Cherry's Annual Report 2013

ANNUAL REPORT 2013

CHERRY

Part 1 About Cherry

Part 2 Annual Report

Online gaming operator of the year2013 was an eventful year for Cherry. In addition

to our extensive investments in online gaming

we have also made several investments to create

the prospects for further expansion. The trans-

formation of 50-year old Cherry from a traditional

casino company to a modern growth company

with a strong focus on online gaming continues.

– Emil Sunvisson, CEO

3 Highlights in the past year

4 Report from the CEO

6 The market

8 Cherry’s vision and business areas

10 Online Gaming

12 Resturant Casino

14 Yggdrasil Gaming

16 Development project Klubblo

17 Cherry – history

20 The share

22 Executives and Board of Directors

23 Introduction

24 Administration report

30 The group

34 The parent company

38 Notes

60 Signatures

61 Auditors’ report

62 Definitions

2 | cherry annual report 2013

Cherry in briefFor over half a century Cherry has offered fun & excitement for millions of players. And we intend to continue to do so when we meet the next generation of players, both on our gaming tables and online. This is Cherry in 2013:

annual figures

best online gaming operator of the yearOnline Gaming grew in 2013 by 31 per cent and the number of active customers increased by 56 per cent. In February 2014 Internatio-nal Gaming Awards also appointed Cherry Online Gaming Operator of the Year. Read more on page 10.

record year for restaurant casinoThanks to a strategy of improve-ments and acquisitions, Cherry increased its sales and succeeded in achieving its best result ever despite a shrinking market.Read more on page 12.

the marketCherry is active in different parts of the gaming market;restaurant casino in Sweden, international online casino and lottery, Swedish online lottery and online gaming development. Read more about the markets on page 6.

Cherry is a market leader with its 60% share in restaurant casino with 372 gaming tables.

32%Cherry increased online gaming turnover in 2013 by

In 2013 Cherry invested in the games development

company Yggdrasil Gaming and Klubblo – a new Swedish sports lottery.

development project klubbloKlubblo’s goal is to offer a national online lottery to support Swedish sports clubs. 30-40 per cent of net gaming revenue will be directly allocated to Swedish sports clubs.Read more on page 16.

yggdrasil gamingYggdrasil is a new games development company, founded by the industry veteran Fredrik Elmqvist, which offers a wide range of lottery and casino games for computers, mobiles and tablets. Read more on page 14.

The group, MSEK 2013 2012

Sales 266.3 231.5

EBITDA -24.0 11.8

EBIT -33.9 6.1

Profit per share -2.53 0.16

Liquid assets (MSEK) 68.4 59.0

Dividend per share* 4.00 11.20

Online gaming

Deposited amount during period

260.1 165.9

Restaurant Casino

Market share 60.4 57.8

*Proposed dividend/redemption process (SEK) per share

KEY FIGURESSALESPer quarter and business area (MSEK)

80,0

70,0

60,0

50,0

40,0

Q1

30,0

20,0

10,0

0,0Q4Q2 Q3

Online Gaming

Restaurant Casino

3cherry annual report 2013 |


Growth on all fronts2013 was an eventful year for Cherry.In addition to our extensive investmentsin online gaming we have also made several investments to create the foundation for further expansion. The transformation of 50-year old Cherry from a traditional casino company to a modern growth company with a strong focus on online gaming continues.

PART 1 REPORT FROM THE CEO

32%Online Gaming revenues increased by 32% and Restaurant Casino set a record both in terms of sales and profit.

266.3msekGroup sales increased by 15 per cent and amounted to 266.3 MSEK (231.5).



DEAR SHAREHOLDERS,Cherry is a company that invests, owns and develops successful operations within gaming and casino. The investments in Yggdrasil and Klubblo, including the acquisition of Web Resorts, are in line with Cherry’s strategy to create growth and shareholder value within gaming and casino.

ONLINE GAMING CONTINUES TO HAVE STRONG GROWTH2013 was a build-up year with major investments. We have launched several new brands on our own platform, which has been developed with the latest technology, and which supports both mobiles and computers. We have also built up an organisation to manage support and pay-ments. The sale of the Automaten sites enabled us to pay a very large dividend to our shareholders and at the same time invest in marketing to build brand awareness.

The investments have given us the tools we need to take the company to the next level. With games operating on our own platform we have created new opportunities to differentiate our offering, to increase control over cus-tomers and products, and finally, but by no means least, we have switched to a business model with significant economies of scale.

During the fall, Cherry acquired 49 per cent of the online gaming company Web Resorts. It is interesting to add brands with alternative profiles and that appeal to new players, and we believe the acquisition to be finan-cially beneficial for Cherry, and we can contribute with our competence within the Nordic markets.

We are also extremely proud to have been appoint-ed Online Gaming Operator of the Year by International Gaming Awards.

In 2014 we will continue to invest in growth in Online Gaming. Our ambition is to increase sales to a much higher level than today.

IMPRESSIVE RESTAURANT CASINORestaurant Casino ended the year impressively with new records in both sales and profits – despite the fact that we are operating in a shrinking market. Our previous acqui-sitions have strengthened our position and contributed to further economies of scale in our activities. It is also very satisfying that our long-term efforts to continuously improve quality, service and modernising our payment solutions have paid off.

Operations are very stable, well functioning, and the profitability is satisfactory. At the present time we have 60 per cent of the market, and hope to be able to even further increase market shares in 2014 – both organically and through acquisitions. We will also continue to develop our concept by offering more and easier payment options to our customers.

A NEW GAMING COMPANY EMERGESYggdrasil Gaming’s investment in lottery products with

Lotto7, keno and video scratch are completely unique on the market. Online casino, poker and sports gaming are highly exposed to competition. In the lottery market, however, we can see significant opportunities for strong growth and a clear trend of conversion from physical to digital lotteries.

The market for online slot machines is larger than the lottery market, but is also more exposed to competition. With the launch of its latest slots, Yggdrasil Gaming has achieved a commercial breakthrough and proved that they also can deliver slot machines of absolute top class.

Several of the leading Nordic operators have already signed agreements, and there are others in the queue. We are so far very pleased with our investment in Yggdra-sil Gaming and impressed with the innovative gaming portfolio they have produced in a short time.

KLUBBLO IS READY TO GOKlubblo is a co-operation between Swedish sports, Metro and Cherry. The ambition is that Klubblo will become an alternative source of financing for Swedish sports clubs. The reception from the sports associations has exceededexpectations and we are looking forward to the launch of Klubblo.

THE FUTURE 2014 is an important year for Cherry. We are going to show that Online Gaming can continue to grow and earn money. Together with our partners, Idrottsalliansen and Metro, we hope to launch the new product Klubblo on the market. We are also going to establish Yggdrasil Gaming as a leading supplier of quality online gaming.

We believe that the reregulation of several European markets will impose new requirements on operators. We look forward to a regulation that permits gaming on fair conditions for both operators and players. The reregula-tion will open new opportunities for those who can best adapt to the new gaming rules.

I am convinced that Cherry has both the competence and the motivation required to succeed in a rapidly changing market, and we are well equipped to manage the different rules and regulations in different markets.

I am pleased and grateful to be entrusted to develop one of Sweden’s finest gaming companies.

We are extremely proud to have been appointed Online Gaming Operator of the Year by International Gaming Awards. In 2014 we will continue to invest in growth in Online Gaming.


PART 1 MARKET

INTERNATIONAL ONLINE CASINOThe market for online casino has experienced very strong growth in recent years, which has been enabled by tech-nical developments driving the transition from physical casino to online casino. Future growth will be driven by increased gaming from mobile units, new regulations and better payment methods.

The main part of Cherry’s earnings in online gaming today comes from the Nordic countries, where gaming is offered under Maltese licence.

In Sweden, Norway and Finland there is still in theory a monopoly in casino. In practice the markets are exposed to fierce competition. The largest private play-ers are Unibet and Betsson. Most players who market themselves in online casino in the Nordic countries do so via a licence in another EU country under the frame-work for the free movement of products and services within the EU.

More and more countries have, however, begun to open up the gaming market for private players by issuing local licences for the purpose of controlling the gaming and also to create much longed for tax revenues. Cherry, for example, has a local licence in the German federal state Schleswig-Holstein for online casino. The shift from international to local regulation is expected to reduce the operators margins, but increase the volumes of gaming and reduce the legal risk in these operations.

Despite the legal situation, the Nordic markets have a long history of online gaming and should now be considered to be relatively mature markets. In 2012 the Swedish online casino market was estimated to 106 million euro (approx. 1 billion SEK) by H2 Gambling Capital. The market in Sweden is expected to grow at a somewhat slower rate than in the rest of Europe and Cherry estimates that it in the Nordic countries will continue to grow by about 5-10 per cent a year.

The EU Commission has taken further steps in an in-fringement procedure whereby Sweden and Norway are in conflict with EU laws. Cherry estimates that this will accelerate a reregulation of the Swedish and Norwegian markets.

The European online gaming market is estimated by H2 Gambling Capital to 13 billion euro (approx. 117 billion SEK) for 2013, of which the casino part accounts for about 3 billion euro (approx. 28 billion SEK). The market is expected to grow by around 10 per cent a year in the next few years. Mobile gaming was estimated in 2012 to about 15 per cent of the total online gaming in the world and is estimated to reach 30 per cent in 2015.

At the same time it is important to note that current-ly only 20 per cent of the total gaming market in the world consists of online gaming and that the remainder continues to take place via physical stores, slot machines and casinos (Redeye).

Market in changeCherry is active in different parts of the gaming market; restaurant casino in Sweden, inter-national online casino and lottery, Swedish online lottery and gaming development.

30%Of the total gaming market in the world, online gaming is predicted to reach 30% in 2015.

€3,000mis the estimate for the European online casino market by H2 GamblingCapital 2013.


Europe accounts for about 45 per cent of the total online gaming market in the world.

INTERNATIONAL ONLINE LOTTERIES The market for lotteries can be divided into physical lotter-ies and online lotteries. Online lotteries can then be divided into nationally and internationally regulated lotteries.

Cherry estimates that over 90 per cent of the lottery market continues to take place through physical sale of lottery tickets. Conversion to online has been relatively slow. The growth in physical lotteries in the Nordic countries is very limited, while online is grow-ing rapidly. Cherry is only active in the online lottery market.

The global market for lotteries (such as lotto, lottery, scratch lotteries and keno) is dominated by the old gaming monopolies. Lotteries represent about 9 per cent of the total online gaming market, in comparison for example with casino at 22 per cent. Among the private players lotteries still continue to be a relatively small product area. Tipp24 is the market leader today, but several large operators have begun to offer online lotteries.

THE MARKET FOR NATIONALLY REGULATED LOTTERIES IN SWEDENIn addition to Svenska Spel, non-profit associations have the opportunity to apply for licences to sell lottery tick-ets. Examples of lotteries run by non-profit associations include Postkodlotteriet, Bingolotto and Miljonlotteriet. Idrottsalliansen is the non-profit association that will re-ceive a licence for the Klubblo lottery.

According to Svenska Spel, the market share of the non-profit lotteries amounts to 17 per cent of the total gaming market in Sweden and comprises a total of SEK 3.4 billion in net gaming revenue. The total net gaming revenue decreased by just over one per cent from 2011 to 2012. The remaining parts of the market in Sweden consist to 68 per cent of Svenska Spel and ATG, 14 per cent of foreign online players and one per cent of restau-rant casino.

SVEA is a system of 50 million SEK (which corre-sponds to approx. 0.3 per cent of Svenska Spel’s turno-ver) that Svenska Spel distributes every year to support Swedish youth sports. The system is based on players selecting up to three support associations. Every SEK played then gives a point, which is added up and deter-mines how much different associations are allocated. Klubblo will function more or less the same, with the critical difference that Klubblo is a sports lottery where the whole surplus goes to Swedish sports in the form of Idrottsalliansen and the associations that the players have chosen to support.

THE MARKET FOR ONLINE GAMING DEVELOPERSOnline casino operators usually purchase the games from different games developers. Net Entertainment, Microgaming, Playtech and Betsoft, for example, produce

games. IGT and Bally are examples of traditional manu-facturers of physical slot machines, but which are now to an increasing degree investing in the development of games for the online market.

Normally the agreements between operators and games developers are based on a revenue share. The market for games developers therefore in principle fol-lows the market for gaming operators. Cherry estimates that the market for games developers in online casino

in 2013 was about 300 million euro in Europe and that it will grow by about 10 per cent a year in the next few years.

Games developers rely on the de-velopment of good games that will be appreciated by the end customers. There is a very big difference between the games that generate most revenue and low revenue generating games. The lifespan of individual games also varies a lot. Games normally bring in most money during the first months after their launch. The operators fol-low the game performance careful-

ly to be able to offer each customer segment the most popular games at any time. They often have several games suppliers to provide for the largest possible spread of customers.

Some games developers do not have their own distribution and licence and offer their games via third party suppliers, which can mean lower margins and less flexibility.

THE RESTAURANT CASINO MARKET The Swedish restaurant casino market is regulated and Cherry operates under licences from the Swedish Gam-bling Authority. The restaurant casino market accounts for about one per cent of the total gaming market in Sweden.

Cherry operates exclusively on the Swedish market, which today consists of some fifty operators of various sizes who mainly offer Black Jack. Cherry is by far the largest operator, with about 60 per cent of the market. There are no other large operators. The largest of the small operators are JPC Casino, Bonik and Betman, each with around 20 venues compared with Cherry’s 270 venues.

Market growth for restaurant casino is negative. The number of venues has reduced by about 40 per cent in the last 10 years. This reduction is partly a result of more competition from the state-owned Casino Cosmopol, which can offer international rules with high stakes, and partly a result of competition from private online operators. Another contributory reason for the reduc-tion is that the maximum allowed stakes have not been increased. A motion in the Swedish parliament (Riks-dagen) in 2013 called for an increase of the maximum stake to SEK 200 from the SEK 70 allowed today. The motion was rejected in anticipation of the postponed gaming inquiry, which will not be held until after the election in 2014.

The European online gaming market is estimated by H2 Gambling Capital to 13 billion euro for 2013


The Cherry familyFun & excitement, responsibility and commitment are Cherry’s core values. Together they create the fundament for the continuation of our journey ahead.

Q1-Q4 in brief

Q1 Q2

Cherry received a licence in the German federal state Schleswig-Holstein for online casino.

PART 1 CHERRY’S VISION AND BUSINESS AREAS

Online GamingCherry offers online gaming on the sites CherryCasino.com, EuroSlots.com, SpilleAutomater.com, EuroLotto.com, NorgesSpill.com and NordicSlots.com via subsid-iaries in Malta and Curaçao (B2C).

Cherry is licenced in Malta and offers gaming in Europe within the framework for the free movement of products and services within the EU. Cherry also has a licence in the German federal state Schleswig-Holstein.

Cherry cooperates with the leading gaming suppliers Net Entertainment, Yggdrasil Gaming, Microgaming, Amaya and Betsoft. Marketing is partly done via tradi-tional channels such as television, radio and newspa-pers, partly through digital marketing and search word optimisation, and partly through marketing partners via CherryAffiliates.com.

Restaurant CasinoThe Swedish restaurant casino market is regulated and Cherry operates under licences from the Swedish Gambling Authority. Restaurant Casino accounts for one per cent of the total Swedish gaming market and Cherry is the market leader in Sweden with a 60 per cent share according to statistics from the Gambling Author-ity. Cherry offers traditional casino gaming (Blackjack and Roulette) at 257 Swedish restaurants, night clubs and hotels.

The business model involves a revenue share with the venue owner, where Cherry is responsible to provide per-sonnel, casino tables, training, follow-up and payment solutions.

Cherry also offers Event Casino to companies and pri-vate persons. Cherry has some 650 employees in Restau-rant Casino, but most are part time croupiers and con-verted to full time positions the number of employees amounts to about 140 persons.

Cherry sold AutomatGruppen for 286 MSEK.

CherryCasino.com was acquired.

Yggdrasil Gaming received a gaming licence in Malta and signed an agreement with its first customer.

Cherry launched SpilleAutomater.com

Cherry paid 143.4 MSEK in dividend via a redemption program.

143.4 msek

+286 msek

Restaurant Casino achieved for the first time a market share of over 60%.


Development projectsCherry has several development pro-jects managed within the group to create new services and products that support Cherry’s business concept, expansion and development strategy.

Yggdrasil GamingThe gaming company Yggdrasil, with head office in Malta, develops games for computers, mobiles and tablets. Yggdrasil has licences in both Malta and Curaçao and sells its products to different gaming operators in Europe and Asia.

The business model is based on revenue share with gaming operators, start-up fees for new customers and fees for customisations and bespoke development.

The company employs directly and indirectly over 20 persons within devel-opment, games design and production.

The gaming portfolio at the year-end consisted of 4 video Keno games, 7 video scratch cards, 3 classical scratch cards, Lotto7 with live draws and Lot-to7 Express with instant draws, and 2 video slots. The reception from the market by both operators and players has so far exceeded expectations. Up to March 2014 six agreements have been signed with Unibet, MrGreen, Vera&-John, LeoVegas, Videoslots and Cherry.

Development project – Klubblo Klubblo is a new Swedish lottery. The lottery will be operating under a Swedish lottery license where Idrotts- alliansen has applied to be the license holder and the lottery will initially be sold via mobiles and computers. Klubblo will operate in the market for nationally regulated lotteries in Sweden.

As the player is allowed to choose which sports clubs

to support, the lottery is given credibility and justification. The media group Metro and Cherry are together respon-sible for development, management and marketing of the lottery through the jointly owned company Svenska Klubbspel AB.

Potential beneficiaries via their specialist sports associ-ations are, in addition to Idrottsalliansen, all of Sweden’s over 20,000 sports associations.

The lottery is expected to open during the first half of 2014.

VISIONCherry shall offer the best environment to develop companies within gaming and casino.

OVERALL STRATEGYCherry shall create shareholder value by investing, owning and developing companies within gaming and casino.Cherry’s core values shall permeate all activities: Fun & Excitement, Responsibility and Commitment.

FINANCIAL OBJECTIVESThe following overall objectives should be a guiding principle for group activi-ties activities, seen over a business cycle:

` Sales in the business area Online Gaming should grow faster than the market.

` Restaurant Casino should retain or increase its market share.

` The growth rate of profits should exceed 10 per cent a year.

` The equity ratio should amount to at least 30 per cent.

` Dividends should be issued with 50 per cent of net profit.

CORE VALUESFun & ExcitementThe fun & excitement we offer is the fundament for all Cherry’s activities.

ResponsibilityCherry takes responsibility – for our customers, partners and employees. Cherry has for over 50 years been the safe, reliable and established alternative.

CommitmentIn Cherry we have a passion for gaming. We do everything to offer the best service and the highest quality. We love going the extra mile to get the most satisfied customers.

Q3 Q4

Yggdrasil Gaming went live with its first customer.

Klubblo – the Swedish sports lottery, was announced in cooperation with Idrottsalliansen and Metro.

Cherry signed agreements with several high profile gaming venues, such as Etage and Crown Nightclub, Göta Källare & Marquise.

Cherry acquired 49% of the shares in the online gaming company Web Resorts, which operates the brands NordicSlots.com and NorgesSpill.com.

Yggdrasil Gaming launches its first slot, Jokerizer.

Update of mobile sites for CherryCasino.com, EuroSlots.com and SpilleAutomater.com.

Cherry has been awarded the prize Online Gaming Operator of the Year (February 2014) by International Gaming Awards.


PART 1 ONLINE GAMING

– We see the award as proof that our investments have been successful, comments Marius Andersen, COO for Cherry Malta.

Cherry has put a lot of work into creating its own platform, support department and payment solutions – with gaming licences in both Malta and Schleswig- Holstein.

– It has involved a united effort to build everything from the bare foundation, but now we have a powerful and modern base to expand from that matches the very best in the industry.

A YEAR OF LAUNCHES AND ACQUISITIONSCherry expanded far more rapidly than the market in 2013, thanks to the launch of new products and strategic acquisitions.

– Early on in the year we bought back CherryCasino.

com from Betsson in conjunction with the sale of Au-tomaten brands to Betsson for SEK 286 million. We remodelled the site to a classic, strict online casino, where we put a lot of emphasis on Cherry’s history and our unique position in the industry.

In June 2013 Cherry launched the new site Spille- Automater.com, with a strong focus on slot machines.With offers such as a 100 per cent satisfied customer guarantee, personal VIP service and cooperation with local sports teams and associations, SpilleAutomater.com is a competitive challenger.

Later on in November Cherry acquired 49 per cent of the company Web Resorts, which markets games on the sites NordicSlots.com and NorgesSpill.com.

– Web Resorts works with a different offering with a very generous bonus policy, which makes them a good complement to our existing offering. Our extensive com-

The online gaming operator of the year is expanding rapidlyCherry continues to expand rapidly in online gaming. In 2013 the turnoverincreased by 32 per cent and the number of active customers increased by a full 56 per cent. To add the finishing touch Cherry was appointed Online Gaming Operator of the Year by International Gaming Awards in February 2014.


petence on the local markets in the Nordic countries will contribute towards reinforc-ing their already strong profitability.

All Cherry’s products have also under-gone substantial face lifts and migrated to our own modern gaming platform, with support for mobiles and tablets.

LOCAL REGULATIONS CREATE CHALLENGES – AND OPPORTUNITIESA change is underway in the European gaming market. An increasing number of countries in the EU are introducing local rules and regulations in line with legislation from Brussels.

– This creates interesting opportuni-ties, but also poses a challenge for gam-ing operators to comply with the specific regulations that apply in each individual market.

Cherry will therefore be facing the choice on several markets of whether to apply for local gaming licences, or to block users from these regions.

– We believe that even Sweden and Norway will in time introduce local reg-

ulations in the gaming markets, not least in view of pressure from the EU.

EVEN BETTER GAMING EXPERIENCES2013 has been a build-up year. In 2014 Cherry will be focusing on growth, espe-cially in the core markets in the Nordic countries and Germany.

– We will be working even harder with our product offering to make it the most attractive in the industry, and to ensure that our customers get the best gaming experiences available in the industry.

Cherry was appointed Online Gaming Operator of the Year in competition with inter-national finalists such as Betsson, Mr. Green and Paddy Power.

CHERRYCASINO.COMA classic online casino started by Cherry in 2000. Here you experience a glamorous, exciting and above all enter-taining gaming experience.

EUROSLOTS.COMThe best European slot machines online. Built on our own platform, with support for seven different languages with European themes.

