veikkaus oy annual & csr report20

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Veikkaus OyANNUAL & CSR REPORT

2019

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A word from the President and CEO ............................................................................... 4Veikkaus’ mission, vision, and values ........................................................................... 5Veikkaus in brief ................................................................................................................. 6Strategy prioritizes Veikkaus’ responsibility towards players .................................7

The four strategic priorities ...............................................................................................7CSR ...................................................................................................................................... 10

A Word from the Senior Vice President, CSR..................................................................11Introduction ..................................................................................................................... 12This is how we measure our success in CSR................................................................ 13 Stakeholder cooperation and stakeholder expectations .................................................14INDIVIDUAL – We care for the individual ........................................................................ 16

Gaming control concept............................................................................................ 16Gaming control tools in the digital channel .............................................................. 18Gaming control tools at Veikkaus’ gaming arcades and the retail outlets .............. 19Age limit control of gaming ......................................................................................20Identified gaming ...................................................................................................... 21Using customer data ................................................................................................22Reducing the number of slot machines ...................................................................23Cooperation with Peluuri ..........................................................................................24Strong consumer protection and reliable gaming ....................................................25Responsible marketing communications .................................................................26Marketing communication expenses ........................................................................ 27Responsible game development ..............................................................................28Regular responsibility surveys and studies .............................................................29

COMPANY – We create joy, entertainment and excitement reliably ................................ 31Fighting crime and fraud .......................................................................................... 31Data protection ......................................................................................................... 31Secure payment and monetary transactions ...........................................................32Ethical way of operating – Code of conduct .............................................................33Resolutions to develop the company .......................................................................33Personnel ..................................................................................................................34CSR management .....................................................................................................37Environmental responsibility and responsible procurement ....................................38

SOCIETY – We work for welfare ......................................................................................40The journey of a Veikkaus’ euro ...............................................................................40

GRI - Links between the material CSR issues and the GRI standard, and the GRI contents ...............41

Content

ANNUAL & CSR REPORT

2019

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Content

ANNUAL & CSR REPORT

2019BOARD OF DIRECTORS’ REPORT 2019 ..........................................................................48FINANCIAL STATEMENT 2019 .........................................................................................58

Statement of comprehensive income .............................................................................59Balance sheet .................................................................................................................60Cash flow statement ...................................................................................................... 61 Statement of changes in shareholders’ equity ..............................................................62Accounting principles 2019 ............................................................................................63Attachments

1. Gross gaming revenue by games and game groups ............................................... 722. Development of profit 2017–2019 .............................................................................. 733. Other operating income ............................................................................................ 744. Depreciation and impairment.................................................................................... 745. Services purchased .................................................................................................. 746. Other operating expenses ......................................................................................... 747. Research and development expenses ...................................................................... 758. Financial income and expenses ............................................................................... 759. Tangible assets and depreciation .............................................................................7610. Intangible assets and depreciation........................................................................... 7711. Cash flow from investments and investments in progress ...................................... 7812. Leases .......................................................................................................................7913. Non-current investments and other long-term receivables ..................................... 8114. Current receivables ................................................................................................... 8115. Cash and short-term investments ............................................................................8216. Shareholders’ equity and equity management .........................................................8217. Employee benefit obligations ....................................................................................8318. Current liabilities .......................................................................................................8519. Related party transactions ........................................................................................8620. Leases and other contingent liabilities .....................................................................8721. Signatures of the Board of Directors’ Report and the Financial Statements ...........88

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A W

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Our responsibility towards playersThe year 2019 was challenging to Veikkaus in many ways. There was lively public debate concerning the company, having to do with the marketing of games, gambling problems, slot machines, and the entire gaming system. It is good that there is dialogue. We at Veikkaus try to consider society’s expec-tations in the best possible way whilst seeking to meet the demands of our changing operating environment.

We have already taken many measures and made several changes to our mar-keting processes. In addition, following a decision by Veikkaus’ Board, we have limited our marketing investments significantly.

The decentralized slot machines, located in the hallways of stores and kiosks, also provoked heated debate in 2019. Veikkaus’ Board made a decision to cut down the number of decentralized slot machines by one fifth in 2020. Further, the Board decided that the compulsory identification on slot machines should be brought forward by one year, making all the decentralized slot machines subject to compulsory identification by the end of January 2021. Identified play-ers have access to effective tools which they can use to control their gaming. Identified gaming can also be used for fighting crime and improving consumer protection.

Veikkaus’ Board also made a decision in principle on compulsory identification covering all gaming, excluding scratchcards, which will be introduced when the Lotteries Act is amended. Moreover, Veikkaus’ strategy will be updated to place even more emphasis on responsibility. The Board also decided to set up an Ethical Advisory Board and introduce a performance-based reward system that pays more attention to responsibility.

In the future, we will be highlighting our responsibility towards the players more and more. Veikkaus’ strategy, which is being updated, will centre on an even more secure and responsible gaming environment. With the changes, we are building an organization that is not only responsible but also capable, skilful, and cost-efficient. Our focus will be on efficiency, social acceptability, and the creation of enablers of our future success.

The profit from Veikkaus’ gaming operations fell in 2019 as compared with the previous year. The decrease was affected by, for example, smaller marketing investments and the limits on online gaming that took full effect in 2018. Despite the challenges in the development of the gross gaming revenue, Veikkaus’ fi-nancial result (EUR 1,009.0 million) reached nearly the level of the previous year (-0.5%), thanks to cost-efficient operations.

The total Finnish gambling market amounted to ca. EUR 2,000 million in terms of gross gaming revenue in 2019. This figure contains both Veikkaus’ gross gaming revenue and the estimate issued by H2 Gambling Capital concerning digital gambling games offered by other operators that Finns engage in. Com-pared with the previous year, the total market fell by 2.1%. Veikkaus’ share of the total market was ca. 85%.

I wish to express my sincere thanks to our customers, employees, and partners for the year 2019!

Olli SarekoskiPresident and CEOVeikkaus Oy

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WOWWe surprise

withexperiences

RESPONSI-BILITY

We care for theindividual

COURAGEWe achieve

results

WESucceedtogether

MISSION, VISION, AND VALUES

Veikkaus’ vision is to be a trailblazer of a responsible player experience.

Veikkaus’ mission is to create joy through games.

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VEIKKAUS IN BRIEF

veikkaus.fi Feel Vegas Pelaamo arcades Casino Helsinki Points of sales of the retail network

LUCKY GAMES CASINO GAMES BETTING

Weekly drawn games Lotto, Eurojackpot, Vikinglotto, Jokeri, Lomatonni

Daily drawn games Keno, Kaikki tai ei mitään, Synttärit, Tähdenlento

Scratchcards

Slot machine games e.g. Emma, Novax, Pikapokeri, Fruttis

Digital slot machine games e.g. KultaJaska 2, Emma, Pikapokeri

Table games Poker games, Blackjack, Roulette

Digital table games Poker games, Blackjack, Roulette

einstants e.g. Nokkapokka, Ässä, Fruttis, Yökyöpelit

eBingo

Fixed odds betting Pitkäveto, Live Betting

Parimutuel betting Football Pools, Moniveto, Tulosveto, Voittajaveto games, Toto games (e.g. Toto75, Toto64, Toto65, Toto4, Kaksari, Troikka)

SALES CHANNELS

GAMES

Veikkaus’ mission is to create joy through games. We offer experiences and top-quality games, but not at any cost. We want to make sure that the joy of gaming is preserved, and that gaming is kept harmless.

Almost all adult Finns play Veikkaus games, and we have over two million registered Loyal Customers.

We have ca. 1,600 employees working at Veikkaus, at nearly a hundred different locations in the coun-try. Our games are sold at thousands of points of sales, and they can also be played at veikkaus.fi, under protection of the gaming restrictions.

Kaavion otsikko

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68 %

32 %

Kaavion otsikko

1 2 3 4 5

9 %

19 %

12 %60 %

Gaming revenue 2019

Retail sales network ...........................................1,153

Digital channel ........................................................ 537

TOTAL ..................................................................1,691

€ million

Distribution of the gaming revenue 2019

Beneficiaries ....................................................... 1,009

Retail commissions ................................................159

Lottery tax to the State .........................................203

Operating costs ......................................................320

TOTAL ..................................................................1,691

€ million

From the financial statements 2019 onwards, Veikkaus makes the presentation of the gaming revenue clearer, starting to report the gaming revenue of all game groups as gross gaming revenue.

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STRATEGY PRIORITIZES VEIKKAUS’ RESPONSIBILITY TOWARDS PLAYERS

Veikkaus’ strategy prioritizes player-centred re-sponsibility, i.e. Veikkaus’ responsibility towards the individual. Our strategic priorities are responsi-bility, channelling capacity, new business, and the objective to develop Veikkaus into the best place to work in the gaming business.

Veikkaus’ mission is to generate joy through games. To us, this means that our games bring joy and ex-periences to people; we want to take care of the players to make sure that the joy of gaming is pre-served, and gaming is kept harmless. Furthermore, we are involved in Finnish life through the gaming revenue in many ways.

Our vision is to be a trailblazer of the responsible player experience.

Veikkaus’ Board of Directors approved an updated strategy, the company’s mission, and vision in Feb-ruary 2020. The strategy builds change towards a responsible, capable and skilful organization that

acts in a cost-efficient way. The company’s reve-nue will be less in focus in the coming years. We will try to take into account society’s expectations as widely as possible whilst responding to the de-mands of the changing operating environment. Our operating environment continues to be challenging and gaming is shifting more and more towards the digital channel, where we are competing against foreign gaming companies. The strategy is updated when necessary, and in 2020, Veikkaus’ CSR pro-gramme will also be updated to correspond to the strategy.

Veikkaus’ values are responsibility – we care for people, we – succeed together, courage – we achieve results, and wow – we surprise with ex-periences. These values illustrate our way of oper-ating and working. They show in the work of every Veikkaus’ employee and all our customer contacts. The values were determined as part of the target state of Veikkaus’ culture, in cooperation with the personnel, when the current Veikkaus was founded in the years 2016 and 2017. The values have re-mained unchanged throughout the whole period of operations of the current Veikkaus.

The four strategic prioritiesVeikkaus implements its strategy through four programmes.

1. RESPONSIBILITY We work for a safer and more responsible gaming environment. We aim at creating a safe customer experience and reducing the harmful effects of gambling.

• We will renew the tools of gaming control to all channels.

• We will reduce the number of slot machines and introduce identi-fication to all decentralized slot machines, and to all gaming at a later date.

• We will develop measures based actions on customer data to im-prove player security.

• We will train our employees in responsibility matters and the related ways of acting.

By secure and responsible gaming environment, we mean that we take care of all the players. It will be easier to monitor, limit, and stop gaming. This will be seen in, e.g. slot machine gaming, which we decided to make subject to compulsory identification earlier than initially planned. Compulsory identification will of-fer the players a chance to set a permanent exclusion on their slot machine gaming. Underage gaming can also be prevented by compulsory identification. In the future, all gaming will require identification, with the exception of scratchcards. We have reduced, and will continue to reduce, the marketing of games.

We want to offer our players a better idea of the fea-tures of the games, and the harms and gambling prob-lems related to them.

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2. CHANNELLING CAPACITY We will develop our offerings to provide outstanding service to the customers. We aim to provide products and services our customers find interesting.

By channelling capacity, we mean that we aim to guide Finns to play in Veikkaus’ regulated and con-trolled gaming environment. We want to secure our market leadership in Finland, even in the digital envi-ronment in 2025.

The upcoming Lotteries Act reform has a central role in how gaming is channelled towards Veikkaus’ of-ferings in the future. The regulation makes Veikkaus’ operations subject to precise preconditions, which affect the company’s capacity to channel gaming towards domestic offerings. Veikkaus uses clearly defined methods in marketing and sales promotion, as well as in game features. For example, we never offer free gaming money to the players, nor do we take aggressive measures to get people to play more. Further, Veikkaus does not offer all possible kinds of games.

• We will revise especially the range and features of digital games.

• We will offer our customers digital services that expand the gaming experience irrespective of chan-nels.

• We will surprise our customers through outstanding encounters and keep improving the customer experience constantly.

• The customers will find our game service attractive, safe, and per-sonalized just for them.

• We will build the best application in the world.

3. NEW BUSINESS We invest in the creation of new business. We aim at bringing new business to the global gaming market.

• We support the digitalization of national gaming companies through Veikkaus’ knowhow and technologies.

• We combine the players, games, and solutions into omnichannel local services for our business customers.

• We aim to sell full-service solu-tions and offer a unique customer experience to international opera-tors in the gaming business.

• We innovate new solutions and concepts together with our cus-tomers for the gaming market.

We aim to create new business that would generate significant revenue in 2025. Extensive development of the company’s new business requires permission from the State, our owner

4. TOGETHER WE WILL BUILD THE BEST WORKPLACE IN THE GAMING BUSINESS We will aim at an agile and modern company where people enjoy working.

• We will develop smoother ways of operating together.

• We will develop our management so that it helps us to achieve our goals.

• We will increase our knowhow together and increase internal mobility and cooperation.

• We will involve all Veikkaus’ employees in the realization of our common goals.

• We will focus on building a positive employer image.

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*As a performance-based compensation indicator**To be further specified during spring 2020.1) Population survey. Starting level 2019 defined in 2017–2018 on the basis of the average of the population surveys2) Customer base survey, people having played during the past six months, by month3) Reputation & Trust survey (population level, measured twice a year)4) Personnel survey People Power index

STRATEGIC INDICATORS 2019 Starting point 2020 Objective

Prevalence of gambling problems at the population level (%) 1) 2.95

*Number of people having played identified during the year (.000) 1,811

Market share in the digital channel (%) 63.5

**Permission to new business received and 1st implementation project underway No Yes

**Turnover of new business and value of portfolio (€ million) 0.0

*Customer satisfaction (NPS) 2) 19.25

Brand reputation 3) (index) 3.27

*Employee satisfaction 4) (index) 58.1

*Efficiency: costs / GGR (%) 27.7

2019Beneficiaries

1 billion euros

85%Veikkaus’ share of the Finnish gaming market

Over 2.1 million Loyal Customers

Number of existing game exclusions nearly 21,000

Over 500 Veikkaus employees took part in the dialogue concerning the new strategy

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Veikkaus Oy CSR REPORT

2019

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CSR

Working for a safe joy of gamingPeople engage in gaming for the prizes, excitement, joy, and leisure. For some people, games mean a brief escape from the everyday routines, whereas for others, gaming is a so-cial thing they can share with their friends. The gaming in-dustry exists for people’s enjoyment, and games should not be a necessity in anyone’s life. Unlike other operators in the field, Veikkaus has always had a mission – generating funds for the common good.

The public debate that we had in 2019 made the challenging balance between the company’s task and mission strong-ly prominent. The company’s mission is to offer Finns safe games and to prevent the harmful effects of gambling. We must acknowledge that we have taken part in the debate by talking more about our responsibility towards society than to individuals, the players.

We now know that that is not enough. We must bear our responsibility towards the players of our games more than before, and we must be able to offer efficient tools for the control of gaming to those who need them.

The measures we decided to take at the end of 2019 help us to increase our understanding and experience of what tools work best for players while they are trying to protect themselves from the harmful effects of gaming. It is also our objective to develop increasingly more effective responsi-bility solutions in cooperation with the authorities and the operators fighting gambling-related harm.

Veikkaus’ mission is to create joy through gaming. For us, this means that our games bring joy and experiences to peo-ple’s lives. Gaming can only remain joyful when it is kept harmless and does not cause problems to individuals and their families and friends. This is why we want to offer a safe and reliable gaming environment to our players. Further, we are involved in Finnish life in many ways through our reve-nue.

Pekka Ilmivalta Senior Vice President, Legal Affairs and CSR, Veikkaus Oy

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MAJOR ACTIONS IN 2019

We prepared a revised strategy, which makes responsibility our top priority.

We decided to bring forward the compulsory identification on decentralized slot machines by a year, i.e. launching it at the beginning of 2021.

We started to reduce the number of decentralized slot machines at the end of the year.

We cut our marketing investments significantly and updated our marketing guidelines and internal processes.

We continued working on Veikkaus’ purpose-oriented CSR Programme according to the revised strategy.

Veikkaus’ environmental programme was finalized.

We supplemented the remuneration model of Veikkaus’ management with a responsibility indicator.

The composition of the Board of Directors was changed, reinforcing its knowledge and expertise in matters related to the harmful effects of gambling and CSR.

Veikkaus’ Board of Directors appointed a new Ethical Advisory Board.

We relaunched the “Peli-ilo on meidän juttu” programme, i.e. a model of early intervention to prevent gambling problems among the personnel.

We focused on the visual design of the gaming restrictions in the digital channel in order to add to the players’ understanding of their gaming.

INTRODUCTION

This CSR report is based on Veikkaus’ CSR programme, which was drafted after the integration of the three previ-ous gaming operators in 2017. In autumn 2019, we started to prepare a new CSR programme, and it will be finalized at the beginning of 2020.

The CSR programme gathers together Veikkaus’ material CSR topics and indicators. The programme is divided into three parts: 1) We care for the individual, 2) we generate joy, entertainment, and excitement reliably, and 3) we work for

welfare. The themes include concrete actions that are used to implement responsibility at Veikkaus. They are explained in more detail in the next sections.

Veikkaus’ CSR reporting is guided by the standards of the Global Reporting Initiative (GRI) framework. In addition, the contents of the report have been drafted in the context of the common responsibility standard of the national gaming companies (European Lotteries CSR Guidelines).

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INDICATORS 2019 2018 2017Profit, € million 1,009.4 1,014.2 1,021.3 Proceeds to society, € million 9) 1,246.6 1,265.60 1,273.80GGR, € million 1,690.7 1,759.00 1,777.8Share of funds to the common good of the GGR, % 10) 71.7 69.7 69.4 Share of people suffering from gambling problems out of population, %, in 2019 April/August/December 11) 3.1 /2.9/2.8 2.8 / 2.6 3.1 / 3.3

Gambling problems experienced, %, population-level pulse indicator 12) 2.9 2.3 1.7

SOCIETYWe work

for welfare

COMPANYWe generate joy,

entertainment, andexcitement reliably

INDIVIDUALWe care for the

individualINDICATORS 2019 2018 2017Share of identified gaming out of GGR, % 45 44.8 40.6Number of gaming restrictions met in a year, total, persons 742,000 692,000 - Number of gaming restrictions met in a month, total, (average) persons 305,000 273,000 - Success in the prevention of gambling problems, % 1) 30 34 - Success in controlling underage gaming, % 2) 64 61 57Employee commitment index 3) 57.7 65.9 61.5Share of employees worried about their gaming, % 4) 4.1 4.2 3.8

INDICATORS 2019 2018 2017Veikkaus’ share of Finnish gaming market, % 5) 85 86 90Digital gaming net promoter score (NPS) 19 31 28

Opinion on the amount of Veikkaus’ advertising, % 6) 61 69 -

Recommended decisions, number 7) 28 52 46

New employees having taken the Ethical Guidelines online training, % 8) 61 73 - Recycling of slot machines, % 97 97 97

THIS IS HOW WE MEASURE OUR SUCCESS IN CSR

1) Source: Omnibus survey by Taloustutkimus. Survey claim: “Veikkaus prevents the occurrence of gambling problems through its actions.” Totally agree or somewhat agree. A total of 4,000 annual respondents. The question was asked in 2018 for the first time. 2) Source: Omnibus population survey by Taloustutkimus. Survey question: “According to the Lotteries Act, people under 18 are no longer allowed to play slots, not even when they are accompanied or given permission by an adult family member. Is the law implemented in practice in your view…?” Totally agree or somewhat agree. A total of 4,000 annual respondents. 3) Source: Personnel Survey, Corporate Spirit 4) Source: Personnel Survey. Corporate Spirit. Survey claim: “I have experienced that my gambling has been problematic during the past year”. Totally agree or somewhat agree. 5) The reporting method changed in 2018. The offshore gaming market share is based on an estimate by H2 Gambling Capital. The market share reported in the CSR report of 2017 was based on Veikkaus’ own estimate concerning offshore gaming. 6) Source: Omnibus population survey by Taloustutkimus. Survey question: “What do you think about Veikkaus’ advertising in Finland?” Way too little or too little, and I am pleased with the present amount of advertising. 4,000 respondents. The question was asked in 2018 for the first time. 7) Strong consumer protection guarantees customers’ legal protection in possible problematic situations, where they feel that they have been treated unjustly. In such cases, the customers may ask the authorities for a recommended decision. 8) In the first operating year of the new Veikkaus, 2017, the entire personnel were obliged to pass the training. In the years 2018 and 2019, the training was targeted at new employees, and they were required to take it within four months from the start of their employment contract. The courses taken by employees having joined the company at the end of the year have not necessarily been recorded in the indicators yet. 9) Revenue to society, including lottery tax and value added tax. 10) Veikkaus’ profit and lottery tax in proportion to the GGR. The GGR is calculated by deducting prize payout to players from the turnover. 11) Source: population surveys carried out by Taloustutkimus market research company and commissioned by Veikkaus, concerning the scope of gambling problems in the population, measured by using the SOGS indicator. In 2017 and 2018, the results were received in April and December. In 2019, they came in April, August, and December. Each survey round had 5,000 respondents. 12) Source: TOmnibus surveys by Taloustutkimus. Survey claim: “I have experienced problems whilst trying to control my gambling during the past year.” Totally agree or somewhat agree. A total of 9,000 respondents every year.

We offer advanced tools for gaming control We make use of data in the prevention of gambling problems We communicate responsibility and do responsible marketing We supervise the age limit of 18+ efficiently We work for the occupational wellbeing of our employees We prevent gam-bling problems among our employees

We offer responsible products and services that our customers find attractive We communi-cate and market responsibly We provide reliable games and secure monetary transfers We guarantee strong consumer protection We process player data reliably and safely We act in an open and transparent way We act responsibly in procurement and promote environmental responsibility

We prevent gambling problems We prevent crime and fraud associated with gaming We act in a cost-efficient way We generate ca. one billion euros to society every year

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STAKEHOLDERS COOPERATION AND STAKEHOLDERS’ EXPECTATIONS

Open two-way interaction with stakeholders is an essential part of Veikkaus’ social impact. Veikkaus wants to listen to and understand its stake-holders’ expectations, seek solutions, and develop its operations to respond to them. Knowing these expectations, responding to them, and main-taining trust towards Veikkaus operations are the prerequisites of success for Veikkaus. Veikkaus wants to communicate openly about its opera-tions and constantly develop new forms and ways of stakeholder interaction.

STAKEHOLDER Ways and channels of interaction

Key themes and expectations Year 2019

CUSTOMERS

Players of Veikkaus games

Customer service. Regular surveys, studies, and interviews. Veikkaus’ website and social media channel. Communications and marketing.

Personal and personalized service, tools for gaming control, attractive games and services, game develop-ment, and usability. Confidentiality of customer data and reliable payment transactions.

We increased our customer under-standing through surveys and by fol-lowing the players’ gaming behaviour. Our strategy, which was updated at the beginning of 2020, makes our responsibility towards the players our top priority.

RETAILERS, GAME SALES CLERKS, AND RETAIL CHAINS

Retailers, game-related harm, and retail chains having contracts with Veikkaus.

Retailer agreements, training, the Myynet online portal, a closed Face-book group for game sales clerks, Veikkaus News.

