Print the annual report 2006 | EKNs Årsredovisning 2007

During the year EKN issued offers and guarantees for export transactions to 101 countries.
During the year, the number of offers and guarantees issued increased in number but decreased in volume compared to the previous year. The difference in volume is due to a single very large transaction that was guaranteed in the previous year.
Indemnifications reached a new record low at only SEK 12 million. Together with the costs for loss prevention, indemnification costs ended the year at SEK 32 million, compared to the previous year’s already low SEK 43 million.
Recoveries again exceeded expectations at SEK 925 million.
Halfway through the year EKN was given a new a broader mandate in EKN’s new ordinance. The new ordinance opens up further opportunities for companies to utilise EKN guarantees. Now it is mainly the extent to which the transaction promotes Swedish exports that determines whether EKN can guarantee the transaction. Previously it was the proportion of Swedish goods in the export transaction.
EKN has conducted a major campaign, with letters, telemarketing and seminars aimed at small and medium-sized enterprises (SMEs), and also local bank branches. The seminars have been nation-wide, working closely with ALMI and the Swedish Trade Council.
During the year, EKN issued offers and guarantees to 99 small and medium-sized enterprises which previously had not used EKN. The previous year we welcomed 74 new companies.
The Export loan was launched. The Export loan provides an opportunity for SMEs to obtain working capital for exports. It is financed and marketed in a collaboration between EKN, SEK, ALMI, the Swedish Trade Council and Swedfund.
The demand for EKN guarantees remains high from major corporates, even though the private sector still shows a great willingness to take risks, and has high liquidity. The number of offers and guarantees to large companies has increased, though the volume has decreased compared to the previous year.
EKN has reorganised its business activities and created two new business areas. One business area meets the needs of SMEs, while the other meets the needs of major companies.

Business volume, SEK million	2007	2006
Total amount for offers during the year	45,669	50,851
Total amount for guarantees during the year	23,943	39,555
Premium income	422	1,591
Indemnifications and costs of loss prevention measures	32	43
Recoveries	925	1,715
Net result for the year	1,755	1,787
Outstanding exposure and accumulated results, SEK million	2007-12-31	2006-12-31
Outstanding offers	68,981	59,697
Outstanding guarantees	88,861	91,576
Provisions for estimated risk exposure	7,973	8,431
Outstanding indemnified claims, nominal	6,867	8,264
Outstanding indemnified claims, estimated net value	1,393	1,913
Accumulated result	9,372	7,617

An EKN offer is a promise, free of charge, to issue guarantees for an unconditional contract, or when delivery takes place. The offer specifies the conditions for the guarantee, such as the premium or which amounts are covered.

An EKN guarantee means that the Swedish State assumes responsibility for a guarantee for the risks covered by the guarantee.

Karin Apelman, Director General

The good news of the year was the new mandate that gives us greater opportunities to promote the internationalisation of Swedish companies. With the focus on Swedish interests, we are able to issue guarantees for global transactions where financing solutions and the sharing of risks are necessary for the transaction.

Increasing number of companies are using us

EKN’s involvement and risk-taking is often a decisive factor for the exporter to realize the transaction. This applies both to very large transactions and to small ones. For several years, the demand for EKN’s guarantees has increased. An increasing number of companies are discovering what EKN can offer. During the year, we had as many as 99 new customers, compared to 74 new customers the previous year – which was itself a substantial increase from the 33 new customers in 2005. This is the result of a campaign that started in 2006 and which today is a separate business area for SMEs. We have sent out information about EKN to companies, banks and export promoters all over Sweden. We have advertised in local newspapers and run a large number of seminars. The response has been substantial. Once companies and bank branches have a better understanding of what EKN can offer, many of them want better and regular contact with us. The awareness of EKN has grown substantially among SMEs, and we are increasingly seen as someone facilitating all sorts of companies, both small and large.

Flow of business

The number of applications for guarantees has increased immensely during the year. We have issued 1,387 offers, compared to 1,230 the previous year. As in previous years, there has been a globally wide spread of transactions. We issued offers for transactions in 101 countries, and at the end of the year, we had commitments in the form of offers or guarantees for transactions in 126 countries. The maximum limit of our commitment, as decided by the Swedish Parliament, is SEK 200 billion. Our current exposure leaves 35% of that limit still available.

EKN is ready to support increasing exports

The importance for trade and industry to get support from EKN is evident. It was significant even in a year like 2007, when the world economy was sound and there was plenty of risk capital on the private market. We shift risk markets, develop new solutions and products and continue to be involved, taking responsibility for enabling Swedish businesses’ competitiveness to grow. The export share of GNP is now just over 50%. With our new mandate, we can also guarantee transactions with only a limited part consisting of Swedish goods and services, but which, in the long run, will contribute to future export earnings for Sweden. This can turn out to be as significant to Swedish interests as direct export promotion in each individual transaction.

Two business areas

As of last summer, we now have a new organisation with two business areas – one for large corporates, and one for SMEs. The division was made in order to meet customer needs and requirements in a better way. The business area for SMEs has a greater element of standardised products and more rapid administrative processing, while the business area for large corporates mainly involves larger and more complex transactions. The business area for SMEs has many transactions, transactions with smaller amounts, more products and shorter guarantee periods. During 2008 the business area will be able to offer electronic guarantee processing.

Financial strength

The result for the year, at SEK 1.7 billion after provisions, further reinforces our financial position and we now have an accumulated result of SEK 9.3 billion. That makes us well equipped for the future. The latter part of the year brought uncertainty and credit concerns to the financial markets of the world. But with our financial position we can handle sudden changes in the world economy. We are able to take on new, difficult and major risks and to develop new products for customers in both our business areas. In the current situation, we can see only a limited risk, within the immediate future, of a drastic increase in losses in the high risk markets where we operate.

Sustainable development

During 2008, we will continue to work with exporters and organisations on the issues in our activities within the scope of the areas of sustainable development and social responsibility.

Business development

During 2008, we will continue to reach out to more companies of all sizes. We are already ahead with special solutions for companies with large transactions and complex financing solutions and we can see a need to devote even more efforts to this. We also want to find out what need for financing and risk management large companies, which currently do not use EKN, may have in order to develop solutions that will suit them. We are well prepared for an increased demand for risk sharing. We will continue to collaborate with export promoters, such as SEK, the Swedish Trade Council, ALMI and Swedfund. It is important for us to understand the challenges the companies may face, so that we can support them in their internationalisation. What is good for trade and industry is good for Sweden.

After an extraordinarily interesting and stimulating first year as Director General, I would like to conclude by expressing my warmest thanks to all my highly skilled and committed colleagues.

Karin Apelman
Director General

EKN adapts its guarantees to meet the exporter’s requirements, and invests in more support for small and medium sized enterprises.
Photographer: Fredrik Schlyter/Johnér

EKN shall ensure that the promotion of Swedish exports by means of guarantees is done in collaboration with other Swedish export promoters, and that this is presented as part of Sweden’s overall export promotion.

The collaboration with ALMI has developed further, and now all the 20 regional ALMI companies around the country can arrange EKN counter guarantees and working capital guarantees. EKN, SEK, ALMI, the Swedish Trade Council and Swedfund have jointly developed the new product called the Export loan for small and medium-sized enterprises (SMEs) who need working capital for exports. During the year, eight export loans were granted for amounts between SEK 1 and 1.5 million.

EKN shall strive to increase people’s interest and awareness of the agency’s activities, and will adapt its products and services to meet customer demand. EKN will invest in more guarantees to small and medium-sized enterprises, with the objective of acquiring at least 250 new customers during 2007.

During the year, there was a nationwide marketing initiative targeting 9,000 companies, 1,700 local bank branches and a few hundred export promoters. In all, EKN acquired 99 new customers during 2007, an increase of 34% from the previous year. EKN has also signed up 1,500 companies who want regular information from EKN, and 150 companies who want some form of personal contact with EKN. The objective of 250 new customers was not achieved, but we are nevertheless happy with the result of 99 new customers, reinforced by the large number of companies who have shown an interest in what EKN has to offer.

EKN shall promote Swedish exports by offering competitive export credit guarantees and investment guarantees. In the long run, this business must achieve break-even. EKN will foster competitive neutrality between different government-supported export credit and investment guarantee systems internationally.

EKN’s guarantees stand up well in comparison with those of other export credit agencies.
In recent years, EKN has achieved a financial surplus and reinforced its financial standing.
In the OECD and the EU, EKN has championed issues to do with competitive neutrality, including competition between companies in countries not covered by OECD rules and regulations.

EKN shall limit the risks in guarantees issued, by sharing the risks. EKN shall aim to spread the risks in their exposure, and limit the concentration of risks. In new transactions, due regard shall be taken of EKN’s current risk exposure.

As a result of EKN’s reinsurance business during the year, it has been possible to reduce the provision in the annual accounts by approximately. SEK 1.3 billion. In new transactions, an assessment is made of the concentration of risk.

EKN shall develop its loss prevention activities and recoveries, with the aim of limiting the losses, and of making the indemnification procedures more efficient, in collaboration with customers.

We have improved the chances of being able to take early loss prevention steps, by transferring all the loss prevention work to a customer team which takes responsibility for the entire transaction.

EKN shall continue to work ethically as regards the environment, corruption and social issues arising from the issuing of guarantees. EKN shall continue to keep customers informed about the Global Responsibility initiative, and the OECD guidelines for multinational companies. EKN shall comply with the rules and regulations laid down by the OECD concerning anti-corruption and environmental/social issues. EKN’s business activities shall contribute to Sweden’s primary objective – fair and sustainable global development. EKN shall also strive towards a sustainable debt situation. Continuing special regard shall be paid when issuing guarantees to Heavily Indebted Poor Countries.

The year started with new procedures in place for combating corruption more effectively in guaranteed transactions. During the year, EKN developed both its environmental policy, and its policy for combating unproductive expenditure in poor, heavily indebted countries. EKN’s policies to do with ethics have been brought together and summarised in ethical guidelines for EKN. Thanks to this year’s work, we have achieved this objective, but at the same time we can see that these issues will become ever more pressing in the future. During 2008, we will therefore continue to develop this, working with exporters and other organisations.

EKN shall aim for a good level of service to the public and to companies, through Service Level Agreements and a dialogue with users. All services that can be provided electronically with equal or greater cost-efficiency shall be supplied electronically and in a user-friendly way.

