />
regard to commercial interest rates. Additional<br />
benefits for policy holder were expected at the<br />
stage of preparing the insurance product, which<br />
represents a discretional right to additional benefits.<br />
2.14.1 Insurance contracts<br />
2.14.1.1 Recognition <strong>and</strong> measurement<br />
The Group is dealing with 4 main categories of<br />
insurance contracts, depending on the duration of<br />
risk <strong>and</strong> whether or not the terms <strong>and</strong> conditions<br />
are fixed:<br />
- Property insurance contracts<br />
- Health insurance contracts<br />
- Life insurance contracts with DPF<br />
- Life insurance contracts where the policy holder<br />
takes on investment risk.
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
2.14.1.2 Property insurance contracts<br />
injured party for damages incurred as a result of the<br />
use or possession of the vehicle causing the damage.<br />
This category includes accident insurance, insurance<br />
of l<strong>and</strong> vehicles, fire <strong>and</strong> other damage insurance,<br />
liability insurance, financial loss insurance, transport<br />
insurance, credit <strong>and</strong> suretyship insurance <strong>and</strong><br />
insurance of assistance <strong>and</strong> costs of procedure. This<br />
mainly involves short-term insurance contracts, with<br />
The insurance also provides coverage of property<br />
(destruction, accident damage) as well as non-property<br />
damage (bodily injury, health conditions or death),<br />
providing the insured with total property security. The<br />
amount of indemnification is limited in both cases by<br />
the legally defined minimal insurance sum.<br />
the exception of credit insurance.<br />
Fire insurance covers real <strong>and</strong> moveable property<br />
In accident insurance, in addition to the basic insured<br />
risks such as disability <strong>and</strong> death, the policy holders<br />
mainly opt for additional insurance coverage such as<br />
daily accident insurance, daily insurance for the event<br />
of hospital treatment due to an accident, <strong>and</strong> daily<br />
insurance fee in the event of prolonged treatment in<br />
a medical facility due to accidents. In addition to the<br />
aforementioned risks, an insurance policy may also be<br />
taken out for the event of death in a traffic accident,<br />
reimbursement of medical expenses, funeral costs in<br />
the event of the insured's death, <strong>and</strong> reimbursement<br />
of accommodation costs for adult supervisors in the<br />
event of insuring schoolchildren.<br />
L<strong>and</strong> motor vehicle insurance covers material damage<br />
(partial or total loss of the vehicle's value) which might<br />
result from traffic accident, natural disasters, theft, fire,<br />
malicious acts <strong>and</strong> other insured risks.<br />
Car insurance falls under the category of m<strong>and</strong>atory<br />
traffic insurance <strong>and</strong> must be ensured by every owner<br />
of a motor vehicle prior to beginning to use the vehicle<br />
in traffic. This applies to all types of motor vehicles<br />
which require registration. The Group reimburses the<br />
from the risk of fire, lightning, explosion, hailstorm,<br />
windstorm, crash of the insured's motor vehicle<br />
<strong>and</strong> work machinery, airplane crash <strong>and</strong> public<br />
manifestations <strong>and</strong> demonstrations. By special<br />
agreement <strong>and</strong> subject to an additional premium,<br />
it is also possible to include insurance coverage<br />
in the event of flooding, water spill, l<strong>and</strong>slide,<br />
avalanche, spill of fluids or gasses, self-combustion<br />
of inventories <strong>and</strong> spill of glowing mass in industrial<br />
environments. Additionally insurance coverage<br />
can extend to earthquake <strong>and</strong> torrential flooding.<br />
Insurance can be taken out on new or actual value.<br />
In the context of the insurance category “Other<br />
damage insurance”, the following subcategories are of<br />
significance according to the amount of the premium:<br />
home insurance for insuring domestic non-fixed<br />
assets, machinery malfunction to ensure machinery<br />
<strong>and</strong> their parts, burglary insurance to ensure moveable<br />
property from burglary <strong>and</strong> theft, <strong>build</strong>ing insurance,<br />
insurance of computers <strong>and</strong> glass.<br />
217
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
General liability insurance covers damages from<br />
indemnification claims enforced by third parties against<br />
the insured due to a sudden event which resulted<br />
in damage to persons or things. The key element<br />
of this insurance category is insurance of general<br />
liability, including employer liability. Other important<br />
subcategories include: forwarding, manufacturer,<br />
project engineering, medical <strong>and</strong> accounting liability.<br />
To a smaller degree other forms of professional liability<br />
insurance are traded: professional liability of attorneys,<br />
insurance agents, real estate agenty, surveyors,<br />
members of boards of managers <strong>and</strong> supervisory<br />
boards, liability of auditing firms <strong>and</strong> other legally<br />
prescribed professional liability insurance types.<br />
Transport insurance includes coverage of goods in<br />
domestic <strong>and</strong> international transport, comprehensive<br />
insurance of boats <strong>and</strong> airplanes, liability insurance<br />
of the owner or authorized user of the boat or<br />
airplane, insurance of transporter's liability in road<br />
traffic, insurance of the forwarding agent's liability<br />
<strong>and</strong> insurance of maritime agents. The quote is<br />
customised to fit the needs of the policy holder, also<br />
in the field of liability insurance in case of damage<br />
to goods under the FIATA bill of lading, <strong>and</strong> we also<br />
design <strong>and</strong> provide more specific insurance policies<br />
such as liability coverage for repairers of boats, marina<br />
<strong>and</strong> harbor managers <strong>and</strong> insurance of risk borne by<br />
constructors of boats/ships.<br />
218<br />
The category of financial loss insurance includes<br />
insurance for the event of halting of the working<br />
process due to fire or machine breakage <strong>and</strong><br />
insurance of public events. The former two are taken<br />
as additional insurances to fire <strong>and</strong> machine breakage<br />
insurance, <strong>and</strong> events are insured independently.<br />
Insurance of halted production process involves<br />
insurance of fixed costs which the insured was unable<br />
to cover due to the fire or machine breakage. By<br />
special agreement insurance may also include profits<br />
which the policy holder was unable to realise during<br />
the halt in production. Insurance of events covers<br />
damages incurred by the organizer in the event of<br />
cancellation of the event due to the weather, <strong>and</strong> by<br />
special agreement also if the cancellation occurs as<br />
a result of natural or administrative force majeure, or<br />
due to fire or explosion.<br />
Credit insurance marketed by the Group cover failure<br />
to pay contractual obligations for whatever reason <strong>and</strong><br />
comprise insurance of commercial loans, insurance of<br />
loans for investment in real property, bank overdraft<br />
limits etc. In the segment of suretyship insurance<br />
the policy holder is provided with a guarantee for<br />
earnest deposits, good performance of works, repair of<br />
malfunctions during the warranty period, payment of<br />
customs duties, for the event of insolvency of tourist<br />
organisations, for ensuring the payment of goods<br />
<strong>and</strong> services acquired through use of the credit card,<br />
guarantees for TIR carnets, etc.<br />
Insurance of assistance costs provide the policy<br />
holder with emergency assistance either in relation<br />
to vehicles in the event of malfunction or traffic<br />
accident, or in relation to an apartment or house when<br />
normal residence is impossible due to the sudden
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
emergence of events, or when emergency assistance<br />
2.14.1.3 Health insurance contracts<br />
is needed when traveling abroad. In insuring the<br />
costs of procedures, the most important feature is the<br />
insurance of legal aid which provides the policy holder<br />
with coverage of attorney fees.<br />
The Group offers three of four types of optional<br />
health insurance as set by the Health Care<br />
<strong>and</strong> Health Insurance Act (ZZVZZ), namely<br />
supplementary health insurance, extra health<br />
In all of the above contracts, premiums accrue<br />
insurance <strong>and</strong> parallel health insurance.<br />
when they become payable by the policy holder.<br />
Premiums contain all costs in addition to premiums,<br />
including the agency fee, except taxes. The part of the<br />
premiums from valid insurance contracts which refers<br />
to unexpired insurance coverages on the balance<br />
sheet date is presented as unearned premium reserve<br />
<strong>and</strong> represents a liability of the Group. Recognised<br />
as revenue are accrued premiums less changes in<br />
unearned premium reserves.<br />
Supplementary health insurance covers the difference<br />
between the healthcare costs under Art. 23 of the<br />
ZZVZZ <strong>and</strong> the share of these costs which is covered<br />
under m<strong>and</strong>atory health insurance, or part of this<br />
difference where the extra payable amount relates to<br />
the right to medical products included in the list of<br />
interchangeable medical products, medication aids<br />
<strong>and</strong> technical accessories.<br />
219<br />
The amounts of damage <strong>and</strong> appraisal costs are<br />
recognised as liability at the time the damage was<br />
incurred. Damages incurred but not fully resolved as<br />
at the balance sheet date are recognised as liabilities<br />
for damages. Liabilities for damages incurred <strong>and</strong><br />
reported as at the balance sheet date are formed on<br />
the basis of individual appraisal of damages. Liabilities<br />
Extra health insurance covers the costs of health<br />
services <strong>and</strong> related services <strong>and</strong> supply of<br />
medical products <strong>and</strong> medical aids <strong>and</strong> technical<br />
accessories, <strong>and</strong> the costs involved in the cash<br />
payouts which are not part of m<strong>and</strong>atory health<br />
insurance <strong>and</strong> are not covered under supplementary<br />
or substitute health insurance.<br />
for damages incurred but not reported as at the<br />
balance sheet date are assessed through statistical<br />
analysis. Liabilities for damages are further increased<br />
by the estimated costs of resolving such damage<br />
cases. Accrued indemnifications/insurance amounts,<br />
including costs of appraisal <strong>and</strong> resolution of damage<br />
cases, increased by the difference of liability for<br />
damages, are recognised as an expense.<br />
Parallel health insurance covers the costs of health<br />
services <strong>and</strong> related services, <strong>and</strong> supply supply of<br />
medical products <strong>and</strong> medical aids <strong>and</strong> technical<br />
accessories which, although they constitute<br />
entitlement under m<strong>and</strong>atory health insurance, are<br />
pursued by the insured under alternative procedures<br />
<strong>and</strong> under different conditions than that regulated<br />
under m<strong>and</strong>atory health insurance.
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
damage cases, increased by the difference of<br />
The Group concludes long-term insurance contracts<br />
liability for damages, are recognised as an expense.<br />
on the basis of monthly or annual premiums.<br />
Insurance companies offering supplementary<br />
In addition to the above, the Group also offers<br />
travel health insurance abroad with assistance from<br />
CORIS which covers the costs of medical treatment<br />
<strong>and</strong> emergency transport. These insurance policies<br />
are short-term in nature.<br />
health insurance are included in compensatory<br />
schemes under ZZVZZ, which offset the differences<br />
in the medical costs between different structures<br />
of insured with individual insurance companies<br />
with regard to gender <strong>and</strong> age. As a compensatory<br />
scheme payer, the Group recognises these expenses<br />
The premium is recognised as a revenue when the<br />
as damage expenses<br />
policyholder's obligation to pay falls due. Premiums<br />
contain all costs in addition to premiums, including<br />
the agency fee, except taxes. The part of the<br />
2.14.1.4 Long-term insurance contracts with included<br />
guarantes <strong>and</strong> DPF<br />
premiums from valid insurance contracts which refers<br />
220<br />
to unexpired insurance coverages on the balance<br />
sheet date is presented as unearned premium reserve.<br />
Recognised as a revenue are accrued premiums less<br />
changes in unearned premium reserves.<br />
The amounts of damage <strong>and</strong> appraisal costs are<br />
recognised as an appraised liability at the time<br />
the damage was incurred. Damages incurred but<br />
not fully resolved as at the balance sheet date are<br />
recognised as liabilities for damages. Liabilities for<br />
damages incurred <strong>and</strong> reported as at the balance<br />
sheet date are formed on the basis of individual<br />
appraisal of damages. Liabilities for damages<br />
incurred but not reported as at the balance sheet<br />
date are assessed through statistical analysis.<br />
Liabilities for damages are further increased by the<br />
estimated costs of resolving such damage cases.<br />
Accrued indemnifications/insurance amounts,<br />
including costs of appraisal <strong>and</strong> resolution of<br />
These contracts include contracts insuring events<br />
related to the insured's life (e.g. death, maturity,<br />
additional insurances), over a longer period of time.<br />
The premium is recognised as a revenue when the<br />
policyholder's obligation to pay falls due. Premiums<br />
are disclosed before deduction of expenses.<br />
Liabilities stemming from the insurance contract are<br />
recorded as expenses as they are incurred.<br />
Liabilities for anticipated future contract entitlements<br />
are recorded at the recognition of premiums. For longterm<br />
life insurance contracts with included guarantees<br />
the liabilities on the valuation date are formed in the<br />
amount of current values of the Group's anticipated<br />
future liabilities less the current estimate of future<br />
premiums to be paid-in on the basis of concluded<br />
insurance policies (prospective method). According
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
to IFRS4, BC 116, the Group uses reduction in<br />
insurance liabilities in terms of Zillmer method.<br />
The Zillmer method is an actuarial method used in<br />
traditional life <strong>business</strong> for deferral of acquisition<br />
costs (reduction in mathematical provisions). The<br />
of profits attributable to life insurance is within<br />
the discretion of the management, which passes<br />
a resolution each year setting the amount of<br />
participation in the surplus. This amount is not<br />
specified in the internal regulations.<br />
Zillmer amount for an individual contract does<br />
not exceed 3.5% of the insured sum. Negative<br />
mathematical provisions are set to 0.<br />
In the case of insurance contracts with a single<br />
payment of the premium, or when the period of<br />
premium payments is shorter than the period during<br />
The premises for evaluation of liabilities also take into<br />
account the risk adjustment.<br />
which the entitlements from the insurance contract<br />
are created, the surplus of premiums which have<br />
fallen due is deferred <strong>and</strong> recognised as a revenue as<br />
Liabilities also include liabilities connected with the<br />
distribution of the surplus to holders of life insurance<br />
policies. In accordance with the insurance terms, only<br />
a valid contract of mixed insurance <strong>and</strong> insurance<br />
in annuities which has been in place for at least 24<br />
months at the end of the financial period is included<br />
in the distribution of surplus.<br />
The surplus in endowment life insurance is added<br />
at the end of each year as an additional premium<br />
<strong>and</strong> consequently the sum insured is increased. An<br />
additional insured sum is paid out in the event of<br />
death or maturity. For annuity insurance the addition<br />
of the surplus during the time of postponement of<br />
pension increases the agreed sum of the annuity.<br />
The surplus can be distributed due to higher yield<br />
of investments, under mortality (over mortality for<br />
annuities) or lower expenses than anticipated <strong>and</strong><br />
provided for.<br />
In accordance with insurance terms, the distribution<br />
entitlements from the insurance contract fall due, i.e.<br />
in accordance with anticipated future entitlements.<br />
Deferred revenue on the balance sheet date is<br />
recognised as a liability. For life insurance (with the<br />
exception of extra accident insurance policies) this<br />
part is recognised under liabilities from insurance<br />
contracts. For extra accident insurance policies,<br />
this part is disclosed as a liability for the unearned<br />
premium. The liability is formed using the pro-rata<br />
method for all insurance contracts which do not<br />
involve monthly payments <strong>and</strong> is calculated for each<br />
insurance contract individually.<br />
As the Group has no reinsurance to partially cover its<br />
liabilities from such contracts, the reinsurance part of<br />
liabilities is zero as at 31 December 2007.<br />
Liabilities are calculated on the balance sheet date on<br />
the basis of the assumptions applicable at the time<br />
of concluding such contracts, or in certain cases on<br />
the assumptions which the Group adopted during the<br />
221
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
insurance term. The assumptions additionally take into<br />
2.14.1.5 Long-term insurance contracts related to unit link<br />
account an adjustment for unanticipated deviations.<br />
Insurance contracts related to unit link cover insurance<br />
Liabilities from damages incurred <strong>and</strong> reported <strong>and</strong><br />
from damages incurred but not reported represent<br />
estimated amounts for:<br />
- claim satteled, but not paid out as of the balance<br />
sheet date;<br />
- incurred but not reported claims as of the balances<br />
sheet date (IBNR);<br />
- incurred but insufficiently reported claims as of the<br />
balance sheet date (IBNER);<br />
- estimated expenses related to claims h<strong>and</strong>ling.<br />
events referring to the life of the policyholder (in the<br />
event of death <strong>and</strong> maturity) for a long term. An<br />
insurance contract related to unit links is a contract<br />
where the contractual payments are invested in units<br />
of an investment fund selected by the policyholder. In<br />
accordance with the accounting st<strong>and</strong>ard, the financial<br />
<strong>and</strong> insurance parts of the contract do not need to be<br />
separated <strong>and</strong> their accounting does not need to be<br />
conducted separately. Liabilities arising from these<br />
contracts are recognised at fair value to income.<br />
222<br />
Liabilities for reported but not yet resolved claims are<br />
recognised based on the estimated amount <strong>and</strong> are<br />
regularly reviewed. Accident Insurance liabilities related<br />
to incurred but not reported claims are determined: for<br />
the accident insurance base on the statistical method,<br />
for other life insurances base on the trend method.<br />
The premium is recognised as revenue when the<br />
policyholder's obligation to pay falls due. The Group<br />
discloses its liabilities to its policyholders under<br />
liabilities related to unit link insurance contracts tied to<br />
investment fund units, in accordance with the relevant<br />
individual insurance contract <strong>and</strong> product.<br />
The liabilities also include expenses related to claims<br />
h<strong>and</strong>ling in the lump sum amount of 2.5% of total<br />
liabilities. Claims liabilities are not discounted. In<br />
accordance with the reinsurance contract, the Group<br />
discloses the reinsurance part of its liabilities attributable<br />
to damages as reinsurance assets.<br />
Liabilities are increased by premiums <strong>and</strong> decreased<br />
by costs. Furthermore, the amount of liabilities takes<br />
into account changes in the value of funds´ unit prices<br />
<strong>and</strong> is reduced by the management fees <strong>and</strong> risk<br />
premium. In the event of redemption, the liabilities<br />
are reduced <strong>and</strong> the redemption value equals the<br />
Group's liabilities less exit fees charged in the event of<br />
redemption or upon termination of insurance.<br />
It is assumed that the risk premiums charged in<br />
an individual time period for expected population<br />
mortality are adequate to cover the damage
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
insurance claims from entitlements in the event of<br />
death which exceed the value of units on individual<br />
personal accounts of the policyholders. Additional<br />
liabilities in regard of such claims are therefore<br />
not disclosed. The risk premium for an individual<br />
For life insurance contracts with DPF <strong>and</strong> investment<br />
contract with DPF, DAC is deducted from mathematical<br />
provisions.<br />
2.14.1.7 Liability adequacy test<br />
insurance contract is calculated on a monthly basis<br />
according to the asset value.<br />
On every balance sheet date, contract liability<br />
adequacy tests are carried out. The Group assesses at<br />
For an individual long-term life insurance contract tied<br />
to investment fund units, the balance of liabilities as<br />
at the balance sheet date equals the value of units<br />
increased by unallocated premiums <strong>and</strong> premiums<br />
recognised on an accrual base.<br />
In case of unit-linked contracts, commission expenses<br />
are deferred where the period of reduction in<br />
premium aimed at covering acquisition expenses<br />
does not match with the period in which commission<br />
expenses are paid. Commissions are deferred <strong>and</strong><br />
amortised so as to achieve matching of premiums<br />
<strong>and</strong> commissions in relation to the first two or three<br />
years of policy life in which commissions are paid <strong>and</strong><br />
premium allocation reduction take place.<br />
2.14.1.6 Deferred policy acquisition costs (DAC)<br />
Commissions <strong>and</strong> other acquisition costs for unit-linked<br />
insurance contracts that vary with <strong>and</strong> are related to<br />
securing new contracts <strong>and</strong> renewing existing contracts<br />
are deferred <strong>and</strong> charged to the income statement<br />
in proportion to <strong>and</strong> over the period when premium<br />
allocations to the unit-linked insurance liability are<br />
reduced for upfront charges. For non-life insurance<br />
contracts a proportional share of acquisition costs is<br />
deducted from the unearned premium reserves (UPR).<br />
each reporting date whether its recognised insurance<br />
liabilities are adequate, using current estimates of<br />
future cash flows under its insurance contracts,<br />
appraisal costs <strong>and</strong> administration cost. Future cash<br />
flows are discounted using the current market risk free<br />
interest rate. If this estimate shows that the carrying<br />
amount of insurance liabilities is not appropriate from<br />
the aspect of estimated future cash flow, the entire<br />
amount of the deficit is recognised in the profit or loss.<br />
The liability adequacy test is done on the basis of<br />
recognised gross liabilities. The relevant insurance<br />
assets are considered separately. In carrying out the<br />
liability adequacy test the insurance considers only<br />
liabilities which stem from contracts listed under the<br />
insurance contracts category according to the st<strong>and</strong>ard.<br />
These liabilities include liabilities for the unearned<br />
premium, liabilities from insurance contracts, deferred<br />
agency fee costs, damage liabilities <strong>and</strong> other liabilities.<br />
If the liability adequacy test indicates inadequate<br />
liabilities, the calculation of liabilities from such<br />
insurance contracts in future periods is done on the<br />
basis of the assumption of the test which showed<br />
inadequate disclosure of liabilities.<br />
223
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
2.14.1.8 Reinsurance contracts<br />
2.14.1.9 Receivables <strong>and</strong> payables related to insurance<br />
contracts<br />
Contracts entered into by the Group with reinsurers<br />
under which the Group is compensated for losses on<br />
one or more contracts issued by the Group <strong>and</strong> that<br />
meet the classification requirements for insurance<br />
contracts are classified as reinsurance contracts held.<br />
Receivables <strong>and</strong> payables are recognised when due.<br />
These include amounts due to <strong>and</strong> from agents, brokers<br />
<strong>and</strong> insurance contract holders. If there is objective<br />
evidence that the insurance receivable is impaired, the<br />
Group reduces the carrying amount of the insurance<br />
The benefits to which the Group is entitled under<br />
its reinsurance contracts held are recognised as<br />
receivable accordingly <strong>and</strong> recognises that impairment<br />
loss in the income statement.<br />
reinsurance assets. These assets consist of shortterm<br />
balances due from reinsurers, as well longer<br />
2.14.1.10 Salvage <strong>and</strong> subrogation reimbursements<br />
term receivables that are dependent on the expected<br />
224<br />
claims <strong>and</strong> benefits arising under the related reinsured<br />
insurance contracts. Amounts recoverable from or<br />
due to reinsurers are measured consistently with the<br />
amounts associated with the reinsured insurance<br />
contracts <strong>and</strong> in accordance with the terms of each<br />
reinsurance contract. Reinsurance liabilities are<br />
primarily premiums payable for reinsurance contracts<br />
<strong>and</strong> are recognised as an expense when due.<br />
The Group assesses its reinsurance assets for<br />
impairment on a regular basis. If there is objective<br />
evidence that the reinsurance asset is impaired, the<br />
Group reduces the carrying amount of the reinsurance<br />
asset to its recoverable amount <strong>and</strong> recognises that<br />
impairment loss in the income statement.<br />
Some insurance contracts permit the Group to sell<br />
(usually damaged) property acquired in settling a<br />
claim (i.e. salvage). The Group may also have the<br />
right to pursue third parties for payment of some or<br />
all costs (i.e. subrogation).<br />
Estimates of salvage recoveries are included<br />
as an allowance in the measurement of the<br />
insurance liability for claims, <strong>and</strong> salvage property<br />
is recognised in other assets when the liability<br />
is settled. The allowance is the amount that can<br />
reasonably be recovered from the disposal of the<br />
property.<br />
Subrogation reimbursements are also considered as<br />
an allowance in the measurement of the insurance<br />
liability for claims <strong>and</strong> are recognised in other assets<br />
when the liability is settled. The allowance is the<br />
assessment of the amount that can be recovered<br />
from the action against the liable third party.
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
2.14.2 Investment contracts<br />
insured retires. Each policy is entitled to distribution of<br />
surplus from higher returns than the guaranteed return,<br />
Investment contracts are contracts which involve<br />
financial risk without significant insurance risk.<br />
which are generated through the long-term <strong>business</strong><br />
fund. The generated profit is distributed among the<br />
insured in the form of regular <strong>and</strong> final bonuses, as per<br />
All of the Group's investment contracts include<br />
the option of discretionary participation, giving<br />
policyholders the right to participate in the generated<br />
surplus over the guaranteed returns through<br />
management of assets which relate to such investment<br />
contracts. The attribution of the generated surplus is the<br />
discretionary right of the management.<br />
the insurance conditions. The amount of the regular<br />
bonus is set each year by the management depending<br />
on the market value of assets held in the long-term<br />
<strong>business</strong> fund.<br />
Limited-time annuity insurance is a new form of<br />
savings which represents a source of income for a<br />
In this category the Group includes optional extra<br />
pension insurance under the PN-A01 pension plan,<br />
<strong>and</strong> annuity contracts with specific periods of pay-ins<br />
<strong>and</strong> pay-outs with a fixed (technical) interest rate.<br />
Optional extra pension insurance is based on the<br />
Pension <strong>and</strong> Disability Insurance Act. Its allows extra<br />
pension savings <strong>and</strong> ensures receiving pension benefits<br />
until death. The pension basis is a collective pension<br />
plan which a company, subscribing to the collective<br />
insurance contract <strong>and</strong> wishing to take care of its<br />
employees, may join with a minimum of 51% of all<br />
employees. Through this type of insurance employees<br />
of the company subscribing to the insurance contract,<br />
invest in assets held on special personal pension<br />
accounts. The paid-in assets accrue interest with<br />
guaranteed returns which is at least 60% of the interest<br />
rate on long-term government securities with a maturity<br />
of more than one year. Based on accumulated assets<br />
an additional pension will be calculated when the<br />
specific period, <strong>and</strong> the insured chooses the term of<br />
savings <strong>and</strong> the term of annuity payouts. The Group<br />
guarantees the payout of agreed annuities, which can<br />
be increased during the term of the contract at the<br />
expense of the insured's participation in the profits<br />
realized within the insurance category.<br />
Premiums attributable to investment contracts with<br />
DPF are recognised under revenues, <strong>and</strong> increase of<br />
liabilities is recognised under expenses. Premiums,<br />
damages <strong>and</strong> provisions are recognised the same way<br />
as with life insurance contracts with DPF.<br />
At the end of the <strong>business</strong> year the Group determines<br />
the DPF distribution based on the relaised result/returns<br />
on the pool of assets relating to the investment contracts<br />
(DPF portion). This amount is added to the liabilities<br />
from investment contracts with DPF <strong>and</strong> no unallocated<br />
DPF portion remains as of the end of the year.<br />
225
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
The liability for these contracts is established in the<br />
same way as for universal life insurance contracts<br />
liability for surplus returns over the guaranteed returns<br />
(for attribution of regular <strong>and</strong> final bonus).<br />
with DPF without applying shadow accounting for<br />
unrealised gains recorded on available for sale financial<br />
investments recognised in equity. Revenue is also<br />
recognised in the same way.<br />
The measurement of the liabilities under investment<br />
contracts with DPF is similar to that of insurance<br />
contracts with guaranteed <strong>and</strong> fixed terms. However,<br />
the impact of interest rate risk is different due to the<br />
Where the resulting liability is lower than the sum of<br />
presence of the DPF.<br />
the amortised cost of the guaranteed element of the<br />
contract <strong>and</strong> the intrinsic value of the surrender option<br />
2.15 Borrowings<br />
embedded in the contract, it is adjusted <strong>and</strong> any shortfall<br />
is recognised immediately in the income statement.<br />
Borrowings are recognised initially at fair value,<br />
net of transaction costs incurred. Borrowings<br />
226<br />
Investment contracts with DPF refers to contract<br />
which do not take significant insurance risk <strong>and</strong> give<br />
additional benefits to the policyholders.<br />
Unearned premium <strong>and</strong> claims reserves are calculated<br />
same as in case of life insurance contracts with DPF.<br />
Mathematical reserves for annuities contracts for<br />
limited time are calculated based on the prospective net<br />
Zillmer method. Its value is calculated as the current<br />
value of future payments of agreed annuities, including<br />
payment commissions, adjusted for current value of<br />
future technical premiums that will be paid based on<br />
these annuity contracts.<br />
Liabilities from long-term pension insurance contracts<br />
are computed as the mathematical product of the value<br />
per unit of the long-term <strong>business</strong> fund <strong>and</strong> the number<br />
of units held on the reporting date. The calculation is<br />
made for each policy. This covers the liability towards the<br />
policy holder. In addition, the Group forms an additional<br />
are subsequently stated at amortised cost; any<br />
difference between the amount at initial recognition<br />
<strong>and</strong> the redemption value is recognised in the<br />
income statement over the period of the borrowings<br />
using the effective interest method.<br />
Borrowings are classified as current liabilities unless<br />
the Group has an unconditional right to defer<br />
settlement of the liability for at least 12 months after<br />
the balance sheet date.<br />
If the Group purchases its own debt, it is removed<br />
from the balance sheet <strong>and</strong> the difference between<br />
the carrying amount of the liability <strong>and</strong> the<br />
consideration paid is included in investment income.
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
2.16 Derivative financial instruments <strong>and</strong> accounting<br />
point of hedging<br />
be <strong>and</strong> have been highly effective in offsetting changes<br />
in fair values or cash flows of hedged items. The<br />
Group assesses the success of hedging at the time of<br />
Derivative financial instruments including futures <strong>and</strong><br />
forwards, swaps <strong>and</strong> options are initially recognised at<br />
fair value in the balance sheet. Fair values are obtained<br />
from quoted market prices in active markets, including<br />
recent market transactions, <strong>and</strong> valuation techniques,<br />
including discounted cash flow models <strong>and</strong> options<br />
pricing models, as appropriate. All derivatives are<br />
carried as assets when fair value is positive <strong>and</strong> as<br />
liabilities when fair value is negative.<br />
transaction <strong>and</strong> in duration of hedging.<br />
Cash flow hedges<br />
The effective portion of changes in the fair value of<br />
derivatives that are designated <strong>and</strong> qualify as cash flow<br />
hedges is recognised in equity. The gain or loss relating<br />
to any ineffective portion is recognised immediately in<br />
the income statement within net fair value gains on<br />
financial assets at fair value through income.<br />
The method of recognising the resulting fair value<br />
gain or loss depends on whether the derivative is<br />
designated as a hedging instrument, <strong>and</strong> if so, the<br />
nature of the item being hedged. The Group uses<br />
derivative financial instruments for hedging of future<br />
cash flows, which are attributable to assets, liabilities<br />
<strong>and</strong> future <strong>business</strong>.<br />
From the accounting point of view hedging is used<br />
only under specific conditions.<br />
The Group documents at the inception of the<br />
transaction the relationship between hedging<br />
instruments <strong>and</strong> hedged items, as well as its risk<br />
management objective <strong>and</strong> strategy for undertaking<br />
various hedging transactions. The Group also<br />
documents its assessment, both at hedge inception<br />
<strong>and</strong> on an ongoing basis, of whether the derivatives<br />
that are used in hedging transactions are expected to<br />
Amounts accumulated in equity are recycled to the<br />
income statement in the periods in which the hedged<br />
item affects profit or loss.<br />
When a hedging instrument expires or is sold, or<br />
when a hedge no longer meets the criteria for hedge<br />
accounting, any cumulative gain or loss existing in<br />
equity at that time remains in equity <strong>and</strong> is recognised<br />
when the forecast transaction is ultimately recognised<br />
in the income statement. However, when a forecast<br />
transaction is no longer expected to occur, the<br />
cumulative gain or loss that was reported in equity is<br />
immediately transferred to the income statement.<br />
2.17 Trade Payables<br />
Trade payables are recognised initially at fair value<br />
<strong>and</strong> subsequently measured at amortised cost using<br />
the effective interest rate method.<br />
227
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
2.18 Income Tax<br />
liabilities are recognised as income or expense in the<br />
Group’s income statement unless the tax arises from a<br />
2.18.1 Current income tax<br />
The Group charges taxes in accordance with the<br />
provisions of the legislation applicable in individual<br />
countries in which the Group’s subsidiaries are located.<br />
In Slovenia, the corporate income tax rate for the year<br />
2007 is 23%. In 2008 the tax rate will be 22%, in<br />
2009 21% <strong>and</strong> by 2010 the corporate income tax rate<br />
will be reduced to 20%.<br />
transaction that has been recognised directly in equity<br />
or a <strong>business</strong> combination.<br />
Deferred income tax is provided on temporary<br />
differences arising on investments in subsidiaries <strong>and</strong><br />
associates, except where the Group controls the timing<br />
of the reversal of the temporary difference <strong>and</strong> it is<br />
probable that the temporary difference will not reverse<br />
in the foreseeable future.<br />
2.18.2 Deferred income tax<br />
2.19 Employee benefits – other long-term employee<br />
Deferred income tax is provided in full, using the balance<br />
benefits<br />
228<br />
sheet liability method, on temporary differences arising<br />
between the tax bases of assets <strong>and</strong> liabilities <strong>and</strong> their<br />
carrying amounts in the consolidated financial statements. this<br />
In accordance with the initial recognition exemption,<br />
deferred taxes are not recorded for temporary differences on<br />
initial recognition of an asset or a liability in a transaction<br />
other than a <strong>business</strong> combination if the transaction,<br />
when initially recorded, affects neither accounting nor<br />
taxable profit. Deferred income tax is determined using tax<br />
rates (<strong>and</strong> laws) that have been enacted or substantively<br />
enacted by the balance sheet date <strong>and</strong> are expected<br />
to apply when the related deferred income tax asset is<br />
realised or the deferred income tax liability is settled.<br />
Deferred income tax assets are recognised to the<br />
extent that it is probable that future taxable profit<br />
will be available against which the temporary<br />
differences can be utilised.<br />
The effects of recognising deferred tax assets <strong>and</strong><br />
The Group provides benefits to employees as a legal<br />
obligation: jubilee rewards <strong>and</strong> retirement benefit bonuses.<br />
According to Slovene legislation employees retire after 40<br />
years of working life, when, if fulfilling certain conditions,<br />
they are entitled to benefits paid in a lump sum amount.<br />
Employees are also entitled to a long service bonus for<br />
every ten years of employment with the Group.<br />
The Group recognised all actuarial gains <strong>and</strong> losses<br />
immediately in the income statement.<br />
These liabilities are valued by an independent<br />
certified actuary. The main actuarial assumptions<br />
included in the calculations of the obligations for<br />
long-term employee benefits are:<br />
- discount rate of 4.5%,<br />
- future salary increases using inflation index<br />
increased by 4.8%,<br />
- the rate of employee turnover of 4%.