Responsibility as part of the game sales clerks’ knowhow. Controlling the age limit of 18 at the points of sales, responsible game marketing practices at the points of sales. Making the role of identified gaming stronger as part of the customer experience.

The retailer agreements include an obli-gation to train the personnel. At least one of the employees at a point of sale must take the age limit control course concerning slot machines. Responsi-bility issues are prominent in contact training events on basic and advanced level courses, as well as on online courses and the channels of sales clerk communication. The sales clerks master sales work that complies with age limit control practice and other instructions and know how to advise a customer who brings up gambling problems to seek help. Brochures of the Gambling helpline Peluuri are avail-able at all gaming locations.

PERSONNEL

Veikkaus’ personnel at the head office and the regional offices, a total of 1,600 employees (at the end of 2019)

Internal communications (intranet Veikka), internal events. Personnel survey, pulse surveys, and perfor-mance appraisal discussions. Anony-mous reporting channel and email for the reporting of compliance issues.

Skills development, professional devel-opment opportunities. Veikkaus’ role in the changing operating environment. Reinforcing independent decision making. Equal and non-discriminato-ry working community. Occupational wellbeing and employees’ ability to cope.

We closed down our restaurant table game operations. We revised the model of performance review discussions, and supervisor training, and adopted a new tool for success management. We carried out our first survey on equality. We launched an updated programme for the prevention of gambling problems among our employees as part of the company’s operating programme for safety and health at work and the op-erating plan of the occupational health-care services. We organized Veikkaus Open Now discussions at both the head office and at the regional offices. We tendered our occupational healthcare services. In 2020, we will update the employee CSR training concept.

BENEFICIARIES

Beneficiaries of Veikkaus’ proceeds

Regular contacts, meetings and events. Communications concerning the use of the proceeds.

Acceptance of Veikkaus’ operations. Scope, continuity, and targeting of proceeds. Cooperation over chosen themes.

Our objective is to secure sufficient contributions to the beneficiaries via the relevant Ministries. Veikkaus com-municates actively responsibility issues and other topical matters to the bene-ficiaries.

POLITICAL DECISION-MAKERS . Finnish Parliament . Council of State . European Parliament and Commission

Regular meetings in Finland and at the EU level according to a separate influ-encing plan. General meeting. Super-visory Board. Interim reports and CSR reporting. Continuous dialogue.

General acceptance of Veikkaus’ oper-ations. Responding to changes in the operating environment and legislation.

All the political groups represented in Parliament are in favour of keeping the exclusive right system. The Government Programme outlined that the system should be developed on the basis of a monopoly system, which has channel-ling capacity.

OWNERSHIP STEERING, MINISTRIES, AND AUTHORITIES . Ownership Steering Department in the Prime Minister’s Office . Ministry of the Interior . National Police Board . State Supervisors . Ministry of Social Affairs and Health and the Working Group on the Evaluation of the risks and harms associated with gambling . Ministry of Education and Culture . Ministry of Agriculture and Forestry

Close dialogue concerning the prepa-ration of legislation and supervisory practice (Ministry of the Interior Na-tional Police Board, State Supervisors).

Regular contacts concerning benefi-ciary communications and the preven-tion of gambling-related harm (Ministry of Social Affairs and Health, Ministry of Education and Culture, Ministry of Agriculture and Forestry).

Cooperation and information sharing concerning the development of and research into gambling-related harm (Evaluation Working Group).

Justification of the exclusive rights system, profitability, and acceptance. Veikkaus’ strategy and competitive-ness. Prevention of gambling-related harm; knowledge base, and solutions.

We started to update our strategy in autumn 2019. We brought forward the decision to make decentralized slot machines subject to compulsory identification by a year, which means that it will become effective in January 2021. We revised our internal mar-keting processes and guidelines and decided to increase the training of-fered to the operators carrying out our marketing. Our strategy, which was approved at the beginning of 2020, makes our responsibility towards the players our top priority.

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STAKEHOLDER Ways and channels of interaction

Key themes and expectations Year 2019

RESPONSIBILITY OPERATORS . Gambling helpline Peluuri . Other operators fighting harm associated with gambling . Finnish Institute for Health and Welfare . Ethical Advisory Board

Contacts, exchange of information, regular dialogue. Reports and statis-tics. Meetings.

Involving and open dialogue on the prevention of gaming-related harm.

Ethics of the games and their market-ing, gaming-related harm, the social impacts of gaming.

We finance Peluuri’s operations and inform people about Peluuri’s services.

Veikkaus’ Board of Directors appointed an Ethical Advisory Board, with the purpose of providing an external view on responsible gaming to the compa-ny’s Board of Directors and the opera-tive management.

PARTNERS . IT and game supplier partners . Advertising, media, production, and communication agencies . Sponsorship partners . International cooperation organizations: World Lottery Association (WLA), European Lotteries (EL), European Casino Association (ECA), European Pari Mutuel Association (EPMA) and our colleague gaming companies . Global Lottery Monitoring System (GLMS)

Cooperation contracts and active cooperation.

Cooperation contracts, meetings, continuous contacts.

International seminars, conventions, and meetings. WLA Magazine, EL Magazine, EL News Briefing.

Innovative, responsible and versatile game provision and gaming services.

Open, reliable, and long-term cooperation.

Developing the brand image and channelling gaming towards safe games.

Active operations and participation in the development of the gaming industry.

We aim at long-term contracts that have undergone a tender process, and far-reaching, confidential cooperation. We carried out pilot projects with startups.

We commissioned an audit of our marketing processes from an external operator. We offered training to our employees in charge of marketing on the extensively updated marketing principles. We compiled a check list on responsible marketing to support creative design. We will make a com-pulsory certificate of responsible mar-keting to all our partners.

We will re-evaluate our partnerships to conform to the new strategy and to address the chosen target groups.

We hosted ECA’s Safety and Security seminar at the Casino Helsinki, and the EL Innovation Seminar.

We passed the requirements of the PCI DSS v3.2.1 Rev.1.0 standard, au-dited by F-Secure. We also passed the ISO/ IEC 27001 and the WLA-SCS audits, as well as the ISO 9001 audit. The application of the certificates corresponding to the afore-mentioned three standards covers now, for the first time, the entire new Veikkaus.

Veikkaus’ President and CEO was elected to the Executive Committee of the EL for another season. Veikkaus has representatives in many working groups of the international organiza-tions.

MEDIA

National, regional, and local media

Media releases and news on jack-pots, regular meetings with media representatives and journalists, media follow-up.

Fast and open communications. Social responsibility and reliability. Accessibility. Gaming proceeds sig-nificant to the operation of Finnish society.

We aim to act quickly, openly, and reli-ably towards the media, paying atten-tion to media interests, e.g., requests for information and shedding light on the background of the industry.

GENERAL PUBLIC

Every adult living in Finland

The traditional media, social media channels, communication and mar-keting.

Openness and reliability of operations. Proceeds to the welfare of people living in Finland. Active prevention of gambling problems. Responsible em-ployer.

We communicate openly and reliably on the company’s operations, provid-ing games responsibly to adults.

Veikkaus’ proceeds are channelled to the advancement of the welfare of everyone living in Finland through the State Budget.

WHAT IS ”PUUTU PELIIN”PROGRAMME?

The Football Player association’s ”Puutu Peliin”

programme lowers the threshold of taking up gambling problems and offers low-threshold help.

Vice President, Community Relations

Hannu Kareinen

https://youtu.be/HAL-1t3CzyU

16

INDIVIDUAL – We care for the individual

THE GAMING CONTROL CONCEPTThe revised strategy, which was updated at the end of 2019 and the beginning of 2020, makes responsibility a top pri-ority in our operations. Our responsibility towards players and safe gaming are in focus. We will pay special attention to getting the players to know the risks associated with the games better than before, as well as the responsible gam-ing tools that Veikkaus offers.

Gaming control in the digital channel Every player at veikkaus.fi must set daily and month-ly limits on their gaming before they can transfer money to their Veikkaus game account. Players wanting to play, e.g., slot-machine types of games, eInstants, bingo, or table games, such as Roulette or BlackJack, must set daily and monthly loss limits on their gaming. The compulsory limits make the players to think about their spending on games before they start to play. Compulsory money transfer and loss limits were introduced to the digital channel in Decem-ber 2017.

The compulsory gaming limits on digital gaming reduced our gross gaming revenue for an estimated EUR 35 million in 2019. In the previous year 2018, the GGR went down as a result of the compulsory gaming limits by ca. EUR 21 million.

The players have also the chance to make their digital gam-ing by games or game groups subject to self-exclusion and to block all of their digital gaming until further notice. On the front page of each game, there is a chance to block the gaming immediately until the end of the following day (the panic button).

Other gaming control tools include a compulsory session timer, and the gaming history, through which the customers can view their total gaming in the summary of their game account at veikkaus.fi.

The game exclusions set by a customer are taken into ac-count in all our customer communications and marketing. We never target direct marketing at people who have opted for a game exclusion.

During 2019, over 300,000 customers played until they reached the monthly money transfer limits they had set by themselves. This means that they could not transfer any more money to their game accounts during that month. The self-imposed money transfer limits hit by the customers were 38 euros per day on the average and 181 euros per month on the average. The average respective loss limit amounts were €33 and €148. Over 8,000 people had permanent game exclusions, effective until further notice, at the end of 2019. They had made all their gaming in Veikkaus’ digital game services subject to self-exclusion, without setting an end date. The removal of a self-exclusion effective until further notice requires at least one year’s effective period, followed by a reconsideration period of three months.

GAMING RESTRICTION CONCEPT IN THE DIGITAL CHANNEL: GAMING LIMITS AND EXCLUSIONS 2019 2018

Moneytransfer and loss limits (self-imposed) daily limit monthly limit daily limit monthly limit

Moneytransfer limits hit, €, (average) 38 181 38 184

Number of money transfer limits hit / day, (average) persons 16,529 84,153 15,857 74,025

Number of money transfer limits hit per year, persons 741,636 304,585 692,428 272,825

Loss limits hit, €, (average) 33 184 43 231

Number of loss limits hit / day, persons, (average) 3,987 20,235 3,461 19,739

Number of loss limits hit per year, persons 174,724 87,661 154,505 78,812

Effective game blocks 2019 2018

Number of effective game blocks, (31 Dec), pcs 20,918 16,170

Number of permanent game blocks, (3i Dec), pcs 8,021 4,788

Use of panic button, times 16,522 18,243

Use of panic button, persons 9,689 9,988

We support our players in responsible gaming

17

Gaming control in slot machines of the partner network This year, we are strongly developing the possibilities of gaming control in the decentralized slot machines in our partner network.

At present, compulsory gaming limits are only in use in the slot machines of the partner network if the customers pay for their games by using payment cards. All the payment cards have a default daily loss limit of 50 euros, which the players can adjust to range between 0 and 100 euros on the slot machine payment terminal. Loyal Customers can link their personal payment cards to their Loyal Customer sta-tus in the online service or at a slot machine. Whilst link-ing a payment card to the Loyal Customer status, the play-ers must set compulsory daily and monthly loss limits on their gaming.

Customers can also impose a self-exclusion on their slot machine gaming when using a payment card. The loss lim-its or gaming self-exclusions do not restrict unidentified gaming paid for in cash. If a customer plays as a Loyal Cus-tomer, they can also view their entire gaming history at the game history section at Oma Veikkaus (“My Veikkaus”). The compulsory identification introduced to the slot machines will enable us to introduce new gaming control tools to the slot machines.

The number of voluntary entry bans to the game arcades is on the rise. The Casino has the right to prevent a customer from entering the Casino by virtue of the Lotteries Act, if gaming has caused, or will be likely to cause them social harm based on economic or health-related reasons. Such entry bans and restrictions made on the Casino’s initiative totalled 74 in 2019. The Casino’s responsibility procedures include, as an essential part, returning discussions with such customers that wish to return to the Casino after an entry ban. These discussions are a prerequisite for the continuation of the customer relation.

ENTRY BANS AND RESTRICTIONS AND INTERVENTION DISCUSSIONS 2019 2018 2017

Voluntary entry bans, other than the Casino 616 409 359

Voluntary entry bans and restrictions at the Casino 426 486 560

Entry bans and restrictions set by the Casino, associated with gambling problems 74 58 48

Intervention discussions with customers at the Casino 1) 23 5 4

Returning discussions with customers at the Casino 451 508 524

1) In some cases the intervention discussions are part of returning discussions, when an intervention discussion takes place in connection with the returning discussion.


Gaming control at Veikkaus’ arcades Players can agree on entry bans at Veikkaus’ own arcades, the Pelaamo and Feel Vegas arcades. Entry bans are based on the players’ commitment. Veikkaus’ employees ask the person with an effective entry ban to leave the arcade if they are seen there; however, the staff are not juridically entitled to force the customers to leave.

Once a player enters into the Casino, their identity is veri-fied. The Casino will prevent the customers from entering if they have an effective entry ban. When a customer having requested an entry ban returns to the Casino, they must join a returning discussion in order that we can ensure that they genuinely want to get back to gaming. The gaming locations also make available information on the services of the Finn-ish Gambling helpline Peluuri. There are always personnel present at the gaming locations, and they can advise play-ers in gaming management issues.

HOW IS VEIKKAUS’RESPONSIBILITYTOWARDS THE PLAYERS SEEN AT THE CASINO HELSINKI?

We engaged in nearly 500 discussions with the customers: How are you, can we help you

with gaming management?

General Manager Tiina Siltanen

Casino Helsinki

https://youtu.be/WOQbiMIhOBk

18

GAMING CONTROL TOOLS IN THE DIGITAL CHANNEL


Gaming limits• Every player must set daily and monthly money transfer limits on their gam-

ing. The limits are amounts that the players can transfer from their bank ac-counts to their game accounts.

• Players engaging in games of high event frequency (casino games, eIn-stants, eBingo, virtual betting) have to set daily and monthly loss limits. The loss limits are amounts that the players can lose at the maximum during a day or a month. The limits do not concern poker.

• Money transfers to game accounts cannot be done in the night time between 0:00 and 6:00 am.

Gaming exclusions• By pressing the panic button, the players can ban all of their gaming until

the end of the following day.

• Temporary gaming self-exclusion covering individual games or game groups, and all digital gaming, for the maximum of a year. Gaming self-ex-clusion can also be made to cover slot machines if a payment card is linked to the Loyal Customer status.

• Gaming self-exclusion until further notice concerning all digital gaming (re-moving the self-exclusion can be made in a year, subject to a reconsidera-tion period of 3 months).

• When the gaming self-exclusion is set, the players are offered a call by Gambling helpline Peluuri.

Gaming summary• When playing as Loyal Customers, the players have the chance to view their

gaming history in the Oma Veikkaus (My Veikkaus) section.

Session timer• Compulsory session timer, which gives the alarm of the time spent on ga-

ming every 60 minutes. The timer can be set to be shown even more fre-quently.

Game test• A chance to consider one’s own gaming by answering 16 questions and re-

ceive feedback on the answers.

Age limit control• In order to register, you must be at least 18. We verify the ages with the po-

pulation data system maintained by the Digital and Population Data Services Agency.

Pelaamaltilla.fi• Veikkaus’ responsible gaming website pelaamaltilla.fi offers a package of

data on gaming control and encourages players to contact to support ser-vices.

The gaming limits and the session timer can be modified at veikkaus.fi/omaveikkaus

PELAAMALTILLA

19

GAMING CONTROL TOOLS IN VEIKKAUS’ ARCADES AND THE POS OF THE RETAIL NETWORK

Pelaamo and Feel Vegas arcades• A chance to a temporary (3–12 months) entry ban, in the context of which

players are offered the chance to be contacted by Gambling helpline Peluuri.

• Peluuri’s brochures on display and easy to find.

• Personnel present and easily approachable. The employees will offer guid-ance on the chances to control gaming.

• Age limit control: everyone looking under 23 must prove their age.

Casino• A chance to a temporary (3–12 months) entry ban, in the context of which

players are offered the chance to be contacted by Gambling Helpline Peluuri.

• The casino may also impose a temporary entry ban on a customer.

• Returning discussions with customers after the end of the gaming exclusion.

• Personnel present and easily approachable.

• The employees will offer guidance on the chances to control gaming.

• Peluuri’s brochures on display and easy to find.

• Automatic age limit control on registration.

Slot machines• When paying their games with a payment card, all customers are subject to

a loss limit of €50/ day. The players can adjust the limit to range between 0 and 100 euros per day in the settings.

• When paying their games with a payment card linked to the Loyal Customer status, the players have access to the daily and monthly gaming limits, as well as the gaming self-exclusion option. The players must set gaming limits and gaming exclusions at veikkaus.fi.

PELUURIA helpline helping people in matters related to the harmful effects of gambling. A toll-free helpline, tel. 0800 100 101. Open on weekdays 12:00–18:00; on Mondays, service also in Swedish.

• Helpline • Chat • LiveChat • OmaPeluuri • Tehostartti • Peli poikki (Time to fold) programme • Valtti & Hertta forums • Peluuri.fi


20

AGE LIMIT CONTROL OF GAMINGGaming is subject to the age limit of 18. Minors are not al-lowed to play, even if they were accompanied by adults or given permission by them. In digital gaming, controlling the age limit takes place reliably, as we verify the customers’ age with the Digital and Population Data Services Agency whilst they register as our customers. At the Casino, the customers’ age is controlled as they sign in at the casino. At Veikkaus’ own gaming locations, the Pelaamo and Feel Ve-gas arcades, age limit controls are carried out by the loca-tion’s personnel. In retail sales, the controlling responsibility is assigned to the retailer by way of contract.

In autumn 2019 the company’s Board made a decision to bring forward the compulsory identification covering all de-


centralized slot machines by a year. This means that all the decentralized slot machines fall within the scope of compul-sory identification starting from January 2021. This will ham-per minors’ access to games significantly.

Veikkaus trains regularly its employees and retail network game sales clerks to carry out age limit controls and takes concrete actions to support the controls. In the retail net-work, for example, the game sales clerks have special game blocking remote controls which they can use from a supervision spot to stop gaming by a person who looks un-derage, in order to control the person’s age.

Veikkaus monitors success in age limit controls through ac-tive research and control calls. In 2019 people’s conception of the realization of age limit controls at the points of sale of the retail network developed favourably. In test purchas-es carried out by Veikkaus, an adult, young-looking person tried to start gambling. Their gaming was blocked in 12% of the cases, as compared with 10% in 2018. Underage gaming can be stopped in January 2021, when the compulsory iden-tification on decentralized slot machines will be introduced. The change will not remove the game sales clerks’ respon-sibility to control the players’ age.

Besides Veikkaus, the “Pakka” network*, which is coordi-nated by the Finnish Institute for Health and Welfare, makes test purchases. We work in continuous cooperation with the Pakka network to raise people’s awareness of the age limit and to improve the controls. We have representatives in ten Pakka working groups in different parts of Finland.

WE TRAINTHE SALES CLERKS TO ASK PEOPLE UNDER 23 TO SHOW THEIR ID

WE STOPGAMING WITH REMOTECONTROLLERS

WE MONITORADHERENCE TOTHE AGE LIMIT

VEIKKAUS’ GAMES ARE FOR ADULTS ONLYWE BEAR RESPONSIBILITY FOR MAKING SURE THAT MINORS DO NOT GAMBLE

WE COMMUNICATETHE AGE LIMITACTIVELY

Age controls on decentralized slot machi-nes are the responsibility of the retailers of the sales network.

We make a slot machine supervision plan for each point of sale in cooperation with the partner in question.

There must always be a person having passed the supervision training on the su-pervision spot, when the slot machines are in use.

We prepare an age control knowhow plan with all the new points of sale, and follow its implementation.

The game areas are marked with a tape with the sign 18+, whenever possible.

Any report on an underage player launches an enhanced supervision process.

Repeated problems in underage gaming lead to the dissolution of the contact for at least three months.

* Pakka is a working group, acting locally, the operation of which is based on the legislation on substance abuse prevention work. The Finnish Institute for Health and Welfare coordinates the operations nationally.

✔

✔

✔

✔

✔

✔

✔

21

Public opinion on the success of age limit controls 2004–2019

Source: Omnibus population survey by Taloustutkimus. Survey question: “According to the Lotteries Act, people under 18 are no longer allowed to play slots, not even when they are accompanied or given permission by an adult family member. Is the law imple-mented in practice in your view…?” A total of 4,000 annual respondents.

------- The age limit of gaming was raised to 18 at the end of the year 2011

Very well

Fairly well

Rather poorly

Very poorly

No opinion

IDENTIFIED GAMINGIncreasing responsible gaming is one of Veikkaus’ core ob-jectives, used to build a safer and more responsible gaming environment for the customers.

Veikkaus’ identified players have access to compulsory gaming limits and they can follow their gaming history. After identification, the players can opt for a gaming self-exclu-sion online, on slot machines or in Veikkaus’ game arcades, if they wish. Identified players having linked their payment cards to their Loyal Customer status can block their use of the card on slot machines. The players can also identi-fy themselves by using their Veikkaus Card or via a mobile device.

The customers’ games, losses, winnings, and payout per-centages are data that help the customers see the facts of their gaming. Gaming should be harmless and bring joy and experiences to people’s lives. We want to take care of the players in order to keep gaming harmless. A player play-ing identified has access to tools for responsible gaming. In addition, identified gaming gives us better opportunities to prevent crime and money laundering, and to improve con-sumer protection.

All Veikkaus’ customers in the digital channel are already playing identified, which means that they also have access to the responsibility tools. The share of identified gaming out of all gaming is 45%.

On slot machines, the share of identified gaming is ca. 10%. According to the Lotteries Act, which was amended in spring 2019, full identification should enter into force on 1 January 2022. Veikkaus made a decision in October 2019 to bring forward the transition to full identification on decen-tralized slot machines. They can only be played identified after January 2021.

In 2020, we will take preparatory measures to raise the share of identified gaming on decentralized slot machines to one hundred percent in January 2021.

Expanding identification to cover all gaming in different channels is a multistage development process, which we have been working on in a consistent manner ever since the current Veikkaus was founded in 2017.

Identified gaming gives players access to a vast set of tools for responsible gaming


22

USING CUSTOMER DATAVeikkaus’ business operations centre on our two million registered customers. Using data is at the core of Veikkaus’ operations and a basic prerequisite for responsible busi-ness development. Every year, Veikkaus games are played by ca. 3.4 million unique players of whom ca. 1.8 million play identified at least once a year. Veikkaus games reach a sig-nificant share of the Finnish adult population.

Analyses, surveys, segmentation, and the development of data and analytics play an increasingly important role in present-day business. The players expect us to use data more intelligently, in order to receive more personalized ser-vice. By using the data acquired through analytics and cus-tomer surveys, Veikkaus can target the right messages and measures to the right target groups even better. In the next few years, we will also investigate wider possibilities of us-ing, e.g., artificial intelligence in business.

In addition to game development and digital solutions, Veik-kaus also focuses more and more on the continuous evalu-ation of the effectiveness of the CSR operations and meas-ures.


Continuous analysis of customer expec-tationsVeikkaus has different channels in place for listening to the customers’ hopes and expectations, and for increasing cus-tomer understanding. Every year Veikkaus carries out and commissions several interviews, polls, and responsibility surveys.

We measure the opinion of customer segments on Veik-kaus and its operations through quarterly customer sur-veys. On the monthly level, we follow the customers’ will-ingness to recommend Veikkaus through an NPS survey. In 2019 the NPS index was 19 (average), whereas in the previ-ous year it was 31. We also follow the experiences of new customers through regular surveys. We will continue to re-vise our methods of measuring the customer experience during 2020.