To judge by the customer survey carried out by EKN at the end of the year, companies are highly satisfied with the service offered by EKN. No fewer than 84% of the respondents gave EKN the overall grading of satisfied or very satisfied with EKN. The previous survey was carried out in 2005, where 78% of respondents gave that grading.
Premium indications, news and general country risk assessments are provided electronically. A system for processing guarantees has been delayed and remains under development.

EKN has shifted risk markets and has increased the issue of guarantees for African countries.
Photographer: Mark Henley/Silver Photo

EKN’s most recent annual report reflects a world economy on the upturn. Economic growth has increased, world trade has increased, and so has the private sector’s liquidity and willingness to take risks. EKN’s role in the market has changed, in line with changing economic trends. Towards the end of the year, uncertainty about the world economy grew – which could again affect EKN’s role.

EKN’s role has traditionally been more important during recessions. The opportunities for laying off risk on the private market become as a rule much more limited when the general risk picture on the finance market seems more gloomy. In good times, the opposite is true. Even so, EKN’s issuing of guarantees has increased during the economic boom in recent years.

The world economy in recent years

In 2002 and 2003, world economic growth was very weak. Both the US and the EU had weak economies. Japan’s economy was going into reverse, and Latin America was in the throes of economic crisis. But 2004 saw the greatest growth in the world economy for 20 years, and ever since then EKN has had a constant upturn in guarantee issuing. The US and emerging markets were the fastest growing markets. Growth was weaker in Japan and the EU. The telecom sector recovered, primarily because of fast expanding economies in Asia. High oil prices gave good growth to countries in the Middle East and Africa, enabling them to increase imports, and Latin America saw a strong recovery.

EKN’s guarantee issuing increased, while losses and loss payments as good as disappeared, enabling EKN to reduce premiums and make improvements in the country risk classifications for a record number of countries. 2006 followed the same trend. But in the middle of 2007, the world economy weakened and uncertainty increased.

It is difficult to show any pattern in EKN’s business, as in some years one or two very large transactions overshadow any pattern. 2007 saw an increase in activity measured by the number of offers and guarantees, but a reduction in the amounts compared to the previous year. But in the previous year, 40% of the guaranteed amounts came from one single transaction.

New products and changes in the risk market

Trends at EKN during the 2002-2007 period from recession to boom appear to contradict the traditional ’truism’ that there is a greater need for EKN in recessions than in booms. The demand for EKN’s guarantees increased instead during the period. There are several explanations for this. One is the increase in exports. Between 2002 and 2007, the proportion of exports in Sweden’s GNP increased from 43% to more than 50%.

One explanation is that EKN has developed new products, and has been able to meet exporters’ needs for finance by guarantees in which EKN shares various risks with the banks. The best example of this is the counter guarantee, for which there was strong demand. Another explanation is that EKN has switched to different risk markets. At the start of the period, there was a demand for EKN’s facility to take on risks in countries like India and China. When the risk outlook in those countries improved, risk coverage for Mexico and Brazil grew in importance for EKN’s customers. In the last few years, EKN’s guarantee issuing has increased for African countries, and also for difficult risk markets like Cuba. Yet another explanation is EKN’s role in transactions in Iran.

The tables below show at least partially how EKN’s role has evolved and changed, even though particular transactions in particular years muddy the pattern somewhat.

Guarantee issuing 2002 – 2007

Counter guarantees issuing 2002 – 2007

EKN’s exposure in countries that have increased or decreased in significance between 31 Dec 2002 and 31 Dec 2007

The situation at the year-end

Uncertainties about the world economy are now greater than for some time. This has arisen primarily from the far-reaching credit crunch on the international financial markets, and fears that this might spread beyond the financial sector. A slowing down of economic growth is now on the way, particularly in the US but also in other industrial countries.

There are therefore strong indications that the credit cycle has turned. After several years of greater liquidity and low risk premiums, there is now a correction to the market’s appetite for risk. This is increasing the costs of financing and the risks of refinancing among borrowers all over the world, but particularly those with weak creditworthiness. The number of borrowers unable to repay is expected to rise.

The growth in developing countries is expected to flatten somewhat, but to remain at a continuing high level, particularly in China and India. Financing of export transactions is expected to be done mostly in the private sector. Looking a little further ahead, there are however question-marks about the sustainability of these countries’ fast pace of economic expansion. The continuing substantial demand for oil, occasional fluctuations of supply and the geopolitical uncertainty mean continuing high and occasionally volatile oil prices.

Increased issue of guarantees for African countries

The geopolitical battle for a range of strategic raw materials is expected to continue. However, the prices of certain raw materials such as metals are tending to flatten out from the record high levels of recent years. Continuing good growth is expected above all from the energy-exporting countries, as well as in many other countries producing raw materials – the so-called Emerging markets. This applies not least to Africa, where the debt situation continues to improve in a number of previously heavily indebted countries. This is likely to lead to greater business volumes for EKN, as the private sector remains very cautious about taking on risks in African countries.

There is a great need of infrastructure investment, above all in Latin America, Africa and in some parts of Asia. A growing focus on the climate issues all over the world is contributing to this. There are still challenges to finding sustainable financing solutions, and it is here that export credit agencies like EKN can play an important role.

Globalisation and a new mandate

Stiffer international competition on the export markets has contributed to downward pressure on prices of goods, above all on standardised products. It is therefore becoming all the more important to reprocess and to increase the knowledge content of company exports, in order to meet this global competition. Small and medium-sized enterprises have an important role to play – to diversify Sweden’s economic base, and foster future growth.

Another clear trend is that the export of services from Sweden is increasing, and there is good potential for a more extensive global trade in services. At the same time, an increased production of capital goods from non-OECD countries means increased competition from export credit agencies outside the OECD circle. A growing number of agencies, including EKN, have adapted or are adapting their activities to meet the needs of national companies that have moved their production abroad.

The mandate that EKN has been given in the new ordinance from the Government offers significantly greater opportunities for guaranteeing export transactions where a major part of the production takes place abroad. Under the new mandate, EKN can issue guarantees if the transaction has a direct or indirect connection with exports, and is significantly in Sweden’s interests. This means that it will become easier for EKN to provide cover for transactions carried out abroad by Swedish subsidiaries.

Guarantees issued during 2007, divided by industry

Guarantees issued during 2002, divided by industry

Swedish exporters take business oportunities in Ukraine’s development.
Photographer: David Isaksson/Global Reporting

An awareness of EKN, and a willingness to use EKN’s guarantees, is increasing among small and medium-sized enterprises. Companies using EKN represent exports both within and outside the OECD, and can be found in many different industries.

More and more small companies are looking for ways into the international market. Even if the major part of their exports is going to nearby countries in Northern and Western Europe, it is exports to countries outside the OECD area that are growing the fastest. During the year, EKN received many applications from small companies for exports to Central and Eastern Europe. There has also been greater demand for risk cover for deliveries to the Middle East, above all to Iran. For many small companies, the EKN guarantee has been a pre-requisite for being able to complete the transactions.

When the private sector’s willingness to take risks for specific countries is low, and the scope for risk cover is limited, this mainly affects the smallest companies. It is here that EKN can be of great benefit for companies who would otherwise have very few opportunities to find risk cover for their deliveries. These are the companies responsible for the growth in Swedish exports.

EKN’s Business Area for SMEs looks after companies whose turnover is below SEK 1 billion, with fewer than 500 employees. Most of EKN’s customers in this segment are small rather than medium-sized companies.

Industries

During the year, small and medium-size enterprises from very different industries made use of EKN’s services. They range from producers of raw materials and components manufacturers, with transactions with short credit periods, to companies who construct major power stations, with credit periods extending over several years.

As well as the guarantees issued directly to exporting companies in order to limit the risks of non-payment, EKN also issues guarantees to banks to reduce their risks vis-à-vis Swedish exporting companies. The working capital guarantee means that EKN takes on half the bank’s credit risk without security. This increases the chances for companies to get access to working capital. Similarly, EKN’s counter guarantee can cover a large part of the risk for the contract guarantees that the bank issues. This in turn increases the bank’s capacity to issue further contract guarantees in export transactions. In EKN’s exposure, these risk undertakings for Swedish exporting companies are recorded in the accounts as guarantees issued in relation to Sweden. The table below shows that in volume terms, the highest demand in 2007 for small and medium-size enterprises was for these guarantees.

The ten largest countries for which offers were issued during 2007

The ten largest countries for which offers were issued during 2007 for SMEs:
Country	Number of offers
Sweden	165
Nigeria	79
Iran	69
Russia	27
China	16
Ukraine	16
United Arab Emirates	11
India	11
Turkey	8
USA	8

Increased awareness of EKN

Previous market surveys have shown a low awareness about EKN and its guarantees. For that reason, we carried out a nationwide marketing initiative during the year, focusing on export seminars at many locations throughout the country. In all, some 9,000 companies, 1,700 local bank branches, and a few hundred export promoters from all Sweden’s counties have received information packs and invitations. The initiative also included advertising in the local press and telemarketing. In all, there were 45 seminars, run in close collaboration with ALMI and the Swedish Trade Council’s regional exporting consultants. To summarise, this means that during 2007 we made contact with 1,500 exporters who confirmed that they were interested in EKN. About 150 of them wanted to be contacted in person by EKN for further information. The follow-up work to process these contacts is continuing in 2008. Using electronic newsletters, we have kept continuously in touch with all 1,500 companies.

New customers

In all, we obtained 99 new customers during 2007, most of them SMEs. This can be seen as a result of the market initiatives that started in 2006 and were further intensified during 2007.

2004 – 32 new customers
2005 – 33 new customers
2006 – 74 new customers
2007 – 99 new customers

Of the 74 new customers in 2006, more than 50 percent have come back to us for further guarantees.

Collaboration with other export promoters

The collaboration initiated earlier with ALMI has developed further, and now all the 20 regional ALMI companies around the country can arrange EKN counter guarantees and working capital guarantees. This collaboration is strategically important for EKN in its marketing efforts towards SMEs. Thanks to ALMI’s regional presence, we are able to reach out to them.

