Rapala VMC Oyj — Annual Report 2013

Mar 17, 2014

FINANCIAL STATEMENTS 2013

RAPALA VMC CORPORATION FINANCIAL STATEMENTS 2013

Review of the Board of Directors	2
Auditor's Report	6
Consolidated Financial Statements, IFRS
Consolidated Income Statement	7
Consolidated Statement of Comprehensive Income	7
Consolidated Statement of Financial Position	8
Consolidated Statement of Cash Flows	9
Consolidated Statement of Changes in Equity	10
Notes to Consolidated Financial Statements	11
Key Financial Figures
Scope of Activity and Profitability	46
Share Related Key Figures	47
Definition of Key Figures	48
Parent Company Financial Statements, FAS
Parent Company Income Statement	49
Parent Company Balance Sheet	49
Parent Company Statement of Cash Flows	50
Parent Company Statement of Changes in Equity	50
Notes to Parent Company Financial Statements	51
Risk Management	57
Shares and Shareholders	59
Board of Directors and Management	61

REVIEW OF THE BOARD OF DIRECTORS

MARKET SITUATION AND SALES

Year 2013 started on a growth trend in line with expectations. In the latter part of the year sales slowed down especially in Russia and some other East European countries, South Africa and in some Asian Pacific countries as economical uncertainties increased. In North America sales were supported by successful product introductions and favorable winter conditions. Sales were also supported by good performance in France, South America and in some Asian countries as well as in Russia despite the slowdown towards the end of the year. At the same time late spring and floods in Central Europe as well as a late start of the 2013/2014 winter season in Europe impacted sales negatively. Fluctuations in foreign exchange rates and growing economical uncertainties impacted consumer behavior and trading environment in several countries and put pressure in some retailers' financial position, as well as created some uncertainties to the coming season.

KEY FIGURES1)

EUR MILLION	2013	2012	2011
Net sales	286.6	290.7	279.5
EBITDA	33.6	32.7	37.7
Operating profit	26.1	25.9	30.7
Profit before taxes	20.6	21.0	25.2
Net profit for the period	16.1	14.0	17.2
Employee benefit expenses	64.0	62.6	62.4
Average personnel for the period, persons	2 428	2 127	2 208
Research and development expenses	1.6	2.0	2.1
as a percentage of net sales	0.6%	0.7%	0.7%
Net cash generated from operating activities	15.3	25.2	15.2
Total net cash used in investing activities	10.8	13.6	9.6
Net interest-bearing debt at the end of the period	96.3	89.9	91.1
Equity-to-assets ratio at the end of the period	44.5%	42.2%	43.2%
Debt-to-equity ratio (gearing) at the end of the period	71.2%	65.3%	67.1%
Return on equity	11.8%	10.2%	13.0%

Net sales were slightly below last year's level at EUR 286.6 million (EUR 290.7 million). Sales were heavily burdened by foreign exchange rates, primarily weakening of US Dollar, Russian Ruble and South African Rand. Changes in foreign exchange rates reduced the net sales by some EUR 11 million compared to last year. With comparable rates sales increased by 2% from last year.

Net sales of Group Products were at last year's level at EUR 176.3 million (EUR 176.4 million). Sales of Group Products and Third Party Products both suffered from unfavorable changes in foreign exchange rates and late spring. Excluding foreign exchange rates, Group Products' sales were above last year's level. Sales were supported by strong ice fishing sales in North America and increased sales of lures, hooks and fishing accessories, while winter sports equipment sales were down.

Sales of Third Party Products were down by 3% to EUR 110.5 million (EUR 114.3 million) resulting from decline in sales of third party fishing products. Excluding foreign exchange rates, sales were at last year's level. Year-end sales were supported by third

party ice fishing products in North America.

Net sales in North America were up by 6%. Currencies had a negative impact on sales compared to last year. With comparable exchange rates North American sales were up 10%. The growth came from strong ice fishing sales, new product launches and positive development in sales of group branded fishing products. In the US, consumer and retail sentiment is improving.

In Nordic counties, sales were down by 3%. Sales were impacted by a delayed start of the summer fishing season as well as suppliers' delivery problems hurting summer season sales.

Net sales in Rest of Europe decreased by 4%. Sales in Central and Eastern Europe were impacted by late spring and floods, weakening of currencies and increasing economical uncertainties as well as a delayed start of the 2013/2014 winter season. With comparable exchange rates sales were down by 2%. Sales were supported by good performance in France as well as in Russia, despite slowdown towards the end of the year. Macro-economic situation continued to burden sales in Spain and Hungary, and in the UK difficult market conditions and increasing competition impacted sales negatively. The restructuring of operations had adverse impact on Swiss sales.

In Rest of the World sales decreased by 7% burdened by foreign exchange rates, especially weakening of South African Rand, Australian Dollar and Japanese Yen. With comparable exchange rates quarterly sales were up by 5%. Sales were supported by the new distribution company in Chile as well as good sales in some Asian countries and in Latin America. South Africa continued to suffer from macro-economic uncertainties and weakening of the currency.

FINANCIAL RESULTS AND PROFITABILITY

Comparable operating profit, excluding non-recurring items and mark-to-market valuation of operative currency derivatives, reached last year's level at EUR 27.1 million (EUR 27.1 million). Comparable operating profit margin was 9.5% (9.3%). Profitability was supported by strong sales in North America and foreign exchange rate benefit on purchases. On the other hand, profitability was especially burdened by costs related to expansion and ramp-up of the lure factory in Batam as well as sales and margins lost due to a late start of the summer fishing season and increased uncertainties in several markets. Profitability was also negatively impacted by unfavorable change in product and customer mix and increased fixed costs.

Reported operating profit was EUR 26.1 million (EUR 25.9 million) and reported operating margin was 9.1% (8.9%). Reported operating profit included net loss of non-recurring items of EUR 1.3 million (EUR 0.6 million) consisting mainly of costs related to closing of lure manufacturing in China and restructuring in Switzerland. Reported operating profit included mark-to-market valuation gain of operative currency derivatives of EUR 0.3 million (EUR 0.6 million loss).

Operating profit for Group Products increased from last year to EUR 19.4 million (EUR 18.9 million) supported by increased sales, while negatively affected by costs related to expansion and rampup of lure production in Batam. Operating profit for Third Party Products decreased to EUR 6.7 million (EUR 7.0 million) burdened by change in product mix. Profitability of both operating segments suffered from lost sales due to late spring and growing economic

uncertainties as well as increased fixed costs.

Total financial (net) expenses were above last year's level at EUR 5.5 million (EUR 4.9 million). Total net interest and other financing expenses were EUR 3.7 million (EUR 4.0 million) and financial foreign exchange expenses (net) resulted in a loss of EUR 1.7 million (EUR 0.9 million).

Net profit for the period and earnings per share increased to EUR 16.1 million (EUR 14.0 million) and 0.32 EUR (0.26 EUR), impacted by positive adjustments to prior year taxes relating to disputes with Finnish tax authorities.

MANAGEMENT ANALYSIS1)

EUR MILLION	2013	2012
Net sales as reported	286.6	290.7
EBITDA as reported	33.6	32.7
Non-recurring items	1.1	0.6
Mark-to-market valuation of derivatives	-0.3	0.6
Comparable EBITDA2)	34.4	33.8
Operating profit as reported	26.1	25.9
Reported operating profit margin %	9.1%	8.9%
Non-recurring items	1.3	0.6
Mark-to-market valuation of derivatives	-0.3	0.6
Comparable operating profit2)	27.1	27.1
Comparable operating profit margin %	9.5%	9.3%

CASH FLOW AND FINANCIAL POSITION

Cash flow from operations was down from last year's record levels to EUR 15.3 million (EUR 25.2 million) driven by cash being tied up into working capital, especially inventories. Due to decreasing currency impact of EUR 7.2 million, balance sheet value of the Group's inventories remained at last year's level amounting to EUR 110.3 million (EUR 110.6 million). Working capital was impacted by the increased inventories resulting from transfer of production from China to Batam and slowing down of sales during the latter part of the year as well as timing of receivables tied up into the growing ice fishing business.

Net cash used in investing activities was EUR 10.8 million (EUR 13.6 million). Operative capital expenditure was EUR 10.7 million (EUR 7.7 million), driven by investments in Batam and setting up new ice drill manufacturing unit in Finland. 2012 investing activities included acquisition of the assets of Strike Master Corporation and Mora Ice brand with a total of EUR 6.7 million.

The liquidity position of the Group was good. Following the increased focus on cash management, cash and cash equivalents reduced to EUR 16.9 million (EUR 38.2 million) and undrawn committed long-term credit facilities amounted to EUR 78.5 million at the end of the period. Net interest-bearing debt increased to EUR 96.3 million (EUR 89.9 million) and gearing to 71.2% (65.3%). Equity-to-assets ratio improved to 44.5% (42.2%). The Group fulfills the financial covenants imposed by the credit facilities, and does not foresee any factors impairing this ability.

STRATEGY IMPLEMENTATION

Execution of Rapala Group's strategy of profitable growth is based on three cornerstones: brands, manufacturing and distribution, supported by strong corporate culture. In 2013 strategy implementation continued in various areas.

To strengthen its position in global ice drill business, the Group made a decision to establish own ice drill manufacturing operations in Korpilahti, Finland. In-house manufacturing of Mora ICE and Rapala-UR branded ice drills started during the last quarter of the year. In USA Otter ice fishing products were added to "The Ice Force" distribution platform for this season.

The expansion of lure manufacturing operations in Batam, Indonesia, accelerated towards the end of the year, making it already the largest in the world as number of employees more than tripled during the year. The ramp-up and transfer of production from the Group's own and subcontractors' facilities in China has been more challenging than expected, which together with costs associated with running two parallel manufacturing operations has burdened profitability this year. During fourth quarter Group made a decision to fully close down its own manufacturing operations in China by the end of Q2/2014.

The establishment of new VMC hook manufacturing unit in Batam was finalized during the first quarter and the production volumes were increased during the year.

During the first quarter the Group increased its ownership in Peltonen cross country ski factory to 100%. The operations of the Group's distribution company in Switzerland were restructured during the year.

Working capital and cash flow management was still one of the top priorities of the Group, and the Group continues to work to reduce the inventory levels and streamline the supply chain.

During the year the Group introduced several new products including exceptionally well received Rapala Scatter Rap and Storm Arashi lures, award winning Sufix NanoBraid fishing line and Rapala Eco Wear Reflection jacket as well as Angry Birds lures and other fishing equipment, which successfully expanded sales to new customer segments.

The Group continued to seek growth opportunities throughout the year and participated in various discussions and negotiations concerning acquisitions and business combinations.

PERSONNEL AND R&D

Number of personnel increased by 24% compared to last year and was 2 590 (2 090) at year-end and the average number of personnel increased by 14% to 2 428 (2 127), majority of the increase resulting from expansion of lure manufacturing operations in Batam which accelerated towards the end of the year.

Research and development expenses were close to last year's level at EUR 1.6 million (EUR 2.0 million).

ENVIRONMENTAL AND CORPORATE RESPONSIBILITY

The Group's operations are continuously developed into an even more sustainable direction to promote clean environment. Products, manufacturing processes and operating methods are developed to reduce the environmental impact throughout the products' lifecycle. The Group seeks to replace current raw materials with more environmentally friendly substances – yet maintaining the products' desirability. The Group develops the reporting and follow-up on environmental matters.

Environmental, economical and social responsibility issues are described in more detail in the Corporate Responsibility section of the corporate website (www.rapalavmc.com).

RISK MANAGEMENT

The objective of the Group's risk management is to support the implementation of the Group's strategy and execution of business targets. The Board evaluates the Group's financial, operational and strategic risk position on a regular basis and establishes related policies and instructions to be implemented and coordinated by the Group management. The principles of the Group's risk management are described in detail in the section Risk Management included in the consolidated financial statements.

GOVERNANCE AND SHARE INFORMATION

The Board updated and approved the Corporate Governance Statement that is available on corporate website.

For information on shares, shareholders, share-based payment programs and Board's authorizations, see the section Shares and Shareholders. Related party transactions and top management remuneration are disclosed in the note 27.

In December 2013 Rapala VMC Corporation announced a change in company's Board of Directors. Isabelle De Bardies resigned from the Board of Directors on December 4th, 2013 due to her new executive position outside the company. In 2013 one new member was appointed to the Executive Committee. For more information on members of the Board of Directors and Executive Committee, see the section Board of Directors and Management.

SHORT-TERM OUTLOOK

The Group's outlook for 2014 is stable, while cautious. The US retail and consumer sentiment is developing positively, supporting the sales. The Group has a strong competitive position, but the late winter and lack of snow in Finland, slowing down of business in Eastern Europe during the last quarter, heavy fluctuations in currencies and political unrest in some countries are raising

uncertainty and reducing short-term visibility. In the end of 2013, the order backlog was at last year's level.