Measures based on customer data developed to improve players security

23


REDUCING THE NUMBER OF SLOT MACHINESVeikkaus made a decision in October 2019 to reduce the number of decentralized slot machines. Their number will be reduced from 18,500 to 15,000 in 2020. Veikkaus esti-mates that the number will still decrease by 2025, being ca. 10,500–13,500 in the end.

During 2020, the maximum number of point-of-sales spe-cific slot machines will be reduced so that there can be a maximum of seven of them in a hypermarket and a service station, and a maximum of five at other points of sales. We aim to carry out the reductions in such a way that they cov-er our different partners, branches, and geographical areas to a maximally equal degree.

Veikkaus will remove such slot machines from its point-of-sales network on which you cannot play identified. Slot ma-chines will be removed throughout the year 2020, which is estimated to reduce the gross gaming revenue by ca. 30 million euros in 2020.

Reducing the number of slot machines is estimated to cut the gross gaming revenue by about 30 million euros in 2020

2017 STAGE 1

Digital gaming

2020 STAGE 2 ADecentralized slot machines,

pilots

2021 STAGE 2 BDecentralized slot machines

100%

2021 STAGE 3 ABetting with fixed odds

2023 STAGE 3 B

Coupon games and arcades

• Increasing harmful effects of gaming

• Lotteries Act

• Biggest single cause of gambling problems• Gaming and its harmful effects decreasing• Comprehensive opportunities to gaming

self-exclusion on decentralized slot machines

• All other gaming (excl. scratchcards)• Aiming at an ecosystem offering efficient

tools for gaming control and the prevention of crime

Work for identified gaming

Building systems of information technology

Identified gaming improves gaming management and prevents crime

24


COOPERATION WITH PELUURIIn the context of gaming self-exclusion in the digital channel and entry bans in Veikkaus’ arcades, we offer the players a chance to be contacted by Gambling helpline Peluuri. The service gives people the chance to discuss their gambling problems or those of their families and friends with a pro-fessional, thereby receiving preventive low-threshold help. In 2019, ca. 860 contact requests to Peluuri were made through Veikkaus’ service.

During 2019 the contacting model of Veikkaus and Peluuri, which helps people in gambling problems, was improved through technological system reforms that were carried out at the beginning of the autumn. According to the model, cus-tomers having opted for a gaming self-exclusion in the dig-ital service are offered the chance to make a call request to Peluuri. Contact requests are also offered in the case of entry bans to the arcades. These reforms were made to im-prove the usability of the model, the follow-up of the service, and reporting.

In 2019, about 860 contact requests to Peluuri were made through Veikkaus’ service

WHEN WILLVEIKKAUS MAKE A CALL REQUEST TO PELUURI?

The calls are targeted at players who would

otherwise be left outside of the scope of help.

Unit managerInka Silvennoinen

Peluuri

https://peluuri.fi/en

https://youtu.be/3vCEx_ne7pc

25

STRONG CONSUMER PROTEC-TION AND RELIABLE GAMINGVeikkaus treats all customers equally. The conditions of gaming are always openly accessible to the customers, and customers’ bets are never subject to deliberation in sports betting.

The prizes are paid out reliably to the customers that are entitled to them.

Strong consumer protection guarantees customers’ legal protection in possible problematic situations where the cus-tomers feel that they have been treated unjustly.

For such situations, Veikkaus has a specific process in place, which is determined in detail. The customers have the right to ask the National Police Board for a recommend-ed decision, if they wish. Our customers used this right a to-tal of 28 times last year (52 times in 2018).

To prevent money laundering and terrorism financing, Veik-kaus verifies the customers’ identity in certain situations when they place their bets and/or before prize payout.

Veikkaus treats all customers equally

Veikkaus’ customers can trust that the quality of the games is high and that they are reliably organized. Customers are treated equally, and their data and funds are taken care of.

• We process the customers’ data and funds with absolute confidentiality. The personal data of anyone registering as a customer is verified with the population data system (p. 31).

• The functioning of Veikkaus’ games and money transfers is verified through regular tests and check-ups.

• Veikkaus treats all customers equally. The prizes are paid out reliably to the customers that are entitled to them (p. 32).

• In the case of an error, the situation is ana-lysed, and the possible error is fixed, if, for example, a customer loses the coins they have fed into a slot machine, or if they lose the winnings they have accumulated.

• Our data protection is verified regularly.

• We only choose events and games by reli-able and responsible organizers as betting objects.

• We engage in international cooperation to prevent crime and fraud associated with gaming (p. 31).

• In order to prevent money laundering, we al-ways check a person’s identity if the sum of the games or a prize won by a player totals at least 2,000 euros or if something suspi-cious is associated with the event (p. 31).


26


RESPONSIBLE MARKETING COMMUNICATIONSResponsibility enables sustainable business, and respon-sible marketing is a significant part of this chain. Veikkaus’ marketing is guided by responsibility principles concerning marketing communications. These principles ensure that the games and gaming are marketed in a sustainable and responsible manner. At the beginning of 2020, we will draft new principles, focusing on an even safer and more respon-sible gaming environment, also from the perspective of mar-keting.

Almost 80% of adult Finns play Veikkaus games every year. We want to channel people’s gaming behaviour towards games of smaller risks, such as Lotto. Our most popular low-risk games, Lotto and Keno, are also those that we ad-vertise the most.

For games involving special risks of problems, Veikkaus on-ly offers product and betting object information. The mar-keting of games is not targeted at minors. In addition to Veikkaus’ own principles of responsible marketing, game marketing is also supervised by the authorities, e.g., the National Police Board.

Veikkaus’ marketing attracted negative public attention dur-ing the summer and autumn in 2019. The company decided to suspend a major share of its advertising in August.

The public debate in the autumn affected people’s general idea of Veikkaus’ and Veikkaus responsibility image, which were on a lower level than a year before. According to the Reputation&Trust survey (12/2019), ca. 35% of Finns think that Veikkaus is a responsible company that acts in the right way. In 2018 the respective share was 55%. According to the market research company Taloustutkimus (12/2019), 49% of Finns held a positive image of Veikkaus. In 2018 the respective share was 72% (Frankly Partners 3/2018).

New marketing guidelinesAt the end of the year, we laid down new guidelines for Veik-kaus’ responsible marketing. They have affected the amount, content, supervision and processes of marketing, as well as the operating culture of marketing. We have reduced our to-tal investments in marketing and limited betting object infor-mation on high-risk games even more than before.

The marketing process has been adjusted, e.g., by adding check points to the ethical evaluation of the realizations; the marketing guidelines have been updated; and we will start to offer responsibility training concerning marketing in 2020 more systematically than previously.

Veikkaus’ own supervision has been reinforced by setting up a marketing evaluation working group, tasked to super-vise the responsibility of concepts and realizations. Further, the Ethical Advisory Board, an advisory body appointed in December 2019, discusses questions associated with the ethics of marketing, and they can make concrete proposals for solutions, if they wish.

The new guidelines and plans take into account the obser-vations, conclusions, and proposed measures issued by

We want to direct gaming towards games of smaller risks, such as Lotto

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27


Tekir, an external organization, which conducted an analysis of Veikkaus. The analysis was finalized in October 2019. Its purpose was to make sure that the mistakes we had made in the summer of 2019 in our advertising would not be re-peated. We had special, detailed discussions with the su-pervisory authority, i.e. the National Police Board, on the up-dated marketing guidelines.

The Finnish Competition and Consumer Authority published a report in November, in which it analysed Veikkaus’ mar-keting. The critical remarks included many such points that we identified in the analyses carried out during autumn 2019 and which we dealt with following the analyses.

Veikkaus’ updated strategy prioritizes responsibility to-wards the players and safe gaming. In the future, Veikkaus will pay more attention to responsible marketing and the fact that people know better the risks involved in the games and the responsibility tools offered by the company. Besides responsibility, Veikkaus’ brand prioritizes the customer ex-perience, the fact that Veikkaus is a trailblazer of the gam-ing experience. Another central factor in Veikkaus’ future success is Veikkaus’ general acceptability among people.

Responsibility messages to customersVeikkaus communicates actively on responsible gaming through targeted customer messages and campaigns.

Veikkaus’ Loyal Customers can subscribe to “Play with moderation” service messages that are sent out once a month. In 2019 the messages handled the myths and facts of gaming, gaming history, visualisation of the game limits, and the age limits of gaming.

Veikkaus’ responsibility website pelaamaltilla.fi offers infor-mation to all players on the risks of gaming, the tools to control gaming, and the operators helping in gambling prob-lems.

MARKETING COMMUNICATIONS EXPENSESThe marketing communication expenses have been clearly on the decrease over the past few years. Veikkaus market-ed its games for a total of EUR 29.7 million in 2019. That is 37% less than in the previous year (in 2018 the total expens-es amounted to ca. 47.3 million, including VAT).

The company’s total marketing communication expenses represented just 1.8% of the gross gaming revenue. From 2017 to 2019, the expenses went down by 44 percent (in 2017, the total expenses were ca. EUR 53.3 million, includ-ing VAT). The figures contain VAT, the share of which Veik-kaus cannot deduct from its expenses. Most companies re-port their figures without VAT.

In autumn 2019 Veikkaus decided to reduce its marketing by a third as compared with the times of the three separate companies (before the merger in 2017, the gaming opera-tions were run by Veikkaus, RAY, and Fintoto).

Veikkaus marketing communications are a multifaceted concept. They include, for example, product advertising and game event information, marketing of the corporate brand, customer relations, service concepts, and sales channels, work for responsibility themes and awareness of the allo-cation of the proceeds, communications, sponsorship, and game event cooperation.

Marketing communication expenses

37%less than the previous year

MARKETING COMMUNICATION EXPENSES EUR million 2019 2018

Marketing of games 11.3 19.6

Other advertising and marketing (incl. brand marketing and game event information) 14.8 23.9

Geme event cooperation (incl. sponsorship) 3.7 3.9

Total 29.7 47.3

The marketing communication expenses have decreased over the past few years. From 2018 to 2019, the expenses went down by 37 percent. The figures contain VAT, the share of which Veikkaus cannot deduct from its expenses. Most companies report their figures without VAT.

https://www.kkv.fi/en/current-issues/press-releases/2019/8.11.2019-fcca-report-regulation-of-veikkaus-marketing-requires-reform/

28

RESPONSIBLE GAME DEVELOPMENTVeikkaus games are always developed for specific custom-er groups, based on our knowledge of the players’ motiva-tion to play. Veikkaus carries out a responsibility evaluation of new games by using the Responsibility Evaluation (Ra-Va) model. The responsibility profile of a game is attached to the proposal for the amendment of game rules, sent to the authorities.

Besides the Responsibility Evaluation, we always have a di-alogue with the authorities responsible for the regulation of games. The independent group for the evaluation of the harmful effects of gambling working under the auspices of the Ministry of Social Affairs and Health also issues state-ments on the risks of Veikkaus’ games and channel solu-tions.

Our product development efforts centred on the release of new casino games in 2019. Development in other product groups was hampered by the slow revision of the decrees concerning game rules. The only approved amendment to the rules that actually advanced product development was the amendment concerning the drawing order of digital slots, issued in March, enabling us to integrate new game libraries to Veikkaus’ game service.

RESPONSIBILITY IN GAMING PRODUCTS AND CONDITIONS• Our games and services are not

based on rewarding players ac-cording to the volumes of money they spend.

• We do not encourage people to play by offering free games or eu-ro-specific discounts (not part of the game) or bonuses.

• We offer information on the ga-me features in a uniform and open way.

• Our game themes and realizations are responsible and ethical.

Responsibility evaluation is always part of the processes of product development


29


REGULAR RESPONSIBILITY SURVEYS AND STUDIESWe follow the development of gambling problems regularly. In 2019 Veikkaus continued the surveys and studies con-cerning the scope and development of gambling problems. Veikkaus has commissioned population-level surveys on gambling problems from market research company Talous-tutkimus annually since the integration in 2017.

The Finnish Institute for Health and Welfare conducts pop-ulation-level surveys by commission from the Ministry of Social Affairs and Health every four years. Veikkaus wants to follow the development of the population-level gambling problems more closely, in order to understand the possible impacts of the deeds on the prevention of gambling-related harm. In 2019 the company commissioned three population surveys analysing gambling problems, each of which had 5,000 interviewees. In 2017 and 2018 the respective survey was carried out twice. In 2020 it will be also made twice.

According to the three population-level gambling problem surveys conducted in 2019, the share of problem gamblers out of the population ranged between 2.8% and 3.1%. The latest survey, carried out in December 2019, suggested that 2.8% of the population were problem gamblers (population estimate 116,000 people). This result was practically at the same level as in the previous survey, made in the summer of 2019 (2.9%). In the survey of spring 2019, the population share of problem gamblers was at its highest, 3.1% (126,000 people).

The share of gambling problems remained at the previous level

31 % of Finnish citizens think that Veikkaus has managed to prevent the occurrence of gambling problems (34% in 2018)

Source: Taloustutkimus, Omnibus surveys. Survey claim: “Veikkaus prevents the occurrence of gambling problems through its actions.” Number of respondents who agree totally or somewhat. A total of 4,000 annual respondents.

Share of people suffering from gambling problems in 2017–2019Population estimate and share of population in %

126 000133 000

116 000107 000

126 000117 000 116 000

3,1 % 3,3 %2,8 % 2,6 %

3,1 % 2,9 % 2,8 %

55 000

65 000

75 000

85 000

95 000

105 000

115 000

125 000

135 000

145 000

Veik

kaus

4/2

017

Talo

ustu

tkim

us

Veik

kaus

12/

2017

Talo

ustu

tkim

us

Veik

kaus

4/2

018

Talo

ustu

tkim

us

Veik

kaus

12/

2018

Talo

ustu

tkim

us

Veik

kaus

4/2

019

Talo

ustu

tkim

us

Veik

kaus

8/2

019

Talo

ustu

tkim

us

Veik

kaus

11/

2019

Talo

ustu

tkim

us

0,0 %

0,4 %

0,8 %

1,2 %

1,6 %

2,0 %

2,4 %

2,8 %

3,2 %

3,6 %

Source: population surveys carried out by Taloustutkimus research company and commissioned by Veikkaus, concerning the scope of gambling problems, measures by using the SOGS indicator. A total of 5,000 respondents every year. Margin of error +/-0.49 percentage points.

145,000

135,000

125,000

115,000

105,000

95,000

85,000

75,000

65,000

55,000

3.6%

3.2%

2.8%

2.4%

2.0%

1.6%

1.2%

0.8%

0.4%

0.0%

126,000

133,000116,000

107,000126,000

117,000 116,000

3.1%3.3%

2.8%2.6%

3.1% 2.9% 2.8%

30


Pulse surveys on the amount of gambling problemsTo follow the development of gambling problems, we also use a survey question referred to as the pulse question, part of the Omnibus survey by the market research company Taloustutkimus: “I have experienced problems whilst trying to control my gambling during the past year”. Every year, we ask ca. 9,000 people to answer this question. The number of respondents who agree totally or somewhat was 2.9% in 2019 (2.3% in 2018).

Share of population playing slots to a problematic degreeIn 2019 ca. 1.8% of the respondents said that they or a per-son living in the same household played slots to a problem-atic degree (1.3% in 2018). The share of people playing slots to a problematic degree has been studied through the Om-nibus survey since 1995.

Population share of problematic slots gambling 1995–2019

Source: Taloustutkimus population survey. Survey claim: “I play slots to a problematic degree” and “someone else in the same household plays slots to a problematic degree”. Number of respondents who agree totally or somewhat. A total of 4,000 annual respondents.

1,8

1,31,11,61,71,71,8

1,61,5

2,01,81,8

2,72,72,82,62,62,72,52,5

2,32,52,1

2,72,6

0

1

2

3

4

5

6

2019

2018

2017

2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

%

Jossain määrin ongelmaiset

Ongelmaiset

Somewhat problematic

Problematic

Financing the Ministry of Social Affairs and Health and the Gambling helpline PeluuriVeikkaus finances research into gambling-related harm and the development of treatment coordinated by the Ministry of Social Affairs and Health, in compliance with section §52 of the Lotteries Act, with around two million euros every year.

INVESTMENTS IN THE PROMOTION OF RESPONSIBLE GAMING, € 2019 2018 2017

Funds to the Ministry of Social Affairs and Health for research into the harmful effects of gaming and development of treatment 1) 2,300,000 2,200,000 1,900,000

Financing of the service concept of the Finnish Gambling Helpline Peluuri 950,000 950,000 950,000

Research and studies into the harmful effects of gambling commissioned by Veikkaus 240,000 160,000 160,000

Preparing for compulsory identification as expenses of the actual project 3) 1,800,000 2,100,000 -

1) Veikkaus finances research into gambling-related harm and the development of treatment coordinated by the Ministry of Social Affairs and Health, in compliance with section §52 of the Lotteries Act, according to the invoicing by the Ministry. 2) In 2017 Veikkaus’ Board of Directors decided to double the financing of Peluuri, raising it to EUR 950,000 a year. The raise aimed at ensuring that the online programme Peli poikki (Time to Fold), targeted at problem gamblers could be continued, and that the service could be developed to meet the needs of the customers. 3) In addition to this, the shift to compulsory identification has been furthered by numerous development projects, the costs of which cannot be easily distinguished from the costs of general business and game development. The reasons why the expenses went down in 2019 as compared with the previous year included the reduced investments in marketing, and the fact that the guidelines following the new strategy were not specified until the end of the year.

2)

Following a decision by the company’s Board of Directors, Veikkaus finances the operations of the Finnish Gambling helpline Peluuri, which total EUR 950,000 a year.

2.6 2.7

2.12.5

2.32.5 2.5

2.7 2.6 2.6 2.8 2.7 2.7

1.8 1.82.0

1.5 1.61.8 1.7 1.7

1.61.1 1.3

1.8

https://peluuri.fi/en

31

COMPANY – We generate joy, entertainment, and excitement reliably

DATA PROTECTIONIn addition to the legislation on money laundering, other leg-islation with a special significance to Veikkaus’ operations includes the legislation on public procurement, and data protection legislation. This can be seen, e.g., in the operat-ing models we have developed for our processes, concern-ing different responsibility issues associated with data pro-tection, money laundering prevention, operating as a public procurement unit, and the legality of products.

Protecting the customers’ data and respecting their privacy is of utmost importance to Veikkaus.

Veikkaus processes the customers’ data confidentially. The secure processing of personal data, respecting privacy, is ensured by providing training and guidance, and by making sure that the specific and restricted user rights covering the processing of data are specified according to the employ-ees’ job descriptions. Each employee must take an online training course on data protection and pass the final exam.

To us, it is also important that the customers know how their data are processed. Veikkaus always uses personal data only for the purposes that the customers have been informed about.

To prevent crime, Veikkaus monitors the game data and the development of gaming real-time

FIGHTING CRIME AND FRAUDVeikkaus engages actively in the detection of and fight against gambling-related crime and fraud both in Finland and internationally.

Some of the core methods of fraud prevention include ed-ucation and development of the company’s processes. We aim to choose only events and games by reliable and re-sponsible organizers as betting objects.

A major threat to the sports games is the manipulation of competitions/ games. To detect and prevent it, it is impor-tant that we work in close cooperation with the Finnish Center for Integrity in Sports (FINCIS), the sports event as-sociations, and the authorities.

The manipulation of a sporting event can often be detected better by looking at the customers’ gaming behaviour than during an event as such. Veikkaus monitors the game data and the development of gaming real-time. This way we can recognize situations where gaming has suspicious features.

Veikkaus is a member of the Global Lottery Monitoring Sys-tem (GLMS). The GLMS observes and analyses suspicious activities related to betting and enables information ex-change between the national gaming companies operating sports betting.

Work against money launderingVeikkaus invests in the prevention of money laundering and terrorist financing. The prevention of money laundering is based on a risk-based approach and continuous develop-ment. In 2019 Veikkaus worked in close cooperation with the supervisory authority, i.e. the National Police Board and the Financial Intelligence Unit of the National Bureau of In-vestigation. The individual prevention measures were based on the risk assessments by Veikkaus and the National Po-lice Board.

Besides the routine measures, including the verification of a person’s identity before prize payout, supervision is tar-geted especially at situations where the risk of money laun-dering is high.

Data protection covers all our functions and projects. The development of data protection is coordinated in an internal data protection group, which meets regularly.

Veikkaus also works responsibly for data protection with its partners. Veikkaus’ partners processing personal data coming from Veikkaus shall sign an agreement where the right ways of operating and responsibility questions are de-termined.

In 2020 data protection will be in even more focus, as gam-ing on decentralized slot machines is gradually made sub-ject to full identification of the players.

32


THE ERROR INCIDENT PROCESSES ARE DEFINIED IN DETAIL

Customers can file a request for the processing of the incident with the cus-tomer service, on the basis of which the case is processed and the customer receives a decision.

If the customer is not satisfied with the decision, they can ask the National Police Board to issue a recommended decision.

The National Police Board asks Veikkaus to provide a report including all da-ta related to the incident in question, together with Veikkaus’ correspondence with the customer, on the basis of which the National Police Board issues a decision on the case.

SECURE PAYMENT AND MONETARY TRANSFERSThe reliability and transparency are the cornerstones of Veikkaus’ payment and monetary transfers. We must be able to follow the cash flows conclusively from the game purchase or prize payout transaction all the way to book-keeping. In 2019, Veikkaus’ monetary transactions focused especially on increasing identified gaming.

All payments leave a traceThe volumes of Veikkaus’ monetary transfers are huge, as the cash flows mostly consist of small game purchases and prize payouts. Veikkaus’ own modern payment gateway en-sures that all the transactions leave a trace. Identified gam-ing increases the certainty of the claiming of prizes and the processing of error incidents, which can be done automat-ically without the customer having to contact the custom-er service.

At the end of 2019, the unclaimed prizes of games which the players had played unidentified totalled ca. ten million. The amount consists of small winnings. With identified gaming, the winnings would have been paid directly to the players’ game account or bank account. A player having played un-identified has the chance to claim their prizes within one year of the draw. The unclaimed prizes are returned in a year to be won by our customers.

People under 18 are not allowed to play Veikkaus games, nor can the games be paid for on credit. In order to ensure this, Veikkaus has agreed on tailored payment solutions with different banks, covering, e.g., debit card payments.

Veikkaus trains its personnel and retailers to act according to the guidelines concerning money, prizes, and game pur-chases.

Cooperation with the finance sectorVeikkaus engages in active dialogue with different operators in the financial sector, including commercial banks, Bank of Finland, European Central Bank, the Finnish Financial Su-pervisory Authority, and solution and service suppliers, in order to develop payment solutions.

The shift which the financial sector is experiencing also brings with it new opportunities and benefits that further im-prove the reliability of monetary transactions.

The second payment service directive PSD2 entered into force on 14 September 2019. Veikkaus made the neces-sary changes to its payment infrastructure on time, and our payment transfers continued without disturbances even af-ter the entry into force of the directive. Veikkaus’ payment transfers have the ISO 9001 quality certificate and the PCI DSS certificate, which covers the processing of payment card data.

In the coming years, Veikkaus will focus on the optimization of the player-customer’s gaming experience and the new in-novations of the finance sector. In addition to these, we will continue to focus strongly on automation, robotics, and us-ing AI in payment and monetary transfers.