SPILLEAUTOMATER.COMStarted in the spring of 2013 with focus on slot machines. In cooperation with sports teams and associations you get a local gaming experience with personal VIP service and 100 per cent satisfied custom-er guarantee.

EUROLOTTO.COMEurope’s largest daily lottery draw with a mega jackpot of at least 25 million euro. With EuroLotto we take up the fight with the state monopolies to offer the best Lotto product.

NORDICSLOTS.COMTargets mainly the Nordic market and has the objective of providing players with the best value for money through generous bonuses.

NORGESSPILL.COMStrives to provide players with the most user-friendly and secure gaming experience in the world, with a high pay-out percentage.

Cherry expanded far more rapidly than the market, thanks to the launch of new brands and products, and with the help of strategic acquisitions.

56%Active customers increased by 56%, of which 164.782 were new customers, corresponding to an increase of 74%.

32%Sales in Online Gaming grew by 32%. Deposits increased by 57%.

marius andersencoo cherry malta ltd


PART 1 RESTAURANT CASINO

372Cherry runs games on 372 gaming tables. 36 new agreements were signed in 2013 and there are now 257 venues.

60% Cherry is market leader in Sweden with a market share of 60%.

Restaurant Casino sets new recordThanks to strategic work in 2013 Cherry increased its sales and succeeded in achieving its best result ever and reached a market share of over 60 per cent.

12 | cherry årsredovisning 2013


With over 50 years in the industry, Cherry now has unique competence to operate Restaurant Casino in Sweden – all the way from Ystad in the south to Kiruna in the north.

– It is satisfying that our long-term work with quali-ty and service have paid off. We are a small, tightly knit organisation with a long history that knows what needs to be done, says Aron Moberg-Egfors, Sales Manager for Restaurant Casino.

One of the secrets for success has been to achieve and maintain a high level of competence and training for the croupiers. Better training of croupiers has helped increase the profit margin from an already a high level.

Aron Moberg-Egfors points out that relations with employees are important for the seriousness in the res-taurant casino industry. For example, Cherry is the only casino company in Sweden that is a member of the employers’ organisation Visita.

– Our employees are our single most important asset, they are our ambassadors to partners and customers.

MORE AND BETTER VENUESBy scaling down operations at places where profitability has been non-satisfactory, Cherry has been able to focus on venues with higher levels of activity. And thanks to a series of strategic acquisitions Cherry’s market share has continued to grow.

– The integration of Göteborgs Casino and City- and Snättringe Casino has gone very smoothly. These ven-ues have already become a natural part of Cherry and contribute to our profitability.

Cherry also continues to reinforce its market shares by establishing operations at even more pubs, restau-rants and night clubs.

– During 2013 we saw a newly awakened interest for casino and signed agreements with 36 new venues.

BETTER PAYMENT SOLUTIONCherry has worked with the planning and preparation of the next generation’s payment terminals, which were rolled out in the beginning of 2014. The new termi-nals are faster, more secure, and permit new payment methods.

– The new payment solution gives us access to bet-ter feedback and more follow-up opportunities, which will lead to an increase in profitability, efficiency – and results.

MORE ROOM FOR GROWTHCherry has taken ever larger shares of the Swedish market. But Aron Moberg-Egfors still sees that there is room for expansion, primarily organic, by perhaps also through additional acquisitions.– We will continue to work with the goal of increasing profitability at existing venues and working pubs, restau-rants and night clubs.

It is satisfying that our long-term work with quality and service have paid off. We are a small, closely-knit organisation with a long history that knows what needs to be done.

Casino gaming at night clubsCherry’s market share increased and amoun-ted to 60 per cent of the active gaming ta-bles according to statistics from the Gaming Authority of Sweden for December 2013. Cherry had at the end of the year gaming at 257 venues with a total of 372 tables.36 new agreements were signed in 2013, while 15 venues were closed as a result of unprofitability, conceptual changes, loss of alcohol licences or bankruptcy. Seven ve-nues were also closed for the season during the year.

Cherry experienced a positive trend in restaurant casino with an increased market share for 2013. Agreements were signed with venues such as the Etage group, which runs Etage and Crown Nightclub in Malmö, and Sweden Rock Festival in Malmö. Profile venues such as Göta Källare, Marquise Nightclub, Slaktis and Pitchers were added in Stockholm In the north of Sweden agre-ements were signed with Allstar in Luleå and Boden, E-Street in Sundsvall and Le Sport in Östersund.

aron moberg-egforssales manager

restaurant Casino


PART 1 YGGDRASIL GAMING

Yggdrasil’s business model is to develop and operate lot-tery and casino games from its own game server. The server is integrated with the gaming operators’ systems, who make the games available for their customers. The revenues are then split between the gaming operators and Yggdrasil according to industrial praxis.

The most important targets for Yggdrasil are large operators who already market a wide range of games, but often lack competitive lottery and number games. Several of the leading Nordic operators – Unibet, Vera & John, LeoVegas Mr Green, VideoSlots and Cherry – have already signed agreements, and more are queuing up.

– We are convinced that the private operators will challenge the monopolies also within the lottery verti-cal in the same way as they have done in other verticals of gaming,” says Fredrik Elmqvist, CEO for Yggdrasil, who has solid experience in the industry, also from Net Entertainment.

NOT JUST LOTTERY GAMINGYggdrasil’s games portfolio consists of a series of inno-vative lottery games, including Video Scratch (scratch lotteries with expanded game mechanics), Video Keno (classical numbers game in modern format), Lotto7 Express (lotto with instant draws – play when in the mood), and the big jackpot lottery Lotto7 with its own daily draws from Malta.

World class gaming experiencesYggdrasil Gaming is a new games development company, founded by the industry veteran Fredrik Elmqvist. The company offers a wide range of lottery and casino games for computers, mobiles and tablets.

The private sector will challenge the monopolies within the lottery vertical in the same way as they have done in other verticals


With the launch of the latest games, the video slots Jokerizer, Winterberries and Robotnik, and presentations of fu-ture games road map at the big ICE exhi-bition in London, the company has made a commercial breakthrough and demon-strated that they can also deliver slots of absolutely top class.

– Our slots have already become a success, despite the fact that they were only started in the third quarter of 2013 and that the portfolio still is limited. But we have solid competence in slots and are well on our way to building up an interesting portfolio in this area.

THE TECHNOLOGY IS IMPORTANTYggdrasil has worked hard to create a uniform gaming experience, so that as a player you will always get a familiar expe-rience, regardless of which game or plat-form you chose to play on.

– Regardless of whether you play Win-terberries on your iPad or Precious Anu-ran on your computer, you will always recognise the unique gaming experience.

But it is not enough to catch the interest of customers, it is also about the resourc-es the operators have for the integration and licensing process. It is therefore im-portant that the integration of Yggdrasil’s products can be done as easily and pain-lessly as possible.

– To simplify our integration we have developed a so-called ”Wallet Adapter”, which solves the payment integration in a simple way and minimises the strain on operators.

WELL EQUIPPED FOR THE FUTUREYggdrasil will continue to roll out its product portfolio in 2014 to even more partners. – We are well equipped to add more large operators, which create a dynamic coop-eration and set relevant demands that drive us forward. – If we can attract even more players and operators we will continuously improve our product and our offering, which will help us to take a leading position in the market.

YGGDRASILHead office: MaltaSubcontractors:Poland, Serbia, SwedenEstablished: Q4 2012Gaming licence received: Q2 2013Commercial launch:Q3/Q4 2013Main market: EuropeSecondary market: AsiaCurrency support: GBP, SEK, NOK, EUR, USD, THB, JPYLanguage support: English, Swedish, Norwegian, Finnish, German, Dutch, Italian, French, Turkish, Japanese, Thai, Vietnamese

GAMING PORTFOLIOVideo SlotsJokerizerWinterberriesRobotnik

Video ScratchKing for a DayPrecious little DiamondHoliday CashA Cool MillionSabbaticalPiggy Bank Scary Money

Classic ScratchLucky TripleSilver DollarsGold Bars

Video KenoPrecious AnuranBeaming CanineMedusa Eyes of FireSiamese Serpents

Video LottoLotto ExpressLotto Live Draw

The private sector will challenge the monopolies within the lottery vertical in the same way as they have done in other verticals

fredrik elmqvistceo yggdrasil


PART 1 KLUBBLO

Swedish sports have found it increasing-ly difficult to finance their activities with membership fees and traditional lotter-ies. Klubblo wants to offer a new modern option as the only lottery only focusing on sports and developed in cooperation with the sports organisations.

Supporters of sports clubs are offered gaming and lottery products where the entire surplus goes to the sports clubs. The lottery will be managed under a Swedish lottery licence, whereby Idrotts- alliansen has applied to be the licence holder. Lotteries will initially be sold via mobiles and computers.

– We want to help the clubs to meet their supporters and convert their commitment to financial support, says Lasse Dilschmann, CEO of Svenska Klubbspel AB.

– We want Klubblo to become the most important sponsor for Swedish sports, and that Swedish sports associations to realise that our product is both better and easier than selling salami sausages or scented candles. It’s smarter, more fun, and the clubs can spend more time on

training and sports and less time on ad-ministration and sales.

Cherry and the media group Metro share responsibility for the development, operation and marketing of the lottery through the jointly owned company Svenska Klubbspel AB.

Potential beneficiaries are all the Swed-ish sports clubs affiliated to the Swedish Sports Confederation.

– This is the first time that the Swedish sports clubs can have its own modern lottery product, where they can easily market themselves to their fans with their own brands. Since all distribu-tion is done online, it makes it easier for unions to administer. They can focus on what they do best: sports.

IDROTTSALLIANSENNon-profit association open to all special sports asso-ciations affiliated with the Swedish Sports Confedera-tion. To date it consists of 25 special sports associations covering 3,737 associations with 847,212 members in addition to AIK, HIF and DIF main associations.

KLUBBLOGaming and lotteries via computers and mobiles. The players choose their favou-rite clubs, which receives money for each lottery ticket purchased. Klubblo handles all administration.

ALLOCATION OF STAKES50% of all stakes in the lot-tery go back to to the players in the form of prizes. 30-40% of the game win goes directly to Swedish sports.

…our product is both better and easier than selling salami sausages or scented candles

Sweden’s sports lotteryKlubblo, which is soon ready for launch, will give Sweden’s non-profit sports associations and clubs a completely new opportunity to finance their activities. Cherry, Metro and Idrottsalliansen want to make Klubblo the most important sponsor for Swedish sports.


PART 1 CHERRY’S HISTORY

Cherry’s history creates our futureThe company that still prides itself in the stylised cherries is a completely different company to the one started 50 years ago. But the emphasis is still the same, to offer fun & excitement in a very responsible way.

…our product is both better and easier than selling salami sausages or scented candles


PART 1 CHERRY’S HISTORY

It all began one evening in December 1963AB Restaurang Rouletter was founded by Bill Lindwall and Rolf Lundström on Lucia Day, December 13, 1963. It was the start of the company that today, 50 years later, is called Cherry.

Lots of students worked on the side as croupiers. Two of these students, Per Hamberg and Lars Kling, were keen on starting a company and trying their own luck. The two companies were competitors for a few years, but in 1968 they decided to join forces. Cherryföretagen AB was launched in 1972 with the name and now iconic cherries that began to be used as the logotype.

The slot machine eraIn 1973 slot machines were permitted by law in Sweden. Cherry was much better prepared than its competitors and in a short space of time took over half of the slot machine market in Sweden.

Cherry became a nationwide company, with offices in Solna, Göteborg, Umeå and Malmö. The 70s were a fantastic success for Cherry, but at the same time there was a lot of hard work to keep competitors at bay.

Gaming on boats – and outside SwedenCherry began to widen operations beyond the borders of Sweden, with organised branches in the UK, Norway and Denmark. Several Eastern European countries were ideal for the launch of slot machines on a broad front.

Successful operations were developed in former Yugoslavia, Czechoslovakia, the Soviet Union and Poland.

There were other business opportunities in another international arena, namely the ferries sailing in inter-national waters. Slot machines were in fact permitted on most of these. The Maritime business grew quickly in Sweden, and also spread with the wind to the Mediterra-nean and the British channel.

Restaurant Casino – the stable baseTo one side of business operations with slot machines, international ventures and maritime gaming, Restaurant Casino has always existed as a secure and stable base.

After over 50 years Cherry is now stronger than ever and has a full 60 per cent of the Swedish market. Cherry continues to grow by taking venues from compet-itors and through acquisitions.

Despite the fact that times have changed and the competition from many forms of gaming has increased, Cherry Restaurant Casino is today bigger and more profitable than ever before.

Internet emergesCherry formed a strategy for online gaming experienc-es in 1997. Cherry’s investment in CherryCasino.com needed a few difficult years before it bore fruit and be-came profitable.

The company Net Entertainment was started as a development project in Cherry to meet the demand for

slot machines on the Internet. It landed on its feet and quickly began expanding through favourable partner-ships.

In 2003 Cherry invested in a small but promising company called Betsson, which with Cherry’s help quickly got things moving. As their different business areas developed it was decided that Cherry would benefit from a separation of the different companies.

Today’s Cherry was born in 2006 through the division of the former Cherryföretagen AB into Betsson, Net Entertainment and the new Cherry.

Cherry – today – and in the futureThe winds of change are now blowing to lay the foundations for another 50 years of growth. Cherry’s gaming services are now mainly to be found online and in restaurants.

The business area Maritime Gaming was sold in 2012, thereby concluding a long and important era in the company’s history.

The Automaten sites were sold in 2013, which involved a fantastic transaction for Cherry and its share-holders. The sales have enabled both generous dividends and investments in online gaming and new exciting development projects.

Cherry has invested in the newly started company Yggdrasil Gaming, which in a short time has taken up a position in the market for casino and lottery games development.

Cherry has also invested in Klubblo, a lottery for Swedish sports.

No one will be surprised if new exciting ventures continue to emerge, which will drive further growth in online gaming and helping Cherry to reach its goal of becoming the leading gaming company of the future.

After over 50 years Cherry is now stronger than ever and has a full 60 per cent of the Swedish market


After over 50 years Cherry is now stronger than ever and has a full 60 per cent of the Swedish market

Cherry 1963-2013

1963AB Restaurang Rouletter is founded.

2014Cherry is appointed Online Gaming Operator of the Year.

1968The business operation is now nationwide.

1972The Cherry name and the cherry symbol are regis-tered.

1978Prohibition of slot machines hit Cherry hard.

2013Sells Automaten Group to Betsson for SEK 286.0 million. Acquires CherryCasino.com.

2012Sells the business area Maritime Gaming.

1984The foundation for a new group is being created.

a quick look back

1992Cherry streamlines operations. Investments in eastern Europe are put on hold.

1996Introduces a new generation of games for the Swedish restaurant and bingo markets.

1998Cherry acquires 35% of Net Entertainment AB.

1999Maritime Gaming starts in the Mediterranean. Cherry invests excess liquidity in IT companies, primarily in the Internet sector.

2000Cherry launches a new logo andthe parent company’s B-sharesare listed on the OM Stockholm Exchange’s O-list.

2003Cherry buys into Betsson.com. Signs a large agreement with Danish Shell of gaming environ-ments at petrol stations.

2006Distributes Cherry Casino to shareholders and are listed on AktieTorget.

2010Acquires the Auto-maten Group and becomes a leading player in online slot machines.

2011Launches EuroLotto.com and CherryAf-filiates.com.


PART 1 THE SHARE

SHARE STRUCTUREAt the end of the year Cherry had 12,805,642 shares, divided into 997,600 A-shares and 11,805,042 B-shares. Each A-share carries 10 votes per share, while each B-share carries one vote. The shares have equal rights to the assets and profits in Cherry.

PRICE MOVEMENTS AND TURNOVERThe price (last paid) on the 31 December 2013 was SEK 31.20 in comparison with SEK 20.00 on 31 December 2013 adjusted for dividends/redemption programme. The market capitalization in 2013 increased to SEK 399.5 million from SEK 371.4 million on 31 December 2013, which corresponds to an increase of 8 per cent (64).

The adjusted average price per trading day in 2013 was SEK 27.70 (26.60), read more in note 7. The average adjusted price per trading day in 2013 was SEK 23.96.

The highest official quotation was SEK 37.60 on 6 May and the lowest was SEK 20.40 on 28 August.

The highest official adjusted price was SEK 31.20 on 30 December, and the lowest was SEK 20.50 on 2 January.

Total turnover in 2013 amounted to SEK 96,756,058 (16,583,827), which equals an average turnover of SEK 385,482 (65,809) per trading day.

A standard trading unit in Cherry B is 200 shares.

DIVIDENDS 2014The board proposes that the annual general meeting decide upon a transfer to shareholders of SEK 51.2 mil-lion (143.4), corresponding to SEK 4.00 per share (11.20). The full proposal will be presented in good time prior to the annual general meeting.

CONVERTIBLES AND OPTIONS PROGRAMMEAt an extraordinary general meeting on 19 October 2011 a decision was taken to introduce a long-term incentive programme for leading executives and key persons in

The share Cherry’s B-share is listed on AktieTorget.

15

18

21

24

27

30

33

Dec-13Nov-13Oct-13Sep-13Aug-13July-13June-13May-13Apr-13Mar-13Feb-13Jan-13 Dec-12

Share price Dec 2012 – Dec 2013(adjusted for dividends/redemption programme)


Name A-shares B-sharesProportion of share

capital, %Proportion of

residual value, %

Familjen Hamberg med bolag 295,621 515,133 6.33 15.94

Morten Klein 65,660 2,754,707 22.03 15.66

Familjen Kling 295,621 414,742 5.55 15.48

Familjen Andreassen 34,340 1,494 474 11.94 8.44

Familjen Lundström med bolag 104,400 270,704 2.93 6.04

BP2S PARIS/NO CONVENTION 56,099 630,141 5.36 5.47

Familjen Lindwall 89,761 215,802 2.39 5.11

CAIL 56,098 395,695 3.53 4.39

Arild Karlsen via bolag 919,836 7.18 4.22

Björn Hornerud Grene via bolag 769,843 6.10 3.53

FÖRSÄKRINGSAKTIEBOLAGET, AVANZA PENSION 256,196 2.00 1.18

Anders Holmgren via bolag 207,528 1.62 0.95

Emil Sunvisson med bolag 186,459 1.46 0.86

Familjen Rolf Åkerlind 180,800 1.41 0.83

Gunnar Lind 170,720 1.33 0.78

JP MORGAN BANK 158,630 1.24 0.73

SVEA EKONOMI AB 125,000 0.98 0.57

ORIGO QUEST 1 118,379 0.92 0.54

NORDNET PENSIONSFÖRSÄKRING AB 133,196 1.04 0.61

UBS AG CLIENTS ACCOUNT 106,265 0.83 0.49

Other shareholders 1,780,791 13.91 8.18

Total 997,600 11,805,042 100.00 100.00

The twenty largest shareholders as of 31 December 2013

Cherry. The decision involves the issue of a maximum of 500,000 subscription options to persons employed with Cherry. The programme involves an offer to acquire options for shares of the B series in Cherry. 455,000 share subscription options have been offered to employ-ees, of which 100 per cent have been subscribed. The subscription options were issued at market price. More information on the share option programme is available in Note 7.

LIQUIDITY GUARANTEEA total of 3,215,602 (622,631) shares have changed own-ers during the year, which corresponds to approx. 27 (5) per cent of the average total number of issued B-shares.

Cherry has appointed Remium as a liquidity guar-antor for Cherry’s B-share. The policy employed by the board of having a liquidity guarantor is to ensure a lower investment cost and less risk for investors trading with the share.

OWNERSHIP STRUCTUREAs of 31 December 2013 the number of shareholders in Cherry amounted to 2,329 (1,932), which was an in-crease of 21 per cent.

Several larger holdings in the company are registered in foreign banks. This practice means that the board has no information as to who some of the final owners of Cherry are.


Gunnar Lind born 1958, Bålstaboard memberMember of the board since 2013

Other assignments: Chairman in Explore Lofsdalen AB, chairman in Soundhailer AB. Chairman in Mecomlabs LtdShare holding: 170,720 B-shares

AuditorsPwCAppointed at AGM 20-05-2010 for period to AGM 2014.

Senior auditor:Niklas Renström, Auditor, born 1974, Saltsjö-Boo, authorised public accountant.

Leading executives

PART 1 LEADING EXECUTIVES AND BOARD OF DIRECTORS

Board of Directors

Magnus Berglind born 1970, Stockholmboard memberMember of the board since 2013

Other assignments: Partner at Pamir, board member in eWork Scandinavia AB, and SchoolSoft ABShare holding: No shareholding

Anders Holmgren born 1973, Stockholmboard memberMember of the board since 2010.Founder of gaming site Betsson.

Other assignments: Chairman in Northberry AB, Shuflr Ltd, FSI8 Ltd. Member in NASP ABShare holding: 207,528 B-shares via company

Rolf Åkerlind born 1943, SaltsjöbadenchairmanMember of the board since 2006

Other assignments: Chairman in SEAB AB and Stark Fasadrenovering. Member in Constant Clean ABShare holding: 180,800 B-shares.Includes holding via family members and endowment assurance.

Morten Klein born 1969, Osloboard memberMember of the board since October 2011

Other assignments: Chairman in Morten Klein AS, Klein Holding AS, Yes Games AS, Klein Eiendom AS, Extra Optical AS. Member in Synphonical ASShare holding: 65,660 A-shares, 2 754,707 B-shares

Martin Wattin born 1974, Stockholmboard memberMember of the board since annual general meeting 2011

Other assignments: Styrelseordförande Rabble Communications AB, VD Inbox Investment ABShare holding: 27,361 B-shares

Jörgen Olsson born 1976, Gävleemployee representative, board memberAppointed by HRF as employee representative since 2007

Share holding: 750 B-shares via associated company

Emil Sunvisson born 1971, Gnestapresident and ceo cherry ab (publ)Employed in the group since 2011

Share holding: 186,459 B-shares 200,000 subscription options

Fredrik Burvall born 1972, Nackacfo and vice ceo cherry ab (publ), responsible for investor relations (ir) cherry ab (publ)Employed in the group since 2006

Share holding: 49,900 B-shares 50,000 subscription options

Marius Andersen born 1974, Maltadirector and coo in cherry malta ltd and cherry ltd Employed in the group since 2010

Share holding: 50,000 subscrip-tion options

Per-AndersPersson born 1959, Solnavice ceo cherry casino abregion northEmployed in the group since 1979

Share holding: 37,240 B-shares20,000 subscription options

Ulf Bergström born 1966, Kungsbackavice ceo cherry casino abregion southEmployed in the group since 1986


Aron Moberg-Egfors born 1977, Boråssales manager restaurant casinoEmployed in the group since 2009



Cherry’s Annual Report 2013The board of directors and CEO in Cherry AB (publ), CIN 556,210-9,909, with head office in Stockholm, hereby submit the Annual Report for the fiscal year of 2013 for the parent company and the group. The Annual Report and auditors’ report cover pages 23-62.