Closing down own manufacturing operations in China and ramping up the new production in Batam will lead to improved efficiency and performance, but will still have adverse impact on profitability in 2014.

Assuming comparable translation exchange rates, the Group expects to maintain net sales and comparable operating profit (excluding non-recurring items and mark-to-market valuations of operative currency derivatives) at 2013 level.

PROPOSAL FOR PROFIT DISTRIBUTION

The Board of Directors proposes to the Annual General Meeting that a dividend of 0.24 EUR (0.23 EUR) per share is distributed from the Group's distributable equity and any remaining distributable funds are allocated to retained earnings. At December 31, 2013 the distributable equity totaled to EUR 24.1 million.

No material changes have taken place in the Group's financial position after the end of the financial year. The Group's liquidity is good and the view of the Board of Directors is that the distribution of the proposed dividend will not undermine this liquidity.

1) Comparative figures restated, see note 1. 2) Excluding non-recurring items and mark-to-market valuations of operative currency derivatives.

4

EQUITY-TO-ASSETS RATIO % 4)

DEBT-TO-EQUITY RATIO (GEARING) % 4)

PERSONNEL AT THE END OF THE PERIOD

DIVIDEND 1)/SHARE, EUR

NET SALES BY UNIT LOCATION

DIVIDEND 1)/EARNINGS RATIO, % 4) 80 88.5

NET SALES BY OPERATING SEGMENTS

Group Products 61%

Third Party Products 39%

EFFECTIVE DIVIDEND YIELD, % 3)

1) For the financial years 2) Board proposal 3) Share price Dec. 31 4) Comparative figures restated, see note 1.

AUDITOR'S REPORT

TO THE ANNUAL GENERAL MEETING OF RAPALA VMC CORPORATION

We have audited the accounting records, the financial statements, the report of the Board of Directors, and the administration of Rapala VMC Corporation for the year ended 31 December, 2013. The financial statements comprise the consolidated statement of financial position, income statement, statement of comprehensive income, statement of changes in equity and statement of cash flows, and notes to the consolidated financial statements, as well as the parent company's balance sheet, income statement, cash flow statement and notes to the financial statements.

RESPONSIBILITY OF THE BOARD OF DIRECTORS AND THE MANAGING DIRECTOR

The Board of Directors and the Managing Director are responsible for the preparation of consolidated financial statements that give a true and fair view in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU, as well as for the preparation of financial statements and the report of the Board of Directors that give a true and fair view in accordance with the laws and regulations governing the preparation of the financial statements and the report of the Board of Directors in Finland. The Board of Directors is responsible for the appropriate arrangement of the control of the company's accounts and finances, and the Managing Director shall see to it that the accounts of the company are in compliance with the law and that its financial affairs have been arranged in a reliable manner.

AUDITOR'S RESPONSIBILITY

Our responsibility is to express an opinion on the financial statements, on the consolidated financial statements and on the report of the Board of Directors based on our audit. The Auditing Act requires that we comply with the requirements of professional ethics. We conducted our audit in accordance with good auditing practice in Finland. Good auditing practice requires that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and the report of the Board of Directors are free from material misstatement, and whether the members of the Board of Directors of the parent company or the Managing Director are guilty of an act or negligence which may result in liability in damages towards the company or have violated the Limited Liability Companies Act or the articles of association of the company.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements and the report of the Board of Directors. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation of financial statements and report of the Board of Directors that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not

for the purpose of expressing an opinion on the effectiveness of the company's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements and the report of the Board of Directors.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

OPINION ON THE CONSOLIDATED FINANCIAL STATEMENTS

In our opinion, the consolidated financial statements give a true and fair view of the financial position, financial performance, and cash flows of the group in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU.

OPINION ON THE COMPANY'S FINANCIAL STATEMENTS AND THE REPORT OF THE BOARD OF DIRECTORS

In our opinion, the financial statements and the report of the Board of Directors give a true and fair view of both the consolidated and the parent company's financial performance and financial position in accordance with the laws and regulations governing the preparation of the financial statements and the report of the Board of Directors in Finland. The information in the report of the Board of Directors is consistent with the information in the financial statements.

Helsinki, 25 February 2014

Ernst & Young Oy

Authorized Public Accountant Firm

Mikko Järventausta

Authorized Public Accountant

Ernst & Young Oy, Elielinaukio 5 B, 00100 Helsinki

CONSOLIDATED FINANCIAL STATEMENTS, IFRS

CONSOLIDATED INCOME STATEMENT

EUR MILLION	2013	2012 Restated1)	NOTE
Net sales	286.6	290.7	2
Other operating income	0.8	1.3	4
Change in inventory of finished products and work in progress	2.2	-6.8
Production for own use	0.1	0.2
Materials and services	-136.7	-134.1	6
Employee benefit expenses	-64.0	-62.6	7
Other operating expenses	-54.9	-55.8	5
Share of results in associates and joint ventures	-0.5	-0.3	13
Operating profit before depreciation and impairments	33.6	32.7
Depreciation and impairments	-7.5	-6.8	11, 12
Operating profit	26.1	25.9
Financial income and expenses	-5.5	-4.9	9
Profit before taxes	20.6	21.0
Income taxes	-4.6	-7.1	10
NET PROFIT FOR THE PERIOD	16.1	14.0
Attributable to
Equity holders of the Company	12.5	10.1
Non-controlling interests	3.6	3.8
Earnings per share			29
Earnings per share, EUR	0.32	0.26
Diluted earnings per share, EUR	0.32	0.26
Weighted average number of shares, 1 000 shares	38 660	38 885
Diluted weighted average number of shares, 1 000 shares	38 660	38 885

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

EUR MILLION	2013	2012 Restated1)
Net profit for the period	16.1	14.0
Other comprehensive income (net of tax) *
Change in translation differences**	-7.1	-0.3
Defined benefit plans	0.1	-0.3
Cash flow hedging**
Changes during the period	-0.1	-0.9
Reclassification adjustments	1.0	0.3
Cash flow hedging total	0.9	-0.6
Net investments and related hedging** Changes during the period	-2.3	0.2
Net investments and related hedging total	-2.3	0.2
Other comprehensive income for the period, net of tax *	-8.4	-1.0
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD	7.7	12.9
Attributable to
Equity holders of the Company	5.1	9.2
Non-controlling interests	2.6	3.7

* The income tax relating to each of the component of the other comprehensive income is disclosed in the note 10.

** Item that may be reclassified subsequently to the statement of income. 1) See note 1

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

EUR MILLION	2013	2012 Restated2)	NOTE
ASSETS
Non-current assets
Goodwill	44.9	46.5	11
Trademarks	20.9	21.7	11
Customer relations	1.7	2.2	11
Other intangible assets	2.6	2.3	11
Land	1.8	1.8	12
Buildings and structures	7.4	7.9	12
Machinery and equipment	15.1	15.0	12
Other tangible assets	4.6	4.2	12
Advance payments and construction in progress	1.7	0.5	12
Investment in associates and joint ventures	0.8	1.3	13
Available-for-sale financial assets	0.3	0.3	14
Interest-bearing receivables 1)	3.0	3.7	15
Non-interest-bearing receivables	0.9	0.9	15
Deferred tax assets	8.1	8.9	10
Total non-current assets	113.7	117.1
Current assets
Inventories	110.3	110.6	16
Trade and other non-interest-bearing receivables	59.2	55.6	15
Income tax receivable	2.9	2.9
Interest-bearing receivables 1)	1.0	2.5	15
Cash and cash equivalents 1)	16.9	38.2	17
Total current assets	190.3	209.7
TOTAL ASSETS	304.1	326.8

EUR MILLION	2013	2012 Restated2)	NOTE
SHAREHOLDERS' EQUITY AND LIABILITIES
Equity
Share capital	3.6	3.6
Share premium fund	16.7	16.7
Fair value reserve	-1.4	-2.3
Fund for invested non-restricted equity	4.9	4.9
Own shares	-4.4	-3.4
Retained earnings	91.2	98.6
Net income for the period	12.5	10.1
Equity attributable to equity holders of the Company	123.1	128.3	18
Non-controlling interests	12.0	9.4
Total equity	135.1	137.7
Non-current liabilities
Interest-bearing liabilities 1)	39.4	78.7	23
Non-interest-bearing liabilities	2.7	4.8	24
Employee benefit obligations	1.9	1.9	19
Deferred tax liabilities	8.1	8.8	10
Provisions	0.1	0.1	20
Total non-current liabilities	52.2	94.3
Current liabilities
Interest-bearing liabilities 1)	77.8	55.5	23
Trade and other non-interest-bearing payables	37.9	38.5	24
Income tax payable	1.0	0.7
Provisions	0.1	0.0	20
Total current liabilities	116.7	94.8
TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES 304.1		326.8

1) Included in net interest-bearing debt. 2) See note 1

8

RAPALA VMC CORPORATION FINANCIAL STATEMENTS 2013

CONSOLIDATED STATEMENT OF CASH FLOWS

EUR MILLION	2013	2012 Restated1)	NOTE
Net profit for the period	16.1	14.0
Adjustments
Income taxes	4.6	7.1	10
Financial income and expenses	5.5	4.9	9
Reversal of non-cash items
Depreciation and impairments	7.5	6.8	11, 12
Share based payments	-0.3	0.3	7, 28
Exchange rate differences	0.5	1.3	9
Share of results in associated companies and joint ventures	0.5	0.2	13
Gains/losses on disposals of intangible, tangible assets and subsidiaries	0.1	-0.2
Other items	0.2	0.3
Total adjustments	18.6	20.6
Financial items
Interest paid	-3.5	-3.7
Interest received	0.3	0.6
Income taxes paid	-4.9	-7.7
Dividends received	0.0	0.0
Other financial items, net	-0.5	-2.8
Total Financial items	-8.6	-13.6
Change in working capital
Change in receivables	-6.7	-2.5
Change in inventories	-6.3	6.9
Change in liabilities	2.2	-0.1
Total change in working capital	-10.8	4.2
Net cash generated from operating activities	15.3	25.2
Net cash used in investing activities
Acquisition of intangible assets	-0.6	-0.5	11
Proceeds from sale of tangible assets	0.2	0.8	12
Acquisition of tangible assets	-10.1	-7.2	12
Mora Ice and Strikemaster acquisitions		-6.7	3
Acquisition of Sufix trademark	-0.7	-0.8	3
Acquisition of other subsidiaries, net of cash	0.0	0.0	3
Proceeds from disposal of Willtech Gift, net of cash	0.5	0.8	3
Change in interest-bearing receivables	-0.1	0.0
Total net cash used in investing activities	-10.8	-13.6

EUR MILLION	2013	2012 Restated1)	NOTE
Net cash generated from financing activities
Dividends paid to parent company shareholders	-8.9	-8.9
Dividends paid to non-controlling interest		-1.6
Purchase of own shares	-1.0	-0.7
Non-current loan withdrawals	9.5	93.2
Current loan withdrawals	120.5	130.4
Non-current loan repayments	-48.1	-24.7
Current loan repayments	-97.7	-189.7
Payment of finance lease liabilities	-0.1	-0.1
Total net cash generated from financing activities	-25.9	-2.2
Adjustments	1.5	0.2
Change in cash and cash equivalents	-19.8	9.6
Cash and cash equivalents at the beginning of the period	38.2	28.9
Foreign exchange rate effect	-1.4	-0.4
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD	16.9	38.2	17

1) See note 1

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

		ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY
				FUND FOR
		SHARE		INVESTED NON				NON
EUR MILLION	SHARE CAPITAL	PREMIUM FUND	FAIR VALUE RESERVE	RESTRICTED EQUITY	OWN SHARES	TRANSLATION DIFFERENCES	RETAINED EARNINGS	CONTROLLING INTEREST	TOTAL EQUITY
Equity on Jan. 1, 2012	3.6	16.7	-1.6	4.9	-2.6	-4.1	111.8	7.2	135.8
Impact of new standards							-0.1		-0.1
Restated Equity on Jan. 1, 2012	3.6	16.7	-1.6	4.9	-2.6	-4.1	111.7	7.2	135.7
Net profit for the period1)							10.1	3.8	14.0
Other comprehensive income *
Translation differences						-0.2		-0.1	-0.3
Defined benefit plans1)							-0.3		-0.3
Cash flow hedging			-0.6						-0.6
Net investments and related hedging						0.2			0.2
Total comprehensive income1)			-0.6			0.0	9.8	3.7	12.9
Purchase of own shares					-0.7				-0.7
Dividends paid							-8.9	-1.5	-10.4
Share based payment							0.3		0.3
Other changes								0.0	0.0
EQUITY ON DEC. 31, 20121)	3.6	16.7	-2.3	4.9	-3.4	-4.1	112.8	9.4	137.7
Net profit for the period							12.5	3.6	16.1
Other comprehensive income *
Translation differences						-6.2		-1.0	-7.1
Defined benefit plans							0.1		0.1
Cash flow hedging			0.9						0.9
Net investment and related hedging						-2.3			-2.3
Total comprehensive income			0.9			-8.4	12.6	2.6	7.7
Purchase of own shares					-1.0				-1.0
Dividends paid							-8.9		-8.9
Share based payment							-0.3		-0.3
Other changes							0.0	0.0	0.0
EQUITY ON DEC. 31, 2013	3.6	16.7	-1.4	4.9	-4.4	-12.5	116.2	12.0	135.1

* Net of tax 1) Restated, see note 1

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

ACCOUNTING PRINCIPLES 1 FOR THE CONSOLIDATED ACCOUNTS

COMPANY'S BACKGROUND

Rapala VMC Oyj ("company") is a Finnish public limited liability company organized under the laws of Finland, domiciled in Asikkala and listed on the NASDAQ OMX Helsinki stock exchange since 1998. The parent company Rapala VMC Oyj and its subsidiaries ("the Group") operate in some 40 countries and the company is one of the leading fishing tackle companies in the world.