During the year, EKN has continued to develop its collaboration with other export promoters. Together with ALMI, SEK, the Swedish Export Credit Corporation, the Swedish Trade Council and Swedfund, a new product for small and medium-sized enterprises has been produced – the Export loan. A lack of financing can inhibit smaller companies from taking on bigger transactions. For this reason it is important to develop new supplementary forms of financing alongside what the banking system already has to offer. ALMI, which works in close regional cooperation with small companies, will be handling the loans. SEK and EKN will jointly supply the capital and risk management. The Swedish Trade Council and Swedfund will assist with marketing. Initially, SEK and EKN have set up a credit framework of Swedish kronor 500 million for the Export loan.

As well as the marketing activities mentioned above, EKN participated during the year in several country seminars and other meetings where banks have invited their customers.

Guarantees for SMEs

The guarantees that SMEs prefer to use are short-term loss on claim guarantee, basic guarantee, counter guarantee and working capital guarantee.

The guarantees can be used for various types of risks during the entire business process, from early negotiations until the final payment, and until the guarantee period for the goods/services has expired. Demand has remained high for all the guarantees, including the relatively new working capital credit guarantee that eases the companies’ provision of capital.

The basic guarantee gives protection against losses on accounts receivable for transactions with a credit period not exceeding 6 months. Compensation is paid by EKN in SEK, EUR or USD depending on the contract currency.

The short loss on claim guarantee gives protection against losses on accounts receivable for transactions with a credit period not exceeding 12 months. Compensation is paid by EKN in SEK.

Neither the basic guarantee nor the short loss on claim guarantee can be used for transactions to Australia, Canada, countries in the EU, Iceland, Japan, Norway, New Zealand, Switzerland or the US, because of EU competition rules.

The counter guarantee protects issuers (usually the exporter’s bank) of contract guarantees (such as the advance payment guarantee) against losses when the beneficiary (usually the purchaser) makes use of the contract guarantee. The counter guarantee increases the bank’s capacity to issue new contract guarantees and credits for the benefit of the customer, thus facilitating further export transactions.

The working capital guarantee reduces the bank’s risk vis-à-vis the borrower, and increases the capacity for fresh credits. The working capital guarantee eases the provision of capital for SMEs. With a working capital guarantee, the bank shares the risk with EKN when offering working capital or loans, or granting overdraft facilities.

Exports

Maritime know-how exported from Gothenburg

SSPA Sweden is an independent consultancy and development company operating in the maritime sector. The company’s main focus is on ship design and maritime operations.

SSPA offers solutions for efficient transport, good fuel economy, as well as clean and living coasts. By being at the leading edge of sustainable, innovative and profitable solutions, SSPA builds long-term relationships with its clients.

Research into better maritime solutions

In order to maintain its leading edge skills, SSPA devotes some 20% of its resources to research programmes that increase those skills. The focus of the research is on systems for waterborne and intermodal transport, and includes information and communications technology.

SSPA receives commissions from industries, shipyards, shipping companies, harbours and official bodies all over the world. The company’s resources for testing the hydrodynamic properties of ships’ hulls have made Gothenburg something of a centre for shipyards evaluating their designs. SSPA has tested more than 6,000 ships’ hulls to date, for both commercial and military vessels. One of the more publicised commissions was model tests for the Swedish America’s Cup syndicate, Victory Challenge.

Credit guarantees from EKN secure the claims

“Many Korean and Chinese shipyards test their designs with us,” says Elisabeth Algar. “We have been working with EKN since 1999 to safeguard our claims on customers. The procedures are very simple. We get a form from the EKN website. We fill it in, and attach a credit report on the customer. Then EKN get back to us with their decision. It works brilliantly.”

Swedish skincare exported

With some 5,000 operations a year, Akademikliniken, operating in Stockholm, Malmoe, Copenhagen and London, is Europe’s largest private clinic for aesthetic and reconstructive plastic surgery.

The company’s surgeons are highly skilled and are considered to be world leaders in several areas of plastic surgery.

Own skincare programme

Complementing the surgical work, Akademikliniken started to market a range of its own skincare products three years ago.
“The products are sold under the name Akademikliniken Cosmeceuticals, indicating that they have both cosmetic and medical properties,” says Managing Director Lars Bjarnemark. “Behind the products are several years of intensive research and development, enabling us to offer preparations with high quality ingredients that have been thoroughly tested. The fact that the products have been developed by some of the world’s leading plastic surgeons and skin specialists gives them extra credibility in marketing. We started selling the products in our own clinics, but soon noticed a growing demand from skin salons, plastic surgeons and pharmacy chains outside Sweden. Today we have 13 products in our range, and we sell to 15 countries in Europe, North America and Asia. Our aim is to continue to increase exports.”

Credit guarantees from EKN allow faster expansion

“It takes financial resources to cope with international expansion,” notes Lars Bjarnemark. “If we can offer advantageous payment terms, that increases the chances of new customers buying sizable stocks. This is particularly the case when we start dealing with a new distributor. Thanks to working closely with EKN, we have released capital for expansion. A working capital credit guarantee has been very helpful. The bank takes on part of the credit risk, and EKN stands for the rest. That way we have been able to increase our working capital, giving a greater impetus to continuing export investment. We are very happy with this solution.”

Large corporates need EKN’s involvement at an early stage, in order to create stability and the preconditions for financing.
Photographer: Aytunc Akad/Silver Photo

The demand for offers from EKN has remained high. EKN are involved at an early stage, but not necessarily once the deal has been agreed. Exporting has continued to go well for large Swedish companies.

As in recent years, the private sector’s liquidity and willingness to take risks has remained high. Financing costs have fallen for many purchasers of Swedish exports. As a result, a greater number of export transactions have been possible without EKN’s involvement. Another consequence is that an increasing number of loans guaranteed by EKN have been paid off early. But overall, this trend has not led to any reduction in the demand for our support, nor in the level of our business activities. During 2007, the demand for EKN’s products from large companies continued to increase. The number of applications for offers increased by 13%, and the number of guarantees by 18%.

Even in good times, EKN is needed to complement private sector alternatives. This trend means that we get involved in transactions at an earlier stage. Another consequence of this trend has been increasing demand for export guarantees in increasingly difficult risk markets and market segments which has been made possible by new products. This is in line with the skills in our business area for large corporates and the focus on more complex transaction structures which may require special solutions in various forms.

Our role in developed markets

In recent years, good access to private sector financing means that such finance has been subscribed to and arranged without EKN’s involvement. Even so, there has been strong demand for our commitment and support even in developed markets. A clear trend is for EKN to step in at an early stage in order to create stability and the preconditions for financing, even if the financing is ultimately handled by the private sector. Sometimes we need to support a transaction by guaranteeing certain parts or stages of the financing. In other cases we are asked to provide bridging finance or other special arrangements.

New and old markets

It is in very high risk markets that EKN fulfils its most important function. In high risk markets, our involvement is often a precondition for a Swedish export transaction to go through at all. At all events, we can help to make the Swedish offer more attractive than it would have been without our involvement. As the private sector has developed a greater appetite for risk, and has moved its positions forward and has taken greater risks, so EKN has kept pace with the market and done the same. Our role in complementing the private sector in high-risk markets has imposed greater demands of us to continually review and develop special solutions, terms and prices.

The ten largest countries for which offers were issued during 2007 for large companies

The ten largest countries for which offers were issued during 2007 for large companies
Country	Number of offers
Iran	128
Russia	62
Turkey	41
Bangladesh	37
Cuba	34
Vietnam	32
Mexico	21
United Arab Emirates	17
Saudi Arabia	17
Oman	16

Countries, industries and guarantee types

From a low level, Africa continues to take an ever greater share of our business. However, it is Iran, Russia and Turkey, plus the Middle East, that dominate new transactions and offers. More than twice as many guarantee offers have been issued for transactions in Iran than in Russia, which is in second place. Guarantee issues to Iran are for several different industries, including telecoms, transport, power and industrial plant. Most of our products are utilised in the guarantees to Iran. The most usual are letter of credit guarantees and short-term loss of claim guarantees, but for major projects, and project-like risks, exporters often have a need to cover production risks.

Many industries and products are also represented in the offers for exports to Russia. In contrast, guarantees to Turkey and the Middle East have been primarily for the more traditional export finance for transport and construction vehicles, reflecting the construction boom in these countries.

In Africa and Cuba, our GSL facility has been an important means for being able to support exports. It has increasingly been used mainly by trading houses, but also by companies exporting vehicles, construction machinery and mining equipment.

Telecoms does not dominate as much as in some previous years, but remains an industry with a steady flow of large and complex projects and project-like risks, with a wide geographic spread. During the year, there have been transactions with both new and old telecoms purchasers in many regions. In several cases, EKN has been asked to make the initial risk assessment without the involvement of financiers. This is a change compared to previous years.

Exports

Shared risks favour Volvo’s expansion in Brazil

Brazil is Sweden’s largest trading partner in Latin America. Swedish exports in 2006 totalled SEK 6.8 billion.

Volvo is one of the largest Swedish companies in the country, with its own assembly factories for trucks and buses. A large proportion of the vehicle components are exported from Sweden.

Credits for resellers and customers

Volvo Financial Services (VFS) operates as the Volvo Group’s own “bank” in more than 40 countries, of which Brazil is one. VFS facilitates sales in the country by offering credits to resellers and end customers. Until spring 2007, VFS handled all credits for Brazil on its own. Once the credits for particular customers or countries reach a certain size, the strategy is to collaborate with other parties in order to spread the risks.

“To enable us to continue growing in Brazil, we got in touch with EKN and Nordea, and discussed a collaboration on credit risks,” says Mikael Gisslén at VFS. “The discussion started in 2006 and were formalised in a contract in the spring of 2007. Thanks to EKN providing guarantees for a proportion of our credit portfolio, we have greater capacity to take on new deals.”

Nordea provides additional support for the deals by reinsuring EKN for a certain proportion of the credit portfolio. Nordea is an agent in the transaction, and also looks after the administration of the collaboration.

Favouring Swedish exports

The collaboration between VFS and EKN is based on the fact that Swedish export goods are often included in the products that Volvo sells in Brazil.
“EKN’s support for Swedish exports have been very important for us, so it was natural for us to turn to them as a financial partner,” says Mikael Gisslén. “The collaboration works extremely well, and I believe that EKN and Nordea are as happy as we are. For VFS, this is the first step in a new collaboration that could become a model for our expansion in other markets.”