ABOUT CHERRYCherry’s activities during 2013 have been

divided into two business areas, along with

group-wide and development projects. Au-

tomatGruppen, which constituted a large part

of the business area Online Gaming, was sold

in February 2013. 49 per cent of the shares in

the online gaming company Web Resort was

acquired in 2013 in the business area Online

Gaming.

All figures with an impact on profits have

been corrected for disposals and discontinued

operations, unless otherwise stated. For dis-

continued operations, see Note 31.

ONLINE GAMINGOnline gaming via the sites CherryCasino.com,

EuroSlots.com, SpilleAutomater.com, EuroLot-

to.com, NorgesSpill, NordicSlots and affiliate

operations from CherryAffiliates.com, are all

run by wholly owned subsidiaries from Malta

and Curacao.

RESTAURANT CASINOTraditional casino gaming (Blackjack and Rou-

lette), which is managed at 257 Swedish res-

taurants, night clubs and hotels. Cherry also

offers companies and private persons Event

Casino.

GROUP-WIDE AND DEVELOPMENT PROJECTSCherry has several development projects man-

aged within the group to create new services and

products that support Cherry’s business con-

cept, expansion and development strategy. Up

until the time the product or service is launched

and established, the cost is taken centrally within

the group and reported in segment reporting as

”Development Project” to create clarity in what

the group’s different business areas generate.

Cherry has had two development projects during

2013; Yggdrasil Gaming and Klubblo.

THE PAST YEARTHE GROUP – FISCAL YEAR 2013Group earnings increased by 15 per cent to

SEK 266.3 million (231.5). EBIT for the group

amounted to SEK -33.9 million (6.1). A non-re-

curring write-down of balance of loss brought

forward for development costs in Online Gam-

ing has been charged to profits to an amount of

SEK -3.1 million.

Group profit after financial items amount-

ed to SEK -32.1 million (2.3) and profit after tax

amounted to SEK -33.7 million (2.1), correspond-

ing to SEK -2.53 EK (0.16) per share after dilution

and minority interest.

Return on equity was -13 per cent (1) and on

total capital -10 per cent (1). Cash holdings in

the group amounted to SEK 68.4 million (59.0)

at the end of the period, and the equity ratio

amounted to 75 per cent (86). Cherry significant-

ly improved its liquidity in February when the

Automaten sites were sold. Profits for discontin-

ued operations amounted to SEK +25.7 million.

Profit per share, including disposed operations

and after dilution, amounted to SEK -0.63 (2.30)

per share.

ONLINE GAMING – FISCAL YEAR 2013Group earnings increased by 32 per cent to

SEK 127.5 million (96.9). Operating income

(EBIT) amounted to SEK -33.0 million (3.0).

Cherry continued with its strong expan-

sion in online gaming during 2013. 2013

was a build-up year, with major investments.

Cherry launched several new trademarks on its

own platform during the year, developed with

the latest technology to support mobiles and

computers. An organisation has been set up

to manage support, marketing and payments.

Cherry has also invested in marketing to build

up trademark awareness. Taken together these

investments have involved a significant bur-

den on profits for 2013, but also given Cherry

the necessary prerequisites to develop the

company.

All of Cherry’s casino sites have undergone

extensive face lifts in 2013 with improved sup-

port for mobiles.

Deposited amounts increased in 2013 by

57 per cent to SEK 260.1 million (165.9) and

the number of active customers increased by

56 per cent and amounted as of 2013-31-12 to

23,347 (15,016). The number of new custom-

ers increased by 74 per cent and amounted

to 164,782 (94,926), and the number of reg-

istered customers amounted at the end of the

period to 361,022 (196,240).

IMPORTANT EVENTS IN 2013: • Cherry received a licence in the German

federal state Schleswig-Holstein for online

casino in January 2013. Schleswig-Holstein

adopted a new law in 2012 which makes it

possible to issue licences for online gam-

ing to private operators. A total of 20 casino

licences have been issued, and the local tax

is 20 per cent of gaming earnings.

• Cherry took out a summons in January

2013 at Oslo City Court against the Nor-

wegian state concerning the injunction

issued against Cherry AB. In the injunc-

tion Lotteri- og Stiftelsestilsynet demands

that Cherry AB close its offer of gaming

for money and stops its marketing in rela-

tion to Norwegian citizens for EuroLotto.

com. After the Norwegian Lotteritillsynet

confirmed that they will not be taking any

further action against Cherry AB, Cherry

decided to withdraw the summons against

the Norwegian state concerning EuroLotto.

com.

• Cherry Malta Ltd sold its trademarks and

domains related to SverigeAutomaten, Norg-

esAutomaten and DanmarksAutomaten

to Betsson AB (Publ) on the 19th of Febru-

ary. The proceeds amounted to SEK 286.0

million.

• SpilleAutomater.com, a new online casino,

was launched in June.

Administration report

The results of the year’s activities and the position of the parent company and the group are presented in the administration report and the following income state-ments and balance sheets, cash flow statements, specifications of equity and other related notes and comments. The reporting currency for the parent company and the group is Swedish kronor (SEK). The consolidated income statements and balance sheets for the group and the parent company are subject to the approval of the annual general meeting on 8 May 2014.

PART 2 ADMINISTRATION REPORT


• Yggdrasils first slot Jokerizer was launched

in November on SpilleAutomaten.com.

• Cherry acquired 49 per cent of the shares

in the online company Web Resorts in No-

vember, which markets gaming on the sites

NordicSlots.com and NorgesSpill.com, for

EUR 3.3 million in cash plus a profit-based

additional purchase sum of up to EUR 1.0

million.

• Disposal of Automaten sites

Cherry Malta Ltd sold its trademarks and

domains related to SverigeAutomaten,

NorgesAutomaten and DanmarksAuto-

maten to Betsson AB (Publ) on 19 Febru-

ary 2013. The proceeds amounted to SEK

286.0 million. The purchase sum con-

sisted of shares in Betsson for SEK 225

million, which were sold for SEK 228.7

million before deductions for transaction

costs, and SEK 60 million paid in cash

on 19 February 2014. Cherry acquired in

conjunction with the sale the gaming site

CherryCasino.com for SEK 1.0 million.

Cherry retained earnings and profits to 31-

03-2013, which is reported in the results

for disposed of operations.

The Automaten sites generated earn-

ings of SEK 168.2 million in 2012. Cher-

ryCasino.com generated earnings in 2012

of SEK 1.5 million. Goodwill that arose

in conjunction with the acquisition of the

Automat sites, and which as of 31 Decem-

ber 2012 amounted to SEK 260.6 million,

was written down as a result of the sale to

SEK 0.0 million. Profits for the disposal

amounted to SEK +25.7 million.

Earnings from disposed of operations 38.3

Cost of disposed of operations -34.0

Profits for disposed operations for quarter 1

4.3

Capital gain 285.5

Write-down of goodwill -264.1

Capital loss 0.0

Profit from disposal (MSEK) 25.7

Cherry applies IFRS 5 for the group in re-

lation to the disposal of the business area

Maritime Gaming and AutomatGruppen.

IFRS 5 specifies how disposed of operations

should be presented and what information

should be issued for disposed of operations.

The results of disposed of operations should

be reported in a separate income statement,

and in the company’s income statement is

taken up under the item “result from dis-

posed of operations” (net after tax).

A further analysis of the result from dis-

posed of operations is included in Note 31.

IMPORTANT EVENTS AFTER THE REPORT PERIOD:• Cherry has by International Gaming Award

been appointed in 2014 as the winner of the

prize ”Online Gaming Operator”.

ACQUISITION OF WEB RESORTCherry acquired 49 per cent of the shares in

Web Resorts NV (Curacao) on 7 November

2013. The acquisition involved several do-

mains, gaming agreements and gaming sites,

including NordicSlots.com and NorgesSpill.

com. The results are consolidated in the

Cherry group as of the takeover on 7 Novem-

ber. The acquisition is expected to contribute

to an increase in sales and increased profits

by at least SEK 8.6 million a year.

RESTAURANT CASINO – FISCAL YEAR 2013Earnings for the fiscal year 2013 increased by

3 per cent and amounted to SEK 138.3 million

(134.5). Operating income (EBIT) increased by 2

per cent to SEK 12.6 million (12.3).

IMPORTANT EVENTS IN 2013: • Cherry’s market share increased and

amounted to 60 per cent (58) of the active

gaming tables according to statistics from

the Swedish Gambling Authority for De-

cember 2013. Cherry had at the end of the

quarter gaming at 257 venues (243) with a

total of 372 tables (349).

• 36 new agreements were signed in the fiscal

year of 2013, while 15 venues were closed as

a result of unprofitability, conceptual chang-

es, loss of alcohol licences or bankruptcy.

Seven venues were also closed for the season

as of 31-12-2013.

GROUP-WIDE AND DEVELOPMENT PROJECTSExternal earnings for the fiscal year of 2013 in

development projects amounted to SEK 0.3 mil-

lion (0.0) and were charged to operating income

(EBIT) to an amount of SEK -3.8 million (-0.4).

DEVELOPMENT PROJECT – YGGDRASIL GAMINGYggdrasil Gaming as a class 4 licence on Malta,

where the head office is located. The company

employs directly and indirectly over 20 persons

in development, game design and production.

Yggdrasil’s gaming portfolio currents con-

sists of 12 Video Keno, 12 scratch lotteries,

Lotto7 with live draws and Lotto7 Express with

direct draws, plus 2 video slots.

The reception on the market by both opera-

tors and players has so far exceeded all expec-

tations.

Yggdrasil Gaming has launched its products

on all of Cherry’s casino sites, as well as on

Vera&John and LeoVegas. Agreements have

also been signed with Unibet, MrGreen and

VideoSlots for gaming deliveries.

Yggdrasil Gaming is run as a separate compa-

ny in Cherry. Cherry’s ownership after dilution

is approx. 92 per cent. Investment has taken

place both through a special issue of shares

and loans. Yggdrasil Gaming has in 2013 been

reported under the business area Development

projects. Cherry has so far invested SEK 11.3 mil-

lion (0.0) in Yggdrasil Gaming in the form of

share capital and shareholder loans.

Cherry’s ownership amounted on 31-12-2013

to 92.0 per cent. There is an opportunity for

leading executives in Yggdrasil to subscribe to

shares over time on the assumption a number

of conditions are met, which would imply that

Cherry’s ownership amounted to 86.3 per cent.

DEVELOPMENT PROJECT – SWEDISH SPORTS LOTTERY KLUBBLOThe club lottery Klubblo is a new Swedish lot-

tery. The lottery will be managed under a Swed-

ish lottery permit and lotteries will in the first

instance be sold via mobiles and computers.

In that the player chooses the beneficiary, this

gives the lottery credibility and justification.

The media group Metro and Cherry are to-

gether responsible for development, manage-

ment and marketing of the lottery through the

jointly owned company Svenska Klubbspel AB.

The non-profit association Idrottsalliansen is

the licence holder for Klubblo and potential

beneficiaries are, in addition to Idrottsalli-

ansen, all the over 20,000 sports associations

in Sweden. The launch is expected to take place

in the first half of 2014.

Cherry owns 50 per cent of Svenska Klubb-

spel AB and the company is reported as an asso-

ciated company. The result for participations in

the associated company amounted to SEK -0.8

million (0.0). Cherry has invested SEK 4.6 mil-

lion (0.0) in Svenska Klubbspel AB.

GROUP-WIDEThe parent company supplies and sells internal

services to other group companies, primarily

within finance, economics and business de-

velopment, and supplies the listing platform,

administration and management, as well as

other external licence earnings.

INVESTMENTSThe investments in intangible, tangible and fi-

nancial fixed assets amounted during the year

to SEK 58.6 million (15.2).

LIQUID ASSETS AND CASH FLOWLiquid assets for the group amounted on 31


December to SEK 68.4 million (59.0). Player

liabilities amounted to SEK 3.3 million (0.0).

Interest bearing liabilities amounted to SEK 1.1

million (1.8). In January 2014 the ministry in

Schleswig-Holstein decided to return the bank

guarantee of EUR 1.0 million that Cherry had

previously issued as security for tax payments.

Betsson paid on 19 February 2014 an addition-

al purchase sum of SEK 60 million. During

the 2nd quarter SEK 143.4 million has been

transferred to shareholders in a redemption

programme.

The cash flow from current operations

amounted to SEK -24.3 million (41.1). The eq-

uity ratio amounted to 75 per cent (86) at the

year end.

EMPLOYEESThe average number of employees (number of

employees converted to full-time jobs) within

the group amounted to 179 (160) at the year

end. At the year end the number of employ-

ees amounted to 706 (677) persons. The ma-

jority of employees in the group are active as

croupiers for Swedish restaurant casino. Most

of them are young people who combine their

studies with part time work in the evenings

and at weekends.

FUTURE PROSPECTSThe business area Online Gaming is estimated

to grow more quickly than the online gaming

market. H2 Gambling Capital estimates that the

global online gaming market would grow by 9

per cent in 2014. Online gaming is surrounded

by severe competition and rules and regulations,

which can quickly change in the different Euro-

pean countries.

Cherry estimates that the market for games

developers in online casino in 2013 was about

300 million euro in Europe and that it will grow

by about 10 per cent a year in the next few years.

The legal situation for online gaming is con-

tinually changing in different geographical mar-

kets. Pressure is still being exerted on countries

in the EU to adapt national legislation to the

applicable EU laws, with the free movement of

products and services. Several countries have ad-

vised that they are working with new legislation

that will be compatible with the requirements

of the EU.

Market growth for restaurant casino is some-

what negative and there is also a certain amount

of local competition.

Cherry is not issuing a forecast for 2014.

ESSENTIAL RISKS AND UNCERTAINTY FACTORSPOLITICAL DECISIONSGaming on most national markets is strictly

regulated by law and all gaming activities are

in principle subject to licence. Cherry’s opera-

tions are therefore influenced to a considerable

extent by political decisions. The legal situation

for online gaming is continuously changing in

different geographical markets. Local regula-

tions are often in conflict with EU regulations,

which creates a confused legal situation. New

intepretations and changes in the application

of existing regulations can in combination with

new laws have both a positive and negative

effect on Cherry’s operations. Cherry engages

actively to remain informed of any changes

concerning gaming legislation in Europe.

LEGAL DISPUTESPersons who suffer from an addiction to gam-

ing may come to sue companies within the

Cherry Group for their gaming abuse. Even if

such claims are overruled they could give rise

to substantial legal costs and possibly a loss of

confidence in Cherry, which by extension would

lead to a reduction in earnings. Cherry’s gaming

sites give customers the opportunity to decide

for themselves how much they want to play for

and there are several gaming responsibility tools

for players on the sites, where the player can

decide to switch off, or limit the amount to play

etc. In restaurant casino Cherry has the oppor-

tunity via physical croupiers to refuse players

who are, for example, considered to have been

drinking too much. The stakes in restaurant

casino are strictly limited, which to a certain

extent minimises the risk of addiction.

Cooperation agreements with partners and

customers can result in legal disputes and appli-

cations for summons.

Cherry received a claim in 2011 from

Norway’s Lotteri- og stiftelsetilsyn (Gaming and

Foundation Authority) where they demanded

that Cherry should stop its marketing of gam-

ing on EuroLotto.com in relation to Norwegian

players. Cherry considers that the claims of

Norway’s Lotteri- og stiftelsetilsyns are invalid

in that they are directed towards the parent

company Cherry AB (Publ) and not Cherry Ltd,

and also because they are in conflict with EU law,

which is superordinate to Norwegian legislation.

No penalties have been announced. Cherry took

out a summons in January 2013 at Oslo City

Court against the Norwegian state concerning

the injunction issued against Cherry AB. After

the Norwegian Lotteritillsynet confirmed that

they will not be taking any further action against

Cherry AB, Cherry decided to withdraw the

summons against the Norwegian state concern-

ing EuroLotto.com.

Cherry initiated in 2012 a legal process

against a supplier in Online Gaming. The par-

ties reached an agreement in 2013 and a new

cooperation agreement was signed, which

means that Cherry will over time recover a large

part of the amount charged to profits in 2012

and 2011. SEK 1.2 million has been redeemed in

profits in 2013.

There are no other legal disputes in progress

from previous years and no summons or other

claims other than the above have been directed

at Cherry during the year or after the year end.

COMPETITIONThe Swedish restaurant casino market is a ma-

ture market and characterised by a large num-

ber of small operators. In line with a possible

reconciliation of Swedish gaming legislation,

Cherry estimates that the competition may in-

crease. Cherry has an established a solid posi-

tion on the Swedish restaurant casino market.

Further political decisions with a negative

effect for the Cherry, or increased competition

from financially stronger competitors, can re-

sult in significant negative effects for Cherry.

There are many competitors with similar prod-

ucts in online gaming and the competition

from web-based operators can be expected to

increase in the future. Online gaming is a high-

ly competitive market, and one that requires a

lot of marketing. Cherry is actively engaged in

strategic policies to handle any increase in the

competition. In gaming development where

Cherry operates via Yggdrasil Gaming the com-

petition in slots is severe, while it is estimated

that online gaming in Lotteries is less exposed

to competition. The competitive situation for

Klubblo in the market for Swedish lotteries

under licence from the Swedish Gambling

Association is relatively moderate, since the

number of licensed operators is limited, but

Klubblo will also face competition from inter-

nationally regulated operators.

RELIANCE ON LARGE CUSTOMERSThere are more than 200 customers in the

business areas in the Cherry Group. No single

customer accounts for more than ten per cent

of group sales. Cherry is actively engaged in re-

inforcing its customer relations in all business

areas.

CUSTOMER AGREEMENTSMost of the customer agreements in the Cherry

Group in restaurant casino can be cancelled if

the venue, i.e. the restaurant, in which the activ-

ity is conducted is transferred, sold or its man-

agement is taken over by other operator. This

is a standard regulation in the industry. Even

PART 2 ADMINISTRATION REPORT / MANAGEMENT AND CONTROL


if Cherry signs long-term agreements there

is therefore no guarantee that a contractual

obligation will persist during the term of the

agreement.

ECONOMIC SITUATIONThe restaurant casino industry has historically

followed developments in the restaurant in-

dustry, while online gaming is considered to be

relatively insensitive to changes in economic

activity.

The online gaming industry has so far been

relatively unaffected by the economic situation.

CHANGES IN CONSUMER BEHAVIOURCherry’s traditional Restaurant Casino is being

increasingly challenged by gaming on com-

puters or mobiles. One risk to which Cherry is

exposed is that legislation will prevent tradi-

tional casino gaming from offering equally

attractive forms of gaming as the Internet.

Cherry must continuously adapt its offering

to meet changes in online behaviour, such as

the use of mobiles as a gaming platform. This

involves new opportunities, but also threats.

Cherry has by virtue of its own platform good

prospects of being able to adapt its offering

to follow changes in consumer behaviour.

Through its investment in gaming develop-

ment, Cherry reduces its reliance on Online

Gaming and Restaurant Casino, and Cherry’s

portfolio will also be broadened via the invest-

ment in Klubblo and lotteries in Sweden.

CASH HANDLINGCash is handled by Cherry in restaurant casino,

which does involve the risk of theft and rob-

bery. In addition to this only a certain part of

cash handling is insured. The risks involved

with handling cash in Restaurant Casino have

nevertheless been reduced in that the physi-

cal handling of cash at most of the venues is

not handled by Cherry. Most of the handling

is managed by the customers instead (restau-

rants and night clubs). Cherry also cooperates

with security carrier companies such as Nokas,

Loomis and others in Restaurant Casino. Cash

is still handled and transported, however, at

some venues in the group. Theft has occurred

at some of Cherry’s venues. Cherry continu-

ously strives to improve security for our per-

sonnel and the handling of cash by developing

new and better systems, reviewing routines,

and increasing credit and cash card handling at

our venues. Cherry also has an internal control

system, which quickly detects deviations and

thefts.

GAMING PLATFORMCherry has its own online gaming platform,

which is integrated with different gaming sup-

pliers such as Net Entertainment, Yggdrasil

Gaming, Microgaming and Amaya. Yggdrasil

Gaming has a separate platform and delivers

gaming to several gaming operators. Like all

online services, these systems can suffer from

interference. This can be a result of many dif-

ferent reasons, and can be both within and

without of Cherry’s control. In the event of

interference the company’s sites or products

can be partially or completely inaccessible for

end users, which has an impact on Cherry’s

earnings. Potential interference or technical

problems with the company’s servers would,

however, result in a loss of earnings, reduced

confidence in the company, and possibly

claims for damages. The company works con-

tinuously to minimise the risk of interference,

and guaranteeing a high level of technical se-

curity in the systems is one way of doing this.

RELIANCE ON PARTNERS AND KEY PERSONS

Cherry relies on the agreements the company

enters into with restaurants and night clubs in

Restaurant Casino. If Cherry lost a large number

of such agreements this would have a negative

effect on operations.

Cherry has a production agreement with Otto

Malta Ltd for EuroLotto, where Cherry utilises

their licence and technology in Online Gaming.

Cherry also has agreements with several other

suppliers in gaming and payment solutions,

which are very important for Cherry’s opera-

tions in Online Gaming. Cherry engages several

consultants and partners for the development,

management and marketing of Cherry’s online

operations. If any of these consultants or part-

ners should fail to meet their obligations in re-

lation to Cherry this could have a negative effect

on operations.

Cherry has a large number of highly qualified

key persons in its employment. The loss of one

or more key persons could in the short term have

a negative effect on Cherry.

For a description of financial risks, refer to

Note 3 on page 43.

RESEARCH AND DEVELOPMENCherry does not undertake research activities.

Development work is reported as assets in the

balance sheet, where it complies with the re-

quirements set in IFRS.

Cherry has conducted development projects

in 2013 in Online Gaming and in Development

Projects, which comply with these require-

ments and are reported as intangible assets. In

2013 the closing balance for development costs

was SEK 7.1 million (1.1).

ENVIRONMENTCherry does not conduct any activities subject

to licence or notification in accordance with the

Environment Act.

