Ericsson Nikola Tesla d.d. — Management Reports 2014

Apr 29, 2014

The Management Report on Ericsson Nikola Tesla Group business situation and comments on the financial results for Q1 2014

Highlights:

• Sales revenues: MHRK 315.4
• Gross margin: 17.8%
• Operating profit: MHRK 31.1
• Net profit: MHRK 34.1
• Cash flow from operating activities: MHRK: 9.9

Gordana Kovačević, the President of Ericsson Nikola Tesla, commented on the Company's performance:

Ericsson Nikola Tesla continued a solid business performance in Q1 2014, despite the current market environment. A significant increase in sales revenue was achieved in the domestic market, amounting to 37%. Ericsson market has a positive trend and an increase in revenue, as planned. However, the total sales revenue decreased by 5% year-over-year, as a result of decrease in sales revenue in other export markets. A political and economic uncertainty in the countries in which we traditionally achieve good export results, resulted in operators' investment slow down and postponement.

We achieved a net profit of MHRK 34.1, which accounts for 10.8 % return on sales. We ended the quarter with a solid balance sheet and equity ratio of 69%. Total cash funds, including short term financial assets at the end of Q1 amount to MHRK 523.2, which is 51% of total assets. Thanks to a healthy financial situation and a high level of liquid assets, we can this year again, provide exceptional return on investment to our shareholders.

We remain focused on strengthening our position and sales in new and targeted areas for telecom operators (4GIP, OSS/BSS, TV and media distribution, network design and optimization and managed services) and in the segment regarding industry and society (health, e-business systems, safety). We still remain focused on operational efficiency, profitability and risk management.

This year's Mobile World Congress in Barcelona was the telecommunication industry central spot to get acquainted with the solutions and applications, which show the kind of possibilities the future brings. Ericsson presented a range of novelties, such as an extremely fast mobile broadband access, world firsts in LTE Advanced Carrier Aggregation and Coordinated Radio Access Network, Global Network Operations Center with live data from a real network, the latest achievements in LTE Broadcast and digital signing. Furthermore, expect for presenting Ericsson PSI Coverage Solution implemented in Vipnet network, solutions and applications were presented, in which Ericsson Nikola Tesla experts participated on preparation and development.

I would like to highlight that, throughout the innovation programs and processes and individual employee goals; we encourage the development of innovative organizational culture. In doing so, we put the emphasis on two main areas: improvement/ growth of business and improvement of the way of working.

In a transforming ICT market, we are well positioned as a reliable partner to our Customers in recognizing new market opportunities."

Financial Highlights:

• Sales revenues decreased by 5% YoY to MHRK 315.4 (Q1 2013: MHRK 330.2). In total sales revenues, the domestic market accounts for 34%, export to Ericsson market accounts for 47%, and export to other markets 19%.
• Network infrastructure amounted to MHRK 159.9 (51% of total Sales revenues), Professional Services MHRK 145.6 (46% of total Sales revenues), and Support Solutions MHRK 9.9 (3% of total Sales revenues).
• Gross profit amounts to MHRK 56.2 (Q1 2013: MHRK 65.2), decreased by 14% YoY. Gross margin decreased to 17.8% (Q1 2013: 19.8%) due to business mix.
• Distribution and administrative expenses increased year-over-year to MHRK 25.5 (Q1 2013: 22.3), due to activities focused on new business opportunities.
• Operating profit decreased by 26% to MHRK 31.1 (Q1 2013: MHRK 42.1), due to lower gross margin.

• Net finance income decreased to MHRK 3.0 (Q1 2013: MHRK 6.8) as a result of lower interest revenues and lower exchange rate gains.

• Net profit decreased by 30% YoY to MHRK 34.1 (Q1 2013: MHRK 48.9). ROS is 10.8% (Q1 2013: 14.8%).

• Cash flow from operating activities is MHRK 9.9 (Q1 2013: MHRK 1.4).
• Total cash balances, including short term financial assets at the end of the quarter, amounted to MHRK 523.2 which accounts for 50,8% of total assets (end of 2013: MHRK 521.2, i.e. 49,7% of total assets).
• The Company has a strong balance sheet with total assets of MHRK 1,030.0. The equity ratio is 69%.
• With related parties, the transactions were as follows: sales of products and services amounted to MHRK 133.1 (Q1 2013: MHRK 128), while the purchase of products and services amounted to MHRK 93.8 (Q1 2013: MHRK 132.2).
• Balances outstanding with related parties as at March 31, 2014 were as follows: receivables amounted to MHRK 68.6 (end of 2013: MHRK 71.8), and payables amounted to MHRK 51.8 (end of 2013: MHRK 60.9).