The consolidated financial statements have been prepared for the accounting period of 12 months from January 1 to December 31, 2013. The Board of Directors of the company has approved these financial statements for publication at its meeting on February 5, 2014. Under Finland's Companies Act, shareholders have the option to accept or reject the financial statements in a meeting of shareholders, which will be held after the publication of the financial statements. The meeting has also the option of changing the financial statements.

A copy of the consolidated financial statements is available at the Group's website www.rapalavmc.com or from Arabiankatu 12, 00560 Helsinki, Finland.

BASIS FOR PREPARING THE CONSOLIDATED FINANCIAL STATEMENTS

The consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards (IFRS), including IAS and IFRS standards as well as the SIC and IFRIC interpretations in effect on December 31, 2013. The term 'IFRS standards' refers to standards and interpretations which are approved and adopted by the European Union (regulation EY 1606/2002) and thus are in force in the Finnish legislation. The Group has not early adopted any new, revised or amended standards or interpretations.

The consolidated financial statements have been prepared on a historical cost basis, unless otherwise stated.

APPLIED NEW AND AMENDED STANDARDS AND INTERPRETATIONS

The Group adopted in 2013 the following revised or amended standards.

• • IFRS 7 Financial Instruments: Disclosures (amendment) and IAS 32 Financial Instruments: Presentation - Offsetting Financial Assets and Liabilities (amendment). The amendments to the standards affect on the requirement to offset financial assets and liabilities and related disclosure requirements. The changes did not have a material impact on the Group's consolidated financial statements.
• • IAS 1 Presentation of Items of Other Comprehensive Income (amendment). The amendment changed the grouping of items presented in other comprehensive income. Items that would be reclassified to profit or loss at future point of time are presented separately from items that will never be reclassified.
• • IFRS 13 Fair Value Measurement. The new standard describes how to measure fair value where fair value is required or permitted by

IFRS. The adoption of the new standard added notes related to fair value measurements. The change did not have a material impact on the Group's consolidated financial statements.

• IAS 19 Employee Benefits (amendment). The standard amendment eliminates the so-called corridor approach. Under the revised standard all actuarial gains and losses related to defined benefit plans are recognized immediately as they occur and in full in other comprehensive income. These items are permanently excluded from the consolidated income statement. Previously actuarial gains and losses were deferred in accordance with the corridor method.

The standard amendment has been applied retrospectively, and restatements to comparative figures in the Group's consolidated income statement, balance sheet and statement of comprehensive income are shown in the table below. Revised disclosure requirements are presented in the note 19 of the consolidated financial statements. The change also impacted key figures, which have been restated in this financial statement.

IMPACT FROM RETROSPECTIVE APPLICATION OF REVISED IAS 19 ON CONSOLIDATED FINANCIAL STATEMENTS 2012

EUR MILLION		REPORTED ADJUSTMENT ADJUSTED
Impact on consolidated income statement
Personnel expenses	62.6	0.0	62.6
Operating profit	25.9	0.0	25.9
Income taxes	7.1	0.0	7.1
Net profit for the period	13.9	0.0	14.0
Impact on statement of financial position
Deferred tax assets Jan 1, 2012	9.3	0.0	9.3
Change in deferred tax assets, income statement	-0.8	0.0	-0.8
Change in deferred tax assets, other comprehensive income	0.2	0.1	0.3
Deferred tax assets, Dec 31, 2012*	8.7	0.2	8.9

*) Included in non-current non-interest bearing assets

Employee benefit obligations Dec 31, 2012*	1.4	0.5	1.9
Effect of any curtailments or settlements	-0.1	-	-0.1
Period change, other comprehensive income	-	0.4	0.4
Period change, income statement	0.1	0.0	0.1
Employee benefit obligations, Jan 1, 2012	1.3	0.1	1.4
Retained earnings Dec 31, 2012	113.2	-0.3	112.8
Other changes	-8.7	-	-8.7
Other comprehensive income for the period	-	-0.3	-0.3
Net profit for the period	10.1	0.0	10.1
Retained earnings Jan 1, 2012	111.8	-0.1	111.7

*) Included in non-current non-interest bearing liabilities

Additionally, the IFRS standards' annual improvement project's amendments which have been approved for application in the EU have been taken into account in the consolidated financial statements.

ADOPTION OF NEW AND AMENDED STANDARDS AND INTERPRETATIONS IN 2014–2017

In 2014, the Group will adopt the following new, revised or amended standards.

• • IFRS 10 Consolidated Financial Statements and IAS 27 Separate Financial Statements (revised). The new IFRS 10 standard replaces the portion of current IAS 27 that addresses to the accounting for consolidated financial statements. The new standard changes the definition of control and may in some cases change whether an entity is consolidated. The change is not expected to have a material impact on the Group's consolidated financial statements.
• • IFRS 11 Joint Arrangements and IAS 28 Investments in Associates and Joint Ventures (revised). The new IFRS 11 replaces the current IAS 31 Interest in Joint Ventures. IAS 28 was also amended to include the application of the equity method to investments in joint ventures and associates. The changes are not expected to have a material impact on the Group's consolidated financial statements.
• • IFRS 12 Disclosures of Interest in Other Entities (revised). The new standard gathers all disclosure requirements related to interest in other entities, and also adds several new disclosure requirements mainly regarding subsidiaries with a material non-controlling interest. The change is not expected to have a material impact on the Group's consolidated financial statements.
• • IAS 36 Impairment of assets (amendment). The change harmonizes the disclosure requirements concerning recoverable amount of non-financial assets regardless whether the company uses fair value less costs of disposal method or value in use method. The change is not expected to have a material impact on the Group's consolidated financial statements.
• • IAS 39 Financial Instruments: Recognition and Measurement (amendment). According to the amendment, hedge accounting can be continued in certain circumstances. The change is not expected to have a material impact on the Group's consolidated financial statements.

In 2015 or later, the Group will adopt the following new, revised or amended standards and interpretations.

• • IFRS 9 Financial Instruments (effective for annual periods beginning on or after January 1, 2015). This new standard will gradually replace the current standard IAS 39 Financial Instruments: Recognition and Measurement. The Group investigates this new standard's impact on the Group's consolidated financial statements. This new standard has not yet been approved for application in the EU.
• • IFRIC 21 Levies (effective for annual periods beginning on or after January 1, 2014). Interpretation defines when a levy is recognized as obligation event and liability. The interpretation is not expected to have a material impact on the Group's consolidated financial statements. The interpretation has not yet been approved for application in the EU.

CONSOLIDATION PRINCIPLES

The consolidated financial statements comprise the financial statements of the company and its subsidiaries in which it holds, directly or indirectly, over 50% of the voting rights or other governing power. The financial statements of the subsidiaries are prepared for the same accounting period as the company, using consistent accounting policies.

Acquired subsidiaries are accounted for using the acquisition cost method, according to which the assets and liabilities of the acquired company are measured at fair value at the date of

acquisition. The excess of the consideration over the fair value of net assets acquired is recognized as goodwill. If the cost of acquisition is less than the fair value of the Group's share of the net assets acquired, the difference is recognized directly through income statement. Goodwill on consolidation is not amortized but tested for impairment annually. Consideration includes the fair value of any contingent consideration arrangement. Also, cost directly related to acquisition were included in the cost of acquisition up to 1 January 2010. The consolidated financial statements include the results of acquired companies for the period from the completion of the acquisition. Conversely, divestments are included up to their date of sale.

Associated companies are companies where the Group holds voting rights of 20–50% and in which the Group has significant influence, but not control. Joint ventures are companies, over which the Group has contractually agreed to share control with another venturer. Associated companies and joint ventures are included in the consolidated financial statements using the equity method. Under the equity method, the Group's share of the profit or loss of an associate or a joint venture is recognized in the consolidated income statement before operating profit.

The Group's interest in an associated company or a joint venture is carried in the balance sheet at an amount that reflects the Group's share of the net assets of the associate or joint venture together with goodwill on acquisition, as amortized, less any impairment. Unrealized gains, if any, between the Group and the associated companies or joint ventures are eliminated to the extent of the Group's ownership. Associated companies' and joint ventures' financial statements have been converted to correspond with the accounting principles in use in the Group. If the Group's share of losses exceeds the carrying amount of the investment, the carrying amount is reduced to nil and any recognition of further losses ceases unless the Group has incurred obligations in respect of the associated companies or joint venture.

The investments in subsidiaries have been eliminated using the acquisition cost method. All transactions between Group companies as well as assets and liabilities, dividends and unrealized internal margins in inventories and tangible assets have been eliminated in the consolidated financial statements. Noncontrolling interest is presented separately from the net profit and disclosed as a separate item in the equity in accordance with the share of the non-controlling interest. All transactions with non-controlling interests are recorded in equity when the parent company remains in control. When the Group loses the control in a subsidiary, the remaining investment is recognized at fair value through the income statement.

FOREIGN CURRENCY TRANSACTIONS AND TRANSLATIONS

Each entity in the Group determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency.

Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency rate of exchange ruling at the balance sheet date. Non-monetary items denominated in foreign currency, measured at fair value, are translated using the exchange rates at the date when the fair value was determined. Other non-monetary items have been translated into the functional currency using the exchange rate on the date of the transaction. Foreign exchange gains and losses for operating business items are recorded in the appropriate income statement account before operating profit. Foreign exchange gains and losses from the translation of monetary interest-bearing assets and liabilities denominated in foreign currencies are

recognized in financial income and expenses. Exchange differences arising on a monetary item that forms a part of a net investment in a foreign operation are recognized in the statement of other comprehensive income and recognized in profit or loss on disposal of the foreign operation.

The consolidated financial statements are presented in euros, which is the company's functional and reporting currency. Income statements of subsidiaries, whose functional and reporting currencies is not euro, are translated into the Group reporting currency using the average exchange rate for the year. Their balance sheets are translated using the exchange rate of balance sheet date. All exchange differences arising on the translation are entered in the statement of other comprehensive income and presented in equity. The translation differences arising from the use of the purchase method of accounting and after the date of acquisition as well as fair value changes of loans which are hedges of such investments are recognized in statement of other comprehensive income and presented in equity. On the disposal of a subsidiary, whose functional and reporting currency is not euro, the cumulative translation difference for that entity is recognized in the income statement as part of the gain or loss on the sale.

Any goodwill arising on the acquisition of a foreign company and any fair value adjustments to the carrying amounts of assets and liabilities arising on the acquisition are treated as assets and liabilities of the foreign subsidiary and translated using the exchange rate of balance sheet date. Goodwill and fair value adjustments arising from the acquisition prior to January 1, 2004 have been treated as assets and liabilities of the Group, i.e. in euros.

REVENUE RECOGNITION

Net sales comprise of consideration received less indirect sales taxes, discounts and exchange rate differences arising from sales denominated in foreign currency. Sales of goods are recognized after the significant risks and rewards of ownership of the goods have passed to the buyer and no significant uncertainties remain regarding the consideration, associated costs and possible return of goods. The costs of shipping and distributing products are included in other operating expenses. Revenues from services are recorded when the service has been performed.

Rental income arising from operating leases is accounted for on a straight-line basis over the lease terms. Royalty income is recorded according to the contents of the agreement. Interest income is recognized by the effective yield method. Dividend income is recognized when the company has acquired a right to receive the dividends.

INCOME TAXES

The Group's income tax expense includes taxes of the Group companies based on taxable profit for the period, together with tax adjustments for previous periods and the change in deferred income taxes. The income tax effects of items recognized directly in other comprehensive income are similarly recognized. The current tax expense for the financial year is calculated from the taxable profit based on the valid tax rate of each country. The tax is adjusted with possible taxes related to previous periods. The share of results in associated companies is reported in the income statement as calculated from net profit and thus including the income tax charge.