LEGISLATION AND ARTICLES OF ASSOCIATIONCherry AB (publ) shall in the first instance ap-

ply the Swedish Companies Act and the regu-

lations that follow from the listing of the share

at AktieTorget. Cherry shall also in its activities

follow the regulations specified in Cherry’s ar-

ticles of association. This is available on Cher-

ry’s website.

ANNUAL GENERAL MEETINNotice is given of the annual general meeting

no earlier than six weeks and no later than

four weeks prior to the meeting. The notice

contains information on application and on

the right to participate and vote at the meet-

ing, the listed agenda and the issues that are

to be considered, information on proposed div-

idends, and the main content of other propos-

als. Shareholders or their representatives can

vote for the full number of shares owned or

represented. Proposals to the meeting should

be addressed to the Board of Directors and

submitted in good time before notice is issued.

The minutes from the meeting are submitted

to shareholders on request, and are available at

the company’s website.

Nomination procedures are carried out by

one of the largest shareholders appointed to

the nomination committee. The following

nomination committee has been appointed

prior to the annual general meeting in 2013:

Morten Klein (appointed by Morten Klein AS),

John Wattin (appointed by the Hamberg fam-

ily), Pontus Lindwall (appointed by the Kling

family) and Rolf Åkerlind (Chairman of Cherry

AB). Rolf Åkerlind gives notice of the nomina-

tion committee. The AGM in 2013 appointed

Rolf Åkerlind and Anders Holmgren in the

Management and control


audit committee. The full Board of Directors is

included in the remuneration committee.

BOARD OF DIRECTORSBoard members are elected annually to the

AGM for the period until the next AGM is

held. There are no rules concerning the long-

est period of time a member can be included

on the board. There are seven members on

Cherry’s board. Six of the members are elected

at the AGM and one member is appointed by

the employee organisation HRF. The members

include persons linked to Cherry’s large share-

holders – Morten Klein and Martin Wattin –

as well as persons independent of them. The

CEO is not included in the board.

By the definition of the Stockholm Stock

Exchange the number of board members in-

dependent of the company should be 50 per

cent and the number of members independent

of the larger shareholders 66.7 per cent. More

than half of the board members and more than

half of the members of the group executive

have underdone training courses in the regu-

lations of the Stockholm Stock Exchange. The

CEO presides over the board. Company execu-

tives participate in board meetings as secretary

and presenters of special issues. The CFO is

the secretary on the board.

The board held twelve meetings at which

minutes were taken in 2013. The board has

paid special attention to strategic, financial

and accounting issues, major investments,

disposals of operations and development pro-

jects, as well as decisions in salary issues for

venue owners (advanced payments of gaming

shares). The work of the board follows a plan

to ensure that it receives all the requisite infor-

mation.

The company’s auditors report their obser-

vations from their audit of the annual report

and their assessment of the company’s inter-

nal routines and control to the audit commit-

tee and the board. The board has adopted an

agenda and issued instructions concerning

the allocation of work between the board and

the CEO, as well as information that the board

should receive on a regular basis.

THE EXECUTIVEThe board has delegated the operative respon-

sibility for the administration of the company

and the group to the company’s president and

CEO. Cherry’s wholly owned Swedish subsidi-

aries normally have only one formal executive

board, consisting of the president and, or CFO,

or the business area manager. The CEOs of

these subsidiaries therefore report internally

directly to the president Instructions have been

prepared for respective CEOs in the wholly

owned subsidiaries, which are transparent

with the instructions for the president.

Foreign and non-wholly owned subsidiaries

normally have their own autonomous board.

Cherry’s representatives in these boards con-

sist of members from Cherry’s executive and,

or other persons with suitable competence pro-

files. The CEOs in these companies report to

their respective boards.

The group executive for Cherry consisted at

the year-end of six persons: the president, the

CFO who is also responsible for IR and vice

CEO for the Cherry, two vice CEOs for the busi-

ness area Restaurant Casino divided into two

geographical areas (South and North), the sales

manager for Restaurant Casino, and a business

area manager for Online Gaming. The group

executive met on two occasions in 2013. The

meetings dealt with earning trends, reports

and issues prior to and after board meetings.

Issues dealt with also concerned the budget,

forecasts, investments, security, risks within

the group and policies, as well as reviews of

market trends and the general economic sit-

uation. Business area related projects were

also discussed and decided upon. In addition

to group executive meetings, regular manage-

ment meetings are held with the management

in respective segments, where specific busi-

ness area issues are dealt with.

REMUNERATIONRemuneration to the board, CEO and other

leading executives during the year is indicated

in Note 7.

INCENTIVE PROGRAMMES 2011–2014At an extraordinary general meeting on 19 Oc-

tober 2011 the board approved a proposal to

introduce an incentive programme for leading

executives and key persons in Cherry.

The programme involves an offer to acquire

options for shares of the B series in Cherry at

a market price (calculated according to Black

& Scholes). More information on the options

programme is available in Note 7.

AUDITPwC was chosen as auditor in 2010, with au-

thorised public accountant Niklas Renström

as senior auditor up until the AGM in 2014.

PwC conducts audits of Cherry AB and all the

Swedish subsidiaries, and all the companies in

Malta.

The audit of the annual report and con-

solidated financial statements takes place in

January–February. An audit of internal rou-

tines and the control system also takes place

throughout the year, which is reported to the

audit committee, the board and executive.

Reports are submitted to both the audit com-

mittee and the board of observations made

during the audit of the annual accounts and

assessment of the company’s internal routines

and financial control. In addition to the audit

assignment, Cherry has also used PwC for

consultations in accounting issues. The remu-

neration paid is indicated in Note 8.

DISCHARGE OF LIABILITYThe board has been authorised at the AGM in

2013 during the period to the next AGM, on

one or more occasions and with or without

preferential rights for shareholders, to take

a decision on the non-cash issue of a total of

1,280,000 shares in the B series in conjunc-

tion with the acquisition of companies. The

issue price for the new shares will be based on

the market price of the company share.

The purpose of this authorisation is to ena-

ble efficient acquisition by means of payment

with shares.

GUIDELINES FOR REMUNERATION AND OTHER COMPENSATION TO LEADING EXECUTIVESThe Swedish Companies Act stipulates that

the board shall at the annual general meeting

set out proposals for guidelines in relation to

salaries and other compensation for leading

executives. The annual general meeting shall

thereafter decide upon the guidelines to apply

for compensation from the company to leading

executives. The leading executives in this con-

text refer to the persons who together with the

CEO constitute the group executive.

UPDATED GUIDELINESA decision was taken at the annual general

meeting in 2013 that the remuneration to the

board would amount to SEK 1,100,000, of

which SEK 350,000 to the chairman and SEK

150,000 to each of the other board members.

It was decided that compensation would be

paid to the auditor on approval of the account.

It was decided that the level of remuneration

for leading executives would be in line with

the market and competitive with a view to at-

tracting and retaining competent executives.

Remuneration shall consist of fixed salaries,

and where appropriate variable salaries, and

include pension commitments and other bene-

fits such as a company car.

Any variable remuneration offered to lead-

ing executives shall be determined on the basis

of the fulfilment of group-wide and individual

targets set in advance in relation to the results

of their administration and the financial devel-

opment of the company, and in consideration

of the personal development of the executives

PART 2 MANAGEMENT AND CONTROL


concerned. Variable remuneration may only be

paid to 100 per cent of the fixed salary.

The normal retirement age is 65. Pensions

shall be in line with the market and based on

defined contributions. Pension premiums are

maximised to 35 per cent of annual salary, in-

cluding bonuses.

The period of notice is normally six to twelve

months if notice is given on the initiative of the

company, and six months if such notice is at

the initiative of the executive. If notice is given

by the company, severance pay can be paid to

an amount corresponding to 12 months salary.

The board may depart from any such guide-

lines if there are special grounds to do so in

individual cases..

PROPOSED GUIDELINES FOR 2014Remuneration is paid to the chairman, board

members and the audit committee in accord-

ance with the decision of the annual general

meeting. Remuneration to the CEO and other

leading executives consists of a basic salary, in

some cases variable salary, pension commit-

ments and other benefits, and is decided by the

remuneration committee.

Remuneration to the CEO shall consist of a

fixed basic salary and a variable salary based on

the turnover and results for the group and pen-

sion commitments in accordance with the ITP

plan. The variable part shall be maximised to

the scale of the fixed remuneration. Remuner-

ation to the CEO is negotiated by the chairman

and decided by the board.

Remuneration to other leading executives

shall consist of a fixed basic salary and in some

cases a variable salary and pension commit-

ments in accordance with the ITP plan. The

variable part shall be maximised to 100 per

cent of the fixed remuneration, and shall be

paid on the basis of the performance targets

approved by the board. Salaries for leading ex-

ecutives are negotiated by the CEO and decided

by the chairman.

The normal retirement age is 65. Pensions

shall be in line with the market and based on

defined contributions. Pension premiums are

maximised to 35 per cent of annual salary, in-

cluding bonuses.

The period of notice is normally six to twelve

months if notice is given on the initiative of the

company, and six months if such notice is at

the initiative of the executive. If notice is given

by the company, severance pay can be paid to

an amount corresponding to 12 months salary.

The board proposes that remuneration to

the auditor is paid on current account.

The board may depart from any such guide-

lines if there are special grounds to do so in

individual cases.

INFORMATION ON PARENT COMPANYThe parent company supplies and sells internal

services to other group companies, primarily

within finance, economics, business develop-

ment, administration and management, as well

as other external licence earnings. Earnings for

the fiscal year 2013 amounted to SEK 2.4 mil-

lion (2.0) and profit/loss before tax amounted

to SEK -24.3 million (-18.5). In conjunction

with the write-down of goodwill related to the

Automaten sites, shares in subsidiaries have

been written down by SEK 286.9 million. The

investments of the parent company in tangible

and intangible assets amounted to SEK 0.2

million (0.2). Liquid assets amounted as of the

balance sheet date to SEK 59.0 million (41.3).

LISTING AND OWNERSHIPThe Cherry B-share has been listed on Ak-

tieTorget since 12 September 2006. Cherry

had 12,802,642 shares at the end of the year,

divided into 997,600 A-shares and 11,805,042

B-shares. Each A-share carries 10 votes, while

each B-share carries one vote. The shares have

equal rights to the assets and profits in Cherry.

The company had a total of 2,329 sharehold-

ers (1,932) at the end of the year. The largest

owners are the Hamberg family with 6.33 per

cent of the capital and 15.94 per cent of the

votes, and Morten Klein with a 22.03 per cent

holding and 15.66 per cent of the votes. See

also page 21 for additional information on the

owners.

PROPOSED ALLOCATION OF PROFITSThe board proposes that the annual general

meeting decide upon an ordinary share div-

idend to shareholders of SEK 51.2 million

(143.4), corresponding to SEK 4.00 per share

(11.20). In 2013 the transfer to shareholders

was distributed via a redemption process, but

is now proposed via an ordinary dividend The

full proposal will be presented in good time pri-

or to the annual general meeting.

The following assets remain at the disposal of the AGM: (TSEK)

Premium fund 256,391

Balance of loss b/f -54,707

Profit/loss for the year -24,356

Total 177,328

The board proposes thatprofits are disposed of as follows: (TSEK)

Ordinary dividend to shareholders 51,211

Brought forward in new account 126,117

Total 177,328

The board proposes that profit/loss for the year

and balance of loss brought forward, includ-

ing dividends to shareholders, a, total of SEK

130,274, is settled with the premium fund.

With reference to the proposal by the board

as above, the board hereby submits the follow-

ing report in accordance with 18 chapter 4 § of

the Companies Act.

The unappropriated profit in the compa-

ny as of 31 December 2013 amounted to SEK

201.7 million, and net profit/loss for the year

amounted to SEK -24.4 million. The annual

general meeting thereby has an unappropriat-

ed profit of SEK 177.3 million at its disposal. On

the assumption that the annual general meet-

ing in 2013 approves the proposal of the board

for the allocation of profits, SEK 126.1 million

will be brought forward in a new account.

There is full coverage for the restricted

equity in the company after the proposed al-

location of profits. The board has taken into

consideration the consolidation requirements

and liquidity for the company and the group

through an overall assessment of the financial

position of the company and the group and

their opportunity to meet their obligations in

the long term. The proposed dividend does not

endanger the capacity of the company to make

the investments deemed to the necessary. The

financial position of the company does not

give rise to any other assessment than that the

company can continue its operations and that

the company is expected to fulfil its obligations

in the short and long term. In addition to the

assessment of the company’s consolidation

and liquidity requirements, the board has also

taken into consideration all other known cir-

cumstances that can be of importance for the

financial position of the company.

With reference to the above the board con-

siders the dividend to be justified in relation to

the requirements set by the type of operations,

scope and risks for the equity in the company

the group, and the consolidation, liquidity and

other requirements for the company and the

group.

PROPOSAL FOR RECORD DAY FOR DIVIDENDThe board proposes 13 May 2014 as the record

day for the dividend. If the annual general

meeting approved the proposal the dividend is

estimated to be issued through the agency of

Euroclear Sweden AB starting on 16 May 2014.


(Amounts in TSEK) 2013 2012

Net profit/loss for the year -8,191 30,378

Other comprehensive income

Conversion differences -4,883 -12,753

Total of other comprehensive income -4,883 -12,753

TOTAL COMPREHENSIVE INCOME (Attributable to) -13,074 17,625

Parent company shareholders earnings from remaining operations -38,336 -10,546

Parent company shareholders earnings from discontinued operations 25,534 28,188

Holdings without controlling influence -272 -17

Consolidated income statement

Consolidated statement of comprehensive income

(Amounts in TSEK) NOTE 2013 2012

Earnings from gaming operations 262,035 231,376

Other operating income 6 4,284 140

Total 4 266,319 231,516

Operating expenses

Running costs in gaming operations -180,112 -123,913

Other external expenses 8, 14 -20,165 -20,964

Personnel expenses 7 -90,036 -74,526

Other operating expenses 10 -2 -322

Operating profit before depreciation and write-downs -23,996 11,791

Depreciation and write-downs of intangible and tangible fixed assets 9 -9,877 -5,654

Write-down of goodwill 15 - -

Total operating expenses -300,192 -225,379

Operating profit/loss -33,873 6,137

Financial items

Results from participations in associated companies -795 -

Interest income and other similar items 11 4,925 233

Interest expenses and other similar items 11 -2,316 -4,026

Total financial items 1,814 -3,793

Profit/loss before tax -32,059 2,344

Tax 12 -1,666 -154

Profit for year from remaining operations -33,725 2,190

Discontinued operations

Profit for the year from discontinued operations 31 25,534 28,188

Profit/loss for the year -8,191 30,378

Attributable to

Parent company shareholders -7,889 30,396

Holdings without controlling influence -302 -18

Profit for period -8,191 30,378

Profit per share, calculated on profit attributable to parent company shareholders during the year 13

Profit per share before dilution

Profit from remaining operations -2.66 0.17

Profit from discontinued operations 2.00 2.20

Profit/loss for the year -0.66 2.37

Profit per share after dilution

Profit from remaining operations -2.53 0.16

Profit from discontinued operations 1.90 2.14

Net profit/loss for the year -0.63 2.30

Proposed dividend per share (SEK) 4.00 11.20

PART 2 GROUP


Assets (amounts in TSEK) NOTE 2013-12-31 2012-12-31

Fixed assets

Intangible fixed assets 15 52,409 272,164

Tangible fixed assets 16 6,770 7,263

Participations in associated companies 17 1,486 -

Deferred tax claims 12, 17 - 17

Other long-term receivables 17 873 430

Total fixed assets 61,538 279,874

Current assets

Inventories 366 608

Accounts receivable 19 8,367 26,580

Tax receivables 12 - 9,006

Receivables from associated companies 2,358 -

Other receivables 20 82,883 7,833

Prepaid expenses and accrued income 21 9,822 3,192

Liquid assets 68,437 59,057

Total current assets 172,233 106,276

TOTAL ASSETS 233,771 386,150

Equity and liabilities (amounts in TSEK) NOTE 2013-12-31 2012-12-31

Equity 22

Share capital 7,041 7,041

Other contributed capital 245,127 297,159

Unappropriated funds including profit for year -76,243 27,946

Equity attributable to parent company shareholders 175,925 332,146

Holdings without controlling influence -154 89

Total equity 175,771 332,235

Long-term liabilities

Long-term interest bearing liabilities 23 432 1,083

Other long-term liabilities - -

Deferred tax liabilities 12 630 116

Total long-term liabilities 1,062 1,199

Current liabilities

Current interest bearing liabilities 25 692 693

Accounts payable 24 10,970 6,235

Tax liabilities 12 2,655 10,842

Other liabilities 25 23,493 11,742

Accrued expenses and prepaid income 26 19,128 23,204

Total current liabilities 56,938 52,716

TOTAL EQUITY AND LIABILITIES 233,771 386,150

Memorandum items

Pledged assets 27 8,943 6,529

Contingent liabilities None None

Consolidated balance sheet


Equity attributable to parent company shareholders

(Amounts in TSEK)Share

capitalOther contri-buted capital

Conversion reserves*

Unappropriated profit including

profit for year TotalHoldings without

controlling influenceTotal

equity

Opening equity 01-01-2012 7,041 297,159 -34,337 53,180 323,043 2,443 325,486

Comprehensive income - - 0

Net profit/loss for the year - - 30,396 30,396 -18 30,378


Conversion differences - - -12,754 - -12,754 1 -12,754

Total of other comprehensive income 0 0 -12,754 0 -12,754 1 -12,754

Total comprehensive income 0 0 12,754 30,396 17,642 -17 17,625

Contributions from and value transfers to shareholders, reported directly in equity

Acquisition of minority - - - 1,062 1,062 -2,444 -1,382

Contribution from minority - - - - 0 107 107

Dividends - - - -9,601 -9,601 - -9,601

Total contributions from and value transfers to shareholders, reported directly in equity

0 0 0 -8,539 -8,539 -2,337 -10,876

Closing equity 31-12-2012 7,041 297,159 -47,091 75,037 332,146 89 332,235

Opening equity 01-01-2013 7,041 297,159 -47,091 75,037 332,146 89 332,235

Comprehensive income - - - - - -

Net profit/loss for the year - - - -7,889 -7,889 -302 -8,191

Other comprehensive income - - - - - - 0

Conversion differences - - -4,912 - -4,912 30 -4,882

Total of other comprehensive income 0 0 -4,912 - -4,912 30 -4,882

Total comprehensive income 0 0 -4,912 -7,889 -12,801 -272 13,073


Transactions with minority - - - -29 -29 29 0

Dividends - - - -143,390 -143,390 - -143,390


0 0 0 -143,419 -143,419 29 -143,390

Closing equity 31-12-2013 7,041 297,159 -52,003 -76,271 175,926 -154 175,772

Consolidated statement of changes in equity

*The conversion reserve is in its entirety attributable to revaluation of net assets in foreign subsidiaries.

PART 2 GROUP


Consolidated cash flow statement

Including discontinued operations* (amounts in TSEK) NOTE 2013 2012

Current operations

Result after financial items -6,525 32,044

Adjustments for items not included in cash flow

- Depreciation and write-downs 9,877 82,730

- Revaluation of supplementary proceeds - -73,447

- Other items -20,811 384

Income tax paid -563 -1,335

Cash flow from current operations before changes in working capital -18,022 40,376

Changes in working capital

Changes in inventories 242 201

Changes in current receivables -6,698 -11,881

Changes in current liabilities 163 12,495

Cash flow from current operations -24,315 41,191

Investment operations

Acquisition of intangible fixed assets 15 -10,284 -9,136

Acquisition of tangible fixed assets 16 -2,626 -6,097

Disposal of tangible fixed assets - 135

Acquisition of operations 30 -27,290 -

Disposal of operations 31 216,395 27,789

Incoming payments of restaurant loans 430 165

Cash flow from investment operations 176,625 12,856

Financial operations

New issue of shares after deductions for issue costs 22 119 -

Change in long-term loans -652 -13,339

Dividends paid -143,390 -9,601

Minority payments - -1,275

Cash flow from financial operations -143,923 -24,215

Change in liquid assets 8,387 29,832

Opening liquid assets 59,057 30,457

Exchange rate differences, liquid assets 993 -1,232

Closing liquid assets 68,437 59,057

Supplementary information

Unutilised credits amounted to - 15,000

During the period interest received amounted to 2,009 251

During the period interest paid amounted to -58 -546

*For cash flow attributate to discontinued operations, see note 31.