Business situation in major markets

In the domestic market, sales revenue amounted to MHRK 106.3, increased by 37% YoY.

An intensive collaboration with the strategic parent Vipnet is continued. IMS system upgrade was successfully finished, which opens numerous possibilities for implementation of new convergent solutions. In addition, the expansion and modernization of mobile telecom network is ongoing, including the fourth generation of mobile networks (LTE) and testing new functionalities, which contribute to enhanced quality and new services for end users, as well.

Business collaboration with T-HT continues in the segment of strategic migration to all-IP environment and on other projects, which will enhance this operator business efficiency.

With the operator Tele 2, activities on constructing 2G and 3G infrastructure continue, by introducing new functionalities and an increase in speed and capacity of mobile broadband internet access service. Contracts were signed on comprehensive service support and field maintenance of all network nodes.

In ICT for Industry and Society Segment, major activities concern upgrading the national ICT healthcare system, continued informatization of Land registry administration and upgrade/ expansion of communal and transport companies' communication infrastructure.

In export markets (except for Ericsson market) sales revenues amounted to MHRK 60.0, which is a decrease by 47% YoY.

In the markets of Southeast Europe (Bosnia and Herzegovina, Montenegro and Kosovo) sales revenues decreased by 22% YoY to MHRK 40.3.

In Bosnia and Herzegovina market, the collaboration with BH Telecom and HT Mostar continued in the segment of providing support services. It is certain that the political and economic uncertainty affects the operators' investment cycle. We expect new investments in further expansion of mobile and fixed networks.

In ICT segment for industry and society, expansion of Operational Communication Center (OKC) 112 ICT infrastructure in Bosnia and Herzegovina was successfully implemented.

In CIS market, sales revenues amounted to MHRK 19.7, which is a decrease by 67% YoY. Sales activities and arrangements related to mobile network modernization with several key customers are ongoing.

In the Ericsson market, sales revenue amounted to MHRK 149.1, which is an increase by 6% year-overyear. This market share in total sales revenues reached 47%.

Ericsson Nikola Tesla Research and Development Center (R&D) successfully continues in developing cutting edge products, as well as gaining new responsibilities within the Ericsson Corporation. The quality, competences and commitment of R&D team was positively evaluated by the managers of Ericsson organizations, which are responsible for development of certain products, in recently held regular evaluation meeting in Stockholm. The evaluation of the collaboration and the results so far, represents a good base for further business and expansion of responsibility.

In core network segment, an entire range of the existing and the work on new functionalities is ongoing. The development teams, working on User data management are expanding, which is related to the ending the development of functionalities targeted at the new product generations. Furthermore, the Unit for Radio Platform Development continues its initiated development of IP functionalities. In fixed core network, where we have the global responsibility for software package development, delivery and maintenance, and providing services to customers worldwide, broad expert knowledge contributed to the continuity of excellent results, especially in the evolution of communication networks based on internet protocols. The research and development, related to "Cloud Computing", as well as other researches, which enjoy the EU funds support, are ongoing.

Service Delivery Center experts have been engaged in numerous projects for the following customers: A1 Austria, British Telecom, Deutsche Telecom, Mobistar Belgium, O2 Great Britain, Orange Slovakia,

Telefonica Germany, Telenor Sweden, Vodafone Great Britain, Vodafone Netherlands, O2 Great Britain. We can highlight the activities related to IPTV project for A1 Austria and Telenor Sweden, VoLTE project for Deutsche Telecom and network modernization for British Telecom. The Centers' experts have also been providing consulting services and services of configuration and dimensioning for A1 Austria, Mosaic Ireland, O2 Great Britain, Slovak Telekom, Telefonica Great Britain, Vodafone Netherlands. Smart Rollout Support tool, developed in our Global Competence Center, was successfully implemented worldwide.

Other information

Ericsson Nikola Tesla Annual General Meeting shall be held on May 27, 2014. The right to participate at the Annual General Meeting have all shareholders, or their proxies, respectively, who register to participate until May 20, 2014, at the latest.

The shareholders who have the Company shares registered on their securities account in the Central Depository & Clearing Company on June 3, 2014, are entitled for the dividend payment in total amount of HRK 320 per share (HRK 20 regular dividend and HRK 300 extraordinary dividend). Ex-dividend date is May 30, 2014.

The dividend shall be paid on June 17, 2014.

The Annual General Meeting's Agenda, including the suggestions of all the decisions, was published on the Company's web page http://www.ericsson.hr/20140416-poziv.