Deferred taxes are provided using the liability method, as measured with enacted tax rates, to reflect the temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. The main temporary differences arise from the depreciation difference on tangible assets, fair valuation of net assets in acquired companies, intra-group inventory profits, defined benefit plans, inventories and other provisions, untaxed reserves and tax losses carried forward. Temporary differences are recognized as a deferred tax asset to the extent that it is probable that future taxable profits will be available, against which the deductible temporary difference can be utilized.

RESEARCH AND DEVELOPMENT COSTS

Research and development costs are expensed as they are incurred, unless they relate to a clearly defined project that meets certain criteria. Development costs for such projects are capitalized if they are separately identifiable and if the products are assessed to be technically feasible and commercially viable and the related future revenues are expected to exceed the aggregate deferred and future development costs and related production, selling and administrative expenses, and if adequate resources exist or will be available to complete the project. Capitalized development costs include all directly attributable material, employee benefit and testing costs necessary to prepare the asset to be capable of operating in the manner intended. Research and development costs that were initially recognized as an expense are not to be capitalized at a later date.

Amortization of such a product is commenced when it is available for use. Unfinished products are tested annually for impairment. Capitalized development expenses are amortized on a straight-line basis over their expected useful lives, a maximum of five years.

GOODWILL

Goodwill represents the excess of the cost of an acquisition over the fair value of the Group's share of the net assets of the subsidiary, associated undertaking or joint venture acquired after January 1, 2004. Until 31.12.2009, any costs directly attributable to the business combination, such as professional fees, were included to the cost of an acquisition. From 1.1.2010 onwards, costs related to acquisitions are recognized directly to income statement. Goodwill from the combination of operations acquired prior to January 1, 2004 corresponds to the carrying amount according to the previous financial statement standards, which has been used as the assumed acquisition cost according to IFRS.

Goodwill is tested annually for impairment. For this purpose, goodwill has been allocated to cash generating units. Goodwill is measured at cost less any accumulated impairment loss, and is not amortized.

INTANGIBLE ASSETS

Intangible assets include customer relations, trademarks, capitalized development expenses, patents, copyrights, licenses and software. An intangible asset is recognized in the balance sheet only if it is probable that the future economic benefits that are attributable to the asset will flow to the Group, and the cost of the asset can be measured reliably. Intangible assets are stated at cost, amortized on a straight-line basis over the expected useful lives which vary from 3 to 15 years and adjusted for any impairment charges.

Trademarks and other intangible assets whose useful life is estimated to be indefinite are estimated to affect cash flow accumulation for an undefined period of time. The expected useful life for most trademarks is indefinite and therefore they are not amortized. These intangibles are measured at cost less any accumulated impairment loss and not amortized. Intangible assets with indefinite useful lives are tested for impairment annually. The valuation of intangible assets acquired in a business combination is based on fair value as at the date of acquisition.

Expected useful lives and indefinite lives of intangible assets are reviewed at each balance sheet date and, where they differ significantly from previous estimates, amortization periods are changed accordingly.

TANGIBLE ASSETS

Tangible assets are stated at historical cost, amortized on a straight-line basis over the expected useful life and adjusted for any impairment charges. The valuation of tangible assets acquired in a business combination is based on fair value as at the date of acquisition. Land is not depreciated as it is deemed to have an indefinite life.

Depreciation is based on the following expected useful lives:
Buildings and structures	10–25 years
Machinery and equipment	5–10 years
Other tangible assets	3–10 years

Expected useful lives of tangible assets are reviewed at each balance sheet date and, where they differ significantly from previous estimates, depreciation periods are changed accordingly. Ordinary maintenance and repair costs are expensed as incurred. The cost of significant renewals and improvements are capitalized and depreciated over the remaining useful lives of the related assets. Gains and losses on sales and disposals are determined by comparing the received proceeds with the carrying amount and are included in the income statement in other operating income and expenses.

Depreciation of a tangible asset is discontinued when the tangible asset is classified as being held-for-sale in accordance with IFRS 5 standard Non-Current Assets Held-for-sale and Discontinued Operations.

BORROWING COSTS

Borrowing costs, that are directly attributable to the acquisition, construction or production of a qualifying asset, are capitalized as part of the cost of that asset. Other borrowing costs are expensed when incurred.

GOVERNMENT GRANTS

Government or other grants are recognized in the income statement as other operating income on a systematic basis over the periods necessary to match them with the related costs, which they are intended to compensate. Government grants relating to purchase of tangible assets are recognized as revenue on a systematic basis over the useful life of the asset when there is reasonable assurance that the grant will be received and all attaching conditions will be complied with. In the balance sheet, grants are deducted from the value of the asset they relate to. The grants are recognized to decrease depreciations over the useful life of the asset. Currently, all grants of the Group have been recognized in the income statement as other operating income.

IMPAIRMENTS OF TANGIBLE AND INTANGIBLE ASSETS

The carrying amounts of tangible and intangible assets are reviewed at each balance sheet date to determine whether there is any indication of impairment. If indication exists, the recoverable amount is measured. Indications of potential need for impairment may be for example changes in market conditions and sales prices, decisions on significant restructurings or change in profitability. Goodwill, intangible assets with indefinite useful lives and unfinished intangible assets are in all cases tested annually. For the purposes of assessing impairment, assets are grouped at the

lowest cash generating unit level for which there are separately identifiable, mainly independent, cash inflows and outflows.

An impairment loss is the amount by which the carrying amount of the assets exceeds the recoverable amount. The recoverable amount is determined by reference to discounted future net cash flows expected to be generated by the asset. Discount rate used is a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the asset. Impairment loss is immediately recognized in the income statement. Impairment losses attributable to a cashgenerating unit are used to deducting first the goodwill allocated to the cash-generating unit and, thereafter, the other assets of the unit on an equal basis. The useful life of the asset to be depreciated is reassessed in connection with the recognition of the impairment loss. A previously recognized impairment loss is reversed only if there has been a change in the estimates used to determine the recoverable amount. However, the reversal must not cause that the adjusted value is higher than the carrying amount that would have been determined if no impairment loss had been recognized in prior years. Impairment losses recognized for goodwill are not reversed.

ASSETS HELD-FOR-SALE

Non-current assets (or a disposal group) are classified as heldfor-sale, if their carrying amount will be recovered principally through the disposal of the assets rather than through continuing use. For this to be the case, the sale must be highly probable, the asset (or disposal group) must be available for immediate sale in its present condition subject only to terms that are usual and customary, the management must be committed to selling and the sale should be expected to qualify for recognition as a completed sale within one year from the date of classification.

Non-current assets held-for-sale (or assets included in the disposal group) are measured at the lower of carrying amount and fair value less estimated selling expenditure. After an asset has been classified as held-for-sale, it is not depreciated. If the classification criterion is not met, the classification is reversed and the asset is measured at the lower of carrying amount prior to the classification less depreciation and impairment, and recoverable amount. A non-current asset held-for-sale and assets included in the disposal group classified as held-for-sale are disclosed separately from the other asset items.

ACCOUNTING FOR LEASES

Group as a lessee

Leases of tangible assets, where the Group has substantially all the rewards and risks of ownership, are classified as finance leases. Finance leases are capitalized at the inception of the lease at the lower of the fair value of the leased asset or the estimated present value of the underlying lease payments.

Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. The corresponding rental obligations, net of finance charges, are included in interest-bearing liabilities with the interest element of the finance charge being recognized in the income statement over the lease period. Tangible assets acquired under finance lease contracts are depreciated over the shorter of the estimated useful life of the asset or lease period.

Leases of tangible assets, where the lessor retains all the risks and benefits of ownership, are classified as operating leases. Payments made there under, and under rental agreements, are expensed on a straight-line basis over the lease periods. Received incentives are deducted from the paid leases based on the time elapse of benefit.

Currently the Group does not have other arrangements that contain a lease.

Group as a lessor

Those leases under which the Group is a lessor are classified as operating leases. Leased assets are presented in the lessor's balance sheet under tangible assets according to the nature of the asset. They are depreciated over their estimated useful lives in accordance with the depreciation policy used for comparable assets in own use. Lease income is recognized in the income statement on a straight-line basis over the lease term.

FINANCIAL ASSETS

Financial assets are classified as financial assets at fair value through profit or loss, financial assets held-to-maturity, loans and receivables, available-for-sale financial assets or as derivatives designated as hedging instruments in an effective hedge. The Group determines the classification of its financial assets after initial recognition and, where allowed and appropriate reevaluates this designation at each financial year-end. Financial assets include current and non-current assets and they can be interest-bearing or non-interest-bearing.

Financial assets at fair value through profit or loss include financial assets held-for-trading and financial assets designated upon initial recognition as at fair value through profit or loss. The Group has not applied the fair value option. Financial assets are classified as held-for-trading if they are acquired for the purpose of selling in the near term. All of the Group's currency derivatives, which do not qualify for hedge accounting, are classified as financial assets held-for-trading. Financial assets classified as held-for-trading are measured at fair value. Unrealized and realized changes in fair value are recognized in the income statement.

Non-derivative financial assets with fixed or determinable payments and fixed maturity are classified as held-to-maturity when the Group has a positive intention and ability to hold to maturity. They are measured at amortized cost using the effective interest method,

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables are measured at amortized cost using the effective interest rate method less any allowance for impairment. Initially recognized amount includes directly attributable transaction costs. Gains and losses are recognized in the income statement when loans and receivables are derecognized, impaired, and through the amortization process.

Financial assets that are not classified in the preceding categories are classified as available-for-sale. When available-forsale financial assets are recognized initially, they are measured at fair value by using quoted market rates and market prices, discounted cash flow analyses and other appropriate valuation models. Certain unlisted shares for which fair values cannot be measured reliably are reported at cost less impairment. The fair value changes of available-for-sale financial assets, net of tax, are recognized as other comprehensive income. Changes in fair value are transferred from the statement of other comprehensive income to the income statement when the instrument is sold or its value has fallen so that an impairment loss has to be recognized for the instrument. Purchases and sales of available-for-sale financial assets are recognized on the trade date.

DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGE ACCOUNTING

The Group is exposed to financial risks related especially to changes in foreign currency exchange rates and interest rates for loans and borrowings. Derivative financial instruments are used, from time to time, to hedge financial risk. All derivatives are initially recognized at fair value on the date derivative contract is entered into, and are subsequently remeasured at fair value on each balance sheet date. Determination of fair values is based on quoted market prices and rates, discounting of cash flows and option valuation models. The fair values of these instruments are either computed by Bloomberg market data tool by the company or received from the respective bank. Currently, the Group does not have embedded derivatives.

Derivatives may be designated as hedging instruments, in which case hedge accounting is applied. At the inception of a hedge relationship, the Group designates and documents the hedge relationship to which the Group wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge. The documentation includes identification of the hedging instrument, the hedged item or transaction, the nature of the risk being hedged and how the entity will assess the effectiveness of changes in the hedging instrument's fair value in offsetting the exposure to changes in the hedged item's fair value or cash flows attributable to the hedged risk. Such hedges are expected to be highly effective in achieving offsetting changes in fair value or cash flows and are assessed on an ongoing basis to determine that they actually have been highly effective throughout the financial reporting periods for which they were designated. In the case hedge accounting is applied, the accounting for hedging instruments is dependent on the particular nature of the hedging relationship.

In cash flow hedges, changes in the fair value of derivative financial instruments that are designated and effective as hedges of future cash flows are recognized as other comprehensive income and the ineffective portion is recognized immediately in the income statement. Accumulated fair value changes recognized in the statement of other comprehensive income are reclassified into income statement in the period when the hedged cash flow affects income. Changes in fair value of derivative instruments are recognized in the income statement based on their nature either in the operative costs if the hedged item is an operative foreign currency transaction or as financial income or expenses, if the hedged item is a monetary transaction.

Changes of the fair value of derivative financial instruments that are designated and qualify as fair value hedges are recorded in the income statement together with the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk.

The changes in the fair values of derivatives that are designated as hedg¬ing instruments but are not accounted for according to the principles of hedge accounting are recognized in the income statement based on their nature either in the operative costs, if the hedged item is an operative transaction, or as financial income or expenses, if the hedged item is a monetary transaction.

In principal, the fair values of derivative instruments are presented in the statement of financial position under short-term or long-term non-interest bearing assets or liabilities based on their maturity. Derivative instruments that are designated and qualify as fair value hedges of monetary assets or liabilities, are presented in the same group of interest-bearing assets or liabilities as the hedged instrument.

Effective portion of changes in the fair values of foreign currency hedges used against the translation differences arising from the consolidation of net investments in foreign subsidiaries are recognized in translation differences in the statement of other comprehensive income. The ineffective portion is recognized in

financial income and expenses. Accumulated fair value changes recognized in the items of other comprehensive income are reclassified into income statement if the hedged subsidiary is disposed of partially or in its entity.

