2013
Contents
Year 2013 ... 4
Norvestia in brief ... 5
Managing Director’s review ... 6
Market review of industrial investments ... 8
Share capital and ownership structure ...10
Net Asset Value of the group ...11
Investments 31 December 2013 ... 12
Financial statements 2013
Report by the Board of Directors ...16Consolidated statement of comprehensive income ...19
Consolidated statement of financial position ... 20
Consolidated statement of cash flows ... 21
Consolidated statement of changes in shareholders’ equity ...22
Notes to the consolidated financial statements ...23
Key figures ... 34
Basis of calculation of key figures ...35
Parent’s income statement ... 36
Parent’s balance sheet...37
Parent’s cash flow statement ... 38
Notes to the parent’s financial statements ... 39
Proposal for distribution of profit...43
Auditor’s report ...45
Board of Directors and management ... 46
Norvestia Group’s corporate governance statement ... 48
Personnel ... 51
Norvestia is a publicly listed
investment company and by acquiring
its shares investors indirectly own a
comprehensive cross-section of the
Nordic economic landscape from
established blue chip firms to exciting
growth companies.
2013
Norvestia’s purpose is
to make professional
investment activities
accessible to all, on equal
terms, with the aim of
making a steady return.
Thanks to Norvestia’s
streamlined business
model, investors can
be sure that Norvestia’s
interests always match
their own.
Year 2013
The Net Asset Value (dividend-adjusted)
increased by 10.3% during the period (4.1%).
The amended Net Asset Value (dividend-adjusted)
increased by 10.7% during the period (4.8%).
The Net Asset Value per share was EUR 9.57 at year-end (8.97).
The amended Net Asset Value per share was EUR 9.67 at year-end (9.03).
The result for the period amounted to EUR 13.5 million (5.6).
The Board of Directors proposes that EUR 0.35 per share
Norvestia Oyj is a publicly listed investment
company. Norvestia Group mainly invests
in Nordic shares, equity funds, hedge funds,
bonds, in the money market and in industrial
investments.
The aim of Norvestia’s investment activities is
to achieve a good risk-adjusted return.
KEY FIGURES FOR THE GROUP 2013
Change in NAV, dividend-adjusted, EUR million ...13.8 Net earnings, EUR million...13.5 Shareholders’ equity, EUR million ...146.5 Equity ratio, % ... 94.9
KEY FIGURES PER SHARE 2013
Change in NAV, dividend-adjusted, EUR ... 0.90 Net earnings, EUR ... 0.88 Net Asset Value, EUR ... 9.57 Amended Net Asset Value, EUR ... 9.67 Shareholders’ equity, EUR ... 9.57
ANNUAL GENERAL MEETING
The Annual General Meeting will be held on Friday 21 March 2014 at 2 p.m. at Pörssisali, Fabianinkatu 14, Helsinki. Shareholders who wish to attend the Annual General Meeting are kindly requested to register no later than Tuesday 18 March 2014 by 4 p.m. either via email to [email protected], by phone +358 9 6226 380, by fax +358 9 6222 080 or by mail to the address Norvestia Oyj, Pohjois-esplanadi 35 E, 00100 Helsinki. Authorizations that allow an authorized representative to exercise the voting right of a share-holder at the Annual General Meeting are asked to be submitted to the company office before the deadline for registering to attend the meeting.
DIVIDEND
The dividend for 2013 will be paid out on 2 April 2014 for shares that are registered in the company’s register of shareholders on 26 March 2014.
INTERIM REPORTS ARE PUBLISHED 24 April 2014
17 July 2014 30 October 2014
Net Asset Value reports are published monthly. WWW.NORVESTIA.FI
The annual report and the interim reports are available in elec-tronic form in Finnish, Swedish and English on the company home page www.norvestia.fi. All press releases from the past year in Finnish and Swedish, as well as earlier releases, can also be found on the company home page.
A printed copy of the annual report can be ordered from the home page at the address www.norvestia.fi/order. It is possible to sign up for a continuous order of annual reports and interim reports at the same address. The request can also be made by phone +358 9 6226 380.
Last year in my Managing Director’s review I
predict-ed that the emergency state of the euro crisis would
become the new normal. This has indeed come to
pass. The euro crisis has churned on for four years
now and has become so normal that it no longer even
makes the headlines. However, its influence remains
pervasive.
tral Bank cannot lower rates much further. The problems of the Eurozone are so com-plex and structural that it is safe to forecast that they will remain unsolved in 2014. The low interest rate level funnels capital into investment targets with higher risks and better earnings expectations, such as shares, and increases their prices. The strong rise on the stock market in the last years has been due mainly to this. Previously Finland was held as a model country of the Eurozone. Unfortunately this is no longer the case. The Finnish economy now has its own problems which will not be solved by global economic growth alone. Finland’s economic growth has fallen short of expectations several times during recent years and the country is rapidly becoming more and more
Managing Director’s review
indebted. According to forecasts, private consumption will continue to decline this year. This means problems for many companies whose revenue comes largely from Finland.
The problems of the Finnish economy are mainly linked to structural changes which include the contraction of electronics and paper industries. Finland’s GDP is now ap-proximately 5% lower than at the beginning of the financial crisis in 2008. Currently the costs of the public sector in relation to GDP are too high and Finland is facing over-in-debtedness. According to the Bank of Fin-land, Finnish GDP will grow by 0.6% this year and by 1.7% next year. Such low growth will not solve the problem of indebtedness and so another solution to the problem must be found quickly. Bold declarations of policy must now be made, otherwise the debt of the Finnish state economy will rise to an unsustainable level.
NORVESTIA IN 2013
Norvestia has managed well during the past years of euro turbulence. 2013 was a good year for Norvestia. The comprehen-sive income for the year after expenses and taxes was EUR 13.8 million which corresponded to a 10.3% return on Net Asset Value. The result more than doubled compared to the previous year and devel-oped fairly evenly throughout the year. The best monthly yield, 2.6%, was reached in September and only fell for one month of the year in June, when Net Asset Value declined by 1.8%.
Norvestia’s investment portfolio yielded well during the year. The best returns came from shares, which rose along with the stock market. Fund investments and bonds also yielded well. Due to the low
O
n the capital markets the euro crisis mani-fests in, among others, record low interest rates which have remained low for years. The European Central Bank (ECB) has now been forced to press its key interest rate to its lowest level since the Euro project began. The interest rate was lowered twice in 2013 and it is currently at 0.25%. Such interest rates could be characterized as unhealthily low and point to the great difficulties currently faced in the Eurozone. Of particular concern is the lack of growth in the Eurozone despite the low interest rate level, now that theCen-400 350 300 250 200 150 100 50 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Performance of Net Asset Value and indices
Norvestia’s share price, dividend and issue-adjusted Norvestia’s NAV, dividend and issue-adjusted OMX Helsinki CAP Yield Index Bloomberg/EFFAS Bond Index, Finland
interest rate level, the yield of short-term interest investments was close to zero. Nokia’s convertible bond was the best sin-gle investment. Its value rose by approxi-mately 75% during the year. It is possible to convert the bond into Nokia shares if desired.
Norvestia’s industrial investment activities developed well during the period under review. Industrial investment activities met clearly the objectives set for them and we believe that the industrial investments in the current portfolio will continue to have good return potential in the coming years. It is also good to see that the cor-relation between returns on industrial in-vestments and other investment activities is low, which balances well the return on Norvestia’s Net Asset Value.