Ericsson Nikola Tesla's major shareholders (as at March 31, 2014)

	Number	% of share
	of shares	capital
Telefonaktiebolaget LM Ericsson	653,473	49.07
Hypo Alpe-Adria-Bank d.d. / Raiffeisen Mandatory Pension Fund	123,.514	9.28
Societe Generale-Splitska banka d.d. / Erste Plavi Mandatory Pension Fund	32,961	2.48
Hypo Alpe-Adria-Bank d.d. / PBZ Croatia osiguranje Mandatory Pension Fund	30,615	2.30
PBZ d.d. / State Street client account	19,817	1.49
Zagrebačka banka d.d. / custodian client account for Unicredit Bank Austria AG	18,290	1.37
PBZ d.d. / The Bank of New York as custodian	17,822	1.34
Societe Generale-Splitska banka d.d. / AZ Mandatory Pension Fund	14,546	1.09
PBZ d.d. / Custodian Client Account	12,841	0.96
Zagrebačka banka d.d. / State Street Bank and Trust Company, Boston	11,650	0.87
Other shareholders	396,121	29.75

Q1 2014 share price information:

Highest (HRK)	Lowest (HRK)	Closing (HRK)	Market cap.
			(in MHRK)
1,659.00	1,445.00	1,600.00	2,130.6

PRESS INFO April 29, 2014

Ericsson Nikola Tesla d.d. Krapinska 45 Zagreb

OIB: 84214771175 Tax No.: 03272699

Pursuant to the Articles 407 to 410 of the Capital Market Law (Official Gazette 88/08 and 146/08) the Managing Director of the joint stock company Ericsson Nikola Tesla d.d. Zagreb, Krapinska 45 gives the following:

Statement of the Management Board responsibility

The accompanying consolidated and nonconsolidated financial statements have been prepared in compliance with the International Financial Reporting Standards (IFRS). The financial statements also comply with the provisions of the Croatian Financial Accounting Law valid as of the date of these financial statements.

Unaudited financial statements for the period 1 Jan 2014 to 31 March 2014 present a true and fair view of the financial position of the Company and of its financial performance and its cash flows in compliance with applicable accounting standards.

Managing Director:

Gordana Kovačević, MSc

For additional information, please contact:

Snježana Bahtijari Orhideja Gjenero Company Communication Director Investor Relations Manager Ericsson Nikola Tesla d.d. Ericsson Nikola Tesla d.d. Krapinska 45 Krapinska 45 HR-10 002 Zagreb HR-10 002 Zagreb Phone: + 385 1 365 4556 Phone: +385 1 365 4431 Mobile: +385 91 365 4556 Mobile: +385 91 365 4431 Fax: +385 1 365 3156 Fax: +385 1 365 3156 E-mail: snjezana.bahtijari@ericsson.com E-mail: orhideja.gjenero@ericsson.com

E-mail: odnosi.investitori@ericsson.com

For more information about Ericsson Nikola Tesla's business performance, please visit: http://www.ericsson.com/hr

Communication Ericsson Nikola Tesla

Consolidated statement of comprehensive income for the period ended 31 March 2014

	2014	2013
	HRK '000	HRK '000
Sales revenue	315.372	330.249
Cost of sales	-259.187	-265.019
Gross profit	__ 56.186	__ 65.230
Selling expenses	-17.254	-14.703
Administrative expenses	-8.274	-7.615
Other operating income	1.583	160
Other operating expenses	-1.148	-981
Operating profit	__ 31.091	__ 42.091
Finance income	__ 2.983	__ 6.863
Finance expense	0	-40
Finance income – net	__ 2.983	__ 6.823
Profit before tax	__ 34.074	__ 48.914
Income tax	0	0
Profit for the year	__ 34.074	__ 48.914
Other comprehensive income	__ 15	__ 0
Total comprehensive income for the year	_ 34.089 _	_ 48.914 _