Export company’s extended arm carries out transactions in all corners of the world

The trading house Elof Hansson has, ever since the start in 1897, been a channel for many Swedish companies’ export sales.

The product area paper and pulp still forms the bulk of the turnover, even though over time Elof Hansson have expanded its activities to cover products such as timber, steel, machinery, yarn, fabrics and household electronics. 550 employees work all round the world, and the business is managed from the head office in Gothenburg.

“We can be seen as our suppliers’ sales organisation in markets where they themselves are not represented,” explains Hans Andersson, CFO. “Our customers are therefore mostly in countries in Latin American, Africa and Asia.”

Market know-how and financing services

Among Elof Hansson’s competitive advantages are long experience of local markets, and the ability to offer their customers financing. The company’s own finances are strong, and it can therefore take on transactions at its own risk. However, in large transactions Elof Hansson shares the risk with private sector insurance companies or EKN.

“EKN can often offer good terms and conditions, particularly where the risk is a bit larger than usual,” says Hans Andersson. “For forestry products, it is mostly a question of short payment terms, whereas machinery may require credits for 5-7 years.”

Long collaboration with EKN

The long-standing collaboration between Elof Hansson and EKN has resulted in good contacts and smooth collaboration. “We often have chats with EKN’s country managers, to update each other about things like the current situation in various countries,” says Hans Andersson. “This collaboration works very well.”

EKN has ethical guidelines for enviromental issues, anti-corruption and principles for state guarantees for business with HIPCs.
Photographer: Oleg Nikishin / Silver Photo

The year started with new procedures in place for combating corruption more effectively in guaranteed transactions. During the year, EKN revised both its environmental policy, and its policy for combating unproductive expenditure in poor heavily indebted countries.

During the year, the work on revising the OECD joint environmental guidelines, known as the “Common Approaches”, was completed, and EKN has incorporated the changes in its environmental policy. This means that all the World Bank’s Safeguard Policies now govern EKN’s environmental assessments, that closely related business operations are included in the environmental assessment of a project, and that the policy has been expanded to cover more than only export projects.

In environmental issues, we have continued to maintain an ongoing dialogue with non-governmental organisations, exporters and banks.

Cleantech companies

During the year, we noted an increase in demand for guarantees from companies in the cleantech sector. Working jointly with SEK, the Swedish Trade Council, ALMI, Swentec and Swedfund, we started collaborating on meeting cleantech companies for briefings and consultations about the services that could be offered to these companies now and in the future.

Environmental classification

EKN classifies all medium and long-term export transactions in the categories A, B, or C, depending on the presumed environmental consequences of the project. Category A signifies a potential major risk of a negative impact on the environment, B a lesser, C a minimal or no impact of the environment.

The majority of transactions with medium- and long-term credit periods that we guaranteed during the business year fell into the C category – in other words they were judged to have minimal or no environmental impact.
In addition to the guaranteed transactions reported in the table, we deal with environmental issues in many cases which may lead to future transactions or may be cancelled.

Environmental classification category A and B

Environmental classification categiry A and B
Category A
Sulphate pulp mill, Vietnam	Construction of a new sulphate pulp mill with chlorine dioxide bleaching. The mill comply with World Bank standards for waste management, emissions to air and discharge to water, etc.
Converter stations, Namibia	Export of two converter stations for a transmission project. Important environmental issues were the routing of the transmission line and the construction of the converter stations.
Coal-fired power station, Turkey	Construction of a coal-fired power station, based on circulating fluidised bed combustion. The power station comply with World Bank standards for the emission of sulphur dioxide, nitrogen oxides, dust etc.
Category B
Panel board manufacture, Brazil	Construction of an MDF panel board plant. Emissions to air and discharge to water comply with World Bank standards.
Compressor stations, Iran	Export of two compressor stations. Emissions to air of nitrogen oxides and carbon monoxide well within World Bank standards.
Dairy equipment, Macedonia	Export of equipment for a dairy. Emissions to air and discharge to water within World Bank standards.
Express tramway, Turkey	Extension of contract (from 2002) for construction of express tramway.

Combating corruption

EKN’s efforts against corruption are intended to prevent us from getting involved in corrupt transactions.

The following four aspects in the OECD guidelines were implemented in EKN’s rules and procedures at the turn of the year 2006 / 2007:

the exporter is now required to disclose information about any prosecutions or convictions for corruption.
the exporter must also disclose information about agents and agent commission.
EKN is under a duty to disclose information to prosecutors and to stop any new guarantees in the event of credible proof of corruption. In the event of any legal judgements, EKN can stop payments and reclaim amounts paid out.
anyone seeking a guarantee from EKN must state whether the company is included it in any of the public lists of blacklisted companies maintained by the World Bank Group or by the EBRD (European Bank for Reconstruction and Development).

EKN had had discussions with exporting companies about the risks of corruption, and has in some transactions required supplementary information about what costs are covered by any agent commission.

Heavily Indebted Poor Countries

Ever since 2002, EKN has had a policy on unproductive expenditure in Heavily Indebted Poor Countries (HIPC), based on an agreement in principle in the OECD. The objective is to restrain State borrowing or State guarantees for loans on commercial terms for investments that are not commercially viable. EKN’s policy is that EKN will not participate by guaranteeing credits if:

the country has set limits to commercial borrowing,
the project or investment is not commercially sound,
the project violates the country’s poverty reduction or debt strategy, or
the project exacerbates the country’s social and/or economic development.

The policy was revised during 2007 and now covers all so-called IDA-only countries, namely the countries that fulfil the criteria for preferential credit terms from the World Bank. EKN did not guarantee any transaction covered by this policy during 2007. The transactions guaranteed for the countries in question during the year were made with private sector debtors, or with public sector purchasers where the amount was too small – below SEK 25 million – to be covered by the policy.

The largest single recovery was the pre payment of Peru’s Paris Club Agreement.
Photographer: Pilar Olivares/Scanpix

Recoveries and indemnifications for the year were of similar to the previous year. Once again, indemnifications were extremely few, while recoveries were at a higher than expected level.

EKN carries on extensive loss prevention measures in both business areas. For 2007 these activities were dominated by transactions which had already required loss prevention measures in the previous year. The largest transaction concerned the leasing of aircraft, where the purpose of the guarantees was to ensure a certain residual value for the owners in the event that the lease contracts are terminated early. In the guarantee, EKN also has recourse agreements with the investors, in which a specified level of lease payments is guaranteed. Because of the crisis in the American aircraft industry, the lease contracts have been renegotiated at much lower rental levels than initially. To cover the rental deficits thus arising on the guaranteed lease contracts, EKN paid out compensation of SEK 20 million during 2007.

Almost no new indemnifications

As an insured credit falls due, EKN pays out an indemnification. Of the 11 transactions that led to indemnifications, only five were new transactions during the year. Other relates to transactions where indemnifications were paid in previous years. The year’s indemnifications fell to an extremely low level, amounting to only SEK 12 million. The growing number of guarantees to small and medium-sized exporters becomes apparent by the fact that losses in this category accounted for seven of the 11 transactions. All the indemnifications relate to different countries with a wide geographic spread. That Sweden is reported as one of these countries is because the indemnification was paid under a counter guarantee.

Recoveries

Recoveries again exceeded our expectations, at a total of SEK 925 million. The largest single recovery was the pre payment of Peru’s Paris Club Agreement. In addition, Angola settled its outstanding capital debt during the year. The other 11 countries who are paying off their debts to EKN in line with agreed contracts are also contributing to the healthy income from recoveries. Large recoveries from a particular country are also expected in 2008, but EKN’s estimate of the nominal claimed amounts, reflecting expected future recoveries, fell back somewhat to 20% of the nominal amount, and amounted to SEK 1.4 billion.

New contracts

Sweden signed a new bilateral contract with Cameroon during the year. The country has consequently been granted further debt relief. The entire remaining outstanding claim, amounting to some SEK 500 million, was written off.

A contract about the sale of a claim was signed during the year for EKN’s largest single commercial claim ever. The claim relates to an Indonesian company producing paper and pulp. As the contract means that the purchaser will pay for the purchase in several instalments, the recoveries for this claim will continue during 2008. The recoveries of commercial claims were entirely dominated by this transaction. Other commercial recoveries have mostly been made under repayment contracts with a number of private debtors.

Compensation for debt relief

The Government decided during 2006 that EKN should receive compensation for debt relief granted under the aegis of the Paris Club, in accordance with an established allocation model. During 2007, SEK 36 million was taken up as income, as compensation for the debt relief granted during 2006 to Cameroon, Congo Kinshasa and Ghana. The compensation covers a small part of the claims written off.

Indemnifications and recoveries in 2007

Indemnifications and recoveries in 2007 and outstanding claims, (SEK m) as of 31 December 2007 (excluding guarantee-holders’ excess)
	Political			Commercial
	Indemnifications	Recoveries	Outstanding claims	Indemnifications	Recoveries	Outstanding claims
Total	4	805	6,270	28	120	597
Angola		388	0
Argentina			69		2	14
Bosnia-Hercegovina		3	45			1
Brazil						8
Colombia				4		24
Congo-Kinshasa			867
Croatia		7	15			14
Cuba			555
Egypt		22	236
Gabon		10	56
India						9
Indonesia		62	219		71	316
Iraq			913
Kenya		1	22
Liberia			56
Libya		11	29
Madagascar		4	0
Macedonia		2	0
Mexico				1	1	5
Montenegro			3
North Korea			2 423
Pakistan		51	622
Peru		532	0			3
Serbia		6	67
Singapore					1	13
Spain					1	37
United Kingdom						45
Sweden				1		1
Togo			37
Turkey					5	32
Uruguay				1	7	12
USA						41
Zimbabwe	4		36
Others				1		22
Standard allocated recoveries		-294			32
Loss prevention lease				20

EKN reinsures risks in order to reduce portfolio concentration. During the year, we took out reinsurance in the private sector market for risks relating to Iran.
Photographer: Yannis Kontos / Silver Photo

The term ‘risk exposure’ includes EKN’s commitments in offers and guarantees, and the claims that EKN has taken over in conjunction with indemnifications. The claims also include the claims for interest that EKN can make to the various debtors.