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
2.20 Revenue recognition<br />
c) Interest income <strong>and</strong> expenses<br />
Interest income <strong>and</strong> expense for all interest-bearing<br />
Revenue comprises the fair value of the consideration<br />
received or receivable for the sale of goods <strong>and</strong><br />
services, in the ordinary course of the Group’s<br />
activities. Revenue is shown net of value-added tax,<br />
returns, rebates <strong>and</strong> discounts <strong>and</strong> after eliminated<br />
sales within the Group. The Group recognises revenue<br />
when the amount of revenue can be reliably measured<br />
<strong>and</strong> it is probable that future economic benefits will<br />
flow to the entity <strong>and</strong> specific criteria have been met<br />
for each of the Group’s activities as described below.<br />
The amount of revenue is not considered to be reliably<br />
measurable until all contingencies relating to the sale<br />
have been resolved. The Group bases its estimates on<br />
historical results, taking into consideration the type of<br />
customer, the type of transaction <strong>and</strong> the specifics of<br />
each arrangement.<br />
a) Sales of goods<br />
Sales of goods are recognised when a <strong>group</strong> entity has<br />
delivered products to the customer <strong>and</strong> the customer<br />
has accepted the products. Revenue is recognised when<br />
it is probable that the economic benefits associated<br />
with the transaction will flow to the <strong>group</strong> entity <strong>and</strong> the<br />
<strong>group</strong> entity has transferred to the buyer the significant<br />
risks <strong>and</strong> rewards of ownership of the goods.<br />
b) Sales of services<br />
Sales of services are recognised in the accounting<br />
period in which the services are rendered, by reference<br />
to completion of the specific transaction assessed on<br />
the basis of the actual service provided as a proportion<br />
of the total services to be provided.<br />
financial instruments, except for those classified as<br />
held for trading or designated at fair value through<br />
profit or loss, are recognised within ‘interest income’<br />
<strong>and</strong> “interest expense” in the income statement using<br />
the effective interest method.<br />
The effective interest method is a method of<br />
calculating the amortised cost of a financial asset<br />
or a financial liability <strong>and</strong> of allocating the interest<br />
income or interest expense over the relevant period.<br />
The effective interest rate is the rate that exactly<br />
discounts estimated future cash payments or receipts<br />
through the expected life of the financial instrument<br />
or, when appropriate, a shorter period to the net<br />
carrying amount of the financial asset or financial<br />
liability. When calculating the effective interest<br />
rate, the Group estimates cash flows considering<br />
all contractual terms of the financial instrument (for<br />
example, prepayment options) but does not consider<br />
future credit losses. The calculation includes all<br />
fees <strong>and</strong> points paid or received between parties<br />
to the contract that are an integral part of the<br />
effective interest rate, transaction costs <strong>and</strong> all other<br />
premiums or discounts.<br />
Once a financial asset or a <strong>group</strong> of similar financial<br />
assets has been written down as a result of an<br />
impairment loss, interest income is recognised using<br />
the rate of interest used to discount the future cash<br />
flows for the purpose of measuring the impairment loss.<br />
229
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
d) Dividend income<br />
Dividend income is recognised when the right to<br />
receive payment is established.<br />
3. Critical accounting estimates <strong>and</strong><br />
judgements<br />
3.1 Critical accounting estimates <strong>and</strong> judgements in<br />
e) Premium income<br />
Income from insurance premiums includes net income<br />
from insurance premiums, calculated on the basis of<br />
gross written premiums accrued in the accounting period,<br />
less the share of gross written premiums ceded to the<br />
reinsurer <strong>and</strong> adjusted for changes in net unearned<br />
premium reserves.<br />
applying accounting policies<br />
The Group makes estimates <strong>and</strong> assumptions that<br />
affect the reported amounts of assets <strong>and</strong> liabilities<br />
within the next financial year. Estimates <strong>and</strong><br />
judgements are continually evaluated <strong>and</strong> based<br />
on historical experience <strong>and</strong> other factors, including<br />
expectations of future events that are believed to be<br />
230<br />
Income from insurance contracts is recognised as<br />
premium income in the following way:<br />
- Income arising from single premium is recognised<br />
when the insurance policy is incepted <strong>and</strong> bills<br />
charged;<br />
- Income arising from long-term insurance contracts<br />
in which the premium is paid in instalments<br />
(monthly, quarterly, annually) is recognised upon<br />
the recognition of premium receivables.<br />
The premium charged by the Group covers<br />
transaction costs (the fees of concluding the<br />
contract, management <strong>and</strong> collection) <strong>and</strong><br />
represents income in the period of settlement. If<br />
a period of more than one year is concerned, a<br />
portion of the premium is deferred as liability <strong>and</strong><br />
transferred to income over the life of the contract.<br />
reasonable under the circumstances.<br />
3.1.1 Estimated impairment of goodwill<br />
The Group annually tests goodwill for potential<br />
impairment in accordance with the accounting<br />
policy stated in Note 2.7. The recoverable amounts<br />
of cash-generating units have been determined<br />
based on value-in-use calculations. These<br />
calculations require the use of estimates.<br />
3.1.2 The ultimate liability arising from claims made<br />
under insurance contracts<br />
The estimation of the ultimate liability arising from claims<br />
made under insurance contracts is the Group’s most<br />
critical accounting estimate. There are several sources of<br />
uncertainty that need to be considered in the estimate<br />
of the liability that the Group will ultimately pay for such<br />
claims. At each balance sheet date, liability adequacy<br />
tests are performed to ensure the adequacy of liabilities.
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
In performing these tests, current best estimates of<br />
future contractual cash flows <strong>and</strong> claims h<strong>and</strong>ling <strong>and</strong><br />
administration expenses, as well as investment income<br />
from the assets backing such liabilities, are used. Any<br />
deficiency is charged to profit or loss by establishing a<br />
provision for losses arising from liability adequacy tests.<br />
is summarised <strong>and</strong> presented by insurance contract<br />
category.<br />
Expected cash flows are generated for:<br />
- premiums (life insurance contracts <strong>and</strong> extra<br />
accident insurance),<br />
- payout of damages (death, maturity, annuities,<br />
redemptions, accident loss),<br />
At each balance sheet date, liability adequacy tests<br />
are performed to ensure the adequacy of the contract<br />
liabilities net of related deferred acquisition cost (DAC)<br />
- costs (remaining commission fees, administrative<br />
fees, costs of damages), <strong>and</strong><br />
- revenues from investments.<br />
assets. In performing these tests, current best estimates<br />
of future contractual cash flows <strong>and</strong> claims h<strong>and</strong>ling <strong>and</strong><br />
administration expenses, as well as investment income<br />
from the assets backing such liabilities, are used. Any<br />
deficiency is immediately charged to profit or loss initially<br />
by writing off DAC <strong>and</strong> by subsequently establishing a<br />
provision for losses arising from liability adequacy tests<br />
(the unexpired risk provision).<br />
Long-term insurance contracts with fixed terms are<br />
measured based on assumptions set out at the inception<br />
of the contract. When the liability adequacy test requires<br />
the adoption of new best estimate assumptions, such<br />
assumptions (without margins for adverse deviation) are<br />
used for the subsequent measurement of these liabilities.<br />
Any DAC written off as a result of this test cannot<br />
subsequently be reinstated.<br />
The test is carried out separately for life <strong>and</strong> non-life<br />
insurance.<br />
1. Liability adequacy test for life insurance<br />
The test is carried out for each contract which was<br />
valid on the balance sheet date, <strong>and</strong> the outcome<br />
For individual future cash flows the following items are<br />
taken into consideration:<br />
- provisions of individual insurance policies (amount<br />
of the premium, premium payment dynamics,<br />
amount of the insured sum for the event of death<br />
<strong>and</strong> maturity, amount of annuities),<br />
- technical bases of the relevant products (mortality<br />
tables, interest rate, initial fee costs, other<br />
administrative costs), <strong>and</strong><br />
- assumptions (the realised mortality rates for life<br />
insurance policies, mortality in annuity insurance,<br />
rates of redemption, future profitability, level of realised<br />
administrative costs, future inflation, damage outcome<br />
from accident insurance policies, profitability...).<br />
Assumptions are individually explained.<br />
The cash flows for individual years (development up to<br />
80 years) are discounted on the balance sheet date.<br />
Economic <strong>and</strong> operative assumptions<br />
1. Risk discount rate<br />
In order to calculate the present value of future cash<br />
flows the euro area risk discount rate graph is used<br />
231
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
(AAA-rated euro area central government bonds)<br />
based on the mortality tables used at the time when<br />
the product was issued on the market. Therefore for,<br />
2. Investment return<br />
In the calculation a 5.5% rate of return was used<br />
for the first 10 years <strong>and</strong> 5.16% years for the<br />
subsequent years, with a 7% rate of return for<br />
products involving investment risk.<br />
the LAT calculation, 55% of the probability included<br />
in the moratlity tables was used.<br />
For annuities contracts, the Group used the Austrian<br />
annuity tables from 1996, which, based on the<br />
opinion of the Management, shows the actual life<br />
expectancyof the population.<br />
3. Inflation<br />
232<br />
The expected inflation rates were considered in the<br />
estimate of expected costs.<br />
Year<br />
Annual Rate<br />
2008 2.60%<br />
2009 2.45%<br />
2010 2.30%<br />
2011 2.15%<br />
≥2012 2.00%<br />
4. Costs<br />
Costs of operations (administration, administration,<br />
costs of payout of damages ...) were calculated on<br />
the basis of estimates contained in the technical<br />
bases of the product, multiplied by a factor which<br />
represents an estimate of expected realised costs<br />
compared to those calculated into the products,<br />
under the assumption that one-half of the costs is<br />
not subject to inflation. Other costs are increased at<br />
the inflation rates listed in the above table.<br />
Management believes that the use of different tables<br />
presents the best estimation of the liabilities related to<br />
life insurance contracts with DPF.<br />
6. Redemption rates<br />
Based on an analysis of redemptions of life insurance<br />
policies <strong>and</strong> investment risk insurance policies, the<br />
following rates of redemption are used:<br />
Year after agreement<br />
Rate of buy-out<br />
Life<br />
Unit Link<br />
insurances<br />
0 12.80% 7.37%<br />
1 7.60% 5.20%<br />
≥2 3.00% 3.00%<br />
7. Damage from extra accident insurance contracts<br />
Based on historical data the future damage from<br />
extra accident insurance is estimated at 40% of the<br />
extra accident insurance premium.<br />
5. Mortality<br />
Within the calculation of the liabilitity adequacy test<br />
for life insurance contracts with DPF, mortality rates<br />
were used based on the last 10 years’ experience.<br />
This shows that the acutal probability of the insured<br />
population is only 55% of the probability which is<br />
Result of the adequacy test<br />
The present value of future cash flows from life<br />
insurance contracts is compared to the amount of<br />
liabilities from life insurance, which includes the<br />
calculation of mathematical provisions, provisions<br />
for damages <strong>and</strong> unearned premium reserve.
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
The opinion on the adequacy of liabilities for 2007<br />
- to be added when the test is carried out<br />
Liabilities as calculated using LAT as per<br />
31.12.2007 are lower than liabilities the Group<br />
recognised in its financial statements using its own<br />
methodology. The test has proven the adequacy of<br />
liabilities formed for life insurance contracts.<br />
The Group first adopted LAT for fiscal year 2006.<br />
expenses attributable to the unexpired periods of<br />
policies in force at the balance sheet date with the<br />
amount of unearned premiums in relation to such<br />
policies after. Expected cash flows relating to claims<br />
<strong>and</strong> expenses are estimated by reference to the<br />
experience during the expired portion of the contracts,<br />
adjusted for significant individual losses which are not<br />
expected to recur.<br />
The test proved the adequacy of liabilities for life<br />
insurance contracts as at 31.12.2006.<br />
The opinion on the adequacy of liabilities for 2007<br />
The results show no deficiency in the liabilitiy<br />
2. Liability adequacy test for property <strong>and</strong> health<br />
amount for either 2007 or 2006.<br />
insurance<br />
The liability adequacy test for property insurance<br />
contracts is carried out for liabilities attributable to<br />
3.1.1 Estimate of future benefit payments <strong>and</strong><br />
premiums arising from long-term insurance contracts<br />
the unearned premium reserve <strong>and</strong> related DAC. <strong>We</strong><br />
consider that the formed liabilities for damages <strong>and</strong><br />
liabilities for bonuses <strong>and</strong> discounts are based on<br />
undiscounted test estimates of management using<br />
actuarial techniques are adequate so no further<br />
adequacy test is considered necessary.<br />
The liability adequacy test for property <strong>and</strong> health<br />
insurance was performed for all insurance liabilities.<br />
Insurance liabilities related to incurred <strong>and</strong> reported<br />
claims <strong>and</strong> incurred but not reported claims are<br />
calculated by using current assumptions <strong>and</strong> therefore<br />
represent the best estimation of the current liabilities<br />
from the insurance contracts.<br />
The liability adequacy test is therefore limited to the<br />
unexpired portion of existing contracts. It is performed<br />
by comparing the expected value of claims <strong>and</strong><br />
The determination of the liabilities under long-term<br />
insurance contracts is dependent on estimates<br />
made by the Group. Estimates are made as to the<br />
expected number of deaths for each of the years in<br />
which the Group is exposed to risk. The Group bases<br />
these estimates on st<strong>and</strong>ard industry <strong>and</strong> national<br />
mortality tables that reflect recent historical mortality<br />
experience, adjusted where appropriate to reflect the<br />
Group’s own experience. For contracts that insure<br />
the risk of longevity, appropriate but not excessively<br />
prudent allowance is made for expected mortality<br />
improvements. The estimated number of deaths<br />
determines the value of the benefit payments <strong>and</strong> the<br />
value of the valuation premiums. The main source<br />
of uncertainty is that epidemics such as AIDS, SARS<br />
<strong>and</strong> wide-ranging lifestyle changes, such as in eating,<br />
smoking <strong>and</strong> exercise habits, could result in future<br />
mortality being significantly worse than in the past for the<br />
233
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
age <strong>group</strong>s in which the Group has significant exposure<br />
to mortality risk. However, continuing improvements<br />
in medical care <strong>and</strong> social conditions could result in<br />
improvements in longevity in excess of those allowed<br />
for in the estimates used to determine the liability for<br />
contracts where the Group is exposed to longevity risk.<br />
as a result of damage claims. On the balance sheet<br />
date liability adequacy tests are carried out in order<br />
to ensure the adequacy of the disclosed contractual<br />
liabilities. In the performance of these tests the Group<br />
uses its best estimates of future cash flows, appraisal<br />
<strong>and</strong> administrative costs <strong>and</strong> investment incomes from<br />
assets which cover these liabilities. Through formation of<br />
234<br />
For long-term insurance contracts with fixed <strong>and</strong><br />
guaranteed terms, estimates are made in two stages.<br />
Estimates of future deaths, voluntary terminations,<br />
investment returns <strong>and</strong> administration expenses are<br />
made at the inception of the contract <strong>and</strong> form the<br />
assumptions used for calculating the liabilities during<br />
the life of the contract. A margin for risk <strong>and</strong> uncertainty<br />
is added to these assumptions. These assumptions<br />
are “locked in” for the duration of the contract. New<br />
estimates are made each subsequent year in order to<br />
determine whether the previous liabilities are adequate<br />
in the light of these latest estimates. If the liabilities are<br />
considered adequate, the assumptions are not altered.<br />
If they are not adequate, the assumptions are altered<br />
(“unlocked”) to reflect the best estimate assumptions. A<br />
key feature of the adequacy testing for these contracts<br />
is that the effects of changes in the assumptions on the<br />
measurement of the liabilities <strong>and</strong> related assets are not<br />
symmetrical. Any improvements in estimates have no<br />
impact on the value of the liabilities <strong>and</strong> related assets<br />
until the liabilities are derecognised, while significant<br />
enough deterioration in estimates is immediately<br />
recognised to make the liabilities adequate.<br />
There are several areas of uncertainty which must be<br />
taken into consideration when preparing the estimation<br />
of liabilities which the Group will be required to pay<br />
provisions for losses stemming from the liability adequacy<br />
tests, the found deviations affect the profit or loss.<br />
Long-term insurance contracts with certain guarantees<br />
are measured on the basis of assumptions used at the<br />
signing of the contract. If the liability adequacy test<br />
requires the use of new assumptions based on the best<br />
estimate, these are used for subsequent measurement<br />
of these liabilities (without the adjustment for<br />
unfavourable experience).<br />
3.1.4 Impairment of available-for-sale equity financial<br />
assets<br />
The Group determines that available-for-sale equity<br />
financial assets are impaired when there has been a<br />
significant or prolonged decline in the fair value below<br />
its cost. This determination of what is significant<br />
or prolonged requires judgement. In making this<br />
judgement, the Group evaluates, among other factors,<br />
the normal volatility in share price, the financial health<br />
of the investee, industry <strong>and</strong> sector performance,<br />
changes in technology <strong>and</strong> operational <strong>and</strong> financing<br />
cash flow. Impairment may be appropriate when there<br />
is evidence of deterioration in the financial health of the<br />
investee, industry <strong>and</strong> sector performance, changes in<br />
technology, <strong>and</strong> financing <strong>and</strong> operational cash flows.
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
3.1.5 Impairment losses on loans <strong>and</strong> receivables<br />
3.1.7 Employee benefits<br />
In determining whether an impairment loss should be<br />
recorded in the income statement, the Group makes<br />
judgments as to whether there is any observable<br />
data indicating that there is a measurable decrease in<br />
the estimated future cash flows. This evidence may<br />
include observable data indicating that there has been<br />
The employee benefits obligations (jubilee rewards<br />
<strong>and</strong> retirement benefit bonuses) are measured using<br />
the actuarial valuations, therefore some actuarial<br />
estimates <strong>and</strong> assumptions are needed, such<br />
as rates of employee turnover, early retirement,<br />
discount rate, future salary levels, etc.<br />
an adverse change in the payment status of borrowers<br />
in a <strong>group</strong>, or national or local economic conditions<br />
3.1.8 Income taxes<br />
that correlate with defaults on assets in the <strong>group</strong>.<br />
Management uses estimates based on historical loss<br />
experience for assets with credit risk characteristics<br />
<strong>and</strong> objective evidence of impairment similar to those<br />
in the portfolio when scheduling its future cash flows.<br />
The methodology <strong>and</strong> assumptions used for estimating<br />
both the amount <strong>and</strong> timing of future cash flows are<br />
reviewed regularly to reduce any differences between<br />
loss estimates <strong>and</strong> actual loss experience.<br />
3.1.6 Held-to-maturity investments<br />
The Group follows the guidance of IAS 39 on classifying<br />
non-derivative financial assets with fixed or determinable<br />
payments <strong>and</strong> fixed maturity as held-to-maturity. This<br />
classification requires significant judgement. In making<br />
this judgement, the Group evaluates its intention <strong>and</strong><br />
ability to hold such investments to maturity. If the Group<br />
fails to keep these investments to maturity other than<br />
for the specific circumstances – for example, selling an<br />
insignificant amount close to maturity – it will be required<br />
to reclassify the entire class as available-for-sale. The<br />
investments would therefore be measured at fair value<br />
<strong>and</strong> not at amortised cost.<br />
The Group is subject to income taxes in different<br />
jurisdictions. Some estimates are required in<br />
determining the amount of provision for income<br />
taxes. There are many transactions <strong>and</strong> calculations<br />
for which the ultimative tax determination is<br />
uncertain during the ordinary course of <strong>business</strong>.<br />
Due to changes in the future income tax rate some<br />
estimates regarding the disposals of available-forsale<br />
portfolio have to be made by the management<br />
when calculating the deferred tax liability. Additionally<br />
the management best estimates of future taxable<br />
profits are used for calculating the deferred tax asset<br />
regarding the carry-forward income tax losses.<br />
4. Comparatives<br />
Some changes in the presentation of the financial<br />
statements have been made in order the financial<br />
statements would give better underst<strong>and</strong>ing of the<br />
activities <strong>and</strong> transactions of the Group. Where<br />
necessary, comparative figures have been adjusted<br />
to conform with changes in presentation in the<br />
current year, as follows:<br />
235
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
- Net income – financial assets for trading <strong>and</strong><br />
financial assets at initial recognition – dividends,<br />
interests have been reclassified from net income<br />
- financial assets at fair value through P&L to<br />
investment income;<br />
- Impairment – intangible assets (goodwill) has been<br />
reclassified from other expenses to depreciation<br />
<strong>and</strong> impairment expenses;<br />
- Expenses from other liabilities have been<br />
reclassified from finance costs to other expenses;<br />
- Income tax receivable <strong>and</strong> liability are presented as<br />
The strategic risk refers to the Group’s<br />
long-term development as much as to the each<br />
of its subsidiaries. The management of the Group<br />
manages these risks defining its vision <strong>and</strong> strategy<br />
<strong>and</strong> monitoring their appropriateness on a regular<br />
basis. According to the variety of Group’s <strong>business</strong>es<br />
the appropriate long-term investment decisions are<br />
the key factor when managing strategic risks. The<br />
corporate governance of the Group helps it to follow<br />
the long-term <strong>business</strong> development <strong>and</strong> growth to<br />
achieve the required rate of return.<br />
a separate line in the balance sheet.<br />
236<br />
Income statement<br />
(in EUR)<br />
2006<br />
adjusted<br />
2006<br />
reported<br />
Investment income 14,401,754 12,791,790<br />
Net income-at fair value through<br />
P&L<br />
18,425,773 20,035,737<br />
Depreciation, amortisation <strong>and</strong><br />
impairment charges<br />
(6,917,704) (8,486,709)<br />
Other expenses (6,408,821) (5,683,799)<br />
Finance costs (5,513,800) (4,669,817)<br />
Operating profit/(loss) 29,863,341 29,019,358<br />
Balance sheet<br />
(in EUR)<br />
2006<br />
adjusted<br />
2006<br />
reported<br />
Assets<br />
Loans <strong>and</strong> other receivables 132,080,595 133,845,743<br />
Income tax receivable 1,765,148 -<br />
Liabilities<br />
Trade <strong>and</strong> other payable 54,020,158 65,882,444<br />
Income tax liability 11,862,286 -<br />
5. Risk management<br />
The Group's activities expose it to a variety of<br />
risks: strategic risks, insurance <strong>and</strong> financial risks,<br />
operating risks <strong>and</strong> general <strong>business</strong> risk.<br />
The Group is exposed to financial risks through<br />
its financial assets <strong>and</strong> liabilities, reinsurance<br />
receivables <strong>and</strong> insurance liabilities. The principal<br />
financial risk is the possibility that the inflows from<br />
financial investments will not be sufficient to cover<br />
the outflows arising from insurance contracts.<br />
The most significant components of this risk are<br />
the change in the interest rate risk, the prices of<br />
securities risk, currency <strong>and</strong> credit risk.<br />
The purpose of financial risk management process<br />
is above all to maintain the stability of operations<br />
<strong>and</strong> reduce the exposure to individual risks to an<br />
acceptable level. Because of highly diversified<br />
activities, the Group is mainly faced with insurance<br />
<strong>and</strong> financial risks.<br />
Risk management is a continuous cyclical process,<br />
which can be divided into three stages. At the first<br />
stage, potential risks are identified. At the second<br />
stage, individual risks are modelled <strong>and</strong> measured.