Consolidated statement of financial position as at 31 March 2014

	2014 HRK '000	2013 HRK '000
ASSETS
Non-current assets
Property, plant and equipment	128.772	131.616
Intangible assets	1.784	2.112
Loans and receivables	15.499	18.801
Other non-current assets	40 __	40 __
Total non-current assets	146.094 __	152.569 __
Current assets
Inventories	60.666	51.506
Trade receivables	225.446	246.152
Receivables from related parties	68.590	71.819
Other receivables	3.441	3.715
Financial assets at fair value through profit or loss	104.028	109.845
Prepayments and accrued income	2.616	1.156
Cash and cash equivalents	419.150	411.328
Total current assets	__ 883.937	__ 895.521
TOTAL ASSETS	__ 1.030.031	__ 1.048.090
EQUITY AND LIABILITIES Equity	__	__
Share capital	133.165	133.165
Treasury shares	-9.571	-9.571
Legal reserves	6.658	6.658
Retained earnings	577.323	540.884
Total equity	__ 707.575	__ 671.136
Non-current liabilities	__	__
Interest-bearing borrowings	68	68
Employee benefits	4.825	4.697
Total non-current liabilities	__ 4.894	__ 4.766
Current liabilities	__	__
Payables to related parties	51.815	60.936
Interest-bearing borrowings	332	309
Trade and other payables	100.456	148.426
Provisions	10.474	13.458
Accrued charges and deferred revenue	154.485	149.059
Total current liabilities	__ 317.562	__ 372.188
Total liabilities	__ 322.456	__ 376.954
TOTAL EQUITY AND LIABILITIES	_ 1.030.031 _	_ 1.048.090 _

Consolidated statement of cash flows for the period ended 31 March 2014

	2014	2013
Cash flows from operating activities	HRK '000	HRK '000
Profit before tax	34.074	48.914
	_	_
Adjustments for:
Depreciation and amortisation	10.935	9.377
Impairment losses and reversals	1.519	1.930
Net increase of provisions	-784	475
(Gain)/loss on sale of property, plant and equipment	-34	-274
Net loss/(gain) on remeasurement of financial assets	-104	198
Amortisation of discount	-83	-406
Interest income	-2.235	-3.199
Interest expense	-1	40
Foreign exchange (gains)/losses	-705	-3.010
Equity-settled transactions	2.351 _	548 _
	44.933	54.593
(Increase)/decrease in receivables	24.176	-27.732
(Increase)/decrease in inventories	-9.160	-9.219
Increase/(decrease) in payables	-50.092	-16.220
Cash generated from operations	_ 9.858	_ 1.423
	_	_
Interest paid	1	-40
Income taxes (paid)/refunded	0	0
Net cash from operating activities	_ 9.858	_ 1.383
Cash flows from investing activities	_	_
Interest received	2.429	3.319
Proceeds from sale of property, plant and equipment	67	274
Purchases of property, plant and equipment, and intangible assets	-11.432	-13.414
Deposits collected/(placed) with financial institutions - net	-	-73
Disposal/(purchases) of financial assets at fair value through profit and loss	5.921	-23.540
	_	_
Net cash used in investing activities	-3.015 _	-33.434 _
Cash flows from financing activities
Repayment of interest-bearing borrowings	0	-223
Purchase of treasury shares	0	-1
Dividends paid	-9	0
Net cash used in financing activities	_ -9	_ -224
Effects of exchange rate changes on cash and cash equivalents	_ 987	_ 2.883
Net decrease in cash and cash equivalents	_ 7.822	_ -29.392
Cash and cash equivalents at the beginning of the year	411.328 _	511.639 _
Cash and cash equivalents at the end of the year	419.150 _	482.246 _

ENCLOSURE 1
Reporting period:				1.1.2014.		to	31.3.2014
				Quarterly Financial Report TFI-POD
Tax number (MB):		03272699
Registration number (MBS):		080002028
Personal identification		84214771175
number (OIB):		Issuer: ERICSSON NIKOLA TESLA D.D. ZAGREB
Postal code and location:		10000		ZAGREB
Street and number: Krapinska 45
		E-mail: etk.company@ericsson.com
Internet address: www.ericsson.hr
Code and city / municipality	133	ZAGREB
Code and county	21	GRAD ZAGREB					umber of employees:	1.762
Consolidated Report	Yes						(at the end of year) Business activity code:	2630
Entities in consolidation (according to IFRS)					Registered seat:		Tax number (MB):
		Libratel d.o.o.				Zagreb, Selska 93	01449613
		ETK BH d.o.o				Sarajevo, Fra Anđela Zvizdovića broj 1	65-01-0996-11
Ericsson Nikola Tesla d.d. - Branch office of Kosovo						Republika Kosova, Kalabria, Obj 1., Bll 1, Kati 1 Nr.13	70633647
Book-keeping office:
Contact person Tatjana Ricijaš
		(Name and surname of contact person)
Telephone: +385 (0)1 365 3343						Telefaks:	+385 (0)1 365 3174
		E-mail: tatjana.ricijas@ericsson.com
Name and surname: Kovačević Gordana		(authorized representatives)
Documents to be published: 2. Management Commentary Statement with notes 3. Responsibility of the Management for the preparation of the consolidated financial statements							1. Consolidated Financial Statements (Balance Sheet, Income statement, Cash Flow Statement, Statement of Changes in Equity)
			(seal)				(signature of authorized representative)