In 2013 trading in Norvestia shares picked up on the stock exchange. The share was traded over three times more than in the previous year. Trading volume was approximately 1.6 million shares which corresponds to more than 10% of the company’s entire stock of shares. Norvestia’s shareholders are typically long-term investors and they seldom trade in the company’s shares. It is important, however, that shareholders can easily and quickly, when desired, buy and sell Norvestia shares on the Helsinki stock exchange. The weekly blog on Norvestia’s home page entitled “Punainen muki” gained recognition and new readers in 2013. This time Norvestia’s Investment Barometer, which was released in September, tackled dividend taxation. The barometer received much attention and initiated discussion in the media. The already traditional morn-ing coffee at Café Strindberg for Norves-tia’s management and shareholders as well as investors was held on the first Tuesday
of each month. These coffee mornings will continue this year. Come and join us! OUTLOOK FOR 2014
This year the Eurozone will face a couple of tough tests. To begin with, the profitability of the banks in the Eurozone has remained weak and there is still a significant amount of poor quality loans on the banks’ balance sheets. The amount of bad loans on the banks’ books has indeed increased alarmingly in many euro countries. In the latter half of the year the object of the ECB’s stress tests is to clarify the banks’ actual financial status and any possible need for additional capitalization. The problem is that some member countries may be poorly prepared for possible recapitalization of the banks. To make matters worse, banks in Eurozone crisis countries have signifi-cant amounts of their own government’s bonds on their balance sheets. This would expose the banks’ investment portfolios to losses if the debt crisis of the euro countries escalates. This combination of nations and banks may in the worst case lead to a viscous and unpredictable circle.
Another test of the Eurozone will come in May when the European parliament elec-tions will be held and Europeans will have a chance to vent their frustrations regard-ing the current system. Austerity measures in many euro countries and worsening unemployment will probably push votes towards the anti-EU parties. If the centre-right European People’s Party and the European social democrats lose their positions as the two dominant parties of the European parliament, a political crisis may ensue. In this case the EU critical par-ties would actually have to present their alternatives to the current system. Despite all this turmoil it is likely that the euro system will ride out this year’s challenges
but the emergency state of the euro crisis will continue for some years yet.
Share prices have risen rather rapid-ly during the last couple of years. For example the value of the OMX Helsinki CAP Yield Index has already reached its all-time high. The outlook for companies’ results has not, however, improved in line with this climb in share prices. This means that the valuation multiples of shares have risen and they are actually already approaching record highs. Share prices are still supported by the record low inter-est rate level but at some point the high valuation levels of shares may cap the rise of share prices.
To all appearances then, it seems that the year 2014 on the stock exchange will be challenging and interesting. Large price movements on the markets are also pos-sible. These always come as a surprise but also bring new opportunities. Norvestia’s strength is that we can make our investment decisions quickly and efficiently change our allocation to correspond to our views on the market when needed. In the midst of instability, the only thing that we can promise with certainty is that Norvestia’s entire personnel will do its utmost to ensure that the return on the company’s investment activities is as good as possible also in 2014.
Juha Kasanen
Managing Director
Norvestia’s NAV, dividend-adjusted
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2000–2013 Return, p.a. 5.3% 5.4% 0.2% 7.2% 11.4% 26.5% 16.0% 6.0% -14.3% 14.2% 9.5% -7.6% 4.1% 10.3% 6.8% Volatility 5.0% 5.2% 4.6% 3.2% 4.3% 10.1% 6.4% 6.0% 7.8% 7.4% 5.6% 5.5% 5.3% 3.5% 6.3% Sharpe ratio 0.3 0.1 neg. 1.4 2.1 2.4 2.0 0.3 neg. 1.7 1.5 neg. 0.6 2.9 0.7
OMX Helsinki CAP Yield Index
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2000–2013 Return, p.a. -21.5% -18.2% -13.5% 22.7% 21.4% 34.5% 29.9% 8.1% -47.3% 45.5% 29.8% -24.9% 15.5% 31.6% 4.5% Volatility 12.5% 33.0% 22.1% 18.9% 10.2% 12.7% 14.2% 13.7% 23.4% 32.0% 17.8% 17.9% 17.0% 12.0% 20.5% Sharpe ratio neg. neg. neg. 1.1 1.9 2.5 1.9 0.3 neg. 1.4 1.6 neg. 0.9 2.6 0.1
WWW.NORVESTIA.FI/BLOGI
2013 was a good year for Norvestia’s industrial
investment portfolio. The yield of the portfolio was
over 25%, which comprised dividend and interest
yields and increases in the value of the portfolio
companies. The growth of the portfolio companies
was faster than that of the market and the
companies’ profitability remained strong.
N
orvestia’s subsidiary Norvestia Industries Oy handles industrial invest-ments, and acts as an active owner together with other owners and entrepreneurs. The object of industrial investment activities is to significantly increase the value of target companies through long-term ownership, which often lasts 4–7 years.Globally the amount and volume of corpo-rate buyouts in 2013 grew by approximately 5% which is, however, less than half of the amount of corporate buyouts executed in 2007. In Finland, corporate buyouts were at a fairly modest level in the period Q3/12– Q3/13. The amount of buyouts decreased by over 40% compared to the previous year and there was a considerable downturn vol-ume-wise as well. There are several reasons for this, the most important of which, the tightening of the terms of the most central element of corporate buyouts, that is debt financing, has slowed down the amount of buyouts the most.
Venture capital investments in growth companies, however, developed favorably last year. 2013 was the third consecutive year in which the amount of venture in-vestments grew in Finland. This trend will hopefully continue and is well illustrated by successful exits, of which the sale of 50% of the gaming company Supercell to
the Japanese SoftBank was the most signif-icant venture trade of the year in Finland. When it comes to arrangements, Norves-tia Industries executed one exit, one new investment and one follow-on investment in its portfolio during the period under review. In the last quarter of 2013 GSP Group Oy was exited. The company hadn’t developed according to original plans and Norvestia decided to withdraw from the company. A new investment was carried out in Aste Holding Oy and a follow-on in-vestment in an existing portfolio company Coronaria Hoitoketju Oy.
INVESTMENT STRATEGY
When evaluating new investments Norves-tia Industries utilizes a venture capital anal-ysis in which a target company’s long-term potential for value increase is emphasized. The assessments of the company manage-ment as well as the velocity of capital have a significant role in making investment decisions. Perhaps the most important criterion is, however, the management’s view on the direction in which the company will be developed. Co-operation between the investor and entrepreneurs often lasts for years and therefore plans for future development need to be agreed on in detail before investment decisions can be made. Norvestia’s strategy of acting as an active owner has proven constructive, and in the
future the company’s target is to increase the size of the industrial investment port-folio in a controlled manner. The object of Norvestia’s industrial investment activities is to significantly increase the value of tar-get companies and thus increase returns for Norvestia’s shareholders. Returns have accrued not only from increases in value but also from individual target companies in the portfolio paying dividends on strong results and interest payments when fund-ing has included debt instruments. Norvestia seeks as investment targets, companies which have productized service concepts or whose products offer explicit added value with solutions already tested in their respective markets. Two fast grow-ing areas that have emerged in Finland in the last few years are the gaming industry and environmental technologies. The majority of companies emerging in these areas (especially the gaming industry) are still however start-up companies and therefore not the kind of targets sought for direct investment by Norvestia. Norvestia is nevertheless involved in both these growth sectors through its partner Lifeline Ventures Oy.
PORTFOLIO COMPANIES Coronaria Hoitoketju Oy
In order to secure Coronaria’s fast growth the Board of the company decided to strengthen the company’s balance sheet
Market review of industrial investments
by organizing a directed share issue in the spring of 2013 to current owners and to one new investor, Suomen Teollisuussijoitus Oy. In doing so Coronaria raised approx-imately EUR 3 million of new capital. In addition to this, the company issued a EUR 1 million mezzanine loan so increas-ing Coronaria’s financial recourses by EUR 4 million.
Coronaria Hoitoketju’s business is divided into three business branches: health care, nursing and private day care services. The turnover of Coronaria Hoitoketju Group developed positively in 2013. The turnover of the group increased by 27% from the previous year to EUR 38.6 million. The company is profitable.
The market outlook for the company is strong and regardless of the fact that political decisions may have effects on the supply of private health care and nursing services, Norvestia expects the company’s competitive position to strengthen. This is also supported by the fact that Coronaria is a Finnish company and operates under the Key Flag Symbol. After the company’s pos-itive development and the new ownership arrangement we have adjusted Coronaria’s valuation to EUR 4.9 million. Norvestia’s ownership share of the group is 19.2%. Miltton Group Oy
Norvestia invested in the communications consultancy Miltton in July 2011 when the sales margin of the company from the period ended was approximately EUR 3.7 million. In 2013 the company’s sales margin was EUR 7.9 million, and the firm’s growth has evolved organically. Profit-ability has also remained high. Norvestia invested EUR 1.5 million in the company’s share capital. In addition EUR 1.8 million is invested in the company as a mezza-nine loan. Interests are paid on the loan quarterly and amortizations have begun.