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
These models serve as a basis for measuring the<br />
level of exposure an individual company in the Group<br />
<strong>and</strong> the Group to individual risks. On the basis<br />
of identification <strong>and</strong> measurement of risks in the<br />
Group, the management adopts adequate measures<br />
for reducing or controlling these risks (stage three).<br />
insurer is the possibility that claims <strong>and</strong> benefits<br />
exceed the amount of insurance liabilities (technical<br />
provisions) created for a portfolio of insurance<br />
contracts using statistical methods. This may happen<br />
because of the change in the frequency of claims or<br />
their amount which can be higher than expected.<br />
Measures used by the management are different <strong>and</strong><br />
depend on the level of exposure <strong>and</strong> the type of risk.<br />
Insured events are incidental which means that<br />
their number <strong>and</strong> amount varies in individual years<br />
The management of the Group manages risks present<br />
in individual companies in the Group <strong>and</strong> on the level<br />
of the Group as a whole. It thereby sets guidelines<br />
concerning the balance between the risks, returns <strong>and</strong><br />
capital, performs periodic controls <strong>and</strong> sets guidelines<br />
for implementation of <strong>business</strong> policies <strong>and</strong> strategy<br />
<strong>and</strong> in relation to statistically established averages.<br />
Experience shows that the larger the portfolio of<br />
similar insurance contracts, the smaller the relative<br />
variability of the expected outcome will be. In<br />
addition, a more diversified portfolio is less likely to<br />
be affected by a change in any subset of the portfolio.<br />
for individual companies in the Group.<br />
Individual companies in the Group have established<br />
a system of reporting for the needs of management<br />
that enables regular monitoring of risks to which<br />
they are exposed. The insurance companies in<br />
the Group have set up investment <strong>and</strong> liquidity<br />
committees, which take care of the ALM function.<br />
Types of risks<br />
Insurance companies in the Group have developed<br />
their own policy of concluding insurance contracts<br />
with the aim of spreading the assumed risks <strong>and</strong><br />
achieve, within each individual category, a sufficient<br />
amount of risk population to reduce the variability of<br />
expected results. The principal means for reducing<br />
insurance risks is reinsurance, i.e. the transfer of<br />
risks that exceed the predetermined amount to the<br />
reinsurance company.<br />
237<br />
5.1 Insurance risk<br />
Risk related to the insurance policy represents the<br />
possibility that the event insured against actually<br />
occurs <strong>and</strong> uncertainty in relation to the amount<br />
of the sum insured or indemnity. It is the nature of<br />
insurance contracts that insurance risks are incidental<br />
<strong>and</strong> unpredictable; however, the main risk for the<br />
When developing a new insurance product it is<br />
very important that the parameters defining the<br />
insurance premium are assessed adequately. The<br />
risk accepted by the Group at the inception of an<br />
insurance contract is reflected in the price, i.e. the<br />
insurance premium. If the parameters defining the<br />
insurance premium are not assessed adequately<br />
when developing a new insurance product, this is a
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
risk for the Group to which it is exposed during the<br />
entire life cycle of the insurance product.<br />
In the management's opinion, the important risks<br />
faced by the Group in its operations are the following:<br />
In the context of insurance risk the Group is<br />
exposed to underwriting process risk, product<br />
design risk, pricing risk, economic environment<br />
risk, policyholder behaviour risk, reserving risk,<br />
claims risk. Insurance risks are also managed with<br />
reinsurance protection.<br />
- Underwriting process risk, the danger of<br />
misevaluation of accepted risk. This risk involves<br />
mistaken decisions to underwrite a risk regardless<br />
of the risk exposure of the insured, insurance on the<br />
basis of inaccurate <strong>and</strong> incomplete information on the<br />
insured, incorrect information about the amount of<br />
maximum potential damage, or potential inappropriate<br />
5.1.1. Description of risks<br />
acquisition of reinsurance coverage by the reinsurer.<br />
238<br />
Insurance activities are based on managing insurance<br />
risks. Insurance risks apply to risks accepted by<br />
the insurer from the policyholder. Insurance risks<br />
are r<strong>and</strong>om <strong>and</strong> unpredictable. At the signing of an<br />
insurance contract the insurer accepts the risk to repay<br />
the insured the agreed contractual amount if an insured<br />
event occurs or if the contract expires, whereas when<br />
the insured event will occur is uncertain.<br />
Insurance cases are r<strong>and</strong>om, their number <strong>and</strong><br />
amounts vary from year to year <strong>and</strong> deviate from<br />
statistical averages. The Group is therefore engaging<br />
in diversifying <strong>and</strong> increasing its portfolio. This allows<br />
it to disperse the risk <strong>and</strong> lower the variability of<br />
expected events. An important instrument to lower<br />
insurance risks is reinsurance, i.e. the transfer of<br />
risks which exceed a predetermined amount, to a<br />
reinsurer. The Group further manages insurance risks<br />
through effective performance of internal controls,<br />
internal audits <strong>and</strong> forming appropriate insurance<br />
technical provisions to cover potential future liabilities<br />
stemming from existing insurance contracts.<br />
The Group manages the aforementioned risk through<br />
providing guidelines for accepting insurance risks, using<br />
software for accepting insurance risks, strict criteria <strong>and</strong><br />
procedures for accepting insurance risks, especially for<br />
large insured sums <strong>and</strong> coverages. Also, the Group has<br />
concluded an obligatory reinsurance contract with its<br />
reinsurer, by which the reinsured risks over a certain<br />
contractually agreed insured sum are automatically<br />
reinsured. The Group also monitors damage results <strong>and</strong><br />
analyses any worsening thereof.<br />
- The risk of inadequate assessment of liabilities<br />
stemming from insurance contracts<br />
(reserving risk) is the risk that these reserves will not be<br />
adequate to cover the liabilities stemming from accepted<br />
risks, or the risk that future damage payments will<br />
exceed the evaluated amount of liabilities.<br />
The Group regularly checks the adequacy of liability<br />
calculations <strong>and</strong> the adequacy of used assumptions<br />
in the calculation of higher liabilities stemming from<br />
insurance contracts. The Group also carries out
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
liability adequacy tests. If the liability adequacy test<br />
indicates that the liabilities are under-presented, they<br />
are increased.<br />
products) to 4% (older products). The adequacy of<br />
returns on investments of insured liabilities in the<br />
future is checked on a regular basis.<br />
For isurance contracts with DPF component<br />
<strong>and</strong> insurance contracts related to unit-linked<br />
assumptions on future mortality, interest rates,<br />
contract terminations <strong>and</strong> administrative costs are<br />
applied. These assumptions are used to determine<br />
liabilities stemming from the insurance contract. The<br />
assumptions also include a risk adjustment.<br />
On each reporting date the assumptions are reset<br />
to reflect current assumptions <strong>and</strong> are used to<br />
check whether the liabilities have been adequately<br />
evaluated. If the liabilities are inadequate, the<br />
assumptions are changed to reflect the current<br />
state. Current assumptions do not contain the risk<br />
adjustment.<br />
For estimations on the mortality rate, mortality tables<br />
are used, as in the past the portfolio of insurance<br />
contracts has been too small for it to be able to<br />
rely on its own experience. Thus, for insurance<br />
for the event of death <strong>and</strong> insurance for the event<br />
of death <strong>and</strong> maturity, the Group uses Slovenian<br />
mortality tables made in 1990-1992, <strong>and</strong> for annuity<br />
insurance it uses Austrian annuity tables from the<br />
year 1996. In comparison with 2006, the Group has<br />
not changed its assumptions regarding population<br />
mortality. In the context of managing insurance risk,<br />
actuarial services are constantly checking the applied<br />
assumptions against the actual damage result, by<br />
individual insurance products.<br />
It is the management's assessment that Slovenian<br />
mortality tables adequately reflect expectations with<br />
regard to maturity <strong>and</strong> mortality rate of the Slovenian<br />
population.<br />
In its long-term insurance products the Group uses<br />
interest rates ranging from 2.75% (new insurance<br />
The assumption on mortality is determined using<br />
the statistical mortality rate <strong>and</strong> analyses of actual<br />
mortality of the insurance portfolio in the past <strong>and</strong><br />
current year. Also, in cases of disability statistical<br />
tables <strong>and</strong> the insurance, own experience is used.<br />
The Group also regularly analyses the duration of<br />
insurance contracts <strong>and</strong> monitors the movements of<br />
such durations over the period by main products <strong>and</strong>, as<br />
necessary, by sales channels if more significant deviations<br />
occur. These analyses are used when estimating the<br />
duration of insurance contracts with a view to providing<br />
the best possible assessment of the insured's behavior.<br />
The return on investment affects the amount of<br />
future payouts from insurance contracts. When<br />
determining returns, the Group considers government<br />
bonds as risk-free securities, <strong>and</strong> for other securities<br />
risk adjustments are applied. Considering this <strong>and</strong><br />
considering the structure of investments for covering<br />
liabilities, pondered returns of the investment<br />
portfolio are calculated.<br />
239
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
Future costs are determined on the basis of current<br />
costs. Additionally, the assumption of future inflation<br />
is also used, which is based on the EU's long-term<br />
projections for the EUR currency.<br />
product, amount of the commission to insurance<br />
agents <strong>and</strong> other potential costs. The Group also<br />
measures <strong>and</strong> monitors the profitability of individual<br />
products<br />
- Pricing risk applies to the risk that the amount<br />
of the insurance premium is not adequate for<br />
covering the insurance liabilities stemming<br />
from damage claims <strong>and</strong> operating costs. The<br />
reasons can vary, e.g. unsuitable statistical<br />
data, inadequate assessment of damage events,<br />
- Product design risk is the risk that, when calculating<br />
the insurance premium, the Group will be exposed to<br />
the danger of non-consideration of the potential for the<br />
occurrence of new diseases <strong>and</strong> accidents which could<br />
significantly affect the movement of future damage<br />
claim cases. This risk is important for life insurance.<br />
low premium due to competition, unsuitable<br />
240<br />
premium for new products, unsuitable mortality,<br />
annuity, morbidity tables, inadequate amount of<br />
expenses calculated into the price of the product.<br />
Furthermore we can speak about the adequacy of<br />
the used probability tables, which further expose<br />
the Group to risks of natural death, longevity,<br />
critical illness <strong>and</strong> accident.<br />
Already at the new product planning stage,<br />
the Group diligently checks <strong>and</strong> acquires the<br />
necessary statistics which confirm the suitability<br />
of the assumptions used. In the case of high-risk<br />
products such as additional coverage for critical<br />
illness, the Group's general terms <strong>and</strong> conditions<br />
allow the possibility of subsequent change in the<br />
amount of the insurance premium if new statistics<br />
or damage events indicate that the premium is too<br />
low. Similarly, the Group diligently monitors the<br />
amount of actual costs <strong>and</strong>, after analysing these<br />
costs, calculates the amount of costs to include in<br />
the price of individual products, which depends on<br />
the type of product, special costs involved in the<br />
As already mentioned under pricing risk, in certain<br />
higher-risk insurance products the Group does not<br />
guarantee the amount of the insurance premium<br />
during the insurance coverage period. In addition<br />
certain increases are used in the mortality <strong>and</strong><br />
morbidity tables. The Group also follows mortality<br />
<strong>and</strong> morbidity trends. Certain modern illnesses are<br />
excluded from the insurance terms <strong>and</strong> conditions.<br />
In this context the Group has established cooperation<br />
with a reinsurer, which transfers certain knowledge<br />
<strong>and</strong> findings to the Group.<br />
- Cost risk is the risk for potential losses which<br />
could occur as a result of misevaluation of costs<br />
when setting prices <strong>and</strong> misevaluation of changed<br />
circumstances in the macroeconomic environment<br />
which could cause excess growth in the Group's<br />
operating costs.<br />
The procedures for managing risk related to<br />
unsuitable cost assessment are based on an<br />
established system of recording <strong>and</strong> allocating
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
costs under cost centers <strong>and</strong> cost units, on<br />
constant monitoring of the movement of costs,<br />
<strong>and</strong> on adopting appropriate measures in case of<br />
unfavourable developments.<br />
In property insurance a significant risk factor is<br />
climate change, which increases the frequency<br />
of extreme weather events (flooding, hail, etc).<br />
For liability insurance, characterised by lengthy<br />
procedures which can take several years for damage<br />
- The risk that social circumstances will change<br />
so as to have an adverse effect on the Group can<br />
be classified under economic environment risk.<br />
cases to be resolved, a significant risk factor is the<br />
increase of legal actions, especially involving<br />
non-material claims (coverage <strong>and</strong> amount).<br />
Increase in the unemployment rate <strong>and</strong> reduction<br />
of purchase power can cause more damage<br />
in credit insurance, fewer insurance contracts<br />
concluded, more cancellations of life <strong>and</strong> pension<br />
insurance contracts. This <strong>group</strong> may also include<br />
the risk of change in case-law when adjudicating<br />
damage claims.<br />
In the interest of managing insurance risk, the<br />
Group has concluded reinsurance contracts whereby<br />
it transfers a portion of this risk to the reinsuring.<br />
Each financial year the management adopts a<br />
planned reinsurance program which includes<br />
calculations of all maximum own insurance shares<br />
- Policyholder behavior risk - insurance fraud.<br />
- Claims risk involves the risk that damages will be<br />
higher than expected in number <strong>and</strong>/or amount,<br />
<strong>and</strong> the risk of excessive portion of self-coverage<br />
due to inadequate reinsurance coverage, especially<br />
in cases of catastrophic events.<br />
In life insurance contracts with coverage for the<br />
event of death, the number <strong>and</strong> amount of damages<br />
is most affected by epidemics, change in lifestyle<br />
such as change in dietary habits, physical exercise<br />
<strong>and</strong> smoking. For life insurance contracts where the<br />
insured event is maturity, <strong>and</strong> for health insurance<br />
contracts, the greatest risk factor is the advancement<br />
of medicine <strong>and</strong> improvement of the population's<br />
social status, along with increasing longevity.<br />
by insurance category, as well as the maximum<br />
coverage table <strong>and</strong> certain procedures, bases<br />
<strong>and</strong> criteria for determining the largest possible<br />
damage. The reinsurance program consists of<br />
traditional proportional <strong>and</strong> nonproportional forms of<br />
reinsurance coverage, <strong>and</strong> it also includes a contract<br />
for natural disasters.<br />
5.1.2. Frequency <strong>and</strong> amount of damages<br />
Concentration of insurance risk can stem from a<br />
single insurance contract or from a smaller number<br />
of contracts covering low-probability events with<br />
high damage potential, such as insurance for<br />
earthquakes <strong>and</strong> other natural disasters.<br />
In insurance for the event of death, the greatest<br />
effects which can increase the frequency of damage<br />
241
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
claims are epidemics <strong>and</strong> lifestyle changes (e.g.<br />
changed dietary habits, exercise, smoking) which<br />
could lead to premature damage or greater damage<br />
than anticipated. For insurance contracts where the<br />
insured event is survival, the greatest risk factor is the<br />
guarantees coverage up to the insured sum during<br />
the insurance coverage period. During the coverage<br />
period under a mixed life insurance contract, the<br />
Group guarantees the payment of the insured sum<br />
in the event of death or maturity.<br />
advancement of medicine <strong>and</strong> improvement of the<br />
population's social st<strong>and</strong>ard, along with increasing<br />
longevity.<br />
With a view of managing the Group's exposure<br />
to insurance risk, the management concluded<br />
a reinsurance contract transferring a part of the<br />
The insurance contract portfolio contains insurance<br />
insurance risk onto the reinsurer.<br />
contracts where the Group accepts the risk<br />
of coverage in the event of death. In cases of<br />
insurance coverage for the event of death the Group<br />
The following table represents the dispersal of the<br />
insurance portfolio <strong>and</strong> exposure to large insurers.<br />
Share of the largest insured in the joint insurance porfolio:<br />
242<br />
(in EUR)<br />
Total premium<br />
of the largest 10<br />
clients<br />
Share in total<br />
premium<br />
Total premium of<br />
the largest 100<br />
clients<br />
2007<br />
Share in total<br />
premium<br />
Life insurance 40,970 0.64% 212,634 3.33%<br />
Unit-linked insurance 431,550 1.25% 1,506,120 4.37%<br />
Non-life <strong>and</strong> health insurance 10,165,000 4.35% 20,926,000 8.95%<br />
Total: 10,637,520 22,644,754<br />
(in EUR)<br />
Total premium<br />
of the largest 10<br />
clients<br />
Share in total<br />
premium<br />
Total premium of<br />
the largest 100<br />
clients<br />
2006<br />
Share in total<br />
premium<br />
Life insurance 20,923 0.13 % 176,590 1.10%<br />
Unit-linked insurance 1,005,558 2.57 % 2,191,316 5.60%<br />
Non-life <strong>and</strong> health insurance 12,113,608 5.60 % 25,818,999 11.93%<br />
Total: 13,140,089 28,186,905<br />
The table above lists the premium of the 10 or<br />
100 largest insured in the insurance portfolio.<br />
Considering the fact that their share is relatively<br />
small in comparison with the overall portfolio, we<br />
can deduce that the Group's portfolio is sufficiently<br />
diversified <strong>and</strong> that it is not overly exposed to a few<br />
large clients.<br />
In the property insurance segment the risks to which<br />
the Group is exposed vary depending on the industry<br />
in which the insured are active. The table below<br />
shows the concentration of liabilities from property<br />
insurance by industry in which the insured are active.<br />
The maximum loss (maximum sum insured) shown<br />
is categorised by size into three categories.
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
2007 42 – 210 thous<strong>and</strong> EUR 210 - 830 thous<strong>and</strong> EUR over 830 thous<strong>and</strong> EUR<br />
Without With Without With Without With<br />
reinsurance reinsurance reinsurance reinsurance reinsurance reinsurance<br />
Construction 57,516 51,764 37,536 31,557 410,152 275,192<br />
Manufacturing 263,465 236,547 392,417 349,739 1,859,570 1,120,263<br />
Our services 5,836,710 5,252,264 2,009,133 1,795,019 5,522,750 2,827,036<br />
Total: 6,157,691 5,540,576 2,439,085 2,176,314 7,792,471 4,222,491<br />
2006 42 – 210 thous<strong>and</strong> EUR 210 - 830 thous<strong>and</strong> EUR over 830 thous<strong>and</strong> EUR<br />
Without With Without With Without With<br />
reinsurance reinsurance reinsurance reinsurance reinsurance reinsurance<br />
Construction 17,595 15,836 43,151 37,665 290,997 245,082<br />
Manufacturing 336,844 302,817 424,881 374,310 1,769,138 638,285<br />
Our services 6,292,461 5,662,236 1,720,943 1,534,179 5,061,720 2,609,417<br />
Total: 6,646,900 5,980,888 2,188,975 1,946,155 7,121,855 3,492,784<br />
In the life insurance segment a potential concentration<br />
of insurance risk can be seen in contracts with<br />
extremely high sums insured.<br />
The table below indicates the concentration of<br />
insurance risk for life insurance, with the total sum<br />
insured risk categorised into four categories, depending<br />
on the amount of the sum insured involved in the<br />
individual insurance contract.<br />
243<br />
Total sum insured risk of all contracts as at 31.12.2007<br />
Without reinsurance<br />
With reinsurance<br />
0 – 29,999 EUR 1,370,044,137 1,345,759,964<br />
30,000 – 59,000 EUR 295,329,593 215,449,399<br />
60,000 – 99,999 EUR 22,729,364 8,124,951<br />
More than 100,000 EUR 6,085,931 635,008<br />
Total: 1,694,189,025 1,569,969,322<br />
Total sum insured risk of all contracts as at 31.12.2006<br />
Without reinsurance<br />
With reinsurance<br />
0 – 29,999 EUR 912,403,505 871,013,610<br />
30,000 – 59,000 EUR 167,183,667 141,821,950<br />
60,000 – 99,999 EUR 4,561,306 1,692,547<br />
More than 100,000 EUR 3,289,250 1,100,042<br />
Total: 1,087,437,728 1,015,628,149<br />
For annuity insurance we present risk concentration<br />
with total annual annuities classified into five<br />
categories, depending on the amount of the annual<br />
annuity per individual insured. As the annual annuity<br />
we consider the amount which the insured would<br />
receive if the contract was already due for payouts.
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
Structure of the amount of annual annuities<br />
(in thous<strong>and</strong> EUR)<br />
Annual annuity per insured on the final<br />
TOTAL ANNUAL ANNUITIES 2007 TOTAL ANNUAL ANNUITIES 2006<br />
date of the year<br />
amount % amount %<br />
0 – 999 EUR 822 14.95 875 15.44<br />
1,000 –1,999 EUR 1,946 35.38 2.027 35.74<br />
2,000 – 2,999 EUR 1,133 20.61 1.145 20.20<br />
3,000 – 3,999 EUR 664 12.06 681 12.00<br />
More than 4,000 EUR 935 17.00 943 16.63<br />
Total: 5,500 100.00 5.671 100.00<br />
5.1.3 Non-life <strong>and</strong> health insurance contracts - assumptions<br />
<strong>and</strong> changes of assumptions<br />
<br />
balance sheet date (IBNR)<br />
IBNR liabilities are established on the level of<br />
a) procedure of establishing assumptions<br />
insurance categories using a triangle (chain ladder)<br />
method or statistical method.<br />
The main assumptions which affect disclosure of<br />
244<br />
liabilities stemming from property insurance contracts<br />
relate to establishing liabilities for damage claims. The<br />
procedure for assessing liabilities varies depending<br />
on the nature of incidence of loss <strong>and</strong> takes place<br />
on the insurance categories level. The calculation of<br />
provisions for damage claims is divided into two parts,<br />
considering the nature of individual damage:<br />
<br />
balance sheet date<br />
On the basis of a review of all damages reported but not<br />
yet paid out as at the balance sheet date, an assessment<br />
is made on expected liabilities stemming from future<br />
payouts of individual damage claims. Larger cases of<br />
material damage are appraised by in-house appraisers,<br />
<strong>and</strong> non-material damages (e.g. liability claims) <strong>and</strong><br />
claims in legal proceedings are assessed by in-house<br />
legal experts (lawyers). Liabilities from damages which<br />
are paid out in the form of annuities are assessed by the<br />
Group as the present value of future payouts, where a<br />
2.6% discount factor is applied.<br />
The Chain Ladder method can be based on recognised<br />
or accrued damages with monthly or annual<br />
development factors, depending on the characteristics<br />
of the incidence of loss <strong>and</strong> procedures for resolving<br />
damage claims. The damages are arranged in a<br />
triangle, where the rows represent the year the<br />
damage was incurred, <strong>and</strong> the columns represent<br />
the number of years from the time the damage was<br />
incurred to recognising or accrual of the damage.<br />
Prediction of final damages is based on the calculation<br />
of average annual development factors.<br />
The statistical method is based on reviewing past<br />
damage claims. The IBNR calculation is made on<br />
the level of individual insurance category as the<br />
mathematical product of the estimated number of<br />
IBNR damages <strong>and</strong> the estimated value of IBNR<br />
damages. The estimated number of IBNR damages<br />
reported after 1 January 2007 is calculated by
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
multiplying the number of reported damages in 2006<br />
b) Changes of assumptions<br />
by the average factor of damages reported later in<br />
relation to all reported damages over the past three<br />
years. The estimated value of IBNR damages equals<br />
There were no changes of assumptions for<br />
insurance contracts in 2007 according to 2006.<br />
the average value of IBRN damages in the past year<br />
or the average value of damages paid in the past year<br />
c) Development of claims<br />
if there were a relatively small number of damages.<br />
The tables below show claims development for nonlife<br />
insurance <strong>and</strong> extra accident insurance as part<br />
of life insurance policies.<br />
Non-life insurance (excl. optional health insurance) in thous<strong>and</strong> EUR for the 2007<br />
Year in which<br />
claims were<br />
Cumulative claim payments in relation number of years passed between the reporting date <strong>and</strong> date of payment<br />
incurred<br />
0 1 2 3 4 5 6 7 8<br />
1999 29,121 41,968 45,344 47,052 48,042 48,690 49,363 49,705 50,006<br />
2000 30,890 45,437 48,806 50,788 51,569 52,024 52,538 52,897<br />
2001 33,180 50,050 54,080 56,386 57,373 57,930 58,636<br />
2002 33,403 51,210 54,992 57,189 57,811 58,524<br />
2003 38,141 58,733 64,094 66,976 68,168<br />
2004 47,218 69,325 73,273 75,673<br />
2005 47,541 69,220 74,561<br />
2006 46,268 73,223<br />
2007 61,395<br />
245<br />
Non-life insurance (excl. optional health insurance) in thous<strong>and</strong> EUR for the 2006<br />
Year in which<br />
claims were<br />
Cumulative claim payments in relation number of years passed between the reporting date <strong>and</strong> date of payment<br />
incurred<br />
0 1 2 3 4 5 6 7 8<br />
1998 18,363 27,505 29,501 30,706 31,342 31,816 32,259 32,570 32,828<br />
1999 22,867 33,893 36,923 38,454 39,419 40,061 40,621 40,959<br />
2000 26,841 40,164 43,352 45,238 46,016 46,461 46,917<br />
2001 30,494 46,527 50,392 52,578 53,491 54,039<br />
2002 31,975 49,421 53,167 55,269 55,883<br />
2003 37,558 57,878 62,955 65,513<br />
2004 41,858 63,798 67,694<br />
2005 44,941 66,107<br />
2006 43,182
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
Life insurance - extra accident insurance in thous<strong>and</strong> EUR for the 2007<br />
Year in which<br />
claims were<br />
Cumulative claim payments in relation number of years between the reporting date <strong>and</strong> date of payment<br />
incurred<br />
0 1 2 3 4 5 6 7 8<br />
1999 294 516 556 598 624 625 625 625 626<br />
2000 284 473 540 558 558 558 568 568<br />
2001 242 477 552 602 610 615 619<br />
2002 233 432 492 520 531 538<br />
2003 151 246 300 319 324<br />
2004 182 293 319 330<br />
2005 196 396 462<br />
2006 278 552<br />
2007 302<br />
Life insurance - extra accident insurance in thous<strong>and</strong> EUR for the year of 2006<br />
246<br />
Year in which<br />
claims were<br />
Cumulative claim payments in relation number of years between the reporting date <strong>and</strong> date of payment<br />
incurred<br />
0 1 2 3 4 5 6 7 8<br />
1998 306 538 597 613 613 624 631 632 634<br />
1999 358 672 773 818 849 852 873 873<br />
2000 414 746 903 948 958 958 968<br />
2001 368 775 946 1,049 1,060 1,065<br />
2002 439 798 923 974 1,005<br />
2003 383 804 984 1,019<br />
2004 430 854 977<br />
2005 490 1,073<br />
2006 719<br />
5.1.4 Long term life insurance – assumptions, changes<br />
of assumptions <strong>and</strong> sensitivity<br />
Preparing the financial statements in accordance<br />
with IFRS require best estimations of liabilities<br />
using assumptions which reflect the current market<br />
(a) procedure of establishing assumptions<br />
situation.<br />
Liabilities from life insurance contracts with DPF were<br />
calculated using assumptions on future mortality from<br />
statistical tables; the portfolio of insurance contracts<br />
was too small in the past so for the purpose of<br />
estimation of mortalitiy the statistical tables are used:<br />
- for life insurance contracts with DPF Slovenian<br />
mortality tables from 1992 were used;<br />
These assumptions are set at the time of concluding<br />
the contract <strong>and</strong> remain the same throughout the<br />
term of insurance, or safer assumptions are used in<br />
the calculation of liability to provide for the possibility<br />
of unfavourable deviation from expectations. An<br />
additional adjustment is applied to these assumptions<br />
to account for the risk <strong>and</strong> uncertainty.<br />
- for annuity products German mortalitiy tables from<br />
1987 were used.
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
New estimates are made for each subsequent financial<br />
year with the purpose of checking the adequacy of<br />
liabilities determined in this manner. If it is determined<br />
that established liabilities are adequate, assumptions<br />
remain unchanged. If the established liabilities prove<br />
to be inadequate, assumptions are revised to reflect<br />
new expectations. Consequently the provisions are<br />
measured according to the appropriate level.<br />
<br />
The Group established assumptions for returns on<br />
investments by taking into account present returns<br />
on government-issued securities <strong>and</strong> other financial<br />
instruments on the market. In addition to this, the<br />
structure of assets which are used to cover liabilities<br />
stemming from life insurance contracts (longterm<br />
<strong>business</strong> fund) is taken into consideration by<br />
determining weighted average returns.<br />
The assumptions used for insurance contracts<br />
described hereunder are as follows:<br />
<br />
<br />
Future costs are determined on the basis of current<br />
costs. The future inflation assumption was also applied.<br />
Depending on the type of contract the appropriate<br />
mortality table is chosen <strong>and</strong> adjusted to reflect<br />
(b) Changes in assumptions<br />
actual mortality of the insurance portfolio in past<br />
years <strong>and</strong> the current period.<br />
<br />
An analysis of the Group's experience of the past<br />
3 years is carried out by application of statistical<br />
methods, <strong>and</strong> the appropriate cancellation percentage<br />
is determined. Cancellation percentages vary by type<br />
of product <strong>and</strong> term of the insurance period. The<br />
analysis is carried out in order to determine the best<br />
estimate of the policyholders' behavior.<br />
In 2007 the Group made no changes to the assumptions<br />
used in the calculation of insurance contracts.<br />
5.1.5. Sensitivity analysis<br />
The Group made a sensitivity analysis of net profits<br />
before taxes on the last day of the financial year,<br />
with consideration of various parameters.<br />
247<br />
Sensitivity test – parameters<br />
Sensitivity factor<br />
Factor description<br />
Technical interest rate (insurance contracts only) Effect of the change of the technical interest rate by ±1%<br />
Costs <strong>and</strong> Expenses<br />
Mortality (life insurance only)<br />
Mortality in annuity insurance (pension <strong>and</strong> annuity insurance)<br />
Claims ratio (property <strong>and</strong> health insurance only)<br />
Effect on the increase/decrease of all costs except the costs of<br />
acquisition by ±5%<br />
Effect of the 5% increase in mortality<br />
Effect of the 5% decrease in mortality<br />
Effect of the 5% increase in the claims ratio<br />
The above factors were used in actuarial <strong>and</strong><br />
statistical models for calculating the changes of net<br />
effect of changes of key factors on the net earnings<br />
of the Group before taxes.<br />
profits of the Group. The table below shows the
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
Effect on the Group’s net profit before tax for 2007<br />
(in EUR)<br />
Life insurance<br />
policies with<br />
DPF<br />
Life insurances<br />
with<br />
investment<br />
risk<br />
Property insurance<br />
excluding<br />
health insurance<br />
policies<br />
Health insurance<br />
policies<br />
Financial<br />
contracts<br />
with DPF<br />
Factor<br />
Costs +5% (177,013) (161,000) (2,130,000) (786,000) (16,000) (3,270,013)<br />
Costs -5% 177,013 161,000 2,130,000 786,000 16,000 3,270,013<br />
Technical interest rate +1% 7,051,662 - - - 1,301,000 8,352,662<br />
Technical interest rate -1% (8,908,662) - - - (1,651,000) (10,559,662)<br />
Mortality +5% (231,050) - - - - (231,050)<br />
Mortality in annuity insurance -5% (187,477) - - - - (187,477)<br />
Claims ratio +5% (393,064) (385,000) (6,706,000) (4,427,000) (74,000) (11,985,064)<br />
Claims ratio -5% 393,064 385,000 6,706,000 4,427,000 74,000 11,985,064<br />
Total<br />
Effect on the Group’s net profit before tax for 2006<br />
248<br />
(in EUR)<br />
Life insurance<br />
policies with<br />
DPF<br />
Life insurances<br />
with<br />
investment<br />
risk<br />
Property insurance<br />
excluding<br />
health insurance<br />
policies<br />
Health insurance<br />
policies<br />
Financial<br />
contracts<br />
with DPF<br />
Factor<br />
Costs +5% (175,739) (117,000) (2,080,000) (772,000) (8,000) (3,152,739)<br />
Costs -5% 175,739 117,000 2,080,000 772,000 8,000 3,152,739<br />
Technical interest rate +1% 10,382,935 - - - 1,630,000 12,012,935<br />
Technical interest rate -1% (13,118,935) - - - (2,073,000) (15,191,935)<br />
Mortality +5% (230,576) - - - - (230,576)<br />
Mortality in annuity insurance -5% (207,665) - - - - (207,665)<br />
Claims ratio +5% (357,365) (384,000) (6,119,000) (3,857,000) (72,000) (10,789,365)<br />
Claims ratio -5% 357,364 384,000 6,119,000 3,857,000 72,000 10,789,364<br />
Total<br />
5.1.6. Risk management in the area of reinsurance<br />
protection<br />
based on the amount of the Group's own shares <strong>and</strong><br />
insurance portfolio profiles.<br />
General description of the purpose <strong>and</strong> goals of<br />
reinsurance protection<br />
The Group has unified the maximum of own shares<br />
at civil liability insurance. The maximum of own<br />
shares in other types of insurance compared with<br />
The basic purpose of reinsurance protection is the<br />
the past year is unchanged.<br />
transfer of insurance risks which the <strong>group</strong> is unable to<br />
offset with its own assets to reinsurers. In this context<br />
we strive towards optimal protection from large-scale<br />
individual losses as well as mass losses. The decision<br />
on the scale <strong>and</strong> structure of reinsurance protection is<br />
Proportional <strong>and</strong> non-proportional reinsurance<br />
protection ensures automatic coverage of the vast<br />
majority of underwritten risks, even in the event of<br />
potential risk assessment errors. For exceptional risks
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
which exceed the contractual reinsurance protection by<br />
scale, special optional reinsurance protection is ensured.<br />
Analysis of the Groupʼs portfolio from the aspect of<br />
reinsurance risk<br />
Basic assumptions used in sensitivity tests<br />
In the largest <strong>group</strong> of other property insurance<br />
contracts we analysed the sensitivity of individual<br />
<strong>We</strong> assume two types of reinsurance protection<br />
risks. The first risk is whether the structure<br />
<strong>and</strong> scale of protection have been adequately<br />
chosen, which can be checked by simulation of<br />
whether decreasing reinsurance protection would<br />
significantly decrease net profit or loss, which<br />
would consequently jeopardise the Group's capital<br />
adequacy. The second risk is whether the profit<br />
or loss would worsen significantly if an aboveaverage<br />
number of large-scale <strong>and</strong> mass losses<br />
(which would also involve above-average amounts)<br />
occurred in a given period.<br />
Two income sensitivity tests have been designed to<br />
assess reinsurance protection risk. Firstly, the test<br />
of sensitivity to a decrease in reinsurance protection<br />
<strong>and</strong> secondly, the test of sensitivity to an<br />
above-average incidence of loss (for large-scale <strong>and</strong><br />
mass losses).<br />
portfolios of insurance categories/<strong>group</strong>s of<br />
insurance categories to large-scale <strong>and</strong> mass<br />
losses, with the aim of focusing the reinsurance<br />
risk management analysis on the most exposed<br />
insurance categories. This analysis showed that<br />
reinsurance risk is most significantly affected, both<br />
in terms of the amount <strong>and</strong> number of potentially<br />
large-scale <strong>and</strong> mass losses, by the portfolio of<br />
auto liability insurance <strong>and</strong> the portfolio of fire<br />
<strong>and</strong> other damage insurance. These portfolios<br />
also significantly affect profit or loss, therefore the<br />
sensitivity analysis was made on the basis of these<br />
reinsurance contracts.<br />
249
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
Concentration of reinsurance for 2007<br />
Contract year 2007<br />
Type of reinsurance<br />
Own<br />
share/<br />
priority in<br />
EUR<br />
Reinsurance<br />
premium<br />
Structure<br />
of the reinsurance<br />
premium<br />
Accrued<br />
reins.<br />
losses<br />
(in thous<strong>and</strong> EUR)<br />
Reserved<br />
reins.<br />
losses<br />
Effect of<br />
the reins.<br />
outcome on<br />
the profit<br />
Surplus reinsurance of fires 1,000 1,425 14.79% 470 195 391 (369)<br />
Quota share reinsurance of fires 900 666 6.91% 226 137 78 (225)<br />
Surplus reinsurance of technical reserves 300 701 7.28% 165 221 227 (88)<br />
Quota share reinsurance of technical reserves 270 586 6.08% 147 204 196 (39)<br />
Quota share reinsurance of earthquakes - 1,254 13.01% 314 - - (940)<br />
Risk XL reinsurance of fires 300 428 4.44% - 575 - 147<br />
Risk XL technical reinsurance 120 51 0.53% - - - (51)<br />
Cat XL property reinsurance excl. vehicle insurance 300 591 6.13% - 1,115 167 691<br />
Total Fire <strong>and</strong> technical insurance - 5,702 59.18% 1,322 2,447 1,059 (874)<br />
XL reinsurance of auto liability <strong>and</strong> green card 250 1,292 13.41% - - 928 (364)<br />
XL reinsurance of comprehensive auto insurance 150 71 0.74% - - - (71)<br />
Cat XL property reinsurance - vehicle insurance 300 876 9.09% - 228 48 (600)<br />
Total auto insurance - 2,239 23.24% - 228 975 (1,036)<br />
Other property insurance - 1,476 15.31% 32 292 - (1,152)<br />
Health insurance policies - - 0.00% - - - -<br />
Life insurance - 218 2.27% 70 1 3 (144)<br />
TOTAL CONTRACT YEAR 2007 - 9,635 100.00 1,424 2,968 2,037 (3,206)<br />
250<br />
Concentration of reinsurance for 2006<br />
Contract year 2006<br />
Type of reinsurance<br />
Own<br />
share/<br />
priority in<br />
EUR<br />
Reinsurance<br />
commission<br />
Reinsurance<br />
premium<br />
Structure<br />
of the reinsurance<br />
premium<br />
Reinsurance<br />
commission<br />
Accrued<br />
reins.<br />
losses<br />
(in thous<strong>and</strong> EUR)<br />
Reserved<br />
reins.<br />
losses<br />
Effect of<br />
the reins.<br />
outcome on<br />
the profit<br />
Surplus reinsurance of fires 1,000 1,844 18.88% 424 6,323 48 4,951<br />
Quota share reinsurance of fires 900 628 6.44% 214 362 32 (20)<br />
Surplus reinsurance of technical reserves 300 889 9.11% 200 380 694 385<br />
Quota share reinsurance of technical reserves 270 611 6.25% 153 379 68 (11)<br />
Quota share reinsurance of earthquakes - 1,419 14.54% 340 - 5 (1,074)<br />
Risk XL reinsurance of fires 300 127 1.30% - - - (127)<br />
Risk XL technical reinsurance 120 49 0.50% - - - (49)<br />
Cat XL property reinsurance excl. vehicle insurance 300 524 5.36% - 401 45 (78)<br />
Total Fire <strong>and</strong> technical insurance 6,091 62.38% 1,331 7,845 892 3,977<br />
XL reinsurance of auto liability <strong>and</strong> green card 250 1,276 13.06% - - 664 (612)<br />
XL reinsurance of comprehensive auto insurance 150 55 0.56% - - - (55)<br />
Cat XL property reinsurance - vehicle insurance 300 860 8.80% - 481 120 (259)<br />
Total auto insurance 2,190 22.43% - 481 784 (925)<br />
Other property insurance 1,288 13.19% 72 9 77 (1,130)<br />
Health insurance policies - 0.00% - - - -<br />
Life insurance 195 2.00% 62 10 5 (118)<br />
TOTAL CONTRACT YEAR 2006 9,764 100.00 1,465 8,345 1,758 1,804
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
Quantitative analysis of sensitivity test results<br />
used the most important reinsurance contracts<br />
covering <strong>group</strong>s of insurance categories which<br />
In order to assess the consequences of lowering<br />
the reinsurance protection, both sensitivity tests<br />
were carried out, measuring the quantitative impact<br />
may potentially have the greatest impact on the<br />
Group's corporate income due to the portfolio size or<br />
potential for large-scale or mass losses.<br />
on net profit or loss. In the sensitivity tests we<br />
Test of sensitivity of profit or loss to a decrease in reinsurance protection for 2007<br />
Contract year 2007<br />
Initial own<br />
share<br />
Increased<br />
own share<br />
Change in<br />
net<br />
premium<br />
Change in<br />
net losses<br />
(in thous<strong>and</strong> EUR)<br />
Change<br />
in net<br />
reserves<br />
Effect of<br />
change to<br />
profit<br />
Total proportional reinsurance unchanged - - - -<br />
Risk XL reinsurance of fires 300 900 408 575 - (167)<br />
Risk XL technical reinsurance 120 120 - - - -<br />
Cat XL property reinsurance excl. vehicle insurance 300 1,000 306 581 - (275)<br />
Total Fire <strong>and</strong> technical insurance - - 714 1,156 - (442)<br />
XL reinsurance of auto liability <strong>and</strong> green card 250 300 204 - 100 104<br />
XL reinsurance of comprehensive auto insurance 150 150 - - - -<br />
Cat XL property reinsurance - vehicle insurance 300 1,000 362 119 - 243<br />
Total auto insurance - - 566 119 100 347<br />
251<br />
Test of sensitivity of the profit or loss to the decrease in reinsurance protection for 2006<br />
Contract year 2006<br />
Initial own<br />
share<br />
Increased<br />
own share<br />
Change<br />
in net<br />
premium<br />
Change in<br />
net losses<br />
(in thous<strong>and</strong> EUR)<br />
Change<br />
in net<br />
reserves<br />
Effect of<br />
change to<br />
profit<br />
Total proportional reinsurance unchanged - - - -<br />
Risk XL reinsurance of fires 300 900 127 - - 127<br />
Risk XL technical reinsurance 120 120 - - - -<br />
Cat XL property reinsurance excl. vehicle insurance 300 1,000 201 303 - (102)<br />
Total Fire <strong>and</strong> technical insurance - - 328 303 - 25<br />
XL reinsurance of auto liability <strong>and</strong> green card 250 300 203 - 50 153<br />
XL reinsurance of comprehensive auto insurance 150 150 - - - -<br />
Cat XL property reinsurance - vehicle insurance 300 1,000 427 397 - 30<br />
Total auto insurance - - 630 397 50 183<br />
A decrease of reinsurance protection in 2006 would<br />
affect the amount of the reinsurance premium,<br />
<strong>and</strong> also may have an impact on decreasing the<br />
reinsurer’s share in claims. In the given year there<br />
was no disproportional reinsurance (XL) used,<br />
which is intended for huge claims <strong>and</strong> significant<br />
quantities, so the decrease of the reinsurance<br />
premium would be higher compared with the <strong>and</strong><br />
decrease of claims, there would be a positive effect<br />
on profit.