Balance Sheet

as at 31 March 2014

Issuer: Ericsson Nikola Tesla d.d.
Item	AOP	Previous period	Current period
1	2	3	4
A) RECEIVABLES FOR REGISTARED UNPAID CAPITAL	001
B) NON CURRENT ASSETS (003+010+020+029+033)	002	152.568.929	146.094.430
I. INTANGIBLE ASSETS (004 do 009)	003	2.111.635	1.784.208
1. Research & Development expenditure	004
2. Patents, licences, royalties, trade marks, software&similar rights	005	2.111.635	1.784.208
3. Goodwill	006
4. Prepayments for intangible assets	007
5. Intangible assets under construction	008
6. Other intangible assets	009
II. PROPERTY, PLANT AND EQUIPMENT (011 do 019)	010	131.616.381	128.771.716
1. Land	011	15.605.344	15.605.344
2. Property	012	33.250.765	32.394.535
3. Plants and equipment	013	74.240.486	72.330.557
4. Tools, plants&vehicles	014	7.439.745	6.859.270
5. Biological asset	015
6. Prepayments for tangible assets	016
7. Assets under construction	017	972.924	1.476.840
8. Other tangible assets	018	107.115	105.170
9. Investments property	019
III. FINANCIAL ASSETS (021 do 028)	020	8.337.421	8.362.037
1. Investments in subsidiaries	021
2. Loans to subsidiaries	022
3. Participating interests (stakes)	023
4. Loans to participating interest	024
5. Investments in securities	025
6. Loans & deposits	026	8.297.421	8.322.037
7. Other non-current financial assets	027	40.000	40.000
8. Investment accounted by equity method	028
IV. RECEIVABLES (030 do 032)	029	10.503.492	7.176.469
1. Receivables from subsidiaries	030
2. Receivables from credit sales	031	6.273.938	2.939.201
3. Other receivables V. DEFERRED TAX ASSETS	032	4.229.554	4.237.269
C) CURENT ASSETS (035+043+050+058)	033 034	0 894.364.954	0 881.320.819
I. INVENTORIES (036 do 042)	035	51.506.038	60.665.683
1. Raw materials & consumables	036	3.930	3.709.502
2. Work in progress	037	51.470.692	56.924.702
3. Products	038
4. Merchandise	039
5. Prepayments for inventories	040	31.416	31.478
6. Other available-for-sale assets	041
7. Biological asset	042
II. RECEIVABLES (044 do 049)	043	321.685.979	297.477.159
1. Receivables for trade debt of subsidiaries	044	71.819.083	68.589.818
2. Trade receivables	045	246.151.673	225.446.441
3. Receivables for trade debts of participating entities	046
4. Amounts receivable from employees	047
5. Receivables from government agencies	048	1.201.552	1.184.785
6. Other receivables	049	2.513.672	2.256.114
III. FINANCIAL ASSETS (051 do 057)	050	109.844.746	104.027.925
1. Investments in subsidiaries	051
2. Loans to subsidiaries	052
3. Participating interests (stakes)	053
4. Loans to participating interest	054
5. Investments in securities	055	109.844.746	104.027.925
6. Loans & deposits	056
7. Other financial assets	057
IV. CASH AND CASH EQUIVALENTS	058	411.328.191	419.150.052
D) PREPAYMENTS AND ACCRUED INCOME	059	1.155.697	2.616.116
E) TOTAL ASSETS (001+002+034+059)	060	1.048.089.580	1.030.031.365
F) OFF-BALANCE SHEET ITEMS	061