FINANCIAL LIABILITIES

Financial liabilities are classified into the following categories: derivatives designated as hedging instruments in an effective hedge, financial liabilities at fair value through profit or loss (including other derivatives) and financial liabilities measured at amortized cost. Financial liabilities, except derivatives, are initially recognized at the fair value of the consideration received plus directly attributable transactions costs. After initial recognition, they are subsequently measured at amortized cost using the effective interest method. Also commercial paper programs are measured at amortized cost. Gains and losses are recognized in the income statement when the liabilities are derecognized, impaired and through the amortization process.

Financial liabilities include current and non-current liabilities and they can be interest-bearing or non-interest-bearing. Contingent considerations of business combinations are classified as non-interest-bearing financial liabilities.

RECOGNITION AND DERECOGNITION OF FINANCIAL ASSETS AND LIABILITIES

Financial assets and liabilities, except for derivatives and available-for-sale financial assets, are recognized at the settlement date. A financial asset or a financial liability is recognized on the balance sheet when, and only when, the Group becomes a party to the contractual provisions of the financial instrument.

A financial asset is derecognized when, and only when the contractual rights to the cash flows from the financial asset expire or when it transfers the financial asset, so that all the risks and rewards of ownership of the financial asset are substantially transferred. A financial liability or a part of a financial liability is removed from the balance sheet when, and only when, it is extinguished, that the obligation specified in the contract is discharged or cancelled or expires.

IMPAIRMENT OF FINANCIAL ASSETS

The Group assesses at each balance sheet date whether a financial asset or group of financial asset is impaired. An impairment loss in respect of loans and receivables is measured as the difference between its carrying amount, and the present value of the estimated future cash flows discounted at the original effective interest rate. An impairment loss in respect of an available-for-sale financial asset is measured as a difference between its acquisition costs and its current fair value, less any impairment loss on that financial asset previously recognized in the income statement. An impairment loss in respect of an unquoted equity instrument that is not carried at fair value, because its fair value cannot be reliably measured, is measured as the difference between the carrying amount of the financial asset and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset.

All impairment losses are recognized in the income statement. Any cumulative loss in respect of an available-for-sale financial asset recognized previously in the items of other comprehensive income is reclassified into income statement when the asset is sold or when the impairment is permanent.

A previously recognized impairment loss is reversed if the

reversal can be related objectively to an event occurring after the impairment loss was recognized. For financial assets amortized at cost and available-for-sale financial assets that are debt securities, the reversal is recognized in the income statement. For available-for-sale financial assets that are equity securities, the reversal is recognized in the statement of other comprehensive income. An impairment loss in respect of an unquoted equity instrument that is not carried at fair value, because its fair value cannot be reliably measured, cannot be reversed.

INVENTORIES

Inventories are valued at the lower of cost or net realizable value. Cost is determined by the first-in, first-out (FIFO) method or, alternatively, weighted average cost where it approximates FIFO. The cost of finished goods and work in progress comprises raw materials, direct labor, depreciation, other direct costs and related production overheads, but excludes borrowing costs. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated costs necessary to make the sale.

TRADE RECEIVABLES

Trade receivables are carried at their anticipated realizable value, which is the original invoice amount less an estimated valuation allowance. A credit loss allowance of trade receivables is made when there is objective evidence (such as significant overdue of receivables and unsuccessful dunning attempts or known financial difficulties and thus increased probability of customer insolvency) that the Group will not be able to collect all amounts due according to the original terms of the receivables. The assessment and decision for credit loss allowances is done locally in each business unit on case-by-case basis.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents comprise cash in hand, deposits held at call with banks and other short-term highly liquid investments with original maturities of three months or less. Bank overdrafts are included within borrowings in current interest-bearing loans.

OWN SHARES

Own shares acquired by the Group, including directly attributable costs, are presented as a deduction from the total equity on the day of trading in the consolidated financial statements. Purchases or subsequent sales of treasury shares are presented as changes in equity.

PROVISIONS

Provisions are recognized in the balance sheet when the Group has a present legal or constructive obligation as a result of a past event, and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where the Group expects some or all of a provision to be reimbursed, the reimbursement is recognized as a separate asset but only when the reimbursement is virtually certain. Provisions are valued at the net present value of the expenses required to cover the obligation. The discount factor used when calculating present value is selected so that it describes the market view of the time value of the money and the risk relating to the obligation at the time of examination.

A warranty provision is recognized when a product containing a

warranty clause is sold. The size of the sum involved is determined on the basis of what is known about past warranty costs. A restructuring provision is recognized when the Group has compiled a detailed restructuring plan, launched its implementation or has informed the parties concerned.

WASTE ELECTRICAL AND ELECTRONIC EQUIPMENT

The Group is a distributor of electrical equipment that falls under the EU Directive on Waste Electrical and Electronic Equipment. Expected costs are recognized as part of other operating expenses and as a current non-interest-bearing payable.

EMPLOYEE BENEFITS

Employee benefit obligations

Throughout the Group operates various pension plans in accordance with local conditions and practices. The plans are classified as either defined contribution plans or defined benefit plans. The contributions to defined contribution plans are charged to the income statement in the year to which they relate.

For defined benefit plans, costs are assessed using the projected unit credit actuarial valuation method, in which the cost of providing benefit is charged to the income statement so as to spread the regular cost over the service lives of employees in accordance with the advice of qualified actuaries who carry out a full valuation of the plan. The benefit obligation is measured as the present value of estimated future cash outflows. Defined benefit liability comprises of the present value of the defined benefit obligation less the fair value of plan assets. All actuarial gains and losses are recognized in other comprehensive income immediately as they occur. The past service cost is recognized as an expense in the income statement. See section 'Adoption of new and amended standards and interpretations' for details.

Share-based payments

Share-based payment programs are valued at fair value on the grant date and recognized as an expense in the income statement during the vesting period with a corresponding adjustment to the equity or liability. In the cash settled option program the liability is revalued at each balance sheet date with changes in fair value recognized in the income statement. The income statement effect of the share-based payments programs is recognized in employee benefit expenses.

The expense of the share-based payments determined at the grant date reflects the Group's estimate of the number of options or share rewards that will ultimately vest. Grant date is the date at which the entity and another party agree to a share-based payment arrangement, being when the entity and the counterparty have a shared understanding of the terms and conditions of the arrangement. The options are valued at fair value using Black-Scholes option-pricing model. The non-market criteria are not included in the fair value of the option but taken into account in the number of options that are assumed to vest. On a regular basis the Group reviews the assumptions made and revises its estimates of the share-based payments that are expected to be settled. The changes in the estimates are recognized in the income statement with a corresponding adjustment to the equity or liability.

When the share options are exercised, the proceeds received, net of any transaction costs, are credited in the fund for invested non-restricted equity.

DIVIDEND

The dividend proposed by the Board of Directors is not deducted from distributable equity until approved by the Annual General Meeting of Shareholders.

EARNINGS PER SHARE

Earnings per share is calculated by dividing the net profit attributable to the shareholders of the company by the weighted average number of shares in issue during the year, excluding shares purchased by the Group and held as treasury shares, if any.

Diluted earnings per share amounts have been calculated by applying the "treasury stock" method, as if the options were exercised at the beginning of the period, or on the issuance of options, if that occurs later during the period, and as if the funds obtained thereby were used to purchase common stock at the average market price during the period. In addition to the weighted average number of shares outstanding, the denominator includes the incremental shares obtained through the assumed exercise of the options. The assumption of exercise is not reflected in earnings per share when the exercise price of the options exceeds the average market price of the shares during the period. The share options have a diluting effect only when the average market price of the share during the period exceeds the exercise price of the options.

OPERATING PROFIT

The IAS 1 (Presentation of Financial Statements) standard does not define operating profit. The Group has defined it as follows: Operating profit is the net amount arising from adding other operating income and share of results in associates and joint ventures to net sales, deducting cost of sales corrected for changes in inventories and cost of production for own use, deducting costs related to employee benefits, depreciation and possible impairments as well as other operating expenses. Foreign exchange differences and changes in the fair value of derivative financial instruments are included in operating profit in case they originate from operating business items; otherwise they are booked in financial income and expenses.

CASH FLOW STATEMENT

Cash and cash equivalents presented in the cash flow statement comprise cash in hand, deposits held at call with banks and other short-term highly liquid investments with original maturities of three months or less. Cash generated from operating activities has been reported using the indirect method. All income taxes paid during the financial year are presented in net cash generated from operating activities, unless they can be particularly allocated to net cash from (used in) investing or financing activities. Unrealized exchange gains and losses from cash and cash equivalents denominated in foreign currencies and from transactions between Group companies are presented on a separate row before change in cash and cash equivalents, separate from cash generated from (used in) operating, investing and financing activities.

NON-RECURRING ITEMS

In order to improve comparability between reporting periods, the Group classifies certain items as non-recurring in its financial reporting. Non-recurring items include mainly income and expenses related to restructurings of Group's business operations, nonrecurring impairments of assets, external costs related to mergers and acquisitions and other exceptional non-recurring items which materially distort the comparability of the Group's underlying profitability.

CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS

The preparation of the consolidated financial statements in accordance with IFRS requires management to make certain estimates and assumptions that affect the amounts recognized in the consolidated financial statements and accompanying notes. Actual results may differ from these estimates. In addition, judgment has to be exercised in applying the accounting principles of the financial statements. Management's estimates and assumptions are based on historical experience and plausible future scenarios, which are continually evaluated. Possible changes in estimates and assumptions are recognized in the accounting period during which estimates and assumptions were fixed and in all subsequent accounting periods.

The key assumptions concerning the future and other key sources of uncertainty related to estimations at the balance sheet date, that have significant risk of causing material adjustments to the carrying amounts of assets and liabilities within the next accounting period, are discussed below.

Determining fair value of acquisitions

The fair values of acquired working capital and tangible assets were evaluated by the Group and external appraisal personnel before the acquisition. The fair value of intellectual property rights (trademarks, patents and technology) and customer relations are established with discounting the related cash flows.

Impairment testing

The carrying amounts of tangible and intangible assets are reviewed at each balance sheet date to determine whether there is any indication of impairment. Goodwill, intangible assets with indefinite useful lives and unfinished tangible assets are in all cases tested annually. For the purposes of assessing impairment, assets are grouped at the lowest cash generating unit level for which there are separately identifiable, mainly independent, cash inflows and outflows. An impairment loss is the amount by which the carrying amount of the assets exceeds the recoverable amount. The recoverable amount is determined by reference to discounted future net cash flows expected to be generated by the asset. These calculations require the use of estimates.

Income taxes

The Group reviews at each balance sheet date especially the carrying amount of deferred tax assets. Deferred taxes are provided using the liability method, as measured with enacted tax rates, to reflect the temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. The main temporary differences arise from the depreciation difference on tangible assets, fair valuation of net assets in acquired companies, intra-group inventory profits, defined benefit plans, inventories and other provisions, untaxed reserves and tax losses carried forward. Temporary differences are recognized as a deferred tax asset to the extent that it is probable that future taxable profits will be available, against which the deductible temporary difference can be utilized. The likelihood for the recovery of deferred tax assets from future taxable income is assessed, and to the extent the recovery is not considered likely the deferred asset is adjusted in accordance. At each balance sheet date the Group reviews whether distribution of earnings in subsidiaries is in its control and probable, and books a deferred tax accordingly.

Defined benefit obligations

Costs for defined benefit plans are assessed using the projected unit credit actuarial valuation method. Several statistical and other actuarial assumptions are used in calculating the expense and liability related to the plans. These factors include assumptions about the discount rate, future salary increase and annual inflation rate. Statistical information used may differ from actual results. Changes in actuarial assumptions are recognized in other comprehensive income immediately as they occur which could have a slight impact on the Group's statement of comprehensive income.

Share-based payments

The expense of the share-based payments determined at the grant date reflects the Group's estimate of the number of options or share rewards that will ultimately vest. Options are valued at fair value using Black-Scholes option-pricing model. Several assumptions are used in calculating the fair value of the option. These factors include dividend yield, risk free interest rate, expected life of option and personnel forfeit ratio. The non-market criteria are not included in the fair value of the option but taken into account in the number of options that are assumed to vest. On a regular basis the Group reviews the assumptions made and revises its estimates of the share-based payments that are expected to be settled. The changes in the estimates are recognized in the income statement.

Provisions

The timing of the recognition of a provision is based on management's estimate of the moment when the Group has a present legal or constructive obligation, as a result of a past event, and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

Hyperinflation

The Group may have operations in hyperinflatory economies. The financial statements of a subsidiary whose functional currency is the currency of a hyperinflationary economy are restated in accordance of IAS 29 (Financial Reporting in Hyperinflatory Economies) in case the adjustments are material in relation to the Group's consolidated financial statements.