33


ETHICAL WAY OF OPERATING – CODE OF CONDUCTEthical thinking permeates all Veikkaus’ operations. Sys-tematic compliance work is part of the continuous devel-opment of Veikkaus’ operations. A uniform way of operating affects the operating culture of the whole organization. By acting right, we will deserve the trust of our customers and other stakeholders.

Gaming operations are subject to strict regulation in Finland. This is why compliance with the legislation and regulatory provisions is reflected on all our operations. The core legis-lation concerning Veikkaus is the Lotteries Act and the rules of the games based on it. This means, for example, that the authorities approve the rules of every game provided by Veikkaus. The players can trust that gaming, winning, and money transfers take place as they should.

Veikkaus’ articles of association also show the public ben-efit nature of the company’s operations. Veikkaus’ proceeds go to the common good and we do not seek profit at any cost.

The balancing of profits and responsibility can be seen in many business solutions and in the way in which they are evaluated. The balance must be taken into account, for ex-ample, in marketing and sales promotion, and in the gami-fied elements. Veikkaus does not offer the players free gam-ing money, nor does it resort to aggressive measures to make the customers play more. Veikkaus’ game portfolio does not contain all possible kinds of games, either.

The company’s ethical principles define Veikkaus’ way of operating (Code of conduct). The principles outline the ways of operating that are acceptable from Veikkaus’ point of view and comment on, e.g., the identification of conflicts of inter-est, bribery, and corruption, and the use of data and prop-erty.

The Ethical principles cover every Veikkaus’ employee, and the related training is compulsory to all. The training covers basic principles and guides Veikkaus’ employees to ask the Compliance unit for help, if necessary.

Veikkaus has a compliance email address and an anony-mous reporting channel, which the employees can use to report any suspicions and observations they have on pos-sible flaws.

The reporting procedure concerning suspected abuse, which is also called the whistle blow procedure, will be ob-ligatory throughout the EU in 2021. We will be preparing for that in 2020 by developing the reporting procedure still. As a whole, compliance is one of Veikkaus’ focus areas in 2020.

Code

of

Con

duct

Compliance in one of the company’s areas of focus in 2020

RESOLUTIONS TO DEVELOP THE COMPANYVeikkaus’ Board of Directors made resolutions on the devel-opment of the company in September 2019. On the basis of the resolutions, we took, and will continue to take, sever-al actions based on which the company will build an even more secure and responsible gaming environment to the customers.

The resolutions outlined that Veikkaus’ strategy should be clarified and that the responsibility programme and the mar-keting guidelines should be updated. It was further decided that the total investments in marketing should be reduced.

Veikkaus had ca. 18,500 decentralized slot machines all over the country in 2019. It was decided that their number should be reduced by ca. 3,500 and that compulsory iden-tification should be brought forward. The compulsory iden-tification will be introduced step by step between 1 October 2020 and 31 January 2021.

In the same context, the Board of Directors made the reso-lution to propose that all gaming should be made subject to compulsory identification when the Lotteries Act is amend-ed, excluding scratchcards and the casinos. Identification enables us to build a comprehensive environment for more secure gaming and creates better opportunities to prevent money laundering crimes. In addition, it was proposed that the use of customer data should be enabled in the manage-ment models of responsible gaming in the future.

Further, the Board also determined the role of the Ethical Ad-visory Board and decided to supplement the system of re-muneration of the company management.

Enquiries on gaming operationsIn 2019 the Finnish Competition and Consumer Authority made several enquiries concerning Veikkaus and the gam-ing operations: in October, concerning gaming supervision, in November, concerning the regulation on the marketing of games, and in December, on the prevention of the harmful effects of gaming. In addition, Veikkaus commissioned an investigation of its marketing processes from an external operator in 2019.

34

PERSONNELResponsible personnel policy at Veikkaus means that all the processes in the lifespan of an employment contract are handled responsibly. Responsibility is also part of our goal setting and compensation scheme, as we want to involve all the employees in the CSR work. Veikkaus has a special mission to take care of the prevention of gambling prob-lems, which must also be reflected in the objectives of em-ployees and teams.

For the personnel, 2019 was a year of changes. As a re-sult of the cooperation negotiations at the beginning of the year, changes were made to the organizations of Veikkaus’ arcades and retail sales, and the restaurant table game ac-tivities were terminated. The total number of employees went down by 468 persons, which resulted mainly from the termination of the table games and the optimization of the sales network. Veikkaus offered career guidance to those leaving the company, as well as support for retraining and starting businesses.

Veikkaus’ organizational model was reformed on 1 Sep-tember 2019 to support the company’s channelling capac-ity. The reform was discussed with personnel representa-tives and it did not lead to employee cuts. The change was made by forming eight functions and moving entire teams and units to new entities. At the same time, the fields of re-sponsibility of the Executive Team members were specified.

SHARE OF WOMEN AND MEN IN DIFFERENT JOBS, % 2019 2018 2017

Men / Women Men / Women Men / Women

Veikkaus total 60% / 40% 56% / 44% 55% / 45%

Board of Directors 43% / 57% 50% / 50% 50% / 50%

Executive Team 67% / 33% 75% / 25% 60% / 40%

Other management, excl. Executive Team 60% / 40% 59% / 41% 65% / 35%

Supervisors * 59% / 41% 59% / 41% 59% / 41%

Other officials and employees 60% / 40% 56% / 44% 55% / 45%

* Includes members of Veikkaus’ Executive Team, directors, and other supervisors


Supervisors

41 % 59 %

women

men

Equal opportunities and diversityDiversity and equal opportunities are the cornerstones of corporate culture. Veikkaus’ key human resources policy is that nobody is discriminated against on the basis of their gender, age, origin, nationality, language, religion, convic-tion, opinion, political activity, trade union activity, family re-lations, health condition, disability, sexual orientation, or any other feature related to the person. Fair and equal treatment are understood in a wide sense in Veikkaus, based on re-spect for the individual.

In the autumn of the reporting year, we launched prepara-tions for the Equal Opportunities and Equality Plan for the years 2020 and 2021. The plan was drafted in cooperation with the chief shop steward and the health and safety dele-gates. The results of the equality survey carried out among the personnel in the autumn and the personnel survey were used as the basis.

35


Personnel wellbeing at work and employees satisfactionIn addition to the annual personnel survey carried out in Veikkaus, we have adopted the Pulse survey, which meas-ures the workplace atmosphere more often. It was car-ried out three times in 2019. The personnel survey contains 41 PeoplePower® questions that measure the employees’ commitment, management, and performance.

The response rate in the personnel of autumn 2019 survey was high, 82.0% (83.6% in 2018). The rate indicates that Veikkaus’ employees want to be involved in the develop-ment of the company’s operations. Veikkaus’ PeoplePow-er® rating was B (A+ in 2018) being below the average level as compared with other Finnish companies. The re-sult, which was weaker than in the previous year, reflected the challenges of the reporting year in the middle of major changes.

The personnel’s wellbeing is supported by occupational health care services, which are more extensive than those of Finnish companies in general. Due to the nature of our business, Veikkaus also has in place operating models that prevent gambling problems. The “Peli-ilo on meidän juttu” programme (“The joy of gaming belongs to us”) has been drafted in cooperation with the occupational health care services and Peluuri, the Finnish Gambling Helpline. One of its key objectives is the prevention of gambling problems among the employees and a workplace community without gambling problems. The operating programme was updated during the year under review.

EMPLOYEES’ WELLBEING AND SAFETY 2019 2018 2017

Sickness absences in person years of employment 58 63 52

Sickness absence percentage of the theoreetical work time 3.8% 3.8% 3.1%

WHAT IS THE ”JOY OF GAMINGBELONGS TO US”PROGRAMME?

The programme aims at a workplace community without

gambling problems.

Senior Vice President, HR,Heli Lallukka

VEIKKAUS’ STRENGTHS HIGHLIGHTED IN THE PERSONNEL SURVEY:

• Enthusiasm about the work

• Work with the closest supervisors

• Smooth working in the units

IDENTIFIED POINTS OF DEVELOPMENT:

• Concern/criticism about Veikkaus’ future and the company’s role in the changing operating environment

• Taking the decision-making closer to customers and work, strengthenning independent decision making

https://youtu.be/xrqXg2UyT1I

36

Skills development and success man-agementVeikkaus adopted a revised performance appraisal discus-sion model at the beginning of 2019. The reform aimed at shifting from performance management to success man-agement. The performance appraisal discussions consist of two parts: objectives discussion and skills and success ap-praisal discussion.

New management principles based on Veikkaus’ values were launched to all the supervisors in June. The goal is to ensure uniform processes of HR management, build an operating culture in accordance with the strategic values, and to strengthen the role of the supervisors. In addition to the management principles, Veikkaus defined the strategic principles in 2019, on the basis of which we will continue to build the HR skills development programme in Veikkaus.

RemunerationVeikkaus uses a performance-based remuneration system, which covers the entire personnel. The performance-based bonus is a one-off compensation paid on the basis of the company’s success and reaching of the strategic goals of the annual level.

The criteria for the performance-based bonus common to all were the company’s financial performance and digital gam-ing in view of the channelling mission. The rewarding sys-tem was revised in the autumn: it was supplemented with a CSR indicator for the company management. The indicator aims at ensuring that the company does not seek to make profit while increasing the harmful effects of gambling.

Veikkaus paid a total of EUR 2.6 million of performance-based bonuses to its employees in 2019. The remunerations to the Board Members and the salaries of the Executive Team are detailed in a separate Corporate Governance report.

Dialogue and strategy workAt the end of the year under review, we organized a Veik-kaus Now Open tour, where the employees and the man-agement engaged in open dialogue on Veikkaus’ strategy, which is being revised on the basis of the resolutions made in September.

The atmosphere during the tour events around the coun-try was enthusiastic, and many new practical ideas came up for the development of responsibility, the employee ex-perience, Veikkaus’ brand, and the operating environment. In total, over 500 Veikkaus employees joined the dialogue. Discussing the themes that are important to Veikkaus will continue at the beginning of 2020, with a new tour.


NUMBER OF EMPLOYEES AND PERSONNEL STRUCTURE 2019 2018 2017

Employees 31 Dec, number 1,606 2,074 2,039

Permanent, % 97% 98% 98%

Fixed-term, % 3% 2% 2%

Full-time, % 72% 53% 58%

Part-time, % 28% 47% 42%

Average turnover, % 21% 20% 21%

Incoming turnover, % 8% 22% 20%

Departing turnover, % 34% 18% 22%

18-30 years old, % 30% 43% 42%

31-50 years old, % 48% 41% 42%

yli 50 years old, % 21% 16% 16%

Average age of personnel 39 36 36

Personnel survey response rate 82 %

37

CSR MANAGEMENTVeikkaus aims at investing even more in our social accepta-bility, responsibility, and the demands of the operating envi-ronment, which is in constant change. Veikkaus’ CSR man-agement will focus on our responsibility towards the players in the future. Our goal is to provide an even more secure and responsible gaming environment to the players, which is a top priority in our new strategy.

The Executive Team is in charge of the focus areas of CSR. The general development and coordination of CSR are shoul-dered by a special CSR Unit, which acts as a special advisor in the development and different projects of CSR. The unit coordinates and reports on actions promoting CSR together with other units and teams.

The CSR operations were made part of the Legal Affairs and CSR function in connection with the larger organizational change in autumn 2019, led by the Senior Vice President, Legal Affairs and CSR. The CSR Unit was reinforced by ap-pointing a vice president to lead the unit.

Veikkaus’ Board of Directors and Supervisory Board dis-cuss CSR topics regularly in their meetings. The composi-tion of the Board of Directors was changed by reinforcing the members’ knowledge of and expertise in the harmful ef-fects of gambling and corporate social responsibility.

The Supervisory Board issued their report on the develop-ment of Veikkaus’ gaming operations and the prevention of gaming-related harm to the Prime Minister’s Office in the General meeting. The report is available at Veikkaus’ web-site.

In December 2019 Veikkaus’ Board of Directors appointed an Ethical Advisory Board, with the purpose of providing an external view on gaming to the company’s Board of Direc-tors and the operative management.

The Ethical Advisory Board focuses especially on ques-tions associated with the ethics of marketing, gaming-re-lated harm, and issues associated with the social impacts of gaming. The Ethical Advisory Board has five members besides the chairperson and its term of office is two years. The chairperson reports on the operations of the Ethical Ad-visory Board during each calendar year by the end of March.


MEMBERS OF THE NEW ETHICAL ADVISORY BOARD

Chairperson SAIJA KIVINEN, General Counsel, Legal and Regulatory Affairs, Telia Finland Oyj

Member SUSANNA RAISAMO, Research Manager, Alcohol, Drug and Addictions Unit, Finnish Institute for Health and Welfare Member LASSI RAJAMÄKI, CEO, Sosped Foundation Member MIKKO MERILÄINEN, Researcher, University of Tampere Member TERHI-ANNA WILSKA, Professor of Sociology, University of Jyväskylä Member JANI HALME, Creative Director, Toinen PHD

38


ENVIRONMENTAL RESPONSIBILITY AND RESPONSIBLE PROCUREMENT

Veikkaus’ Executive Team approved an environmental pro-gramme for the company, titled “Ilmastoystävällinen Veik-kaus” (“Climate friendly Veikkaus”), for the years 2019–2025. The major environmental impacts of Veikkaus’ operations are caused by slot machines, terminals, and premises, as well as transportation.

The Environmental Programme was a project of several specialists and it is built on the basis of Veikkaus’ Material-ity Analysis and the carbon footprint calculations commis-sioned by the former three gaming operators.

The programme aims at making environmental criteria part of acquisitions that have significant environmental impacts, reducing the total energy consumption of the premises, and decreasing the environmental impacts of slot machines and game terminals through lifespan management and choices of materials. The Environmental Programme was presented to the personnel through the Ekotekoja concept late in the autumn. The employees came up with new ideas for ecolog-ical action, and the best ideas were rewarded.

During the year under review, we carried out an enquiry as-sociated with commuter cycling with the personnel of the head office. The suggestions for improvement based on the feedback were implemented during 2019. In 2020 we will plan an operating programme for commuting, aiming at the reduction of CO2 emissions. Veikkaus participated in the Earth Hour climate event in 2019.

Slot machines have a high degree of recyclingThe recycling degree of slot machines remained at the same level as in the year before, at 97%, if the energy recovery of the material, as well as wood and plastic, are considered.

The fact that the slot machines are designed at Veikkaus has enabled us to pay attention to the recyclability of the materials, the servicing of the parts, and their serviceability and reuse, as well as the energy efficiency of the slot ma-chines. We aim to guarantee cost-efficient and high-quality operations through the lifespan model.

In the Voltti slot machine model, launched in 2019, we have made choices concerning the quality of the plastic, which can be recycled and reused directly.

The slot machines are compiled in the Scanfil factory in Sievi, Northern Ostrobothnia.

Climate friendly Veikkaus 2019-2025• Veikkaus complies with the Act on Public Procurement in

all its procurement practices. All our procurement is tran-sparent and aim at making environmental criteria part of acquisitions that have significant environmental impacts.

• Our goal is to reduce the CO2 emissions of transportation and travel through operating programmes. We encourage commuter cycling.

• Most of our offices use electricity generated by hydro po-wer, with the objective of reducing the total energy con-sumption at our premises.

• The recycling degree of slot machines is high, with the aim of reducing the environmental load caused by slot machines and game terminals, for example, through effi-cient lifespan management.

• The employees are involved in environmental action – we have annual theme days, and we participate in the Earth Hour climate event.

• Veikkaus provides opportunities for distance work, and we have central printers in all our offices. The objective is to enhance the energy efficiency of the ICT services.

Recycling degree of slot machines

97 %

39


Responsible procurementVeikkaus complies with the Act on Public Procurement in all its procurement practices, which is a responsibility choice as such, as it forces the company to carry out all of its pro-curement processes in a transparent way. Tenders are car-ried out in compliance with the legislation on public pro-curement, openly and equally. Veikkaus considers the goals and viewpoints of social, economic, and environmental re-sponsibility whilst preparing the tenders, during the pro-cesses, and throughout the contract period, as appropriate. These are recorded in the “Responsibility issues in a tender” document on a general level.

A model to consider responsibility issues in practice as part of the tender processes will be planned and implemented in 2020.

We will be paying attention to social responsibility especial-ly in such procurement processes that may involve risks of negligence concerning social responsibility. As for econom-ic responsibility, Veikkaus aims to fight grey economy by, e.g., asking for reports on how the contractors have com-plied with the Act on the Contractor’s Obligations and Lia-bility in the case of procurement falling within the scope of the legislations.

Veikkaus’ procurement of products and services amounted to ca. EUR 230 million in 2019. They were divided between 2,300 suppliers. There were 40 public tenders in 2019 (in-cluding joining in Hansel’s framework agreements), and in

addition to these, a significant number of acquisitions made within the scope of framework agreements. A major part of Veikkaus’ acquisitions are associated with ICT and mar-keting.

Since the integration of the gaming operators in 2017, the new Veikkaus has started to renew the company’s agree-ment base systematically. A clear majority of our acquisi-tions have been made subject to a tender process.

The procurement category process, started in 2018, was continued in 2019. The goal is to make procurement and the tender processes more efficient, thus improving the chanc-es to achieve the objectives of the entire company.

As part of its environmental responsibility programme, Veik-kaus has determined a long-term objective for the environ-mental criteria of the procurement processes. We aim at making environmental criteria part of 50% of Veikkaus’ new public tenders (including Hansel’s framework agreements) starting from the year 2021. During the year under review, we signed Hansel agreements in which the environmental criteria were already taken into account.

In 2020 we will standardize the environmental criteria to be used and build a follow-up procedure of the criteria for the systems. We also aim to train specialists preparing busi-ness acquisitions to use the environmental criteria.

40

SOCIETY – We work for welfare

THE JOURNEY OF A VEIKKAUS’ EUROVeikkaus has the unique mission to provide responsible gambling games responsibly and on the basis of an ex-clusive right. The entire gaming proceeds are used for the common good in accordance with the decisions by the min-istries responsible for the distribution of the funds.

Veikkaus has a wide customer base, with over two million registered Loyal Customers. Identified gaming gives players access to all the gaming control tools.

Veikkaus provides games in the digital channels, the game arcades, and at the points of sales of the retail network. In 2019, 68.2% of Veikkaus’ gross gaming revenue came from the retail network and 31.8% from the digital channel. We paid a total of EUR 159.0 million to the retailers as retail commissions in 2019.

Veikkaus employs over 1,600 gaming industry profession-als, half of whom work as croupiers and dealers or in cus-tomer service jobs. Further, game sales have a significant employment impact on the points of sales around the coun-try.

The proceeds from Veikkaus’ gaming operations, i.e. the gross gaming revenue, was EUR 1,690.7 million, of which EUR 1,009.0 million were returned to the ministries. In 2019, a total of EUR 361.8 million were distributed to social wel-fare and health care organizations; EUR 246.3 million to cul-ture and the arts; EUR 154.7 million to sports; EUR 109.9 million to war veterans; EUR 107.6 million to science; EUR

OVER 2 MILLION LOYAL CUSTOMERS

POINTS OF SALES 68.2%OF GGR

GGR€1,690.7 MILLION

1,600VEIKKAUS EMPLOYEES

TOTAL AMOUNT DISTRIBUTED€1,009.0 MILLION

SOCIAL WERFARE AND HEALTH CARE ORGANIZATIONS

€361.8 MILLION

WAR VETERANS AND WAR INJURY COMPENSATIONS €109.9 MILLION

YOUTH WORK€54.3 MILLION

CULTURE AND ART €246.3 MILLION

EQUESTRIAN SPORTS €41.6 MILLION

SCIENCE €107.6 MILLION ONLINE STORE 31.8%OF GGR

SPORTS€154.7 MILLION

PLAYER

BENEFICIARY VEIKKAUS

GAME SALES

MINISTRIES

54.3 million to youth work; and EUR 41.6 million to eques-trian sports.

Over 4,000 beneficiaries are supported through Veikkaus funds every year. The CSR measures planned for 2020 will have a decreasing effect on the company’s revenue, ca. EUR 50 million according to estimates. Naturally, this will also be reflected on the funds granted to the beneficiaries.

The company’s total proceeds to society amounted to EUR 1,246.6 million in 2019, as the company paid lottery tax and VAT to the State for a total of EUR 237.6 million. The com-pany’s tax footprint is reported in a separate Corporate Governance 2019 report.

Finns continue to be in favour of the exclusive right system

of Finnish citizens think that game provision should be based on a national monopoly system. (73% in 2018)

72%Source: Taloustutkimus, Omnibus surveys. Research claim: “I think gaming provision should be based on a national monopoly system even in the future” Totally agree or somewhat agree. A total of 4 000 annual respondents.

41GRI – Links between the material CSR topics and the

GRI standard, and the GRI contents

42

LINKS BETWEEN VEIKKAUS’ MATERIAL CSR TOPICS AND THE GRI STANDARD

Veikkaus complies with the core option of the GRI standards, as well as with the Council of State resolution to state-controlled companies of 13 June 2016. The corporate responsibility expert company Mitopro has verified that Veikkaus’ CSR reporting 2019 corresponds to the GRI standards.

VEIKKAUS THEMES AND MATERIAL TOPICS GRI STANDARDSOCIETYWe prevent gambling problems GRI 416: Customer Health and Safety

We prevent crime and fraud in gambling GRI 205: Anti-corruption

We operate in a cost-efficient way GRI 201: Economic performance GRI 203: Indirect Economic Impacts

We generate over EUR 1 billion to society GRI 201: Economic performance GRI 203: Indirect Economic Impacts

COMPANYWe provide responsible gaming products and services that our customers find attractive

GRI 416: Customer Health and Safety GRI 417: Marketing and Labeling

We market and communicate responsibly GRI 417: Marketing and Labeling

We provide reliable and safe games and monetary transfers GRI 205: Anti-corruption

We guarantee strong consumer protection GRI 416: Customer Health and Safety GRI 418: Customer Privacy

We process player data reliably and securely GRI 418: Customer Privacy

We act openly and transparently GRI 205: Anti-corruption GRI 415: Public Policy GRI 419: Socioeconomic compliance

We act responsibly in procurement and promote environmental responsibility GRI 103: Management Approach (procurement approach) GRI 305: Emissions GRI 308: Supplier Environmental Assessment

INDIVIDUALWe provide state-of-the-art tools for gaming control GRI 416: Customer Health and Safety

We use data to prevent gambling problems GRI 416: Customer Health and Safety

We carry out CSR communications and marketing GRI 417: Marketing and Labeling

We monitor the age limit of 18+ efficiently GRI 416: Customer Health and Safety

We work for our employees’ wellbeing GRI 401: Employment GRI 402: Labor/Management relations GRI 403: Occupational health and safety GRI 404: Training and education GRI 405: Diversity and equal opportunity GRI 406: Non-discrimination

We prevent gambling problems among our own personnel GRI 403: Occupational health and safety

43

GRI-CONTENTGRI-STANDARD REPORT CONTENTS LOCATION IN REPORT FURTHER INFORMATION

General disclosureGRI 102: General disclosures 2016

Organisation’s background102-1 Name of the organization Veikkaus Oy

102-2 Activities, brands, products, and services

Veikkaus in brief, p. 6 Board of Directors’ report, p. 48-56 Financial statement, p. 62

102-3 Location of headquarters Financial statement, p. 62 Helsinki, Suomi

102-4 Location of operations Veikkaus in brief, p. 6 Financial statement, p. 62

102-5 Ownership and legal form Financial statement, p. 62 Corporate Governance, p. 3-4

102-6 Markets served Veikkaus in brief, p. 6 Financial statement, p. 62

102-7 Scale of the organization Veikkaus in brief, p. 6 Strategy prioritizes Veikkaus’ responsibility towards players, p. 9 This is how we measure our success in CSR, p. 13 Board of Directors’ report, p. 48-56

102-8 Information on employees and other workers

Personnel, p. 34-36 Board of Directors’ report, p. 55-56

102-9 Supply chain Responsible procurement., p. 39

102-10 Significant changes to the organization and its supply chain

Board of Directors’s report, p. 48-56

102-11 Precautionary principle or approach Corporate Governance, p. 16 Veikkaus complies with the Precautionary principle in its opera-tions. The company’s operating model is based on the precautionary avoid-ance or reduction of risks and harmful impacts associated with the environ-ment in all the operations.