EQUITY AND LIABILITES
A) EQUITY (063+064+065+071+072+075+078)	062	671.136.220	707.575.302
I. SHARE CAPITAL	063	133.165.000	133.165.000
II. CAPITAL RESERVES	064
III. RESERVES FROM PROFIT (066+067-068+069+070)	065	15.710.740	15.710.740
1. Legal reserves	066	6.658.250	6.658.250
2. Reserves for treasury shares	067	18.623.622	18.623.622
3. Treasury shares and stakes (less)	068	9.571.133	9.571.133
4. Statutory reserves	069
5. Other reserves	070
IV. REVALUATION RESERVES	071
V. RETAINED EARNINGS (073-074)	072	377.905.054	524.625.435
1. Retained earnings	073	377.905.054	524.625.435
2. Loss brought forward	074
VI. PROFIT OR LOSS FOR THE FINANCIAL YEAR (076-077)	075	144.355.426	34.074.127
1. Profit for the financial year	076	144.355.426	34.074.127
2. Loss for the financial year	077
VII. MINORITY INTEREST	078
B) PROVISIONS (080 do 082)	079	0	0
1. Provisions for redundancy costs	080
2. Provisions for tax obligations	081
3. Other provisions	082
C) NON-CURRENT LIABILITIES (084 do 092)	083	4.765.612	4.893.796
1. Amounts payable to subsidiaries	084
2. Liabilities for loans, deposits and other	085
3. Liabilities towards banks and other financial institutions	086	68.365	68.365
4. Amounts payable for prepayment	087
5. Trade payables	088
6. Amounts payable for securities	089
7. Liabilities toward participating interests	090
8. Other non-current liabilities	091	4.697.246	4.825.431
9. Deffered tax	092
D) CURRENT LIABILITIES (094 do 105)	093	223.128.563	163.077.049
1. Amounts payable to subsidiaries	094	60.936.236	51.814.574
2. Liabilities for loans, deposits and other	095
3. Liabilities towards banks and other financial institutions	096	308.019	332.343
4. Amounts payable for prepayment	097
5. Trade payables	098	68.633.562	39.719.653
6. Amounts payable for securities	099
7. Liabilities toward participating interests	100
8. Amounts payable to employees	101	73.802.627	49.708.091
9. Liabilities for taxes and contributions	102	19.448.119	21.502.388
10. Dividend payables	103
11. Liabilities directly associated with the assets classified as held for sale	104
12. Other current liabilities	105
E) ACCRUED CHARGES AND DEFERRED REVENUE	106	149.059.185	154.485.218
F) TOTAL EQUITY AND LIABILITIES (062+079+083+093+106)	107	1.048.089.580	1.030.031.365
G) OFF-BALANCE SHEET ITEMS	108
ANNEX TO THE BALANCE SHEET (to be filled in by entrepreneur submitting consolidated financial report)
A) CAPITAL AND RESERVES
1. Attributable to equity holders of the parent company's capital	109	671.136.220	707.575.302
2. Attributable to minority interest	110

Note 1.: APPENDIX TO THE BALANCE SHEET (to be filled in by entites who submitting consolidated financial statements).

for the period 01 January 2014 to 31 March 2014 INCOME STATEMENT

Issuer: Ericsson Nikola Tesla d.d.