ROUNDING OF FIGURES

The consolidated financial statements are presented in millions of euros. All figures in these accounts have been rounded. Consequently, the sum of individual figures can deviate from the presented sum figure. Key figures have been calculated using exact figures.

In the financial statements, EUR 0.0 million means the figure is less than EUR 50 000. If the amount is EUR 0, the cell is left empty.

The Rapala Group is led as a whole, as an integrated chain of units engaged in sourcing, manufacturing and distributing fishing tackle equipment. The base unit of Group's management is a single subsidiary engaged in one or several activities within the integrated supply chain. The Group does not have any division structure, but nearly all of the Group's subsidiaries report directly to the Group's CEO, who together with the Board is the ultimate decision maker.

Despite the integrated nature of Group's operations, the type and source of products being processed by the units creates difference in Group's management approach. There is a distinction in the strategic and operative role of the products depending on whether the product sold is being manufactured by the Group itself; whether the product is sourced by the Group externally, but sold under one of Group's own brands; whether the product is a third party product represented and distributed by the Group; or whether the product is part of Group's core fishing tackle business or some supporting product category outside of fishing. This distinction between the type and source of products is the basis for Group's operating segments.

Group's operating segments are Group Fishing Products, Other Group Products and Third Party Products. Group Fishing Products and Other Group Products have been combined to reportable segment Group Products. Group Fishing Products are fishing tackle products manufactured or sourced by the Group itself and sold under Group's brands. Group Fishing Products include Group Lures and Baits, Fishing Hooks, Fishing Lines and Fishing Accessories. Other Group Products include Group manufactured and/or branded products for winter sports and some other nonfishing businesses. Third Party Products include non-Group branded fishing products and third party products for hunting, outdoor and winter sports, which are distributed by the Group utilizing the same supply channel as Group Fishing Products and Other Group Products.

The Group measures segment performance based on operating profit. Reported figures are consistent with IFRS accounting principles. Pricing of inter-segment transactions is based on market prices.

OPERATING SEGMENTS

2013

EUR MILLION	GROUP PRODUCTS	THIRD PARTY PRODUCTS	INTRA-SEGMENT SALES	GROUP TOTAL
Net Sales	176.3	110.5		-0.1 286.6
Depreciation, amortization and impairment losses	-6.3	-1.2		-7.5
Share of results in associates and joint ventures (included in OP)	-0.3	-0.2		-0.5
Operating Profit	19.4	6.7		26.1
Financial income and expenses				-5.5
Net Profit before taxes				20.6
Non-interest-bearing assets	215.2	67.1		282.3
Investment in associates and joint ventures	0.4	0.3		0.8
Unallocated interest-bearing assets				21.0
Total Assets				304.1
Investments	9.8	0.9		10.7

2012 Restated1)

EUR MILLION	GROUP PRODUCTS	THIRD PARTY PRODUCTS	INTRA-SEGMENT GROUP SALES TOTAL
Net Sales	176.4	114.3	290.7
Depreciation, amortization and impairment losses	-5.9	-0.9	-6.8
Share of results in associates and joint ventures (included in OP)	-0.3	0.0	-0.3
Operating Profit	18.9	7.0	25.9
Financial income and expenses			-4.9
Net Profit before taxes			21.0
Non-interest-bearing assets	212.9	68.3	281.2
Investment in associates and joint ventures	1.1	0.2	1.3
Unallocated interest-bearing assets			44.3
Total Assets			326.8
Investments	13.4	1.0	14.4

1) See note 1

GEOGRAPHICAL AND GROUP-WIDE INFORMATION

The Group operates in four geographical areas which are North America, Nordic Countries, Rest of Europe and Rest of the World. External net sales and non-current assets are presented separately in the countries which proportion is significant.

The non-current assets exclude non-current financial assets and deferred tax assets.

The Group's customer base consists of a large number of customers in several market areas and no single customer represent by itself a significant part of the Group's net sales.

External net sales by unit location

EUR MILLION	2013	2012
Finland	26.7	26.1
Other Nordic Countries	34.1	36.6
Nordic Total	60.8	62.7
Russia	36.4	36.6
France	35.5	35.2
Other European Countries	31.7	36.4
Rest of Europe Total	103.6	108.2
USA	72.5	68.2
Other North America	15.8	15.4
North America Total	88.4	83.6
Rest of the World Total	33.8	36.2
TOTAL	286.6	290.7

Non-current assets by unit location

TOTAL	101.4	103.2
Rest of the World Total	32.0	32.3
Other countries	6.6	5.7
China (incl. Hong Kong)	25.4	26.7
North America Total	31.2	32.5
Other North America	3.9	4.1
USA	27.3	28.4
Rest of Europe Total	16.7	18.3
Nordic Total	21.5	20.1
Other Nordic Countries	6.3	6.1
Finland	15.2	14.1
EUR MILLION	2013	2012

ACQUISITIONS AND 3 DISPOSALS

CORPORATE ACQUISITIONS IN 2013 AND 2014

In March 2013, the Group purchased a 10% share of the Finnish ski manufacturing unit. This acquisition raised the Group's ownership to 100%. Acquisition has no significant impact on the Group's consolidated financial statements.

In September, the escrow deposit of EUR 1.3 million relating to the acquisition of Dynamite Baits in 2010 was released to the sellers.

Also, in 2013 EUR 0.7 million (EUR 0.8 million) was paid related to Sufix trademark acquisition closed in 2008.

In January 2014, the Group acquired 100% of the shares and voting rights of a French coarse fishing attractant manufacturer Mystic s.a.r.l.. The consideration amounted to EUR 0.2 million and is subject to finalization of the closing accounts. The acquisition does not have material impact on the result or financial position of the Group.

CORPORATE ACQUISITIONS IN 2012

In February, the Group acquired the assets, including Mora trademark in North America, of Minnesota based Strike Master Corporation ("Strike Master"), the leading supplier of ice augers in the US. The Group also acquired 100% of the share capital of Swedish Mora Ice Ab including the Mora Ice brand, together with all intellectual property rights relating to the Mora Ice products. Mora Ice is Europe's leading and premium brand of ice augers and auger cutting blades.

These strategic initiatives gave the Rapala Group global leadership position in the ice fishing category. The Group is well equipped to exploit this position as it is having strong distribution companies in all main arctic markets: US, Canada, Russia, East European and Nordic countries, Japan and China.

Net sales after the acquisition, EUR 5.1 million, are included in the consolidated income statement. The acquisitions did not have material impact on the profit of the Group. Due to the structure of the acquisitions it is not possible to reliably determine pretransaction sales and profit prior in 2012.

In September, the Group purchased a 20% share of the Indonesian distribution company. This acquisition raised the Group's ownership to 100 %. Acquisition has no significant impact on the Group's consolidated financial statements.

Total considerations for the acquisitions during 2012 amounted to EUR 6.8 million.

EUR MILLION	2012
Inventories	1.8
Trade and other non-interest-bearing receivables	0.3
Intangible assets	4.4
Tangible assets	0.1
Trade and other non-interest-bearing payables	0.0
Deferred tax liability (net)	-0.6
Non-controlling interest	0.0
FAIR VALUE OF ACQUIRED NET ASSETS	6.0
EUR MILLION	2012
Cash paid during financial year	6.8
TOTAL PURCHASE CONSIDERATION	6.8
Goodwill	0.7
NET GOODWILL	0.7
Cash paid for the acquisitions	6.8
NET CASH FLOW	6.8

In 2012 the transaction costs of EUR 0.0 million have been expensed and are included in the other operating expenses in the income statement and treated as a non-recurring item. The goodwill of EUR 0.7 million for acquisitions in 2012 is justified by expansion of product assortment and market coverage as well as utilization of economies of scale in sourcing and distribution. None of the goodwill is expected to be deductible for income tax purposes. The goodwill was tested for impairment.

The business combinations are accounted for by applying the acquisition method. The fair value of intellectual property rights is established using the relief from royalty method. The fair value of customer relationships is established with the income approach based on the future economic returns from the customers over their useful lives.

CORPORATE DISPOSALS IN 2012

In line with the existing joint venture agreements with Shimano, the distribution company in Belarus was transferred to the Rapala Shimano East Europe structure in June 2012. The Group's ownership was reduced to 50% (controlled by the Rapala Group). The disposal had no significant impact on the Group's consolidated financial statements.

In December 2011 the Group sold 100% of the shares of Willtech Gift Ltd ("Willtech Gift "). Part of the consideration was settled by a guaranteed interest bearing promissory note that matures at the latest in 2016. The second installment of the promissory note was received in December 2013. Impact on the Group cash flow was EUR 0.5 million (2012: EUR 0.8 million including EUR 0.3 million price adjustment paid).

DISPOSALS

EUR MILLION	2012
Cash received at closing	0.0
Price adjustment	-0.3
Total Consideration	-0.3
Gain/loss on sale	-0.3
Cash flow from disposals	0.8

TOTAL	0.8	1.3
Other income	0.2	0.3
Scrap sales	0.0	0.3
Rental income	0.1	0.2
Royalty income	0.3	0.3
Other gains from sale of intangible and tangible assets	0.1	0.3
EUR MILLION	2013	2012

NON-RECURRING INCOME AND EXPENSES INCLUDED IN OPERATING PROFIT

EUR MILLION	2013	2012
Costs related to business acquisitions		0.0
Sale of gift manufacturing unit in China 1)		-0.7
Gain on disposal of real estate in Finland		0.1
Closure of Chinese lure manufacturing	-0.8
Other restructuring costs	-0.2
Other non-recurring items	-0.1	0.0
Total included in EBITDA	-1.1	-0.6
Other non-recurring impairments	-0.2
TOTAL INCLUDED IN OPERATING PROFIT	-1.3	-0.6

1) 2012: Including an adjustment to sales price and costs related to the disposed business.

Non-recurring income is included in other operating income in the consolidated income statement. Non-recurring expenses are included in other operating expenses, employee benefit expenses and depreciation and impairments.

OTHER OPERATING 5 EXPENSES

EUR MILLION	2013	2012
Selling and marketing expenses	-12.3	-12.5
Rents paid	-8.1	-7.8
Freight	-5.6	-5.5
Maintenance and utility expenses	-5.7	-5.6
Traveling expenses	-4.7	-5.1
Sales commissions	-4.1	-4.1
Consulting expenses	-2.3	-2.5
IT and telecommunication	-2.0	-2.1
Auditors' fees and services	-0.8	-0.8
Other expenses	-9.2	-9.8
TOTAL	-54.9	-55.8

AUDITORS' FEES AND SERVICES

0.0	0.0
0.0	0.0
-0.8	-0.7
2013	2012

MATERIALS AND 6 SERVICES

EUR MILLION	2013	2012
Materials, goods and supplies
Purchases during the period	-135.1	-128.7
Change in inventory	4.1	-0.1
External services	-5.7	-5.3
TOTAL	-136.7	-134.1

EMPLOYEE BENEFIT 7 EXPENSES

EUR MILLION	2013	2012 Restated1)
Wages and salaries	-51.4	-49.6
Pension costs - defined contribution plans	-4.1	-4.0
Pension costs - defined benefit plans	-0.3	-0.1
Other long-term employee benefits	0.0	0.0
Option programs to be settled in shares	0.3	-0.3
Other personnel expenses	-8.5	-8.5
TOTAL	-64.0	-62.6

1) See note 1

The employee benefit expenses in 2013 included EUR 0.5 million employee related restructuring expenses. For more details on employee benefits for top management and option programs, see notes 27 and 28.

AVERAGE PERSONNEL

PERSONS	2013	2012
North America	133	130
Nordic	383	384
Rest of Europe	882	868
Rest of the World	1 030	745
TOTAL	2 428	2 127

RESEARCH AND DEVELOPMENT 8 EXPENSES

Net profit for the period includes research and development expenses of EUR 1.6 million recognized as an expense in 2013 (2012: EUR 2.0 million). Group has not capitalized research and development costs.