Parent company income statement

Parent company statement of comprehensive income

(Amounts in TSEK) NOTE 2013 2012

Net sales 5 2,293 1,864

Other operating income 6 133 87

Total 2,426 1,951

Operating expenses

Other external expenses 8, 14 -3,932 -4,998

Personnel expenses 7 -7,941 -7,934

Depreciation and write-down of intangible and tangible fixed assets 9 -250 -276

Other operating expenses 10 -1 -182

Total operating expenses 5 -12,125 -13,390

Operating profit/loss -9,699 -11,439

Financial items

Result from participations in group companies 11 -17,094 -3,620

Interest income and other similar items 11 2,493 210

Interest expenses and other similar items 11 -1 -3,621

Total financial items -14,602 -7,031

Profit/loss before tax -24,301 -18,470

Tax 12 -55 -

NET PROFIT/LOSS FOR THE YEAR -24,356 -18,470

(Amounts in TSEK) 2013 2012

Net profit/loss for the year -24,356 -18,470


Total of other comprehensive income 0 0

TOTAL COMPREHENSIVE INCOME -24,356 -18,470

PART 2 PARENT COMPANY


Parent company balance sheetsAssets (amounts in TSEK) NOTE 2013-12-31 2012-12-31

Fixed assets

Intangible fixed assets

Trademarks 15 165 182

Total intangible fixed assets 165 182

Tangible fixed assets

Equipment 16 155 190

Total tangible fixed assets 155 190

Financial fixed assets

Participations in group companies 17, 18 28,440 306,975

Participations in associated companies 2,250

Total financial fixed assets 30,690 306,975

Total fixed assets 31,011 307,347

Current assets

Receivables from group companies 59,243 26,200

Receivables from associated companies 2,358 -

Other receivables 20 60,473 500

Prepaid expenses and accrued income 21 586 363

Liquid assets 58,960 41,252

Total current assets 181,619 68,315

TOTAL ASSETS 212,629 375,662

Equity and liabilities (amounts in TSEK) NOTE 2013-12-31 2012-12-31

Equity 22

Restricted equity

Share capital 7,041 7,041

Statutory reserve 1,924 1,924

Total restricted equity 8,965 8,965

Unrestricted equity

Premium fund 256,391 256,391

Unappropriated profit -54,707 107,153

Net profit/loss for the year -24,356 -18,470

Total unrestricted equity 177,328 345,074

Total equity 186,293 354,039

Current liabilities

Accounts payable 24 803 320

Liabilities to group companies 22,947 17,138

Tax liabilities 12 402 298

Other liabilities 25 189 205

Accrued expenses and prepaid income 26 1,996 3,662

Total current financial liabilities 26,336 21,623

TOTAL EQUITY AND LIABILITIES 212,629 375,662

Memorandum items

Pledged assets 27 - 8,313

Contingent liabilities None None


Parent company statement of changes in equity

(Amounts in TSEK)Share

capital Statutory reserve Premium fund

Unappropriated profit including profit for

yearTotal equity

Opening equity 01-01-2012 7,041 1,924 256,391 116,754 382,110

Comprehensive income - - - - -

Net profit/loss for the year - - - -18,470 -18,470

Total of other comprehensive income 0 0 0 0 0

Total comprehensive income 0 0 0 -18,470 -18,470


Dividends - - - -9,601 -9,601


0 0 0 -9,601 -9,601

Closing equity 31-12-2012 7,041 1,924 256,391 88,683 354,039

Opening equity 01-01-2013 7,041 1,924 256,391 88,683 354,039

Comprehensive income - - - - -

Net profit/loss for the year - - - -24,356 -24,356

Total of other comprehensive income 0 0 0 0 0

Total comprehensive income 0 0 0 -24,356 -24,356


Dividends - - - -143,390 -143,390


0 0 0 -143,390 -143,390

Closing equity 31-12-2013 7,041 1,924 256,391 -79,063 186,293

PART 2 PARENT COMPANY


Parent company cashflow statement

Current operations (amounts in TSEK) 2013 2012

Result after financial items -24,301 -18,470

Adjustments for items not included in cash flow

- Depreciation and write-downs 250 276

- Write-down of shares in subsidiaries 287,049 19,982

- Non paid group contributions and dividends -67,228 -11,862

- Other - 4,182

Income tax paid 49 476

Cash flow from current operations before changes in working capital 195,819 -5,416

Changes in working capital

Changes in current receivables -28,368 6,984

Changes in current liabilities 4,609 14,296

Cash flow from current operations 172,060 15,864

Acquisition of intangible fixed assets -35 -139

Acquisition of tangible fixed assets -164 -23

Acquisition of shares and participations in group companies -8,338 -

Disposal of shares and participations in subsidiaries -175 30,716

Acquisition of shares and participations in associated companies -2,250 -

Cash flow from investment operations -10,962 30,554

Amortisation loans 24 - -13,333

Dividends paid -143,390 -9,601

Cash flow from financial operations -143,390 -22,934

Change in liquid assets 17,708 23,484

Opening liquid assets 41,252 17,768

Closing liquid assets 58,960 41,252

Supplementary information

Unutilised credits amounted to - 15,000

During the period interest received amounted to 1,961 210

During the period interest paid amounted to -1 -465


Note 1: General informationCherry AB (parent company, CIN 556,210-

9,909) and its subsidiaries (together Cherry or

the group) is a Swedish group of companies that

via subsidiaries and partners offers fun & excite-

ment on land and online. Cherry offers online

casino and lotteries via the sites (CherryCasino.

com, EuroSlots.com, SpilleAutomater.com, Eu-

roLotto.com, NorgesSpill.com, NordicSlots.com

and Klubblo.se), including the development of

online gaming via Yggdrasil Gaming.

Cherry is also market leader in casino at

restaurants and night clubs in Sweden. The

Automaten sites, which ran online gaming, were

disposed of in February 2013.

The parent company is a Swedish lim-

ited company (publ) with its head office in

Stockholm. The address of the company is Blek-

holmstorget 30, S-111 64 Stockholm. The parent

company’s B-share is listed on AktieTorget.

This Annual Report and consolidated finan-

cial statements have been approved for publi-

cation by the board on 7 April 2014 and will be

submitted to the annual general meeting on 8

May 2014 for ratification.

Note 2: Accounting principlesGENERAL ACCOUNTING PRINCIPLESThe consolidated financial statements have

been prepared in accordance with the An-

nual Accounts Act, RFR 1 Supplementary

accounting regulations for groups, International

Financial Reporting Standards (IFRS) and

interpretations from IFRIC such as have been

approved by the EU Commission for applica-

tion within the EU.

The parent company applies the same ac-

counting principles as the group, with the

exception of in those cases indicated below

in the section “Parent company accounting

principles”.

The applied accounting principles corre-

spond with those applied in the previous year,

with the exception of the following.

NEW AND CHANGED STANDARDS APPLIED BY THE GROUP 2013As of 1 January 2013 the group applies the

following new items and supplements in IFRS.

In IAS 1 “Structure of financial statements”

changes have been introduced concerning oth-

er comprehensive income.

IFRS 13 “Fair value measurement” is to en-

sure that valuations to real value will be more

consistent and less complex in that the stand-

ard provides an precise definition and mutual

source in IFRS for real value valuations and

related disclosures.

None of the IFRS or IFRIC interpretations,

which for the first time are mandatory for the

fiscal year that began on 1 January 2013 , have

had any essential impact on the group.

NEW STANDARDS, CHANGES AND INTER-PRETATIONS OF EXISTING STANDARDS THAT HAVE STILL NOT COME INTO FORCE AND WHICH HAVE NOT BEEN APPLIED IN ADVANCE BY THE GROUPSeveral new standards and changes of interpre-

tations and existing standards come into force

in the fiscal year that begins after 1 January 2013

and have not applied during the preparation of

the consolidated financial statements. None of

these are expected to have any essential impact

of the consolidated financial statements, with

the exception of the following:

IFRS 10 “Consolidated financial statements”

The group intends to apply IFRS 10 for the fis-

cal year that begins on 1 January 2014 and has

still not assessed the full effect on the financial

statements.

IFRS 11 “Joint Arrangements” focused on

the rights and obligations the parties in a joint

venture have, rather than the legal form of the

arrangement. The group has still not evaluated

the full effect on the financial reports.

IFRS 12 “Disclosures of interests in other

entities” includes disclosure requirements for

subsidiaries, joint arrangements, associated

companies and non-consolidated structured

companies. The group intends to apply IFRS

12 for the fiscal year that begins on 1 January

2014 and has still not assessed the full effect on

the financial statements.

IFRS 9 “Financial instruments” concerns

the classification, valuation and recognition of

financial assets and liabilities. The group has

still not evaluated the effects.

None of the other IFRS or IFRIC interpre-

tations that have so far not come into force are

expected to have any essential impact on the

group.

APPLIED VALUATION PRINCIPLESAssets and liabilities are reported at historic

acquisition values, with deductions for value

depreciation and write-downs in those cases

where this is applicable. Some financial instru-

ments are valued to their fair value.

Fixed assets and long-term liabilities consist

of amounts that are expected to be recovered or

paid after more than twelve months from the

balance sheet date. Current assets and current

liabilities consist of amounts that are expected

to be recovered or paid within twelve months

from the balance sheet date.

FUNCTIONAL AND REPORTING CURRENCYThe parent company uses Swedish kronor

(SEK) as its functional currency, which is also

used as the reporting currency for the group

and the parent company. The financial reports

are therefore presented in Swedish kronor, and

all amounts are, unless otherwise stated, round-

ed off to the nearest thousand.

FOREIGN CURRENCYTRANSACTIONS AND BALANCE SHEET ITEMS IN FOREIGN CURRENCYTransactions in foreign currency are convert-

ed to the functional currency according to the

exchange rates applicable on the transaction

date, or the date when the items are revalued.

Exchange rate profits and losses incurred

during the payment of such transactions are

reported in the income statement as other op-

erating income or other operating expenses.

Receivables and liabilities related to oper-

ations in foreign currency are valued at the

rate on the balance sheet date. Exchange rate

differences incurred during conversion are

reported in the income statement as other

operating income or other operating expenses.

Exchange rate profits and losses attributa-

ble to loans and liquid assets are reported in

the income statement as financial income or

expenses.

CONVERSION OF FOREIGN OPERATIONSAssets and liabilities in foreign operations are

converted in the consolidated financial state-

ments from the functional currencies of the

operations at the rate on the balance sheet date.

Earnings and costs are converted at the average

rate for the year. The exchange rates are taken

from the Riksbank. Conversion differences in-

curred during conversion are reported in other

comprehensive income and accumulated in a

separate component in equity, designated con-

version differences.

Goodwill and adjustments of fair value in-

curred during the acquisition of a foreign op-

eration are treated as assets and liabilities for

this activity, and are converted at the rate on the

balance sheet date.

Exchange rate differences are reported in

other comprehensive income.

ASSESSMENTS AND ESTIMATESThe preparation of financial statements in

PART 2 NOTES


accordance with IFRS requires the executive

management to make assessments and esti-

mates and to make assumptions that influence

the application of the accounting principles

and reported amounts for assets, liabilities,

earnings and costs.

Estimates and assumptions are regularly re-

viewed and based on historical experience and

other factors, including expectations of future

events, that are considered to be justified in

the prevailing conditions. The results of these

estimations and assumptions are used to

assess the reported values of assets and liabili-

ties, which otherwise would not be clear from

other sources. The actual result can deviate

from these estimations and assessments.

During the preparation of Cherry’s consol-

idated financial statements the board and the

CEO have come to the conclusion that the val-

uation of gaming agreements and concessions,

customer and restaurant receivables and the

write-down of goodwill are the critical areas

where other estimates and assessments would

have an effect on the financial position and

results.

WRITE-DOWNSWhen the group assesses the write-down re-

quirements for gaming agreements and con-

cessions the utility value is assessed on the ba-

sis of forecast future cash flows from the cash

generating units defined as venues. The most

important assumptions in these calculations

refer to the expected rate of growth of turnover

and development of the operating margin.

The write-down requirement for goodwill

is assessed annually by comparing the recov-

ery value with the reported value of the asset.

The most important assumptions in these cal-

culations refer to the expected rate of growth

of turnover, growth rate or forecast period,

and interest. Write-downs of goodwill are not

reversed. For a description of write-downs of

goodwill in 2013, see Note 15.

CUSTOMER AND RESTAURANT RECEIVABLESCustomer and restaurant receivables constitute

an important part of Cherry’s balance sheet.

Provisions for uncertain receivables are based

on the credit worthiness of the debtor and the

amount that is expected to be received. For a

more detailed description of the executive’s

assessment of customer and restaurant receiv-

ables, see Note 19 and 20.

SUPPLEMENTARY PAYMENTSIn conjunction with the acquisitions made

in recent years the acquisition price has been

made up of supplementary payments paid

during an agreed time after the acquisition,

and based on the development of turnover

and earnings and other parameters. The ex-

ecutive assess on a regular basis the expected

result of supplementary payments. The fair

value of conditional purchase amounts is esti-

mated through the application of the so-called

productive value method. The estimates are

based on a discount rate of interest with the

assumption of an expected result of the supple-

mentary payment.

CONSOLIDATED FINANCIALSTATEMENTS The consolidated financial statements in-

clude the parent company Cherry AB and

all the subsidiaries. The subsidiaries are all

the companies where the group is entitled

to arrange financial and operative strategies

with a view to achieving financial benefits, in

a way normally employed for a shareholding

of more than half of the voting rights. Sub-

sidiaries are included in the consolidated

financial statements as of the date the con-

trolling influence is transferred to the group.

They are excluded from the consolidated fi-

nancial statements as of the date when the

controlling influence is no longer valid.

The group applies the acquisition method

for acquisitions.

ACQUISITIONS 2010 AND LATERAll payments to acquire a business operation

are reported at the fair value on the date of

acquisition. The revaluation of any supplemen-

tary payments over and above what was as-

sessed at the time of the acquisition is reported

in the income statement. Holdings without a

controlling interest in the acquired business

can optionally for each acquisition be valued at

either the fair value or the proportional share

of the net assets in the acquired business,

which are held without controlling interest. All

acquisition-related transaction costs are recog-

nised and reported in the consolidated income

statement as sales and administration expens-

es. The excess consisting of the difference be-

tween the acquisition value and the fair value

of the group’s share of identifiable acquired

assets, liabilities and contingent liabilities is

reported as goodwill.

ACQUISITIONS 2009 AND EARLIERAll payments to acquire a business opera-

tion are reported at the fair value on the date

of acquisition. The revaluation of any supple-

mentary payments over and above what was as-

sessed at the time of the acquisition is reported

in the income statement. Holdings without a

controlling interest in the acquired business

can optionally for each acquisition be valued at

either the fair value or the proportional share

of the net assets in the acquired business,

which are held without controlling interest. All

acquisition-related transaction costs are recog-

nised and reported in the consolidated income

statement as sales and administration expens-

es. The excess consisting of the difference be-

tween the acquisition value and the fair value

of the group’s share of identifiable acquired

assets, liabilities and contingent liabilities is

reported as goodwill.

CHANGED IN OWNERSHIP IN SUBSIDIARIES WITHOUT CHANGE OF CONTROLLING INFLUENCEReceivables in parent company ownerships

in subsidiaries that do not lead to a loss of the

controlling influence are reported as equity

transactions. The reported values for the hold-

ings, with and without controlling influence,

are adjusted so that they reflect changes in

their relative holdings in the subsidiary. Any

differences between the amount with which

the holding without controlling influence is ad-

justed and the fair value of the paid or received

compensation are reported directly in equity

and allocated to parent company shareholders.

SALES OF SUBSIDIARIESWhen the group no longer has a controlling in-

fluence each remaining holding is valued to the

fair value as of the date when the controlling

interest was lost. The change in the reported

value is reported in the income statement. The

fair value is used as the first reported value and

forms the basis for the further reporting of the

remaining holding as an associated company,

joint venture or financial asset. All amounts

concerning the disposed unit previously re-

ported in other comprehensive income are

reported as if the group had directly disposed

of the attributable assets or liabilities. This can

result in amounts previously reported in other

comprehensive income being reclassified to

income.

ASSOCIATED COMPANIESAssociated companies are all the companies

where the group has a significant but not con-

trolling influence, which in general is applica-

ble for shareholdings that include from 20 to

50 per cent of the votes. Holdings in associated

companies are reported in accordance with the

equity method. On application of the equity

method, investments are valued initially to the

acquisition value and the recognized value is

increased or diminished thereafter to take into

consideration the group’s share of profit or

loss in the associated company after the date


of acquisition. The group’s recognized value of

the holdings in associated companies includes

goodwill as identified at the time of acquisition.

If the holding in an associated company is

reduced, but the investment continues to be

an associated company, only a proportional

amount of the profit or loss previously recog-

nized in other comprehensive income will be

reclassified as income.

The group’s share of income incurred after

the acquisition is reported in the income state-

ment and its share of any changes in other

comprehensive income after the acquisition is

reported in other comprehensive income with

the corresponding change of the reported value

of the holding. When the group’s share in the

losses of an associated company amounts to or

exceeds its holding in the associated company,

including any unsecured receivables, the group

does not recognize any additional losses, un-

less the group has incurred legal or informal

obligations or made payments on behalf of the

associated company.

The group determines at the end of each

reporting period whether there is objective

evidence to indicate the need for a write-down

of the investment in the associated company. If

this is the case, the group calculates the write-

down amount as the difference between the

recovery value of the associated company and

the recognized value, and reports this amount

in “Share of income in associated companies”

in the income statement.

Profits and losses from “upstream” and

“downstream transactions” between the group

and its associated companies are reported in

the consolidated financial statements only to

the extent they correspond to a non-associated

company’s holding in the associated company.

Unrealized losses are also eliminated, unless

the transaction constitutes confirmation that a

write-down is required for the transferred as-

set. The applied accounting principles in asso-

ciated companies have where appropriate been

amended to guarantee consistent application

of group principles.

Dilution profit and loss in participations in

associated companies is reported in the income

statement.

REPORTING OF DISCONTINUED OPERATIONSCherry applies IFRS 5 Non-current assets held

for sale and discontinued operations. IFRS 5

implies that such operations are reported sepa-

rately from remaining operations in the consol-

idated income under the heading “Result from

discontinued operations”. Comparative peri-

ods have been reconverted correspondingly.

AutomatenGruppen and Maritime oper-

ations have been reported as discontinued

in the consolidated financial statements for

2013. Note 31 indicates the effects of these

adjustments for 2013 and 2012 in the income

statement.

REPORTING PER BUSINESS AREAGroup operations are divided up into business

areas on the basis of which parts of the opera-

tions the company’s highest executive follows

up, the so-called executive perspective. The

division per business area corresponds with

the group’s operative structure and the inter-

nal reporting to the CEO and the board. The

business areas are reported so as to correspond

with the internal reporting submitted to the

chief executive, which corresponds with the

CEO of Cherry AB. The chief executive is the

function responsible for allocation of resources

and assessment of business area profits. The

CEO assesses the operations of subsidiaries in

the first instance from a customer and product

perspective, where Cherry’s business areas are

divided up into Online Gaming and Restau-

rant Casino. The CEO assesses the profits of

business areas on the basis of operating profit.

The business area Maritime Gaming has been

disposed of in 2012 and is reported in discon-

tinued operations. Cherry also runs several

development projects. Up until to the date the

product or service is launched, these expens-

es are reported under the heading “Joint and

other” in the business area reporting.

EARNINGSEarnings are reported in the income statement

when in all probability the future financial ben-

efits will accrue to the group and these benefits

can be calculated in a reliable way. Earnings in

the group consist of gaming income, consul-

tancy and service income, licence revenues and

other revenues.

EARNINGS FROM GAMING OPERATIONSThis item includes gaming income and consul-

tancy and service income.

Earnings from gaming operations in the

group are reported net after deductions for

player winnings, and for poker, casino, betting

exchange and bingo after deductions for player

winnings, bonuses and loyalty programmes.

PART 2 NOTER PART 2 NOTES


Gaming income is reported when payment is

received, because this concurs with the date

when the gaming took place or the service was

delivered.

Assignments in consultancy and service ac-

tivities are normally of short duration and in-

come from these is reported when the assign-

ment has been completed.

Internal group sales are eliminated in the

consolidated financial statements.

OTHER OPERATING INCOMEOther operating income mainly includes

licence revenues, recovered write-downs of

receivables, exchange profit in operations and

the results of sales of fixed assets. Licence reve-

nues are periodised linearly over the period the

revenues refer to. Other earnings are reported

when the risks and benefits associated with the

ownership rights have been transferred to the

buyer and the earned amount can be reliably

calculated.

Cherry receives some of its earnings in the

business area Online Gaming in the form of

service and support. This is reported net as

other operating income in the business area

Online Gaming.

RUNNING COSTS IN GAMING OPERATIONSRunning costs in gaming operations for

Restaurant Casino refer to gaming shares to

venues and shipping companies, gaming tax,

licence fees, purchased materials and pur-

chased services directly related to gaming

operations.

Running costs in gaming operations for

Online Gaming refer to shares to gaming

operators, support, and purchased services

directly related to gaming operations.

Running costs in gaming operations are

periodised in line with when the gaming took

place or the service was delivered.

WRITE-DOWNSAssessments of the residual value of assets

and useful period are carried out on an annual

basis. If there is an indication that tangible or

intangible assets with a fixed useful period, or

financial fixed assets in the group, have an ex-

cessively high book value, then an analysis is

made where the recovery value is determined

for individual or naturally associated types of

assets. If the reported value exceeds the calcu-

lated recovery value, this value is immediately

written-down.

For intangible assets with an indeterminate

useful period and intangible assets that are still

not ready for use, the recovery value is deter-

mined every year. Write-downs are reported

when an asset’s reported value exceeds the re-

covery value.

A write-down is reversed if there has been a

change in the circumstances used to determine

the recovery value, with the exception of write-

downs of goodwill which are not reversed. A

reversal is made at the most up to a value that

does not exceed the book value that should

have been reported, with deduction for depreci-

ation, if no write-down should have been made.

Write-downs are included in the income state-

ment item, Depreciation and write-downs.

For intangible assets with an indeterminate

useful period and intangible assets that are still

not ready for use, the recovery value is deter-

mined every year. Write-downs are reported

when an asset’s reported value exceeds the re-

covery value.

A write-down is reversed if there has been a

change in the circumstances used to determine

the recovery value, with the exception of write-

downs of goodwill which are not reversed. A

reversal is made at the most up to a value that

does not exceed the book value that should

have been reported, with deduction for depreci-

ation, if no write-down should have been made.

Write-downs are included in the income

statement item, Depreciation and write-downs.

TAXESIncome tax reported in the income statement

includes the actual tax, i.e. the tax that should

be paid or received in the year, adjustments for

tax in previous years, and deferred tax.

Items reported in the income statement

therefore also include such related tax effects

in the income statement. Items reported

directly to equity include associated tax effects

directly to equity.

The valuation of all tax liabilities and re-

ceivables is made at nominal amounts and in

accordance with the stipulated tax regulations

and tax rates, or those that have been advised

and will in all probability be applied.

Deferred tax is calculated in accordance with

the balance sheet method on the basis of tem-

porary differences between reported and tax

values of assets and liabilities, with the appli-

cation of the tax rates and tax regulations that

are decided or advised at the balance sheet

date. Temporary differences are not taken into

consideration in group-wide goodwill, nor in

differences attributable to participations in

subsidies and associated companies, which are

not expected to be taxed within the foreseeable

future.

Deferred tax receivables concerning

deductible temporary differences and deficit

deductions are only reported to the extent that

it is likely that they will be utilised and result

in lower tax payments in the future. The de-

termining factor for whether a deferred tax re-

ceivable concerning a deficit deduction will be

reported or not is whether an assessment can

be made of how likely it is that the group will

be able to utilise it for settlement in relation

to future taxable profits. Consideration is taken

in this context to expected taxable income in

coming periods and the opportunity of legal

set-off in relation to profits in companies in the

same country.

FINANCIAL ASSETS AND LIABILITIESCherry classifies its financial instruments in

the following categories:

1. Loans receivable and other receivables.

2. Financial assets or liabilities at fair value

via the income statement.

3. Other financial liabilities.

4. Financial assets and liabilities that can be

sold.