The outstanding volumes of offers and guarantees at the end of 2007 are for similar amounts and a similar distribution by country, compared to the 2006 year-end. In total, the volume at the year-end was SEK 158 billion, compared to SEK 151 billion at the end of 2006. The volume of offers was SEK 69 billion, compared to SEK 60 billion the previous year. The volume of guarantees was SEK 89 billion, compared to SEK 92 billion at the previous year end.

Claims continued to decline during the year, by SEK 1.4 billion to the present figure of SEK 6.9 billion. The reduction is mostly because of the large recoveries primarily from Peru and Angola, and the debt-relief of the outstanding claims on Cameroon. A small part of the reduction was the result of currency trends, as the greater part of the claims are in US dollars. Another distinguishing feature of the year was that on the whole there were no additional items which usually increase the size of the claims, such as indemnifications paid out, or capitalised interest in contracts.

Exposure split by type of risk

The distribution of the total exposure by type of risk continues to be largely unchanged. The declining proportion in recent years of pure sovereign risks and other public sector sovereign risks switched during the year to a small increase, by 3 percentage units to 38%. Telecoms has declined by 5 percentage units to 14%. The demand for counter guarantees is reflected in an increase of 3 percentage units to 15%.

EKN’s total exposure, divided by type of risk

The 15 largest countries – outstanding guarantees and indemnified claims

Reduced risk concentration

EKN has exposure and/or claims in a total of 125 countries, but the risks are very unevenly distributed between the countries. A handful of countries are responsible for the bulk of the risks, and as in the previous year, Pakistan and South Africa are at the top of the list. During the year just gone, the concentration of risk has declined slightly. This can be explained mainly by the new transactions that have taken place and which have reduced South Africa’s share of the total exposure, and in addition the risk periods for exposure in South Africa and Pakistan have become shorter.

The exposure in Sweden has increased the level during the year. This is because the risk in the counter guarantees which have been in demand lies with the Swedish exporters. Other countries in the table are, with some exceptions, the same countries as reported in the previous year.

When estimating our risk exposure, we take into account whether there is a concentration risk in the transactions, and we make provisions to cover this risk, which we call unforeseen losses.

Reinsurance

During the year, we took out reinsurance in the private sector market for a single risk relating to Iran, to the value of EUR 50 million. Furthermore, the contract period has been extended by one year, partly for comprehensive reinsurance for 20 risks in 20 countries, partly for a counterparty relating to the reinsurance of Pakistan. In total, the reinsurance on the private sector market amounted to SEK 3.9 billion at the year-end.
We had reinsurance policies with other export credit agencies to the value of SEK 1.6 billion, and other export credit agencies had reinsurance with us to the value of SEK 17.4 billion.

The OECD countries have agreed on an increase in the permitted proportion of local costs in state-backed transactions.
Photographer: Bengt Olof Olsson/Scanpix

Local costs and environmental guidelines are examples of issues that were topical in the international forums in which EKN participates.

The international contexts in which EKN regularly participates in meetings are mainly the OECD, the EU, the Berne Union and the Paris Club. There is also Nordic cooperation.

Revised environmental guidelines

In June 2007, the OECD countries adopted a recommendation about stronger joint environmental guidelines for export credit agencies, namely the OECD Recommendation on Common Approaches on the Environment and Officially supported Export Credits.

The new guidelines mean, among other things, that a larger number of international environmental and social standards must be complied with, that a larger range of transactions must be subject to environmental review, and there must be greater transparency about environmental aspects in transactions. The exchange of information and experience between countries is being strengthened, in the form of a network of experts on the environment. EKN has implemented the revised OECD recommendation.

The OECD working group for export credits and guarantees will conduct a survey in order to follow up how the new guidelines have been incorporated into the various export credit agencies’ policies and procedures. The annual summary of the transactions that have been subject to environmental review will also be implemented.

Larger proportion of local costs

The issue of support for local costs in the purchasing country has been discussed within the OECD for many years. The background to this is that these days many export transactions include a growing proportion of goods and services produced in the purchasing country. There is therefore a need for greater flexibility in including such costs in the guarantee cover. In 2007, the OECD were able to agree on an increase in the permitted proportion. An export credit agency can now support local costs of up to 30% of the value of the export contract, compared to the previous 15%. This rather cautious increase is the result of a compromise, and applies during a three-year trial period, meaning until the end of year 2010.

Berne Union to discuss mandate issues

In the Berne Union, an international association of credit and investment insurers, the mandate of the export credit agencies is a key issue. There is a trend going back some years among Government institutions to seek a more flexible and wide-ranging framework for their activities. This ambition is an adaptation to changing corporate structures, production and trade patterns as a consequence of globalisation and the development of financing techniques. The export industry has needs that require the task to be redefined. Previously it was all about promoting national exports; now it is to promote the national interest.

Photo: Stefan Weitanen

A radical organisational change was carried out during the year. Two business areas have been created – one for large corporates and one for small and medium-sized enterprises (SMEs). Each business area has a customer teams tasked with looking after customer contacts.

The purpose of the reorganisation, which was carried out at mid-year, was to achieve a greater degree of customer focus by means of some new working practices. One business area looks after small and medium-sized enterprises. Marketing, new transactions, payment defaults, losses and recoveries – everything is done based on the needs of SMEs. In the other business area, this is done based on the needs of large corporates, which are often very different from those of SMEs.

The reorganisation meant changed job responsibilities for many people. A new staff function has been formed, with the task of further ensuring that we comply with external rules, and that we have internal policies and rules in key areas. A special group, Business Support, has been set up to support the business areas’ customer-focused activities, and to ensure rapid processing.
More wide-ranging working practices, in which everyone has multiple skills, are being developed in the business areas’ customer teams. In order to implement this, a training programme was initiated, covering credit research, risk assessment, guarantee techniques and financing.

Additional employees

During the year, we increased our workforce by six annual work units, to 101, in order to meet customer needs better, and to continue actively marketing EKN. A need for quality control, business development and greater knowledge of industry has also contributed to EKN’s need to grow. The year 2007 saw the top of an economic boom, which also meant an increase in staff turnover. However, we have found no problems in re-recruiting people.

Security policy

In order to live up to the demands imposed on us by clients, customers and others, as well as legislation and ordinances, we continuously analyse risks. We have rules and guidelines for protecting staff, property and information. Employees are continuously briefed about this, and are kept up-to-date so that they are best able to manage the operational risks that may arise.

Objectives for skills provision

We will continue our strategic efforts in skills provision in order to be able to attract, recruit, develop and retain skilled staff. Below we report EKN’s values for this objective, with 2006 values in brackets:

A uniform age distribution with a median age in the range 38-42.
The median age at the end of 2007 was 43 (42).
Annual turnover of personnel around 4-5%.
The turnover of personnel was just over 11% (10%).
A balanced distribution by gender in all skills areas, i.e. within the range 40%-60%.
At the end of 2007, 58% of EKN’s employees were women and 42% were men (55%, 45%).
The average period of employment for persons who give notice to leave shall not be less than 4 years.
The average period of employment for persons who left during the year was 4 years (3 years).

That the objective for personnel turnover was not met can be explained by the favourable situation for employees on the job market.

EKN has been working for several years to increase ethnic and cultural diversity.

Sick leave has been very low during the year at 1.9% of total normal working hours. No fewer than 70% of EKN’s employees had five or fewer days of illness during the year, the definition of what is called being long-term healthy.

Age distribution at EKN

Proportion men and women

Men and women
	Women	Men
Management skills	65%	35%
Core skills	51%	49%
Support skills	68%	32%

Sick leave in % of the group’s total normal working hours

Sick leave in % of the group’s total normal working hours
Below age 30	0,74%
Age 30 – 49	1,71%
Above age 49	2,43%
Total absence	1,88%

The result for the year of SEK 1.8 billion means that EKN has further strengthened its already strong financial position. To that must be added the right to unlimited borrowing from the Swedish National Debt Office, which guarantees that EKN can fulfil its commitments.

The 2007 result of SEK 1.8 billion is at the same level as the previous year’s result. The main reasons for the result are extremely low losses, reduced provisions, recoveries being larger than expected, and the return on capital. These are by and large the same reasons as behind last year’s result.

EKN’s annual accounts are subject to risk, and are greatly affected by changes in risk in our exposure, and changes in the net value of claims. The result is positively affected by risk provisions that are reversed because the risks in the transaction have ceased, and negatively affected by risk provisions that are increased because the risks in the transaction have increased. The result is positively affected by recoveries being greater than expected, and negatively by losses in a transaction being greater than the risk provision for it. In addition to this, the result is affected by interest on liquid assets.

Premium income has a positive effect on the result, but premiums are always linked to risk-taking in a transaction, which affects the result in a negative direction. The two items, premiums and risks, partly cancel each other out in a transaction.

Recoveries can have a large positive effect on the result if they are larger than expected, but if they are in line with expectations the result is not affected. In the same way, writing off a loss may have no effect whatsoever on the result, if the claim has already been valued at zero.

Premiums

Net premium income for the year was SEK 515 million, compared to SEK 1,120 million in 2006. The difference is mainly due to the previous year’s premium income for one single very large transaction. During the year, several large transactions were also paid off early, and premiums for the remaining risk period were repaid. Following the repayment of premiums, these risks were removed from our exposure.

Reduction in the provision

The fixed exposure, defined as outstanding commitments, guarantees falling due in problem transactions, notified delays in payment, and binding offers, amounted to SEK 95.8 billion at the year-end (SEK 97.7 billion in 2006). Total provisions for risks in our exposure amounted to SEK 8.0 billion (SEK 8.5 billion in 2006). This is equivalent to 8.3% of the fixed exposure, compared to 8.6% at the previous year end, and 10.1% in the year before that.

There are several reasons for the reduction in provisions. The average risk period for the whole exposure became in total somewhat shorter. The provisions for the large transactions paid off early during the year have been reversed. An improvement in the risks in several large transactions, and the upgrading of a number of countries, except for Iran, led to a reduced need for provisions. EKN reinsures a proportion of its risks, and in all this means that the provisions could be reduced by SEK 1.3 billion.

Low level of losses

The year’s relatively low amounts of indemnifications and loss prevention costs of SEK 32 million (43 million in 2006) mean that almost none of the provisions set aside to cover expected losses needed to be utilised.