FINANCIAL INCOME 9 AND EXPENSES

EUR MILLION	2013	2012
Foreign exchange gains
From loans and receivables	3.6	6.1
From financial liabilities measured at amortized cost	2.4	4.9
Foreign exchange losses
From loans and receivables	-6.1	-6.7
From financial liabilities measured at amortized cost	-2.0	-4.9
Interest and other financial income
Interest income from loans and receivables	0.4	0.4
Other financial income	0.0	0.0
Interest and other financial expenses
Interest expense on financial liabilities measured at amortized cost	-3.4	-3.7
Interest rate derivatives - non-hedge accounted	0.1	-0.3
Currency derivatives - non-hedge accounted	0.4	-0.2
Other financial expenses	-0.8	-0.5
TOTAL	-5.5	-4.9

RECOGNIZED IN THE STATEMENT OF OTHER COMPREHENSIVE INCOME

TOTAL	-1.4	-0.4
Gains and losses on hedges of net investments, net of tax	-2.3	0.2
Change in fair value of interest rate derivatives - hedge accounted, net of tax	0.9	-0.6
EUR MILLION	2013	2012

EXCHANGE GAINS AND LOSSES IN THE INCOME STATEMENT

TOTAL	-0.8	-0.3
Currency derivatives, non-hedge accounted	0.7	-0.4
In other operating expenses
In purchases	-1.4	-0.2
In net sales	-0.1	0.2
EUR MILLION	2013	2012

Derivatives in hedge accounting are presented together with the hedged instrument, if hedge accounting is applied: EUR -1.0 million (2012: EUR -0.2 million) have been recognized in interest expenses and EUR -0.5 million (2012: EUR +0.1 million) in foreign exchanges gains and losses.

In 2013 and 2012, hedges of net investments and interest rate derivatives, which fulfill IAS 39 effectiveness requirements, had no material income statement effect.

INCOME TAXES IN THE INCOME STATEMENT

EUR MILLION	2013	2012 Restated1)
Income taxes	-5.1	-6.9
Deferred taxes	0.5	-0.2
TOTAL	-4.6	-7.1

INCOME TAX RECONCILIATION

EUR MILLION	2013	2012
Income taxes at Finnish corporate tax rate (24.5%)	-5.1	-5.2
Effect of different tax rates in foreign subsidiaries	-0.2	-0.6
Non-deductible expenses and tax exempt income	-0.1	-0.4
Foreign withholding taxes		-0.3
Losses for which no deferred tax benefit is recognized	-2.3	-1.1
Taxes for prior years	1.8	0.1
Changes in the carrying amounts of deferred tax assets and liabilities from prior years	0.7	0.0
Impact of the changes in the tax rates on deferred tax balances	0.7
Other items	-0.1	0.3
INCOME TAXES IN THE INCOME STATEMENT	-4.6	-7.1

TAX EFFECTS RELATING TO EACH COMPONENT OF OTHER COMPREHENSIVE INCOME

2013

EUR MILLION	BEFORE TAX	TAX EXPENSE/ BENEFIT	NET OF TAX
Change in translation differences	-7.1		-7.1
Employee benefits	0.2	-0.1	0.1
Cash flow hedging	1.3	-0.4	0.9
Net investment and related hedging	-2.3	0.0	-2.3
TOTAL	-8.0	-0.4	-8.4

2012

Restated1)

TOTAL	-1.3	0.3	-1.0
Net investment and related hedging	0.3	-0.1	0.2
Cash flow hedging	-0.9	0.2	-0.6
Employee benefits	-0.4	0.1	-0.3
Change in translation differences	-0.3		-0.3
EUR MILLION	BEFORE TAX	TAX EXPENSE/ BENEFIT	NET OF TAX

1) See note 1

MOVEMENT OF DEFERRED TAXES

2013

		INCOME		TRANSLATION
EUR MILLION	JAN. 1	STATEMENT	EQUITY	DIFFERENCES	ACQUISITIONS	DEC. 31
Tax losses and credits carried forward	2.2	-0.1		-0.1		2.0
Provisions	0.3	0.0		0.0		0.2
Employee benefits	0.5	0.1	-0.1	0.0		0.5
Depreciation difference	0.1	0.0		0.0		0.1
Effect of consolidation and eliminations	4.9	-0.4		-0.3		4.2
Other temporary differences	2.1	-0.2	-0.4	-0.1		1.5
TOTAL DEFERRED TAX ASSETS	10.1	-0.6	-0.4	-0.5		8.5
Depreciation difference and other untaxed reserves	2.8	0.1		-0.1		2.8
Inventory	2.3	-0.2		-0.1		2.0
Fair value adjustments for acquired net assets	4.0	-0.7		-0.1		3.2
Other temporary differences	0.8	-0.3		0.0		0.5
TOTAL DEFERRED TAX LIABILITIES	9.9	-1.1		-0.4		8.5
NET DEFERRED TAX ASSET	0.1	0.5	-0.4	-0.2		0.1

2012

Restated1)

EUR MILLION	JAN. 1	INCOME STATEMENT	EQUITY	TRANSLATION DIFFERENCES	ACQUISITIONS (SEE NOTE 3)	DEC. 31
Tax losses and credits carried forward	2.7	-0.6		0.0		2.2
Provisions	0.2	0.1		0.0		0.3
Employee benefits	0.4	0.0	0.1	0.0		0.5
Depreciation difference	0.2	-0.1		0.0		0.1
Effect of consolidation and eliminations	4.7	0.2		-0.1		4.9
Other temporary differences	1.6	0.3	0.2	0.0		2.1
TOTAL DEFERRED TAX ASSETS	9.8	-0.1	0.3	0.0		9.9
Depreciation difference and other untaxed reserves	2.7	0.1		0.0		2.8
Inventory	2.4	0.0		0.0		2.3
Fair value adjustments for acquired net assets	3.3	0.0		0.0	0.6	4.0
Other temporary differences	0.8	0.0		0.0		0.8
DEFERRED TAX LIABILITIES	9.2	0.1		0.0	0.6	9.9
NET DEFERRED TAX ASSET	0.6	-0.2	0.3	0.0	-0.6	0.1

1) See note 1

Deferred taxes have been reported as a net balance according to IAS 12. As of December 31, 2013, the Group had tax losses carried forward of EUR 15.4 million (2012: EUR 9.7 million), for which deferred tax assets have not been recognized in the consolidated financial statements because the realization of the tax benefit is not probable. EUR 11.1 million of these tax losses will expire during the next five years (2012: EUR 5.2 million).

Deferred tax liability on undistributed earnings of subsidiaries has not been recognized in the consolidated balance sheet because distribution of the earnings is in the control of the Group and such distribution is not probable within the foreseeable future.

The consolidated balance sheet includes deferred tax assets of EUR 1.4 million (2012: EUR 1.2 million) in subsidiaries, which have generated losses in financial year 2013 or 2012. The recognition of these assets is based on result estimates, which indicate that the realization of these deferred tax assets is probable.

2013

EUR MILLION	TRADEMARKS	CUSTOMER RELATIONS	GOODWILL	OTHER INTANGIBLE ASSETS	TOTAL
Acquisition cost Jan. 1	22.2	4.1	46.5	6.8	79.6
Additions				0.5	0.5
Disposals			-0.2	-0.3	-0.5
Reclassifications1)				0.3	0.3
Translation differences	-0.8	-0.3	-1.4	-0.1	-2.6
ACQUISITION COST DEC. 31	21.5	3.8	44.9	7.1	77.2
Accumulated amortization Jan. 1	-0.6	-2.0		-4.5	-7.0
Disposals				0.3	0.3
Reclassifications1)				-0.1	-0.1
Amortization during the period		-0.4		-0.4	-0.7
Translation differences	0.0	0.2		0.0	0.3
ACCUMULATED AMORTIZATION DEC. 31	-0.5	-2.1		-4.5	-7.2
CARRYING VALUE JAN. 1	21.7	2.2	46.5	2.3	72.6
CARRYING VALUE DEC. 31	20.9	1.7	44.9	2.6	70.0

2012

EUR MILLION	TRADEMARKS	CUSTOMER RELATIONS	GOODWILL	OTHER INTANGIBLE ASSETS	TOTAL
Acquisition cost Jan. 1	18.5	3.4	46.0	6.4	74.3
Additions	0.1			0.4	0.5
Acquisitions (see note 3)	3.7	0.7	0.7		5.2
Disposals				-0.1	-0.1
Translation differences	-0.1	0.0	-0.2	0.0	-0.3
ACQUISITION COST DEC. 31	22.2	4.1	46.5	6.8	79.6
Accumulated amortization Jan. 1	-0.6	-1.6		-4.2	-6.4
Disposals				0.0	0.0
Amortization during the period		-0.4		-0.3	-0.7
Translation differences	0.1	0.0		0.0	0.1
ACCUMULATED AMORTIZATION DEC. 31	-0.6	-2.0		-4.5	-7.0
CARRYING VALUE JAN. 1	17.9	1.8	46.0	2.3	67.9
CARRYING VALUE DEC. 31	21.7	2.2	46.5	2.3	72.6

1) Includes reclassifications between intangible and tangible assets.

GOODWILL AND TRADEMARKS WITH INDEFINITE LIVES BY BUSINESS SEGMENTS

EUR MILLION	GROUP FISHING PRODUCTS	OTHER GROUP PRODUCTS	THIRD PARTY PRODUCTS	TOTAL
2013
Goodwill	42.9	0.0	1.9	44.9
Trademarks with indefinite lives	20.3	0.1	0.5	20.9
Discount rate, %	9.2	9.2	11.1
2012
Goodwill	44.2	0.0	2.3	46.5
Trademarks with indefinite lives	21.0	0.1	0.5	21.7
Discount rate, %	8.2	8.2	10.6

IMPAIRMENT TESTING OF GOODWILL AND TRADEMARKS WITH INDEFINITE LIVES

The Group is led as a whole and not organized nor managed in segments. Most of the units are also strongly interlinked i.e. some units do not have a sales or a production organization or some other functions or operations needed to operate on a stand-alone basis. However, according to IFRS, the lowest cash-generating unit (CGU) cannot be larger than an operating segment in the Group's segment reporting. As a consequence, goodwill and trademarks with indefinite lives are tested on the operating segment level.

The recoverable amount of the CGU is determined based on value-in-use calculations. Cash flow projections, which were used in these calculations, were based on most recent 5-year financial forecasts prepared by the management and approved by the Board. The estimated sales and production volumes are derived from the utilization of existing property, plant and equipment. The most important assumptions on which management has based its cash flow projections are the sales and gross margins. Discount rate is the weighted average pre-tax cost of capital (WACC) which is defined for each cash-generating unit separately. The components of WACC are the risk-free yield rate, market risk premium, industry specific beta, cost of debt, and target capital structure. In the impairment tests prepared in 2013 and 2012, the growth rate used to extrapolate the cash flow beyond the five-year period is 0%. As a result of the performed impairment tests, no impairment losses have been recognized in 2013 or 2012.

Key assumptions

Sales – The Group's estimated sales are based on present and future product assortment and utilization of distribution and manufacturing capacity. In addition, estimated sales are based on long-term growth of industry and further implementation of Group's strategic objectives.

EBITDA margin – The Group's estimated EBITDA margin, operating profit before depreciation and impairments compared to net sales, is based on past years actual margins and management's view on sales and gross margin development. The increase in general cost level has also been taken into account in the development of EBITDA margin.

Discount rate – Discount rate is the weighted average pretax cost of capital (WACC). Weighted average cost of capital represents the total cost of Group's equity and debt taken into account specific risks related to assets.

Growth rate – Compared to actual growth rates during past 5 years, management has been conservative in determining the growth rate for impairment purposes.

Sensitivity analysis

The key sensitivity factors for the impairment test are the estimated EBITDA margin and the discount rate. According to the management's opinion no probable change in any of the key sensitivity factors would lead to a situation where the carrying amount would exceed the recoverable amount. Even if EBITDA would be 36 percentage points lower or discount rate 5 percentage points higher than used in the management's estimates, it would not lead to an impairment loss in any of the cash generating units. The corresponding figures for Group Fishing Products segment are 10 percentage points for discount rate and 53 percentage points for EBITDA.