The company started paying dividends in 2013. Norvestia’s ownership share of the company is 46.5%.
The market for communications con-sultancies has been challenging for the last three years and the total market has remained at the same level or even declined somewhat. Despite this Miltton has advanced quickly to become the lead-ing communications consultancy in the country. Its customers include a significant number of leading Finnish companies as well as several international brands. In the summer of 2013 Miltton opened an office in Singapore where Finnish companies are served on the growing markets of Asia. Polystar Instruments AB
The Swedish Polystar develops and mar-kets business intelligence software solu-tions to international teleoperators. The company has over a hundred customers globally and is one of the leading players in this market. The company’s revenue was SEK 283 million in the financial period ending April 2013, which represents the same level as in the previous year. Profit-ability improved substantially, however, and the company’s EBIT increased from SEK 4 million to over SEK 16 million. Nor-vestia’s ownership share of the company is 10.0%.
Aste Holding Oy
Norvestia invested in the media inte-grator Aste in September 2013. After the arrangement, Norvestia’s ownership share of the company is 40.0% and the found-ers of the company still own the majority share. Norvestia invested EUR 0.8 million in the company’s share capital and EUR 1.1 million as a mezzanine loan. Interests are paid on the loan annually.
Aste was founded in 2009 and has advanced quickly to become the leading
media integrator by offering technological platforms with the help of which com-munications materials can be produced efficiently and cost effectively as services to end customers. Aste’s know-how is to con-nect marketing with digital and printed media in a way that builds brands through all channels.
The company’s revenue was approximately EUR 5.6 million in 2013 with EBIT com-prising 16% of this. The company employs approximately 70 people. Aste aims to con-tinue the implementation of its strategy of strong profitability and moderate growth. PRIVATE EQUITY FUNDS
The content of the industrial investment portfolio is complemented by two private equity fund investments of which an early-stage fund administered by Lifeline Ventures Oy seeks new investment targets particularly in the gaming industry and in environmental technologies. The Amanda V East fund of funds administered by eQ’s private equity funds invests in the shares of large buyout funds operating in Russia and Eastern Europe. Norvestia has made a commitment to invest EUR 2 million in both funds which complement Norvestia’s industrial investment portfolio in fields in which Norvestia doesn’t invest directly itself. Norvestia operates on the advisory committees of both funds.
Juha Mikkola
Senior Investment Director
“Norvestia’s strategy of acting as an active
owner has proven constructive, and in the
future the company’s target is to increase
the size of the industrial investment
portfolio in a controlled manner.”
WWW.NORVESTIA.FI
The share capital of Norvestia Oyj amounted to EUR 53,607,960 on 31 December 2013. The share capital is divided into 900,000 A shares with ten votes each, and 14,416,560 B shares with one vote each, in total 15,316,560 shares (15,316,560). The shares have no nominal value. The ISIN code of the B shares is FI0009000160 and the A shares are unlisted.
Market capitalization of Norvestia Oyj’s listed shares amounted to EUR 101.6 million (89.5) on 31 December 2013. The ten largest sharehold-ers possessed 55.28% of shares (54.34%) and 70.73% of the total number of votes (70.13%). The membsharehold-ers of the Board and the Managing Director possessed 62,000 shares (36,000).
The average shareholding in Norvestia Oyj by private individuals was 1,218 shares (1,201). The corresponding amount for associations was 15,573 shares (15,236). The number of nominee registered shares amounted to 33.95% of the total number of shares (1.15%) and 56.80% of votes (0.75%). The shares owned by Kaupthing were nominee registered in 2013. The amount of shareholders amounted to 5,765 (5,833) on 31 December 2013.
Ten principal shareholders on 31 December 2013
Shareholder A series amount % amountB series % amount % of shares % of votesTotal Kaupthing hf. 900,000 100.00 4,113,976 28.54 5,013,976 32.74 56.00 Mandatum Henkivakuutusosakeyhtiö 1,789,538 12.41 1,789,538 11.68 7.64 Laakkonen Mikko 373,157 2.59 373,157 2.44 1.59 Laakkonen Hannu 319,457 2.22 319,457 2.09 1.36 Hartwall Capital Oy Ab 287,168 1.99 287,168 1.87 1.23 Keskinäinen Vakuutusyhtiö Kaleva 189,700 1.32 189,700 1.24 0.81 Immonen Jukka 162,424 1.13 162,424 1.06 0.69 Wild Cat Capital Ab 131,484 0.91 131,484 0.86 0.56 Pasanen Matti 109,215 0.76 109,215 0.71 0.47 Turpeinen Urho 90,000 0.62 90,000 0.59 0.38 900,000 100.00 7,566,119 52.49 8,466,119 55.28 70.73 Nominee registered 5,199,682 36.07 5,199,682 33.95 56.80
Shares and voting rights
Share series Votes/share sharesNo. of No. of votes
Share capital, EUR Series A 10 900,000 9,000,000 3,150,000 Series B 1 14,416,560 14,416,560 50,457,960 In total 15,316,560 23,416,560 53,607,960
Holdings by number of shares and owners
Shareholding of shares of votes of owners 1–100 0.4% 0.2% 18.0% 101–1,000 9.4% 6.2% 58.9% 1,001–5,000 15.2% 10.0% 19.1% 5,001–10,000 5.6% 3.6% 2.1% 10,001– 69.3% 79.9% 1.9% Not in the book-entry system 0.1% 0.1% -100.0% 100.0% 100.0%
Share capital and ownership structure
Breakdown of share capital
by owner groups 31 December 2013
Households 43.8%
Foreign shareholders 33.2%
Financial and insurance institutions 14.2%
Companies 6.7%
Non-profit organizations 1.9%
The public sector 0.1%
Net Asset Value of the group
EUR million 31/12/2013 31/12/2012 31/12/2011 31/12/2010 31/12/2009 Assets Non-current assets Intangible assets 0.0 0.0 0.1 0.1 -Tangible assets 0.0 0.0 0.0 0.0 0.0 Interests in associates 6.3 4.9 4.7 3.4 3.7 Loan receivables from associates 3.6 2.2 2.4 --Other investments 3.8 2.7 2.0 2.0 1.8
Deferred tax assets 5.5 8.4 7.4 5.8 6.9 Current assets
Shares held for trading 61.1 49.1 48.4 60.5 48.6 Other financial assets at fair value 58.5 61.9 50.8 56.6 43.2 Cash and receivables 15.5 17.2 26.5 36.0 51.9 Total assets 154.3 146.4 142.3 164.4 156.1 Current liabilities -1.4 -2.9 -1.4 -1.0 -0.9 Deferred tax liabilities -6.4 -6.1 -4.6 -8.2 -6.1 NET ASSET VALUE 146.5 137.4 136.3 155.2 149.1 AMENDED NET ASSET VALUE* 148.1 138.2 - - -Net Asset Value/share, EUR 9.57 8.97 8.90 10.13 9.73 Amended Net Asset Value/share, EUR* 9.67 9.03 - -
-Change in NAV, dividend-adjusted 2013 2012 2011 2010 2009
Change, EUR million 13.8 5.7 -11.3 13.7 18.6 Change per share, EUR 0.90 0.37 -0.73 0.90 1.21
* Due to a refinancing round, an external revaluation has been made of one of the associates, Coronaria Hoitoketju Oy, which has resulted in an appreciation in the value of industrial investments. According to IFRS, this type of appreciation of investments in associates cannot be booked because the associates are accounted for in Norvestia’s consolidated financial statements using the equity method.
Principles for calculation
Publicly listed shares, investment funds and derivative contracts have been measured at closing price. Where the closing price has been un-available, the purchase quotation has been used. Unlisted shares and units have been measured at fair value using various valuation methods.