Recoveries that exceed expectations

Recoveries amounted to SEK 925 million during the year – once again a larger than expected amount, which exceeded the book values. Claims amounted to a nominal SEK 6.9 billion at the year-end, a reduction of SEK 1.4 billion. The change was due to the large recoveries and write-offs. The valuation of claims reflects the expected recoveries over time. The claim value fell to SEK 1.4 billion, a reduction of SEK 0.5 billion.

Asset management

The large liquid assets and holdings of securities increased by SEK 1.3 billion, to a year-end total of SEK 14.6 billion. During the year, a contract was drawn up with the Legal, Financial and Administrative Services Agency for the management of a third of the liquid assets. Other assets in SEK are invested with the Swedish National Debt Office with maturities up to five years. Foreign currencies, primarily US dollars and euro, are invested in cash deposits in Swedish commercial banks, and in bonds with maturities up to three years. Interest income from asset management amounted during the year to SEK 469 million, representing a quarter of the result for the year.

Premiums

Premiums are charged once a guarantee has been issued. For investment and counter guarantees, premiums are charged at regular intervals. As a result, the income statement has been supplemented with estimated premiums for these guarantee types, and for binding offers. These items are included in the balance sheet under the heading ‘Receivables from guarantee holders’. For premiums in arrears, the premiums are charged as payments fall due under the guaranteed credit. The nominal premium in arrears claim, after adjustment for present value and risk, is carried as an asset under Receivables from guarantee holders. Newly recorded premiums in arrears and any claims in previously recorded premiums in arrears are reported as premium income. Periodising the present value adjustment, plus any changes in discount rates, is reported under other interest income.

Valuation of exposure

EKN’s fixed exposure is defined as outstanding guarantees, newly due amounts in problem transactions, notified postponements and binding offers. The currency for part of the long-term exposure remains undetermined at the date of contract and is thus booked in SEK.

The risk valuation of outstanding exposure is based on the premium level for risks with corresponding time to maturity at the time of valuation. A deduction is made from that part of the premium estimated to equal the administration costs. For major commercial risks a follow-up of the development of the project or the company is conducted, as well as of the premium assessed at the time of evaluation to reflect the remaining risk. These valuations result in an estimated expected risk of exposure loss under normal circumstances. In the event that part of the exposure has been reinsured, the risk for the re-insurer is estimated (see also note 2).

As a large part of EKN’s exposure is concentrated on a limited number of countries, losses in these particular countries can produce an outcome considerably more negative than normally expected. Thus special provision is made for unexpected loss in the exposure. The estimate is made on the basis of a fixed degree of security of 95%. The previously used term ’risk concentration’ is now called ’unexpected loss’.

Valuation of indemnified claims

The definition of outstanding claims is based on the indemnification amounts paid out by EKN. Deduction is made for amounts recovered or written off. Capitalised moratorium interest, overdue moratorium interest and accrued moratorium interest not yet due are added. Demands for penalty interest are not added to claims until the amount of the claim is agreed with the debtor.

Large commercial claims are investigated and valued from case to case. Valuation of claims is made in phased 5% steps. For claims against countries, the assessment is based on the country’s debt burden, its level of income, plus the extent to which it has managed its debt payments. This assessment is supplemented with details on general risk level for the country and the term of EKN’s outstanding claim. Other supplementary details used may be, for example, the prospects for claim sales or debt write-downs.
As with exposure, a specific reduction is made on the claim value taking into account the fact that most claims are also concentrated on a limited number of countries with a view to ensuring a 95% probability that the stated claim value will be realised.

Other valuations

Valuation of assets and liabilities in foreign currency is based on closing day rate. Valuation of other assets and liabilities, plus accruals and deferrals of income and expenses, has been made according to normal accounting principles.

Other

By long-term investments is meant investments with an original term exceeding one year. This is in accordance with Chapter 5 Section 1 of the Annual Reports and Budget Information Ordinance (SFS 2000:605).
Computers and other computer equipment are written off over 3 years. Other office furniture and fittings are written off over 5 years.

The Swedish National Financial Management Authority has in a decision dated 11 February 2003 given EKN exemption from the terms in the Annual Reports and Budget Information Ordinance (SFS 2000:605) regarding the form of the income statement, the balance sheet and the statement of source and application of funds.

In accordance with the Terms of Reference for 2007, EKN is exempted from Section 23 of the Capital Procurement Ordinance (SFS 1996:1188).

Amounts in SEK thousands		2007	2006
Profit /loss for the year		1,755,112	1,786,589
Operating income and expenses
Premiums:
Premium income	Note 1	406,369	1,591,448
Change in estimated premiums for investment guarantees and counter-guarantees		-10,450	-16,342
Change in estimated premiums for binding offers		182,186	-80,732
Premium income from reinsurance		31,063	90,479
Premium cost for reinsurance		-94,594	-464,184
Net premium income		514,574	1,120,669
Change in technical reserves for estimated risk in exposure, gross	Note 2	328,000	-768,000
Reinsurer’s share of change in technical reserves for estimated risk in exposure	Note 2	130,000	1,080,000
Change in technical reserves for estimated risk in exposure, net	Note 2	458,000	312,000
Recoveries:
Capital	Note 3	724,594	1,285,312
Total capitalised interest	Note 3	248,458	143,602
Interest	Note 3	214,013	145,491
Undistributed recoveries	Note 3	-262,157	141,061
Total recovered claims	Note 3	924,908	1,715,466
Other recovery costs		-2,519	-10,014
Net recovery income		922,389	1,705,452
Indemnifications:
Indemnification payments		-11,616	-27,013
Loss prevention lease		-20,434	-14,239
Loss prevention measures		-269	-2,117
Total indemnifications		-32,319	-43,369
Called excess		-37,173	-109,837
Compensation for debt relief		36,268	265,806
Change in estimated net value of indemnified claims	Note 4	-520,000	-1,201,000
Other operating expenses	Note 5	-6,104	-6,054
Running expenses:
Administrative expenses	Note 6	-116,674	-106,619
Depreciation of equipment	Note 6	-1,270	-1,334
Administrative income	Note 6	182	1,915
Total running expenses	Note 6	-117,762	-106,038
Operating profit/loss		1,217,873	1,937,629
Financial income and expenses

Interest income on treasury management		469,402	350,492
Other interest income		98,754	47,817
Interest expenses, loans		-82	-60
Other interest expenses		-26,479	2,404
External expenses for treasury management		-1,640	-260
Exchange rate differences, assets and liabilities	Note 7	-2,716	-551,433
Total financial items		537,239	-151,040

Amounts in SEK thousands		2007	2006
Assets
Tangible fixed assets
Computers and other equipment	Note 8	2,011	1,908
Financial fixed assets
Estimated net value of indemnified claims	Note 4	1,393,000	1,913,000
Pension funds	Note 9	21,904	23,302
Other long-term holdings of securities	Note 10	10,217,045	9,833,508
Reinsurer’s share of technical reserves
Technical reserves for estimated risk in exposure	Note 2	1,304,000	1,174,000
Receivables
Receivables from guarantee holders	Note 11	1,606,935	1,218,020
Receivables, Sida and the Baltic Framework		0	107
Other receivables		1,371	1,026
Total receivables		1,608,306	1,219,153
Accruals and deferrals
Prepaid expenses	Note 12	2,541	2,319
Accrued income	Note 12	147,838	149,798
Total accruals and deferrals		150,379	152,117
Short-term investments
Deposits and securities	Note 13	1,187,152	1,117,297
Cash and bank balances
National Debt Office	Note 13	3,084,881	1,743,326
Liquid assets	Note 13	96,627	614,498
Total cash and bank balances		3,181,508	2,357,824
Total assets		19,065,305	17,792,109
Capital and liabilities
Agency capital
Profit brought forward		7,616,820	5,830,231
Profit for the year		1,755,112	1,786,589
Total agency capital		9,371,932	7,616,820
Provisions
Technical reserves for estimated risk in exposure	Note 2	9,277,000	9,605,000
Pension provision	Note 9	21,904	23,302
Liabilities
Loan for fixed assets, Swedish National Debt Office	Note 14	2,108	2,781
Payable to guarantee holders		15,668	77,695
Liability to Sida and the Baltic Framework		9,988	114,612
Accounts payable		3,223	2,761
Other liabilities		358,101	343,825
Total liabilities		389,088	541,674
Accruals and deferrals
Accrued expenses	Note 12	5,381	5,148
Prepaid income	Note 12	0	165
Total accruals and deferrals		5,381	5,313
Total capital and liabilities		19,065,305	17,792,109
Assets pledged		none	none

Contingent liabilities: Contingent liabilities consist of guarantee commitments issued in operations and sureties given, as included in the exposure referred to in the tables.

Amounts in SEK thousands	2007	2006
Change in liquid assets	893,539	-112,428
Liquid assets, opening balance	3,475,121	3,587,549
Liquid assets, closing balance	4,368,660	3,475,121
Operations for the year
Net result for the year	1,755,112	1,786,589
Depreciation charged against earnings	1,270	1,334
Change in short-term receivables	-387,415	-513,710
Change in short-term liabilities	-151,845	344,046
Cash flow from year’s operations	1,217,122	1,618,259
Investment activities
Investments in equipment and computer hardware	-1,373	-889
Change in estimated net value of indemnified claims	520,000	1,201,000
Change in pension funds	1,398	6
Change in other securities held as fixed assets	-383,537	-2,619,238
Total investment activities	136,488	-1,419,121
Remaining after net investments	1,353,610	199,138
Financing activities
Change in technical reserves for estimated risk in exposure	-458,000	-312,000
Change in pension provision	-1,398	-6
Change of liability for repayment of interest	0	0
Total financing activities	-460,071	-311,566

Liquid assets are defined as Short-term Investments plus Cash and bank balances.

All amounts in SEK thousands.