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
In the case of unfavourable claim events in 2007,<br />
there is a situation of a decrese of reinsurance<br />
protection; the decrease of the reinsurer’s share in<br />
claims would be higher from the decrease of the<br />
reinsurance premium, which would have a negative<br />
effect on profit.<br />
Test of sensitivity of profit or loss to the above-average number <strong>and</strong> amount of large-scale <strong>and</strong> mass losses for 2007<br />
Contract year 2007<br />
Change in net<br />
premium<br />
Change in net<br />
losses<br />
Change in net<br />
reserves<br />
(in thous<strong>and</strong> EUR)<br />
Effect of change<br />
to profit<br />
Total proportional reinsurance - 4,054 - (4,054)<br />
Risk XL reinsurance of fires (146) (420) - 274<br />
Risk XL technical reinsurance (51) (150) - 99<br />
Cat XL property reinsurance excl. vehicle insurance (578) (2,817) - 2,239<br />
Total Fire <strong>and</strong> technical insurance (775) 667 - (1,442)<br />
XL reinsurance of auto liability <strong>and</strong> green card - 625 625 (1,250)<br />
XL reinsurance of comprehensive auto insurance - - - -<br />
Cat XL property reinsurance - vehicle insurance (123) 53 - (176)<br />
Total auto insurance (123) 678 625 (1,426)<br />
Test of sensitivity of profit or loss to the above-average number <strong>and</strong> amount of large-scale <strong>and</strong> mass losses for 2006<br />
252<br />
Contract year 2006<br />
Change in net<br />
premium<br />
Change in net<br />
losses<br />
Change in net<br />
reserves<br />
(in thous<strong>and</strong> EUR)<br />
Effect of change<br />
to profit<br />
Total proportional reinsurance - 4,054 - (4,054)<br />
Risk XL reinsurance of fires (89) (420) - 331<br />
Risk XL technical reinsurance (49) (150) - 101<br />
Cat XL property reinsurance excl. vehicle insurance (531) (2,817) - 2,286<br />
Total Fire <strong>and</strong> technical insurance (669) 667 - (1,336)<br />
XL reinsurance of auto liability <strong>and</strong> green card - 625 625 (1,250)<br />
XL reinsurance of comprehensive auto insurance - - - -<br />
Cat XL property reinsurance - vehicle insurance (113) 53 - (166)<br />
Total auto insurance (113) 678 625 (1,416)<br />
In the two tables above the following losses have been<br />
added to the actual incidence of loss:<br />
- Fire damage in the amount of EUR 800,000, which<br />
was the subject of quota <strong>and</strong> fire risk XL reinsurance.<br />
- Installation damage in the amount of EUR<br />
subject to surplus reinsurance to a small degree, <strong>and</strong><br />
the remaining portion was covered under quota <strong>and</strong><br />
property Cat XL reinsurance.<br />
- Car liability claims in the amounts of EUR 250,000,<br />
750,000, 1,500,000, 3,000,000 <strong>and</strong> 15,000,000.<br />
6,000,000, which was the subject of surplus (95%)<br />
<strong>and</strong> technical risk XL reinsurance.<br />
- Storm damage in the amount of 2x flood damage in<br />
September 2007, i.e. EUR 5,652,000, which was<br />
In car liability insurance we assumed that 50% of<br />
additional damages remains in the reservation <strong>and</strong><br />
for all other added damages we simulated payout in
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
the course of the year. Change of net damages <strong>and</strong><br />
net reserves have the same effect on profit.<br />
The risk of unfavourable changes in investment<br />
values can be the consequence of foreign exchange<br />
rates, as well as changes of interest rates or stock<br />
In total, EUR 32,952,000 in gross damages were<br />
prices.<br />
added, which would have affected profit in 2006 in<br />
the amount of 8.35% of additional damages, <strong>and</strong><br />
8.7% of the amount of added damages in 2007.<br />
The Group manages <strong>and</strong> controls the risks to which<br />
it is exposed by constantly monitoring cash flows <strong>and</strong><br />
ensuring that it always has enough liquid assets at its<br />
5.2 Financial risks<br />
disposal to settle its liabilities, by investing its assets<br />
in a manner which ensures stable long-term returns<br />
Group is exposed to financial risks through its<br />
financial assets <strong>and</strong> liabilities, reinsurance receivables<br />
<strong>and</strong> insurance liabilities. Financial risks are risks that<br />
due to changes in the capital markets <strong>and</strong> ratings<br />
which exceed the amount of returns on insurance<br />
liabilities, by matching the terms of financial assets<br />
against financial liabilities, <strong>and</strong> by ensuring adequacy<br />
of financial assets.<br />
of the Group’s clients inflows will not be sufficient<br />
to cover outflows. The most significant components<br />
of this financial risk are liquidity risk, credit risk <strong>and</strong><br />
market risk, the Group is exposed to the risks of<br />
changes in interest rates, securities market prices <strong>and</strong><br />
currency rates.<br />
Currency risk is less important for the Group because<br />
of ERM2 <strong>and</strong> adopting the euro in 2007.<br />
253<br />
Liquidity risk is the risk that the Group may be<br />
unable to repay all of liabilities, including potential<br />
liabilities, without threat to its normal activities. The<br />
Group maintains capital adequacy with a sufficient<br />
adequate amount of capital in order to be able to<br />
ensure liquidity at any moment <strong>and</strong> so that it is<br />
sustainably able to meet its obligations (solvency).<br />
Market risks appear especially in investment of<br />
assets, where there is the potential that expectations<br />
regarding the value of investments are not met or are<br />
not met entirely.
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
Analysis of assets <strong>and</strong> liabilities for financial risk management<br />
Life insurance contracts<br />
with DPF<br />
Life insurance<br />
contracts<br />
with<br />
DPF<br />
Financial life<br />
insurance<br />
contracts<br />
with DPF<br />
Non life<br />
insurance<br />
contracts<br />
without health<br />
insurance<br />
contracts<br />
Short term Insurance<br />
contracts<br />
Health<br />
insurance<br />
contracts<br />
Financial<br />
contracts<br />
with DPF<br />
Unit-linked<br />
Other assets<br />
(in EUR)<br />
contracts<br />
<strong>and</strong> liabilities Total<br />
ASSETS<br />
Debt securities 47,642,410 10,307,343 534,066 86,505,046 4,173,591 1,035,240 250,038 150,447,734<br />
At fair value through P&L: 3,233,084 408,989 418,879 16,245,051 1,673,222 380,654 229,640 22,589,519<br />
- listed 3,233,084 408,989 418,879 11,242,965 1,516,746 145,344 229,640 17,195,647<br />
- unlisted - - - 3,957,376 69,014 198,919 - 4,225,309<br />
- government bonds - - - 1,044,710 87,462 36,391 - 1,168,563<br />
Available for sale 36,823,247 9,898,354 115,187 70,259,995 2,500,369 654,586 16,313 120,268,051<br />
- listed 4,189,418 1,345,454 - 25,157,872 348,566 279,907 16,313 31,337,530<br />
- unlisted - - - - - - - -<br />
- government bonds 32,633,829 8,552,900 115,187 45,102,123 2,151,803 374,679 88,930,521<br />
Held to maturity 7,586,079 - - - - - 4,085 7,590,164<br />
- listed 6,360,995 - - - - - 4,085 6,365,080<br />
- unlisted 115,486 - - - - - - 115,486<br />
- government bonds 1,109,598 - - - - - - 1,109,598<br />
Equity securities 25,100,583 2,657,885 112,467,705 76,689,593 18,219,095 1,784,565 113,462,957 350,382,383<br />
At fair value through P&L: 9,276,424 370,524 112,467,705 15,847,531 2,917,422 1,645,563 10,910,937 153,436,106<br />
2007<br />
254<br />
- listed 9,276,424 370,524 112,467,705 15,847,531 2,917,422 1,645,563 10,910,937 153,436,106<br />
- unlisted - - - - - - - -<br />
Available for sale 15,824,159 2,287,361 - 60,842,062 15,301,673 139,002 102,552,020 196,946,277<br />
- listed 14,825,948 2,287,361 - 57,122,573 14,203,547 139,002 70,170,846 158,749,277<br />
- unlisted 998,211 - - 3,719,489 1,098,126 - 32,381,174 38,197,000<br />
Investment in associates - - - - - - 71,687,821 71,687,821<br />
Loans <strong>and</strong> receivables 2,417,912 296,580 5,843,346 45,000,990 17,750,847 283,266 64,098,030 135,690,971<br />
Loans <strong>and</strong> deposits 1,187,980 - 4,808,922 6,150,347 2,064,209 281,983 43,257,651 57,751,092<br />
Insurance receivables 600,195 188,275 970,464 31,526,968 11,946,210 - 1,704,633 46,936,745<br />
Other receivables 629,737 108,305 63,960 7,323,675 3,740,428 1,283 19,135,746 31,003,134<br />
Investment properties 465,103 - - 1,318,521 - - 18,817,897 20,601,521<br />
Reinsurance assets 175,242 - - 10,829,582 - - - 11,004,824<br />
Cash <strong>and</strong> cash equivalents 1,117,861 4,326 2,554,420 1,853,608 313,987 2,652 23,551,263 29,398,117<br />
Other assets 27,880 8,748 127 42,416,320 772,735 4,549 143,603,672 186,834,031<br />
Total assets 76,946,991 13,274,882 121,399,664 264,613,660 41,230,255 3,110,272 435,471,678 956,047,402<br />
LIABILITIES<br />
Insurance contracts 4,917,859 - 112,998,283 172,595,677 15,861,968 - - 306,373,787<br />
Long-term liabilities 321,412 - 112,978,279 63,914,425 196,930 - - 177,411,046<br />
Short-term liabilities 4,596,447 - 20,004 108,681,252 15,665,038 - - 128,962,741<br />
Insurance contracts with<br />
DPF<br />
62,548,026 - - - - - - 62,548,026<br />
Long-term liabilities 62,548,026 - - - - - 62,548,026<br />
Investments contracts<br />
with DPF<br />
- 12,381,669 - - - 3,222,605 - 15,604,274<br />
Long-term liabilities - 12,289,555 - - - 3,222,605 - 15,512,160<br />
Short-term liabilities - 92,114 - - - - - 92,114<br />
Borrowings - - - 4,019,040 - - 166,544,377 170,563,417<br />
Other liabilities 2,779,867 - 2,204,500 25,515,731 9,521,918 13,207 20,658,308 60,693,531<br />
Total liabilities 70,245,752 12,381,669 115,202,783 202,130,448 25,383,886 3,235,812 187,202,685 615,783,035
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
Life insurance contracts<br />
with DPF<br />
Life insurance<br />
contracts<br />
with<br />
DPF<br />
Financial life<br />
insurance<br />
contracts<br />
with DPF<br />
Non life<br />
insurance<br />
contracts<br />
without health<br />
insurance<br />
contracts<br />
Short term Insurance<br />
contracts<br />
Health<br />
insurance<br />
contracts<br />
Financial<br />
contracts<br />
with DPF<br />
Unit-linked<br />
Other assets<br />
(in EUR)<br />
contracts<br />
<strong>and</strong> liabilities Total<br />
ASSETS<br />
Debt securities 45,937,977 10,173,696 - 80,999,091 5,785,290 626,334 560,432 144,082,820<br />
At fair value through P&L: 3,151,911 293,937 - 11,262,606 1,400,309 - 495,783 16,604,546<br />
- listed 2,017,409 293,937 - 1,980,967 - - 495,783 4,788,096<br />
- unlisted - - - - - - - -<br />
- government bonds 1,134,502 - - 9,281,639 1,400,309 11,816,450<br />
Available for sale 35,806,301 9,879,759 - 69,736,485 4,384,981 626,334 56,537 120,490,397<br />
- listed 4,124,329 1,273,923 - 23,296,429 987,865 165,681 56,537 29,904,764<br />
- unlisted 310,495 - - 382,954 - 1,381 - 694,830<br />
- government bonds 31,371,477 8,605,836 - 46,057,102 3,397,116 459,272 - 89,890,803<br />
Held to maturity 6,979,765 - - - - - 8,112 6,987,877<br />
- listed 5,868,227 - - - - - 8,112 5,876,339<br />
- unlisted - - - - - - - -<br />
- government bonds 1,111,538 - - - - - - 1,111,538<br />
Equity securities 17,310,606 3,318,246 55,196,020 49,364,789 15,535,323 441,266 93,503,190 234,669,439<br />
At fair value through P&L: 4,916,919 1,233,570 55,196,020 10,816,980 1,812,765 - 25,042,183 99,018,437<br />
2006<br />
- listed 4,916,919 1,233,570 55,196,020 10,816,980 1,812,765 - 25,042,183 99,018,437<br />
- unlisted - - - - - - - -<br />
Available for sale 12,393,687 2,084,676 - 38,547,809 13,722,558 441,266 68,461,007 135,651,002<br />
- listed 12,207,104 1,921,481 - 37,849,917 13,278,952 441,266 35,014,151 100,712,870<br />
- unlisted 186,583 163,195 - 697,892 443,606 - 33,446,856 34,938,132<br />
Investment in associates - - - - - 45,119,877 45,119,877<br />
Loans <strong>and</strong> receivables 3,659,240 213,833 2,954,118 51,765,180 19,047,176 451,332 53,989,716 132,080,595<br />
Loans <strong>and</strong> deposits 2,663,254 - 208,646 20,678,081 83,480 451,198 36,215,092 60,299,751<br />
Insurance receivables 481,924 133,773 1,483,982 26,798,612 11,263,967 - 1,029,881 41,192,139<br />
Other receivables 514,062 80,060 1,261,490 4,288,487 7,699,729 134 16,744,743 30,588,705<br />
Investment properties 472,191 - - 5,441,566 - - 14,678,359 20,592,116<br />
Reinsurance assets 174,224 - - 8,457,373 - - - 8,631,597<br />
Cash <strong>and</strong> cash equivalents 1,103,591 54,679 3,874,649 979,124 370,705 2,788 13,924,193 20,309,729<br />
Other assets - - - 30,301,626 - - 139,632,316 169,933,942<br />
Total assets 68,657,829 13,760,454 62,024,787 227,308,749 40,738,494 1,521,720 361,408,083 775,420,115<br />
LIABILITIES<br />
Insurance contracts 4,166,509 - 57,911,692 160,213,336 15,133,783 - - 237,425,320<br />
Long-term liabilities 687,211 - 57,882,765 47,874,971 174,871 - - 106,619,818<br />
Short-term liabilities 3,479,298 - 28,927 112,338,365 14,958,912 - - 130,805,502<br />
Insurance contracts with<br />
DPF<br />
57,765,184 - - - - - - 57,765,184<br />
Long-term liabilities 57,765,184 - - - - - - 57,765,184<br />
Investment contracts<br />
with DPF<br />
- 11,610,103 - - - 2,181,284 - 13,791,387<br />
Long-term liabilities - 11,370,022 - - - 2,181,284 - 13,551,306<br />
Short-term liabilities - 240,081 - - - - - 240,081<br />
Borrowings - - - 4,017,217 - - 113,732,705 117,749,922<br />
Other liabilities 1,256,452 - 595,944 25,421,265 14,606,516 4,357 23,997,909 65,882,442<br />
Total liabilities 63,188,145 11,610,103 58,507,636 189,651,818 29,740,299 2,185,641 137,730,614 492,614,255<br />
255
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
5.2.1 Liquidity <strong>and</strong> Interest rate risk<br />
The Group is exposed to interest rate risk via<br />
financial assets <strong>and</strong> liabilities, reinsured receivables<br />
Liquidity risk is the risk that cash may not be<br />
available to pay obligations due at a reasonable cost.<br />
<strong>and</strong> insured liabilities. Due to the nature of its<br />
investments <strong>and</strong> liabilities, the Group is particularly<br />
facing the risk of changed interest rates.<br />
Exposure to liquidity risk is reflected in the<br />
acceptance of insurance risk <strong>and</strong> the Group's ability<br />
to meet its contractual obligations from existing<br />
insurance contracts <strong>and</strong> liabilities related to the<br />
insurer's day-to-day operations.<br />
In the following the liquiditiy risk with maturity of<br />
assets is presented according to contractual cash<br />
flows, which are compared with expected cash<br />
flows of insurance <strong>and</strong> financial contracts.<br />
256<br />
Liquidity risk stems from an imbalance in inflows<br />
<strong>and</strong> outflows <strong>and</strong> manifests itself in the potential that<br />
the Group, despite having adequate financial assets,<br />
would find itself in a position of having to cash in<br />
its investments under less favourable circumstances<br />
(e.g. lower price, higher transaction costs) in order to<br />
meet its contractual obligations, which would result<br />
in a lower return on investments.<br />
The Group manages its liquidity risk through:<br />
- maintaining a suitable structure of investments;<br />
- diversification of the investment portfolio;<br />
- planning future cash flows, ensuring a suitable<br />
volume of cash flows from operating <strong>and</strong> investing<br />
activities (payout of interest <strong>and</strong> principal) to cover<br />
future foreseeable liabilities;<br />
- providing an adequate volume of high-liquidity<br />
investments which are readily cashable without loss<br />
in order to cover future unforeseeable liabilities.<br />
Contractual cash flows for debt securities are<br />
calculated with data of issuers. The amorisation<br />
schedule <strong>and</strong> coupon rate at the date of calculation<br />
is used. For each time interval the future cash<br />
flows (principal <strong>and</strong> coupon rate) are considered,<br />
which will be according to the situation of the debt<br />
securities portfolio.<br />
For the purpose of presenting cash flows of life<br />
insurance contracts with DPF <strong>and</strong> life insurance, in<br />
which the insured are exposed to investment risk,<br />
all cash flows of the future payments of claims <strong>and</strong><br />
costs, which come from life insurance contracts as<br />
at 31 December 2007 are generated.<br />
For the purpose of presenting cash flows of financial<br />
contracts, all the cash flows of the future payments<br />
of claims <strong>and</strong> costs which come from financial<br />
contracts as at 31December 2007 are generated.
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
Expected cash flows of non-life insurance <strong>and</strong><br />
health insurance present an assessment of<br />
payments for claims (which have already been<br />
incurred) including costs <strong>and</strong> the release of liability<br />
from unearned premiums <strong>and</strong> for provisions.<br />
Own assets of the Group are not intended for<br />
covering liabilities from insurance <strong>and</strong> financial<br />
contracts <strong>and</strong> this is the reason why the mean<br />
duration of assets is not presented.<br />
257
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
Universal life insurance contracts with DPF in 2007<br />
(in EUR)<br />
Carrying<br />
amount<br />
No stated<br />
maturity<br />
Contractual cash flows (undiscounted)<br />
0 - 5 years 5 - 10 years 10 - 15 years 15 - 20 years More than 20 years<br />
258<br />
Debt securities 47,642,410 - 32,338,119 17,979,968 6,373,613 636,406 7,848,174<br />
At fair value through P&L 3,233,084 - 1,541,508 2,213,686 438,900 - -<br />
Listed securities 3,233,084 - 1,541,508 2,213,686 438,900 - -<br />
- fixed interest rate 2,554,872 - 1,200,479 2,053,719 - - -<br />
- floating interest rate 678,212 - 341,029 159,967 438,900 - -<br />
Available for sale 36,823,247 - 24,179,744 13,483,549 5,801,391 636,406 7,848,174<br />
Listed securities 4,189,418 - 4,334,013 2,689,276 359,925 65,143 -<br />
- fixed interest rate 3,392,541 - 3,737,928 2,304,938 359,925 65,143 -<br />
- floating interest rate 796,877 - 596,085 384,338 - - -<br />
Government bonds 32,633,829 - 19,845,731 10,794,273 5,441,466 571,263 7,848,174<br />
- fixed interest rate 32,633,829 - 19,845,731 10,794,273 5,441,466 571,263 7,848,174<br />
Held to maturity 7,586,079 - 6,616,867 2,282,733 133,322 - -<br />
Listed securities 6,360,995 - 5,531,029 1,931,461 110,750 - -<br />
- fixed interest rate 6,151,904 - 5,486,842 1,685,273 110,750 - -<br />
- floating interest rate 209,091 - 44,187 246,188 - - -<br />
Unlisted securities 115,486 - 138,736 - - - -<br />
- fixed interest rate 115,486 - 138,736 - - - -<br />
Government bonds 1,109,598 - 947,102 351,272 22,572 - -<br />
- fixed interest rate 1,109,598 - 947,102 351,272 22,572 - -<br />
Equity securities 25,100,583 25,100,583 - - - - -<br />
At fair value through P&L 9,276,424 9,276,424 - - - - -<br />
Listed securities 9,276,424 9,276,424 - - - - -<br />
Available for sale 15,824,159 15,824,159 - - - - -<br />
Listed securities 14,825,948 14,825,948 - - - - -<br />
Unlisted securities 998,211 998,211 - - - - -<br />
Investment property 465,103 465,103 - - - - -<br />
Loans <strong>and</strong> receivables 2,417,912 - 2,417,912 - - - -<br />
Reinsurance assets 175,242 - 175,242 - - - -<br />
Cash <strong>and</strong> cash equivalents 1,117,861 1,117,861 - - - -<br />
Total assets 76,919,111 26,683,547 34,931,273 17,979,968 6,373,613 636,406 7,848,174<br />
Carrying No stated<br />
Expected cash flows (undiscounted)<br />
(in EUR)<br />
amount maturity 0 - 5 years 5 - 10 years 10 – 15 years 15 - 20 years More than 20 years<br />
Liabilities<br />
Insurance contracts with<br />
DPF<br />
67,465,885 - 40,656,040 12,499,323 29,821,560 24,855,974 45,195,933<br />
Total liabilities 67,465,885 - 40,656,040 12,499,323 29,821,560 24,855,974 45,195,933<br />
Difference between contractual<br />
<strong>and</strong> expected cash<br />
26,683,547 (5,724,767) 5,480,645 (23,447,947) (24,219,568) (37,347,759)<br />
Mean duration of assets 6.15 years - - - - - -<br />
Mean duration of liabilities 9.81 years - - - - - -
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
Universal life insurance contracts with DPF in 2006<br />
(in EUR)<br />
Carrying<br />
amount<br />
No stated<br />
maturity<br />
Contractual cash flows (undiscounted)<br />
0 - 5 years 5 - 10 years 10 - 15 years 15 - 20 years More than 20 years<br />
Debt securities 45,937,977 - 24,939,934 14,112,268 13,971,454 246,816 5,408,836<br />
At fair value through P&L 3,151,911 - 2,113,371 1,096,624 814,588 - -<br />
Listed securities 2,017,409 - 1,103,834 722,846 810,166 - -<br />
- fixed interest rate 1,073,038 - 675,481 484,790 243,544 - -<br />
- floating interest rate 944,371 - 428,353 238,056 566,622 - -<br />
Government bonds 1,134,502 - 1,009,537 373,778 4,422 - -<br />
- fixed interest rate 1,134,502 - 1,009,537 373,778 4,422 - -<br />
Available for sale 35,806,301 - 16,179,308 11,405,751 13,032,769 246,816 5,408,836<br />
Listed securities 4,124,329 - 2,659,663 2,121,080 320,543 48,557 -<br />
- fixed interest rate 3,708,572 - 2,537,975 1,712,405 320,543 48,557 -<br />
- floating interest rate 415,757 - 121,688 408,675 - - -<br />
Unlisted securities 310,495 - 60,000 311,996 - - -<br />
- fixed interest rate 310,495 - 60,000 311,996 - - -<br />
Government bonds 31,371,477 - 13,459,645 8,972,675 12,712,226 198,259 5,408,836<br />
- fixed interest rate 31,371,477 - 13,459,645 8,972,675 12,712,226 198,259 5,408,836<br />
Held to maturity 6,979,765 - 6,647,255 1,609,893 124,097 - -<br />
Listed securities 5,868,227 - 5,658,153 1,243,681 119,765 - -<br />
- fixed interest rate 5,659,185 - 5,476,386 1,180,207 116,125 - -<br />
- floating interest rate 209,042 - 181,767 63,474 3,640 - -<br />
Government bonds 1,111,538 - 989,102 366,212 4,332 - -<br />
- fixed interest rate 1,111,538 - 989,102 366,212 4,332 - -<br />
Equity securities 17,310,606 17,310,606 - - - - -<br />
At fair value through P&L 4,916,919 4,916,919 - - - - -<br />
Listed securities 4,916,919 4,916,919 - - - - -<br />
Available for sale 12,393,687 12,393,687 - - - - -<br />
Listed securities 12,207,104 12,207,104 - - - - -<br />
Unlisted securities 186,583 186,583 - - - - -<br />
Investment property 472,191 472,191 - - - - -<br />
Loans <strong>and</strong> receivables 3,659,240 - 3,659,240 - - - -<br />
Reinsurance assets 174,224 - 174,224 - - - -<br />
Cash <strong>and</strong> cash equivalents 1,103,591 1,103,591 - - - - -<br />
Total assets 68,657,829 18,886,388 28,773,398 14,112,268 13,971,454 246,816 5,408,836<br />
259<br />
Carrying No stated<br />
Expected cash flows (undiscounted)<br />
(in EUR)<br />
amount maturity 0 - 5 years 5 - 10 years 10 - 15 years 15 - 20 years More than 20 years<br />
Liabilities<br />
Insurance contracts with<br />
DPF<br />
61,931,693 - 34,592,178 33,769,214 27,920,787 23,034,983 41,974,793<br />
Total liabilities 61,931,693 - 34,592,178 33,769,214 27,920,787 23,034,983 41,974,793<br />
Difference between contractual<br />
<strong>and</strong> expected cash flow<br />
18,886,388 (5,818,780) (19,656,946) (13,949,333) (22,788,167) (36,565,957)<br />
Mean duration of assets<br />
Mean duration of liabilities<br />
5.96 years<br />
10.62 years
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
Financial life insurance contracts with DPF in 2007<br />
(in EUR)<br />
Carrying<br />
amount<br />
No stated<br />
maturity<br />
Contractual cash flows (undiscounted)<br />
0 - 5 years 5 - 10 years 10 - 15 years 15 - 20 years More than 20 years<br />
Debt securities 10,307,343 - 7,340,301 3,894,673 1,080,348 255,864 2,885,106<br />
At fair value through P&L 408,989 - 119,181 492,614 - - -<br />
Listed securities 408,989 - 119,181 492,614 - - -<br />
- fixed interest rate 408,989 - 119,181 492,614 - - -<br />
Available for sale 9,898,354 - 7,221,120 3,402,059 1,080,348 255,864 2,885,106<br />
Listed securities 1,345,454 - 1,864,478 976,102 253,378 45,859 -<br />
- fixed interest rate 1,345,454 - 1,864,478 976,102 253,378 45,859 -<br />
Government bonds 8,552,900 - 5,356,642 2,425,957 826,970 210,005 2,885,106<br />
- fixed interest rate 8,552,900 - 5,356,642 2,425,957 826,970 210,005 2,885,106<br />
Equity securities 2,657,885 2,657,885 - - - - -<br />
At fair value through P&L 370,524 370,524 - - - - -<br />
Listed securities 370,524 370,524 - - - - -<br />
Available for sale 2,287,361 2,287,361 - - - - -<br />
Listed securities 2,287,361 2,287,361 - - - - -<br />
Loans <strong>and</strong> receivables 296,580 - 296,580 - - - -<br />
Cash <strong>and</strong> cash equivalents 4,326 4,326 - - - - -<br />
Total assets 13,266,134 2,662,211 7,636,881 3,894,673 1,080,348 255,864 2,885,106<br />
260<br />
(in EUR)<br />
Carrying<br />
amount<br />
No stated<br />
maturity<br />
Expected cash flows (undiscounted)<br />
0 - 5 years 5 - 10 years 10 - 15 years 15 - 20 years More than 20 years<br />
Liabilities<br />
Insurance contracts with DPF 12,381,669 - 6,253,603 7,181,699 385,825 3,095,406 5,403,150<br />
Total liabilities - 6,253,603 7,181,699 385,825 3,095,406 5,403,150<br />
Difference between<br />
contractual <strong>and</strong> expected<br />
cash flows<br />
- 2,662,211 1,383,278 (3,287,026) 694,523 (2,839,542) (2,518,044)<br />
Mean duration of assets<br />
Mean duration of liabilities<br />
7.4 years<br />
9.2 years
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
Financial life insurance contracts with DPF in 2006<br />
(in EUR)<br />
Carrying<br />
amount<br />
No stated<br />
maturity<br />
Contractual cash flows (undiscounted)<br />
0 - 5 years 5 - 10 years 10 - 15 years 15 - 20 years More than 20 years<br />
Debt securities 10,173,696 - 4,342,993 3,946,466 3,384,522 127,477 2,128,561<br />
At fair value through P&L 293,937 - 179,109 195,023 - - -<br />
Listed securities 293,937 - 179,109 195,023 - - -<br />
- fixed interest rate 293,937 - 179,109 195,023 - - -<br />
Available for sale 9,879,759 - 4,163,884 3,751,443 3,384,522 127,477 2,128,561<br />
Listed securities 1,273,923 - 408,287 983,994 282,891 49,456 -<br />
- fixed interest rate 1,273,923 - 408,287 983,994 282,891 49,456 -<br />
Government bonds 8,605,836 - 3,755,597 2,767,449 3,101,631 78,021 2,128,561<br />
- fixed interest rate 8,605,836 - 3,755,597 2,767,449 3,101,631 78,021 2,128,561<br />
Equity securities 3,318,246 3,318,246 - - - - -<br />
At fair value through P&L 1,233,570 1,233,570 - - - - -<br />
Listed securities 1,233,570 1,233,570 - - - - -<br />
Available for sale 2,084,676 2,084,676 - - - - -<br />
Listed securities 1,921,481 1,921,481 - - - - -<br />
Unlisted securities 163,195 163,195 - - - - -<br />
Loans <strong>and</strong> receivables 213,833 - 213,833 - - - -<br />
Cash <strong>and</strong> cash equivalents 54,679 - 54,679 - - - -<br />
Total assets 13,760,454 3,318,246 4,611,505 3,946,466 3,384,522 127,477 2,128,561<br />
(in EUR)<br />
Carrying<br />
amount<br />
No stated<br />
maturity<br />
Expected cash flows (undiscounted)<br />
0 - 5 years 5 - 10 years 10 - 15 years 15 - 20 years More than 20 years<br />
Liabilities<br />
Insurance contracts with DPF 11,610,103 - 5,449,606 6,603,094 5,390,420 3,269,165 5,213,896<br />
Total liabilities 11,610,103 - 5,449,606 6,603,094 5,390,420 3,269,165 5,213,896<br />
261<br />
Difference between<br />
contractual <strong>and</strong> expected<br />
cash flows<br />
- 3,318,246 (838,101) (2,656,628) (2,005,898) (3,141,688) (3,085,335)<br />
Mean duration of assets<br />
Mean duration of liabilities<br />
7.6 years<br />
10 years
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
Unit-linked contracts in 2007<br />
(in EUR)<br />
Carrying<br />
amount<br />
No stated<br />
maturity<br />
Contractual cash flows (undiscounted)<br />
0 - 5 years 5 - 10 years 10 - 15 years 15 - 20 years More than 20 years<br />
Debt securities 534,066 - 635,288 45,307 - - -<br />
At fair value through P&L 418,879 - 495,912 45,307 - - -<br />
Listed securities 418,879 - 495,912 45,307 - - -<br />
- fixed interest rate 114,218 - 90,612 45,307 - - -<br />
- floating interest rate 304,661 - 405,300 - - - -<br />
Available for sale 115,187 - 139,376 - - - -<br />
Government bonds 115,187 - 139,376 - - - -<br />
- fixed interest rate 115,187 - 139,376 - - - -<br />
Equity securities 112,467,705 112,467,705 - - - - -<br />
At fair value through P&L 112,467,705 112,467,705 - - - - -<br />
Listed securities 112,467,705 112,467,705 - - - - -<br />
Loans <strong>and</strong> receivables 5,843,346 - 5,843,346 - - - -<br />
Cash <strong>and</strong> cash equivalents 2,554,420 2,554,420 - - - - -<br />
Total assets 121,399,537 115,022,125 6,478,634 45,307 - - -<br />
(in EUR)<br />
Carrying<br />
amount<br />
No stated<br />
maturity<br />
Expected cash flows (undiscounted)<br />
0 - 5 years 5 - 10 years 10 - 15 years 15 - 20 years More than 20 years<br />
Liabilities<br />
Insurance contracts 112,998,283 18,770,946 79,014,592 52,048,537 54,633,573 118,676,530<br />
Total liabilities 112,998,283 - 18,770,946 79,014,592 52,048,537 54,633,573 118,676,530<br />
262<br />
Difference between contractual<br />
<strong>and</strong> expected cash flo<br />
115,022,125 (12,292,312) (78,969,285) (52,048,537) (54,633,573) (118,676,530)<br />
Mean duration of assets<br />
Mean duration of liabilities<br />
4.30 years<br />
14.73 years
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
Unit-linked contracts in 2006<br />
(in EUR)<br />
Carrying<br />
amount<br />
No stated<br />
maturity<br />
Contractual cash flows (undiscounted)<br />
0 - 5 years 5 - 10 years 10 - 15 years 15 - 20 years More than 20 years<br />
Equity securities 55,196,020 55,196,020 - - - - -<br />
At fair value through P&L 55,196,020 55,196,020 - - - - -<br />
Listed securities 55,196,020 55,196,020 - - - - -<br />
Loans <strong>and</strong> receivables 2,954,118 - 2,954,118 - - - -<br />
Cash <strong>and</strong> cash equivalents 3,874,649 3,874,649 - - - - -<br />
Total assets 62,024,787 59,070,669 2,954,118 - - - -<br />
(in EUR)<br />
Carrying<br />
amount<br />
No stated<br />
maturity<br />
Expected cash flows (undiscounted)<br />
0 - 5 years 5 - 10 years 10 - 15 years 15 - 20 years More than 20 years<br />
Liabilities<br />
Insurance contracts 57,911,692 6,295,947 20,223,741 28,622,328 19,008,772 30,586,914<br />