180 160 140 120 100 80 60 40 20 0 2009 2010 2011 2012 2013
Group’s Net Asset Value
and market capitalization
Net Asset Value Market capitalization* EUR million 12 10 8 6 4 2 0 2009 2010 2011 2012 2013
Share price and Net Asset Value
per share
Net Asset Value Share price EUR
Number of
shares/units Acquisition priceEUR 1,000 EUR 1,000Fair value total investmentsShare of
NORVESTIA OYJ LISTED SHARES
Ahlstrom Corporation 53,455 596 444 0.3% Amer Sports Corporation 56,770 378 858 0.6%
Apetit Plc 74,294 914 1,445 1.1% Atria plc 147,672 1,575 1,142 0.9% Caverion Corporation 93,034 362 828 0.6% Elisa Corporation 131,556 2,160 2,534 1.9% Finnair plc 399,751 2,090 1,107 0.8% Fortum Corporation 309,681 4,793 5,150 3.9% HKScan Corporation A share 83,875 541 315 0.2% Honkarakenne Oyj 461,889 1,703 1,247 0.9%
Huhtamäki Oyj 86,409 552 1,612 1.2%
Kemira Group 128,409 1,334 1,561 1.2%
Kesko Corporation B share 71,775 1,878 1,924 1.4%
Konecranes plc 40,531 864 1,048 0.8%
Metso Corporation 57,753 1,826 1,791 1.3% Metsä Board Corporation B share 260,000 294 819 0.6%
Munksjö Oyj 14,165 30 76 0.1%
Neste Oil Corporation 165,367 2,048 2,376 1.8%
Nokia Corporation 42,527 119 248 0.2%
Nokian Tyres plc 24,701 371 861 0.6%
Oriola-KD Corporation B share 91,100 138 232 0.2% Orion Corporation B share 43,225 708 883 0.7%
Outokumpu Oyj 1,365,740 1,789 555 0.4%
Outotec Oyj 55,000 441 419 0.3%
Pohjola Bank plc A share 117,717 1,301 1,721 1.3%
Raisio plc V share 173,400 267 758 0.6%
Ramirent plc 72,897 260 667 0.5%
Rapala VMC Corporation 125,700 761 654 0.5% Rautaruukki Corporation K share 300,766 2,319 2,027 1.5% Sampo plc A share 65,464 1,749 2,338 1.8% Sanoma Corporation 122,070 1,262 779 0.6%
Sponda plc 652,657 2,184 2,232 1.7%
Stockmann plc B share 148,707 2,466 1,642 1.2% Stora Enso Oyj R share 335,533 1,617 2,448 1.8%
Tikkurila Oyj 81,311 1,284 1,618 1.2% UPM-Kymmene Corporation 316,752 2,953 3,890 2.9% Uponor Corporation 50,826 686 723 0.5% YIT Corporation 93,034 1,237 945 0.7% Nordea Bank AB FDR 492,638 4,398 4,784 3.6% Powershares QQQ 29,100 1,123 1,856 1.4%
SPDR S&P 500 ETF Trust 9,885 1,065 1,324 1.0%
TeliaSonera AB 190,000 685 1,143 0.9%
55,121 61,024 45.7%
FUNDS
Brummer & Partners Nektar 24,278 4,672 6,530 4.9% Brummer & Partners Zenit 796 517 5,172 3.9% Brummer & Partners Multi-Strategy Euro 18,360 3,500 3,665 2.8% Didner & Gerge Aktiefond 27,102 1,954 5,185 3.9%
eQ Hedge 1 K 84,324 1,000 959 0.7%
eQ Euro Investment Grade 1 K 22,121 3,047 4,238 3.2% eQ High Yield Bond 1 K 14,434 2,155 3,255 2.4%
Evli Eurooppa B 10,158 800 931 0.7%
Fondita European Top Picks 6,891 803 894 0.7% Fourton Hannibal A 14,482 1,000 1,742 1.3%
Futuris 8,699 1,035 3,212 2.4%
OP-Suomi Arvo A 5,218 384 1,023 0.8%
RAM One 27,117 2,341 3,771 2.8%
Russian Prosperity Fund Euro A 28,783 2,600 2,620 2.0% Taaleritehdas Arvo Markka 9,001 1,010 1,096 0.8%
VISIO Allocator 7,593 1,000 1,021 0.8%
27,818 45,314 34.1%
Number of
shares/units Acquisition priceEUR 1,000 EUR 1,000Fair value total investmentsShare of
DERIVATIVE CONTRACTS
Euro Stoxx put options (bought) 1,500 226 3 0.0% Fortum put options (sold) -1,000 0 32 0.0%
226 35 0.0%
BONDS nominal value
Ahlstrom, expires 2/10/2017 1,000 1,012 1,040 0.8% Finnair, expires 26/11/2016 1,400 1,449 1,512 1.1% Nokia, expires 26/10/2017 1,500 1,503 3,552 2.7% Pohjola Bank, expires 30/11/2015 1,000 930 940 0.7% Outokumpu, expires 24/6/2015 2,000 2,006 1,992 1.5% Sanoma, expires 20/3/2017 2,000 2,036 2,036 1.5% SEB, expires 31/3/2015 1,000 1,097 1,081 0.8% Svenska Handelsbanken, expires 16/12/2015 1,000 990 1,027 0.8%
11,023 13,180 9.9%
NORVESTIA OYJ IN TOTAL 94,188 119,553 89.7%
NORVESTIA INDUSTRIES OY
UNLISTED ASSOCIATED COMPANIES*
Aste Holding Oy 4,000 800 827 0.6%
Coronaria Hoitoketju Oy 35,307 3,112 3,406 2.6% Miltton Group Ltd 5,000 1,500 2,072 1.6%
Loans to associates 3,638 3,638 2.7%
9,050 9,943 7.5%
PRIVATE EQUITY FUNDS
Amanda V East KY 621 665 0.5%
Lifeline Ventures Fund I Ky 670 601 0.4% Lifeline Ventures Fund III Ky 72 72 0.1%
1,363 1,338 1.0%
NORVESTIA INDUSTRIES OY IN TOTAL 10,413 11,281 8.5%
NORVENTURES OY UNLISTED COMPANIES
Polystar Instruments AB 266,000 1,717 2,434 1.8%
NORVENTURES OY IN TOTAL 1,717 2,434 1.8%
NORVESTIA GROUP IN TOTAL 106,318 133,268 100.0%
The table does not include cash and cash equivalents of the group.
* The fair value of associated companies is presented as the consolidated balance value.
Geographic breakdown of Norvestia
Group’s investments 31 December 2013
Finland 60%
Other Nordic countries 17%
Other European countries 13%
Non-European countries 10%
Norvestia Group’s investments
31 December 2013
Listed shares 46% Industrial investments 10% Equity funds 10% Hedge funds 18% Bonds 16%2013
Financial statements 2013
Report by the Board of Directors ...16
Consolidated statement of comprehensive income ...19
Consolidated statement of financial position ... 20
Consolidated statement of cash flows ... 21
Consolidated statement of changes in shareholders’ equity ...22
Notes to the consolidated financial statements ...23
Key figures ...34
Basis of calculation of key figures ...35
Parent’s income statement ... 36
Parent’s balance sheet ...37
Parent’s cash flow statement ...38
Notes to the parent’s financial statements ... 39
CAPITAL MARKETS
2013 was the second consecutive good year for share investors with almost all of the world’s most important share indices yielding pos-itively. The OMX Helsinki CAP Yield Index rose by 31.6% to become one of the best yielding indices last year. The fortunes of the Helsin-ki stock exchange were to a large extent due to the price of NoHelsin-kia shares almost doubling, which accounted for approximately one third of the total increase in the yield index of the Helsinki stock ex-change in 2013.
Share prices rose at a steady pace on the Helsinki stock exchange, declining only in June. Following the 19 June announcement by the United States central bank (Fed) that it would gradually reduce its policy of quantitative easing, the stock market experienced a tempo-rary downturn before rebounding in July. Daily fluctuations in share prices were rather small in 2013. Various indices which measure the risk level of stock markets have shown falls in volatility for the last couple of years. At year-end the risk level or volatility of the Euro Stoxx 50 Index was about the same as it was in 2005–2007. During this period, before the culmination of the banking crisis, the volatility of stock markets was exceptionally low.