Item	AOP	Previous period		Current period
		Cumulative	Quarter	Cumulative	Quarter
1	2	3	4	5	6
I. OPERATING INCOME (112+113)	111	334.038.647	334.038.647	320.450.706	320.450.706
1. Sales revenue	112	330.249.471	330.249.471	315.372.411	315.372.411
2. Other operating income II. OPERATING EXPENSES (115+116+120+124+125+126+129+130)	113 114	3.789.175 291.947.875	3.789.175 291.947.875	5.078.295 289.359.332	5.078.295 289.359.332
1. Changes in inventories of finished products and work in progress	115	-9.378.799	-9.378.799	-5.407.294	-5.407.294
2. Raw material and consumables used (117 do 119)	116	178.958.959	178.958.959	148.173.149	148.173.149
a) Cost of raw materials & consumables	117	122.328.114	122.328.114	91.617.711	91.617.711
b) Cost of goods sold	118
c) Other costs	119	56.630.845	56.630.845	56.555.438	56.555.438
3. Staff costs (121 do 123)	120	106.858.852	106.858.852	125.022.235	125.022.235
a) Net salaries b) Employee income tax and contributions	121 122	57.974.593 35.062.272	57.974.593 35.062.272	61.489.349 47.381.085	61.489.349 47.381.085
c) Employer's contributions	123	13.821.987	13.821.987	16.151.801	16.151.801
4. Depreciation and amortisation expense	124	9.376.842	9.376.842	10.934.880	10.934.880
5. Other costs	125	3.620.897	3.620.897	8.044.345	8.044.345
6. Impairment losses (127+128)	126	1.819.920	1.819.920	1.482.211	1.482.211
a) non-current assets (except financial assets)	127
b) current asssets (except financial assets)	128	1.819.920	1.819.920	1.482.211	1.482.211
7. Provisions 8. Other operating expenses	129 130	691.204	691.204	1.109.806	1.109.806
III. FINANCIAL INCOME (132 do 136)	131	6.862.905	6.862.905	2.982.752	2.982.752
1. Interest, foreign exhange gains, dividends and other income from related parties	132
2. Interest, foreign exchange gains, dividends and other income from non-related and other
entities	133	6.079.473	6.079.473	2.716.975	2.716.975
3. Income from associates and ownership interests	134
4. Unrealized gains	135
5. Other financial income	136	783.432	783.432	265.777	265.777
IV. FINANCIAL EXPENSES (138 do 141) 1. Interest, foreign exchange losses and other expenses with related parties	137 138	39.886	39.886
2. Interest, foreign exchange differences and other expenses with non-related and other
entities	139	39.886	39.886
3. Unrealized losses	140
4. Other financial expenses	141
V. SHARE OF INCOME OF ASSOCIATES	142
VI. SHARE OF LOSS OF ASSOCIATES	143
VII. EXTRAORDINARY - OTHER INCOME VIII. EXTRAORDINARY - OTHER EXPENSES	144 145
IX. TOTAL INCOME (111+131+142 + 144)	146	340.901.552	340.901.552	323.433.458	323.433.458
X. TOTAL EXPENSES (114+137+143 + 145)	147	291.987.760	291.987.760	289.359.332	289.359.332
XI. PROFIT OR LOSS BEFORE TAX (146-147)	148	48.913.791	48.913.791	34.074.127	34.074.127
1. Profit before tax (146-147)	149	48.913.791	48.913.791	34.074.127	34.074.127
2. Loss before tax (147-146)	150	0	0	0	0
XII. INCOME TAX EXPENSE	151
XIII. PROFIT OR LOSS FOR THE PERIOD (148-151) 1. Profit for the period (149-151)	152 153	48.913.791 48.913.791	48.913.791 48.913.791	34.074.127 34.074.127	34.074.127 34.074.127
2. Loss for the period (151-148)	154	0	0	0	0
ANNEX TO THE PROFIT AND LOSS ACCOUNT (to be filled in by entities submitting consolidated financial statements)
XIV. PROFIT OR LOSS FOR THE PERIOD
1. Attributable to owners of the company	155	48.913.791	48.913.791	34.074.127	34.074.127
2. Attributable to non-controlling interests	156
STATEMENTS OF COMPREHENSIVE INCOME (to be filled by entities who work in compliance with IFRS) I. PROFIT OR LOSS FOR THE PERIOD (= 152)	157	48.913.791	48.913.791	34.074.127	34.074.127
II. OTHER COMPREHENSIVE INCOME /LOSS BEFORE TAX (159 do 165)	158	0	0	0	0
1. Exchange differences arising from foreign operations	159	450	450	14.514	14.514
2. Revaluation of non-current assets and intangible assets	160
3. Gains or loss available for sale investments	161
4. Gains or loss on net movement on cash flow hedges	162
5. Gains or loss on net investments hedge	163
6. Share of the other comprehensive income/loss of associates	164
7. Acturial gain / loss on post employment benefit obligations	165
III. TAX ON OTHER COMPREHENSIVE INCOME OF THE PERIOD	166
IV. NET OTHER COMPREHENSIVE INCOME OR LOSS FOR THE YEAR (158-166)	167	450	450	14.514	14.514
V. TOTAL COMPREHENSIVE INCOME/LOSS FOR THE PERIOD (157+167)	168	48.914.241	48.914.241	34.088.641	34.088.641
APPENDIX Statement of Comprehensive Income (to be filled in by entities submitting consolidated financial statements) VI. TOTAL COMPREHENSIVE INCOME/LOSS FOR THE PERIOD
1. Attributable to owners of the company	169	48.914.241	48.914.241	34.088.641	34.088.641
2. Attributable to non-controlling interests	170
OPERATING INCOME		42.090.772	42.090.772	31.091.375	31.091.375

CASH FLOW STATEMENT - Indirect method in the period 01 January 2014 to 31 March 2014