1. REPORTING OF CLASSIFICATIONS AS

“LOANS RECEIVABLE AND ACCOUNTS

RECEIVABLE”

Operating receivables, including accounts

receivable, are classified as “Loans receivable

and accounts receivable” and valued to the ac-

crued acquisition value. In the balance sheet

these are reported as accounts receivable and

liquid assets, with the exception of items with

a due date more than twelve months after the

balance sheet date, which are classified as fi-

nancial fixed assets. Bank balances and loans

receivable and accounts receivable are valued

at the accrued acquisition value. Returns on

bank balances and short-term investments are

reported as financial income in the consolidat-

ed income statement.

The value of loans receivable and accounts

receivable is reviewed on a regular basis

and write-downs are reported in operating

expenses.

2. REPORTING OF CLASSIFICATIONS AS “FI-

NANCIAL ASSETS/LIABILITIES VALUED AT

FAIR VALUE VIA THE INCOME STATEMENT”

When assets in this category are held, chang-

es in value are reported on a regular basis at

fair value. The revaluation of derivatives held

to minimise transaction risks for the operative

business is reported in operating profit, and

derivatives held to minimise transaction risks

for the financial business are reported in net fi-

nance. A financial asset is classified in this cat-

egory if it is held for trading purposes, i.e. has

mainly been acquired with a view to disposal

in the short term, or if the group executive has

classified it as such. Cherry has not held any

assets classified in this category during the re-


ported periods. When liabilities in this classi-

fication are held they are reported in the same

way as “Financial assets valued to fair value via

the income statement”. Liabilities in this cat-

egory refer to the allocation of supplementary

payments, which are reported as other long-

term liabilities in the balance sheet.


“OTHER FINANCIAL LIABILITIES”

This category includes loan liabilities and ac-

counts payable. Liabilities in this category are

valued to the accrued acquisition value with

the application of the effective interest meth-

od. Loan liabilities are also reported initially

at the received amount after deduction for

transaction costs. If the fair value differs from

what should be repaid on the due date, the loan

liability is then reported to the accrued acqui-

sition value, which means that the difference

is periodised in accordance with the effective

interest method as an interest expense. Cherry

applies IAS 23, Loan expenses. In accordance

with this standard loan expenses referring to

borrowing directly attributable to acquisition,

performance and production of qualified as-

sets, are included as part of the acquisition val-

ue of the investment. Cherry has, however, no

borrowing attributable to such investments at

the present time, which is why costs for bor-

rowing are charged to the income statement.

Loan liabilities, short-term investments and

liquid assets are reported in accordance with

the business date principle. Borrowing is

classified as short-term liabilities if the group

does not have an unconditional right to defer

payment of the debt for at least twelve months

after the balance sheet date.


“FINANCIAL ASSETS THAT CANNOT BE SOLD”

Cherry has no financial liabilities or assets clas-

sified in this category.

On the balance sheet date there were no tan-

gible differences between book value and fair

value in the group’s assets and liabilities. For

allocation in respective category, see Note 29.

INTANGIBLE FIXED ASSETSGOODWILLGoodwill corresponds to the positive difference

between the acquisition price and fair value of

the group’s share of the identifiable net assets

in the acquired company or business operation

as of the date of acquisition. Because good-

will has an indeterminate useful period it is

reviewed annually in relation to write-down

requirements and is reported at its acquisition

value with the deduction of any accumulated

write-downs. Profits and losses in conjunction

with the disposal of companies include the

book value of the goodwill that is attributa-

ble to discontinued company. Write-downs of

goodwill are not reversed.

Goodwill is allocated to cash-generating

units during the examination of any write-

down requirements. This allocation is made

to the cash-generating units or groups of

cash-generating units, determined in accord-

ance with the group’s operating segments,

which are expected to benefit from the acquisi-

tion where the goodwill item arose.

OTHER INTANGIBLE FIXED ASSETSOther intangible assets include acquired gam-

ing agreements and concessions, trademarks

and development costs. The intangible assets

are reported in the balance sheet at the acqui-

sition value, with deductions for accumulated

depreciation and write-downs. Depreciation

is based on the original acquisition value, re-

duced by the estimated residual value and tak-

ing into account the write-downs made.

Linear depreciation is applied over the useful life of the assets as follows:

Acquired gaming agreements and concessions

3-6 years

Trademarks 5 years

Development costs 2-5 years

TANGIBLE FIXED ASSETSTangible fixed assets are reported at their

historic acquisition cost after deduction for

accumulated depreciation and any write-

downs. Repairs and maintenance are recog-

nised on a regular basis. Depreciation is based

on the original acquisition value, reduced by

the estimated residual value and taking into

account the write-downs made.

Linear depreciation is applied over the useful life of the assets as follows:

Casino tables 5 years

Casino wheels, Sweden 3-5 years

Other gaming inventories max 5 years

Registering equipment (restaurant casino)

3 years

Computers 3 years

Vehicles 3-5 years

INVENTORIESInventories are valued at the lower of the acqui-

sition cost after the requisite deduction for ob-

solescence and net sales value. The acquisition

value for the inventory is calculated through

the application of the FIFO method.

LEASINGLeasing is classified as either financial or

operational leasing.

Leasing where an essential part of the risks

and advantages of the ownership are retained

by the lessor is classified as operational leas-

ing. Payments made during the leasing period

(after deductions for any incentives from the

lessor) are recognized in the income statement

linearly over the leasing period.

The group leases some tangible fixed assets.

Leasing agreements of fixed assets where the

group essentially holds the financial risks and

advantages associated with the ownership is

classified as financial leasing.. At the start of

the leasing period financial leasing is reported

in the balance sheet at the lower of the fair val-

ue of the leasing object and the current value of

minimum lease charges.

Each leasing payment is allocated between

amortisation of the liability and financial

expenses. The corresponding payment obliga-

tions, after deduction of financial expenses, are

included in the balance sheet items Long-term

borrowing and Short-term borrowing. The in-

terest part in the financial expenses is report-

ed in the income statement, allocated over the

leasing period so that each accounting period

is charged with an amount that corresponds to

a fixed interest rate for liability reported dur-

ing respective periods. Fixed assets held in

accordance with financial leasing agreements

are written-down during the shorter period of

the asset’s useful life and the leasing period.

The scope of Cherry’s operational leasing

agreements is reported in Note 14 and financial

leasing agreements are indicated in Note 16. REMUNERATION TO EMPLOYEESSHORT-TERM REMUNERATIONShort-term remuneration to employees is cal-

culated without discounting and reported as an

expense when the related services are received.

A provision for estimated bonus payments and

other contractual compensation is reported

when the group has legal or informal obliga-

tions to make such payments as a result of the

fact that the services in question have been re-

ceived from the employees and the provision

amount can be estimated reliably.

PENSION COMMITMENTSPension plans are financed through payments

from respective group companies and in some

cases from the employees. All pensions are

reported as defined contributions. Group pay-

ments concerning defined contribution pen-

sion plans are recognised during the period

the employees have performed the services

to which the contributions refer. Pensions for

employees who have chosen the opportunity of

an alternative ITP and pensions for croupiers

PART 2 NOTES


and dealers are defined contributions.

Pension commitments for some of the

company’s employees are secured through

insurance in Alecta. Alecta’s surplus can be

distributed to the insured parties. At the end

of 2013, Alecta’s surplus amounted in the form

of the collective consolidation level to 130 per

cent (preliminary data, the last previous year it

was 143 per cent). The collective consolidation

level consists of the market value of Alecta’s as-

sets in per cent of the insurance undertakings

calculated in accordance with Alecta’s insur-

ance undertakings, which did not correspond

with IAS 19.

COMPENSATION ON NOTICE OF TERMINATIONCompensation on the termination of employ-

ment is paid when an employee is given notice

by the group prior to the normal pension date,

or when an employee accepts a voluntary re-

tirement in exchange for such compensation.

The group reports severance pay when it is ma-

nifestly obliged to give notice to an employee in

accordance with a detailed formal plan without

the opportunity of recall. In the event the com-

pany has issued an offer to encourage volun-

tary retirement, the severance pay is based on

the number of employees who are estimated

to accept the offer. Benefits due more than 12

months after the end of the reporting period

are discounted to current value.

INCENTIVE PROGRAMMECherry’s 2011–2014 incentive programme does

not come under IFRS 2 Share based payment,

because employees are offered the opportunity

to acquire options at market prices.

PROVISIONSA provision is reported in the balance sheet

when the group has an existing legal or in-

formal obligation as a result of an event that

has occurred, and where it is likely that an

outflow of financial resources will be needed

to regulate the obligation and it is possible to

make a reliable estimation of the amount. A

provision for restructuring is reported when

the group has established a detailed and for-

mal restructuring plan, and the restructuring

has either been begun or has been officially

acknowledged. Provisions are reported in the

balance sheet under Other current and long-

term liabilities. When the outflow of resources

is estimated to take place later than one year

after the balance sheet date, the expected future

cash flow is discounted and the provision is

reported at capitalised value.

CASH FLOW STATEMENT AND DEFINITION OF LIQUID ASSETSThe cash flow statement is prepared in accord-

ance with the indirect method. The reported

cash flow only includes transactions that per-

mit incoming or outgoing payments. Liquid

assets are classified as cash and bank balances

with a term shorter than three months, and

which are only exposed to a negligible risk of

fluctuations in value.

PARENT COMPANY ACCOUNTING PRINCIPLESThe parent company accounting is prepared

in accordance with the Annual Accounts Act

and RFR 2 Accounting regulations for legal

entities. The parent company applies the same

principle as the group, with the exception

of the following. The principles remain un-

changed in comparison with previous years,

unless otherwise stated in Changes in account-

ing principles.

Deviations between group and parent com-

pany accounting principles are motivated

by the limitations the Annual Accounts Act

imposes in the application of IFRS in the

parent company and the tax regulations that

enable different accounting for legal entities

than for the group.

CHANGES IN ACCOUNTING PRINCIPLES 2013Unless otherwise stated below the parent

company accounting principles in 2013 have

changed in line with what has been specified

for the group.

GROUP CONTRIBUTIONS AND SHARE-HOLDER CONTRIBUTIONS

The parent company reports group contribu-

tions received in accordance with the same

principle as ordinary dividends, i.e. as a

financial income. Group contributions are

reported as financial expenses. Shareholder

contributions are made directly to equity at the

recipient and activated in shares and partici-

pations at the issuer, in so far as there are no

write-downs.

GROUP COMPANIESParticipations in group companies are reported

in the parent company at the acquisition val-

ue, reduced by any write-downs. Conditional

proceeds are valued on the basis of the likeli-

hood that they will be received. Any changes

in the provision/receivable are added to, or

reduce the acquisition value.

DIVISION INTO RESTRICTED ANDUNRESTRICTED EQUITYIn the parent company balance sheet, equity is

divided up into restricted and unrestricted equity

in accordance with the Annual Accounts Act.

ANTICIPATED DIVIDENDS

The parent company reports anticipated divi-

dends from subsidiaries in those cases where

the parent company has the sole right to the

scope of the host transfer and if the parent

company has taken a decision on the scope

of the dividend before its financial reports are

published. No anticipated dividends were

reported in the annual accounts for the fiscal

year of 2013.

POLICYThe group’s financial operations are conducted

on the basis of the financial policy established

by the board and are characterised by a low

level of risk. Financial operations and the ma-

nagement of financial risks are coordinated via

the parent company Cherry AB, which is also

responsible for the placement of excess liqui-

dity. Financing of subsidiaries mainly takes

place via the parent company and a cash pool,

to which all the Swedish companies are linked.

The operational subsidiaries manage their

own financial risks within the framework esta-

blished by the board and in coordination with

the parent company. Disclosures on Cherry’s

financial risk management reflect the informa-

tion issued internally to leading executives.

CURRENCY EXPOSURE RISKSThe group is exposed to changes in foreign

exchange rates as some of its sales take place

in currencies that differ from the costs (trans-

action exposure). Results are also affected by

changes in foreign exchange rates when the

results of the foreign subsidiaries are conver-

ted to Swedish kronor (translation exposure).

Group equity is also affected by changes in fo-

reign exchange rates when the assets and liabi-

lities in foreign subsidiaries are recalculated to

Swedish kronor (translation exposure).

All the earnings of the business area Online

Gaming are in SEK and euro, and the majority

of its costs are in euro. Cherry does not imple-

Note 3: Financial risk management


ment hedging for this part at present.

Foreign companies are mainly financed th-

rough equity and intergroup loans, which are

issued either in the parent company currency

or in the currency of the subsidiary. Hedging

of equity in foreign subsidiaries is not imple-

mented.

Earnings items in foreign group and associa-

ted companies are not hedged.

Exchange rates used in consolidated financial statements

Average rate 2013 2012

EUR 8.6494 8.7053

Closing rate (Ultimo) 2013 2012

EUR 8.943 8.6166

REFINANCING RISKS, LIQUIDITY RISKS AND CAPITAL MANAGEMENTGroup operations are mainly financed with

their own resources. The group had no loans

as of the balance sheet date 31-12-2013.

The table below shows group liabilities alloca-

ted by the time remaining to the contractual

due date. The amounts shown in the table are

the contractual, non-discounted cash flows.

Cherry has traditionally aimed for a low

level of debt with an equity ratio of at least 30

per cent. The tangible fixed assets in the group

mainly consist of gaming and gaming equip-

ment. Future investments in tangible fixed

assets are mainly estimated to be financed with

internally generated resources. There may be a

need for external financing in the event of any

major acquisitions of companies. The objective

is primarily to implement acquisitions through

cash payment and, or the issue of shares.

INTEREST RISKS

Group earnings and cash flows from opera-

tions are essentially independent of changes

in interest levels on the market. Excess liqui-

dity in the group is banked in accordance with

group finance policy. Short terms are applied.

Cherry had no loans as of 31-12-2013.

COUNTERPARTY RISKS AND CREDIT RISKS

Cherry has no essential concentration of cre-

dit risks. The company estimates that it has

more than 200 customers in its business ope-

rations. No single customer accounts for more

than 10 per cent of group sales. Concerning

Online Gaming, Cherry bears the responsibili-

ty for any credit risks of customers and also for

any jackpots.

Cherry has its own platform for Online Ga-

ming, as well as white label solutions. For white

label solutions, Cherry’s partners are respon-

sible for all the credit risks of customers and

for any jackpots, where provisions are made

monthly. Concerning its own platform, Cherry

is responsible for credit risks and jackpots.

Provisions are also made monthly for jack-

pots. Individual units in respective business

areas may, however, have a larger exposure to

individual customers. Large jackpots are often

pooled via the game suppliers with other

gaming operators and therefore the impact

on Cherry is only what has been allocated

monthly.

Cherry issues loans, so-called restaurant

loans/advanced gaming income, to some of

the customers in the group, which is a natu-

ral part of Cherry’s gaming operations in Res-

taurant Casino. The terms and conditions for

repayment rates are agreed individually with

respective restaurant owners. Cherry receives

compensation corresponding to the market

interest rate for outstanding loans/advanced

gaming income. Restaurant loans/advanced

gaming income are a competitive factor in

the industry and are of importance for the

outcome of the business negotiations concer-

ning venue agreements. Their issue involves

a credit risk. To minimise this risk the borro-

wer takes out security in the form of corporate

or real estate mortgages, personal guarantees

and, or other mortgaging of property. All loan/

advance issues undergo Cherry’s credit assess-

ment. In 2012 a credit resolution in excess of

TSEK 300 was taken by the board of Cherry,

a credit resolution of TSEK 150-300 by the

president together with the chairman, and a

credit resolution of up the TSEK 150 by the

president.

In Cherry’s business operations no official

independent external credit rating service is

available for customers. Nevertheless, risk

assessments of customer credit worthiness

are made on the basis of their financialposi-

tion, previous experience and other factors.

Individual risk limits are established on the

basis of internal or external credit assess-

ments in accordance with the limits set by the

board. The use of credit limits is followed up

regularly.

The credit quality of financial assets that

neither have fallen due for payment, nor are

in need of a write-down, is assessed through

reference to external credit ratings (if such

are available) or to the payment history of the

counterparty.

Cash handling in Cherry does take place,

but has significantly diminished now that

Martime Gaming has been discontinued.

The risks involved with handling cash in

Restaurant Casino have nevertheless been

reduced in that the physical handling of

cash at most of the venues is not handled by

Cherry, along with the introduction of card

terminals at almost all of the Cherry venues.

This has led to a significant reduction in the

handling of cash. In those cases where cash

handling does take place, most of the handling

is managed by our partners, i.e. restaurants,

hotels and night clubs. This does involve a

credit risk for Cherry. Reversal accounting of

internal control systems is used minimise this

risk, which quickly detects deviations. Security

companies such as Nokas, Loomis and others

are often used in those cases where Cherry

handles cash.

TAX RISKS

Cherry conducts its business operations th-

rough subsidiaries in Malta, Gibraltar, Curacao

and Sweden. Operations, including transac-

tions between group companies, are managed

in accordance with the company’s interpreta-

tion of current tax laws, gaming agreements

and regulations, or by the interpretation of

them by the government agencies concerned.

In addition, these regulations can change,

possibly with a retroactive impact. The

decisions of tax authorities can have a

negative effect on the previous or current tax

situation for the group. The company and

its subsidiaries are, in so far as this can be

known, not currently the object of any form

of tax audit.

PART 2 NOTES

As of 31 december 2013 Less than 3 months From 3 months to 1 year From 1 to 2 years From 2 to 5 years More than 5 years

Acquisition loan - - - - -

Other long-term liabilities - - - - -

Financial leasing 172 535 286 - -

Accounts payable and other liabilities 29,132 7,986 - - -

The groups debts divided into agreements due date:


Not 4: Reportng per business area

2013Restaurant

CasinoOnline

GamingGroup-wide and deve-

lopment projects Discontinued

operations Total for

the group

Total profit/loss

External income 138,343 127,470 506 - 266,319

Intragroup income - 1,321 2,794 -

Total income 138,343 128,791 3,300 0

Operating profit (EBIT) 12,603 -33,023 -13,452 -33,872

Result before tax -32,059

Result after tax from remaining operations -33,725

Result from discontinued operations 25,534 25,534

Result after tax -8,191

Other information

Assets 17,299 83,274 133,198 - 233,771

Liabilities -22,220 -30,989 -4,792 - -58,001

Acquisitions - 37,328 - - 37,328

Other investments 794 6,877 5,239 - 12,910

Dep. and write-downs -3,410 -4,963 -1,504 - -9,887

2012Restaurant

CasinoOnline

GamingGroup-wide and

development projectsDiscontinued operations

Maritime GamingTotal for

the group

Result

External income 134,526 96,903 87 - 231,516

Intragroup income 7 2,313 1,863 -

Total income 134,533 99,216 1,950 0

Operating profit (EBIT) 12,345 2,950 -9,158 - 6,137

Result before tax 2,344

Result after tax from remaining operations 2,190

Result from discontinued operations 28,188 28,188

Result after tax 30,378

Other information

Assets 19,304 55,268 41,511 270,067 386,150

Liabilities -22,713 -15,236 -6,526 -9,440 -53,915

Acquisitions 2,500 9,087 - - 11,587

Other investments 1,319 5,307 3,859 2,248 12,733

Dep. and write-downs -2,670 -2,706 -278 -77,076 -82,730

2013 Scandinavia Rest of Europe The group

External income 210,497 55,822 266,319

Assets 141,410 92,361 233,771

Acquisitions - 37,328 37,328

Other investments 993 11,917 12,910

2012 Scandinavia Rest of Europe The group

External income 207,290 24,226 231,516

Assets 56,619 329,531 386,150

Acquisitions 2,500 - 2,500

Other investments 2,722 10,011 12,733

SALES, ASSETS AND INVESTMENTS PER GEOGRAPHICAL AREA

For definition of business areas and group-wide and development projects, see page 62 in the annual report.

For further information on discontinued operations, see Note 31.


Note 5: Transaction with associated

Note 6: Other operating incomes

Parent company

Purchases and sales, group companies 2013 2012

Net sales of subsidiaries 2,316 1,864

Share of total earnings 95% 100%

Purchases from subsidiaries 0 563

Share of total operating expenses 0.0% 0.0%

Group Parent company

2013 2012 2013 2012

Exchange rate differences in operations 54 74 22 41

Service income 4,160 - - -

Licence income 11 46 11 46

Recovered write-down of receivables 12 12 - -

Capital gain from sale of fixed assets - 8 - -

Other 46 - 100 -

Total 4,284 140 133 87

The parent company has a close affiliation with its subsidiaries (see Note

18). Services sold to subsidiaries refer in similarity with the previous

year mainly to management services, rental and office costs, and future

invoiced expenditures. Transactions with subsidiaries take place at market

rates.

Remuneration the chairman of the board, board members and

executives is reported in Note 7.

None of the board members or leading executives in Cherry or its sub-

sidiaries have, or have had, any direct or indirect involvement in any bu-

siness transactions with Cherry or its subsidiaries that are, or have been,

unusual in terms of their character or conditions.

The sellers of AutomatGruppen have been engaged as consultants to

Improm Ltd and EuroSlots Ltd on Malta and Red Trading NV. Consul-

tancy services have been included at market rates and services have been

purchased for TSEK 8,368 (7,027).

During the year, 8.3 MSEK has been paid as an additional purchase

sum to the sellers of AutomatGruppen.

On 31 December 2013 liabilites to associated companies amounted to

TSEK 934 (0). There were no receivables from associated companies at

the year end.

Cherry has not, nor have its subsidiaries, issued loans, set guarantees

or entered into personal guarantees on behalf of any ofboard members or

leadng executives in Cherry or its subsidiaries.

Note 7: Employees 2013 2012

Average number of employees including discontinued operations

Total of which, men Total of which, men

Parent company

Sweden 5 60% 4 75%

Total for parent company 5 60% 4 75%

Subsidiaries

Sweden 138 25% 132 30%

England 0 0% 7 40%

Greece 0 0% 25 29%

Malta 36 67% 30 50%

Poland 0 0% 6 0%

Total for subsidiaries 174 35% 200 30%

Group total including discontinued operations 179 34% 204 30%

The average number of employees in discontinued operations amounted to

- 44

PART 2 NOTES



Salaries, other compensation and payroll overhead 2013 2012 2013 2012

Board, CEO, vice CEO and other leading executives -8,180 -6,991 -3,831 -3,030

Other employees -59,609 -59,420 -1,037 -1,535

Total -67,789 -66,411 -4,868 -4,565

Of which variable remuneration to CEO, other executives -946 -1,382 -258 -20

Payroll overhead (including pension expenses) -14,790 -16,440 -2,151 -2,357

Pension expenses including payroll tax

Board, CEO, vice CEO and other leading executives -1,258 -1,287 -730 -721

Other employees -1034 -1,893 -76 -94

Total -2,292 -3,180 -806 -815

Of which in discontinued operations

Salaries and remuneration to employees 0 -495 - -

Salaries other employees 0 -5,773 - -

Payroll overhead (including pension expenses) 0 -1,386 - -

Pension expenses leading executives 0 -116 - -

Pension expenses other employees 0 -291 - -

Remuneration is paid to the chairman and board members in accordance

with the decision of the annual general meeting. No remuneration is paid

for committee work. No remeneration is paid to the employee representa-

tive, but payment is made for hours engaged in board work.