102-12 External Initiatives Stakeholders cooperation and stakeholders’ expectations, p. 14-15

102-13 Memberships Memberships: HENRY – Finnish Asso-ciation for Human Resource Manage-ment; the Finnish Advertisers; MARK, the Finnish Marketing Association; Service Sector Employers, PALTA; Data and Marketing Association of Finland; Finnish Software and E-business Asso-ciation; GLMS Global Lottery Monitoring, System (GLMS); European Association for the Study of Gambling (EASG); The European Lotteries Association (EL); World Lottery Association (WLA); Euro-pean Casino Association (ECA), Euro-pean Pari Mutuel Association (EPMA).

Strategy

102-14 Statement from senior decision-maker

A word from the President and CEO, p. 4A Word from Senior Vice President, CSR: Working for a safe joy of gaming, p. 11

102-15 Key impacts, risks, and opportunities Strategy prioritizes Veikkaus’ responsibility towards players, p. 7-9 This is how we measure our success in CSR, p. 13 Resolutions to develop the company, p. 33

We prepared for a strategy reform, making responsibility a top priority.

44


Ethics and integrity102-16 Values, principles, standards, and

norms of behaviourVeikkaus’ mission, vision, and values, p. 5 Strategy prioritizes Veikkaus’ responsibility towards players, p. 7-9 Ethical way of operating – Code of conduct, p. 33 Corporate Governance, p. 13-15

The Ethical principles cover every Veikkaus’ employee, and the related training is compulsory to all.

102-17 Mechanisms for advice and concerns about ethics

Ethical way of operating – Code of conduct, p. 33 Corporate Governance, p. 13-15

Veikkaus has a compliance email address and an anonymous reporting channel, which the employees can use to report any suspicions and observa-tions they have on possible flaws.

Governance102-18 Governance structure CSR Management, p. 37

Corporate Governance, p. 5-11Veikkaus’ Board of Directors appoint-ed a new Ethical Advisory Board. In autumn 2019 the Board outlined that the task of the Audit Committee should be extended in 2020 to cover the pro-cessing and follow-up of issues related to the company’s special mission and corporate responsibility, besides the committee’s previous tasks.

102-19 Delegating authority CSR Management, p. 37Corporate Governance, p. 5-11

102-20 Executive-level responsibility for economic, environmental, and social topics

CSR Management, p. 37 Corporate Governance, p. 5-11

102-21 Consulting stakeholders on economic, environmental, and social topics

Stakeholders cooperation and stakeholders’ expectations, p. 14-15 Corporate Governance, p. 11

In December 2019 Veikkaus’ Board of Directors appointed an Ethical Advisory Board, with the purpose of providing an external view on gaming to the company’s Board of Directors and the operative management. The Ethical Advisory Board focuses especially on questions associated with the ethics of marketing, gaming-related harm, and issues associated with the social impacts of gaming. The Supervisory Board issues their report on the devel-opment of Veikkaus’ gaming operations and the prevention of gaming-related harm annually.

102-22 Composition of the highest gover-nance body and its committees


102-23 Chair of the highest governance body Corporate Governance, p. 6

102-24 Nominating and selecting the highest governance body

Corporate Governance, p. 6

102-25 Conflicts of interest Corporate Governance, p. 13-15

102-26 Role of Board of Directors in setting purpose, values, and strategy

Corporate Governance, p. 5-11

102-27 Developing collective knowledge of highest governance body

CSR Management, p. 37Board of Directors’ report, p. 55 Corporate Governance, p. 5-11

The Board of Directors handles respon-sibility issues associated with the com-pany’s special mission on the basis of a review by the company twice a year. The Executive Team is in charge of the focus areas of CSR. The composition of the Board of Directors was changed, reinforcing its knowledge and expertise in matters related to the harmful effects of gambling and CSR.

102-28 Evaluating the highest governance body’s performance


102-29 Board of Directors’ and Executive Team’s role in identifying and managing economic, environmental, and social impacts.


45


102-30 Role of Board of Directors and Executive Team in the evaluation of the effectiveness of risk manage-ment processes


102-31 Review frequency of economic, environmental, and social topics


102-32 Approval of sustainability reporting Veikkaus’ Board of Directors has approved the annual report and the CSR report 2019.

102-33 Communicating critical concerns Corporate Governance, p. 13-16

102-34 Nature and total number of critical concerns

Board of Directors’ report, p. 49

102-35 Remuneration policies of the compa-ny management (Board of Directors and Executive Team)

Remuneration, p. 36 Corporate Governance, p. 11-12

The remuneration model of Veikkaus’ management was supplemented with a responsibility indicator in 2019.

Stakeholder engagement103-40 List of stakeholders Stakeholders cooperation and

stakeholders’ expectations, p. 14-15

103-41 Collective bargaining agreements All employees are covered by collec-tive bargaining agreements, with the exception of those having a manage-ment agreement and the labor relations manager.

103-42 Stakeholder identification and selection

Stakeholders cooperation and stakeholders’ expectations, p. 14-15

103-43 Approach to stakeholder involvement Stakeholders cooperation and stakeholders’ expectations, p. 14-15

103-44 Key topics and concerns raised A Word from Senior Vice President, CSR: Working for a safe joy of gaming, p. 11 Stakeholders cooperation and stakeholders’ expectations, p. 14-15

Reporting practice102-45 Entities included in the consolidated

financial statementsThe calculation limit of the CSR report is the same as that of the financial statements.

102-46 Defining report content and topic boundaries

Introduction, p. 12

102-47 List of material CSR topics GRI, p. 42

102-48 Restatements of information No restatements of information.

102-49 Changes in reporting No changes in reporting.

102-50 Reporting period Reporting period 1 Jan–31 Dec 2019

102-51 Date of most recent report 26 March 2019

102-52 Reporting cycle One year.

102-53 Contact point for questions regarding the report

veikkaus.fi/yhteystiedot

102-54 Claims of reporting in accordance with the GRI standards

The CSR Report was prepared in accordance with the GRI standards core option.

102-55 GRI content index GRI, p. 41-47

102-56 External assurance The report has not been made subject to external assurance

Material topicsGRI 103: Management approach 2016

103-1 Explanation of the material topics and their boundaries

GRI, s. 42

103-2 The management approach and its components

INDIVIDUAL – We care for the indivi-dual, p. 16-30 COMPANY – We generate joy, entertain-ment, and excitement reliably, p. 31-39 SOCIETY – We work for wellbeing, p. 40

103-3 Evaluation of the management approach

CSR Management, p. 37

https://www.veikkaus.fi/fi/yritys#!/contacts?lang=en

46


GRI 200 Economic responsibility standardsGRI 201: Economic performance 2016

Economic operations201-1 Direct economic value generated

and distributedThe journey of one Veikkaus’ euro, p. 40

201-3 Defined benefit plan obligations and other retirement plans

Notes to the financial statements, liabil-ities from employee benefits, p. 81-82

Indirect economic impacts203-2 Significant indirect economic

impactsThe journey of one Veikkaus’ euro, p. 40

Purchasing practicesGRI 103: Managementapproach 2016

103-1 Management approach to procurement practices

Vastuullisuus hankinnoissa, p. 39

Anti-corruptionGRI 205: Anti-corruption 2016

205-2 Communication and training about anti-corruption policies and procedures

Fighting crime and fraud, p. 31 Ethical way of operating – Code of conduct, p. 33

205-3 Confirmed incidents of corruption and actions taken

No incidents in 2019.

GRI 207:Tax 2019

Tax207-1 Approach to tax Corporate Governance, p. 17

207-2 Tax payment control Corporate Governance, p. 17

207-3 Stakeholder engagement and management concerns related to tax.

Corporate Governance, p. 17 Veikkaus reports on its tax footprint according to the guidelines issued by the Ownership Steering Unit of the Prime Minister’s Office.

207-4 Country-by-country reporting of tax Corporate Governance, p. 17

GRI 300 Environmental disclosuresGRI 305: Emissions 2016

Emissions305-5 Reduction of GHG emissions Environmental responsibility and

responsible procurement, p. 38“The Ilmastoystävällinen Veikkaus” (“Climate friendly Veikkaus”) pro-gramme for the years 2019–2025 aims at supplementing acquisitions that have significant environmental impacts with environmental criteria, reducing the total energy consumption of the prem-ises, and decreasing the environmental impacts of slot machines and game terminals through lifespan manage-ment and choices of materials.

GRI 308: Supplier Environmental Assessment 2016

Supplier Environmental Assessment308-1 New suppliers that were screened

using environmental criteriaEnvironmental responsibility and responsible procurement, p. 38

As part of its environmental respon-sibility programme, Veikkaus has de-termined a long-term objective for the environmental criteria of the procure-ment processes. We aim at making environmental criteria part of 50% of Veikkaus’ new public tenders starting from the year 2021

47

GRI-CONTENTGRI-STANDARDI REPORT CONTENTS LOCATION IN REPORT FURTHER INFORMATION

GRI 400 Social topicsGRI 401: Employment 2016

Employing401-1 New employee hires and employee

turnover.Personnel, p. 36Board of Directors’ report, p. 55

GRI 402: Labor/ Management relations 2016

Labor/Management relations402-1 Minimum notice periods regarding

operational changesPersonnel, s. 34 Board of Directors’ report, p. 55

Veikkaus operates in accordance with the Act on Co-operation within Under-takings

GRI 403: Occupational health and safety2016

Occupational health and safety403-1 Workers’ representation in formal

joint management worker health and safety committees

Personnel, p. 35 The entire personnel are covered by the operations of the health and safety committee.

403-2 The entire personnel are covered by the operations of the health and safety committee.

Personnel, p. 35 Sick absences reported.

GRI 404: Training and education 2016

Training and education404-3 Percentage of employees

receiving regular performance and career development reviews

Personnel, p. 36

GRI 405: Diversity and equal opportu-nity 2016

Diversity and equal opportunity405-1 Diversity of governance bodies and

employeesPersonnel, p. 34 Corporate Governance, p. 6-7

GRI 406: Non-discrimi-nation 2016

Non-discrimination406-1 Incidents of discrimination and

corrective actions takenNo incidents in 2019.

GRI 415: Public policy 2016

Public policy

415-1 Political contributions Veikkaus is not involved in political activities or support them. Veikkaus is registered in the EU Transparency Register.

GRI 416: Customer health and safety 2016

Customer health and safety416-1 Assessment of the health and safety

impacts of product and service categories

The gaming control concept, p. 16-17

416-2 Incidents of non-compliance con-cerning the health and safety im-pacts of products and services


Marketing and LabelingGRI 417: Marketing and Labeling 2016

417-1 Requirements for product and ser-vice information and labelling

Responsible marketing communications, s. 26-27

Responsibility principles concerning marketing communications

417-2 Incidents of non-compliance concerning product and service information and labelling


417-3 Incidents of non-compliance concerning marketing communications

Responsible marketing communication, p. 26-27 Enquiries on gaming operations, p. 33

The Finnish Competition and Consumer Authority published a report in No-vember, in which it analysed Veikkaus’ marketing and the responsibility of the marketing.

GRI 418: Customer privacy 2016

Customer privacy418-1 Substantiated complaints concerning

breaches of customer privacy and losses of customer data

Data protection, p. 31 No incidents in 2019.

GRI 419: Socioeconomic compliance 2016

Socioeconomic compliance419-1 Non-compliance with laws and

regulations in the social and economic area


48

Veikkaus Oy BOARD OF DIRECTORS’ REPORT 2019

49

BOARD OF DIRECTORS’ REPORT 2019The gaming revenue from Veikkaus’ gambling op-erations during the financial period 2019, i.e. the gross gaming revenue amounted to EUR 1,690.7 million (-3.9%). The falling trend in the gross gam-ing revenue resulted from, for example, the gam-ing and money transfer limits adopted in the digital channel to help customers control their gaming. Further, the decrease also reflected the regulation of game and service development that has turned stricter, and the reduced marketing of games. The total volume of gaming was ca. EUR 12.5 billion in 2019.

Veikkaus’ operating profit was EUR 1,009.4 million (-0.5%) and the financial result was EUR 1,009.0 million (-0.5%). Despite the drop in the gross gam-ing revenue, the result reached nearly the level of the previous year thanks to cost-efficient opera-tions. The major changes affecting the cost level included reduced marketing investments, a de-crease in the one-off costs related to the merger of the gaming operators, smaller business-operation

bound costs in the retail network, and a drop in the commissions paid for retail sales. The result remained below the amount recorded in the State Budget 2019 for the beneficiary ministries, to be distributed further to the beneficiaries, i.e. EUR 1,023.3 million of the financial result of the year.

Starting from the financial statements of 2019, Veikkaus will present its gaming proceeds more clearly and begin to report the gambling proceeds as gross gaming revenue for all game groups. The new practice is in line with the IFRS standard covering financial reporting. This way, comparing the different product groups with each other be-comes easier, as the readability of the reports is enhanced. In the new way of reporting, gross gam-ing revenue (GGR) replaces the lines of turnover and winnings. We have previously already applied GGR-based reporting on physical and digital slot machine and table games. The change will not af-fect the return of the gaming proceeds.

AIMING AT AN INCREASINGLY SECURE AND RESPONSIBLE GAMING ENVIRONMENT

In 2019, there was lively public debate over the gaming system and Veikkaus’ operations. The company made several changes to its operations during the year, to meet the expectations of the changed operating environment. Veikkaus’ actions to prevent gambling problems have not been suffi-cient, which is why we need to focus on responsi-bility even more in the future. The strategy, updated during the end of 2019 and the beginning of 2020, will make responsibility increasingly central in the company’s operations.

The core themes of the strategy work are responsi-bility, channelling capacity, and new business. The strategy that is being revised aims at an increas-ingly secure and responsible gaming environment. Further, one of our major goals is making sure that gaming is channelled towards Veikkaus’ offerings in Finland, even in the digital environment. Veik-kaus also wants to be competitive in international business to business operations.

The era of the new Veikkaus has already seen some of the most significant CSR reforms in the history of Finnish gaming, including the adoption of compulsory loss and money transfer limits of online gaming.

The problems caused by Veikkaus games have remained at their previous level or possibly even decreased, according to surveys. According to three population surveys on problem gambling carried out in 2019, problem gamblers represented between 2.8%–3.1% of the entire population. The lowest figure, 2.8% (population estimate 116,000 people), was obtained in the last survey of 2019. In the years 2017–2018, a total of four respective sur-veys were conducted, with the population share of problem gamblers varying between 2.6% and 3.3%. More detailed information on the development of gambling detriments can be read in the CSR Report 2019.

50

BRAND: RESPONSIBILITY BECOMES THE CORE OF THE BRAND

At the end of 2019, a brand reform was launched at Veikkaus, focusing on player-centred responsi-bility. In the future, Veikkaus’ brand and communi-cations will focus more and more on responsibility, which has been part of the company’s values since the very beginning. In addition, good customer ex-periences play a central role in the brand – Veik-kaus as a forerunner of gaming experiences. An-other key part of Veikkaus’ future success is the general acceptability of the company. The brand work is continued in 2020.

According to the Reputation&Trust survey (12/2019), ca. 35% of Finns think that Veikkaus is a responsible company that works in the right

way. The respective figure was 55% in 2018. In the Taloustutkimus survey (12/2019), 49 % of the re-spondents held a positive image of Veikkaus. In 2018 the respective share was 72% (Frankly Part-ners 3/2018). Last autumn’s heated public debate affected people’s general image of Veikkaus, and their image of CSR at Veikkaus, which dropped to a level lower than that of 2018.

In November and December, several staff events were organized, to prompt dialogue concerning Veikkaus’ strategy, player-centred responsibility, and the future of Veikkaus’ brand. The events that were organized in various places attracted over 500 Veikkaus’ employees.

CUSTOMER RELATIONS: IDENTIFICATION FACILITATED THROUGH NEW SOLUTIONS

At the end of the financial period, Veikkaus’ cus-tomer base boasted ca. 2,126,000 Loyal Custom-ers, of whom ca. 156,000 were Gold Customers, and ca. 66,000 Silver Customers. About 266,000 Loyal Customers had subscribed to the Pelaa malt-illa (Play moderately) service message, required for reaching the Gold and Silver levels, and 287,000 customers had taken the Game Test which you must take to become a Gold Customer.

The share of identified gaming of all gaming went up to 45.0 percent (+0.2 percentage points). Rais-ing the share of identified gaming is one of Veik-kaus’ key strategic objectives, based on which we are building a more secure and responsible gam-ing environment.

Identification enables the adoption of new kinds of gaming control tools, whilst at the same time offer-ing a more service-minded customer experience. According to the Lotteries Act, which was revised in spring 2019, identification will be compulsory on all decentralized slot machines as of 1 January 2022. Veikkaus brought the adoption of compul-sory identification forward by one year, and it will take effect in January 2021. With some of the slot machines, identification will be required as early as in autumn 2020.

Developing identification solutions and gam-ing control tools is a major project that involves

changes associated with business operations, the customer experience, and technology. The change will require extensive development of the process-es, systems, and user interfaces, whilst engaging in accurate dialogue with the authorities.

During the year 2019 we built the background capa-bilities necessary for compulsory identification and made certain reforms visible to the customers. We made it easier for players to identify themselves on slot machines by introducing new identification methods in 2019. Besides using the new Veikkaus Card containing a chip, which was sent out to all Loyal Customers, players can identify themselves on slot machines as Loyal Customers via a mobile application or browser. The option of linking a per-sonal payment card to the Loyal Customer status was also introduced to slot machine gaming. By using a payment card linked to the Loyal Custom-er status while playing, the gaming always takes place identified, and the customers must set dai-ly and monthly loss limits on their payment-card based slot machine gaming. The customers can also impose a ban on their payment-card based slots gaming, if they wish. Further, we created a revised “Oma Veikkaus” [My Veikkaus] section for the slot machines, where players can find further information on the identification methods. At the end of the year, 10.0 percent of slot machine gam-ing took place identified.

51

SALES NETWORK: ONGOING DEVELOPMENT OF AN EVEN MORE RESPONSIBLE GAMING ENVIRONMENT

In the year under review, 68.2% of the gross gaming revenue came from the sales network and 31.8% from the digital channel (+0.6 percentage points). The number of customers to sign in to Veikkaus’ online service reached an average of 743,737 a week 1. During the year, a total of 1,564,394 cus-tomers signed in to the service. Mobile gaming maintained its popularity, and at the end of the fi-nancial period, 62% of the customers of the online store used mobile devices whilst using Veikkaus’ services.

We carried out several projects to improve the cus-tomer experience at the online service veikkaus.fi. During the year under review, we prepared for the overhaul of the concepts of betting and online ca-sino that will take place in 2020, and the revised features were tested actively with the customers.

At the beginning of 2019, we made another reform, following which all the customers registered in the veikkaus.fi gaming service can view their daily and monthly money transfer and loss limits in a more graphic form. By visualizing the gaming limits, we wish to increase the customers’ understanding of how the money transfer and loss limits work and to illustrate what limits would be best suited for each player’s personal way of gaming.

Veikkaus’ retail sales and the customer numbers at the points of sales reached nearly the level ex-pected in 2019, despite the changes in the busi-ness environment, the reductions in the point-of-sales network, and the growth of digital gaming. The shift of daily service encounters from kiosks and service stations to grocery store units in par-ticular has continued to be rapid. In grocery stores, especially the largest ones, game sales have de-veloped relatively well.

Veikkaus has continued to take and prepare meas-ures aiming at a more responsible gaming environ-ment in the point-of-sales network. The measures are taken first in the retail sales channel and then at Veikkaus’ own arcades. We have a challenging schedule, as the great diversity of Veikkaus’ game offerings and the related technology, equipment, and system solutions require major investments and revisions, to make all playing of Veikkaus games covered by a more secure system by the year 2023.

In 2019 we worked to revise the data connections of gaming at the retail outlets. This is a major pro-ject, seeking to connect all the sales terminals and slot machines to the network of our new service provider DNA in 2020. A shared data network is a prerequisite to, for example, the introduction of player identification to all decentralized slot ma-chines.

One of the decisions in principle concerning re-sponsibility is that Veikkaus will reduce the num-ber of decentralized slot machines in the point-of-sales network by nearly a fifth, from ca. 18,500 to 15,000 in 2020. We will be cutting the number of slot machines per points of sales significantly. The number of slot machines will be limited to a maximum of seven or five, depending on the type of the point of sales. In addition, Veikkaus is pre-paring for the adoption of compulsory identification by removing such slot machines from its network that do not allow identification. Cutting the number of slot machines will take the entire year 2020, and we have estimated that it will reduce the gross gaming revenue by ca. EUR 30 million in 2020. Fol-lowing the cuts, the commissions paid to the retail-ers will decrease by ca. EUR 4.5 million.

Veikkaus also estimates that the compulsory iden-tification will affect consumer behaviour in the coming years to such a degree that the number of decentralized slot machines will drop to 10,500 –13,500 by the year 2025.

We are well underway in the process of designing a sales reform and making preparations for a pub-lic tender of a new sales terminal. The project aims at enabling even smoother customer encounters, improving the customer experience, and promoting responsible gaming. It has been planned that the new sales terminals should be introduced during 2022.

For Veikkaus’ gaming locations, the year 2019 was a period of a structural change. In the spring, we carried out extensive cooperation negotiations, which resulted in a less hierarchical organization of a lighter cost structure, making Veikkaus’ op-erations more efficient and supporting sustainable development. At the same time, the table game operations that had been unprofitable were termi-nated in restaurants and at the Pelaamo arcades.

1 Thefigurecannotbecomparedwith thoseof thepreviousyears,asitincludesallthecustomerssign-edintothedigitalchannel.Previously,thefiguresonly covered customers who have played in theservice.

52

A number of Pelaamo arcades with unfavourable business locations or insufficient yield were also closed down.

The customer numbers and gaming developed as expected in the Pelaamo and Feel Vegas arcades. Casino Helsinki, which had previously been los-ing customers, also attained positive customer numbers in the autumn. The indicators measuring

customer service at Veikkaus’ own points of sales show that Veikkaus’ customers continue to value gaming locations where they can meet other play-ers and access professional personal service. We will continue to develop Veikkaus’ own gaming lo-cations in 2020, with player-centred responsibility and a good customer experience as our points of emphasis.