Total liabilities 57,911,692 - 6,295,947 20,223,741 28,622,328 19,008,772 30,586,914<br />
Difference between contractual<br />
<strong>and</strong> expected cash flow<br />
59,070,669 (3,341,829) (20,223,741) (28,622,328) (19,008,772) (30,586,914)<br />
Mean duration of assets<br />
Mean duration of liabilities<br />
0 years<br />
14.30 years<br />
263
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
Non-life insurance contracts without health insurance contracts in 2007<br />
(in EUR)<br />
Carrying<br />
amount<br />
No stated<br />
maturity<br />
Contractual cash flows (undiscounted)<br />
0-1 year 1-2 years 2-3 years 3-4 years 4-5 years More than 5 years<br />
264<br />
Debt securities 86,505,046 - 7,458,607 5,780,712 9,109,293 12,852,777 9,518,399 66,891,035<br />
At fair value through P&L 16,245,051 - 2,372,178 599,369 599,369 599,369 599,369 16,581,994<br />
Listed securities 11,242,965 - 1,842,605 528,685 528,685 528,685 528,685 11,671,504<br />
- fixed interest rate 11,242,965 - 1,842,605 528,685 528,685 528,685 528,685 11,671,504<br />
Unlisted securities 3,957,376 - 65,000 65,000 65,000 65,000 65,000 4,325,000<br />
- fixed interest rate 3,957,376 - 65,000 65,000 65,000 65,000 65,000 4,325,000<br />
Government bonds 1,044,710 - 464,573 5,684 5,684 5,684 5,684 585,490<br />
- fixed interest rate 1,044,710 - 464,573 5,684 5,684 5,684 5,684 585,490<br />
Available for sale 70,259,995 - 5,086,429 5,181,343 8,509,924 12,253,408 8,919,030 50,309,041<br />
Listed securities 25,157,872 - 1,963,692 3,021,535 5,952,739 3,546,946 2,899,364 13,889,806<br />
- fixed interest rate 25,157,872 - 1,963,692 3,021,535 5,952,739 3,546,946 2,899,364 13,889,806<br />
Government bonds 45,102,123 - 3,122,737 2,159,808 2,557,185 8,706,462 6,019,666 36,419,235<br />
- fixed interest rate 45,102,123 - 3,122,737 2,159,808 2,557,185 8,706,462 6,019,666 36,419,235<br />
Equity securities 76,689,593 76,689,593 - - - - - -<br />
At fair value through P&L 15,847,531 15,847,531 - - - - - -<br />
Listed securities 15,847,531 15,847,531 - - - - - -<br />
Available for sale 60,842,062 60,842,062 - - - - - -<br />
Listed securities 57,122,573 57,122,573 - - - - - -<br />
Unlisted securities 3,719,489 3,719,489 - - - - - -<br />
Investment property 1,318,521 1,318,521 - - - - - -<br />
Loans <strong>and</strong> receivables 45,000,990 - 34,319,355 3,832,500 4,250,528 3,837,568 4,008,360 1,360,795<br />
Reinsurance assets 10,829,582 - 5,918,528 1,005,573 725,641 540,704 518,001 2,121,135<br />
Cash <strong>and</strong> cash equivalents 1,853,608 1,853,608 - - - - - -<br />
Total assets 222,197,340 79,861,722 47,696,490 10,618,785 14,085,462 17,231,049 14,044,760 70,372,965<br />
Carrying No stated<br />
Expected cash flows (undiscounted)<br />
(in EUR)<br />
amount maturity 0-1 year 1-2 years 2-3 years 3-4 years 4-5 years More than 5 years<br />
Liabilities<br />
Debt securities (issued) 4,019,040 - 262,080 262,080 4,137,696 - - -<br />
Insurance contracts 172,595,677 - 108,681,254 16,877,525 11,268,610 7,944,134 6,496,303 21,327,851<br />
Total liabilities 176,614,717 - 108,943,334 17,139,605 15,406,306 7,944,134 6,496,303 21,327,851<br />
Difference between contractual<br />
<strong>and</strong> expected cash flo<br />
- 79,861,722 (61,246,844) (6,520,820) (1,320,844) 9,286,915 7,548,457 49,045,114<br />
Mean duration of assets<br />
Mean duration of liabilities<br />
4.9 years<br />
1.7 years
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
Non-life insurance contracts without health insurance contracts in 2006<br />
(in EUR)<br />
Carrying<br />
amount<br />
No stated<br />
maturity<br />
Contractual cash flows (undiscounted)<br />
0-1 year 1-2 years 2-3 years 3-4 years 4-5 years More than 5 years<br />
Debt securities 80,999,091 - 7,023,719 5,800,652 5,670,667 6,696,536 11,576,203 73,495,104<br />
At fair value through P&L 11,262,606 - 927,354 843,625 595,752 681,703 1,704,818 10,388,815<br />
Listed securities 1,980,967 - 425,332 229,622 171,328 179,666 187,221 1,500,276<br />
- fixed interest rate 1,980,967 - 425,332 229,622 171,328 179,666 187,221 1,500,276<br />
Government bonds 9,281,639 - 502,022 614,003 424,424 502,037 1,517,597 8,888,539<br />
- fixed interest rate 9,281,639 - 502,022 614,003 424,424 502,037 1,517,597 8,888,539<br />
Available for sale 69,736,485 - 6,096,365 4,957,027 5,074,915 6,014,833 9,871,385 63,106,289<br />
Listed securities 23,296,429 - 3,607,492 1,916,289 2,968,462 3,525,890 2,377,544 18,929,835<br />
- fixed interest rate 23,296,429 - 3,607,492 1,916,289 2,968,462 3,525,890 2,377,544 18,929,835<br />
Unlisted securities 382,954 - 14,800 14,800 14,800 14,800 14,800 371,825<br />
- fixed interest rate 382,954 - 14,800 14,800 14,800 14,800 14,800 371,825<br />
Government bonds 46,057,102 - 2,474,073 3,025,938 2,091,653 2,474,143 7,479,041 43,804,629<br />
- fixed interest rate 46,057,102 - 2,474,073 3,025,938 2,091,653 2,474,143 7,479,041 43,804,629<br />
Equity securities 49,364,789 49,364,789 - - - - - -<br />
At fair value through P&L 10,816,980 10,816,980 - - - - - -<br />
Listed securities 10,816,980 10,816,980 - - - - - -<br />
Available for sale 38,547,809 38,547,809 - - - - - -<br />
Listed securities 37,849,917 37,849,917 - - - - - -<br />
Unlisted securities 697,892 697,892 - - - - - -<br />
Investment property 5,441,566 5,441,566 - - - - - -<br />
Loans <strong>and</strong> receivables 51,765,180 - 51,383,691 348,513 32,566 - 14 396<br />
Reinsurance assets 8,457,373 - 5,042,984 984,780 670,770 461,751 405,983 891,105<br />
Cash <strong>and</strong> cash equivalents 979,124 979,124 - - - - - -<br />
Total assets 197,007,123 55,785,479 63,450,394 7,133,945 6,374,003 7,158,287 11,982,200 74,386,605<br />
265<br />
Carrying No stated<br />
Expected cash flows (undiscounted)<br />
(in EUR)<br />
amount maturity 0-1 year 1-2 years 2-3 years 3-4 years 4-5 years More than 5 years<br />
Liabilities<br />
Debt securities (issued) 4,017,217 - 262,080 290,496 290,496 4,297,152 - -<br />
Insurance contracts 160,213,336 - 107,879,828 15,922,896 10,398,777 6,983,887 5,366,221 13,661,727<br />
Total liabilities 164,230,553 - 108,141,908 16,213,392 10,689,273 11,281,039 5,366,221 13,661,727<br />
Difference between contractual<br />
<strong>and</strong> expected cash flo<br />
- 55,785,479 (44,691,514) (9,079,447) (4,315,270) (4,122,752) 6,615,979 60,724,878<br />
Mean duration of assets<br />
Mean duration of liabilities<br />
5.2 years<br />
1.4 years
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
Health insurance contracts in 2007<br />
(in EUR)<br />
Carrying<br />
amount<br />
No stated<br />
maturity<br />
Contractual cash flows (undiscounted)<br />
0-1 year 1-2 years 2-3 years 3-4 years 4-5 years More than 5 years<br />
266<br />
Debt securities 4,173,591 - 215,510 205,200 205,200 839,500 171,106 4,023,364<br />
At fair value through P&L 1,673,222 - 104,105 93,795 93,795 93,795 93,795 1,982,095<br />
Listed securities 1,516,746 - 88,397 88,397 88,397 88,397 88,397 1,826,872<br />
- fixed interest rate 1,516,746 - 88,397 88,397 88,397 88,397 88,397 1,826,872<br />
Unlisted securities 69,014 - 1,050 1,050 1,050 1,050 1,050 75,250<br />
- fixed interest rate 69,014 - 1,050 1,050 1,050 1,050 1,050 75,250<br />
Government bonds 87,462 - 14,658 4,348 4,348 4,348 4,348 79,973<br />
- fixed interest rate 87,462 - 14,658 4,348 4,348 4,348 4,348 79,973<br />
Available for sale 2,500,369 - 111,405 111,405 111,405 745,705 77,311 2,041,269<br />
Listed securities 348,566 - 14,460 14,460 14,460 14,460 14,460 391,818<br />
- fixed interest rate 348,566 - 14,460 14,460 14,460 14,460 14,460 391,818<br />
Government bonds 2,151,803 - 96,945 96,945 96,945 731,245 62,851 1,649,451<br />
- fixed interest rate 2,151,803 - 96,945 96,945 96,945 731,245 62,851 1,649,451<br />
Equity securities 18,219,095 18,219,095 - - - - - -<br />
At fair value through P&L 2,917,422 2,917,422 - - - - - -<br />
Listed securities 2,917,422 2,917,422 - - - - - -<br />
Available for sale 15,301,673 15,301,673 - - - - - -<br />
Listed securities 14,203,547 14,203,547 - - - - - -<br />
Unlisted securities 1,098,126 1,098,126 - - - - - -<br />
Loans <strong>and</strong> receivables 17,750,847 - 17,750,847 - - - - -<br />
Cash <strong>and</strong> cash equivalents 313,987 313,987 - - - - - -<br />
Total assets 40,457,520 18,533,082 17,966,357 205,200 205,200 839,500 171,106 4,023,364<br />
(in EUR)<br />
Liabilities<br />
Carrying<br />
amount<br />
No stated<br />
maturity<br />
Expected cash flows (undiscounted)<br />
0-1 year 1-2 years 2-3 years 3-4 years 4-5 years More than 5 years<br />
Insurance contracts 15,861,968 - 15,665,039 - - - - 196,930<br />
Total liabilities 15,861,968 - 15,665,039 - - - - 196,930<br />
Difference between contractual<br />
<strong>and</strong> expected cash flo<br />
- 18,533,082 2,301,318 205,200 205,200 839,500 171,106 3,826,434<br />
Mean duration of assets<br />
Mean duration of liabilities<br />
3.3 years<br />
0.6 years
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
Health insurance contracts in 2006<br />
(in EUR)<br />
Carrying<br />
amount<br />
No stated<br />
maturity<br />
Contractual cash flows (undiscounted)<br />
0-1 year 1-2 years 2-3 years 3-4 years 4-5 years More than 5 years<br />
Debt securities 5,785,290 - 369,726 250,919 611,326 250,919 2,362,190 3,336,823<br />
At fair value through P&L 1,400,309 - 96,780 61,902 61,902 61,902 681,704 743,937<br />
Government bonds 1,400,309 - 96,780 61,902 61,902 61,902 681,704 743,937<br />
- fixed interest rate 1,400,309 - 96,780 61,902 61,902 61,902 681,704 743,937<br />
Available for sale 4,384,981 - 272,946 189,017 549,424 189,017 1,680,486 2,592,886<br />
Listed securities 987,865 - 40,058 40,058 400,465 40,058 40,058 802,703<br />
- fixed interest rate 987,865 - 40,058 40,058 400,465 40,058 40,058 802,703<br />
Government bonds 3,397,116 - 232,888 148,959 148,959 148,959 1,640,428 1,790,183<br />
- fixed interest rate 3,397,116 - 232,888 148,959 148,959 148,959 1,640,428 1,790,183<br />
Equity securities 15,535,323 15,535,323 - - - - - -<br />
At fair value through P&L 1,812,765 1,812,765 - - - - - -<br />
Listed securities 1,812,765 1,812,765 - - - - - -<br />
Available for sale 13,722,558 13,722,558 - - - - - -<br />
Listed securities 13,278,952 13,278,952 - - - - - -<br />
Unlisted securities 443,606 443,606 - - - - - -<br />
Loans <strong>and</strong> receivables 19,047,176 - 19,047,176 - - - - -<br />
Cash <strong>and</strong> cash equivalents 370,705 370,705 - - - - - -<br />
Total assets 40,738,494 15,906,028 19,416,902 250,919 611,326 250,919 2,362,190 3,336,823<br />
Carrying No stated<br />
Expected cash flows (undiscounted)<br />
(in EUR)<br />
amount maturity<br />
0-1 year 1-2 years 2-3 years 3-4 years 4-5 years More than 5 years<br />
Liabilities<br />
Insurance contracts 15,133,783 - 14,958,912 - - - - 174,871<br />
Total liabilities 15,133,783 - 14,958,912 - - - - 174,871<br />
267<br />
Difference between contractual<br />
<strong>and</strong> expected cash flow<br />
- 15,906,028 4,457,990 250,919 611,326 250,919 2,362,190 3,161,952<br />
Mean duration of assets<br />
Mean duration of liabilities<br />
3.2 years<br />
0.6 years
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
Investment contracts with DPF in 2007 – Pension in 2007<br />
(in EUR)<br />
Carrying<br />
amount<br />
No stated<br />
maturity<br />
Contractual cash flows (undiscounted)<br />
0 - 5 years 5 - 10 years 10 - 15 years 15 - 20 years More than 20 years<br />
268<br />
Debt securities 1,035,240 - 430,412 840,349 49,599 1,922 -<br />
At fair value through P&L 380,654 - 132,558 344,413 - - -<br />
Listed securities 145,344 - 42,354 175,063 - - -<br />
- fixed interest rate 145,344 - 42,354 175,063 - - -<br />
Unlisted securities 198,919 - 81,745 139,750 - - -<br />
- fixed interest rate 198,919 - 81,745 139,750 - - -<br />
Government bonds 36,391 - 8,459 29,600 - - -<br />
- fixed interest rate 36,391 - 8,459 29,600 - - -<br />
Available for sale 654,586 - 297,854 495,936 49,599 1,922 -<br />
Listed securities 279,907 - 187,372 112,135 44,041 1,922 -<br />
- fixed interest rate 279,907 - 187,372 112,135 44,041 1,922 -<br />
Government bonds 374,679 - 110,482 383,801 5,558 - -<br />
- fixed interest rate 374,679 - 110,482 383,801 5,558 - -<br />
Equity securities 1,784,565 1,784,565 - - - - -<br />
At fair value through P&L 1,645,563 1,645,563 - - - - -<br />
Listed securities 1,645,563 1,645,563 - - - - -<br />
Available for sale 139,002 139,002 - - - - -<br />
Listed securities 139,002 139,002 - - - - -<br />
Loans <strong>and</strong> receivables 283,266 - 283,266 - - - -<br />
Cash <strong>and</strong> cash equivalents 2,652 2,652 - - - - -<br />
Total assets 3,105,723 1,787,217 713,678 840,349 49,599 1,922 -<br />
(in EUR)<br />
Liabilities<br />
Carrying<br />
amount<br />
No stated<br />
maturity<br />
Expected cash flows (undiscounted)<br />
0 - 5 years 5 - 10 years 10 - 15 years 15 - 20 years More than 20 years<br />
Insurance contracts with DPF 3,222,605 - 1,401,084 3,002,291 4,055,913 5,055,988 15,647,492<br />
Total liabilities 3,222,605 - 1,401,084 3,002,291 4,055,913 5,055,988 15,647,492<br />
Difference between contractual<br />
<strong>and</strong> expected cash<br />
- 1,787,217 (687,406) (2,161,942) (4,006,314) (5,054,066) (15,647,492)<br />
Mean duration of assets<br />
Mean duration of liabilities<br />
5 years<br />
16.6 years
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
Investment contracts with DPF in 2006 – Pension in 2006<br />
(in EUR)<br />
Carrying<br />
amount<br />
No stated<br />
maturity<br />
Contractual cash flows (undiscounted)<br />
0 - 5 years 5 - 10 years 10 - 15 years 15 - 20 years More than 20 years<br />
Debt securities 626,334 - 236,883 337,011 209,369 1,416 -<br />
Available for sale 626,334 - 236,883 337,011 209,369 1,416 -<br />
Listed securities 165,681 - 107,417 51,697 32,796 1,416 -<br />
- fixed interest rate 165,681 - 107,417 51,697 32,796 1,416 -<br />
Unlisted securities 1,381 - 267 1,340 - - -<br />
- fixed interest rate 1,381 - 267 1,340 - - -<br />
Government bonds 459,272 - 129,199 283,974 176,573 - -<br />
- fixed interest rate 459,272 - 129,199 283,974 176,573 - -<br />
Equity securities 441,266 441,266 - - - - -<br />
At fair value through P&L 441,266 441,266 - - - - -<br />
Listed securities 441,266 441,266 - - - - -<br />
Loans <strong>and</strong> receivables 451,332 - 451,332 - - - -<br />
Cash <strong>and</strong> cash equivalents 2,788 2,788 - - - - -<br />
Total assets 1,521,720 444,054 688,215 337,011 209,369 1,416 -<br />
(in EUR)<br />
Liabilities<br />
Insurance contracts with<br />
DPF<br />
Carrying<br />
amount<br />
No stated<br />
maturity<br />
Expected cash flows (undiscounted)<br />
0 - 5 years 5 - 10 years 10 - 15 years 15 - 20 years More than 20 years<br />
2,181,284 - 1,017,806 2,162,277 3,497,338 4,238,656 13,069,180<br />
Total liabilities 2,181,284 - 1,017,806 2,162,277 3,497,338 4,238,656 13,069,180<br />
269<br />
Difference between contractual<br />
<strong>and</strong> expected cash<br />
- 444,054 (329,592) (1,825,266) (3,287,970) (4,237,240) (13,069,180)<br />
Mean duration of assets<br />
Mean duration of liabilities<br />
5.2 years<br />
17.6 years
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
Other assets <strong>and</strong> liabilities (own assets) in 2007<br />
(in EUR)<br />
Carrying<br />
amount<br />
No stated<br />
maturity<br />
Contractual cash flows (undiscounted)<br />
0-1 year 1-3 years 3-5 years More than 5 years<br />
270<br />
Debt securities 250,038 - 7,150 6,131 6,131 300,838<br />
At fair value through P&L 229,640 - - - - 291,643<br />
Listed securities 229,640 - - - - 291,643<br />
- fixed interest rate 229,640 - - - - 291,643<br />
Available for sale 16,313 - 3,065 6,131 6,131 9,195<br />
Listed securities 16,313 - 3,065 6,131 6,131 9,195<br />
- fixed interest rate 16,313 - 3,065 6,131 6,131 9,195<br />
Held to maturity 4,085 - 4,085 - - -<br />
Listed securities 4,085 - 4,085 - - -<br />
- fixed interest rate 4,085 - 4,085 - - -<br />
Equity securities 113,462,957 113,462,957 - - - -<br />
At fair value through P&L 10,910,937 10,910,937 - - - -<br />
Listed securities 10,910,937 10,910,937 - - - -<br />
Available for sale 102,552,020 102,552,020 - - - -<br />
Listed securities 70,170,846 70,170,846 - - - -<br />
Unlisted securities 32,381,174 32,381,174 - - - -<br />
Investment property 18,817,897 18,817,897 - - - -<br />
Loans <strong>and</strong> receivables 64,098,030 - 63,860,110 1,338,617 - -<br />
Investment in associates 71,687,821 71,687,821 - - - -<br />
Cash <strong>and</strong> cash equivalents 23,551,263 23,551,263 - - - -<br />
Total assets 291,868,006 227,519,938 63,867,260 1,344,748 6,131 300,838<br />
Liabilities<br />
Debt securities (issued) 71,349,685 - 3,704,081 8,179,864 7,177,599 79,665,468<br />
Borrowings 88,881,957 - 49,031,695 30,508,053 14,006,061 8,475,909<br />
Derivative financial instruments 6,312,735 - 6,279,463 33,272 - -<br />
Trade <strong>and</strong> other payables 20,658,308 - 20,432,923 148,869 32,718 98,299<br />
Total liabilities 187,202,685 - 79,448,162 38,869,458 21,216,378 88,239,676
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
Other assets <strong>and</strong> liabilities (own assets) in 2006<br />
(in EUR)<br />
Carrying<br />
amount<br />
No stated<br />
maturity<br />
Contractual cash flows (undiscounted)<br />
0-1 year 1-3 years 3-5 years More than 5 years<br />
Debt securities 560.432 - 62.135 152.752 158.304 349.845<br />
At fair value through P&L 495.783 - 51.508 123.386 137.049 317.903<br />
Listed securities 495.783 - 51.508 123.386 137.049 317.903<br />
- fixed interest rate 495.783 - 51.508 123.386 137.049 317.903<br />
Available for sale 56.537 - 10.627 21.255 21.255 31.942<br />
Listed securities 56.537 - 10.627 21.255 21.255 31.942<br />
- fixed interest rate 56.537 - 10.627 21.255 21.255 31.942<br />
Held to maturity 8.112 - - 8.112 - -<br />
Listed securities 8.112 - - 8.112 - -<br />
- fixed interest rate 8.112 - - 8.112 - -<br />
Equity securities 93.503.190 93.503.190 - - - -<br />
At fair value through P&L 25.042.183 25.042.183 - - - -<br />
Listed securities 25.042.183 25.042.183 - - - -<br />
Available for sale 68.461.007 68.461.007 - - - -<br />
Listed securities 35.014.151 35.014.151 - - - -<br />
Unlisted securities 33.446.856 33.446.856 - - - -<br />
Investment property 14.678.359 14.678.359 - - - -<br />
Loans <strong>and</strong> receivables 53.989.716 - 53.892.947 1.389.117 - -<br />
Investment in associates 45.119.877 45.119.877 - - - -<br />
Cash <strong>and</strong> cash equivalents 13.924.193 13.924.193 - - - -<br />
Total assets 221.775.767 167.225.619 53.955.082 1.541.869 158.304 349.845<br />
Liabilities<br />
Debt securities (issued) 71.307.750 - 3.865.574 8.179.264 7.177.599 83.254.265<br />
Borrowings 42.424.955 - 12.936.286 12.522.526 8.636.185 16.519.978<br />
Trade <strong>and</strong> other payables 23.997.909 - 23.770.801 31.224 32.718 216.880<br />
Total liabilities 137.730.614 - 40.572.661 20.733.014 15.846.502 99.991.126<br />
271<br />
5.2.2 Credit risk<br />
further limits on individual amounts <strong>and</strong> on already<br />
specified amounts of maximum exposure of individual<br />
Credit risk is the consequence of an inability on the part<br />
of a contracting party to fully repay its obligations or<br />
overdue debts. In terms of financial instruments included<br />
in investments, the risk that one party in a contract<br />
regulating the financial instrument will cause the other<br />
party to incur financial loss due to default on obligations<br />
as a result of difference between actual <strong>and</strong> contractually<br />
agreed fulfillment of obligations.<br />
securities. In order to minimise the risk exposure, the<br />
Group analyses the credit rating scores of issuers of<br />
securities. It also manages its credit risk exposure through<br />
investments in government-issued securities, <strong>and</strong> through<br />
investments in low-risk securities. The procedures for<br />
checking the credit rating of foreign issuers of securities<br />
are based on acquiring credit rating information from such<br />
international firms as St<strong>and</strong>ard & Poor’s, Fitch-IBCA <strong>and</strong><br />
Moody’s.<br />
The Group manages its credit risk exposure by introducing
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
Issuers of securities in Slovenia do not have ratings,<br />
but the insurance part of the Group hase the highest<br />
concentration of investments in debt securities, bank <strong>and</strong><br />
government bonds. The credit risk of investment coupons<br />
<strong>and</strong> equity securities are controlled by diversification of<br />
investments.<br />
In the context of reinsurance, as for financial asset<br />
investment, credit risk management procedures relate<br />
to verifying the reinsurer’s credit rating. In accordance<br />
with the strategy of credit risk management, reinsurancerelated<br />
liabilities are reinsured by prime-grade reinsurers.<br />
This does not, however, discharge the Group’s liability<br />
as primary insurer. If a reinsurer fails to pay a claim for<br />
Procedures of verifying credit ratings are based on<br />
obtaining <strong>and</strong> reviewing publicly accessible data on<br />
the current financial status of the issuer of financial<br />
instruments <strong>and</strong> the issuer’s future solvency. The credit<br />
any reason, the Group remains liable for the payment<br />
to policyholder. The creditworthiness of reinsurers is<br />
considered on an annual basis by reviewing their financial<br />
strength prior to finalisation of any contract.<br />
rating of domestic the issuer’s of financial instruments is<br />
determined by the Group itself. In checking the issuer’s<br />
credit using its own sources, the Group checks the issuer’s<br />
future solvency, in particular the issuer’s adequacy of<br />
expected future cash flows from regular activities offset<br />
The Group restructures credit risk through establishing<br />
limits to the counterparty <strong>and</strong> also according to territory<br />
<strong>and</strong> industry. These risks are changing regulary.<br />
272<br />
against the outflows for settlement of future liabilities.<br />
Maximum credit risk exposure<br />
(in EUR) AAA-A BBB-B Without rating Total<br />
2007 2006 2007 2006 2007 2006 2007 2006<br />
Debt securities 107,619,183 24,513,164 6,031,103 10,075,785 36,797,448 109,493,871 150,447,734 144,082,820<br />
At fair value through P&L 3,613,689 2,819,810 999,623 - 17,976,207 13,784,736 22,589,519 16,604,546<br />
Available for sale 101,702,133 21,484,312 3,666,648 7,960,728 14,899,270 91,045,357 120,268,051 120,490,397<br />
Held to maturity 2,303,361 209,042 1,364,832 2,115,057 3,921,971 4,663,778 7,590,164 6,987,877<br />
Loans <strong>and</strong> receivables - - - - 135,690,971 132,080,595 135,690,971 132,080,595<br />
Loans <strong>and</strong> deposits - - - - 57,751,092 60,299,751 57,751,092 60,299,751<br />
Insurance receivables - - - - 35,598,232 32,395,529 35,598,232 32,395,529<br />
Recourse receivables - - - - 11,338,513 8,796,610 11,338,513 8,796,610<br />
Other receivables - - - - 31,003,134 30,588,705 31,003,134 30,588,705<br />
Reinsurance assets - - - - 11,004,824 8,631,597 11,004,824 8,631,597<br />
Cash <strong>and</strong> cash equivalents 44,572 - 692,174 - 28,661,371 20,309,729 29,398,117 20,309,729<br />
Other assets - - - - 2,870,170 1,765,148 2,870,170 1,765,148<br />
Total assets 107,663,755 24,513,164 6,723,277 10,075,785 215,024,784 272,280,940 329,411,816 306,869,889
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
Recourse receivables - recourse claims <strong>and</strong> assets<br />
acquired in the course of settlement of damages<br />
The Group may deal with the selling of items damaged<br />
in insurance cases which are acquired in the course<br />
of resolving damage cases. The net recoverable value<br />
of damaged items in damage cases which the Group<br />
manages to sell is recognised as revenue on the<br />
transaction date (sale of the damaged item).<br />
Exercised recourse receivables are recorded<br />
separately as receivables insured by mortgage <strong>and</strong><br />
other recourse receivables, which is the basis for<br />
impairment calculation. The Group makes impairment<br />
of exercised recourse receivables <strong>and</strong> receivables on<br />
redemption based an individual estimation of the<br />
financial situation <strong>and</strong> liquidity of the insurance policy<br />
holder. Liquidity of debtors <strong>and</strong> other receivables,<br />
With the payment of damages, the rights in relation to<br />
those responsible for the damage are also transferred<br />
from the policy holder to the Group (subrogation). The<br />
Group exercises that right through a recourse claim,<br />
or partial payment of the insurance amount. In the<br />
event that the insured person of compulsory liability<br />
insurance loses his or her rights (intoxication etc.) the<br />
Group dem<strong>and</strong>s recourse from the policy holder or<br />
the person responsible for the damage for the entire<br />
or partial portion of the paid damages. Exercised<br />
recourse claims are recognised as insurance revenue.<br />
Expected recourse amounts are also included in the<br />
calculation of damage liabilities.<br />
Recourse receivables are recorded separately, as<br />
exercised <strong>and</strong> unexercised, whereas unexercised<br />
recourse receivables are kept in off-balance-sheet<br />
records <strong>and</strong> no impairment are formed with regard<br />
to them.<br />
except deferred tax receivables are assessed<br />
individually <strong>and</strong> likewise for impairment calculation.<br />
Loans<br />
The Group approves loans to its subsidiaries <strong>and</strong><br />
associates in order to take advantage of synergy. The<br />
Group can get loans under advantageous conditions<br />
compared with subsidiaries <strong>and</strong> associates because<br />
of its financial power <strong>and</strong> intensive cooperation with<br />
financial institutions. It uses the interest rate for<br />
interest on loans according to related parties. Loans<br />
are not insured.<br />
In some cases loans are also approved to companies<br />
outside the Group if exists mutual interest for<br />
<strong>business</strong> cooperation. Loans are not insured <strong>and</strong> the<br />
interest rate is higher.<br />
273
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
274<br />
Neither<br />
Past due but not impaired Past due <strong>and</strong> impaired<br />
Total<br />
Individually Collective carrying<br />
past due<br />
Assets (in EUR)<br />
More<br />
amount<br />
<strong>and</strong> nor Up to 30 31-90 91-270<br />
Gross value Impairment<br />
than 271<br />
days days days<br />
Gross Impairment<br />
impaired<br />
days value<br />
Up to 31-60 61-90 91-270 More than Up to 30 31-60 61-90 91-270 More than<br />
30 days days days days 271 days days days days days 271 days<br />
2007<br />
Debt securities 150,447,734 - - - - - - - - - - - - - - - - 150,447,734<br />
Loans 57,749,747 974 - - 371 1,327,883 (1,327,883) - - - - - - - - - - 57,751,092<br />
Receivables 41,908,915 4,206,593 514,557 523,470 320,250 17,755,186 (15,193,669) 7,181,936 2,741,113 5,924,646 12,396,462 34,042,881 (991,676) (930,398) (3,008,894) (6,567,524) (22,883,969) 77,939,879<br />
- insurance receivables 17,091,945 3,219,250 130,283 135,831 35,379 - - 6,164,206 2,193,799 1,895,053 5,510,524 12,490,703 (477,869) (553,217) (480,968) (2,407,909) (9,348,778) 35,598,232<br />
- recourse receivables - - - - - - - 278,009 495,314 3,977,593 6,833,562 19,248,544 (146,372) (350,357) (2,501,102) (4,132,541) (12,364,137) 11,338,513<br />
- other receivables 24,816,970 987,343 384,274 387,639 284,871 17,755,186 (15,193,669) 739,721 52,000 52,000 52,376 2,303,634 (367,435) (26,824) (26,824) (27,074) (1,171,054) 31,003,134<br />
Reinsurance assets 11,004,824 - - - - - - - - - - - - - - - - 11,004,824<br />
TOTAL 261,111,220 4,207,567 514,557 523,470 320,621 19,083,069 (16,521,552) 7,181,936 2,741,113 5,924,646 12,396,462 34,042,881 (991,676) (930,398) (3,008,894) (6,567,524) (22,883,969) 297,143,529<br />
2006<br />
Debt securities 143,403,068 - - - - 2,479,462 (1,799,710) - - - - - - - - - - 144,082,820<br />
Loans 60,178,678 - - 3,992 117,081 907,816 (907,816) - - - - - - - - - - 60,299,751<br />
Receivables 31,507,266 3,819,168 211,936 124,313 10,229,910 17,635,173 (15,083,300) 6,318,707 2,525,347 4,387,325 9,743,178 17,400,940 (830,930) (891,300) (1,744,421) (5,303,130) (8,269,338) 71,780,844<br />
- insurance receivables 7,915,938 1,732,432 58,564 38,865 9,811,992 - - 5,281,127 2,137,807 1,980,767 4,345,341 9,854,678 (343,086) (615,832) (571,578) (2,006,140) (7,225,346) 32,395,529<br />
- recourse receivables - - - - - - - 217,513 387,540 2,291,262 5,346,666 5,346,408 (115,085) (275,468) (1,145,631) (3,249,205) (7,390) 8,796,610<br />
- other receivables 23,591,328 2,086,736 153,372 85,448 417,918 17,635,173 (15,083,300) 820,067 - 115,296 51,171 2,199,854 (372,759) - (27,212) (47,785) (1,036,602) 30,588,705<br />
Reinsurance assets 8,631,597 - - - - - - - - - - - - - - - - 8,631,597<br />
TOTAL 243,720,609 3,819,168 211,936 128,305 10,346,991 21,022,451 (17,790,826) 6,318,707 2,525,347 4,387,325 9,743,178 17,400,940 (830,930) (891,300) (1,744,421) (5,303,130) (8,269,338) 284,795,012
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
5.2.3 5.2.3 Sensitivity analysis<br />
2007<br />
(in EUR) Impact on profit before tax Impact on equity<br />
change in interest rate by + 25 bt (295,647) (1,829,762)<br />
change in interest rate by - 25 bt 171,261 1,805,234<br />
+ 5% change in the price of shares 7,671,805 9,847,313<br />
- 5% change in the price of shares (7,671,805) (9,847,313)<br />
Change in management fee (investment + 5%) 722,067 -<br />
Change in management fee (investment -5%) (722,067) -<br />
2006<br />
(in EUR) Impact on profit before tax Impact on equity<br />
change in interest rate by + 25 bt (214,560) (1,995,402)<br />
change in interest rate by - 25 bt 211,385 1,949,627<br />
+ 5% change in the price of shares 4,950,922 6,782,550<br />
- 5% change in the price of shares (4,950,922) (6,782,550)<br />
Change in management fee (investment + 5%) 464,864 -<br />
Change in management fee (investment -5%) (464,864) -<br />
275
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
5.2.4 Currency risk<br />