Note 1. Premium income

	2007	2006
Premium income, gross	397,946	770,024
Premium refunds	-214,021	-75,455
Premium repayments	-244	-9,639
Other premium-related costs	-93	-67
Premium income, net	183,588	684,863
Changes to claims relating to premiums in arrears, nominal	226,923	1,489,461
Changes to claims relating to premiums in arrears, adjusted for present value	-16,003	-415,720
Changes to claims relating to premiums in arrears, risk adjustment	11,861	-167,156
Changes to claims relating to premiums in arrears, net	222,781	906,585
Total premium income	406,369	1,591,448

Note 2. Technical reserves for estimated risk in exposure

Provisions for actuarially calculated risk of the exposure: gross (before re-insurance)

	Provision for expected losses	Provision for unexpected losses	Total provision
OB 2006	-3,782,000	-5,055,000	-8,837,000
Change during the year	-338,000	-430,000	-768,000
CB 2006 / OB 2007	-4,120,000	-5,485,000	-9,605,000
Change during the year	255,000	73,000	328,000
CB 2007	-3,865,000	-5,412,000	-9,277,000

Reinsurer’s share of provisions for actuarially calculated risk in the exposure:

	Provision for expected losses	Provision for unexpected losses	Total provision
OB 2006	52,000	42,000	94,000
Change during the year	435,000	645,000	1,080,000
CB 2006 / OB 2007	487,000	687,000	1,174,000
Change during the year	31,000	99,000	130,000
CB 2007	518,000	786,000	1,304,000

Provisions for actuarially calculated risk in the exposure: net (after re-insurance):

	Provision for expected losses	Provision for unexpected losses	Total provision
OB 2006	-3,730,000	-5,013,000	-8,743,000
Change during the year	97,000	215,000	312,000
CB 2006 / OB 2007	-3,633,000	-4,798,000	-8,431,000
Change during the year	286,000	172,000	458,000
CB 2007	-3,347,000	-4,626,000	-7,973,000

Note 3. Recoveries

Recoveries with agreed due dates up to and including the closing date are stated as income for the year. As of the closing date, recovered claims of SEK 60,780 thousand had been received, and were still to be allocated. Of this total, some 80%, or SEK 48,624 thousand was stated as income without specific allocation. The remaining 20% has been stated as a liability to guarantee-holders. In the previous year, a sum of SEK 310,781 thousand was stated without specific allocation. The net difference between the amounts without specific allocation in 2007 and 2006 (SEK -262,157 thousand) is included in the result for the year.

	2007	2006
Principal, own insurance	720,110	1,284,105
Principal, from re-insurers	7,535	6,991
Principal, re-insurers’ share	-3,051	-5,784
Total principal	724,594	1,285,312
Capitalised interest, own insurance	248,283	143,339
Capitalised interest, from re-insurers	306	263
Capitalised interest, re-insurers’ share	-131	0
Total capitalised interest	248,458	143,602
Interest, own insurance	216,416	149,937
Interest, from re-insurers	2,797	2,302
Interest, re-insurers’ share	-5,200	-6,748
Total interest	214,013	145,491
Recovered claims without specific allocation	-262,157	141,061
Total recovered claims	924,908	1,715,466

Note 4. Actuarially calculated net value of claims

	Gross value	Provision for expected losses	Provision for unexpected losses	Net value
OB 2006	10,573,000	-7,319,000	-140,000	3,114,000
Change during the year	-2,309,000	1,105,000	3,000	-1,201,000
CB 2006 / OB 2007	8,264,000	-6,214,000	-137,000	1,913,000
Change during the year	-1,397,000	864,000	13,000	-520,000
CB 2007	6,867,000	-5,350,000	-124,000	1,393,000

Note 5. Other operating costs

	2007	2006
Total	-6,104	-6,054
Premiums PA91 and PA03	-7,502	-6,060
Change in pension provision	1,398	6

Note 6. Operating costs

	2007	2006
Personnel costs	-78,708	-69,191
Cost of premises	-11,079	-14,664
Other operating costs	-26,887	-22,764
Depreciation	-1,270	-1,334
Administrative compensation	182	1,915
Total operating costs	-117,762	-106,038

A sum of SEK 135,000 in taxable remuneration was paid to the chairman. SEK 107,500 was paid to the first deputy chairman and SEK 83,250 to the second deputy chairman. SEK 75,000 each was paid to Kristina Alsér and Wilhelm Alstermark. Anna-Karin Jatko received SEK 71,666. Yvonne Gustafsson received SEK 55,000, Christian de Filippi received 27,500 up to 30 June, and Andreas Skinnars and Teppo Tauriainen were each paid SEK 27,500.

Karin Apelman, Director General, was paid remuneration of SEK 981,012, and the retiring Director General, Olof Rydh, was paid SEK 246,574. No remuneration was paid to Karin Apelman or Olof Rydh in their capacity as board members.

No other benefits or future commitments have been agreed in favour of any members of the EKN board or its Director General.

Members of EKN’s Board held the following positions as members of the boards of other state authorities or companies.

Lennart Nilsson, chairman of AP Real Estate, member of The Swedish Financial Supervisory Authority. Göran Johnsson, chairman of Unionkonsult, member of Swedbank, Elanders, The Swedish Television, IQ-Initiativet, The Fourth Swedish National Pension Fund, Swedish Foundation for Strategic Research and Umeå University Karin Apelman, member of SEK. Kristina Alsér, member of Swentec, Globalisation Council and Kalmar University. Yvonne Gustafsson, chairman of The National Government Employee Pension Board, chairman of The Swedish Nuclear Waste Fund, member of BAE Systems AB, The Swedish National Defence College and ESO. Wilhelm Alstermark, Ulla Holm, Andreas Skinnars, Teppo Tauriainen and Anna-Karin Jatko had no other board positions.

Note 7. Currency fluctuations

	2007	2006
Realised currency gains/losses on assets	10,775	-127,763
Realised currency gains/losses on liabilities	0	-1
Unrealised currency gains/losses on assets	-51,064	-485,382
Unrealised currency gains/losses on liabilities	37,573	61,713
Total	-2,716	-551,433

Not 8. Computers and other equipment

	2007		2006
	Acquisition value	Accumulated depreciation	Acquisition value	Accumulated depreciation
Net value stated in balance sheet	2,011		1,908
Opening balance	21,939	-20,031	21,050	-18,697
Acquisitions during the year	1,373	0	889	0
Depreciation for the year	0	-1,270	0	-1,334
Closing balance	23,312	-21,301	21,939	-20,031

Note 9. Pension funds and provisions for pension liabilities

Pension funds amounting to SEK 21,904 thousand have been funded with the Swedish National Debt Office for future pension payments and corresponded to pension provisions. Pension provisions refer to previous employees who as of 31 Dec 2003 received a retirement pension.

Note 10. Other long-term holdings of securities

The breakdown of EKN’s other long-term holdings of securities was as follows:

	2007		2006
Currency	Amount in currency thousand	Equivalent value in SEK 000s	Amount in currency thousand	Equivalent value in SEK 000s
Total		10,217,045		9,833,508
SEK	7,500,000	7,500,000	7,500,000	7,500,000
USD	240,882	1,551,278	260,090	1,779,015
EUR	123,361	1,165,767	61,406	554,493

As at 31 Dec 2007, EKN’s other long-term holdings of securities consisted of fixed interest investments in SEK with the Swedish National Debt Office [RGK], for a fixed duration of up to five years to an amount of SEK 7,500,000 thousand; foreign exchange deposits in USD at Swedish commercial banks with a duration of up to two years to an amount equivalent to SEK 257,600 thousand; bonds in USD issued by Swedish and European banks as well as Swedish State-owned companies with a duration of up to four years to an amount equivalent to SEK 1,293,678 thousand; foreign exchange deposits in EUR at Swedish commercial banks with a duration of up to three years to an amount equivalent to SEK 274,050 thousand; plus bonds in EUR issued by Swedish and European commercial banks and Swedish State-owned companies, with a duration of up to four years to an amount equivalent to SEK 891,717 thousand.

Note 11. Receivables from guarantee holders

	2007	2006
Total receivables from guarantee-holders	1,606,935	1,218,020
Debited premiums owing	12,729	112,258
Premiums relating to binding offers	369,577	187,391
Investment guarantee premiums	0	2,709
Counter-guarantee premiums	1,336	9,077
Total receivables from guarantee holders, advance payments	383,642	311,435
Premiums in arrears, nominal	1,716,384	1,489,461
Premiums in arrears, change in capitalized value	-337,796	-415,720
Premiums in arrears, adjusted for risk	-155,295	-167,156
Total receivables from guarantee-holders, payments in arrears	1,223,293	906,585

Note 12. Accruals and deferrals

Prepaid costs and accrued income consisted of the following:

	2007	2006
Accrued interest income on investments at fixed rates of interest	147,838	149,788
Prepaid rent for first quarter of coming year	2,457	2,319
Other	84	10
Total	150,379	152,117
Accrued costs and deferred income consisted of the following:
Interest compensation to guarantee holders for recoveries without specific allocation	1,592	1,541
Accrued vacation and overtime pay	3,554	3,607
Other	235	165
Total	5,381	5,313

Note 13. Short-term investments, plus cash and bank balances

The breakdown of the EKN’s liquid funds and securities by currency was as follows:

	2007		2006
Currency	Amount in currency thousand	Equivalent value in SEK 000s	Amount in currency thousand	Equivalent value in SEK 000s
Total		4,368,660		3,475,121
SEK	3,113,702	3,113,702	2,157,618	2,157,618
USD	171,865	1,106,814	56,073	383,538
EUR	6,379	60,280	93,938	848,257
CHF	2,838	16,121	2,590	14,553
JPY	1,195,716	71,743	1,185,914	71,155

As at 31 Dec 2007, EKN’s liquid funds consisted of bank deposits in SEK of SEK 3,113,702 thousand, of which SEK 3,084,881 thousand were placed in interest-bearing accounts at the Swedish National Debt Office (RGK), and SEK 28,821 thousand was invested in the Swedish commercial banks. Foreign currency bank deposits amounted to the equivalent of SEK 67,806 thousand. Investments at fixed rates of interest in foreign currencies consisted of currency deposits at Swedish commercial banks, plus bonds issued by Swedish banks with a duration of up to one year at a value equivalent to SEK 1,187,152 thousand.