The biggest news on the Helsinki stock exchange in 2013 was the announcement by Nokia in September that it would sell its mobile phone business to Microsoft. Although the share price almost dou-bled after the announcement the closing price of EUR 5.80 was, however, only approximately 10% of the share’s peak level in 2000. For many long-term investors the development of Nokia’s share price has been a major disappointment.
The strong general increase in share prices has not been based so much on companies’ strong earnings development or on substantial-ly better earnings forecasts. The impressive increase in share prices has been mainly due to the unusual situation in the capital markets in which very low earnings expectations of low-risk investments have funneled assets into the stock markets, which has lifted share prices. This basic framework of the capital markets has remained unchanged for a couple of years now.
Global economic growth has fallen behind expectations for several years, with the growth of the Eurozone being particularly weak. This has forced central banks to engage in vigorous quantitative easing and it seems that this will have to continue this year. Quantitative easing has increased the amount of liquidity in the economy and has forced the interest rate levels of countries with good credit ratings to record lows. For example the interest rate level of German government short-term bonds has been close to zero for two years.
The following table illustrates the index trends on various exchanges in 2013:
Finland/OMX Helsinki Index 26.5% Finland/OMX Helsinki CAP Yield Index 31.6% Sweden/OMX Stockholm Index 23.2% Norway/OBX Index 22.7% Denmark/OMX Copenhagen Index 28.0%
USA/Nasdaq Composite Index 38.3% USA/S&P 500 Index 29.6% Bloomberg European 500 Index 17.1% MSCI World Index 24.1% Japan/Nikkei 225 Index 56.7% Norvestia’s share price (dividend-adjusted) 18.4% Norvestia’s Net Asset Value (dividend-adjusted) 10.3% Norvetia’s amended Net Asset Value (dividend-adjusted) 10.7%
NET ASSET VALUE AND SHARE PRICE
On 31 December 2013, Norvestia’s Net Asset Value stood at EUR 146.5 million or EUR 9.57 per share (EUR 137.4 million or EUR 8.97 per share at the end of 2012). Taking into account the dividend of EUR 0.30, which was distributed in March 2013, the company’s Net Asset Value increased by EUR 0.90 per share (0.37) in the year under review, equal to a 10.3% (4.1%) increase from the beginning of the year. In the last quarter, the increase in Net Asset Value amounted to EUR 0.25 per share (0.21).
Due to a refinancing round, an external revaluation has been made of one of the associates, Coronaria Hoitoketju Oy, which has resulted in an appreciation in the value of industrial investments. With this appre-ciation, the amended Net Asset Value amounted to EUR 148.1 million (138.2) on 31 December 2013, equal to a 10.7% increase (4.8%). In the last quarter, the amended Net Asset Value increased by 2.5 % (2.4%). According to IFRS, this type of appreciation of investments in asso-ciates cannot be booked because the assoasso-ciates are accounted for in Norvestia’s consolidated financial statements using the equity meth-od.
The price of Norvestia’s dividend-adjusted B share rose by 18.4% during the year. The price of the B share stood at EUR 7.05 (6.21) on 31 December 2013, corresponding to a discount in Net Asset Value of 26.3% (30.8%). The market capitalization of Norvestia’s B shares on 31 December 2013 was EUR 101.6 million (89.5).
GROUP RESULT
The result of the group in 2013 amounted to EUR 13.5 million (5.6/2012; -11.2/2011), and operating expenses to EUR 2.2 million (1.9/2012; 1.9/2011). The group’s operating expenses were 1.5% (1.4%/2012; 1.4%/2011) of Net Asset Value. The result for the last quarter was EUR 3.7 million (3.1/2012; 0.9/2011). The return on equity was 9.5% (4.1%) and the return on investment 11.2% (4.1%). Other key figures are presented on page 34.
LIQUIDITY AND SOLVENCY
Norvestia Group’s cash and cash equivalents totalled EUR 14.6 mil-lion at year-end (16.5/2012; 25.9/2011). The equity ratio stood at 94.9% (93.8%/2012; 95.8%/2011). The group’s shareholders’ equity totalled EUR 146.5 million (137.4/2012; 136.3/2011).
PERSONNEL
In 2013 Norvestia Group employed an average of 6 (6/2012, 6/2011) people. Personnel expenses were EUR 1.4 million (1.1/2012; 0.9/2011).
Report by the Board of Directors for
1 January–31 December 2013
NORVESTIA’S INVESTMENTS
The investment portfolio of Norvestia Group can be divided into five categories: listed shares and share funds, hedge funds, bonds, indus-trial investments and cash.
Norvestia’s investments excluding cash and other liquid assets were 90% (82%) of total assets at year-end. The market value breakdown of the investments was as follows:
EUR 2013 EUR 2012
million % million % Listed shares and share funds* 74.6 50.4 57.9 42.2 Industrial investments 13.7 9.3 9.8 7.1 Hedge funds 24.3 16.4 25.9 18.9 Bonds and bond funds 20.7 14.0 19.3 14.0 Cash and other liquid assets 14.6 9.9 24.4 17.8 In total 147.9 100.0 137.3 100.0 * of which share funds amounted to EUR 13.5 million (8.8).
80% of the group’s assets were in euros, 16% in Swedish krona, 3% in US dollars and 1% in other currencies.
The return of the company’s Net Asset Value during the year was, after expenses and taxes, 10.3% and was achieved with a monthly calculated volatility of 3.5%. At the same time the OMX Helsinki CAP Yield Index yielded 31.6% with a volatility of 12.0%.
The emphasis of the portfolio was changed during the year. The share of listed shares and share funds was increased and the share of cash was respectively decreased. Returns on listed share invest-ments, share funds, hedge funds and bonds were good in 2013. The biggest single profit was due to the increase in the value of Nokia shares and convertible bond.
Norvestia’s Net Asset Value fluctuated notably less month on month, than did the stock market in general. The company protected its in-vestments from time to time by selling Euro Stoxx Index forward contracts and by buying put options. Approximately half of the Swedish krona currency risk was hedged with a currency future.
INDUSTRIAL INVESTMENTS
Returns on industrial investments were good. In September, Norves-tia invested in the media production and consulting company Aste Holding Oy. After the arrangement, Norvestia’s stake in the compa-ny is 40%. In October, Norvestia sold its stake in GSP Group Ltd. Investments in unlisted companies belong to Norvestia’s industrial investment portfolio which is administered by Norvestia’s subsidi-ary Norvestia Industries Oy. The aim of Norvestia’s industrial invest-ment activities is to find interesting companies with strong growth potential, the long-term and active development of which can yield significant increases in value and thereby return to Norvestia’s share-holders. According to the investment strategy, Norvestia aims to find target companies that operate in sufficiently large markets and have the opportunity to take advantage of their service and solutions in-novations both in Finland and internationally.
Norvestia invests in minority shares or can be in the majority together with another investor. At the end of 2013, the industrial investment port-folio comprised four unlisted companies: Aste Holding which offers me-dia production and consulting, Coronaria Hoitoketju which offers health care services, Miltton Group which offers innovative communications
services and Polystar Instruments which develops business intelligence software solutions. The total balance value of interests in these compa-nies amounted to EUR 8.7 million. In addition, Norvestia owned 8.9% of Honkarakenne Oyj, corresponding to EUR 1.2 million at the end of 2013. Norvestia has committed itself to investing EUR 2.0 million in Lifeline Ventures Fund I, of which EUR 0.7 million is now invested. In addition, Norvestia has committed itself to investing EUR 2.0 million in the Aman-da V East private equity fund, of which EUR 0.6 million is now invested. Norvestia has also invested EUR 0.1 million in Lifeline Ventures Fund III. According to the current investment strategy, about 20–30% of vestment assets may be used for industrial investments. These in-vestments have no time limits and will be made when the right op-portunity presents itself.
NORVESTIA GROUP
Norvestia Oyj is the parent company of Norvestia Industries Oy and Norventures Oy. The parent company of the entire group is Kaupth-ing hf., which is domiciled in Reykjavik, Iceland.