The Group takes on exposure to effects of fluctuations<br />
in the prevailing foreign currency exchange rates on<br />
its financial position <strong>and</strong> cash flows. The Group’s<br />
currency risk is not considered to be significant<br />
due to the fact that Slovenia has been in the ERM2<br />
The table below summarises the Group’s exposure<br />
to foreign currency exchange rate risk as at 31<br />
December. Included in the table are the Group’s<br />
financial assets <strong>and</strong> financial <strong>and</strong> insurance liabilities<br />
in carrying amounts, categorised by currency.<br />
system with fixed foreign currency rates <strong>and</strong> the euro<br />
was introduced in Slovenia on 1 January 2007.<br />
276<br />
2007<br />
(in EUR) EUR Other Total<br />
Assets<br />
Financial assets at fair value through P&L 143,040,153 32,985,472 176,025,625<br />
- Equity securities 120,450,634 32,985,472 153,436,106<br />
- Debt securities 22,589,519 - 22,589,519<br />
Available for sale 294,319,323 22,895,005 317,214,328<br />
- Equity securities 174,765,769 22,180,508 196,946,277<br />
- Debt securities 119,553,554 714,497 120,268,051<br />
Held to maturity 7,590,164 - 7,590,164<br />
- Debt securities 7,590,164 - 7,590,164<br />
Investment property 20,601,521 - 20,601,521<br />
Loans <strong>and</strong> receivables 129,018,868 6,672,103 135,690,971<br />
Reinsurance assets 11,004,824 - 11,004,824<br />
Cash <strong>and</strong> cash equivalents 22,623,434 6,774,683 29,398,117<br />
Total assets 628,198,287 69,327,263 697,525,550<br />
Liabilities<br />
Debt securities (issued) 75,368,725 - 75,368,725<br />
Loans 88,463,016 418,941 88,881,957<br />
Derivative financial instruments 6,312,735 - 6,312,735<br />
Insurance contracts 306,070,319 303,468 306,373,787<br />
Insurance contracts with DPF 62,446,521 101,505 62,548,026<br />
Investment contracts with DPF 15,588,746 15,528 15,604,274<br />
Total liabilities 554,250,062 839,442 555,089,504
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
2006<br />
(in EUR) EUR Other Total<br />
Assets<br />
Financial assets at fair value through P&L 85,536,213 30,086,770 115,622,983<br />
- Equity securities 68,931,667 30,086,770 99,018,437<br />
- Debt securities 16,604,546 - 16,604,546<br />
Available for sale 241,365,987 14,775,412 256,141,399<br />
- Equity securities 121,493,205 14,157,797 135,651,002<br />
- Debt securities 119,872,782 617,615 120,490,397<br />
Held to maturity 6,979,766 8,111 6,987,877<br />
- Debt securities 6,979,766 8,111 6,987,877<br />
Investment property 20,592,116 - 20,592,116<br />
Loans <strong>and</strong> receivables 126,865,409 5,215,186 132,080,595<br />
Reinsurance assets 8,631,597 - 8,631,597<br />
Cash <strong>and</strong> cash equivalents 16,474,497 3,835,232 20,309,729<br />
Total assets 506,445,585 53,920,711 560,366,296<br />
Liabilities<br />
Debt securities (issued) 75,324,967 - 75,324,967<br />
Loans 42,225,314 199,641 42,424,955<br />
Insurance contracts 237,389,001 36,319 237,425,320<br />
Insurance contracts with DPF 57,330,326 434,858 57,765,184<br />
Investment contracts with DPF 13,791,387 - 13,791,387<br />
Total liabilities 426,060,995 670,818 426,731,813<br />
5.3 Operational risk<br />
Operational risks are risks related to errors in the<br />
functioning of <strong>business</strong> processes, information<br />
technology, organisation <strong>and</strong> similar areas.<br />
The operational risks of the Group are managed<br />
in the subsidiaries by monitoring the weaknesses<br />
<strong>and</strong> opportunities of their <strong>business</strong>es <strong>and</strong> by<br />
controlling the <strong>business</strong> processes. Operational risk<br />
management is based on the Groupʼs strategic <strong>and</strong><br />
companiesʼ operational objectives.<br />
The Group manages operational risks by introducing<br />
the ISO st<strong>and</strong>ards at the level of the Group <strong>and</strong> in<br />
its individual members with which the Group wants<br />
to st<strong>and</strong>ardise <strong>business</strong> processes. The Group uses<br />
st<strong>and</strong>ardised <strong>and</strong> uniform software in the area of<br />
accounting <strong>and</strong> investments.<br />
5.4 General <strong>business</strong> risk<br />
General <strong>business</strong> risks are related to the Group’s<br />
operations in the environment, such as the<br />
economic environment, legislation <strong>and</strong> similar, on<br />
which the Group has no direct impact.<br />
Such risks are quite difficult to measure or<br />
model. In order to manage such risks, the Group<br />
regularly monitors legislation through its technical<br />
services, developments on capital markets <strong>and</strong><br />
macroeconomic parameters of the markets in which<br />
it is present.<br />
277
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
The global market in 2007 was very changeable. In<br />
second half of the year, the real estate crisis in the<br />
USA was bigger that was expected, causing distrust in<br />
the money market; short term interest rates increased,<br />
<strong>and</strong> liquidity in the inancial market decreased.<br />
in Slovenia; a decision on dividends distribution is<br />
taken by the shareholders’ meeting.<br />
KD Holding has no specific aims about ownership by<br />
employees <strong>and</strong> has no program for share options. In the<br />
Group there were no changes in managing capital in<br />
5.5 Capital managment<br />
2007.<br />
278<br />
Management Board takes decisions for maintenance of<br />
significant (large) capital scope to ensure the confidence of<br />
all participants <strong>and</strong> development of KD Holding. As one of<br />
the strategic indicators, the Group defines return on equity<br />
as the ratio between net profit for the year of the majority<br />
ownerʼs <strong>and</strong> the average value of majority owner equity.<br />
The Group seeks to keep the balance of large returns<br />
which can be reached by higher indebtedness, <strong>and</strong> the<br />
advantages <strong>and</strong> safety of powerful capital structure.<br />
According to the shareholders’ meeting decision, the<br />
parent company KD Holding has established its own<br />
share fund. On 31 December 2007 there were 62,601<br />
ordinary shares with the mark KDHR, which is 2.11%<br />
of issued capital, <strong>and</strong> 51,306 preference shares with<br />
the mark KDHP, which is 1.74% of issued capital.<br />
The investment plan, optimal capital structure<br />
policy, expectation <strong>and</strong> the interests of shareholders<br />
are basis for the development of dividend policy.<br />
The entity distributes a dividend once a year.<br />
Management <strong>and</strong> Supervisory Boards of the<br />
parent company take a decision on the amount of<br />
proposed dividends. Dividends are distributed from<br />
accumulated profit of the parent company which<br />
is regulated with compliance of valid regulations<br />
The parent company is not a subject to the capital<br />
requirements which could be set by the regulatory<br />
authority.<br />
An entity has subsidiaries in the field of financial <strong>and</strong><br />
insurance segment, the capital requirements of which are<br />
provided by the regulatory authority. The management<br />
of the entities provides the proper amount of capital<br />
(capital adequacy) according to the scope <strong>and</strong> type<br />
of operation, which are managed by management<br />
<strong>and</strong> according to the risk which are they exposed to.<br />
5.6 Fair value of financial assets <strong>and</strong> liabilities<br />
Fair value is the amount for which an asset could be<br />
exchanged or a liability settled, between knowledgeable,<br />
willing parties in an arm’s length transaction.<br />
The Group establishes the fair value of financial<br />
assets in the following way:<br />
- The fair value of investments in equity instruments<br />
that have a quoted market price in an active market<br />
is determined as the product of the number of units of<br />
the instrument <strong>and</strong> its quoted market price.<br />
- If there is no active market for the financial<br />
instruments, the methods of assessing the fair
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
value of a financial instrument are used. Valuation<br />
techniques include using recent arm’s length market<br />
transactions between knowledgeable, willing parties,<br />
if available, reference to the current fair value of<br />
another instrument that is substantially the same,<br />
<strong>and</strong> discounted cash flow analysis. The Group has<br />
developed a model for assessing the fair value of<br />
non-listed equity instruments; its appropriateness was<br />
assessed by an independent qualified expert. Using<br />
- The estimated fair value of borrowings not quoted in<br />
an active market is based on discounted cash flows<br />
using current market rates. The aggregate fair value<br />
of quoted debt securities are calculated based on<br />
quoted market prices.<br />
- Current receivables <strong>and</strong> liabilities are assumed their<br />
carrying value reflects their fair value.<br />
- For a contract containing a discretionary participation<br />
feature the fair value cannot be measured reliably.<br />
this model, the fair values of significant financial<br />
investments in non-listed companies are estimated<br />
once a year on the basis of data available.<br />
- The fair value of loans <strong>and</strong> deposits represents the<br />
discounted amount of estimated future cash flows<br />
expected to be received. Expected cash flows are<br />
discounted at current market rates to determine fair value.<br />
The following table summarises the carrying amounts<br />
<strong>and</strong> fair values of those financial assets <strong>and</strong> liabilities<br />
not presented on the Group’s balance sheet at<br />
their fair value. Bid prices are used to estimate fair<br />
values of assets, whereas offer prices are applied to<br />
liabilities.<br />
Carrying value<br />
Fair value<br />
(in EUR)<br />
2007 2006 2007 2006<br />
Financial assets<br />
Investment securities (held-to-maturity) 7,590,164 6,987,877 7,610,152 7,178,651<br />
Loans <strong>and</strong> bank deposits 57,751,092 60,299,751 57,751,092 60,299,751<br />
65,341,256 67,287,628 65,361,244 67,478,402<br />
Financial liabilities<br />
Borrowings 88,881,957 42,424,955 88,903,456 42,272,588<br />
Bonds issued 75,368,725 75,324,967 75,052,404 75,463,983<br />
164,250,682 117,749,922 163,955,860 117,736,571<br />
279<br />
6. Reporting by Business Segment <strong>and</strong><br />
Geographical Segment<br />
The Group’s main activities i.e. <strong>business</strong> segments<br />
are the following:<br />
- Property insurance<br />
- Life insurance<br />
- Health insurance<br />
- Financial operations (asset management <strong>and</strong> other<br />
- Cinematography<br />
- Other (tourism, publishing, etc.).<br />
As at 31 December 2007, the Group operated<br />
in Slovenia <strong>and</strong> the countries: Bulgaria, Cyprus,<br />
Czech Republic, FBIH, Croatia, Netherl<strong>and</strong>s,<br />
Pol<strong>and</strong>, Slovakia, Romania, Serbia, Montenegro,<br />
Ukraine, USA.<br />
financial operations)
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
6.1 Primary reporting format – <strong>business</strong> segment<br />
6.1.1 Performance by <strong>business</strong> segment<br />
The segment results for the year ended 31 December 2007 are as follows:<br />
Property Life Health Financial Cinema-<br />
Other Group<br />
(in EUR)<br />
insurance insurance insurance operations tography<br />
Total gross segment sales 123,271,148 54,579,703 77,890,381 18,146,895 16,108,308 23,130,838 313,127,273<br />
Inter-segment sales (580,450) (317,192) (6,001) (3,245,230) (25,342) (215,619) (4,389,834)<br />
Sales 122,690,698 54,262,511 77,884,380 14,901,665 16,082,966 22,915,219 308,737,439<br />
Operating profit/Segment result 16,246,123 2,622,709 2,146,382 8,578,393 (736,000) 1,005,734 29,863,341<br />
Finance costs – net (271,683) 21,194 5,262 (3,985,445) (1,314,797) 31,669 (5,513,800)<br />
Property Life Health Financial Cinema-<br />
Other Group<br />
(in EUR)<br />
insurance insurance insurance operations tography<br />
Total gross segment sales 131,995,552 87,014,283 89,226,380 34,570,638 18,699,600 28,344,158 389,850,611<br />
Inter-segment sales (536,557) (10,930,946) (6,049) (6,019,053) (20,629) (346,324) (17,859,558)<br />
Sales 131,458,995 76,083,337 89,220,331 28,551,585 18,678,971 27,997,834 371,991,053<br />
Operating profit/Segment result 28,124,164 (101,495) 4,628,423 11,269,112 151,272 (1,202,966) 42,868,509<br />
Finance costs – net (429,606) 1,107,568 (46,050) (4,142,700) (1,704,774) (1,337,071) (6,552,633)<br />
Share of profit of associates 898,260 262,634 - 9,973,103 (6,022) 13,049 11,141,024<br />
Profit before income tax 28,592,818 1,268,707 4,582,373 17,099,515 (1,559,524) (2,526,988) 47,456,900<br />
Income tax expense (6,321,004) (1,198,100) (1,563,428) (2,553,139) (862,618) (13,027) (12,511,316)<br />
Profit for the year 22,271,814 70,607 3,018,945 14,546,376 (2,422,142) (2,540,015) 34,945,584<br />
The segment results for the year ended 31 December 2006 are as follows:<br />
2007<br />
280<br />
2006<br />
Share of profit of associates 2,057,261 206,685 - 2,134,693 (31,614) 5,805 4,372,830<br />
Profit before income tax 18,031,701 2,850,588 2,151,644 6,727,641 (2,082,411) 1,043,208 28,722,371<br />
Income tax expense (5,663,729) (974,587) (622,137) (333,588) 782,862 (1,034,423) (7,845,602)<br />
Profit for the year 12,367,972 1,876,001 1,529,507 6,394,053 (1,299,549) 8,785 20,876,769<br />
The costs are allocated to segments as they originally<br />
occur in the operations of the each <strong>business</strong> segment<br />
<strong>and</strong> as it is reported by the subsidiaries which are<br />
included in the relevant segment.<br />
Other segment items included in the income statement for the year ended 31 December 2007 are as follows:<br />
2007<br />
Property Life Health Financial Cinema<br />
(in EUR)<br />
insurance insurance insurance operations tography<br />
Other Group<br />
Depreciation <strong>and</strong> amortisation (1,649,232) (739,127) (751,799) (659,514) (4,156,186) (259,698) (8,215,555)<br />
Impairment of trade receivables (8,771,977) (237,771) (1,107,971) (114,118) (103,372) (181,630) (10,516,839)<br />
Other segment items included in the income statement for the year ended 31 December 2006 are as follows:<br />
2006<br />
Property Life Health Financial Cinema<br />
(in EUR)<br />
insurance insurance insurance operations tography<br />
Other Group<br />
Depreciation <strong>and</strong> amortisation (2,231,485) (380,792) (62,185) (574,691) (3,501,736) (166,816) (6,917,705)<br />
Impairment of l<strong>and</strong> <strong>and</strong> property - - - (1,569,005) - - (1,569,005)<br />
Impairment of trade receivables (2,048,932) (47,046) (1,468,736) (6,948) (407,774) (35,231) (4,014,667)
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
Inter-segment transfers or transactions are entered<br />
into under the normal commercial terms <strong>and</strong><br />
conditions that would also be available to unrelated<br />
third parties.<br />
The segment assets <strong>and</strong> liabilities at 31 December 2007 <strong>and</strong> for the year then ended are as follows:<br />
2007<br />
Property Life Health Financial Cinema<br />
(in EUR)<br />
insurance insurance insurance operations tography<br />
Other Group<br />
Assets 265,357,582 247,703,125 42,217,794 244,993,866 58,545,874 25,541,340 884,359,581<br />
Associates 6,664,165 1,685,290 - 63,338,366 - - 71,687,821<br />
Total assets 272,021,747 249,388,415 42,217,794 308,332,232 58,545,874 25,541,340 956,047,402<br />
Liabilities 202,134,934 209,930,611 26,332,435 136,298,707 36,804,548 4,281,801 615,783,035<br />
Capital expenditure 8,946,181 2,062,174 24,094 1,571,356 3,202,725 2,525,766 18,332,296<br />
The segment assets <strong>and</strong> liabilities at 31 December 2006 <strong>and</strong> for the year then ended are as follows:<br />
2006<br />
Property Life Health Financial Cinema<br />
(in EUR)<br />
insurance insurance insurance operations tography<br />
Other Group<br />
Assets 224,123,410 151,628,664 42,072,734 236,200,071 61,328,756 14,946,603 730,300,238<br />
Associates 7,551,135 1,634,698 - 35,459,418 6,022 468,604 45,119,877<br />
Total assets 231,674,545 153,263,362 42,072,734 271,659,489 61,334,778 15,415,207 775,420,115<br />
Liabilities 189,711,567 140,161,755 30,388,182 88,223,840 38,114,797 6,014,115 492,614,256<br />
Capital expenditure 4,211,588 814,614 139,351 1,146,270 10,589,730 132,015 17,033,568<br />
281<br />
Segment assets consist primarily of property, plant<br />
6.2 Secondary reporting format - geographical segment<br />
<strong>and</strong> equipment, intangible assets, inventories,<br />
financial assets, receivables <strong>and</strong> operating cash.<br />
6.2.1 Performance by geographical segment<br />
Segment liabilities comprise financial <strong>and</strong> operating<br />
liabilities.<br />
The Group’s <strong>business</strong> segments operate in three<br />
main geographical areas, even though they are<br />
managed on a worldwide basis. The home country<br />
Losses from impairment of available-for-sale financial<br />
assets in the total amount of EUR 2,596,286 (2006:<br />
EUR 9,552,771 in financial operations <strong>and</strong> EUR<br />
81,076 in other operations) were recognised in the<br />
income statement in the <strong>business</strong> segment.<br />
of the Group is Slovenia. The areas of operation are<br />
principally property insurance, life insurance, health<br />
insurance, financial services (asset management <strong>and</strong><br />
other financial operations), cinematography <strong>and</strong> other<br />
(tourism, publishing, etc.).
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
The Group particularly operates in Slovenia, in EU countries <strong>and</strong> other South Eastern European countries.<br />
(in EUR) 2007 2006<br />
Sales<br />
Slovenia 356,223,435 304,404,240<br />
Euro zone 5,474,344 580,709<br />
Other countries 10,293,274 3,752,491<br />
371,991,053 308,737,440<br />
(in EUR) 2007 2006<br />
Total assets<br />
Slovenia 767,825,242 665,415,419<br />
Euro zone 117,270,859 39,345,965<br />
Other countries 70,951,301 70,658,731<br />
956,047,402 775,420,115<br />
Associates<br />
Slovenia 67,722,410 38,341,258<br />
Euro zone 3,294,302 4,821,203<br />
Other countries 671,109 1,957,416<br />
71,687,821 45,119,877<br />
282<br />
(in EUR) 2007 2006<br />
Capital expenditure<br />
Slovenia 14,462,757 14,341,011<br />
Euro zone 822,020 1,931,869<br />
Other countries 3,047,519 760,688<br />
18,332,296 17,033,568<br />
(in EUR) 2007 2006<br />
Analysis of sales by category<br />
Sales of goods 5,055,547 2,481,760<br />
Revenue from services 366,935,506 306,255,680<br />
371,991,053 308,737,440
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
7. Property, plant <strong>and</strong> equipment<br />
(in EUR) L<strong>and</strong> & <strong>build</strong>ings Vehicles & machinery<br />
Furniture, fittings &<br />
equipment<br />
Total<br />
At 1 January 2006<br />
Cost 63,123,577 13,464,981 19,477,541 96,066,099<br />
Accumulated depreciation (9,601,035) (8,601,945) (9,042,660) (27,245,640)<br />
Net book value 53,522,542 4,863,036 10,434,881 68,820,459<br />
Year 2006<br />
Opening net book amount 53,522,542 4,863,036 10,434,881 68,820,459<br />
Exchange differences 50 8,099 7,169 15,318<br />
Acquisition of subsidiary - - 18,344 18,344<br />
Additions 689,816 2,815,871 10,378,451 13,884,138<br />
Disposals - (79,457) (195,768) (275,225)<br />
Depreciation charge (1,183,684) (1,689,296) (2,305,443) (5,178,423)<br />
Transfer to investment property (5,894,467) - - (5,894,467)<br />
Other movements - - (169,742) (169,742)<br />
Closing net book value 47,134,257 5,918,253 18,167,892 71,220,402<br />
At 31 December 2006<br />
Cost 57,599,288 15,752,054 26,832,795 100,184,137<br />
Accumulated depreciation (10,465,031) (9,833,801) (8,664,903) (28,963,735)<br />
Net book amount 47,134,257 5,918,253 18,167,892 71,220,402<br />
Year 2007<br />
Opening net book value 47,134,257 5,918,253 18,167,892 71,220,402<br />
Exchange differences (87,629) (20,023) (7,215) (114,867)<br />
Acquisition of subsidiary (Note 31) 948,626 159,561 334,380 1,442,567<br />
Disposal of subsidiary (Note 31) (338,408) (207,975) (255) (546,638)<br />
Additions 2,928,102 5,323,678 8,278,837 16,530,617<br />
Disposals (1,543,051) (172,533) (883,821) (2,599,405)<br />
Depreciation charge (1,254,881) (2,141,299) (2,724,651) (6,120,831)<br />
Transfer to investment property 4,055,165 - - 4,055,165<br />
Closing net book value 51,842,181 8,859,662 23,165,167 83,867,010<br />
At 31 December 2007<br />
Cost 65,186,188 20,032,673 34,571,658 119,790,519<br />
Accumulated depreciation (13,344,007) (11,173,011) (11,406,491) (35,923,509)<br />
Net book value 51,842,181 8,859,662 23,165,167 83,867,010<br />
283<br />
Bank borrowings are collateralised by l<strong>and</strong> <strong>and</strong> <strong>build</strong>ings with the carrying value of EUR 24,640,163<br />
(2006:EUR 20,942,710).
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
8. Investment property<br />
(in EUR) 2007 2006<br />
At 1 January<br />
Cost 22,895,497 16,740,290<br />
Accumulated depreciation (2,303,381) (1,458,688)<br />
Net book amount 20,592,116 15,281,602<br />
Year ended 31 December<br />
Opening net book amount 20,592,116 15,281,602<br />
Acquisition of subsidiary 4,536,423 -<br />
Additions 197,384 653,622<br />
Transfer from property, plan <strong>and</strong> equipment (4,055,165) 5,894,467<br />
Disposals (47,874) (590,382)<br />
Depreciation charge (621,363) (647,193)<br />
Closing net book amount 20,601,521 20,592,116<br />
At 31 December<br />
Cost 24,058,580 22,895,497<br />
Accumulated depreciation (3,457,059) (2,303,381)<br />
Net book amount 20,601,521 20,592,116<br />
The following amounts have been recognised in the income statement:<br />
284<br />
(in EUR) 2007 2006<br />
Rental income 1,737,018 1,268,461<br />
Direct operating expenses arising from investment properties that generate rental income 1,198,783 345,902<br />
The Group does not have any investment properties<br />
that do not generate rental income. Lease<br />
agreements are short-term <strong>and</strong> cancellable.<br />
Fair value of the Group’s investment properties as<br />
at 31 December 2007 is EUR 23,538,720 (2006:<br />
EUR 25,631,860) as determined by an external<br />
independent valuer. The determination of fair value<br />
is not supported by the market approach, as there<br />
is no publically available data in Slovenia. Therefore<br />
the method of discounted cash flows is used, with<br />
cash flow projections until 2010 <strong>and</strong> discount rate<br />
of 5.5%.
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
9. Intangible assets<br />
(in EUR) Goodwill Licences Computer software Total<br />
At 1 January 2006<br />
Cost 83,648,882 806,723 8,497,692 92,953,297<br />
Accumulated amortisation <strong>and</strong> impairment - (495,752) (5,764,384) (6,260,136)<br />
Net book amount 83,648,882 310,971 2,733,308 86,693,161<br />
Year 2006<br />
Opening net book amount 83,648,882 310,971 2,733,308 86,693,161<br />
Exchange differences - 246 10,457 10,703<br />
Additions - 152,286 3,078,974 3,231,260<br />
Acquisition of subsidiary - - 2,166 2,166<br />
Increase in equity share of subsidiaries 115,613 - - 115,613<br />
Disposals - (2,141) (179,836) (181,977)<br />
Disposal of subsidiary - (15,285) - (15,285)<br />
Amortisation charge - (143,895) (948,193) (1,092,088)<br />
Impairment charge (1,569,005) - - (1,569,005)<br />
Other movements - 1,084,222 (914,480) 169,742<br />
Closing net book amount 82,195,490 1,386,404 3,782,396 87,364,290<br />
At 31 December 2006<br />
Cost 83,764,495 1,940,845 11,172,819 96,878,159<br />
Accumulated amortisation <strong>and</strong> impairment (1,569,005) (554,441) (7,390,423) (9,513,869)<br />
Net book amount 82,195,490 1,386,404 3,782,396 87,364,290<br />
Year 2007<br />
Opening net book amount 82,195,490 1,386,404 3,782,396 87,364,290<br />
Exchange differences - 1,126 (13,874) (12,748)<br />
Additions - 72,092 1,729,587 1,801,679<br />
Acquisition of subsidiaries (Note 31) 403,304 - 54,993 458,297<br />
Increase in equity share of subsidiaries 85,612 - - 85,612<br />
Disposals - - (234,129) (234,129)<br />
Disposal of subsidiary (Note 31) (25,092) - (67,907) (92,999)<br />
Amortisation charge - (84,711) (1,388,650) (1,473,361)<br />
Impairment charge (Note 23.2) - - - -<br />
Other movements - - - -<br />
Closing net book amount 82,659,314 1,374,911 3,862,416 87,896,641<br />
At 31 December 2007<br />
Cost 84,228,319 2,005,457 12,463,933 98,697,709<br />
Accumulated amortisation <strong>and</strong> impairment (1,569,005) (630,546) (8,601,517) (10,801,068)<br />
Net book amount 82,659,314 1,374,911 3,862,416 87,896,641<br />
285<br />
In January 2007 the Group acquired from minority<br />
shareholders of Ljubljanjski kinematografi d. d.<br />
the additional 5.21% share of the net assets of its<br />
subsidiary. With the investment of EUR 221,937 <strong>and</strong><br />
acquired net assets of EUR 136,325 the goodwill of<br />
EUR 85,612 on the transaction was recognised.
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
The segment-level summary of the goodwill allocation is presented below:<br />
(in EUR)<br />
Non-life insurance<br />
Financial<br />
operations<br />
Cinematography Other Group<br />
Slovenia 22,849,770 53,952,108 890,682 465,791 78,158,351<br />
Euro zone - 781,079 - 141,179 922,258<br />
Other Countries - 3,578,705 - - 3,578,705<br />
Total at 31 December 2007 22,849,770 58,311,892 890,682 606,970 82,659,314<br />
Slovenia 22,849,770 53,952,108 696,595 490,882 77,989,355<br />
Euro zone - 641,370 - - 641,370<br />
Other Countries - 3,564,765 - - 3,564,765<br />
Total at 31 December 2006 22,849,770 58,158,243 696,595 490,882 82,195,490<br />
Goodwill is allocated mainly to non-life insurance<br />
<strong>and</strong> to the financial operations segment, <strong>and</strong> is<br />
annually assessed for impairment.<br />
- unearned premium reserve projection is based on<br />
the premium earning patterns applied to the gross<br />
premium written amount for each calendar year<br />
<strong>and</strong> line of <strong>business</strong> separately:<br />
286<br />
In 2007 for the purpose of exclusion of minority<br />
interest an assumption was made in 2006 for the<br />
non-life insurance segment by an independent<br />
qualified expert. It was concluded that operational<br />
results in 2007 <strong>and</strong> planned results in 2007 were<br />
not substantially different <strong>and</strong> there is also no<br />
substantial difference in equity.<br />
Key assumptions used in 2006 <strong>and</strong> in 2007 for the<br />
non-life insurance segment are:<br />
- the Income Approach (discounted cash flows) <strong>and</strong><br />
Market Approach methods were used to calculate<br />
a range of values for the non-life <strong>business</strong>;<br />
- the best management projections <strong>and</strong> estimates<br />
regarding the future written premium were used<br />
for the period 2006-2011. For the following<br />
years decreasing growth rates consistent with<br />
market growth were used. The forecasted growth<br />
of the Slovenian general insurance market is<br />
approximately 7% annually;<br />
- ceded premium assumptions range from 0% to<br />
35% of the gross earned premium depending on<br />
the line of <strong>business</strong>. Ceded claims assumptions<br />
range from 0% to 50% of the gross claims<br />
incurred depending on the line of <strong>business</strong>.<br />
- ultimate loss ratio assumptions for future accident<br />
years range from 35% to 110% depending on the<br />
line on <strong>business</strong>;<br />
- the risk discount rate 10.2% was derived based on<br />
the CAPM (Capital Asset Pricing Model).<br />
Based on the result of the valuation, which was<br />
performed by an independent qualified expert, the<br />
Group assessed that the goodwill related to the non-life<br />
insurance segment does not need to be impaired.<br />
No impairment charge of goodwill of the financial<br />
segment in 2007 was recognised (impairment charge<br />
in 2006 was EUR 1,569,005). The goodwill of the<br />
financial segment was assessed by an independent
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
qualified expert using the following key assumptions<br />
in 2007:<br />
- present value of future cash-flows without<br />
indebteness;<br />
- estimation was based on analysis of past operations<br />
<strong>and</strong> estimation of future <strong>business</strong> opportunities;<br />
- cash return was discounted with the appropriate<br />
weighted arithmetic average of the return rate of<br />
debt <strong>and</strong> equity securities;<br />
- the CAMP model was used, modified for each<br />
country;<br />
- assumptions: 5% cost growth rate per employee,<br />
4% expected rate of return on non-risk<br />
investments, 7% premium for capital risk, 1.05<br />
The goodwill of the financial segment was assessed<br />
by an independent qualified expert using the<br />
following key assumptions 2006:<br />
- the value of the investment is based on the present<br />
value of future cash-flows;<br />
- the strategic <strong>and</strong> operational projections of the future<br />
cash flows prepared by the Management. The period<br />
over which the Management has projected cash flows<br />
is 5 years. The growth rate used to extrapolate cash<br />
flow projections is 1%;<br />
- the required rate of return on the investment is<br />
11.10%, the required rate of return on the total<br />
investment is 10.4%,<br />
- 10% discount for lack of liquidity.<br />
systematic risk, 1% premium for particular risk,<br />
10% discount for illiquidity;<br />
- return on equity from 13.2% to 17.1%<br />
- return on capital from 12.3% to 16.0%.<br />
Goodwill has been assessed with the internal<br />
method of evaluation. Goodwill does not need to be<br />
impaired.<br />
287<br />
Based on the result of the assessment the Group<br />
assessed that the goodwill in 2007 does not need to<br />
be impaired.