Note 14. Loans for fixed assets, Swedish National Debt Office RGK

EKN’s loan limit for fixed assets equalled SEK 6,500 thousand at 31 Dec 2007

	2007	2006
Closing liability	2,108	2,781
Opening liability	2,781	2,341
Amount of loan	600	500
Amortisation payments	-1,273	-60

	2007		2006		2005
	SEK m	number	SEK m	numberl	SEK m	number
Issued during the year:
Offers
Guarantees to exporters:
Loss on claim	10,990	801	7,206	775	5,100	632
Loss on production/ Loss on claim	1,972	40	4,194	45	3,911	38
Guarantees to lenders	23,671	76	23,814	65	20,063	55
Total	36,633		35,214		29,074
Guarantees for physical loss	-	-	-	-	-	-
Guarantees for unfair calling	2,021	22	2,086	22	4,077	17
Counter guarantee	3,878	131	11,859	112	2,838	110
Letter of credit guarantee	1,634	262	1,559	194	2,756	243
Guarantee for bill of exchange	915	14	88	10	-	-
Working capital guarantee	588	41	45	7	-	-
Investment guarantee	-	-	-	-	-	-
Total	45,669	1,387	50,851	1,230	38,745	1,095
Guarantees
Guarantees to exporters:
Loss on claim	6,023	1,890	5,756	1,665	3,539	1,351
Loss on production / Loss on claim	1,021	21	2,363	23	1,377	14
Guarantees to lenders	11,337	103	25,245	90	16,777	85
Total	18,381		33,364		21,693
Guarantees for physical loss	-	-	-	-	-	-
Guarantees for unfair calling	194	19	2,473	19	144	11
Counter guarantee	3,472	131	2,293	107	2,628	105
Letter of credit guarantee	1,663	260	1,396	189	2,739	242
Guarantee for bill of exchange	54	12	20	6	-	-
Working capital guarantee	179	34	9	2	-	-
Investment guarantee	-	-	-	-	-	-
Total	23,943	2,470	39,555	2,101	27,204	1,808

	2007		2006		2005
	SEK m	number	SEK m	number	SEK m	number
Outstanding at year-end:
Offers
Guarantees to exporters:
Loss on claim	8,563	706	5,511	735	3,380	474
Loss on production / Loss on claim	2,504	18	2,466	23	3,631	26
Guarantees to lenders	37,361	68	35,006	61	42,951	49
Total	48,428		42,983		49,962
Guarantee for physical loss	-	-	-	-	-	-
Guarantee for unfair calling	2,646	7	1,092	6	1,640	4
Counter guarantee	16,624	41	15,489	40	11,607	20
Letter of credit guarantee	7	3	36	3	109	2
Guarantee for bill of exchange	845	16	61	7	-	-
Working capital guarantee	431	9	36	5	-	-
Investment guarantee	-	-	-	-	-	-
Total	68,981	868	59,697	880	63,318	575
Guarantees
Guarantees to exporters:
Loss on claim	4,881	1,310	4,178	1,232	2,393	879
Loss on production / Loss on claim	2,382	38	3,037	36	4,251	33
Guarantees to lenders	68,634	364	71,797	346	65,141	373
Total	75,897		79,012		71,785
Guarantee for physical loss	-	-	-	-	12	1
Guarantee for unfair calling	2,179	24	2,300	16	230	11
Counter guarantee	7,478	159	7,157	133	5,747	116
Letter of credit guarantee	1,129	132	847	116	2,600	82
Guarantee for bill of exchange	8	3	17	4	-	-
Working capital credit guarantee	189	34	9	2	-	-
Investment guarantee	-	-	128	1	133	1
SLV guarantee	1,981	42	2,106	42	2,438	42
Total	88,861	2,106	91,576	1,928	82,945	1,538

	31 Dec 2007	31 Dec 2006	31 Dec 2005
Relates to guarantee amounts in SEK million.
Export credit guarantees
Maximum amount of liability permitted by Parliament	200,000	200,000	200,000
Amount authorised by the Government to EKN	175,000	175,000	175,000
Outstanding guarantee commitments	129,110	126,217	117,558
Investment guarantees
Maximum amount of liability permitted by Parliament	10,000	10,000	10,000
Amount authorised by the Government to EKN	10,000	10,000	10,000
Outstanding guarantee commitments (guarantees and offers)	0	128	133

The above utilisation of statutory limits set by the Parliament and the Government includes 100% of guarantees and binding offers, and 50% of non-binding offers of the corresponding amount. Claim on losses are not included in utilisation limits set.

Limits for EKN

Parliament decides on a limit for the guarantees to which EKN may commit the Swedish state. The government then mandates EKN to use up to a certain amount within the limit. The total value of guarantees and binding offers is then netted off against the limit. Offers are netted off against the limit at 50% of their amounts. The limit set by Parliament for export credit guarantees amounts to SEK 200 billion. At the end of 2007, EKN’s mandate from the government amounted to SEK 175 billion. At the end of the year, EKN had utilised SEK 129 billion of its limit. The amount utilised at the end of the previous year was SEK 126 billion. There is a special limit of SEK 10 billion for investment guarantees. At the year-end, it had not been used at all.

	2007	2006	2005	2004	2003
Compilation of material information pursuant to Chapter 2 Section 4 of the Ordinance concerning the Annual Reports and Budget .
SEK million
Loan limit at the National Debt Office for indemnifications, granted	Unlimited	Unlimited	Unlimited	Unlimited	Unlimited
Loan limit at the National Debt Office for indemnifications, utilised	0	0	0	0	0
Loan limit at the National Debt Office for fixed assets, granted	6.5	6.5	6.5	5.5	5.5
Loan limit at the National Debt Office for fixed assets, utilised	2.1	2.8	2.3	2.2	4.8
Future obligations = outstanding guarantees	88,900	91,576	82,945	69,033	71,420
Premium income	422	1,591	775	627	410
Net result for the year	1,755	1,784	1,925	767	2,283
Profit brought forward	7,617	5,830	3,905	3,138	854
	2007	2006	2005	2004	2003
Number of annual work units	101	95	95	95	87
Average number of employees	114	109	111	113	102
Operating expenses per annual work unit , in SEK 000s	1,168	1,136	1,110	984	1,080

EKN reports information that is applicable to its operations.

The Swedish National Audit Office has examined EKN’s annual report for the 2007 fiscal year as adopted on 15 February 2008.

The Executive management of the agency is responsible for the efficient and statutorily correct conduct of the activities. This responsibility includes submitting to the government a reliable report on the activities covered by the annual report.

It is the Swedish National Audit Office’s responsibility to examine the agency’s annual report in accordance with generally accepted auditing standards with the object of assessing the reliability of the accounts and the correctness of the accounting records, and to examine whether the Executive management’s administration conforms to applicable instructions and specific government decisions.

Our audit has been performed in accordance with generally accepted auditing standards. This means that it was planned and performed with the object of obtaining a reasonable basis for assessing the accuracy of the annual report. The audit thus involved examining a sample of the material transactions and administrative decisions.

The audit provides reasonable grounds for the statements below.

The annual report is made up in accordance with the ordinance relating to the annual reports and budget documentation of government agencies, annual budget approval documents and other decisions relating to the agency.

The Swedish National Audit Office considers that the annual report provides a true and fair picture in all essentials.

Leif Lundin (auditor director) had right of decision in this case. Annika Flygare (auditor director) was appointed to present the report.

Leif Lundin

Annika Flygare

Chairman
Director Lennart Nilsson, AP Real Estate
First Deputy Chairman
Former General Secretary Göran Johnsson, the Swedish Metal Workers Union
Second Deputy Chairman
Director Ulla Holm, Tetra Pak
Board member
County governor Kristina Alsér, Kronoberg
Board member
Director Wilhelm Alstermark
Board member
Director Anna-Karin Jatko, Ministry of Finance
Board member
Director General Yvonne Gustafsson, the Swedish National Financial Management Authority
Board member
Director Andreas Skinnars, the Swedish Trade Council
Board member
Ambassador Teppo Tauriainen, Ministry for Foreign Affairs
Board member
Director General Karin Apelman, EKN

Photo: Per Dahl

Helén Seemann, Head of Large corporates, Kerstin Bjellerup, Head of Compliance, Director General Karin Apelman, Gun Lidholm, Head of HR, Håkan Hindberg, Head of Finance, Hans Leijonhufvud, Head of IT, Gert Eriksson, Head of Small and medium sized enterprises, Deputy Director General Anne Abrahamson, Head of Planning and international co-operation, Beatrice Arnesson, Head of Communications.

Photo: Per Dahl

Highlights of the year

Key financial figures

Message from the Director General

Increasing number of companies are using us

Flow of business

EKN is ready to support increasing exports

Two business areas

Financial strength

Sustainable development

Business development

The Government’s objectives

The development of EKN’s mission

The world economy in recent years

New products and changes in the risk market

Guarantee issuing 2002 – 2007

Counter guarantees issuing 2002 – 2007

EKN’s exposure in countries that have increased or decreased in significance between 31 Dec 2002 and 31 Dec 2007

The situation at the year-end

Increased issue of guarantees for African countries

Globalisation and a new mandate

Guarantees issued during 2007, divided by industry

Guarantees issued during 2002, divided by industry

Small and medium-sized enterprises

Industries

Risk-sharing with banks

The ten largest countries for which offers were issued during 2007

Increased awareness of EKN

New customers

Collaboration with other export promoters

Guarantees for SMEs

Exports

Maritime know-how exported from Gothenburg

Research into better maritime solutions

Credit guarantees from EKN secure the claims

Swedish skincare exported

Own skincare programme

Credit guarantees from EKN allow faster expansion

Large corporates

Our role in developed markets

New and old markets

The ten largest countries for which offers were issued during 2007 for large companies

Countries, industries and guarantee types

Exports

Shared risks favour Volvo’s expansion in Brazil

Credits for resellers and customers

Favouring Swedish exports

Export company’s extended arm carries out transactions in all corners of the world

Market know-how and financing services

Long collaboration with EKN

Sustainable development

Cleantech companies

Environmental classification

Environmental classification category A and B

Combating corruption

Heavily Indebted Poor Countries

Recoveries and indemnifications

Almost no new indemnifications

Recoveries

New contracts

Compensation for debt relief

Indemnifications and recoveries in 2007

EKN’s exposure

Exposure split by type of risk

EKN’s total exposure, divided by type of risk

The 15 largest countries – outstanding guarantees and indemnified claims

Reduced risk concentration

Reinsurance

International cooperation

Revised environmental guidelines

Larger proportion of local costs

Berne Union to discuss mandate issues

Staff

Additional employees

Security policy

Objectives for skills provision

Age distribution at EKN

Proportion men and women

Sick leave in % of the group’s total normal working hours

Results and reserves

Premiums