The annual general meeting has decided on the following guidelines

concerning remuneration to executives.

Remuneration to the CEO and other leading executives consists of

their basic salary, variable remuneration, other benefits and pension. Other

leading executives refers to the five persons whotogether with the CEO

constitute the group management. For the composition of the group

executive, see page 22.

The division between basic salary and variable remuneration should

stand in proportion to responsibility and authorization of the executive.

Variable remuneration for other leading executives is limited to SEK

200-500 thousand for 2013. The variable remuneration is based on results

in relation to individual set targets approved by the chairman.

Pension benefits and other benefits for the CEO and other leading

executives are included as part of the total remuneration.

DECISION AND DRAFTING PROCESS

* Other leading executives include Per-Anders Persson, Ulf Bergström, Aron Moberg-Egfors, and Marius Andersen.

For further information, see leading executives on page 20.

Remunerations and other benefits for the management in 2013Basic

salaryVariable

remunerationPension

expensesOther

benefitsOther

remuneration Total

Chairman of the board Rolf Åkerlind -347 - - - - -347

Board member Kjell Berggren -37 - - - - -37

Board member Anders Holmgren -137 - - - - -137

Board member Morten Klein -133 - - - - -133

Board member Magnus Berlind -116 - - - - -116

Board member Gunnar Lind -100 - - - - -100

Board member Martin Wattin -137 - - - - -137

Total remuneration to the board including to chairman -1006 0 0 0 0 -1006

CEO Emil Sunvisson -1,754 -104 -445 -10 - -2,313

Vice CEO Fredrik Burvall -844 -52 -143 -90 - -1,129

Other leading executives* -3,542 -790 -378 -119 - -4,829

Other leading executives in discontinued operations - - - - - -

Total -7,146 -946 -966 -219 0 -9,277


Remunerations and other benefits for the management in 2012Basic

salaryVariable

remunerationPension

expensesOther

benefitsOther

remuneration Total

Chairman of the board Rolf Åkerlind -340 - - - -33 -373

Board member Kjell Berggren -107 - - - - -107

Board member Anders Holmgren -107 - - - - -107

Board member Morten Klein - - - - - 0

Board member Martin Wattin -107 - - - - -107

Total remuneration to the board including to chairman -661 0 0 0 -33 -694

CEO Emil Sunvisson -1,491 -240 -440 -89 - -2,260

Vice CEO Fredrik Burvall -810 -119 -140 -90 - -1,159

Other leading executives* -3,501 -733 -361 -132 - -4,727

Other leading executives in discontinued operations -495 -290 -116 - - -901

Total -6,958 -1,382 -1057 -311 -33 -9,741

* Other leading executives include Per-Anders Persson, Ulf Bergström, Marius Andersen and Lars-Gunnar Persson.

For further information, see leading executives on page 22.

COMMENTS TO PREVIOUS TABLES Basic salary refers to salary and other benefits, including car and fuel

benefits.

Variable remuneration refers to recognised variable remuneration,

which is based on achieved targets and is paid in 2014.

Pension expenses refer to the cost that has affected net profit for the

year excluding payroll tax. The chairman and members of the board have

not received any remuneration in addition to the board remuneration

in 2013.

OPTIONS PROGRAMAt an extraordinanyr general meeting on 19 October 2011 the board appro-

ved a proposal to introduce an incentive programme for leading executives

and key persons in Cherry. The programme involves an offer to acquire

options for shares of the B series in Cherry at a market price (calculated

according to Black & Scholes). 455,000 options have been subscribed to.

The option price was SEK 0.93 per option and the redemption price

was set to SEK 22.94 per share. The redemption programme introduced

in 2013 means that the subscription price is recalculated to SEK 15.97

(22.94) and that each option entitles the subscription of 1,436 (1.0) shares

during the redemption perioden 1-30 November 2014.

2013 2012

Average redemption price in SEK

per option

Options (thou-

sands)

Average redemption

price in SEK per option

Options (thou-

sands)

As of January 1 15.97 455,000 -

Allocated 0 22.94 455,000

As of Decem-ber 31

15.97 455,000 22.94 455,000

The weighted average fair value for options allocated in 2011, determined

with the Black-Scholes valuation model, was SEK 0.93 per option. Im-

portant input data in the model included the weighted average share price

of SEK 17.44 on the day of allocation, the above redemption price,volativity

of 30 per cent, expected dividend of SEK 3.75, and expected term of 3 years

and an annual risk-free interest of 1.5 per cent.

A total of 500,000 options have been issued in the programme for

2011-2014. They were subscribed free of charge by the subsidiary. Cherry

Casino Syd AB and the options that were not subscribed, 45,000 options,

are still held by the subsidiary.

LOYALTYTo motivate leading executives the board has decided to issue remunera-

tion for loyalty, which will be paid by 1 November 2014 tosected employees

still employed by Cherry when the payment is made. The remuneration can

amount to an amount corresponding, net after tax, to a maximum of 50 per

cent of the premium paid for subscription options, or a total of TSEK 565

including payroll overhead. This remuneration, including payroll overhead,

is recognised at the rate it is earned during the period 1 November 2011 to 31

October 2014.

TERMS OF EMPLOYMENT FOR THE CEOThe CEO Emil Sunvission is employed until further notice, up to the age

of 65.

A fixed salary of TSEK 150 is paid every month. The CEO also has

the opportunity to receive variable remuneration. The scope of the CEO’s

variable remuneration is related to achievement of the targets set by the

board in this context.

In addition to pension benefits in accordance with the General In-

surance Act (ATP and AFP) the CEO is entitled to an extended pension

premium. The salary on which a pension is based does not include

variable remuneration, company car or other benefits. The total pension

premium including extended pensions does not exceed 10 price base

amounts. The pension is a defined contribution. No agreement exists

on the right to an early retirement pension before 65 years of age. The

pension is unconditional.

If notice is given by Cherry, the CEO is entitled to a term of notice of six

months and severance pay corresponding to 12 months salary. No deduc-

tion will be made from severance pay if a salary is received from another

position. If notice is given by the CEO, the term of notice is six months.

Severance pay will not be paid in this case.

TERMS OF EMPLOYMENT FOR OTHER LEADING EXECUTIVESEmployment contracts include regulations on remuneration and terms

of notice. Variable remuneration in 2013 for business area managers and

subsidiary managers amounted to a maximum of 35 per cent of the fix-

ed annual salary, excluding benefits. Variable remuneration is based on

an earning period of one year. The result is based on to what extent the

individual achieves set targets in advance. The targets are primarily

quantitative and are set by the president after approval by the chairman

of the board.

PART 2 NOTES


2013 2012

Gender balance in corporate management Number of men Number of women Number of men Number of women

Board of Directors 6 - 6 -

Other leading executives 2 - 2 -

Total parent company 8 0 8 0

Other leading executives 3 - 4 -

Total group 11 0 12 0

An employee can normally give notice with a term of six months in the

contract. No severance pay is paid in this case. If notice is given by Cherry,

leading executives are entitled to a term of notice of six months and seve-

rance pay corresponding to 6 months salary. No deduction will be made

from severance pay if a salary is received from another position.

The executive committee is entitled to pensions in accordance with the

ITP system, or equivalent, and also to a some increase in pension pre-

miums. Salary on which a pension is based does not include variable

remuneration or a company car. The total pension premium including

extended pensions does not exceed 10 price base amounts for anyone. No

agreement exists on the right to an early retirement pension before 65

years of age.

Pensions are defined contributions, with the exception of ITP

premiuims which are defined benefit plans. Pensions are unconditional.

Employment contracts normally include a competion clause that is va-

lid during the term of employment and for an additional 12 to 24 months.


2013 2012 2013 2012

Gaming agreements and concessions -2,326 -1,372 0 -

Development costs -4,129 -1,652 0 -

Trademarks and domain names -218 -402 -52 -47

Equipment and gaming equipment -3,203 -2,229 -199 -230

Total -9,877 -5,654 -250 -276

Note 8: Remuneration to auditors

Note 9: Depreciation and write-downs


2013 2012 2013 2012

PricewaterhouseCoopers AB

Audit assignment -778 -698 -269 -303

Auditing in addition to audit assignment -150 -

Tax advising -70 - - -

Other assignments -64 -55 -284 -55

Total -1,062 -753 -553 -358

Other audit companies

Audit assignment - - - -

Auditing in addition to audit assignment - - - -

Tax advising - - - -

Other assignments 0 0 - -

Total 0 0 0 0

Total -1,062 -753 -553 -358

of which in discontinued operations -13 -231

The audit assignment refers to remuneration for the audit stipulated by law, i.e such work as is necessary to produce the audit report, as well as audit

advising issued in conjunction with the audit assignment.


Note 11: Financial items Group Parent company

2013 2012 2013 2012

Group contributions 7,228 11,862

Write-down of shares in subsidiaries -287,048 -19,982

Result on liquidation - -

Dividends from subsidiaries 262,727 4,500

Result from participations in group companies -17,094 -3,620

Interest income 2,010 233 1,961 210

Changes in exchange rates, net 2,915 - 532 -

Financial income 4,925 233 2,493 210

(of which group companies) - -

Interest expenses -58 -2,510 -1 -2,428

Interest expenses, financial leasing 0 0 - -

Changes in exchange rates, net -2,258 -1,516 - -1,193

Financial expenses -2,316 -4,026 -1 -3,621

(of which group companies) 0 0

Total net finance -2,609 -3,793 -14,602 -7,031

Note 12: Tax Group Parent company

Tax expenses in income statements 2013 2012 2013 2012

Allocation to current and deferred tax

Current tax -1,381 -3 -55 -

Deferred tax -285 -151 - -

Total -1,666 -154 -55 0


Difference between real tax expense and tax expense based on applicable tax rate 2013 2012 2013 2012

Reported profit before tax -32,059 2,344 -24,302 -18,470

Tax as per applicable tax rate (22/26.3%) 7,053 -616 5,346 4,858

Tax attributable to previous year - -

Difference in tax in foreign operations -6,273 612

Tax effect of non-reported deficit deductions -2,348 -18

Tax effect of utilised loss deductions not reported previously 206 157

Tax effect of changes in tax rate -3 23

Tax effect of non-taxable/non-deductible items -95 -361 -5,401 -5,014

Total tax -1,666 -154 -55 0

Specification of deferred tax

Tax changes for temporary differences -5 -35 - -

Tax on group contributions from discontinued operations - -

Tax expenses on changes in balance sheet allocations -280 -116 - -

Total deferred tax -285 -151 0 0

For specification of changes in deferred tax receivables, see Note 17.

PART 2 NOTES


2013 2012 2013 2012

Capital loss from sale of fixed assets -2 -322 -1 -182

Total -2 -322 -1 -182

Note 10: Other operating expenses



Taxes in balance sheets 2013 2012 2013 2012

Deferred tax claims

Deferred tax receivables, temporary differences - 17 - -

Total Long-term receivables 0 17 0 0

Current receivables

Tax receivables - 9,006 - -

Total 0 9,006 0 0

Deferred tax liabilities

Deferred tax, temporary differences -234 - - -

Deferred tax, overdepreciation -396 -116 - -

Total -630 -116 0 0

Of the reported deferred tax liabilities, SEK 0 thousand is expected to be used within one year from the balance sheet date.

Current liabilities

Tax liabilities -2,655 -10,842 -402 -298

Total -2,655 -10,842 -402 -298

Non-reported deferred tax receivables concerning deficit deductions amount to TSEK 3,464 (1,056).

No part of the deferred tax receivables concerning deficit deductions is limited in time.

Profit per share before dilution is calculated by dividing the result attribu-

table to parent company shareholders by a weighted average number of

outstanding ordindary shares during the period, excluding any redeemed

shares held as shares by the parent company.

To calculate profit per share after dilution the weighted average

number of outstanding common shares is adjusted for the dilution

effect of all potential ordinary shares. The parent company only has one

category of potential ordinary shares with a dilution effect, i.e. share

options. For these a calculation is made for the number of shares that

could have been purchased at fair value (calculated as the average market

price for the parent company shares), for an amount corresponding to the

monentary value of the subscription rights linked to the outstanding

share options. The number of shares calculated is compared with the

number of shares that would have been issued onthe assumption that

the options were utilised. The calculation shows that outstanding options

(455,000 options in the option programme 2011-2014) had a dilution

effect in 2013.

A total of 500,000 options were issued, but the remaining 45,000

options have not been issued and have been placed in Cherry Casino

Syd AB.

Note 13: Profit per share Group

2013 2012

Profit for the year from remaining operations attributable to parent company shareholders -33,725 2,190

Profit for the year from total operations attributable to parent company shareholders -7,889 30,396

Total number of outstanding shares 1 January 12,802,642 12,802,642

Issue of shares during the year - -

Total number of outstanding shares 31 December 12,802,642 128,02,642

Average number of shares prior to dilution 12,802,642 12,802,642

Effect of options 653,582 403,548

Average number of shares after dilution 13,456,224 132,06,190

Profit per share (SEK)

Profit per share from remaining operations prior to dilution -2.63 0.17

Profit per share from remaining operations after dilution -2.51 0.17

Profit per share from total operations prior to dilution -0.62 2.37

Profit per share from total operations after dilution -0.59 2.30


Note 14: Leasing

Future minimum charges concerning non-terminable operational leasing and rental agreements will be incurred as below


2013 2013

- in 2014 -272 -130

- in 2015-2018 -27 -130

- after 2018 - -

Total -299 -260

Leasing and rental expenses for equipment that is rented and included in the concept of operational leasing amounted to


2013 2012 2013 2012

Recognised leasing and rent expenses -532 -499 -160 -126

Note 15: Intangible assets2013 2012

Group Goodwill

Gaming agreements

& conces-sions

Deve-lopment

costs

Trade-marks & domain names Total Goodwill

Gaming agreements

& conces-sions

Deve-lopment

costs

Trade-marks & domain names Total

Opening acquisition value 334,071 13,752 4,258 1,572 353,653 346,792 9,345 2,989 1,428 360,554

Investments - - 10,049 235 10,284 - 5,075 1,379 182 6,636

Increase through acquisition 25,008 10,495 - 1,825 37,328 - 2,500 - - 2,500

Discontinued operations -329,195 - - - -329,195 - -3,147 - - -3,147

Other sales & retirements - -138 - -9 -146 - 0 - - 0

Exchange rate differences -4,876 187 161 40 -4,489 -12,721 -21 -110 -39 -12,890

Closing accumulated acquisi-tion value

25,008 24,296 14,468 3,663 67,435 334,071 13,752 4,258 1,572 353,653

Opening depreciation & write-downs

-73,447 -3,608 -3,074 -1,361 -81,489 - -4,961 -1,494 -988 -7,443

Depreciation & write-downs in the year - -2,326 -4,129 -218 -6,673 -73,447 -1,372 -1,652 -402 -76,873

Discontinued operations -73,447 - - - 73,447 - 2,705 - - 2,705

Other sales & retirements - 5 - 9 13 - 0 - - 0

Exchange rate differences - -120 -142 -61 -324 - 21 72 29 122

Closing accumulated deprecia-tion

0 -6,049 -7,346 -1,631 -15,026 -73,447 -3,608 -3,074 -1,361 -81,489

Recognised value 25,008 18,247 7,123 2,032 52,409 260,624 10,144 1,184 211 272,164

2013 2012

Parent company Trademarks Total Trademarks Total

Opening acquisition value 517 517 378 378

Acquisitions in the year 35 35 139 139

Closing accumulated acquisition value 552 552 517 517

Opening depreciation -335 -335 -289 -289

Annual depreciation -52 -52 -47 -47

Closing accumulated depreciation -387 -387 -335 -335

Recognised value 165 165 182 182

PART 2 NOTES

WRITE-DOWN OF GOODWILLThe goodwill reported for the group derives from the acquistion of

Webresorts in 2013. The goodwil, which has a reported value of SEK

25 million, belongs to the business segment Online Gaming. Since

goodwill is not written-down, a write-down test has been made in

accordance with IAS 36 in the fourth quarter of 2013 by comparing

future discounted cash flows with the reported value. The test showed

that no write-down requirement was necessary.

The recovery value is based on cash flow forecasts based on actual


Group: Equipment and gaming equipment Parent company: Equipment

2013 2012 2013 2012

Opening acquisition value 21,531 90,658 1096 1073

Investments 2,626 6,097 164 23

Discontinued operations - -73,397 - -

Other disposals and retirements -130 - -130 -

Reclassifications - - - -

Exchange rate changes 170 -1,826 - -

Closing accumulated acquisition value 24,198 21,532 1,130 1096

Opening depreciation -14,269 -62,089 -905 -676

Discontinued operations - 52,749 - -

Other disposals and retirements 130 - 130 0

Annual depreciation -3,203 -5,857 -199 -230

Annual depreciation for discontinued operations - - - -

Exchange rate changes -85 929 - -

Closing accumulated depreciation -17,427 -14,268 -975 -905

Recognised value 6,770 7,263 155 190

Note 16: Tangible assets

This item includes leasing objects that the group holds in accordance with financial leasing agreements with the following amounts:

Group

Participations in group companies 2013 2012

Acquisition value of activated financial leasing 3,367 3,367

Accumulated depreciation -2,357 -1,684

Group 2013

- in 2014 -707

- in 2015-2018 -286

- after 2018 -

Total -993

Future minimum charges concerning financial leasing agreements will have the following results:

results in operations in 2013 and a five year foreast, which is based on

a business plan and budget for 2014. The growth rate in the first five

years is expected to be in line with the industry. Cash flows for the years

after 2019 have been extrapolated by an annual growth rate of 2 per cent,

which corresponds to an assusmed average future rate of inflation and

lies at the level of expectations in the industry.

The forecasted cash flows have been discounted with an interest rate

of 13.7 per cent before tax. The discount interest reflects the specific risk

applicable for the cash flow generating unit Online Gaming.

The most important assumptions in the five year forecast and the methods used to estimate these values are as follows:

Important variables Method to estimate values

SalesA forecast based on current market plans, updated annually on the basis of actual results. The forecast is based on previous experi-ences and external sources of information.

Operating marginThe operating margin largely depends on which market investments are implemented. Amounts are determined in annual budgets for the unit. The forecast is based on previous experiences and external sources of information.

The following sensitivity analyses of the calculation of the present value

in conjunction with the write-down assessment have been made:

A general reduction of the sales growth rate by 1 percentage unit in

the forecast period, a general reduction of the operating margin by 1

percentage unit in the forecast period, a general increase of WACC by

1 percentage unit, and a general reduction of the growth rate after the

forecast period by 0.5 percentage unit. The sensitivity analyses

show that none of the adjustments generate an essential write-down

requirement.

In February 2013 the trademarks and domains related to Sverige-

Automaten, NorgesAutomaten and DanmarksAutomaten were sold to

Betsson AB (Publ). For a more detailed description, see Note 31.


Note 17: Financial assetsParent company

Participations in group companies 2013 2012

Opening acquisition value 306,975 408,447

Annual acquisitions 8,338 -

Disposal of subsidiaries -286,873 -28,026

Revaluation of conditional proceeds - -73,446

Closing book value 28,440 306,975


Deferred tax claims 2013 2012 2013 2012

Opening value 17 157 - -

Tax receivables attributable to discontinued operations - -104 - -

Tax changes for temporary differences -17 -36 - -

Closing value 0 17 0 0


Other long-term receivables 2013 2012 2013 2012

Opening value 430 595 - -

Changes in long-term receivables 442 -165 - -

Closing value 872 430 0 0

PART 2 NOTES


Participations in associated companies 2013 2012 2013 2012

Acquisition 2,280 - 2,250 -

Share of earnings -795 - - -

Closing book value 1,485 0 2,250 0

The group’s share of income in associated companies and its share of assets (including goodwill) and liabilities are as follows:

Name (2013) Head office Assets Liabilities Earnings Result Ownership %

Svenska Klubbspel AB Stockholm 3,775 -2,805 - -1,557 50

Web Resort NV Curacao 65 -34 - -33 49

Note 18: Participations in group companiesCompany CIN Head office Participation % No. of shares 2013 2012

Cherry Casino AB 556225-3806 Solna 100% 20,000 8,313 8,313

Cherry Casino Syd AB 556229-6730 Solna 100% 20,000 6,972 6,972

Playcherry PR & Media AB 556420-9632 Solna 100% 5,000 1,670 1,670

Cherry Malta Ltd C 47263 Malta 100% 1,200 10,285 288,820

- Inprom Trading Limited C 43921 Malta 100% 125,000 - -

- Esprom Trading Limited C 48657 Malta 100% 1,200 - -

- Playcherry Trading Limited C 43059 Malta 100% 280,000 - -

- Web Resort Holding N.V. 130789 Curacao 100% 100

Red Trading N.V. 130790 Curacao 100% 100

- Yggdrasil Holding Trading Limited C 57560 Malta 92% 103,333 - -

Yggdrasil (Gibraltar) Trading Limited 108560 Gibraltar 92% 2,000 - -

Yggdrasil Gaming Ltd C 57683 Malta 92% 40,000 - -

Cherry Gaming Trading Limited C 48654 Malta 100% 12,000 1,200 1,200

- Cherry Trading Limited C 48658 Malta 100% 1,200 - -

- Cherry (Gibraltar) Trading Limited 107753 Gibraltar 100% 2,000 - -

Total 28,440 306,975


Note 19: Accounts receivable 2013 2012

Accounts receivable 12,466 26,580

Minus: reserves for doubtful receivables -4,099 -2,670

Accounts receivable – net 8,367 23,910

2013 2012

Accounts receivable in euro 12,005 25,770

Accounts receivable in SEK 461 810

Accounts receivable in GBP - -

Accounts receivable 12,466 26,580

Accounts receivable in the group have terms of payment of 10-30 days and

therefore the value in the balance sheet corresponds with the fair value.

The maximum exposure to credit risks concerning accounts receivable as

of the balance sheet date is the reported net value for the receivables as

stated above.In general Cherry does not have any guarantees for accounts

receivable, but there are guarantees for some restaurant loans and some

accounts receivable.