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
10. Investments in associated companies<br />
(in EUR) 2007 2006<br />
Balance at 1 January 45,119,877 20,730,216<br />
Acquisitions 23,412,841 24,324,775<br />
Disposals (4,228,866) (3,047,016)<br />
Business combination (1,076,688) (1,205,909)<br />
Share of profit <strong>and</strong> revaluation 10,922,133 6,802,550<br />
Dividends (2,487,951) (129,473)<br />
Exchange differences 26,475 56,977<br />
Impairment - (2,412,243)<br />
Balance at 31 December 71,687,821 45,119,877<br />
The Group acquired an additional share of<br />
Nama d.d. <strong>and</strong> holds a total share of 48.46%.<br />
The additional investment amount was EUR<br />
In 2007 the Group invested EUR 750,009 in a<br />
newly established risk equity fund in Holl<strong>and</strong> <strong>and</strong><br />
acquired a 48.21% share of the fund.<br />
8,739,073. In the fair value of net assets aquired<br />
288<br />
of EUR 6,284,317, goodwill is included as a part<br />
of the carrying value of this investment of EUR<br />
2,454,756.<br />
The Group acquired an additional share of Deželna<br />
banka Slovenije d.d., Ljubljana <strong>and</strong> holds a total<br />
share of 33.68%. The additional investment<br />
amounts to EUR 216,120 <strong>and</strong> represents<br />
approximately the fair value of net assets acquired;<br />
therefore no goodwill or excess has been calculated.<br />
The Group disposed of a part of its investment<br />
in Žičnice Vogel Bohinj d.d. (19.04%) <strong>and</strong> holds<br />
a total share of 21.54%. At disposal the Group<br />
incurred EUR 99,098 in losses which is recognised<br />
in the income statement as net financial<br />
income - associates.<br />
In 2007 the Group invested EUR 1,558,081 in its<br />
own internally managed mutual funds <strong>and</strong> disposed<br />
of EUR 3,835,474 of its own funds. The funds<br />
listed below are treated as associated companies.
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
Information on associates of the Group:<br />
(in EUR)<br />
Associates<br />
Registered<br />
office<br />
Share of interest<br />
Associates<br />
Designated<br />
at<br />
fair value<br />
through P/L<br />
All together Assets Liabilities Revenue<br />
Profit/ (loss)<br />
– pro rata<br />
share<br />
KD Concorde d.o.o. Slovenia 50.00% - 50.00% 1,075,484 282,816 1,268,063 85,769<br />
Seaway Group d.o.o. Slovenia 50.00% - 50.00% 33,732,822 24,732,822 35,925,934 777,139<br />
Zabavna znanost d.o.o. Slovenia 50.00% - 50.00% 56,874 153,932 46,751 (6,022)<br />
Kinematografi Kranj d.o.o. Slovenia 45.00% - 45.00% 953,542 93,977 45,564 (3,141)<br />
Žičnice Vogel Bohinj d.d. Slovenia 21.54% - 21.54% 12,736,550 6,935,055 2,107,915 28,884<br />
Radio Kranj d.o.o. Slovenia 20.00% - 20.00% 847,952 133,983 747,094 9,687<br />
Deželna banka d.d. Slovenia 33.68% - 33.68% 793,855,000 713,757,000 50,274,000 2,094,222<br />
KD ID d.d.* Slovenia 9.93% - 9.93% 170,048,252 1,572,211 62,658,723 5,261,011<br />
Semenarna Ljubljana Slovenia 29.90% - 29.90% 53,771,498 40,694,038 48,705,558 326,809<br />
Nama d.d. Slovenia 48.46% - 48.46% 17,876,006 3,269,797 20,223,618 794,203<br />
Kd Private Equity b.v. Netherl<strong>and</strong>s 48.21% - 48.21% 906,060 422,476 35,668 (498,308)<br />
Zelnner Holdings Limited Cyprus 48.65% - 48.65% 183,770 15,824 - (3,216)<br />
1,086,043,810 792,063,931 222,038,888 8,867,037<br />
*together with the parent company KD Group d.d. over 20%<br />
289<br />
(in EUR)<br />
Associates<br />
Registered<br />
office<br />
Share of interest<br />
Associates<br />
Designated<br />
at<br />
fair value<br />
through P/L<br />
All together Assets Liabilities Revenue<br />
2006<br />
Profit/ (loss)<br />
– pro rata<br />
share<br />
KD Concorde d.o.o. Slovenia 50.00% - 50.00% 920,168 147,062 939,814 (5,341)<br />
Seaway Group d.o.o. Slovenia 50.00% - 50.00% 22,173,822 14,732,941 16,520,627 709,226<br />
Zabavna znanost d.o.o. Slovenia 50.00% - 50.00% 113,028 100,985 90,060 (31,614)<br />
VIB a.d. Banja Luka FBIH 49.00% - 49.00% 593,878 9,393 77,917 (14,084)<br />
Kino Kranj d.o.o. Slovenia 45.00% - 45.00% 958,267 91,721 97,480 (11,025)<br />
Gea College d.d. Slovenia 38.94% - 38.94% 3,792,464 3,625,142 3,924,553 (80,625)<br />
Žičnice Vogel Bohinj d.d. Slovenia 40.45% - 40.45% 8,166,700 2,480,738 2,183,976 193,987<br />
Radio Kranj d.o.o. Slovenia 20.00% - 20.00% 816,975 112,348 743,945 12,427<br />
Deželna banka d.d. Slovenia 33.39% - 33.39% 620,941,279 581,099,286 38,474,337 930,871<br />
KD ID d.d.** Slovenia 9.93% - 9.93% 128,406,919 3,786,851 30,573,080 2,611,114<br />
Semenarna Ljubljana Slovenia 29.90% - 29.90% 59,236,910 45,613,808 51,103,221 (306,940)<br />
Vrtnarstvo Celje* Slovenia 50.46% - 50.46% 3,070,280 1,670,385 3,163,095 429<br />
849,190,690 653,470,660 147,892,105 4,008,425<br />
* The Group does not control the company<br />
**Together with the subsidiary KD Group d.d. over 20%
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
290<br />
Associates<br />
Registered<br />
office<br />
Associates<br />
Designated at fair<br />
value through P/L<br />
Share of interest 2007<br />
All together Assets Liabilities Revenue<br />
Investment in funds:<br />
KD Balkan Slovenia 1.66% 9.21% 10.87% 76,612,298 319,235 24,390,524<br />
KD Bond Slovenia 2.21% 13.71% 15.92% 11,318,490 18,294 1,629,968<br />
KD Galileo Slovenia 1.02% 9.17% 10.19% 359,239,497 235,482 123,490,393<br />
KD MM Slovenia 2.57% 0.37% 2.94% 9,185,040 543,597 284,151<br />
KD Novi trgi Slovenia 2.76% 15.67% 18.43% 21,989,589 190,688 8,643,124<br />
KD Nova energija Slovenia 1.67% 8.76% 10.43% 19,108,358 273,963 5,238,802<br />
KD Prvi izbor Slovenia 2.98% 12.36% 15.34% 36,380,753 73,384 13,444,249<br />
KD Rastko Slovenia 0.99% 10.69% 11.68% 172,456,376 284,769 63,325,536<br />
KD Severna Amerika Slovenia 37.01% 8.11% 45.12% 982,824 2,119 478,075<br />
KD Surovine in energija Slovenia 7.92% 12.41% 20.33% 7,157,263 45,502 3,313,871<br />
KD Vitalnost Slovenia 9.69% 1.11% 10.80% 2,174,134 3,114 930,952<br />
KD Tehnologija Slovakia 10.33% 26.43% 36.76% 2,516,053 16,538 1,083,585<br />
KD Bonds Bolgarija Bulgaria 88.65% 0.00% 88.65% 401,882 5,624 103,480<br />
KD Equity Bolgarija Bulgaria 14.70% 0.00% 14.70% 3,415,482 48,062 814,079<br />
KD Pelikan AD Bulgaria 16.99% 47.32% 64.31% 3,514,674 43,460 1,151,536<br />
KD Maximus Romania 1.33% 75.35% 76.68% 12,131,600 131,321 5,505,552<br />
FDI KD Multifond Romania 99.94% 0.00% 99.94% 252,894 1,577 23,752<br />
FDI KD Optimus Romania 54.98% 0.00% 54.98% 489,673 6,341 161,458<br />
KD Prosperita Slovakia 7.64% 41.88% 49.52% 9,365,423 118,721 133,196<br />
KD Russia Slovakia 7.28% 50.29% 57.57% 7,339,606 80,160 56,636<br />
KD Adria Bond Croatia 77.71% 0.00% 77.71% 865,250 954 50,106<br />
KD Victoria Croatia 0.44% 6.55% 6.99% 69,318,590 866,148 15,077,807<br />
KD Nova Europa Croatia 4.89% 0.00% 4.89% 8,207,625 102,251 69,061<br />
KD Balanced Croatia 0.00% 0.00% 0.00% 5,727,366 280,576 536,736<br />
Total: 840,150,741 3,691,881 269,936,629<br />
Associates<br />
Registered<br />
office<br />
Associates<br />
Designated at fair<br />
value through P/L<br />
Share of interest 2006<br />
All together Assets Associates<br />
Registered<br />
office<br />
Investment in funds:<br />
KD Severna Amerika Slovenija 46.15% 5.21% 51.36% 841,567 2,717 351,711<br />
KD Surovine in energija Slovenija 13.25% 6.46% 19.71% 3,488,938 10,299 678,952<br />
KD Nova energija Slovenija 18.71% 0.00% 18.71% 1,130,525 5,266 71,653<br />
KD Tehnologija Slovenija 11.29% 5.36% 16.65% 1,990,820 10,353 386,859<br />
KD Novi trgi Slovenija 7.76% 8.84% 16.60% 6,070,873 16,516 2,235,215<br />
KD Prvi izbor Slovenija 4.07% 6.90% 10.97% 33,017,868 11,834 10,811,288<br />
KD Rastko Slovenija 1.01% 7.90% 8.91% 117,355,684 52,333 34,593,186<br />
KD Bond Slovenija 1.52% 6.74% 8.26% 14,888,082 6,960 1,529,561<br />
KD Vitalnost Slovenija 8.15% 0.00% 8.15% 3,052,896 151,390 42,276<br />
KD Galileo Slovenija 1.06% 7.02% 8.08% 251,079,465 114,626 68,789,576<br />
KD Balkan Slovenija 2.52% 2.83% 5.35% 32,029,298 99,036 6,597,117<br />
KD Prosperita Slovaška 38.97% 7.37% 46.34% 2,815,156 213,908 45,602<br />
KD Russia Slovaška 27.01% 6.91% 33.92% 3,617,539 27,971 30,379<br />
KD Bonds Bolgarija 97.39% 0.00% 97.39% 303,305 1,661 19,880<br />
KD Equity Bolgarija 59.35% 0.00% 59.35% 527,086 4,077 103,480<br />
KD Pelikan AD Bolgariija 0.00% 29.85% 29.85% 2,648,168 10,194 448,076<br />
FDI KD Multifond Romunija 100.00% 0.00% 100.00% 251,352 509 1,448<br />
FDI KD Optimus Romunija 94.53% 0.00% 94.53% 266,829 697 2,604<br />
KD Maximus Romunija 0.00% 67.07% 67.07% 7,224,316 37,873 1,907,257<br />
KD Adria Bond Hrvaška 77.57% 0.00% 77.57% 840,039 5,312 24,925<br />
KD Victoria Hrvaška 0.00% 4.89% 4.89% 37,410,570 232,349 8,057,340<br />
KD Delux Luxemburg 16.48% 9.14% 25.62% 16,100,042 33,838 1,485,315<br />
Total: 536,950,417 1,049,720 138,213,700
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
The income from investments in mutual funds which<br />
are presented as associated companies amounts<br />
to EUR 2,107,111 (2006: EUR 2,654,565) <strong>and</strong><br />
financial assets designated at fair value through profit<br />
or loss amount to EUR 93,718,387 (2006: EUR<br />
46,144,997).<br />
income from investments in mutual funds which are<br />
presented as financial assets designated at fair value<br />
through profit or loss amounts to EUR 15,282,347<br />
(2006: EUR 6,630,850). Investments in associated<br />
mutual funds presented in the balance sheet as<br />
The associate KD ID d.d. is listed on the Ljubljana<br />
Stock Exchange. The fair value of the Group’s<br />
interest in KD ID d.d. was EUR 13,687,109 at 31<br />
December 2007 (2006: EUR 8,778,480).<br />
11. Financial assets<br />
(in EUR) 2007 2006<br />
At fair value through profit <strong>and</strong> loss<br />
Current<br />
Held for trading 42,508,318 48,515,149<br />
Initially recognised through profit <strong>and</strong> loss 133,517,307 67,107,834<br />
176,025,625 115,622,983<br />
Held-to-maturity<br />
Non-current 7,590,164 6,987,877<br />
Available for sale<br />
Non-current 218,916,170 189,872,199<br />
Current 98,298,158 66,269,200<br />
317,214,328 256,141,399<br />
291<br />
Total 500,830,117 378,752,259<br />
11.1 Financial assets at fair value through profit or loss - held for trading<br />
(in EUR) 2007 2006<br />
Equity securities<br />
Listed securities: 39,390,601 43,822,413<br />
Debt securities<br />
Listed securities:<br />
Fixed interest rate 2,155,177 3,748,365<br />
Floating interest rate 678,212 944,371<br />
2,833,389 4,692,736<br />
Government bonds 284,328 -<br />
Total: 42,508,318 48,515,149
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
11.2 Financial assets at fair value through profit or loss - other assets<br />
(in EUR) 2007 2006<br />
Equity securities<br />
Listed securities: 114,045,505 55,196,024<br />
Debt securities<br />
Listed securities:<br />
Fixed interest rate 14,057,597 95,360<br />
Floating interest rate 304,661 -<br />
14,362,258 95,360<br />
Unlisted securities<br />
Fixed interest rate 4,225,309 -<br />
Government bonds 884,235 11,816,450<br />
Total: 133,517,307 67,107,834<br />
11.3 Investments held-to-maturity<br />
(v EUR) 2007 2006<br />
292<br />
Debt securities<br />
Listed securities:<br />
Fixed interest rate 6,155,989 5,667,296<br />
Floating interest rate 209,091 209,043<br />
6,365,080 5,876,339<br />
Unlisted securities:<br />
- fixed interest rate 115,486 -<br />
Government bonds 1,109,598 1,111,538<br />
Total: 7,590,164 6,987,877
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
11.4 Financial assets available for sale<br />
(in EUR) 2007 2006<br />
Equity securities<br />
Listed securities 158,749,277 100,712,870<br />
Non-listed securities 38,197,000 34,938,132<br />
196,946,277 135,651,002<br />
Debt securities<br />
Listed securities:<br />
Fixed interest rate 30,540,653 29,489,007<br />
Floating interest rate 796,877 415,757<br />
31,337,530 29,904,764<br />
Non-listed securities:<br />
Fixed interest rate - 694,830<br />
Government bonds 88,930,521 89,890,803<br />
Total: 317,214,328 256,141,399<br />
11.5 Movements in financial assets<br />
(in EUR)<br />
Fair value through<br />
profit & loss -<br />
trading<br />
Fair value<br />
through profit &<br />
loss - other<br />
Available-forsale<br />
Held-to-maturity<br />
Total<br />
293<br />
At 1 January 2006 22,848,297 36,923,765 271,901,957 6,563,024 338,237,043<br />
Exchange differences on monetary assets (440,769) 259,902 85,295 1,740 (93,832)<br />
Additions 33,256,273 28,541,410 69,776,135 1,632,511 133,206,329<br />
Acquisition of subsidiary - - 427,954 - 427,954<br />
Disposals (sale <strong>and</strong> redemption) (17,550,805) (5,382,261) (92,815,210) (1,209,398)* (116,957,674)<br />
Impairment of available-for-sale equity<br />
securities<br />
- - (9,633,388) - (9,633,388)<br />
Net fair value gain (loss) - excluding net<br />
realised gains<br />
10,402,153 6,765,018 16,398,656 - 33,565,827<br />
At 31 December 2006 48,515,149 67,107,834 256,141,399 6,987,877 378,752,259<br />
At 1 January 2007 48,515,149 67,107,834 256,141,399 6,987,877 378,752,259<br />
Exchange differences on monetary assets (865,193) (505,740) (53,008) - (1,423,941)<br />
Additions 23,732,024 65,762,997 94,509,089 1,242,045 185,246,155<br />
Acquisition of subsidiary 189,657 8,853 25,145 - 223,655<br />
Disposal of subsidiary - - (23,031) - (29,519)<br />
Disposals (sale <strong>and</strong> redemption) (32,787,535) (15,052,741) (73,093,232) (639,758)* (121,566,778)<br />
Impairment of available-for-sale equity<br />
securities<br />
- - (2,596,286) - (2,596,286)<br />
Net fair value gains - excluding net realised<br />
gains<br />
3,724,216 16,196,104 42,304,252 - 62,224,572<br />
At 31 December 2007 42,508,318 133,517,307 317,214,328 7,590,164 500,830,117<br />
* only redemption
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
Impairment of available-for-sale non-listed equity<br />
securities is recognised whether on the basis<br />
of external independent valuations, using the<br />
discounted future cash flow method or on the basis<br />
of an internal model in which appropriateness has<br />
been assessed by an independent qualified expert.<br />
- the method of discounted cash flows was used<br />
- projections were made for minority shareholder<br />
- cash flow projections for the period of 5 years were<br />
prepared<br />
- revenue growth rates range up to 5% per year<br />
- growth of employee costs was 3% per year<br />
- discount rates range up to 11,6% per year<br />
According to valuations performed in 2007 the<br />
impairment of EUR 2,596,286 (2006: EUR<br />
9,633,388) was recognised. The following key<br />
assumptions were used in these valuations:<br />
Held-to-maturity investments were redeemed in<br />
2007 in the amount of EUR 639,758 (2006: EUR<br />
1,209,398).<br />
The effective interest rates on debt securities were as follows:<br />
2007 2006<br />
294<br />
Debt securities:<br />
– held-to-maturity financial assets 5.08% 5.12%<br />
– available-for-sale financial assets 4.36% – 4.96% 4.00%-4.50%
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
12. Loans <strong>and</strong> other receivables<br />
12.1 Loans<br />
(in EUR) 2007 2006<br />
Loans to individuals<br />
Non-current 12,096 14,334<br />
Current 266,645 -<br />
Loans to corporate entities<br />
Non-current 1,404,625 1,571,858<br />
Current 18,883,951 15,759,076<br />
Loans to related parties<br />
Current 10,817,163 18,415,494<br />
Bank deposits<br />
Non-current 2,573,327 3,035,428<br />
Current bank deposits 25,143,195 22,652,270<br />
Total loans 59,101,002 61,448,460<br />
Less: allowance for losses on loans <strong>and</strong> advances<br />
Non-current (696,279) (689,767)<br />
Current (653,631) (458,942)<br />
(1,349,910) (1,148,709)<br />
Total: 57,751,092 60,299,751<br />
295<br />
Current bank deposits are not treated as cash <strong>and</strong> cash equivalents, mainly due to the liquidity requirements<br />
for insurance companies.<br />
Movement in allowance for losses on loans:<br />
(in EUR) 2007 2006<br />
Balance at 1 January 1,148,709 1,069,867<br />
Impairment in a year 252,198 203,875<br />
Disposal of subsidiaries (50,997) -<br />
Reversal of impairment during the year - (125,033)<br />
Balance 31 December 1,349,910 1,148,709<br />
The effective interest rates on loans were as follows:<br />
2007 2006<br />
Non-current loans 4.65% - 8.00% 4.65% - 7.00%<br />
Current loans 2.53% - 10.00% 2.53% - 9.00%<br />
Loans to related parties 3.29% - 5.45% 3.29% - 7.30%<br />
Short-term bank deposits 2.9% - 4.38% 3.00% - 3.53%
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
12.2 Other receivables<br />
(in EUR) 2007 2006<br />
Trade receivables<br />
Current 22,206,739 25,822,244<br />
Less: provision for impairment of receivables (2,620,257) (3,195,186)<br />
Trade receivables – net 19,586,482 22,627,058<br />
Receivables arising from insurance <strong>and</strong> reinsurance contracts:<br />
Due from contract holders 43,845,188 39,721,244<br />
Less: provision for impairment of receivables from contract holders (13,140,743) (10,653,668)<br />
Due from agents, brokers <strong>and</strong> intermediaries 32,700,280 25,904,556<br />
Less: provision for impairment of receivables from agents, brokers<br />
<strong>and</strong> intermediaries<br />
(19,620,427) (15,434,223)<br />
Due from reinsurers 3,154,077 1,655,860<br />
Less: provision for impairment of receivables from reinsurers (1,630) (1,630)<br />
Receivables arising from insurance <strong>and</strong> reinsurance contracts – net 46,936,745 41,192,139<br />
Prepayments 851,925 3,396,316<br />
Receivables from related parties 240,142 383,876<br />
Accrued income <strong>and</strong> deferred expenses 10,324,585 4,181,455<br />
11,416,652 7,961,647<br />
Total: 77,939,879 71,780,844<br />
296<br />
Trade receivables of EUR 734.666 (2006: EUR 462,346) are classified as current assets based on the<br />
normal operating cycle but are expected to be settled more than twelve months after the balance sheet date.<br />
Movement in allowance for losses on trade <strong>and</strong> other receivables:<br />
(in EUR) 2007 2006<br />
Balance at 1 January 29,284,708 29,030,262<br />
Provision for receivable impairment 10,361,156 11,063,585<br />
Receivables written off during the year as uncollectible (826,621) (5,442)<br />
Amounts recovered during the year (3,436,186) (10,803,697)<br />
At 31 December 35,383,057 29,284,708
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
13. Inventories<br />
(in EUR) 2007 2006<br />
Property intended for sale in the ordinary course of <strong>business</strong> 10,654,407 7,577,233<br />
Other 1,545,803 542,956<br />
Total: 12,200,210 8,120,189<br />
Other inventories consist of material <strong>and</strong> raw material (inventories of beverages <strong>and</strong> food) <strong>and</strong> inventories of<br />
finished goods (books <strong>and</strong> special publications). Inventories are not pledged as collateral for liabilities.<br />
14. Cash <strong>and</strong> cash equivalents<br />
(in EUR) 2007 2006<br />
Cash at bank <strong>and</strong> in h<strong>and</strong> 10,730,139 11,217,333<br />
Call deposits 18,667,978 9,092,396<br />
Total: 29,398,117 20,309,729<br />
The effective interest rate on deposits held at call with banks ranged from 3.76% to 4.41% (2006: from<br />
2.35% to 3.18%).<br />
297<br />
15. Capital<br />
15.1 Share capital<br />
(in EUR)<br />
No. of shares<br />
Ordinary<br />
Preference<br />
Ordinary<br />
shares<br />
Preference<br />
shares<br />
Share<br />
premium<br />
Treasury<br />
sharesv<br />
Total<br />
Balance as at 1 January 2006 2,627,990 217,840 89,321,983 8,893,774 104,258,987 (2,921,650) 199,553,094<br />
Purchase of treasury shares (30,001) (2,733) - - - (1,472,959) (1,472,959)<br />
Disposal of treasury shares 15,450 - - - 136,325 541,654 677,979<br />
Balance as at 31 December 2006 2,613,439 215,107 89,321,983 8,893,774 104,395,312 (3,852,955) 198,758,114<br />
Balance as at 1 January 2007 2,613,439 215,107 89,321,983 8,893,774 104,395,312 (3,852,955) 198,758,114<br />
Purchase of treasury shares - - - - - - -<br />
Disposal of treasury shares - - - - - - -<br />
Balance as at 31 December 2007 2,613,439 215,107 89,321,983 8,893,774 104,395,312 (3,852,955) 198,758,114
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
All issued shares are fully paid. The total number of<br />
shares, including treasury shares, is:<br />
- ordinary shares issued 2,675,640 (2006:<br />
2,675,640),<br />
- preference shares issued 266,413 (2006:<br />
266,413).<br />
Preference shares carry no voting rights but provide<br />
their holder with the following rights:<br />
- Preference right to dividend payment in amount<br />
of EUR 1.67 before dividend payments to ordinary<br />
share holders;<br />
- In case of dividend payout to ordinary share<br />
holders, the right to an additional dividend<br />
Share premium in the amount of EUR 104,395,312<br />
include:<br />
- Share premium in the amount of EUR 45,177,164<br />
- Revaluation reserves in the amount of EUR<br />
59,218,148.<br />
payment in amount of EUR 1.67, for a maximum<br />
preference dividend payment of EUR 3.34;<br />
- In case of liquidation of the company, the right of<br />
preference treatment compared to ordinary share<br />
holders, with the pay-out of the remaining assets<br />
after liquidation in the amount of EUR 33.38.<br />
The ordinary shares have been traded on<br />
298<br />
the organised market on the Ljubljana Stock<br />
Exchange since 12 July 2001 <strong>and</strong> give shareholders<br />
voting rights <strong>and</strong> participation on dividends.<br />
At the 9th Annual General Meeting of shareholders<br />
of KD Holding d.d. held on 30 August 2006,<br />
the shareholders have adopted a resolution by<br />
which each share, carrying nominal value of SIT<br />
8,000 has been replaced by one non-par-value<br />
share. The share capital <strong>and</strong> the number of shares<br />
issued have remained unchanged.<br />
15.2 Treasury shares<br />
2007 2006<br />
(in EUR)<br />
Carrying<br />
value Jan 1<br />
Purchase<br />
value<br />
Carrying<br />
value Dec<br />
31<br />
Share (%)<br />
in capital<br />
Carrying<br />
value Jan 1<br />
Purchase<br />
value<br />
Carrying<br />
value Dec<br />
31<br />
Share (%)<br />
in capital<br />
KDHR* 2,424,829 - 2,424,829 2,11 1,564,685 860,144 2,424,829 2,11<br />
KDHP** 1,428,126 - 1,428,126 1,74 1,356,965 71,161 1,428,126 1,74<br />
Total: 3,852,955 - 3,852,955 3,85 2,921,650 931,305 3,852,955 3,85<br />
* ordinary shares<br />
** preference-shares
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
2007 2006<br />
Number Jan 1 Purchase Number Dec 31 Number Jan 1 Disposal Number Dec 31<br />
Number of shares<br />
KDHR 62,201 - 62,201 47,650 14,551 62,201<br />
KDHP 51,306 - 51,306 48,573 2,733 51,306<br />
Total: 113,507 - 113,507 96,223 17,284 113,507<br />
15.3 Accumulated profit of KD Holding d.d.<br />
consists of net profit for the current year, decreases<br />
for increased other reserves in the amount of EUR<br />
The parent company KD Holding d.d. earned<br />
EUR 17,335,788 net profit for 2007. Profit for<br />
6,000,000 <strong>and</strong> increases for retained earnings in<br />
the amount of EUR 9,642,380.<br />
appropriation is EUR 20,978,168 for 2007 <strong>and</strong><br />
16. Other reserves <strong>and</strong> retained earnings<br />
(in EUR) 2007 2006<br />
Consolidation adjustment (1,463,252) 221,490<br />
Revaluation reserve of financial assets-available for sale 55,574,797 24,150,460<br />
Revaluation of derivative financial instruments (33,272) -<br />
Retained earnings 76,416,444 52,739,049<br />
299<br />
Total: 130,494,717 77,110,999<br />
(in EUR)<br />
Translation reserves-currency<br />
Revaluation<br />
reserve-AFS Hedging reserve differences<br />
Retained<br />
earnings<br />
Balance at 1 January 2006 20,003,020 - 2,836 34,594,554 54,600,410<br />
Revaluation – gross 16,398,655 - - - 16,398,655<br />
Revaluation – tax (3,771,691) - - - (3,771,691)<br />
Net gains transferred to net profit-gross (11,012,369) - - - (11,012,369)<br />
Net gains transferred to net profit-gross<br />
– tax (Note 21)<br />
2,532,845 - - - 2,532,845<br />
Currency translation differences:<br />
- Group - - 161,677 - 161,677<br />
- Associates - - 56,977 - 56,977<br />
Profit of the year - - - 18,569,269 18,569,269<br />
Dividends - - - (424,774) (424,774)<br />
Minority interest - - - - -<br />
Balance as at 31 December 2006 24,150,460 - 221,490 52,739,049 77,110,999<br />
Total
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
(in EUR)<br />
Translation reserves-currency<br />
Revaluation<br />
reserve-AFS Hedging reserve differences<br />
Retained<br />
earnings<br />
Total<br />
Balance at 1 January 2007 24,150,460 - 221,490 52,739,049 77,110,999<br />
Revaluation – gross 42,304,250 - - - 42,304,250<br />
Revaluation – tax (7,063,187) - - - (7,063,187)<br />
Net gains transferred to net profit-gross (4,302,824) - - - (4,302,824)<br />
Net gains transferred to net profit-gross<br />
– tax (Note 21)<br />
1,530,797 - - - 1,530,797<br />
Revalutation-associates (269,420) - - - (269,420)<br />
Revaluation-derivative instrument - (33,272) - - (33,272)<br />
Currency translation differences:<br />
- Group - - (1,627,765) - (1,627,765)<br />
- Associates - - (56,977) - (56,977)<br />
Profit of the year - - - 33,059,887 33,059,887<br />
Dividends - - - (9,382,492) (9,382,492)<br />
Minority interest (775,281) - - - (775,281)<br />
Balance as at 31 December 2007 55,574,797 (33,272) (1,463,252) 76,416,444 130,494,717<br />
17. Borrowings<br />
300<br />
(in EUR) 2007 2006<br />
Non-current<br />
Bank borrowings<br />
In Slovenia 48,373,487 36,318,382<br />
Current portion (5,384,643) (4,735,232)<br />
Loans due to others 227,250 -<br />
Current portion (68,260) -<br />
Bonds issued 75,368,725 75,324,967<br />
Current portion (1,448,951) (1,449,170)<br />
117,067,608 105,458,947<br />
Current<br />
Bank borrowings<br />
In Slovenia 35,791,058 4,130,204<br />
Loans due to others 4,490,162 1,976,369<br />
Current portion of non-current borrowings 6,901,854 6,184,402<br />
47,183,074 12,290,975<br />
Total: 164,250,682 117,749,922<br />
Total borrowings include collateralised liabilities<br />
of EUR 88,032,819 (2006: EUR 17,795,080).<br />
Bank borrowings are collateralised by the l<strong>and</strong> <strong>and</strong><br />
<strong>build</strong>ings of the Group (Note 7).