GAMING BUSINESS: CHALLENGING YEAR FOR ALL GAME GROUPS

Veikkaus games fall into three categories: Casi-no Games, Lucky Games, and Betting. The Casino Games represented 53.9% of Veikkaus’ profit at the end of the year, whereas the share of Lucky Games was 37.3%, and the share of Betting was 8.7%.

The gaming proceeds dropped in almost all games during the period under review. The game to succeed the best was Veikkaus’ most popular game Lotto.

The Casino Games cover the slot machines located at both the points of sales of the partner network and in Veikkaus’ own gaming arcades, togeth-er with the other casino games, including digital slots, physical and digital table games, the eIn-

stants, and the eBingo games. The gross gaming revenue of the casino games (EUR 911.8 million) fell by 3% in the reporting period.

The slot machines yielded EUR 683.4 million (-2.3%) in 2019. The gross gaming revenue generated by the slot machines in our partner network (EUR 554.6 million) decreased by 2.5% as compared with the previous year. The drop can be explained by fewer points of sales and a loss of popularity of the old slot machine type Valtti. In 2020, we will be replacing the old Valtti slot machines with a new slot machine model titled Voltti and a model that has already been in use previously, titled Hertta.

Viikoittaiset arvontapelit

Päivittäiset arvontapelit

Raaputusarvat

Peliautomaatit kumppaniverkostoPeliautomaatit

omat pelipaikat

Muut kasinopelit

Vedonlyöntipelit

Toto-pelit

53,9%KASINOPELIT

37,3 %ONNENPELIT8,7%

VEDONLYÖNTI8,7%BETTING

53,9% CASINO GAMES

37,3%LUCKY GAMES

Weekly drawn gamesToto games

Sports betting

Other casino games

Daily drawn games

Scratchcards

Slot machines in partner networkSlot machines in Veikkaus’

arcades

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Veikkaus own game studio produced seven new multi-channel games during the year. The most significant games introduced to the slot machines of the partner network were Lootuskeno released at the end of June and Emma - Majakan loiste, re-leased at the end of August.

The gross gaming revenue of the slot machines at Veikkaus’ own arcades (EUR 128.9 million) went down by 1.1%. The decrease resulted partly from the fact that the Casino Helsinki attracted fewer customers. We provided 67 new casino slot ma-chines to our own arcades in 2019, with hundreds of new game releases.

The gross gaming revenue of the digital casino games (EUR 203.8 million) dropped by 1.3% as compared with the previous year, despite the fact that the average number of weekly players in the digital channel of the casino games increased by 5.0%. The compulsory game limits of Veikkaus’ online store, which became effective in December 2017, impacted on the customers’ gaming signifi-cantly. This hindered growth in the digital slots in particular. The drop in the gross gaming revenue of the digital games was also affected by the fact that we stopped sending out game object infor-mation and customer communications in autumn 2019. We also released significantly fewer digital table games in autumn 2019 than in the autumn of the previous year.

Veikkaus.fi extended its digital slots game selec-tion in 2019 by introducing two international game libraries. The games of the supplier Netent were released at veikkaus.fi in June, and in December, the games by Yggdrasil Gaming were added to the selection. In addition, we introduced games by Pla-ytech and Veikkaus’ own game studio. In all, we launched 79 new digital slots games during the year.

The online instant game selection grew by six new eInstants during the year. A new eInstant based on the theme of the Kulta Jaska slots game, already known to the players of slot machines, was re-leased in November.

The Lucky Games include the weekly draw games Lotto, Eurojackpot, and Vikinglotto, and their add-on games Jokeri and Lomatonni. The Lucky Games group also comprises the daily drawn games Keno, Kaikki tai ei mitään, Synttärit and Tähden-lento, which can be played in the online service, as well as the games Syke and Pore, which were removed from the online store’s selection in De-

cember 2019. The scratchcards also belong to the Lucky Games group. The Lucky Games group reached a turnover of EUR 631.1 million (-4.1%) in the year under review.

Veikkaus’ most popular game Lotto saw its gross gaming revenue (EUR 205.2 million) increase by 8.8%. The most important reason for the increase was a record-high jackpot, which rolled over for six weeks in a row. The record-breaking rollover jack-pot, which had already begun in December 2018 ended in a victory in the town of Lohja in southern Finland, as a single player won the jackpot of EUR 15.5 million. Veikkaus’ customers showed an inter-est towards Lotto throughout the year, even if there were no further record-breaking jackpots available.

The gross gaming revenue of Eurojackpot (EUR 125.6 million) dropped by 16.5% from the previous year. The maximum 90-million-euro jackpot was only available on four different weeks, whereas it had been available on 13 weeks in the previous year. Finnish players continued to be lucky in Eu-rojackpot, scooping the jackpot twice. One of the maximum jackpots amounted up to EUR 92 million and was won by a syndicate of players in the mu-nicipality of Siilinjärvi in eastern Finland.

Betting includes betting games Pitkäveto (Fixed Odds Betting), Live-veto (Live Betting), and the Vir-tuaaliveto games (Virtual Bets), Moniveto, Tulosve-to, the Voittajaveto (Winner Odds Betting), and Va-kio (Football Pools), as well as the Toto games. In the year under review, Betting reached a gross gaming revenue of EUR 147.8 million (-8.5%).

The gross gaming revenue of the betting games belonging to the Betting group was EUR 93.1 million (-9.5%). The decrease in the gross gaming revenue can be partly explained by the fact that the year of comparison 2018 was a year of both the Winter Olympics and the FIFA World Cup. The drop was also affected by the loss and money transfer limits of online gaming that were introduced in Decem-ber 2017 and which took full effect in March 2018. The traditional game Vakio (Football Pools) had the best success of the games in the Betting group. Its customer numbers and gross gaming revenue (EUR 23.8 million; -0.7%) remained on the same level as in 2018. The weekly number of customers remained at a good level (-2%) despite the major sporting events that had taken place in the year of comparison. The odds of the favourite soccer and ice hockey leagues of Pitkäveto were raised in March, which has had a positive impact on the competitiveness of Pitkäveto.

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The players showed enormous interest towards betting during the IIHF Ice Hockey World Champi-onship in the spring. During the final game between Finland and Canada, we reached a record-breaking game turnover of all times, as people spent over EUR 900,000 on the fixed odds betting objects of the final. The game turnover of the championship also hit a new record, attracting bets for a total of EUR 18.8 million. Similarly, betting on the FIFA Women’s World Cup almost tripled as compared with the UEFA Women’s Championship in 2017.

The Toto games generated a gross gaming reve-nue of EUR 54.7 million (-6.6%). At the beginning of the year, as many as nine domestic horse races had to be cancelled due to major fluctuations in the temperature. This had a crucial effect on the gross

gaming revenue of the Toto games. The Toto games underwent a reform at the beginning of the year, as Toto64, introduced in Finland for the first time, was made the main game played on Wednesdays, and Toto75 turned into Saturday’s main game. The new releases Superlauantai and Kuuma keskiviik-ko established their status on days when there is a peak in the customer numbers. The horse rac-ing event Lahden Kuninkuusravit attracted a record high number of weekly players of the Toto games.

Veikkaus signed a cooperation agreement with Finland’s most successful and internationally ac-knowledged esports organization ENCE Esports in the summer. Esports has quickly grown into the fifth most popular event in Veikkaus’ betting games.

COST DEVELOPMENT: IMPROVED EFFICIENCY THROUGH LOWER COSTS Veikkaus’ costs have decreased after the merg-er of the gaming operators thanks to continuous development, lessened integration costs, and the removal of overlapping expenses. We managed to improve our cost efficiency still, despite the drop in the gross gaming revenue, with the costs being 27.7% in proportion to the gross gaming revenue.

Veikkaus returned EUR 203.0 million to the Finnish State in lottery tax, whereas the retail commissions paid out to the business partners were EUR 159.0

million. Both of these cost items went down, as the gaming revenue dropped over the previous year. Thanks to the reduced marketing activity, there was a significant drop in both product advertising and other advertising and marketing expenses. Follow-ing the merger of the gaming operators, the costs have been reduced and the operations have been made more efficient, especially in the purchasing of services and the other costs of the business op-erations.

RESEARCH AND DEVELOPMENT: FOCUS ON THE TECHNOLOGICAL CAPABILITIES NEEDED FOR FULL IDENTIFICATION In 2019 we built our technological capabilities to enable compulsory identification on slot machines. Finalizing the technological capabilities associated with the compulsory identification will also be in focus in 2020. Veikkaus has engaged in dialogue with the authorities concerning the different tools and functionalities of identification, as well as the new tools for the control of gaming.

During the year under review, the revision of gam-ing data connections at the retailers’ points of sales took several steps forward. In addition, we developed new technological features for the slot machine software and back end systems, to pre-pare for the upcoming introduction of compulsory identification on slot machines. Whilst creating the

new slot machine model Voltti, we have focused on supporting identified gaming in particular.

In 2019 Veikkaus adopted a new game platform and engine of its own, which will work as a release plat-form of all new digital slots games of Veikkaus’ own production in the future. This way, we will achieve significant cost savings every year. The reporting period also brought with it the launch of a project to revise the eInstant platform.

Further, we started a reform of the basic IT services for the staff in 2019, to be finalized at the beginning of 2020. Veikkaus spent a total of EUR 26.8 million (+14.7%) on product development and research in 2019.

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GOVERNANCE: CHANGES TO BOARD OF DIRECTORS AND THE SUPERVISORY BOARD Three new members were appointed to Veikkaus’ Board of Directors in the general meeting of 4 Sep-tember 2019: Christian Cedercreutz, Anne Larilahti, and Juha A. Pantzar. The Board continues to be chaired by Olli-Pekka Kallasvuo, and the members to continue are Outi Henriksson, Minna Pajumaa, and Hanna Sievinen.

Veikkaus’ Supervisory Board received 13 new members, appointed in an extraordinary meeting on 9 October 2019. Jukka Gustafsson was appoint-ed chairperson, and Jani Mäkelä vice chairperson. Veikkaus’ Supervisory Board has 28 members: 13 party representatives, 13 representatives of Veik-kaus’ beneficiaries, and 2 personnel representa-tives.

Veikkaus’ Board of Directors set up a new advisory expert organ, Veikkaus’ Advisory Board. The Advi-

sory Board’s objective is to offer an external view to the company’s board and operative management on ethical questions related to gaming. The Advi-sory Board will focus especially on the ethics of games and their marketing, gaming detriments, and issues having to do with the societal impacts of gaming. If they wish, the Advisory Board may make concrete suggestions, issue statements, and present arguments concerning practical questions having to do with gaming and public discussion associated with gaming. Besides the chairperson, the Advisory Board has five members and its term of office is two years. The chairperson presents a report to the Board of Directors on the Advisory Board’s activities during the previous calendar year by the end of March.

PERSONNEL: MAJOR ORGANIZATIONAL CHANGES REALIZED IN 2019

At the end of the year, Veikkaus employed 1,606 people. Of the employees, 56% worked as croupiers and dealers, and in other customer service jobs. The share of full-time employees was 72% and that of part-time employees was 28%. 97% of the em-ployees had permanent employment contracts. Of the personnel, 40% were women and 60% men. In 2019, Veikkaus’ personnel expenses amounted to EUR 98.2 million (-0.1%). Salaries represented EUR 80.3 million of the personnel expenses, whereas the share of pensions and indirect personnel ex-penses was EUR 17.9 million.

For the personnel, the year 2019 meant signifi-cant changes. The cooperation negotiations that took place at the beginning of the year resulted in changes in the organization of Veikkaus’ own ar-cades and retail sales, and the restaurant table game activities were terminated. The total number of employees decreased by 468 in the year under review. This was a result of the termination of the restaurant table games and the optimization of the sales network. Veikkaus offered career counselling to those leaving the company, including support in retraining and advice on starting private businesses.

Veikkaus revised its organization as of 1 September 2019, in order to improve its channelling capacity in

the middle of a challenging operating environment. Personnel representatives took part in negotiations concerning the reform, and no personnel cuts were made. The change was carried out by forming eight functions and transferring entire teams and units to new entities. At the same time, the responsibility areas of the members of the Executive Team were specified and employees were appointed to posi-tions corresponding to the organizational change.

Besides President and CEO Olli Sarekoski, Veikkaus’ Executive Team has eight Senior Vice Presidents:

• Communications and Community Relations: Executive Vice President Velipekka Nummikoski

• Business Operations: SVP, COO Nora Vähävirta

• New Business: SVP, New Business Timo Kiiskinen

• Points of Sales: SVP, Channels and Sales Jari Heino

• ICT: CIO Ari Aarnihuhta

• HR: SVP, HR Heli Lallukka

• Legal Affairs and CSR: SVP, Legal Affairs and CSR Pekka Ilmivalta

• Finance, Planning, and Services: CFO Regina Sippel

56

In addition to the annual personnel survey and the Pulssi survey, which has been conducted three times, we organized a Veikkaus Now Open tour at the end of the year, during which the employees and the management engaged in open dialogue about Veikkaus’ strategy, which is being revised based on the decisions in principle made by the Board of Directors in September.

The rewarding system was also revised: the sys-tem was supplemented with a responsibility indi-cator, the purpose of which is to make sure that the company does not seek to make profit out of problem gambling. Further, the rewarding indica-tors concerning the whole personnel were updated to better correspond to the company strategy. At the end of the year, negotiations for a collective bar-

gaining agreement covering the officials were com-pleted, and negotiations for a collective bargaining agreement covering the employees were initiated.

In the year under review, we enhanced Veikkaus Culture by defining shared governance principles for the company, based on Veikkaus’ values. We also determined the skills strategic to the compa-ny, on the basis of which we will continue to build a program for the development of personnel skills. Further, in 2019 we updated the operational plan titled Peli-ilo on meidän juttu [The Joy of Gaming Is Our Thing], which covers the entire personnel and whose main objectives are the prevention of em-ployees’ gambling problems and ensuring a work-ing community free of problem gambling.

SUPERVISION AND RISK MANAGEMENT According to chapter 42, section 2 of the Lotteries Act (506/2009), Veikkaus’ gaming operations are supervised by the National Police Board working under the Ministry of the Interior. The Ministry of the Interior approves the rules of the games, and the National Police Board supervises that the rules are complied with.

The company’s supervision and risk management are described in the Corporate Governance 2019 report.

FUTURE PROSPECTSVeikkaus’ operating environment continues to be challenging. Gaming is shifting more and more strongly towards the digital channel, where Veik-kaus competes against foreign gaming operators. The upcoming amendment of the Lotteries Act will play a central role in the way in which gaming will be channelled towards Veikkaus’ supply in the fu-ture.

The responsibility actions decided by Veikkaus’ Board of Directors have a major impact on the com-pany’s financial prospects. It is estimated that in 2020, Veikkaus’ total return will decrease to the

level on which the three former gaming operators (Veikkaus, RAY, and Fintoto) were in 2014, when added together. The total return was EUR 963 mil-lion in that year, plus the lottery tax, EUR 205 mil-lion.

Questions associated with data protection and se-curity are another significant issue in our opera-tions. The regulation of gaming and the changes in consumer behaviour and domestic purchasing power make our operations subject to significant insecurities.

57

BOARD OF DIRECTORS’ PROPOSAL FOR THE DISTRIBUTION OF PROFITS The financial profit of the financial period of 2019 of Veikkaus Oy was EUR 1,009,012,718.03. The Board of Directors proposes that the profit of the financial period of 2019 of Veikkaus Oy, EUR 1,009,012,718.03 be returned to the beneficiary ministries: EUR 40,360,508.72 to the Ministry of Agriculture and Forestry; EUR 534,776,740.56 to the Ministry of Ed-ucation and Culture; and EUR 433,875,468,75 to the Ministry of Social Affairs and Health. Veikkaus’ di-

rect financial profit to society in the year under re-view can be calculated to amount to a total of EUR 1,246.6 million. Further, Veikkaus paid EUR 203.0 million to the State in lottery tax, and a total of EUR 34.6 million in VAT, which affected the result as an expense. Veikkaus is not VAT liable and cannot therefore deduct the VAT included in its purchases of goods and services.

58

Veikkaus Oy FINANCIAL STATEMENT 2019

59

STATEMENT OF COMPREHENSIVE INCOME

EUR Attachment 2019 2018

GROSS GAMING REVENUE (GGR) 1 1,690,744,435.90 1,758,956,342.69

Other operating income 3 4,414,463.18 3,812,488.55

Lottery tax 202,901,656.41 210,995,010.77

Materials and servicesPayments to authorities and supervision fees 9,888,955.02 11,272,408.32Retail commissions and location fees 159,035,985.92 170,488,164.54Materials and supplies 5,550,376.54 7,115,909.75Playslips and lottery tickets 5,386,820.76 5,843,535.27Drawing expenses and result information 11,138,889.35 10,958,478.88Game event cooperation 7,831,408.08 8,613,071.14Product advertising 11,251,952.60 19,557,015.67

210,084,388.27 233,848,583.57

Employee benefit expensesSalaries and compensations 80,323,732.43 81,828,544.40Pension expenses 15,405,682.13 14,333,284.30Indirect personnel expenses 2,455,778.46 2,095,891.99

98,185,193.02 98,257,720.69

Other operating expensesServices purchased 5 63,436,775.63 69,416,292.40Depreciation and impairment 4.9.10 58,343,097.69 49,960,908.33Other operating expenses 6 52,789,326.42 85,786,376.54

174,569,199.74 205,163,577.27

OPERATING PROFIT 1,009,418,461.64 1,014,503,938.94

Financial itemsFinancial income 8 230,894.96 136,215.45Financial expenses 8 636,638.57 518,186.02

-405,743.61 -381,970.57

TAXES 0.00 -86,285.40

PROFIT FOR THE FINANCIAL YEAR 1,009,012,718.03 1,014,208,253.77

Earnings per share *Number of shares 6000 pcs 6000 pcsEarnings per share 168,168.79 169,034.71*Earnings per share were calculated by dividing the profit for the financial year by the number of shares. As of the financial statements 2019. we have made the presentation of the gaming proceeds more uniform for all game groups. and the gaming proceeds are reported as GGR. The data for the comparative period 2018 have been made to correspond to the new way of presentation. The Accounting principles explain the notion of GGR in more detail.

60

BALANCE SHEET


ASSETSNON-CURRENT ASSETSTangible assets 9 145,126,463.71 159,175,012.64Intangible assets 10 24,513,531.79 27,221,287.01Right-of-use assets 12 25,619,775.00 0.00Long-term investments 13 1,236,387.43 1,236,387.43Other non-current receivables and advance payments 13 14,324,280.50 15,037,277.00 CURRENT ASSETSInventories 5,093,092.99 6,618,636.19Advance payments 963,000,000.00 975,000,000.00Accrued income and deferred expenses 14 42,250,079.12 42,607,045.30Cash and cash equivalents 15 139,593,313.07 126,589,799.55 TOTAL ASSETS 1,360,756,923.61 1,353,485,445.12

EQUITY AND LIABILITIESSHAREHOLDERS’ EQUITYShare capital 16 600,000.00 600,000.00Acquisition capital 16 151,257,550.33 151,257,550.33Invested unrestricted equity reserve 16 345,698.01 345,698.01Retained earnings (losses) from previous financial periods

0.00 0.00

Profit for the financial year 1,009,012,718.03 1,014,208,253.77TOTAL SHAREHOLDERS’ EQUITY 1,161,215,966.37 1,166,411,502.11 LIABILITIESNON-CURRENT LIABILITIESLease debts. interest-bearing 12 16,132,489.00 0.00Liabilities from personnel benefits 17 3,697,000.00 2,623,000.00Other non-current liabilities 17 1,440,083.00 1,518,994.00

CURRENT LIABILITIES Lease debts. interest-bearing 12 9,901,193.00 0.00Advance payments received 18 5,629,987.72 6,452,486.85Advances for multi-week subsriptions 18 12,098,158.36 10,710,304.25Accounts payable 18 16,021,271.21 18,929,013.03Prizes payable 18 35,704,022.33 39,209,758.12Settlement debt to the State 18 37,925,823.04 41,750,437.15Accrued liabilities and deferred income 18 48,924,859.16 53,909,770.79Other current liabilities 18 12,066,070.42 11,970,178.82

TOTAL SHAREHOLDERS’ EQUITY AND LIABILITIES 1,360,756,923.61 1,353,485,445.12

61

CASH FLOW STATEMENT


CASH FLOW FROM BUSINESS OPERATIONS:Operating profit 1,009,418,461.64 1,014,503,938.94Adjustments to cash-flow based on business operationsDepreciation 57,541,303.57 49,174,177.62Other non-cash income and expenses (+/-) -158,262.39 586,026.61Other adjustments to cash-flow based on business operations (+/-) 0.00 410,098.65

Cash flow from business operations before change in working capital 1,066,801,502.82 1,063,854,044.52

CHANGES IN WORKING CAPITAL Increase (+)/ decrease (-) in working capital 1,525,543.20 412,601.32 Increase (+)/ decrease (-) in current non-interest-bearing receivables 1,069,962.68 5,887,626.38

Increase (+)/ decrease (-) in current non-interest-bearing liabilities -13,566,667.77 9,148,656.94

Cash flow from business operations before change in financing items and taxes 1,055,830,340.93 1,079,302,929.16

Interests received from business operations 150,782.31 72,431.70Interests paid and other financial expenses of the business operations (-) -636,638.57 -108,087.37

Direct taxes paid (-) 0.00 86,285.40CASH FLOW FROM BUSINESS OPERATIONS 1,055,344,484.67 1,079,353,558.89

CASH FLOW FROM INVESTMENTS:Investments in tangible and non-tangible assets 11 -32,619,566.03 -40,297,892.75Proceeds from disposal of tangible and non-tangible assets 2,207,930.00 1,399,978.00

Dividends reveiced from investments 11 80,112.65 63,783.75CASH FLOW FROM INVESTMENTS: -30,331,523.38 -38,834,131.00

CASH FLOW FROM FINANCING:Return to the beneficiary ministries -1,002,208,253.77 -1,014,645,042.50Refunding of lease debts -9,801,194.00 0.00CASH FLOW FROM FINANCING -1,012,009,447.77 -1,014,645,042.50

CHANGE IN CASH AND CASH EQUIVALENTS: 13,003,513.52 25,874,385.39Cash and other short-term investments at the beginning of the financial year 126,589,799.55 100,715,414.16

CASH AND CASH EQUIVALENTS AT THE END OF THE FINANCIAL PERIOD 139,593,313.07 126,589,799.55

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STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

EUR thoudand Share capital

Acquisition capital

Invested unrestricted equity fund

Retained earnings from previous years

Retained earnings

Total shareholders’

equity

Shareholders’ equity 31 Dec 2018

600 151,258 346 0 1,014,208 1,166,412

Return to the Ministry of Education and Culture

-537,530 -537,530

Return to the Ministry of Social Affairs and Health

-436,110 -436,110

Return to the Ministry of Agriculture and Forestry

-40,568 -40,568

Retained earnings from the previous financial year

1,014,208 -1,014,208 0

Profit for the financial year 1,009,013 1,009,013


600 151,258 346 0.00 1,009,013 1,161,216

EUR thousand Share capital

Acquisition capital

Invested unrestricted equity fund

Retained earnings from previous years

Retained earnings

Total shareholders’

equity


600 151,258 346 -6,647 1,021,292 1,166,848

Return to the Ministry of Education and Culture

-537,762 -537,762

Return to the Ministry of Social Affairs and Health

-436,297 -436,297

Return to the Ministry of Agriculture and Forestry

-40,586 -40,586

Retained earnings from the previous financial year

1,021,292 -1,021,292 0

Profit for the financial year 1,014,208 1,014,208


600 151,258 346 0.00 1,014,208 1,166,412

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ACCOUNTING PRINCIPLES 2019

CORPORATE PROFILE

Veikkaus Oy is a Finnish gaming company domi-ciled in the City of Helsinki. The company’s oper-ations started at the beginning of 2017, when the gaming operations of the three previous gaming operators were integrated. Veikkaus is a limited li-ability company fully owned by the Finnish State, subject to ownership steering by the Prime Minis-ter’s Office. The company is subject to regulations on limited liability companies and the State Share-holdings and Ownership Steering Act. Further, Veik-kaus’ operations are regulated in accordance with the Lotteries Act, according to which Veikkaus Oy has the exclusive right to operate gaming. Veikkaus provides entertaining and exciting games to Finns in a secure and reliable manner. The company aims to ensure its competitiveness and maintain the strong market position of Veikkaus’ digital games by constantly developing new innovations for the customers. Veikkaus’ game revenue is used for the benefit of Finns through the distribution of funds. The company’s task is to operate gaming in such a way that the legal protection of those engaging in gaming activities is secured, abuse and crime are prevented, and any economic, social, and health-re-lated problems are prevented and reduced.