As of 31 December 2013, TSEK 8,227 (19,676 ) of accounts receivable

were older than 30 days. Of these TSEK 4,099 (3,162) have been reserved

as doubtful. The due receivables for which no write-down has been made

refer to severalcustomers where Cherry has a separate agreement with

concerning the payment period.

Accounts receivable have been recovered during the year, which means

that profit for the year has been charged with income/expenses for suspec-

ted and confirmed customer losses of TSEK +1,770 (-2,670) concerning

accounts receivable.

Note 20: Other receivables Group Parent company

2013 2012 2013 2012

Short-term part of restaurant loans 4,964 1,708 - -

Receivable gaming cash, small change cash, money in slot ma-chines and gaming shares

-

Receivables proceeds discontinued operations 60,000 - 60,000 -

Set guarantees 8,943 -

Other 6,625 1,803 473 500

Total 82,883 7,833 60,473 500

RESTAURANT LOANS/ADVANCED GAMING INCOMERestaurant loans/advanced gaming income have different terms of

payment, depending on the agreements made with respective owners.

Loans/advanced gaming income issued seldom have a life term longer

than one year. The part of the restaurant loan/advanced gaming income

expected to be paid later than one year from the balance sheet date is

reported as long-term receivables.

As of 1 December 2013, restaurant loans amounting to TSEK 1,146

(1,105) were due. Of these TSEK 953 (1,007) have been reserved as

doubtful.

RECEIVABLE GAMING CASH, SMALL CHANGE CASH These receivables have short terms and payment is normally received

within 15 to 30 days. As of 31 december 2013, TSEK 118 (174) of these

receivables were older than 30 days. Of these TSEK 73 (77) have been

reserved as doubtful.

In total profit for the year has been charged with expenses for suspected

and confirmed losses concerning receivables of gaming cash, small change

cash and money in slot machines to an amount of TSEK 21 (31).

GAMING SHARESGaming shares refer to receivables at venues where the restaurant looks

after the cash takings, or where Cherry has other receivables from the

restaurant owner. Settlements of accounts, so-called ”krögarbrev”, are

issued monthly in arrears. The accounts are due for payment 10 to

30 days after they are issued. As of 31 December 2013, gaming shares

amounting to TSEK 468 (496) were due. Of these TSEK 440 (465) have

been estimated as doubtful and havebeen reserved in their entirety.

In total profit for the year has been charged with expenses for

suspected and confirmed customer gaming share receivables to an

amount of SEK 84 thousand (126).

OTHER CURRENT RECEIVABLESIn total profit for the year has been charged with expenses for

suspected and confirmed customer losses of SEK 294 thousand (441)

concerning other receivables.


Note 22: EquityComposition of share capital 2013 2012

Parent company No. of shares Share capital No. of shares Share capital

Shares, A series (10 votes) 997,600 549 997,600 549

Shares, B series (1 vote) 118,05,042 6,493 118,05,042 6,493

Total shares 128,02,642 7,041 128,02,642 7,041

The nominal value of the share was SEK 0.55 as of 31-12-2012. Both

A- and B-shares have equal rights to assets and profits in the company.

An issue of 500,000 subscription options was decided at an extra-

ordinary general meeting on 19-10-2011. All the options were subscri-

bed by the subsidiary Cherry Casino Syd AB, which disposed 455,000 of

these to leading executives and key persons in Cherry. For further

information, refer to Note 7.

PART 2 NOTES


2013 2012 2013 2012

Long-term interest bearing liabilities

Liabilities related to financial leasing -432 -1083 - -

Total -432 -1083 0 0

Granted non-utilised credit amounted to - 15,000 - 15,000

Note 23: Long-term liabilities

Concerning conditional proceeds, see Note 30.

Note 24: Accounts payableAccounts payable in the group have standard terms of payment and therefore the value in the balance sheet corresponds with the fair value.

Note 21: Prepaid expenses and accrued income Group Parent company

2013 2012 2013 2012

Rent 638 626 168 75

Insurance 295 126 204 93

Accrued interest income - 70 - -

Prepaid marketing 5,082 - - -

Depositions for rental contracts 713 - - -

Other prepaid expenses 3,094 2,370 213 195

Total 9,822 3,192 586 363



2013 2012 2013 2012

Current interest bearing liabilities

Liabilities related to financial leasing -692 -693 - -

Total -692 -693 0 0

Other current liabilities

Personnel tax -2,704 -2,637 -152 -146

Gaming taxes -1,535 -1,453 - -

Gaming shares to venues -4,124 -3,910 - -

VAT -136 -3,167 - -

Conditional supplementary proceeds -7,602 - - -

Deferred supplementary proceeds -4,472 - - -

Other -2,919 -575 -37 -59

Total -23,493 -11,742 -189 -205


2013 2012 2013 2012

Accrued salaries -3,908 -5,613 -618 -2,076

Holiday pay -4,372 -4,202 -140 -98

Payroll overheads -2,925 -3,062 -247 -326

Other -7,925 -10,327 -991 -1,162

Total -19,129 -23,204 -1,996 -3,662

Note 25: Current liabilities

Note 26: Prepaid expenses and prepaid income

Note 27: Accrued expenses and prepaid income Group Parent company

2013 2012 2013 2012

Shares in subsidiaries - 6,529 - 8,313

Blocked bank funds for guarantees 8,943 - - -

Total 8,943 6,529 0 8,313

Note 28: Pledged assets relating to liabilities in company Group Parent company

2013 2012 2013 2012

Guarantees and contingent liabilities for subsidiaries - - 8,943 -

Total 0 0 8,943 0


Non financial assets and liabilities include taxes and personnel related balance sheet items regulated by a standard other than IFRS 7.

PART 2 NOTES

Note 30: AcquisitionsACQUISITIONS 2013Cherry acquired 49 per cent of the shares in Web Resorts NV (Curacao)

on 7 November 2013. The acquisition involved several domains, gaming

agreements and gaming sites, including NordicSlots.com and NorgesSpill.

com. The goodwill of SEK 25 million that arose in conjunction with the ac-

quisition is attributable to synergies and an established customer database.

Most of the assets are in Red Trading NV, which is owned to 100 per cent,

and the result is consolidated in the Cherry Group as of the take over on

7 November.

Note 29: Financial assets and liabilitiesLoans receivable

and accounts recei-vable

Financial assets and liabilities reported at fair value via the income

statementOther financial

liabilitiesTotal reported

value

Non financial assets and

liabilitiesTotal balance

sheet

Group 2013 -

Other long-term receivables 873 - - 873 - 873

Accounts receivable 8,367 - - 8,367 - 8,367

Other receivables 85,241 - - 85,241 9,822 95,063

Cash and bank balances 68,437 - - 68,437 - 68,437

Total 162,918 0 0 162,918 9,822 172,740

Long-term interest bearing liabilities - - 432 432 - 432

Current interest bearing liabilities - - 693 693 - 693

Accounts payable - - 10,970 10,970 - 10,970

Other liabilities - - 19,117 19,117 23,503 42,620

Total 0 0 31,212 31,212 23,503 54,715

Group 2012

Other long-term receivables 430 - - 430 - 430

Accounts receivable 26,580 - - 26,580 - 26,580

Other receivables 7,443 - - 7,443 12,588 20,031


Total 93,510 0 0 93,510 12,588 106,098

Long-term interest bearing liabilities - - 1083 1083 - 1083

Other long-term liabilities - - 0 0 - 0

Current interest bearing liabilities - - 693 693 - 693

Accounts payable - - 6,235 6,235 - 6,235

Other liabilities - - 4,485 4,485 41,303 45,788

Total 0 0 12,496 12,496 41,303 53,799

Parent company 2013

Other receivables 62,831 - - 62,831 586 63,417

Liquid assets 58,960 - - 58,960 - 58,960

Total 121,791 0 0 121,791 586 122,387

Accounts payable - - 803 803 803

Other liabilities - - 37 37 2,550 2,587

Total 0 0 840 840 2,550 3,390

Parent company 2012

Accounts receivable - - - 0 - 0

Other receivables 369 - - 369 494 863


Total 41,621 0 0 41,621 494 42,115

Long-term interest bearing liabilities - - - 0 - 0

Other long-term liabilities - - - 0 - 0

Current interest bearing liabilities - - - 0 - 0

Accounts payable - - 320 320 - 320

Other liabilities - - 59 59 4,106 4,165

Total 0 0 379 379 4,106 4,485


(Amounts in TSEK)Reported values in

acquired operations Adjustments to fair value Fair value

Current receivables 32 - 32

Domain names/trademarks - 1,825 1,825

Gaming agreements - 10,494 10,494

Deferred tax - -246 -246

Identified net assets 32 12,073 12,105

Goodwill - - -25,008

Purchase price - - 37,113

Deferred purchase price to be paid in 2014 - - -4,472

Conditional purchase price, linked to targets for 2014 - - -7,602

Net effect on liquid assets - - 25,040

The acquisition balances are not definitive.

Note 31: Discontinued operationsAUTOMATEN SITESOn 19 February 2013 the trademarks and domains related to SverigeAu-

tomaten, NorgesAutomaten and DanmarksAutomaten were sold to

Betsson AB (Publ). The discontinued operations have been part of the

segment Online Gaming. The purchase price amounted to SEK 286.0

million, of which SEK 225 million was regulated through the delivery

of newly issued shares in Betsson AB, which was sold in February and

realised SEK 228.7 million before deductions for transaction costs. In

conjunction with the sale, Cherry acquired the gaming site CherryCasino.

com for SEK 1.0 million. The remaining part of the purchase price, SEK

60 million was regulated in February 2014.

Cherry completed on 8 November 2012 the sale of all the shares

in Cherry Maritime Gaming AB, Astral Maritime Services Ltd and

Cherry Services Ltd to Bell Casino AB. The discontinued operations

have previously comprised the Maritime segment, which has now

been completely discontinued as a result of the sale. Cherry received total

proceeds of SEK 36.3 million for shares, dividends from the sold

companies and repayment of group loans that had been issued to the

discontinued companies.

Analysis of results from discontinued operations 2013 2012

Earnings 38,319 235,945

Operating expenses -34,170 -205,218

Depreciation - -3,637

Result from discontinued operations before tax 4,149 27,090

Income tax - -1,361

Result from discontinued operations after tax 4,149 25,729

Profit from disposal before tax 21,385 2,459

Tax - -

Profit for the year from discontinued operations 25,534 28,188

Cash flow attributable to discontinued operations

Cash flow from current operations 8,562 26,629

Cash flow from investment operations 215,408 24,386

Cash flow from financial operations - -1,774

Total cash flow 223,970 49,241

MARITIME OPERATIONS

The acquisition is expected to result in an increase in sales and earnings of at least SEK 8.6 million per year.

The acquisition is expected to have the following effect on Cherry’s assets and liabilities:

Note 32: Events efter reporting

LIQUID ASSETS• In January 2014 the ministry in Schleswig-Holstein decided to return

the bank guarantee of EUR 1.0 million that Cherry had previously is-

sued as security for tax payments.

• On 19 February 2014 Cherry received SEK 60 million from Betsson for

the supplementary proceeds related to the sale of AutomatGruppen.


The Annual Report and consolidated financial statements for Cherry

AB (Publ) in the fiscal year of 2013 have been approved for publication

following a decision taken by the board on 13 April 2014.

It is proposed that the Annual Report and consolidated financial

statements be adopted at the AGM on 8 May 2014.

The board of directors and CEO hereby declare that the consolidated

financial statements and Annual Report have been prepared in accor-

dance with international financial reporting standards IFRS, as adopted

by the EU, and give a true and fair view of the group’s financial posi-

tion and results of operations. The Annual Report has been prepared in

accordance with generally accepted accounting principles and gives a

true and fair view of the financial position and results of operations for

the parent company.

The Administration Report for the group and parent company gives

a true and fair view of the development of group and parent company

operations, financial position and results of operations, and describes

essential risks and uncertainty factors that face the parent company and

the companies included in the group.

Our audit report was submitted on 14 April 2014


Niklas RenströmAuthorised public accountant

Emil SunvissonCEO

Rolf Åkerlind Chairman

Anders Holmgren Board member

Magnus BerglindBoard member

Martin Wattin Board member

Morten Klein Board member

Jörgen Olsson Employee representative

Gunnar Lind Board member

Signatures

Stockholm, 11 April 2014.

PART 2 SIGNATURES/OUR AUDIT REPORT


Our audit reportTO THE ANNUAL GENERAL MEETING IN CHERRY AB (PUBL.)CIN 556210-9909

ANNUAL REPORT AND CONSOLIDATED FINANCAL STATEMENTSWe have audited the Annual Report and consolidated financial statements

for Cherry AB for the fiscal year of 2013. The company’s Annual Report and

consolidated financial statements are included in the printed version of this

document on pages 23-60.

THE RESPONSIBILITY OF THE BOARD OF DIRECTORS AND THE PRESIDENT FOR THE ANNUAL REPORT AND CONSOLIDATED FINANCAL STATEMENTS

The board of directiors and the president are responsible for the prepa-

ration of an Annual Report that gives a true and fair view in accordance

with the Swedish Annual Accounts Act and for consolidated financial

statements that give a true and fair view in accordance with International

Financial Reporting Standards, as adopted by the EU, and the Swedish

Annual Accounts Act, and for the internal inspection that the board of

directors and the president judge are necessary to prepare an Annual

Report and consolidated financial statements that are free of material

misstatement, whether these are a result of irregularities or error.

RESPONSIBILITY OF THE AUDITORS

Our responsibility is to express an opinion on the Annual Report and con-

solidated financial statements based on our audit. We have conducted our

audit in accordance with International Standards on Auditing and gener-

ally accepted auditing standards in Sweden. These standards require that

we follow professional ethics and plan and conduct our audit to achieve

reasonable assurance that the Annual Report and consolidated financial

statements are free from any material misstatement.

An audit includes obtaining through different procedures an audit of

figures and other information in the Annual Report and consolidated

financial statements. The auditor chooses which procedures to take, by

evaluating the risks of any material misstatement in the Annual Report

and consolidated financial statements, whether these are a result of ir-

regularitites or error. During this risk assessment the auditor considers

the parts of the internal inspection that are relevant to how the company

prepared the Annual Report and consolidated financial statements to give

a true and fair view for the purpose of audit procedures suitable for the

circumstances, but not for the purpose of expressing an opinion on the

efficiency of the company’s internal inspection. An audit also includes an

assessment of the expediency of the accounting principles that have been

applied and of the reasonability of the estimations made by the board

of directors and the president in the accounts, including also an assess-

ment of the general presentation in the Annual Report and consolidated

financial statements.

We believe that the audit evidence we have obtained is sufficient and

expedient to form the basis for our statements.

STATEMENT

n our opinion the Annual Report has been prepared in accordance with

the Swedish Annual Accounts Act and gives an essentially true and fair

view of the financial position of the parent company as of 31 December

2013 and its financial results and cash flows for the fiscal year in accord-

ance with the Swedish Annual Accounts Act. The consolidated financial

statements have been prepared in accordance with the Swedish Annual

Accounts Act and give an essentially true and fair view of the financial

position of the group as of 31 December 2013 and its financial results

and cash flows for the fiscal year in accordance with International Finan-

cial Reporting Standards, as adopted by the EU, and the Swedish Annual

Accounts Act. A Corporate Governance Report has been prepared. The

Administration Report and Corporate Governance Report are consistent

with the other parts of the Annual Report and the consolidated financial

statements.

We therefore recommend that the Annual General Meeting adopts the

income statements and balance sheets for the parent company and the

group.

REPORT ON OTHER REQUIREMENTS IN ACCORD-ANCE WITH LEGISLATION AND OTHER ORDINANCES

In addition to our audit of the Annual Report and consolidated financial

statements we have also conducted an audit of the proposed allocations

concerning the profit or loss in the company, as well as the administration

by the board of directors and the president of Cherry AB for the fiscal

year of 2013.

THE RESPONSIBILITY OF THE BOARD OF DIRECTORS AND THE PRESIDENT

The board of directors is responsible for the proposed allocation of profit

or loss in the company, and its administration in accordance with the

Companies Act.

RESPONSIBILITY OF THE AUDITORS

It is our responsibility to express an opinion with a reasonable degree

of assurance on the proposed allocation of profit or loss and on the

administration on the basis of our audit. We have conducted our audit in

accordance with generally accepted auditing standards in Sweden.

In order to express an opinion on the proposed allocation of profit or

loss in the company by the board of directors, we have examined the

statements of the board of directors and relevant parts of the under-ly-

ing documentation to see whether the proposal is consistent wth the

Companies Act.

In addition to our audit of the Annual Report and the consolidated

financial statements, we have examined essential decisions, procedures

and circumstances in the company in order to express an opinion as

to whether any member of the board, or the president, is liable to pay

damages to the company We have also examined whether any board

member, or the President, has in any other way acted in contraven-

tion of the Companies Act, the Annual Accounts Act or the Articles of

Association.

We believe that the audit evidence we have obtained is sufficient and

expedient to form the basis for our statements.

STATEMENT

We recommend to the Annual General Meeting the proposed alloca-

tion of profits in the Administration Report, and discharge the board of

directors and the president from any liability for the fiscal year.

Stockholm, 14 April 2014


Niklas Renström

Authorised public accountant


PART 2 DEFINITIONS

EARNINGS Gaming income reported net after deductions for winnings, bonuses and

loyalty programmes. Cherry reports its share of lottery earnings as income.

RUNNING COSTS IN GAMING OPERATIONS Running costs in gaming operations refer directly to costs such as gaming shares

at venues, gaming taxes and licences, purchased materials, and services purchased

directly related to gaming operations.

AVERAGE TOTAL CAPITAL Balance sheet total at the start of the fiscal year, plus balance sheet total at the end of

the fiscal year divided by two.

GENOMSNITTLIGT SYSSELSATT KAPITAL Balance sheet total reduced by non-interest bearing liabilities, including deferred

tax liabilities at the start of the fiscal year, plus closing balance divided by two.

AVERAGE EQUITY Equity at the start of the fiscal year, plus closing equity divided by two.

RETURN ON TOTAL CAPITAL Result after financial items with the amendment for financial expenses in relation

to average total capital.

RETURN ON CAPITAL EMPLOYED Result after financial items with the amendment for financial expenses in relation

to average capital employed.

RETURN ON EQUITY Result after tax in relation to average equity.

PROFIT MARGIN Result after financial items in relation to sales for the period.

OPERATING MARGIN Operating profit in relation to sales for the period.

OPERATING PROFIT BEFORE DEPRECIATION (EBITDA) Result before tax, financial items, depreciation and write-downs.

OPERATING PROFIT (EBIT) Result before tax and financial items.

EQUITY RATIO Equity at the end of the period in per cent of balance sheet total at the end of the period.

ACID-TEST RATIO Current assets excluding inventories in relation to current liabilities,including

proposed but not adopted share dividends.

TIMES INTEREST EARNED Current assets excluding inventories in relation to current liabilities, including

proposed but not adopted share dividends.

NUMBER OF PERSONS EMPLOYED The number of persons employed in the last month salaries were paid.

AVERAGE NUMBER OF EMPLOYEES Number of employees converted to full time positions.

NUMBER OF SHARES Number of shares at end of respective period.

AVERAGE NUMBER OF OUTSTANDING SHARES Weighted average of the number of outstanding shares during the period.

PROFIT PER SHARE Result after tax in relation to average number of outstanding shares during the

period.

PROFIT PER SHARE AFTER DILUTION Profit for the year divided by the weighted average of the number of outstanding

shares during the year, adjusted for additional number of shares during conversion

and options with dilution effect. Calculated in accordance with IAS 33 Profit per

share.

CASH FLOW PER SHARE The cash flow in relation to average number of outstanding shares during the period.

EQUITY PER SHARE Equity in relation to the number of shares at the end of the period.

DIVIDENDS PER SHARE Completed/proposed dividend.

SHARE PRICE Completed/proposed dividend.

NUMBER OF (REGISTERED) SHAREHOLDERS Number of Euroclear and nominee-registered shareholders according to the list

of shareholders/share register kept by Euroclear.

Definitions

Stockholm (H. O.)CHERRY HEAD OFFICECherry AB (Publ)Blekholmstorget 30SE-111 64 StockholmTel (switchboard): +468-514 969 40Fax: +468-514 969 [email protected] Emil SunvissonCFO/IR Fredrik Burvall

Malta, SliemaONLINE GAMING: Eurolotto.com, Euroslots.com, Cherrycasino.com, Spilleautomater.com and Cherryaffiliates.comCherry Ltd, Cherry Gaming LtdTagliaferro Business Centre, 4 Gaiety Lane c/w High Street Sliema SLM 1 551, MaltaTel: +356-2 276 6 000Fax: +356-2 134 0665CEO Marius Andersen

CuracaoONLINE GAMING: NordicSlots, NorgesSpillSchottegatweg Oost 10 Unit A1K, WillemstadCuracaoTel: +356-2 276 6 000

Malta, SliemaGAMING DEVELOPMENT: YGGDRASIL GAMING LTDOffice 35, Regent House, Bisazza StreetSliema, SLM1 606, MaltaTel: +356-9 962 5 104CEO Fredrik Elmqvistwww.yggdrasilgaming.com

UmeåRESTAURANT CASINO NORTHERN SWEDEN(Söderhamn in the south to the border in the north)Cherry Casino ABKungsgatan 42903 25 UmeåTel (switchboard): +4 690-12 57 30Fax: +4690-13 37 13vice CEO Per-Anders Persson, +46 709-27 96 25

StockholmRESTAURANT CASINO CENTRAL SWEDENStockholm, Mälardalen, Östergötland)Cherry Casino ABBlekholmstorget 30111 64 StockholmTel (switchboard): +468-514 969 40Fax: +468-514 969 59vice CEO Per-Anders Persson, +46 709-27 96 25

GöteborgRESTAURANT CASINO/EVENT CASINO SOUTHERN SWEDEN(Counties of Värmland, Skaraborg, Jönköping, Kronoborgand to south)Cherry Casino ABFürstenbergsgatan 4416 64 GöteborgTel (switchboard): +4 631-80 15 55Fax: +4631-80 29 99vice CEO Ulf Bergström, +46 709-27 96 50

StockholmSWEDEN’S SPORTS LOTTERY: KLUBBLOSvenska Klubbspel ABBlekholmstorget 30111 64 StockholmTel (switchboard): +468-514 969 40Fax: +468-514 969 59vice CEO Lasse Dilschmann, +46z701-47 58 64www.klubblo.se

www.cherry.se

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