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
The effective interest rates on borrowings were as follows:<br />
2007 2006<br />
Non-current loans 5.38% - 6.05% 4.78% - 4.93%<br />
Current loans 4.87% - 5.43% 3.39% - 4.80%<br />
18. Insurance contracts<br />
18.1 Insurance liabilities <strong>and</strong> reinsurance assets<br />
(in EUR) 2007 2006<br />
Insurance contract<br />
Non-life insurance contracts <strong>and</strong> health contract-gross:<br />
- claims reported <strong>and</strong> loss adjustment expenses 59,375,825 60,696,455<br />
- claims incurred but not reported 56,290,288 45,380,443<br />
- unearned premiums 69,061,426 64,061,158<br />
- provisions for bonuses, rebates <strong>and</strong> lapses 140,505 324,573<br />
- mathematical provisions (for health insurance) 196,930 174,871<br />
- other technical provisions (unexpired risk provisions included) 3,392,671 4,709,619<br />
188,457,645 175,347,119<br />
Life insurance contracts-gross:<br />
- claims reported <strong>and</strong> loss adjustment expenses 1,753,838 1,557,370<br />
- claims incurred but not reported 2,355,148 1,494,971<br />
- unearned premiums 793,971 1,085,146<br />
301<br />
- other technical provisions (unexpired risk provisions included) 34,906 57,949<br />
4,937,863 4,195,436<br />
Long term insurance contracts:<br />
- with DPF 62,548,026 57,765,184<br />
- without fixed terms - unit-linked 112,978,279 57,882,765<br />
175,526,305 115,647,949<br />
Total insurance liabilities, gross 368,921,813 295,190,504
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
302<br />
(in EUR) 2007 2006<br />
Receivables from reinsurers<br />
Non-life insurance contracts:<br />
- claims reported <strong>and</strong> loss adjustment expenses 8,848,566 7,465,540<br />
- claims incurred but not reported 910,669 295,159<br />
- unearned premiums 1,069,940 688,504<br />
- provisions for bonuses, rebates 407 2,420<br />
- other technical provisions (unexpired risk provisions included) - 5,750<br />
10,829,582 8,457,373<br />
Life insurance contracts:<br />
- claims reported <strong>and</strong> loss adjustment expenses 127,076 104,795<br />
- claims incurred but not reported 2,144 19,784<br />
- unearned premiums 46,022 49,645<br />
175,242 174,224<br />
Total reinsurers' receivables of insurance liabilities 11,004,824 8,631,597<br />
Non-life insurance contracts <strong>and</strong> healh contracts-net:<br />
- claims reported <strong>and</strong> loss adjustment expenses 50,527,259 53,230,915<br />
- claims incurred but not reported 55,379,619 45,085,284<br />
- unearned premiums 67,991,486 63,372,654<br />
- provisions for bonuses, rebates 140,098 322,153<br />
- mathematical provision (for health insurance) 196,930 174,871<br />
- other technical provisions (unexpired risk provisions included) 3,392,671 4,703,869<br />
177,628,063 166,889,746<br />
Life insurance contract-net:<br />
- claims reported <strong>and</strong> loss adjustment expenses 1,626,762 1,452,575<br />
- claims incurred but not reported 2,353,004 1,475,187<br />
- unearned premiums 747,949 1,035,501<br />
- other technical provisions (unexpired risk provisions included) 34,906 57,949<br />
4,762,621 4,021,212<br />
Long-term insurance contracts:<br />
- with DPF 62,548,026 57,765,184<br />
- without fixed terms - unit-linked 112,978,279 57,882,765<br />
175,526,305 115,647,949<br />
Total insurance liabilities, net 357,916,989 286,558,907<br />
18.2 Movements in insurance liabilities <strong>and</strong> reinsurance assets<br />
a) Claims <strong>and</strong> loss adjustment expenses<br />
2007 2006<br />
(in EUR)<br />
Gross Reinsurance Net Gross Reinsurance Net<br />
Notified claims 62,253,827 (7,570,335) 54,683,492 48,995,535 (6,226,260) 42,769,275<br />
Incurred but not reported 46,875,412 (314,943) 46,560,469 45,479,490 (728,852) 44,750,638<br />
Total at the beginning of the year 109,129,239 (7,885,278) 101,243,961 94,475,025 (6,955,112) 87,519,913<br />
Cash paid for claims settled in the year (45,978,724) 2,273,779 (43,704,945) (36,189,427) 2,133,267 (34,056,160)<br />
Increase in liabilities<br />
- arising from current year claims 55,417,401 (2,874,711) 52,542,690 53,634,431 (1,809,602) 51,824,829<br />
- arising from prior year claims 1,207,183 (1,402,245) (195,062) (2,790,790) (1,253,831) (4,044,621)<br />
Total at end of the year 119,775,099 (9,888,455) 109,886,644 109,129,239 (7,885,278) 101,243,961
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
2007 2006<br />
(in EUR)<br />
Gross Reinsurance Net Gross Reinsurance Net<br />
Notified claims 61,129,663 (8,975,642) 52,154,021 62,253,827 (7,570,335) 54,683,492<br />
Incurred but not reported 58,645,436 (912,813) 57,732,623 46,875,412 (314,943) 46,560,469<br />
Total at the end of the year 119,775,099 (9,888,455) 109,886,644 109,129,239 (7,885,278) 101,243,961<br />
b) Unearned premiums<br />
2007 2006<br />
(in EUR)<br />
Gross Reinsurance Net Gross Reinsurance Net<br />
Total at the beginning of the year 65,146,304 (738,149) 64,408,155 57,280,596 (1,145,731) 56,134,865<br />
Increase of liabilities 72,441,980 (1,561,424) 70,880,556 58,424,069 (33,317) 58,390,752<br />
Decrease of liabilities (67,737,367) 1,183,611 (66,553,756) (50,558,361) 440,899 (50,117,462)<br />
Currency differences-net 4,480 - 4,480 - - -<br />
Total at the end of the year 69,855,397 (1,115,962) 68,739,435 65,146,304 (738,149) 64,408,155<br />
c) Unit-liked contracts<br />
(in EUR)<br />
2007 2006<br />
Gross Reinsurance Net Gross Reinsurance Net<br />
Total at the beginning of the year 57,882,765 - 57,882,765 23,196,349 - 23,196,349<br />
Increase linked to premium<br />
payments<br />
43,236,959 - 43,236,959 31,040,559 - 31,040,559<br />
Decrease linked to payouts (1,645,670) - (1,645,670) (885,342) - (885,342)<br />
Decrease due to charged<br />
commission<br />
(2,668,624) - (2,668,624) (1,469,126) - (1,469,126)<br />
303<br />
Change due to change in unit price 16,196,103 - 16,196,103 5,999,232 - 5,999,232<br />
Currency differences-net (23,254) - (23,254) 1,093 - 1,093<br />
Total at the end of the year 112,978,279 - 112,978,279 57,882,765 - 57,882,765<br />
d) Long-term insurance contracts with DPF<br />
2007 2006<br />
(in EUR)<br />
Gross Reinsurance Net Gross Reinsurance Net<br />
Total at the beginning of the year 57,765,184 - 57,765,184 54,139,230 - 54,139,230<br />
Increase linked to premium payments 7,563,285 - 7,563,285 5,382,333 - 5,382,333<br />
Decrease linked to payouts (4,713,079) - (4,713,079) (3,130,787) - (3,130,787)<br />
Increase by the interest 1,184,965 - 1,184,965 1,139,489 - 1,139,489<br />
Increase by the DPF portion for the<br />
current period<br />
748,121 - 748,121 234,919 - 234,919<br />
Currency differences-net (450) - (450) - - -<br />
Total at the end of the year 62,548,026 - 62,548,026 57,765,184 - 57,765,184
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
e) Other insurance contracts<br />
2007 2006<br />
(in EUR)<br />
Gross Reinsurance Net Gross Reinsurance Net<br />
Total at the beginning of the year 5,267,012 (8,170) 5,258,842 2,257,404 (1,415) 2,255,989<br />
Increase of liabilities 3,572,597 (407) 3,572,190 4,693,521 (6,958) 4,686,563<br />
Decrease of liabilities (5,074,597) 8,170 (5,066,427) (1,683,913) 203 (1,683,710)<br />
Total at the end of the year 3,765,012 (407) 3,764,605 5,267,012 (8,170) 5,258,842<br />
19. Derivative financial instruments<br />
The Group has an interest swap in the amount of<br />
EUR 11,000,000 intended to reduce the exposure<br />
of cash flows of interest on loans (cash flow hedge).<br />
The fair value of the interest swap on 31 Decmber<br />
2007 is negative <strong>and</strong> the amount is EUR 33,272.<br />
Financial derivatives of the Group include future<br />
contracts; the fair value as at 31 December 2007<br />
is EUR 6,279,463. The Group recognised EUR<br />
6,279,463 in losses from valuation of future<br />
contracts.<br />
The effect of valuation of hedge instruments is<br />
recognised in equity.<br />
304<br />
20. Trade <strong>and</strong> other payables<br />
(in EUR) 2007 2006<br />
Trade payables 20,597,027 26,280,314<br />
Amounts due to related parties 188,603 978,046<br />
Payables-state (without income tax) 1,964,406 1,883,701<br />
Salaries 3,779,780 3,244,118<br />
Employee benefits 4,582,141 3,283,733<br />
Accrued expenses <strong>and</strong> deferred income 7,220,873 5,568,110<br />
Other insurance payables 12,536,188 12,782,136<br />
Total: 50,869,018 54,020,158
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
21. Deferred income taxes<br />
Deferred income tax assets <strong>and</strong> liabilities are offset<br />
when there is a legally enforceable right to offset<br />
current tax assets against current tax liabilities <strong>and</strong><br />
when the deferred income taxes relate to the same<br />
fiscal authority.<br />
The offset amounts are as follows:<br />
(in EUR) 2007 2006<br />
Deferred tax assets:<br />
– Deferred tax assets to be recovered after more than 12<br />
months<br />
8,938,370 7,844,619<br />
8,938,370 7,844,619<br />
Deferred tax liabilities:<br />
– Deferred tax liabilities to be recovered after more than 12<br />
months<br />
(11,466,256) (6,380,706)<br />
(11,466,256) (6,380,706)<br />
(2,527,886) 1,463,913<br />
(in EUR) 2007 2006<br />
The gross movement in the deferred income tax account is as follows:<br />
Beginning of the year 1,463,913 (3,050,175)<br />
Exchange differences (33,900) 6,063<br />
Acquisition of subsidiaries (543) -<br />
Disposal of subsidiaries (11,562) -<br />
Income statement charge (Note 28) 1,586,596 5,746,871<br />
Tax charged/(credited) to equity (Note 17) (5,532,390) (1,238,846)<br />
At the end of the year (2,527,886) 1,463,913<br />
305<br />
The movement in deferred tax assets <strong>and</strong> liabilities during the year, without taking into consideration the offsetting<br />
of balances within the same tax jurisdiction, is as follows:<br />
Deferred tax liabilities:<br />
(in EUR) Fair value gains Other Total<br />
At 1 January 2006 9,005,041 602,429 9,607,470<br />
Charged/(credited) to the income statement (4,087,869) (377,896) (4,465,765)<br />
Charged to equity 3,771,691 - 3,771,691<br />
Charged to equity-transfer to net profit (Note 16) (2,532,845) - (2,532,845)<br />
Exchange differences 13 142 155<br />
At 31 December 2006 6,156,031 224,675 6,380,706<br />
Charged /(credited) to the income statement (287,965) (159,493) (447,458)<br />
Charged to equity-fair value remeasurement 7,063,187 - 7,063,187<br />
Charged to equity-transfer to net profit (Note 16) (1,530,797) - (1,530,797)<br />
Acquisition of subsidiaries - 543 543<br />
Exchange differences - 75 75<br />
At 31 December 2007 11,400,456 65,800 11,466,256
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
Deferred tax assets:<br />
Employee Impairment<br />
(in EUR)<br />
benefits losses<br />
Tax losses Other Total<br />
At 1 January 2006 737,803 4,993,382 530,350 295,760 6,557,295<br />
Charged/(credited) to the income statement (197,396) 961,680 241,874 274,948 1,281,106<br />
Exchange differences - - 6,218 - 6,218<br />
At 31 December 2006 540,407 5,955,062 778,442 570,708 7,844,619<br />
Charged/(credited) to the income statement 85,984 (1,703,264) 3,317,710 (561,292) 1,139,138<br />
Disposal of subsidiaries (11,562) - - - (11,562)<br />
Exchange differences 130 - (33,955) - (33,825)<br />
At 31 December 2007 614,959 4,251,798 4,062,197 9,416 8,938,370<br />
The deferred income tax charged to equity during the year is as follows:<br />
(in EUR) 2007 2006<br />
Fair value reserves in shareholders’ equity:<br />
- Available-for-sale financial assets (5,532,390) (1,238,846)<br />
(5,532,390) (1,238,846)<br />
306<br />
Deferred income tax assets are recognised for tax loss<br />
carry-forwards to the extent that the realisation of the<br />
related tax benefit through the future taxable profits<br />
is probable. The Group did not recognise deferred<br />
income tax assets of EUR 2,722,784 (2006: EUR<br />
1,793,465) in respect of losses amounting to EUR<br />
11,773,632 (2006: EUR 8,967,330) that can be<br />
Unrecognised potential deferred tax assets:<br />
carried forward against future taxable income. These<br />
losses have been generated by the subsidiaries<br />
of the Group with a history of loss-making.The<br />
management estimates that the future taxable<br />
profits will not be sufficient to realise the related tax<br />
benefit. According to the new corporate income tax<br />
legislation there are no time limitations to use the tax<br />
loss carry-forwards or tax credits.<br />
(in EUR) 2007 2006<br />
Deductible temporary differences 3,508,088 155,930<br />
Unrecognised tax loss carry forwards 11,773,632 8,967,330<br />
Unrecognised tax credits 1,079,411 102,249<br />
Total: 16,361,131 9,225,509
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
22. Revenue<br />
22.1 Net earned premiums on insurance contracts<br />
(in EUR) 2007 2006<br />
Long-term insurance contracts with DPF 14,273,783 14,469,321<br />
Long-term insurance contracts without fixed terms - unit-linked 59,712,368 39,680,875<br />
Financial contracts with DPF<br />
- Premium receivables 1,486,631 1,440,253<br />
- Change in unearned premium provisions (11,426) 14,162<br />
1,475,205 1,454,415<br />
Non-life insurance contracts <strong>and</strong> health contracts<br />
- Premium receivables 233,847,233 215,082,493<br />
- Change in unearned premium provisions (4,256,009) (7,863,907)<br />
229,591,224 207,218,586<br />
Premium revenue arising from insurance contracts issued 305,052,580 262,823,197<br />
Short-term reinsurance contract<br />
- Premium payables (9,777,362) (9,303,455)<br />
- Change in unearned premium provisions (67,168) 113,545<br />
Long-term reinsurance contracts (449,267) (359,773)<br />
Premium revenue ceded to reinsurers on insurance contracts issued (10,293,797) (9,549,683)<br />
Net insurance premium revenue 294,758,783 253,273,514<br />
307
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
22.2 Revenue <strong>and</strong> other operating income (excluding net earned premiums on insurance contracts)<br />
(in EUR) 2007 2006<br />
Sales of goods 5,055,547 2,481,758<br />
Sales of services 72,176,723 52,982,167<br />
77,232,270 55,463,925<br />
Other operating income:<br />
Other insurance income 4,345,868 4,282,136<br />
Other operating income 17,992,188 10,101,199<br />
Excess on acquisition of a subsidiary (Note 31) 768,664 120,535<br />
Excess on disposal of subsidiary (Note 31) 2,795,586 -<br />
Gain from increase the share capital of a subsidiary 1,062,019 1,308,354<br />
26,964,325 15,812,224<br />
Total: 104,196,595 71,276,149<br />
In November 2007 the Group made an additional<br />
increased its holding by 2.38% <strong>and</strong> recorded a gain.<br />
investment in its subsidiary KD Življenje d.d., which<br />
issued new shares to increase its share capital.<br />
Since the minority shareholders did not participate<br />
The Group disposed of an investment in Globtour d.d.<br />
<strong>and</strong> recorded a gain of EUR 2,758,865.<br />
in the transaction with their entire share, the Group<br />
308<br />
23. Expenses<br />
23.1 Insurance contracts benefits (net) <strong>and</strong> claims<br />
2007<br />
(in EUR) Gross Reinsurance Net<br />
Long-term insurance contracts with DPF<br />
- death, maturity <strong>and</strong> surrender benefits 7,118,590 (115,694) 7,002,896<br />
- increase of liabilities - - -<br />
Long-term insurance contracts without fixed terms (unit-linked)<br />
- death, maturity <strong>and</strong> surrender benefits 1,959,628 - 1,959,628<br />
- increase of liabilities 55,118,769 - 55,118,769<br />
Net mathematical provisions-insurance contracts with DPF<br />
- death, maturity <strong>and</strong> surrender benefits 1,801,462 - 1,801,462<br />
- increase of liabilities 4,783,291 - 4,783,291<br />
Non-life insurance <strong>and</strong> health insurance<br />
- claims <strong>and</strong> loss adjustment expenses 165,467,815 (11,469,003) 153,998,812<br />
- increase of liabilities 7,148,616 - 7,148,616<br />
Total cost of policyholder benefits, claims <strong>and</strong> loss 243,398,171 (11,584,697) 231,813,474
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
2006<br />
(in EUR) Gross Reinsurance Net<br />
Long-term insurance contracts with DPF<br />
- death, maturity <strong>and</strong> surrender benefits - - -<br />
- increase of liabilities - - -<br />
Long-term insurance contracts without fixed terms (unit-linked)<br />
- death, maturity <strong>and</strong> surrender benefits 631,192 - 631,192<br />
- increase of liabilities 35,108,892 - 35,108,892<br />
Net mathematical provisions-insurance contracts with DPF<br />
- death, maturity <strong>and</strong> surrender benefits 7,787,197 (80,675) 7,706,522<br />
- increase of liabilities 3,521,236 - 3,521,236<br />
Non-life insurance <strong>and</strong> health insurance<br />
- claims <strong>and</strong> loss adjustment expenses 145,734,198 (3,970,477) 141,763,721<br />
- increase of liabilities (2,388,228) - (2,388,228)<br />
Total cost of policyholder benefits, claims <strong>and</strong> loss 190,394,487 (4,051,152) 186,343,335<br />
23.2 Expenses by nature (excluding insurance contracts benefits (net) <strong>and</strong> claims)<br />
(in EUR) 2007 2006<br />
Raw materials <strong>and</strong> consumables used 7,184,227 5,038,503<br />
Cost of services 84,724,041 75,887,790<br />
Employee benefit expense:<br />
Wages <strong>and</strong> salaries 43,226,249 35,066,931<br />
Social security costs 8,034,912 7,500,327<br />
Other cost of employees 5,721,519 6,062,326<br />
Other long-term <strong>and</strong> post-employment benefits 2,268,097 1,427,069<br />
59,250,777 50,056,653<br />
Depreciation, amortisation <strong>and</strong> impairment 8,215,555 6,917,704<br />
Other insurance expenses 7,248,001 4,567,005<br />
Other expenses 14,337,515 6,408,821<br />
309<br />
Total: 180,960,116 148,876,476<br />
Number of employees 1,927 1,802<br />
In 2007 many new insurance companies were established by the Group, which is why some income <strong>and</strong><br />
expenses in 2006 are not comparable with 2007.
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
23.3 Audit remuneration<br />
(in EUR) 2007 2006<br />
Expenses (VAT included):<br />
- Audit of the financial statements 440,343 293,937<br />
- Other audit services 178,057 776<br />
- Tax advisory 3,000 78,509<br />
- Other non audit services 75,000 144,838<br />
Total: 696,400 518,060<br />
24. Investment income<br />
(in EUR) 2007 2006<br />
Available-for-sale:<br />
- dividend income 2,894,635 2,824,079<br />
- interest income, exchange differences 5,031,917 4,549,957<br />
7,926,552 7,374,036<br />
Held-to-maturity<br />
- interest income 362,506 218,373<br />
310<br />
Financial assets at fair value through P&L:<br />
- dividend income 720,907 621,941<br />
- interest income, exchange differences (209,415) 1,110,920<br />
511,492 1,732,861<br />
Cash <strong>and</strong> cash equivalents, loans, deposits, receivables:<br />
- interest income 5,044,313 5,076,484<br />
Total: 13,844,863 14,401,754<br />
25. Net realised gains on financial assets available for sale<br />
(in EUR) 2007 2006<br />
Realised gains on financial assets – available for sale 26,046,744 21,694,705<br />
Realised losses on financial assets – available for sale (1,848,818) (4,355,357)<br />
24,197,926 17,339,348<br />
Impairment of financial assets (2,596,286) (9,633,386)<br />
Total: 21,601,640 7,705,962
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
26. Net fair value gains on assets at fair value through profit <strong>and</strong> loss<br />
(in EUR) 2007 2006<br />
Changes of fair value of financial assets<br />
- held for trading 3,724,216 10,057,019<br />
- initial recognition 16,196,104 5,999,232<br />
19,920,320 16,056,251<br />
Net fair value gains on financial assets at fair value through profit <strong>and</strong> loss:<br />
- held for trading 7,149,735 2,425,239<br />
- initial recognition 449,626 (55,717)<br />
7,599,361 2,369,522<br />
Changes of fair value of derivatives (6,279,463) -<br />
Total: 21,240,218 18,425,773<br />
27. Finance costs<br />
(in EUR) 2007 2006<br />
Interest expense:<br />
Bank borrowings (3,040,305) (1,653,998)<br />
Bonds (4,055,059) (3,030,041)<br />
Other (175,146) (113,320)<br />
Net foreign exchange differences - other 717,877 (716,441)<br />
Total: (6,552,633) (5,513,800)<br />
311<br />
28. Income tax expense<br />
(in EUR) 2007 2006<br />
Current tax (14,097,912) (13,592,473)<br />
Deferred tax 1,586,596 5,746,871<br />
Total: (12,511,316) (7,845,602)
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
The tax on the Group’s profit before tax differs from the theoretical amount that would arise using the<br />
weighted average tax rate applicable to profits of the consolidated companies as follows:<br />
(in EUR) 2007 2006<br />
Profit before tax 47,456,900 28,722,371<br />
Tax calculated at domestic tax rates applicable to profits in the<br />
respective countries<br />
(11,093,938) (7,147,220)<br />
Income not subject to tax 4,542,968 3,356,177<br />
Expenses not deductible for tax purposes (5,284,546) (3,499,708)<br />
Utilisation of previously unrecognised tax losses 690,293 995,037<br />
Tax losses for which no deferred income tax asset was recognised (1,366,093) (1,549,888)<br />
Tax charge (12,511,316) (7,845,602)<br />
Effective tax rate 26.36% 27.32%<br />
The tax authorities may at any time inspect the<br />
books <strong>and</strong> records within 5 years subsequent to the<br />
reported tax year, <strong>and</strong> may impose additional tax<br />
assessments <strong>and</strong> penalties. Some of the subsidiaries<br />
have been the subject of the tax inspection in the<br />
last years, but the parent company has not been<br />
inspected by the tax authorities since 2001 when it<br />
was established. The Group's management is not<br />
aware of any circumstances which may give rise to<br />
a potential material liability in this respect.<br />
312<br />
29. Earnings per share<br />
by the weighted average number of ordinary shares<br />
in issue during the year, excluding ordinary shares<br />
Basic earnings per share is calculated by dividing<br />
the profit attributable to equity holders of the Group,<br />
adjusted for the amount of preference dividends,<br />
purchased by the Group <strong>and</strong> held as treasury<br />
shares. There are no potential dilutive shares.<br />
(in EUR) 2007 2006<br />
Basic<br />
Profit attributable to equity holders of the Group 32,341,428 18,210,040<br />
<strong>We</strong>ighted average number of ordinary shares in issue 2,613,439 2,620,354<br />
Basic <strong>and</strong> diluted earnings per share (EUR per share) 12.38 6.95
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
30. Dividends per share<br />
31. Acquisitions <strong>and</strong> disposals<br />
According to the General Meeting’s decision<br />
31.1 Acquisition<br />
on accumulated profit distribution, holders of<br />
preference shares received a dividend of EUR 3.34<br />
per share in 2007 (2006: EUR 1.67 per preference<br />
In 2007 the Group acquired more than 50% in<br />
six companies:<br />
share) <strong>and</strong> a dividend of EUR 3.2 per ordinary<br />
share (2006: EUR 0 per ordinary share). For 2007<br />
the Chief Executive Officer proposed a dividend to<br />
holders of preference shares of EUR 3.34 per share<br />
<strong>and</strong> a dividend to holders of ordinary shares of EUR<br />
3.4 per share.<br />
- KD Securities ead Sofija – 1. 1. 2007<br />
- Vrtnarstvo Celje d.o.o. – 1. 1. 2007<br />
- KD Vifin d.o.o. Bratislava – 30. 6. 2007<br />
- VIB a.d. Banja Luka – 30. 6. 2007<br />
- Oklev d.o.o. Ljubljana – 31. 12. 2007<br />
- Group Gea College – 31. 12. 2007.<br />
According to four <strong>business</strong> combinations the Group<br />
recognised goodwill totaling EUR 403,304; in the<br />
other two <strong>business</strong> combinations (the companies<br />
313<br />
Gea College <strong>and</strong> Vrtnarstvo Celje d.o.o.) the Group<br />
recognised an excess of EUR 768,664.<br />
Details of net assets acquired <strong>and</strong> excess on the acquisition are as follows:<br />
(in EUR) 2007 2006<br />
Purchase consideration:<br />
– cash paid 1,847,987 424,762<br />
– direct costs relating to the acquisition - 9,314<br />
Total purchase consideration 1,847,987 434,076<br />
Fair value of net assets acquired 2,213,347 554,611<br />
Goodwill (Note 9) 403,304 -<br />
Excess (Note 22.2) (768,664) (120,535)
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
The assets <strong>and</strong> liabilities arising from the acquisition are as follows:<br />
(in EUR) Fair value Carrying value<br />
Cash <strong>and</strong> cash equivalents 986,672 718,257<br />
Property, plant <strong>and</strong> equipment 1,442,568 18,344<br />
Investment property 4,536,423 -<br />
Available-for-sale financial assets 223,649 427,954<br />
Loans <strong>and</strong> receivables 1,812,768 1,823,556<br />
Other assets 1,306,403 69,271<br />
Financial liabilities (2,734,719) -<br />
Payables (1,217,667) (59,735)<br />
Net assets 6,356,097 2,997,647<br />
Minority interest 2,402,190 1,237,310<br />
Net assets acquired:<br />
- in the previous years 1,740,560 1,205,909<br />
- in a current year 2,213,347 554,611<br />
Cash <strong>and</strong> cash equivalents in subsidiary acquired<br />
- in the previous years 768,602 669,459<br />
- in a current year 1,847,987 434,076<br />
Cash <strong>and</strong> cash equivalents in subsidiary acquired (986,672) (718,257)<br />
Cash outflow on acquisition 1,629,917 385,278<br />
314<br />
31.2 Disposal<br />
In December 2007 the Group disposed of 100% of the<br />
share capital of Globtour d.o.o. <strong>and</strong> 100% of the share<br />
capital of company KD Investments b.v., Netherl<strong>and</strong>s.<br />
The gain on the disposal amounted to EUR 2,795,586.<br />
(in EUR)<br />
Carrying value<br />
Cash <strong>and</strong> cash equivalents 293,958<br />
Property, plant <strong>and</strong> equipment 546,638<br />
Loans <strong>and</strong> receivables 4,407,932<br />
Other assets 90,938<br />
Financial liabilities (1,297,935)<br />
Payables (5,162,211)<br />
Net assets (1,120,680)<br />
Goodwill 25,092<br />
Minority interest -<br />
Cash <strong>and</strong> cash equivalents for disposal of net assets 1,700,000<br />
Cash <strong>and</strong> cash equivalents in diposed companies (293,958)<br />
Cash from company disposal 1,406,042
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
Globtour d.o.o. realised EUR 21,963,462 in income<br />
in 2007, the major part being for travel arrangements.<br />
Operating profit in 2007 was EUR 57,961, net loss for<br />
2007 was EUR 36,215.<br />
32. Related-party transactions<br />
The Group is controlled by KD Group d.d., Ljubljana<br />
(incorporated in Slovenia), which owns 60.39% of<br />
the Group’s shares. The remaining 39.61% of the<br />
shares are widely held.<br />
The following transactions were carried out with related parties:<br />
(in EUR) 2007 2006<br />
Sales of goods <strong>and</strong> services<br />
- Associates 2,562,461 1,946,315<br />
- KD Group d.d. 1,942 26,160<br />
- Other KD Group d.d. related parties - 35,624<br />
Total: 2,564,403 2,008,100<br />
Goods <strong>and</strong> services are sold on the basis of the price lists in force for both related <strong>and</strong> unrelated parties.<br />
(in EUR) 2007 2006<br />
Purchases of goods <strong>and</strong> services<br />
- Associates 1,618,907 915,753<br />
- KD Group d.d. 2,945 871,833<br />
- Other KD Group d.d. related parties 86,411 81,163<br />
315<br />
Total: 1,708,263 1,868,749<br />
(in EUR) 2007 2006<br />
Year-end balances arising from sales/purchases of goods/services<br />
Receivables from related parties:<br />
- Associates 237,221 346,720<br />
- KD Group d.d. 2,921 1,527<br />
- Other KD Group d.d. related parties - 35,628<br />
240,142 383,876<br />
Payables to related parties:<br />
- Associates 167,257 130,746<br />
- KD Group d.d. 19,180 844,129<br />
- Other KD Group d.d. related parties 2,166 3,171<br />
188,603 978,046
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
(in EUR) 2007 2006<br />
Key management personnel compensation<br />
Salaries 2,592,343 2,067,839<br />
Total: 2,592,343 2,067,839<br />
(in EUR) 2007 2006<br />
Loans to associates<br />
Beginning of the year 1,008,805 511,650<br />
Loans advanced during the year 1,545,904 1,273,176<br />
Loan repayments received (2,463,949) (777,099)<br />
Interest charged 56,788 24,566<br />
Interest received (58,496) (23,489)<br />
End of the year 89,052 1,008,805<br />
316<br />
(in EUR) 2007 2006<br />
Loans to KD Group d.d.<br />
Beginning of the year 17,406,689 19,489,079<br />
Loans advanced during the year 16,596,200 23,083,404<br />
Loan repayments received (23,043,790) (25,236,050)<br />
Interest charged 681,938 635,562<br />
Interest received (912,926) (565,306)<br />
End of the year 10,728,111 17,406,689<br />
No provision was required in 2007 <strong>and</strong> 2006 for loans to associates <strong>and</strong> KD Group d.d.<br />
(in EUR) 2007 2006<br />
Borrowings from associates<br />
Beginning of the year - 1,173,106<br />
Borrowings received during the year - -<br />
Borrowings repayments - (1,168,419)<br />
Interest charged - 300<br />
Interest paid - (4,987)<br />
End of the year - -
KD Holding Group<br />
Notes to Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
(in EUR) 2007 2006<br />
Contribution to <strong>and</strong> from mutual funds<br />
Investments in mutual funds – associates 14,953,733 16,569,846<br />
Investments in mutual funds – recognised at fair value through profit / loss 93,718,387 46,144,997<br />
Share of profit of associates (Note 10) 2,107,111 2,654,565<br />
Share of profit – recognised at fair value through profit / loss 15,282,347 6,630,850<br />
33. Events after the balance sheet date<br />
made on 16 January 2008 for shares of KD Življenje<br />
(SZZR) <strong>and</strong> on 17 January 2008 for shares of Adriatic<br />
In January 2008 KD Holding d.d. took the decision<br />
of the Central Securities Clearing Corporation (KDD)<br />
to transfer shares because of the exclusion of minority<br />
shareholders of KD Življenje insurance company d.d.<br />
Slovenica d.d. (ADZR). By entry of the transfer of<br />
shares in the Central Corporation KD Holding became<br />
the sole shareholder of the companies Adriatic<br />
Slovenica d.d. <strong>and</strong> KD Živjenje d.d.<br />
<strong>and</strong> Adriatic Slovenica d.d. The transfer of shares<br />
from minority shareholders to main shareholder was<br />
Since the beginning of 2008 many activities in<br />
the Group which may cause disposal of Adriatic<br />
Slovenica d.d. have taken place.<br />
317
KD Holding Group<br />
Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
318<br />
Annual Report 2007<br />
KD Holding Group<br />
Publisher:<br />
KD Holding, finančna družba, d. d., Celovška 206, 1000 Ljubljana<br />
Editing <strong>and</strong> production:<br />
KD Holding d. d.<br />
Concept <strong>and</strong> creative texts:<br />
Stojan Pelko, PhD., Korpus d. o. o.<br />
Creative concept <strong>and</strong> design:<br />
Katarina Klemen Kovačič, MSc. (KD Holding d. d.)<br />
Original photography:<br />
Arne Hodalič<br />
The photographs of the Group management were taken in the City Museum of Ljubljana, with which KD Holding collaborated, as a<br />
sponsor, on the installation of a permanent commemorative collection dedicated to Oton Župančič at the Oton Župančič Library in Ljubljana.<br />
Redaction:<br />
KD Holding d. d. <strong>and</strong> Korpus d. o. o.<br />
Translation:<br />
Amidas d. o. o. <strong>and</strong> Erica Johnson Debeljak<br />
Technical support:<br />
Prajs d. o. o. <strong>and</strong> Fotoformat<br />
Printed by:<br />
Collegium Graphicum d. o. o.<br />
Impression:<br />
400<br />
July 2007<br />
The Annual Report of the KD Holding Group for 2007 is available at: www.<strong>kd</strong>-<strong>group</strong>.com.<br />
The Annual Report 2007 in English language is the translation of the Slovene version of the KD Holding Group Annual Report 2007, which is the legal version,<br />
approved by the supervisory board of KD Holding d. d. <strong>and</strong> published on the information system of the Ljubljana Stock Exchange (SEOnet).
KD Holding Group<br />
Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007<br />
Rimski kovanci - arheološko najdbišče reka Ljubljanica<br />
319
320<br />
KD Holding Group<br />
Consolidated Financial Statements as at <strong>and</strong> for the year ended 31 December 2007