Norvestia Group mainly invests in Nordic shares, equity funds, hedge funds, bonds, in the money market and in industrial investments. Norvestia Oyj’s B share is quoted on the Nasdaq OMX Helsinki Ltd. Subsidiary company Norvestia Industries Oy was established in Sep-tember 2007 in order to realize the group’s industrial investment strategy. No changes occurred in Norventures Oy, another entirely owned subsidiary, during the year.
SHARES AND SHARE CAPITAL
Norvestia Oyj’s share capital is divided into 900,000 A shares with ten votes each, and 14,416,560 B shares with one vote each. In total the share capital consists of 15,316,560 shares and the total voting rights amount to 23,416,560. All shares have an equal right to divi-dend and the assets of the company.
SHAREHOLDERS
At the end of December 2013, Norvestia Oyj had 5,765 shareholders (5,833). 33.2% of the shares were in foreign ownership (33.1%) and 33.9% were nominee-registered (1.2%).
The largest shareholder is Kaupthing hf. with a holding of 32.7% (32.7%) at year-end, which corresponds to 56.0% (56.0%) of votes. Norvestia’s second largest shareholder, Mandatum Life Insurance Company Ltd, had an 11.7% (11.7%) shareholding and held 7.6% (7.6%) of votes at year-end. The ten major shareholders held a total of 55.3% (54.3%) of shares and 70.7% (70.1%) of votes. More infor-mation about shareholders can be found on page 10.
ANNUAL GENERAL MEETING
The Annual General Meeting (AGM) held on 19 March 2013 decided to distribute EUR 0.30 per share as dividends for 2012. The dividend was paid on 2 April 2013.
The following persons were re-elected to the Board: J.T. Bergqvist, chairman
Hilmar Thór Kristinsson, vice chairman Georg Ehrnrooth, member
Robin Lindahl, member Freyr Thordarson, member
60 50 40 30 20 10 0 %
Group investments
2012 2013 Listed shares and share funds Industrial invest-ments Hedgefunds other liquid Cash and
Bonds
PricewaterhouseCoopers Oy was elected as auditor, with CPA Jan Holmberg as main responsible auditor and CPA Lauri Kallaskari as deputy auditor. The AGM unanimously decided to discharge the Board of Directors and the Managing Director from liability for 2012. The AGM authorized the Board of Directors to decide on a repurchase of own shares, publicly on the Helsinki stock exchange. The authori-zation gives the right to acquire up to 4,500,000 B shares by 31 May 2014. No acquisitions were made in 2013. The Board of Directors was also authorized to decide upon a share issue and on an issue of special rights entitling to shares. The maximum amount that may be issued is 4,500,000 shares. The authorization is effective until 31 May 2014.
RISKS IN INVESTMENT ACTIVITIES
In addition to pursuing steady asset growth, one of the guiding prin-ciples of Norvestia’s investment activities is to diversify investments and thereby reduce overall risk. Occasionally a significant propor-tion of investments may be focused on certain types of investments and securities, the negative development of which may substantially decrease Norvestia’s result. Norvestia occasionally hedges its invest-ments with options and futures, although there may still be situa-tions where such hedges are not effective.
The five largest investments of Norvestia Group as of 31 December 2013 consisted of the Didner & Gerge Aktiefond, Nektar and Zenit funds as well as Fortum and Nordea shares.
Norvestia’s result is greatly affected by economic developments and changes in share prices both in Finland and abroad. Changes in ex-change rates also impact the company’s result. The general uncer-tainty on the capital markets increases the volatility of Norvestia’s investments and therefore also increases their risk.
INTERNAL SUPERVISION AND RISK MANAGEMENT
More information about the company’s principles of internal super-vision and risk management can be found in Norvestia Group’s sepa-rate corposepa-rate governance statement on page 49.
DIVIDEND POLICY
Norvestia aims to distribute an annual dividend in excess of the Finn-ish stock market average. The long-term objective is to distribute about half of the group’s after-tax profit.
PROPOSED DIVIDEND DISTRIBUTION
The Board proposes that of the parent company’s distributable funds, EUR 0.35 per share (0.30) be distributed to shareholders as dividend, corresponding to EUR 5.4 million (4.6).
FUTURE PROSPECTS
Positive sentiment on the stock market has occasionally disguised the fact that the world economy is undergoing a period of great un-certainty. The economy of the Eurozone remains in crisis with sev-eral euro countries battling against huge over-indebtedness. The growth of the Eurozone which is hampered by unemployment, debts and problems in the banking sector is forecast to remain low for sev-eral more years. The growth of the European economy is forecast to amount to 1.1% in 2014 and 1.5% in 2015.
The situation outside Europe seems brighter. Signs of recovery were seen in the US economy during 2013 and economic growth is expected to accelerate in the coming years. The growth of US GDP is forecast to amount to 2.6% in 2014 and to accelerate to 3.2% in 2015.
In the coming years the growth of the world economy is expected to pick up gradually but will nevertheless grow markedly slower than in the years preceding the crisis. The latest forecast for the growth of the world economy in 2014 is 3.5% and 3.7% in 2015.
The situation on the stock market is rather challenging and weak eco-nomic growth may cap the rise of share prices. The recent increase in share prices has been mainly supported by liquidity driven monetary policy and lack of low-risk alternatives. The valuation multiples of stock markets rose sharply in 2013. If companies’ results do not improve in line with the increase in share prices then valuation multiples will rise fur-ther. This kind of development may become problematic at some point with the probability of corrections on the stock markets increasing. Elections to the European Parliament will be held in May this year. There is currently a party in almost every European country which appeals to voters with an anti-EU stance. In the current European environment which is characterized by scarce economic growth, mass unemploy-ment and general disappointunemploy-ment these parties may well gather a sur-prising amount of votes. Indeed, with enough support these parties may at worst hamper the decision-making of the European Parliament, which could have unpredictable effects on the capital markets as well. In this sensitive investment environment, Norvestia aims to take into account various possible scenarios in the economy and on the stock market, based on the latest economic figures available. Investment levels between shares, funds and interest-yielding investments are assessed on the basis of the prevailing situation.
NORVESTIA’S INVESTMENT STRATEGY 2014
Norvestia’s twofold investment strategy consists of market invest-ments and industrial investinvest-ments. The emphasis between different in-vestment strategies will be assessed on a case by case basis.
Market investments are made according to prevailing market circum-stances. The aim is to achieve a good risk-adjusted return. At year-end a large part of Norvestia’s assets were invested directly in shares on the Helsinki stock exchange. Investments may also be made in other stock ex-changes in order to diversify risks and on the basis of return expectations. The Annual General Meeting in the spring of 2013 authorized the Board of Directors to purchase the company’s own shares and to de-cide on a possible share issue. Both authorizations were meant to be used for industrial investments. The use of leverage can also be con-sidered when it comes to financing industrial investments.