According to its articles of association, Veikkaus’ field of operations covers the operation, in accord-ance with the Lotteries Act, of sporting and horse race competitions, and other gaming based on the results of competitions or draws; betting games, lotteries, and slot machine and casino operations, as well as any activities arising from these oper-ations. The rules of the gambling games are laid down by a Ministry of the Interior Decree. The rules of the games must contain regulations on prize payout and the refunding of stakes, as well as regu-lations on the largest allowed stakes and prizes for slot machines, special slot machines, and casino games. Further, the rules of lotteries, pools, betting, and toto games must also contain regulations on the draws.

The company has a Supervisory Board. The Super-visory Board’s task is to monitor and supervise that the company carries out gaming operations, and to support cooperation between the company and its stakeholders. The company’s gaming operations are supervised by the National Police Board, work-ing under the Ministry of the Interior.

BASIS OF PREPARATION

Veikkaus Oy’s financial statements 2019 were pre-pared in accordance with the International Financial Reporting Standards (IFRS) effective on 31 Decem-ber 2019 and approved for use within the European Union, as well as the interpretations concerning the standards (IFRIC). The notes to the financial state-ments also comply with the regulations of the Finn-ish Accounting Act (FAS), and other statutes and regulations concerning the preparation of financial statements effective in Finland.

Veikkaus has adopted the following new standards during the financial year:

IFRS 16 Leases (the company has applied the standard during the financial period that started on 1 January 2019).

IFRS 16 changes the accounting treatment of leas-es by requiring lessees to also recognise operative leases in the balance sheet as a lease liability and as a related right-of-use asset, if the lessee has a right to control the use of the underlying asset dur-ing the effective period of the lease, and the lease is non-cancellable. Instead of lease expense, de-preciations arising from the right-of-use asset are recognised, and the interest related to the lease debt is recognized as an expense in the income statement during the effective period of the leas-es. The standard includes exemptions according to which short-term leases with a lease term of 12 months or less, or assets of minor value, need not be recognized in the balance sheet.

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Veikkaus has complied with an adjusted retrospec-tive procedure in the adoption of the standard, so the comparative data have not been corrected. For Veikkaus, the standard involves significant impacts on the treatment of the leases of the office and the business premises, as well as those of the Pelaa-mo and Feel Vegas arcades. The cumulative effects of the introduction of IFRS 16 have been recognized as an adjustment in the opening balance sheet of 2019. IFRS 16 affects the comparability of the fol-lowing data:

• The depreciations have increased, whereas the lease expenses have decreased respectively. The depreciations of the right-of-use assets amount-ed to EUR 10 215 thousand in the financial period 2019, while the adjustment of the lease expens-es was EUR 10 339 thousand. The net impact of these items improved the operating profit by EUR 124 thousand.

• The interest on the leasing debts amounted to a total of EUR 538 thousand in the reporting peri-od, and the total impact of all the items impaired the result of the financial year 2019 by EUR 419 thousand.

• The opening balance sheet of 2019 grew by EUR 29 720 thousand as a result of the recognition of the right-of-use assets and the leasing debts. The share of the leasing debt concerning the capital is presented on a separate line in the cash flow of the cash-flow statement. The refunds of the leasing debt in the financial period 2019 totalled EUR 9 801 thousand. The new capitalized leases totalled EUR 6 115 thousand in the financial period 2019.

• The figures presented in the attachment titled “Leases and other contingent liabilities” do not cover the leasing debts presented in the balance sheet for the year 2019.

The company adopted the standard in the financial period starting on 1 January 2019; yet the reporting effects can only be seen in the financial statements of the financial period 2019. The company will ad-just the figures of 2019, where necessary, in its in-terim reporting in the financial year 2020.

ACCOUNTING ESTIMATES

The preparation of the financial statements in ac-cordance with the IFRS standard requires that the management makes estimates and assumptions about the future, together with decisions based on reflection, that affect the amount of the reported assets and liabilities, including contingent assets and liabilities, and the recognition of income and expenses in the income statement.

Although the estimates and assumptions are based on the management’s best knowledge, the actual results may differ from the values reported in the financial statement.

In Veikkaus’ financial statements, the most signif-icant estimates relate to the depreciation periods and depreciation methods of tangible and intan-gible assets; to the actuarial calculations on the assumptions; and to the present value used for cal-culating the pension obligation and the bonus for years of service. The actual results may differ from the estimates made. In addition, it is necessary to use judgment in the application of the accounting principles.

The financial statements are presented in euros and are based on the original acquisition cost of the transactions, unless separately stated otherwise in the accounting principles. The figures in the finan-cial statements have been rounded from the exact values, so the total amounts of individual figures may deviate from the total amounts presented.

The financial statements cover 12 months, the fi-nancial period 1 January–31 December 2019. The Board of Directors of Veikkaus Oy has approved the financial statements for publishing on 10 February 2019. According to the Finnish Companies Act, the regular General Meeting has the right to approve, reject, or amend the financial statements after their publication.

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FOREIGN CURRENCY ITEMS

The company’s functional currency is the euro. Transactions denominated in foreign currency are recorded in the functional currency at the exchange rate of the transaction date. Receivables and lia-bilities in the balance sheet at the balance sheet date have been valued at the closing rates. Foreign exchange differences arising from transactions de-

nominated in foreign currencies, and from trans-lation of receivables and liabilities, are recognized in the income statement through profit and loss. Gains and losses on operating items are included in the corresponding items above operating profit. Financing gains and losses are recognized in the financial income and expenses.

RESEARCH AND DEVELOPMENT COSTS

Research costs are recognized as an expense in the period during which they have been incurred. Costs associated with the development of new products, offerings, and processes, are capitalized when it is probable that the intangible asset re-sulting from the development will generate future economic benefit and meet the recognition criteria.

In addition, the development costs must be reliably measurable. After initial recognition, the capitalized development costs are measured at the acquisi-tion cost, less the accumulated depreciation and impairment. Recognizing the depreciation is started when an asset is ready for use.

NON-CURRENT ASSETS

Intangible and tangible assets are reported at their original acquisition cost, less the accumulated de-preciation and impairment losses. Subsequently, the cost of an asset is only capitalized when it in-creases the future economic benefit associated with the asset. Intangible and tangible assets are depreciated according to the depreciation plan, based on their estimated economic lifetime. Other expenses, including normal maintenance and re-pairs, are expensed once they are incurred.

Depreciation periods for property, plant and equip-ment (years):

• Buildings and constructions 25

• Basic improvements of real estate 5

• Property machinery and equipment 5

• Gaming equipment 5-10

• Other machinery and equipment 4

• ICT equipment 4

Depreciation periods for intangible assets (years):

• ICT software and capitalized research and devel-opment costs 4

Land, real estate, housing shares and art objects are not subject to depreciation.

Gains or losses arising from the disposal of tan-gible assets are recognized in the other operating income or expenses in the statement of compre-hensive income. The depreciation methods, eco-nomic life, and residual values of tangible assets are reviewed at the end of the financial year.

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IMPAIRMENT OF TANGIBLE AND INTANGIBLE ASSETS

The balance sheet value of assets is reviewed on the date of the financial statements, to determine whether there is any indication of impairment; and whenever there are indications that the value of an asset has been impaired.

An impairment test is performed to determine any impairment and whenever necessary, and as a re-sult, an impairment loss may be recognized.

A previous recognition of an impairment loss is reversed if the values used for determining the income to be accumulated change substantially. However, the impairment loss is not reversed to an extent greater than the carrying amount of the as-set without the recognition of an impairment loss.

TANGIBLE RIGHT-OF-USE ASSETS AND LEASES

In accordance with IFRS 16, the lessees recognize all their leases in the balance sheet according to a model based on right-of-use. The leased assets are treated during the lease period based on the same principles as owned assets, and their right-of-use assets recognized in the balance sheet are depre-ciated based on the lease period defined. The debt based on the current value of the lease payments decreases as the leases are paid.

A lease is distinguished from service agreements by applying a model based on the right to control. When an arrangement includes an identified asset that is under the customer’s control, it is a lease to be recognized in the balance sheet as a right-of-use asset and a consequent lease liability. The service agreements are recognized as expenses in the income statement.

Leasing debt: Veikkaus measures the leasing debts on the start-ing date of the agreement to the current value of the leases that have not been paid on that date. The payments cover the fixed leases, less the possible incentives available, that are associated with the lease. Veikkaus takes into account the payments incurred by the termination of a lease as part of the lease payments, if it has prepared for a termination option during the lease term. Value added tax is not included in the amount of the lease debt; and maintenance and servicing charges, as well as oth-er service-related payments are mainly treated as expenses that cannot be capitalized to the balance sheet.

The leases are discounted based on an estimated interest rate on Veikkaus’ additional credit. Accord-ing to the standard, the interest on the addition-al credit is defined as the interest that the lessee

would pay whilst lending funds for an equivalent period or on equivalent securities, which would be needed for the acquisition of an equivalent asset.

Right-of-use asset: Veikkaus recognizes the right-of-use asset of a lease on the starting date of the leasing agreement, i.e. on the date when the lessor assigns the asset to Veikkaus’ control. The given asset is measured at the acquisition cost, less the accumulated de-preciations and the impairment loss, and adjusted based on the items resulting from the remeasure-ment of the leasing debt. The original acquisition cost corresponds to the amount of the original leasing debt. In the future, the right-of-use assets are also subject to impairment tests.

Applying exemptions and core assumptions: Veikkaus does not treat short-term leases of fewer than 12 months of assets of minor value as right-of-use assets recognized in the balance sheet but recognizes the leasing expenses incurred by them as expenses of the financial period. As for the tem-porary leases, Veikkaus considers their non-can-cellable lease term and possibly takes into account the optional further terms, when the company has enough certainty that they will be realized. Leases that are effective until further notice are considered to fall within the scope of exemptions on the basis of their 12-month period of notice.

Leases in which Veikkaus is the lessor are opera-tive leases, recognized in the income statement on a straight-line basis over the lease term.

The remaining liabilities of leases on which no right-of-use assets or lease debts are recognized in the balance sheet are presented in attachment 20. Attachment 12 presents a bridge calculation

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showing the share of the operative lease liabilities of 2018 that has been recognized in the opening balance sheet, and the share that remains a liability outside of the balance sheet.

Treatment of leases during the comparative period 2018

Leases where the essential risks characteristic for ownership are not transferred to the lessee are classified as other leases. The leasing and rent-

al payments paid on the basis of other leases in which Veikkaus acts as the lessee are recognized as lease expenses in the income statement on a straight-line basis over the lease term. The liabil-ities remaining from the comparative period 2018 are shown in attachment 20.

The other leases in which Veikkaus is the lessor are classified as operative leases, and their rental income is recognized in the income statement on a straight-line basis over the lease term.

INVENTORY

Inventory is measured at its acquisition cost or net realizable value, depending on which of them is lower. The acquisition cost is determined mainly on the basis of the weighted average acquisition price. Whilst measuring the value of the inventory assets, impairment due to obsolescence is taken into account.

NON-CURRENT RECEIVABLES AND ADVANCE PAYMENTS

The non-current receivables include a rent paid in advance on the premises of Casino Helsinki, which is recognized as an expense in the income state-ment on a straight-line basis over a 20-year rental period.

LOYAL CUSTOMER PROGRAMME

Veikkaus has a Loyal customer Program in place for the customers’ registration. When gaming takes place identified, Veikkaus can offer the customers versatile tools for the control of gaming. Compulsory identification on decentralized slot machines will be adopted gradually between 1 October 2020 and 31 January 2021.

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FINANCIAL ASSETS AND LIABILITIES

Financial assets

Financial assets are classified in accordance with IFRS 9 into the following categories: those meas-ured at amortized cost and those measured at fair value through income statement. The classification is based on the objective of the business model and on the contractual cash flows of the investments or the application of the fair value option in the initial acquisition.

Transaction costs are included in the original carry-ing amount of financial assets when the item is not measured at fair value through profit and loss. All purchases and sales of financial assets are recog-nized at the trade date.

Financial assets at amortized cost

The receivables classified as belonging to the group of financial assets at amortized cost include trade receivables and other receivables, as well as bank deposits of over three months. The assets classi-fied as part of the group are measured at amortized cost using the effective interest method. Trade re-ceivables include the retail agents’ sales of games, the retail commissions, less the prizes they have paid out to customers and the difference between slot machine funds and the location fees. The car-rying amount of current trade receivables and other receivables is assumed to be the same as the fair value.

The company recognizes the expected credit loss allowance for a financial asset that is measured at amortized cost. For the estimation of expected credit losses in trade receivables, a simplified pro-cedure in accordance with IFRS 9 standard is used, where credit losses are recognized at an amount equal to the expected credit losses covering the entire effective period. The recognized credit losses are based on historical information on a negligence of receivables.

Financial assets at fair value cost

The group of the financial assets recognized at fair value through profit and loss includes financial assets that have been acquired for trading or are classified at fair value through profit and loss, on the data of the initial recognition. Financial assets held for trading are acquired primarily for obtain-ing a profit in the short or long term and they are presented under either the long or the short-term financial assets.

The group includes Veikkaus’ investments in list-ed shares and unlisted shares, as well as equities. Gains and losses from changes in fair value, dis-posal and impairment losses are presented under financial income and expenses.

Cash and cash equivalents consist of cash, bank deposits withdrawable on demand, and other cash equivalents. Other cash and cash equivalents con-sist of short-term, highly liquid investments, the value of which only shows minor variation. The maturity of the items in the other cash and cash equivalents is a maximum of three months at the acquisition date.

Financial liabilities

The company’s financial liabilities are classified as financial liabilities at amortized cost. Financial li-abilities at amortized cost are initially recognized at fair value. Transaction costs are included in the original carrying amount of the financial liabilities. Subsequently, the financial liabilities are measured at amortized cost using the effective interest meth-od. Items that are measured at amortized cost may include long and short-term liabilities, trade pay-ables and other liabilities. A financial liability or a part thereof shall only be derecognized when the debt has ceased to exist, when the obligation spec-ified in the contract is discharged or cancelled or expired.

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SHAREHOLDERS’ EQUITY AND DISTRIBUTION OF PROFIT

The company’s operations are governed by the Lot-teries Act, which also defines the allocation and use of income, and the control of the use of income. The company may not distribute to its shareholders any dividend on its profit or on its unrestricted equity, nor shall its employees receive any consideration in return for their profits or surpluses. In accord-ance with a Council of State Decree, the company shall pay advances to the beneficiary ministries in accordance with the distribution shares laid down by the Lotteries Act. The State Budget determines the funds to be allocated annually, in proportion to the intended uses, which are estimated to corre-spond to the profit for the financial year and the funds to be distributed further.

The company pays an estimated share of the profit for the financial year as an advance return at least quarterly to the three beneficiary ministries: the Ministry of Agriculture and Forestry, the Ministry of Education and Culture, and the Ministry of Social Affairs and Health. Within one month from the ap-proval of the financial statements, the profit of the financial year less the previously paid advance is returned to the ministries. The advance payments are presented under current assets in the balance sheet. The result for the financial year is charged from the shareholders’ equity following a decision by the General Meeting.

PENSIONS AND OTHER LONG-TERM EMPLOYEE BENEFITS

Pension plans

In accordance with IFRS, pension plans are divided into defined contribution and defined benefit plans. The defined contribution plans are such in which Veikkaus makes fixed payments to a pension com-pany and has no obligation to make additional pay-ments even if the fund does not have enough funds to pay the pensions. The payments to the defined contribution plans are recognized in the statement of comprehensive income as statutory pension ex-penses. Such payments are payments to the TyEL system.

The other pension plans are defined benefit pension plans. They are recognized in the balance sheet as debt calculated based on certain assumptions, reflecting the amounts of future pensions payable based on the plan. The cost of retirement recog-nized through profit or loss reflects, inter alia, an increase in debt due to work done by the staff dur-ing the financial year.

Items from the defined benefit plans are derived from actuarial calculations. The calculations are based on assumptions concerning, for example, the termination of employment by persons covered by the pension plan before retirement age, the future salary level and the discount rate used in the calcu-lations. Expenses based on seasonal performance and net interest on defined benefit plans are rec-ognized through profit and loss and included in the employee benefit expenses. The items arising from the redefinition of the defined benefit net debt (or asset) are recognized under other comprehensive income.

Long-term employee benefits

The compensation liability for years of service has been calculated based on when the employees joined the company, by discounting the compen-sation liability realized at the end of the year to the present. Liabilities based on long-term employee benefits are included in the other long-term liabili-ties in the balance sheet.

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OTHER CURRENT LIABILITIES – THE PRIZE FUND

The prize fund is not an actual fund, but the com-pany’s liability to players. The prize fund consists of funds based on the share of prizes that remains undistributed in the prize distribution of the games in accordance with the lottery decree and the priz-es left unclaimed after the prize claim period of one year, or left unclaimed after games of personal draws. The funds in the prize fund are used for ad-ditional prize distribution in different games, as well as for adjustments to prizes in accordance with the lottery decree.

The company is under obligation to distribute the entire amount corresponding to the prizes deter-mined in the lottery decree to the players.

In multinational lottery games of joint prize tiers, the rounding of prizes and unpaid funds are trans-ferred to the multi-national prize fund of the game. Unless the prizes have been collected within the timeframe provided by the Lotteries Act, the com-pany must transfer individual unclaimed prizes of at least EUR 10 million to the multinational prize fund of the game and the other unclaimed prizes to the unpaid gaming assets. These funds are used in the company’s games as decided by the company.

GROSS GAMING REVENUE

As of the financial statements 2019, Veikkaus will make the presentation of the gaming revenue in the income statement uniform for all game groups and begin to report the proceeds from gaming as gross gaming revenue. The new practice is in line with the IFRS covering financial reporting and the inter-national code of conduct in the field, adding to the comparability. The change will not affect the return-ing of the gaming proceeds.

The change in the method of presentation entails that gross gaming revenue replaces the lines of turnover and the profit. The gross gaming reve-nue consists of the bets placed by players on the games less the prize shares in accordance with the rules of the games. We have already applied reporting through the gross gaming revenue with physical and digital slot machine and table games previously. The sales of lottery and betting games are recognized according to the draw dates. The draws may take place weekly or daily.

The uncashed proceeds in the cash registers of slot machines on 31 December and the game capital in

the prize payout machinery on 31 December have been recognized and entered in the balance sheet as cash and cash equivalents. The lottery tax and the retail commissions on these items are record-ed as a liability. According to the lottery decree, the prizes left unclaimed in the previous year and the funds generated from the rounding of the prizes shall be paid as prizes on subsequent rounds of the games during the following calendar year at the latest.

The toto games organized by the company include both Finnish and international horse race events. The company also offers foreign players game events organized in Finland through game opera-tors operating in their home countries. The gross gaming revenue of Finnish and foreign toto games played in Finland is recorded in the turnover ac-cording to the time of the confirmation of the game result. In the case of toto games played to Finland from abroad, the game object compensations paid by foreign gaming operators to Veikkaus affecting the turnover are recognized under game event co-operation.

OTHER OPERATING INCOME AND EXPENSES

Other operating income includes rental income from coin & note exchange machines placed at the points of sales managed by retailers, Casino Hel-sinki event fees, indemnifications, disposal gains and losses on property, and other non-operating

income such as rental income. Other operating ex-penses include losses from the disposal of assets and expenses related to the operational business.

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MATERIALS AND SERVICES

The retail commissions consist of the retail com-missions paid to the partners and based on game sales, as well as of slot machine location fees.

Materials and supplies include the cost of spare parts and tools for maintaining the company’s gam-ing equipment.

The payments to authorities and supervision fees include the costs of monitoring the games, the costs of the supervision systems covering game development; the costs of monitoring and research-ing gaming addiction; and the costs of the Peluuri Gambling Helpline. In addition, the company’s share of the costs of the Funding Centre for Social Welfare and Health Organization, working under the auspic-es of the Ministry of Social Affairs and Health, is recorded on this line.

Scratchcard printing costs, game coupons, receipt rolls, and the costs associated with the Veikkaus Card are expensed at the time of acquisition.

The draw and result information costs include the TV co-operation agreements and other result pub-lishing costs.

Game event cooperation includes the costs of the usability of betting object information. The costs are contract-specific or formed on the basis of either game rounds or the annual turnover of games. The costs charged and paid by foreign gaming opera-tors of toto games are included in this category.

Product advertising costs include product-related media slot purchases and production and design costs.

OPERATING PROFIT

The operating profit consists of turnover and other operating income less the prizes paid and lottery tax, as well as the material and service costs, em-ployee benefit expenses, service purchases, and other operating expenses, depreciation and possi-ble impairment losses.

TAXES

The lottery tax is 12% of the amount determined for the calendar month of the proceeds from the sales of games, less the prizes recognized as an expense. The funds that are withdrawn from or paid into the prize fund during the calendar month are added to or subtracted from the sum.

In accordance with section 59 of the Value Add-ed Tax Act, Veikkaus’ operations are not subject to VAT. The effective value added tax is included in the company’s expenses and investments.

In accordance with Section 21 of the Income Tax Act, Veikkaus is only liable to income tax in respect of profit other than that referred to in the Lottery Tax Act. Income tax is paid on the rental income on coin & note exchange machines placed at the points of sales managed by retailers, and on the compensation for the use of holiday accommoda-tion by the staff. Veikkaus’ financial statements do not include other income subject to income tax.

THE APPLICATION OF NEW AND REVISED IFRS STANDARDS

At the date of the financial statements, Veikkaus has estimated that the upcoming published IFRS standards will not have an effect on Veikkaus’ fi-nancial statements.