Issuer: Ericsson Nikola Tesla d.d.
Item	AOP	Previous period	Current period
1	2	3	4
CASH FLOW FROM OPERATING ACTIVITIES
1. Profit before tax	001	48.913.791	34.074.127
2. Depreciation and amortisation	002	9.376.842	10.934.880
3. Increase in liabilities	003
4. Decrease in receivables	004		24.176.232
5. Decrease in inventories	005
6. Other increase in cash flow	006
I. Total increase in operating cash flow (001 do 006)	007	58.290.633	69.185.239
1. Decrease in liabilities	008	16.219.640	50.091.912
2. Increase in receivables	009	27.731.967
3. Increase in inventories	010	9.219.183	9.159.645
4. Other decrease in cash flow	011	3.737.037	75.250
II. Total decrease in operating cash flow (008 do 011)	012	56.907.827	59.326.807
A1) NET INCREASE IN OPERATING CASH FLOW (007-012)	013	1.382.806	9.858.432
A2) NET DECREASE IN OPERATING CASH FLOW
(012-007)	014
CASH FLOW FROM INVESTMENT ACTIVITIES
1. Proceeds from sale of property, plant and equipment	015	273.650	66.799
2. Net disposal of financial assets	016
3. Interest received	017	3.319.289	2.429.355
4. Dividend received	018
5. Other cash from investing activities	019		5.920.549
III. Total cash flow from investing activities (015 do 019)	020	3.592.939	8.416.702
1. Purchase of property, plant and equipment and intangible assets	021	13.413.691	11.431.546
2. Purchase of financial instruments	022	23.540.232
3. Other cash flow used in investing activites	023	73.282
IV. Total cash flow from investing activities (021 do 023)	024	37.027.205	11.431.546
B1) NET INCREASE IN CASH FLOW FROM INVESTING ACTIVITIES	025
(020-024) B2) NET DECREASE IN CASH FLOW FROM INVESTING ACTIVITIES
(024-020)	026	33.434.266	3.014.844
CASH FLOW FROM FINANCIAL ACTIVITIES
1. Proceeds from issuance of financial instruments	027
2. Proceeds from loans	028
3. Other cash flow from financial activities	029	2.882.005	987.290
V. Total cash flow from financial activities (027 do 029)	030	2.882.005	987.290
1. Repayment of interest-bearing borrowings	031	222.998
2. Dividend paid	032		9.017
3. Repayment of finance lease	033
4. Repurchase of treasury shares	034
5. Other cash flow used in financial activities	035
VI. Total cash flow used in financial activities (031 do 035)	036	222.998	9.017
C1) NET INCREASE IN CASH FLOW FROM FINANCIAL ACTIVITIES	037	2.659.007	978.273
(030-036) C2) NET DECREASE IN CASH FLOW FROM FINANCIAL ACTIVITIES
(036-030)	038
Total increase in cash flow (013 – 014 + 025 – 026 + 037 – 038)	039		7.821.861
Total decrease in cash flow (014 – 013 + 026 – 025 + 038 – 037)	040	29.392.453
Cash and cash equivalents at the beginning of the period	041	511.638.566	411.328.191
Increase in cash and cash equivalents	042		7.821.861
Decrease in cash and cash equivalents	043	29.392.453
Cash and cash equivalents at the end of the period	044	482.246.113	419.150.052

for the period from 31.3.2014 1.1.2014 to
Item	AOP	Previous period	Current period
1	2	3	4
1. Share capital	001	133.165.000	133.165.000
2. Capital reserves	002
3. Reserves from profit	003	34.916.456	15.710.740
4. Retained earnings	004	587.199.477	524.625.435
5. Profit or loss for the period	005	48.913.791	34.074.127
6. Revaluation of property, plant and equipment	006
7. Revaluation of intangible assets	007
8. Revaluation of financial financial assets available for sale	008
9. Other revaluations	009
10. Total capital and reserves (AOP 001 do 009)	010	804.194.725	707.575.302
11. Foreign exchange differences from investments in foreign operations	011	450	14.514
12. Current and deferred taxes	012
13. Cash flow hedge	013
14. Changes in accounting policies	014
15. Prior year adjustment	015
16. Other changes in equity	016
17. Total increase/decrease in equity (AOP 011 do 016)	017	450	14.514
17 a. Parent company share in subsidiary	018	450	14.514
17 b. Minority interest	019

Items that decrease equity have negative sign

Items from 001 to 009 are state of balance sheet date

Notes to the Financial Statements

1. Segment reporting

		Networks		Professional services		Support solutions		Unallocated		Total
	31.3.2014.	31.3.2013.	31.3.2014.	31.3.2013.	31.3.2014.	31.3.2013.	31.3.2014.	31.3.2013.	31.3.2014.	31.3.2013.
	'000 kn	'000 kn	'000 kn	'000 kn	'000 kn	'000 kn	'000 kn	'000 kn	'000 kn	'000 kn
Sales revenue - gross	161.556	193.689	146.318	128.222	9.854	10.095	0	0	317.728	332.005
Inter-segment sales	-1.635	-1.021	-718	-725	-3	-11	0	0	-2.356	-1.756
Sales revenue - net	159.921	192.668	145.600	127.497	9.851	10.084	0	0	315.372	330.249
Operating profit/(loss)	1.267	7.843	37.454	40.303	468	401	-8.097	-6.456	31.091	42.091

2. Transactions with related parties

	31.3.2014. '000 kn	31.3.2013. '000 kn
Total sales	133.118	127.982
Total purchases	93.772	132.150

3. Balances with related parties

	31.3.2014. '000 kn	31.12.2013 '000 kn
Receivable	68.590	71.819
Payable	51.815	60.936

4. Other notes to the financial statements are disclosed within the Management Board report.