Consolidated statement of
comprehensive income
EUR 1,000 Notes 1/1–31/12/2013 1/1–31/12/2012 Trading gains and losses 3, 9 18,532 7,413
Personnel expenses 4, 26 -1,435 -1,124
Depreciation and impairment charges 5 -21 -20
Other operating expenses 6 -784 -765
OPERATING PROFIT 16,292 5,504
Share of results of associates 12 675 254 Realized return from shares in associates -202 -Financial income and expenses 7 -233 126
RESULT BEFORE TAXES 16,532 5,884
Income taxes* 8 -3,034 -265
RESULT FOR THE FINANCIAL PERIOD 13,498 5,619 Other comprehensive income, net of taxes:
Items that may be reclassified subsequently to profit or loss
Change in value of available-for-sale financial assets 14 254 94 COMPREHENSIVE INCOME FOR THE PERIOD 13,752 5,713
* Based on the result for the period
Earnings per share, EUR 0.88 0.37
Consolidated statement of financial position
EUR 1,000 Notes 31/12/2013 31/12/2012 Assets NON-CURRENT ASSETS Intangible assets 10 22 36 Tangible assets 11 11 8 Interests in associates 12 6,305 4,926Loan receivables from associates 13 3,638 2,171 Available-for-sale financial assets 14 3,772 2,673
Deferred tax assets 15 5,535 8,379
19,283 18,193
CURRENT ASSETS
Financial assets held for trading 16 61,058 49,141 Other financial assets at fair value through profit or loss 17 58,494 61,936
Receivables 18 884 707
Cash and cash equivalents 19 14,645 16,456
135,081 128,240
154,364 146,433
Shareholders' equity and liabilities
SHAREHOLDERS' EQUITY 20
Share capital 53,608 53,608
Share premium 6,896 6,896
Fair value reserve 606 352
Retained earnings 71,941 70,916
Result for the period 13,498 5,619
146,549 137,391
DEFERRED TAX LIABILITIES 15 6,378 6,150
CURRENT LIABILITIES 21 1,437 2,892
Consolidated statement of cash flows
EUR 1,000 Notes 1/1–31/12/2013 1/1–31/12/2012 CASH FLOW FROM OPERATING ACTIVITIES
Result before taxes 16,532 5,884
Adjustments:
Unrealized gains -6,492 -6,188
Other operations which do not include cash transactions -614 -204
Interest income -888 -622
Dividend income -3,180 -3,901
5,358 -5,031
Changes in working capital
Change in shares and other investments -2,787 -6,212
Change in receivables -177 -76
Change in current liabilities -1,455 1,466
-4,419 -4,822
Dividends received 3,180 3,901
Interest received 888 622
Received and paid taxes -2 211
CASH FLOW FROM OPERATING ACTIVITIES 5,005 -5,119 CASH FLOW FROM INVESTING ACTIVITIES
Acquisitions of associates -744
-Loan receivables from associates -1,467 250 Investments in intangible and tangible assets -10 -CASH FLOW FROM INVESTING ACTIVITIES -2,221 250 CASH FLOW FROM FINANCING ACTIVITIES
Dividends paid -4,595 -4,595
CASH FLOW FROM FINANCING ACTIVITIES -4,595 -4,595 CHANGE IN CASH AND CASH EQUIVALENTS -1,811 -9,464 Cash and cash equivalents at the beginning of the period 19 16,456 25,920 Cash and cash equivalents at the end of the period 19 14,645 16,456
Consolidated statement of
changes in shareholders’ equity
EUR 1,000 capitalShare premiumShare Fair valuereserve Retainedearnings the periodResult for Total Shareholders' equity 1 January 2012 53,608 6,896 258 86,753 -11,242 136,273
Allocations -11,242 11,242 0
Other comprehensive income 94 94
Dividends -4,595 -4,595
Result for the period 5,619 5,619
Shareholders' equity 31 December 2012 53,608 6,896 352 70,916 5,619 137,391
Shareholders' equity 1 January 2013 53,608 6,896 352 70,916 5,619 137,391
Allocations 5,619 -5,619 0
Other comprehensive income 254 254
Dividends -4,594 -4,594
Result for the period 13,498 13,498
1. Accounting principles for the
consolidated financial statements
GROUP INFORMATION
Norvestia is an investment company that mainly invests in Nordic shares, equity funds, hedge funds, bonds, in the money market and in industrial investments.
The group’s parent company Norvestia Oyj is a Finnish publicly listed company, whose B share is quoted on the Nasdaq OMX Helsinki Ltd. Norvestia Oyj is domiciled in Helsinki and its registered address is Pohjoisesplanadi 35 E, 00100 Helsinki, Finland. The parent company of Norvestia Oyj and the entire group is Kaupthing hf., which is do-miciled in Reykjavik, Iceland.
A copy of the consolidated financial statements is available on the company homepage www.norvestia.fi or at the head office of the parent company at Pohjoisesplanadi 35 E, Helsinki.
The financial statements of Norvestia Group for the year ending 31 December 2013 were authorized for issue in accordance with a reso-lution of the Board of Directors on 3 February 2014. According to the Finnish Limited Liability Companies Act, the Annual General Meet-ing shall have the right to adopt, reject or amend the financial state-ments after their publication.
BASIS OF PREPARATION
The consolidated financial statements have been prepared in accor-dance with the International Financial Reporting Standards (IFRS). Inter-national Accounting Standards (IAS), IFRS standards and their IFRIC and SIC Interpretations valid at 31 December 2013 have been applied. The International Reporting Standards refer to standards and their inter-pretations approved for adoption within the EU in accordance with the procedure enacted in EC regulation 1606/2002, included in the Finnish Accounting Standards and regulations based on them. The notes to the consolidated financial statements also comply with the Finnish account-ing and corporate legislation which supplements the IFRS.
The consolidated financial statements have been prepared on a his-torical cost basis, with the exception of items identified separately, which have been measured at fair value in compliance with the stan-dards. All amounts in the consolidated financial statements are pre-sented in thousands of euros (EUR 1,000).
New and revised standards and interpretations effective from 1 Jan-uary 2013 do not have a material effect on the consolidated financial statements and therefore they have not been listed.
BASIS OF CONSOLIDATION
Subsidiaries
The consolidated financial statements include the financial state-ments of the parent company and its directly or indirectly owned subsidiaries. Subsidiaries are companies in which the parent compa-ny has control. Control exists when the group owns more than 50% of the voting rights or the share capital or when the group otherwise exerts control. Acquired subsidiaries are included in the consolidat-ed financial statements from the date of acquisition, i.e. the moment when the group has gained control, until the date on which control ceases. The subsidiaries are listed in note 26.
The group’s internal shareholdings are eliminated by using the ac-quisition cost method. The shareholders’ equity of the subsidiary is entirely eliminated on the acquisition date. Only the proportion of the shareholders’ equity in subsidiaries accrued after the acquisition date will thus be included in shareholders’ equity of the group. All in-ternal transactions, assets and liabilities have been fully eliminated in the consolidated financial statements.
Minority interests in net income are disclosed in the income state-ment and the amount of equity attributable to minority interest is disclosed separately in the group’s shareholders’ equity.
Associates
Associates are companies in which the group owns 20–50% of voting rights or in which the group has a significant influence otherwise, but not a controlling interest. Associates have been consolidated using the equity method. If the group’s share of the losses exceeds its in-terest in the associate, the carrying amount is written down to zero unless the group has incurred obligations from the associated com-pany. Goodwill arising from the acquisition is included in the cost of the investment in the associate. The group’s share of results of asso-ciates is presented as a separate line item in the income statement after operating profit. The associates are listed in note 12. If there is any indication that the value of the investment may be impaired, the carrying amount is tested by comparing it with its re-coverable amount. The rere-coverable amount is the higher of its value in use or its fair value less costs to sell. If the recoverable amount is less than its carrying amount, the carrying amount is reduced to its recoverable amount by recognizing an impairment loss in the state-ment of comprehensive income. If the recoverable amount later in-creases and is greater than the carrying amount, the impairment loss is reversed in the income statement.
FOREIGN CURRENCY ITEMS
The consolidated financial statements are presented in euros. Trans-actions in foreign currency have been recorded in euros at the ex-change rate on the date of the transaction. Assets and liabilities de-nominated in foreign currency have been translated to euros using the average exchange rates at the balance sheet date, confirmed by the European Central Bank. All differences are recognized in the in-come statement.
Currency exchange rates used in the consolidated financial statements:
Rate 31/12/2013 Rate 31/12/2012 1 EUR = USD 1.3791 1.3194 SEK 8.8591 8.5820 NOK 8.3630 7.3483 CHF 1.2276 1.2072 GBP 0.8337 0.8161 REVENUE RECOGNITION
Revenue is recognized to the extent that it is probable that the eco-nomic benefits will accrue to the group and the revenue can be reli-ably measured. The following specific recognition criteria must also be met before revenue is recognized:
Dividends
Revenue is recognized when the group’s right to receive the pay-ment is established.
Interest income
Revenue is recognized as interest accrues using the effective interest method.
PENSION PLANS
The group’s pensions are recognized in the income statement during the financial period to which the pensions relate. The group’s pen-sions comply with the legislative TyEL-insurance. The group has no voluntary pension arrangements. The insurance through the TyEL-pension scheme is classified as a defined contribution plan.