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1. GROSS GAMING REVENUE BY GAMES AND GAME GROUPS

EUR thousand 2019 Share of GGR. % 2018 Share of GGR. %

CASINO GAMESSlot machines total 683,448 40.4 699,282 39.8 - Partner network 554,582 32.8 569,043 32.4 - Veikkaus’ arcades 128,866 7.6 130,240 7.4Other casino games 228,333 13.5 240,301 13.7CASINO GAMES TOTAL 911,781 53.9 939,583 53.4

LUCKY GAMESWeekly drawn games 419,829 24.8 439,698 25.0Daily drawn games 160,830 9.5 163,919 9.3Scratchcards 50,487 3.0 54,233 3.1LUCKY GAMES TOTAL 631,145 37.3 657,850 37.4

BETTINGBetting games 93,077 5.5 102,892 5.8Toto games 54,741 3.2 58,631 3.3BETTING GAMES TOTAL 147,818 8.7 161,523 9.2

GAME GROUPS TOTAL 1,690,744 100.0 1,758,956 100.0

As of the financial statements 2019 we have made the presentation of game proceeds more uniform for all game groups. and they are reported as gross gaming revenue (GGR). The data from the comparative period 2018 have been modified to correspond to the new way of presentation. The Accounting principles explain the notion of GGR in more detail.

Other casino games: Digital slot machine games. physical and digital table games. eInstants. and eBingo games

Weekly drawn games: Lotto. Eurojackpot. Vikinglotto. Jokeri. and Lomatonni

Daily drawn games: Keno. Kaikki tai ei mitään. Synttärit. Tähdenlento. Pore. and Syke

Betting games: Moniveto. Tulosveto. and Voittajaveto games. Pitkäveto. Live-veto. Vakio. and Virtuaaliveto games

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2. DEVELOPMENT OF PROFIT 2017–2019

EUR thousand 2019 2018 2017

GGR 1,690,744 1,758,956 1,777,757

Operating profit 1,009,418 1,014,504 1,021,285 % of GGR 59.7 % 57.7 % 57.4 %

Profit before appropriations and taxes 1,009,013 1,014,122 1,021,378 % of GGR 59.7 % 57.7 % 57.5 %

Profit for the financial year 1,009,013 1,014,208 1,021,292% of GGR 59.7 % 57.7 % 57.4 %

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EUR thousand 2019 2018

Rental income 2,383 2,132Proceeds from sales of fixed assets 1,023 534Other income 1,008 1,146TOTAL 4,414 3,812

3. OTHER OPERATING INCOME

4. DEPRECIATION AND IMPAIRMENT


Buildings and constructions 5,874 6,147Machinery and equipment 30,403 31,935Intangible assets 11,050 11,092Leases 10,215 0Disposal loss of fixed asssets 802 787TOTAL 58,343 49,961

Fixed assets and right-of-use assets are depreciated on a straight-line basis over their economic useful lifetime. Land, housing stocks, and art objects are not subject to depreciation.

5. SERVICES PURCHASED


Services purchased, ICT services 52,394 56,311Services purchased, other 11,043 13,105SERVICES PURCHASED 63,437 69,416

Auditors’ fees included in services purchased Audit 36 36Other services 265 279TOTAL 300 314


Other advertising and marketing expenses 14,761 23,879Real estate expenses 12,064 23,012Banking and cash processing expenses 9,331 9,212Other expenses 16,634 29,683TOTAL 52,789 85,786

6. OTHER OPERATING EXPENSES

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7. RESEARCH AND DEVELOPMENT EXPENSES


R & D expenses 20,461 20,395R & D investments 6,301 2,932TOTAL 26,762 23,327 Research and development expenses are mainly included in the personnel expenses and services purchased. Research and development investments are related to new products and mainly included in the intangible assets.

8. FINANCIAL INCOME AND EXPENSES


Dividend income from long-term investments 80 64Interest income from deposit and bank accounts 114 43Other financial income 36 29FINANCIAL INCOME 231 136

Interest expenses on leasing debts 538 0Other interest expenses 99 518FINANCIAL EXPENSES 637 518

TOTAL -406 -382

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9. TANGIBLE ASSETS AND DEPRECIATION

2019 EUR thousandLand and

water

Buildings and

constructions

Machinery and

equipment

Acquisitions in

progressTotal

Acquisition cost 1 Jan 2019 3,943 129,065 271,465 48 404,521Increase 0 1,158 22,971 122 24,251Decrease -121 -4,522 -27,016 0 -31,659Reclassification 0 0 0 -48 -48Acquisition cost 31 Dec 2019 3,821 125,701 267,420 122 397,065

Accumulated depreciation 1 Jan 2019 0 -70,161 -175,184 0 -245,346Depreciation for the financial year 0 -5,874 -30,403 0 -36,276Accumulated depreciation on disposal 0 3,624 26,059 0 29,683Accumulated depreciation 31 Dec 2019 0 -72,411 -179,528 0 -251,939

NET BOOK VALUE 31 DEC 2019 3,821 53,291 87,892 122 145,126

2018 EUR thousandLand and

waterBuildings and constructions

Machinery and

equipment

Acquisitions in

progressTotal

Acquisition cost 1 Jan 2018 3,943 130,754 262,243 27 396,967Increase 0 2,643 34,181 48 36,872Decrease 0 -4,348 -24,970 -1 -29,318Reclassification 0 14 11 -26 0Acquisition cost 31 Dec 2018 3,943 129,065 271,465 48 404,521

Accumulated depreciation 1 Jan 2018 0 -66,823 -167,772 0 -234,595Depreciation for the financial year 0 -6,147 -31,935 0 -38,083Accumulated depreciation on disposal 0 2,809 24,523 0 27,332Accumulated depreciation 31 Dec 2018 0 -70,161 -175,184 0 -245,346

NET BOOK VALUE 31 DEC 2018 3,943 58,903 96,281 48 159,175

Following the adoption of IFRS 16, the right-of-use assets recognized in the balance sheet are reported as a separate group under non-current assets in the balance sheet.The right-of-use assets are specified in note 12.

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2019 EUR thousand Software and capitalized development costs

Acquisitions in progress Total

Acquitision cost 1 Jan 2019 143,043 1,954 144,997Increase 412 7,956 8,368Decrease -671 0 -671Reclassification 218 -218 0Acquisition cost 31 Dec 2019 143,002 9,692 152,694

Accumulated depreciation 1 Jan 2019 -117,776 0 -117,776Depreciation for the financial year -11,050 0 -11,050Accumulated depreciation on disposal 645 0 645Accumulated depreciation 31 Dec 2019 -128,181 0 -128,181

NET BOOK VALUE 31 DEC 2019 14,821 9,692 24,514

Net book value 1 Jan 2020 14,821 9,692 24,514

2018 EUR thousand Software and capitalized development costs

Acquisitions in progress Total

Acquisition cost 1 Jan 2018 138,219 3,501 141,721Increase 1,445 1,853 3,298Decrease -22 0 -22Reclassification 3,401 -3,401 0Acquisition cost 31 Dec 2018 143,043 1,954 144,997

Accumulated depreciation 1 Jan 2018 -106,706 0 -106,706Depreciation for the financial year -11,092 0 -11,092Accumulated depreciation on disposal 22 0 22Accumulated depreciation 31 Dec 2018 -117,776 0 -117,776

NET BOOK VALUE 31 DEC 2018 25,268 1,954 27,221

Net book value 1 Jan 2019 25,268 1,954 27,221

10. INTANGIBLE ASSETS AND DEPRECIATION

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11. CASH FLOW FROM INVESTMENTS AND INVESTMENTS IN PROGRESS

EUR thousand 2019 2018 Slot machines 21,014 31,860Casino games 57 102Machinery and equipment 0 232Fixtures and other equipment 0 119Transportation equipment 1,632 1,879Worktools 268 22,971 0 34,192

Software 629 4,846Basic improvement of real estate 1,158 2,658Stocks and shares 0 127Dividend income -80 -64Changes in investments in progress 7,861 -1,525TOTAL 32,539 40,234

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12. LEASES 1 (2)

The impact of the adoption of IFRS 16 has been recorded as an adjustment to the opening balance 2019. The right-of-use assets recognized in the balance sheet are presented as a separate group under the non-current assets in the balance sheet. The debt incurred by leases is presented as short and long term interest-bearing debt. The upcoming rental payments have been discounted at their present value on the balance sheet, using an estimated interest of 1.5% on an additional loan.

Adjustments to the opening balance sheet 2019 EUR thousand 1 Jan 2019

NON-CURRENT ASSETSRight-of-use assets 29,720

NON-CURRENT LIABILITIESLease debt, interest-bearing 20,644CURRENT LIABILITIESLease debt, interest-bearing 9,076

The remaining liabilities of such leases on which Veikkaus does not recognize right-of-use assets or leasing debt in the balance sheet in the opening balance 2019, are presented as liabilities outside the scope of the balance sheet in attachment 20.

Adjustments associated with the adoption of the IFRS 16 standard EUR thousand Operative lease liabilities in the financial statements 31 December 2018 37,033Short-term and minor leases and other lease liabilities the payments of which are expensed

-6,231

Discounting the lease payments to the current value -1,082Lease liabilities recognized in the balance sheet 1 January 2019 29,720

Right-of-use assets EUR thousand Land Buildings and

constructions Total

Net book value 1 Jan 2019 196 29,524 29,720Increase for the financial year 6,115 6,115Decrease for the financial year -14 -10,202 -10,215NET BOOK VALUE 31 DEC 2019 183 25,437 25,620

The asset group of land includes land leases. The asset group of buildings and constructions includes the leases for business premises such as the Pelaamo and Feel Vegas arcades and the Casino, as well as the leases for other premises and depots.The lease for the head office is also part of this group.

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12. LEASES 2 (2)

Lease expenses recognized through profit and loss: 2019

Lease expenses for short-term leases 2,188Lease expenses for minor leases 81Other lease expenses and changing lease expenses for leases 665TOTAL 2,934

Amounts recorded in the cash flow statement Decrease in lease debt 9,801 Interest on lease debt 538 Lease expenses recognized through profit and loss 2,934TOTAL 13,273

Lease debt EUR thousand 12/31/2019

Non-current liabilities Lease debt, interest-bearing 16,132Current liabilities Lease debt, interest-bearing 9,901NET BOOK VALUE 31 DEC 26,034

Expiry of undiscounted lease payments Within a year 10,292In over a year and in five years at the maximum 16,247In over five years 332TOTAL 26,871

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13. NON-CURRENT INVESTMENTS AND OTHER LONG-TERM RECEIVABLES

NON-CURRENT INVESTMENTSEUR thousand 2019 2018

Shares in unlisted companies 1,066 1,066Listed shares 170 170TOTAL 1,236 1,236

LONG-TERM RECEIVABLES AND ADVANCE PAYMENTS EUR thousand 2019 2018

Security deposit, Eurojackpot 12,185 12,185Lease advances and guarantees paid 2,139 2,852TOTAL 14,324 15,037


Accounts receivable 28,579 28,001Accrued income and deferred expenses 7,083 9,437Other receivables 6,589 5,169TOTAL 42,250 42,607

The accounts receivable consist of game fees uncharged from retailers. The charging period runs from Monday to Sunday and the payments for the previous week iare charged on the basis of payment data on Tuesdays, Wednesdays, and Thursdays. There are 6,325 points of sales. Due to the nature of the accounts receivable, there is no credit risk. The balance sheet values of the accounts receivable on the date of the financial statements are assumed to equal their fair value.

KEY ITEMS OF ACCRUED INCOMEEUR thousand 2019 2018

Unclaimed prizes of slot machines 3,875 5,521Other accrued income 3,208 3,916TOTAL 7,083 9,437

14. CURRENT RECEIVABLES

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15. CASH AND SHORT-TERM INVESTMENTS


Cash and bank accounts 99,593 106,690Deposits and receivables 40,000 19,900TOTAL 139,593 126,590

The deposits and receivables are deposits with a short maturity period.

PPRINCIPLES OF FINANCIAL RISK MANAGEMENT In its business operations, Veikkaus is exposed to certain financial risks of a limited scale. The main finan-cial risks are interest risk and CCR (credit risk). To manage these risks, Veikkaus complies with a risk man-agement policy, approved by Veikkaus’ Board of Directors. Of the financial risks, exchange risk and liquidity risk are not significant due to the nature of Veikkaus’ operations.

INTEREST RATE RISKShort-term financial investments make Veikkaus subject to an interest rate risk, which is, however, not significant. The income and the operative cash flows are mainly unaffected by fluctuation in the market interest. Due to negative market interest, Veikkaus has agreed on fixed deposit levels with the banks, with the deposits remaining below these levels being subject to an interest of 0.0%. The negative market interest is only applied to the share of the deposits in these accounts exceeding the deposit level.

CREDIT RISKIn its investing activities, Veikkaus complies with the guidelines approved by the Board of Directors, accord-ing to which investments are made by securing the capital without exchange rate risks and for a maximum of five years. According to the investment principles, active investing shares is not permitted. The shares currently recognized as long-term investments belonged to the previous gaming operators and were trans-ferred to Veikkaus’ owndership during the integration. The credit risk associated with the accounts receivable is largely dispersed and does not therefore involve a significant credit risk. The retailers’ sales and commissions, and the prizes they pay out to customers, the slot machine charges and the location fees are netted, and debited or credited to the retailers. The net receivables are charged or the net liabilitied are paid by Veikkaus via a direct debit - credit system. Historic data suggests that the credit loss risk is nearly 0 %.

16. SHAREHOLDERS’ EQUITY AND EQUITY MANAGEMENT

EUR thousand shares pcs 2019 shares

pcs 2018

Share capital 6,000 600 6,000 600Acquitision capital 151,258 151,258Reserve for invested unrestricted equity 346 346Retained earnings from previous financial periods 0 0Profit for the financial year 1,009,013 1,014,208TOTAL 1,161,216 1,166,412

ACQUISITION CAPITALFollowing an approval by the MInistry of Social Affairs and Health, the equity of the former Finland’s Slot Machine Association included working capital, which corresponded to the amount of the non-depreciated cost of the non-current assets and the reserve made for future investments (as defined in FAS, the Finnish Accounting Standards). In connection with the integration, the working capital was transferred to Veikkaus’ shareholders’ equity as acquisition capital.

RESERVE FOR INVESTED UNRESTRICTED EQUITYThe reserve for invested unrestricted equity is subject to the regulation in chapter 8, section 2 of the Limited Liability Companies Act. The Reserve for invested unrestricted equity is part of the company’s unrestricted equity which can be used for distributing funds.

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17. EMPLOYEE BENEFIT OBLIGATIONS 1 (2)

PENSION OBLIGATIONSVeikkaus’ defined benefit pension plans include additional old age pensions for part of the employees to en-able them to retire at an earlier age without losing their pension benefit. Pension plans were granted partly to persons having started working for Veikkaus before 1985. With employees having joined the company as old employees of Finland’s Slot Machine Association, persons having started to work for the company before 28 February 1994 have access to the pension benefit. The commitment given to the insured in presented as a liabiliy, whereas the insurance company’s share of the commitment is presented as an asset. Pensions and paid-up policies are adjusted with a pension index, the cost of which is borne by Veikkaus. In the insurance plan, the amount of the funds is calculated using the same discount rate as that which is applied to the liability. Thus, a change in the discount rate does not lead to significant risks. Similarly, increases in life expectancy do not cause a significant risk, as the insurance company covers the majority of the impact of life expectancy. Meanwhile, Veikkaus is fully liable for any raise in the pensions; thus, an increase in the pension index of, for example 0.5 % would raise the liability by 6.8 % and, respectively, a decrease of 0.5 % would cut the liability by 6.2 %.

EUR thousand 2019 2018Pension liabilities in the statement of comprehensive income

DEFINED EMPLOYEE BENEFIT LIABILITIES RECOGNIZED IN THE INCOME STATEMENT Expenses based on service during the financial year 432 485Net interest expenses 42 40TOTAL 474 525

ITEMS ARISING FROM REMEASUREMENT 912 -375

RECONCILIATION OF THE NET DEFINED BENEFIT LIABILITY IN THE BALANCE SHEET

Defined benefit obligation 17,006 15,017Fair value of assets -13,309 -12,394NET DEFINED BENEFIT LIABILITY IN THE BALANCE SHEET 31 DEC 3,697 2,623

NET DEFINED BENEFIT OBLIGATION IN THE BALANCE SHEET 1 JAN 2,623 2,756Amount recognized in the statement of comprehensive income, including items arising from remeasurement for EUR 912 000 (2018; -315,000)

1,386 150

Contributions to the plan paid by the employer -312 -283NET DEFINED BENEFIT LIABILITY IN THE BALANCE SHEET 31 DEC 3,697 2,623

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CHANGES IN THE NET DEFINED BENEFIT OBLIGATION IN THE BALANCE SHEET

DEFINED BENEFIT OBLIGATION 1 JAN 15,017 15,197Expenses based on service during the financial year 432 238Expenses based on service during the financial year arising from re-measurement

0 477

Interest expenses 252 225ITEMS ARISING FROM REMEASUREMENTActuarial gains (-) / losses (+) arising from changes in demographic assumptions

0 0

Actuarial gains (-) / losses (+) arising from changes in economic as-sumptions

1,449 -891

Actuarial gains (-) / losses (+) arising from changes in experiential ad-justments

201 137

Benefits paid -345 -366DEFINED BENEFIT OBLIGATION 31 DEC 17,006 15,017

CHANGES IN THE FAIR VALUE OF PLAN ASSETS RECOGNIZED IN THE BALANCE SHEET

FAIR VALUE 1 JAN 12,394 12,441Interest income 210 185Income from the plan assets (excluding items included in interest expen-ses/income)

738 -379

Remeasurement 0 230Payments made to the plan by the employer 312 283Benefits paid -345 -366FAIR VALUE 31 DEC 13,309 12,394

The amount the company expects to pay to the defined benefit plans during the following year

287 300

The funds in the plan are approved insurance agreements.

MOST SIGNIFICANT ACTUARIAL ASSUMPTIONSDiscount rate 0,7 % 1,7 %Rate of salary increase 2,2 % 2,6 %Rate of pension increase 1,5 % 1,9 %Weighted average duration of the defined benefit obligation 15 15

OTHER LONG-TERM EMPLOYEE BENEFITS: BONUS FOR YEARS OF SERVICE Veikkaus grants its employees a bonus for years of service, classified as a long-term employee benefit liability. Obligation recognized in the balance sheet


At the beginning of the financial year 1,519 1,452Change -79 67AT THE END OF THE FINANCIAL YEAR 1,440 1,519

17. EMPLOYEE BENEFIT OBLIGATIONS 2 (2)

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18. CURRENT LIABILITIES


ADVANCES RECEIVED 5,630 6,452

ADVANCES FOR MULTI-WEEK SUBSCRIPTIONS 12,098 10,710

ACCOUNTES PAYABLE 16,021 18,929

CUSTOMERS’ FUNDS 35,704 39,210

SETTLEMENT DEBT TO THE STATELottery tax 34,677 38,280Withholding tax liability 1,594 1,612Social security liability 44 55Value added tax 1,611 1,803SETTLEMENT DEBT TO THE STATE TOTAL 37,926 41,750

ACCRUALS AND DEFERRED INCOMEAccrued prizes payable 13,923 17,026Items arising from salaries 19,615 19,717Other accrued income 15,387 17,167ACCRUALS AND DEFERRED INCOME TOTAL 48,925 53,910

OTHER CURRENT LIABILITIESPrize fund 9,830 9,541Eurojackpot fund 2,236 2,391Other current liabilities 0 6Other liabilities 0 33Lease debt, interest-bearing 9,901 0OTHER CURRENT LIABILITIES 21,967 11,970

CURRENT LIABILITIES TOTAL 178,271 182,932

The customers’ funds include unclaimed prizes and return payments on lottery and betting games, as well as the funds deposited in online players’ game accounts. The prize fund consists of matured unclaimed prizes, funds arising from the rounding of prizes, and un-claimed prizes in disposed scratchcards, which shall be distributed as prizes to players on subsequent rounds of different games in accordance with the Council of State Decree on Lotteries. In 2019 the funds accumulated in the prize fund amounted to EUR 10.5 million, and the funds were used to pay out prizes in different games for EUR 10.2 million during the financial year.

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Veikkaus’ related parties include the President and CEO, the Executive Team, the Board of Directors, the Supervisory Board, and the other state-owned companies.

Salaries paid, compensations, and fringe benefits


President and CEO 444 437Other members of the Executive Team* 1,488 1,642Board of Directors 264 262Supervisory Board 93 74TOTAL 2,289 2,415

*At the beginning of the financial year 2019, the Executive Team had 7 members, and at the end of the finan-cial year, 8 members, in addition to the President and CEO.

The salaries paid include the taxable salaries and other remuneration elements paid to the Executive Team.

The members are entitled to a performance-based incentive for the financial year 2019, the size of which will be determined after the completion of the financial statements, and which will be paid in 2020.

The President and CEO’s period of notice is six (6) months on both the company’s and the President and CEO’s part. If certain criteria defined in the President and CEO’s contract are met, a severance pay equalling six (6) months’ salary is paid. The President and CEO’s retirement age is determined in accordance with the Employees’ Pension Act.

The notice period of the Executive Team members is three (3) months on the part of the company and the executives.

The Board of Directors and the executives do not enjoy extraordinary employee benefits. The executives are entitled to a car and telephone benefit. The executives are not entitled to additional pension benefits or to stock options or share-based incentive plans.

Other related party transactions: Veikkaus may purchase goods and services from other state-owned companies. The purchase prices of the goods and services are the same as for any other group of customers, and their volume is insignificant.There have been no extraordinary transactions with subsidiaries belonging to the related parties of Veikkaus Oy.

19. RELATED PARTY TRANSACTIONS

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20. LEASES AND OTHER CONTINGENT LIABILITIES


Operating lease liabilities Items classified as operative expenses

5,036 37,033

Leasing liabilities 491 612Other contingent liabilities 50 50TOTAL 5,576 37,695

Lease liabilitiesDue within one year 2,399 11,700Due in over one year but within five years 2,553 24,698Due in over five years 83 635TOTAL 5,036 37,033

Other leases include the leases of business premises of the gaming locations and those of the company’s offices.

Leasing liabilitiesDue within one year 381 475Due in over one year but within five years 110 137TOTAL 491 612

The other lease liabilities include rental of offices, business premises, depots, and parking spaces. The leases that are the most significant in terms of their amount are temporary, and they are classified accord-ing to IFRS 16 as leases that shall be recognized as right-of-use assets in the balance sheet. Attachment 12 concerning IFRS 16, Leases, shows the distribution of the lease liabilities of 2018 in the balance sheet and the income. The discounted contract value of the leases is recognized as depreciation and interest expenses in the income statement.

The leasing liabilities cover coffee machines by JOBMeal Oy; and the slot machines located at the Casino Helsinki and the Feel Vegas and Pelaamo arcades. In addition, the leasing liabilities cover a cleaning ma-chine, kitchen equipment, and copy machines.

Banks and financial institutions have granted guarantees in favour of Veikkaus’ normal business operations for a maximum of EUR 50,000.00 on 31 Dec 2019. The guarantees will mature in 2027.

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21. SIGNATURES OF THE BOARD OF DIRECTORS’ REPORT AND THE FINANCIAL STATEMENTS

Helsinki, 10 February 2020

Olli-Pekka KallasvuoChairperson of the Board

Outi Henriksson Minna Pajumaa

Hanna Sievinen Christian Cedercreutz

Anne Larilahti Juha A. Pantzar

Olli Sarekoski

President and CEO

A report on the audit has been issued today.

Helsinki, 18 February 2020

KPMG Oy Ab

Lasse Holopainen, Authorised Public Accountant

89Veikkaus Oy | PL 1, 01009 Veikkaus | p. 09 437 01 | Y-tunnus 2765220-1 | veikkaus.fi

veikkaus oy annual & csr report20

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