LEASES
The group has only operating leases, meaning that the risks and ben-efits incidental to the leased item have not essentially transferred to the group. Operating lease payments are recognized as a rental ex-pense in even installments in the income statement over the lease term.
INCOME TAXES
Tax expenses in the income statement consist of taxes on the tax-able income for the financial period and deferred taxes. Taxes on the taxable income for the financial period of the group companies are calculated according to the Finnish tax rate. The income tax is adjust-ed for any taxes from earlier periods.
Deferred taxes are calculated using the liability method on tem-porary differences at the balance sheet date between the carrying amounts and taxable values of the assets and liabilities. Deferred taxes have been calculated using the current tax rate. The carrying amounts of the deferred tax assets are reviewed on each balance sheet date and are recognized to the extent that it is probable that taxable income, against which all or part of the deferred tax assets can be applied, will materialize in the future.
Income tax relating to items recognized directly in equity is recog-nized in equity, not in the statement of comprehensive income. De-ferred tax assets and liabilities can be offset, if a legally enforceable right exists to set off tax assets against tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation au-thority. In the consolidated financial statements deferred tax assets and liabilities have not however been offset.
EARNINGS PER SHARE
The undiluted and diluted earnings per share are calculated by dividing the result for the financial period by the weighted average number of shares outstanding. The diluted earnings per share is not shown, as the company has issued no instruments with a diluting effect.
INTANGIBLE ASSETS
IT software products procured externally are recognized on the bal-ance sheet as intangible assets with finite useful lives, if it is probable that the expected future economic benefits that are attributable to the assets will flow to the group and the cost of the assets can be mea-sured reliably.
Intangible assets are measured at cost less accumulated depreciation and impairment losses. Intangible assets are amortized on a straight-line basis over the estimated useful life of the asset of five years.
TANGIBLE ASSETS
Tangible assets are stated on the balance sheet at cost less accumu-lated depreciation. Gains and losses on the disposal of tangible as-sets are included in operating profit. The depreciation according to plan of property, plant and equipment meets the maximum amounts regulated in the Finnish tax law corresponding to 25% of the remain-ing residual value. Other tangible assets are depreciated over five years on a straight-line basis.
FINANCIAL ASSETS
The group’s financial assets are classified in the following catego-ries: 1) financial assets held for trading 2) financial assets at fair val-ue through profit or loss 3) available-for-sale financial assets and 4) loans and other receivables. The classification of financial assets is determined upon initial recognition on the basis of why they were originally acquired.
All purchases and sales of financial assets are recognized on the trade date i.e. the date on which the group commits to purchase or sell the asset. Financial assets are derecognized from the statement of financial position when the contractual rights to the cash flow of the financial asset expire or when the risks and rewards of ownership have been substantially transferred outside the group.
Financial assets held for trading
Financial assets are classified as held for trading if they are acquired for the purpose of being sold in the near term. Financial assets held for trading mainly consist of listed shares that are measured at fair value by the last trade price on active markets on the balance sheet date. Derivative financial instruments that do not fulfill the principles of hedge accounting, are also classified as held for trading. Gains and losses on assets held for trading are recognized in the income state-ment.
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss consist mainly of funds whose fair value is determined as the funds’ Net Asset Value at the balance sheet date. The group also includes bonds, the fair value of which is measured by the last trade price on the balance sheet date.
Available-for-sale financial assets
Available-for-sale financial assets include non-derivative assets des-ignated as available for sale at the date of initial recognition. Avail-able-for-sale financial assets are measured at fair value. If the invest-ments have no active market then the fair value is determined using various valuation methods that are usually based on forecasted cash flows. Private equity fund investments are valued according to the practice generally used in the sector, i.e. the fair value of the private equity fund investment is the latest fund value announced by the private equity fund management company. The value is calculated according to the International Private Equity and Venture Capital Guidelines (IPEV).
Changes in the fair value of the available-for-sale financial assets are recognized as a separate component of equity, net of income taxes. The cumulative gain or loss previously reported in equity is trans-ferred to the income statement when the investment is sold or de-termined to be impaired.
When an available-for-sale financial asset is impaired an amount comprising the difference between its cost and its current fair value less any impairment loss previously included in the income state-ment is transferred from equity to the income statestate-ment. Reversals
in respect of equity instruments classified as available-for-sale are not recognized in profit.
Loans and other receivables
Loans and other receivables are non-derivative financial assets with fixed or determinable payments that are not quoted on an active market. Such assets are carried at amortized cost in the statement of financial position using the effective interest method. Gains and loss-es are recognized in the income statement when the loans and re-ceivables are derecognized or impaired. Recognitions to the income statement are also done through the amortization process. The fair values of other financial assets and financial liabilities are assumed to approximate their carrying amounts, either because of their short maturities, or where their fair values cannot be measured reliably.
DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING
The group uses derivative financial instruments such as options and futures contracts to manage its portfolio more effectively. The group has not adopted hedge accounting in derivative contracts. Deriva-tive financial instruments are initially recognized at fair value on the date on which a derivative contract is entered into and are subse-quently remeasured at fair value. Fair values of derivative contracts are based on quoted market rates on the balance sheet date or, in an illiquid market, on values determined by the counterparty. Deriva-tives are carried as assets when the fair value is positive and as liabil-ities when the fair value is negative. Any gains or losses arising from changes in the fair value of derivatives are recorded directly in the income statement.
RECEIVABLES
Current receivables are measured at the estimated total amount to be received.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise cash, short-term deposits and money market investments with an original maturity of three months or less. In the consolidated statement of cash flows, cash and cash equivalents consist of items above.
PROVISIONS
Provisions are recorded when the group has a legal or constructive obligation on the basis of a prior event, the materialization of the payment obligation is probable and the size of the obligation can be reliably estimated.
OPERATING PROFIT
Operating profit consists of trading gains and losses deducted with personnel expenses, depreciation and impairment charges and oth-er opoth-erating expenses. Exchange rate diffoth-erences are included in the operating profit if they arise from items related to operating activi-ties. Otherwise they are recognized as financial income or expense.
NEW IFRS STANDARDS AND INTERPRETATIONS
The IASB has published the following standards, amendments to standards and interpretations which have not yet been adopted in the consolidated financial statements. Each standard and interpreta-tion will be adopted by the group as they become effective, or if the effective date is other than the first date of the financial period, from the beginning of the accounting period following the effective date. • IFRS 9 Financial Instruments (effective for accounting periods be-ginning on or after 1 January 2016). The standard will in stages re-place entirely the current IAS 39. The first part of the standard
con-cerns classification and measurement of financial assets and the subsequent parts include classification and measurement of financial liabilities, hedge accounting and derecognition. The group assesses that the amendment may have some effects on future consolidated financial statements, but the scale and substance of the effects can-not yet be reasonably assessed. The amendment has can-not yet been endorsed by the European Union.
• IFRS 10 Consolidated financial statements (effective for account-ing periods beginnaccount-ing on or after 1 January 2013, latest application for accounting period beginning on 1 January 2014). The standard replaces the portion of IAS 27 Consolidated and Separate Financial Statements that addresses the accounting for consolidated financial statements. The standard determines control as a key factor when deciding whether an entity should be included in the consolidated financial statements. Further the standard gives additional instruc-tions on defining control when it is difficult to measure. The group’s structure remaining as it is the standard will have no material effects on future consolidated financial statements.
• IFRS 11 Joint arrangements (effective from accounting periods be-ginning after 1 January 2013, latest application for accounting period beginning on 1 January 2014). The standard replaces IAS 31 Interests in Joint ventures and SIC-13 Jointly-controlled entities. In accounting for joint arrangements the standard emphasizes the rights and ob-ligations resulting from them rather than their legal form. There are two types of joint arrangements: joint operations and joint ventures. In addition the standard requires the use of one single method, the equity method, in accounting for joint arrangements and the former alternative proportional consolidation method is no longer permit-ted. The group’s structure remaining as it is the standard will have no material effects on future consolidated financial statements. • IFRS 12 Disclosure of interests in other entities (effective from accounting periods beginning on or after 1 January 2013, latest application for accounting period beginning on 1 January 2014). The standard includes disclosure requirements related to interests in other entities including a