2013

		BUILDINGS AND	MACHINERY	OTHER TANGIBLE	ADVANCE PAYMENTS AND CONSTRUCTION
EUR MILLION	LAND	STRUCTURES	AND EQUIPMENT	ASSETS	IN PROGRESS	TOTAL
Acquisition cost Jan. 1	1.8	22.8	55.1	10.8	0.5	90.9
Additions	0.1	0.4	4.1	2.2	2.7	9.4
Disposals			-1.6	-0.5	-0.1	-2.2
Reclassifications1)		0.3	-1.1	1.9	-1.4	-0.3
Translation differences	-0.1	-0.6	-1.2	-0.6	0.0	-2.5
ACQUISITION COST DEC. 31	1.8	22.9	55.3	13.7	1.7	95.3
Accumulated depreciation Jan. 1		-14.9	-40.1	-6.5		-61.5
Disposals			1.4	0.5		1.8
Reclassifications1)			1.4	-1.3		0.1
Depreciation during the period		-0.8	-3.7	-1.7		-6.2
Impairment				-0.4		-0.4
Translation differences		0.3	0.8	0.4		1.5
ACCUMULATED DEPRECIATION DEC. 31		-15.5	-40.2	-9.1		-64.7
CARRYING VALUE JAN. 1	1.8	7.9	15.0	4.2	0.5	29.3
CARRYING VALUE DEC. 31	1.8	7.4	15.1	4.6	1.7	30.6

2012

EUR MILLION	LAND	BUILDINGS AND STRUCTURES	MACHINERY AND EQUIPMENT	OTHER TANGIBLE ASSETS	ADVANCE PAYMENTS AND CONSTRUCTION IN PROGRESS	TOTAL
Acquisition cost Jan. 1	1.8	21.7	51.8	10.1	1.0	86.4
Additions		0.8	3.4	1.6	1.3	7.0
Acquisitions (see note 3)			0.1			0.1
Disposals	0.0	-0.8	-1.7	-0.9	-0.1	-3.4
Reclassifications		0.1	1.5	0.0	-1.7	-0.1
Transfer from assets held-for-sale	0.1	0.9				1.0
Translation differences	0.0	0.0	0.0	-0.1	0.0	-0.2
ACQUISITION COST DEC. 31	1.8	22.8	55.1	10.8	0.5	90.9
Accumulated depreciation Jan. 1		-14.0	-38.2	-5.7		-57.9
Disposals		0.7	1.5	0.6		2.8
Reclassifications		0.0	0.1	0.0		0.1
Transfer from assets held-for-sale		-0.7				-0.7
Depreciation during the period		-0.9	-3.6	-1.5		-6.0
Translation differences		0.0	0.1	0.0		0.1
ACCUMULATED DEPRECIATION DEC. 31		-14.9	-40.1	-6.5		-61.5
CARRYING VALUE JAN. 1	1.8	7.7	13.7	4.4	1.0	28.5
CARRYING VALUE DEC. 31	1.8	7.9	15.0	4.2	0.5	29.3

1) Includes reclassifications between intangible and tangible assets.

Assets leased by finance lease agreements

		2013		2012
EUR MILLION	MACHINERY AND EQUIPMENT	OTHER TANGIBLE ASSETS	MACHINERY AND EQUIPMENT	OTHER TANGIBLE ASSETS
Carrying value Jan. 1	0.1	0.1	0.2	0.1
Additions			0.0	0.0
Disposals		0.0		0.0
Reclassifications	0.0	0.0	0.0	0.0
Depreciation during the period	0.0	0.0	-0.1	0.0
Translation differences	0.0	0.0	0.0	0.0
CARRYING VALUE DEC. 31	0.1	0.1	0.1	0.1
Accumulated depreciation Dec. 31	-0.2	-0.1	-0.2	-0.1
ACQUISITION COST DEC. 31	0.3	0.1	0.3	0.2

INVESTMENTS IN ASSOCIATES 13 AND JOINT VENTURES

The Group has a 50% interest in unlisted joint venture, Shimano Normark UK Ltd. to distribute Rapala Group and Shimano products in the UK on an exclusive basis. The carrying amount does not include goodwill or impairments.

The Group has a 33.3% interest in unlisted Lanimo Oü. Its main activity is producing leather-haberdashery. The carrying amount does not include goodwill or impairments. Lanimo Oü's figures are based on the information for the period ending on September 30, due to differences in reporting time schedule. Information for the financial period ending on December 31, 2012 is the following: assets EUR 0.1 million, liabilities EUR 0.1 million, sales EUR 0.1 million and loss EUR 0.0 million.

EUR MILLION	2013	2012
Acquisition cost Jan. 1	1.3	1.5
Share of profit/loss	-0.5	-0.3
Translation differences	0.0	0.1
ACQUISITION COST DEC. 31	0.8	1.3

INFORMATION ON ASSOCIATES AND JOINT VENTURES

2013

EUR MILLION	OWNERSHIP, %	DOMICILE	NON-CURRENT ASSETS	CURRENT ASSETS	NON-CURRENT LIABILITIES	CURRENT LIABILITIES	SALES	PROFIT/LOSS
Shimano Normark UK Ltd.	50.0	United Kingdom	0.2	2.0		0.9	9.9	-1.0
Lanimo OÜ	33.3	Estonia	0.0	0.1	0.0	0.0	0.1	0.0
2012
			NON-CURRENT	CURRENT	NON-CURRENT	CURRENT

EUR MILLION	OWNERSHIP, %	DOMICILE	ASSETS	ASSETS	LIABILITIES	LIABILITIES	SALES	PROFIT/LOSS
Shimano Normark UK Ltd.	50.0	United Kingdom	0.1	3.1	0.0	0.7	11.4	-0.6
Lanimo OÜ	33.3	Estonia	0.1	0.0	0.0	0.0	0.1	0.0

AVAILABLE-FOR-SALE 14 FINANCIAL ASSETS

EUR MILLION	2013	2012
Carrying value Jan. 1	0.3	0.3
Translation differences	0.0	0.0
CARRYING VALUE DEC. 31	0.3	0.3

Available-for-sale financial assets comprise of unlisted shares. The most significant is As Oy Tahkon Eagle.

RECEIVABLES ¹⁵

EUR MILLION	2013	2012
Non-current receivables
Interest-bearing
Loan receivables	3.0	3.4
Derivatives		0.3
Other interest-bearing receivables	0.0	0.0
Non-interest-bearing
Trade receivables	0.7	0.7
Other receivables	0.2	0.2
Current receivables
Interest-bearing
Loan receivables	1.0	1.1
Escrow deposit		1.3
Non-interest-bearing
Trade receivables	51.6	48.9
Derivatives	0.8	0.3
VAT receivable	2.3	2.2
Other prepaid expenses and accrued income	2.7	3.1
Other receivables	1.8	1.0
TOTAL	64.1	62.7

Fair values of financial assets are presented in the note 22. The weighted average interest rate of non-current loan

receivables was 3.32% (2012: 2.22%). The weighted average interest rate of current loan receivables at December 31, 2013 was 3.20% (2012: 2.14%).

ALLOWANCES BOOKED FOR TRADE RECEIVABLES

EUR MILLION	2013	2012
Allowance for trade receivables Jan. 1	3.3	2.8
Additions	0.7	1.1
Deductions	-0.5	-0.5
Recovery	-0.3	-0.2
Translation differences	-0.1	0.0
ALLOWANCE FOR TRADE RECEIVABLES DEC. 31	3.1	3.3

In most cases allowances are determined individually, when there is objective evidence (such as significant overdue of receivables and unsuccessful dunning attempts or known financial difficulties and thus increased probability of customer insolvency) that the Group will not be able to collect all amounts due according to the original terms of the receivables. Allowances have not been made on other receivables.

INVENTORIES ¹⁶

EUR MILLION	2013	2012
Raw material	12.0	7.8
Work in progress	9.9	8.6
Finished products	92.9	98.6
Net realizable value provisions	-4.5	-4.4
TOTAL	110.3	110.6

CASH AND CASH 17 EQUIVALENTS

EUR MILLION	2013	2012
Cash at bank and in hand	15.8	37.4
Short-term deposits	1.1	0.8
TOTAL	16.9	38.2

EQUITY ATTRIBUTABLE 18 TO SHAREHOLDERS

EUR MILLION	2013	2012 Restated1)
Share capital Jan. 1	3.6	3.6
SHARE CAPITAL DEC. 31	3.6	3.6
Share premium fund Jan. 1	16.7	16.7
SHARE PREMIUM FUND DEC. 31	16.7	16.7
Fair value reserve Jan. 1	-2.3	-1.6
Gains and losses on cash flow hedges, net of tax	0.9	-0.6
FAIR VALUE RESERVE DEC. 31	-1.4	-2.3
Fund for invested non-restricted equity Jan. 1	4.9	4.9
FUND FOR INVESTED NON-RESTRICTED EQUITY DEC. 31	4.9	4.9
Own shares Jan. 1	-3.4	-2.6
Purchase of own shares	-1.0	-0.7
OWN SHARES DEC. 31	-4.4	-3.4
Retained earnings Jan. 1	108.7	107.6
Defined benefit plans	0.1	-0.3
Translation differences	-6.2	-0.2
Net investments and related hedges, net of tax	-2.3	0.2
Dividends paid	-8.9	-8.9
Share-based payments	-0.3	0.3
Other changes	0.0
Net income for the period	12.5	10.1
RETAINED EARNINGS DEC. 31	103.7	108.7

1) See note 1

In those cases where option rights were granted during the period when the old Finnish Companies Act (September 29, 1978/734) was in force, the proceeds received for option-based share subscriptions, net of any transaction costs, have been credited to share capital (nominal value) and share premium fund. The fund for invested non-restricted equity includes other investments of equity nature and subscription prices for shares to the extent that it is specifically not to be credited to share capital. The payments received for share subscriptions based on the options granted after the entry into force (September 1, 2006) of the new Finnish Companies Act (21 July 2006/624) are fully recognized in the fund for invested non-restricted equity.

Translation differences contain exchange differences arising from the currency translation of foreign subsidiaries' financial statements and exchange differences arising from a monetary item that forms part of a net investment in a foreign company. Translation differences also contain fair value changes from hedging the net investment in foreign companies where this meets the conditions for hedge accounting. Fair value reserve includes movements in the fair values of available-for-sale financial assets and derivative instruments used for cash flow hedging. Own shares acquired by the Group, including directly attributable costs, are presented as a deduction from the total equity in the consolidated financial statements.

DIVIDENDS

The dividend paid for 2012 was EUR 0.23 per share, totaling EUR 8.9 million. A dividend of EUR 0.24 per share, a total of EUR 9.3 million, is proposed for the Annual General Meeting of Shareholders to be held on April 10, 2014. This dividend payable is not reflected in the financial statements for 2013.

SHARES AND SHARE CAPITAL

On December 31, 2013, the share capital fully paid and reported in the Trade Register was EUR 3.6 million and the total number of shares was 39 468 449. The book value of a share is EUR 0.09. There were no changes in the share capital in 2012 and 2013.

BOARD'S AUTHORIZATIONS

For information on the Board's authorizations and acquisition of own shares, see section Shares and Shareholders.

SHARE BASED PAYMENTS

For more details on share based payments, see note 28.

EMPLOYEE BENEFIT 19 OBLIGATIONS

The Group applied revised IAS 19 standard retrospectively in the current period. The impacts are disclosed in Accounting Principles for the Consolidated Accounts under "Applied New and Amended Standards and Interpretations".

Most of the Group´s pension plans are defined contribution plans. The Group has defined benefit pension plans in France, South Korea and Thailand. The retirement benefits are determined based on salary and period of employment. These obligations are unfunded. The Group has no other post-employment benefit obligations. The pension security of the personnel of the Group's Finnish companies is arranged under the Finnish statutory employee pension plan (TYEL) through an external pension insurance company. Employee benefit obligations also include a long-term profit-sharing payable to the employees in France.

EXPENSES RECOGNIZED IN THE INCOME STATEMENT

TOTAL	-0.3	-0.1
Interest cost	0.0	0.0
Current service cost	-0.2	-0.1
EUR MILLION	2013	2012 Restated1)

AMOUNTS RECOGNIZED IN THE BALANCE SHEET

PRESENT VALUE OF UNFUNDED OBLIGATIONS	1.9	1.9
Rest of the World	0.1
Rest of Europe	1.8	1.9
EUR MILLION	2013	2012 Restated1)

BALANCE SHEET RECONCILIATION

EUR MILLION	2013	2012 Restated1)
Obligations Jan. 1	1.9	1.4
Current service cost	0.2	0.1
Interest cost	0.0	0.0
Actuarial gains and losses
Changes in demographic assumptions	0.0
Changes in financial assumptions	-0.1	0.3
Changes in experience assumptions	-0.1	0.1
Effect of any curtailments or settlements	-0.1	-0.1
Translation differences	0.0
OBLIGATIONS DEC. 31	1.9	1.9

The following payments are expected contributions to be made in the future years out of the defined benefit plan obligation.

EUR MILLION	2013
Within one year	0.1
1–5 years	0.5
5–10 years	0.3
Later than 10 years	1.2
TOTAL	2.1

ASSUMPTIONS

	Rest of Europe

%	2013	2012
Discount rate	3.1	2.8
Future salary increase	2.6	2.6
Annual inflation rate	2.0	2.0
Rest of the World
%	2013	2012
Discount rate	4.1 - 4.4	-
Future salary increase	7.0 - 8.0	-
Annual inflation rate	3.0	-
		1) See note 1

The discount rate and the future salary increase are identified as significant actuarial assumptions. Changes in these assumptions do not cause material impact on the net defined benefit obligation.

The Group expects that threre will be no contributions to its defined benefit pension plans in 2014.

EUR MILLION	2013	2012
Other provisions
Provisions Jan. 1	0.1	0.2
Utilized provisions		-0.1
Translation differences	0.0	0.0
PROVISIONS DEC. 31	0.1	0.1
Non-current	0.1	0.1
Current	0.1	0.0
TOTAL PROVISIONS	0.1	0.1

FINANCIAL RISK MANAGEMENT AND 21 DERIVATIVE FINANCIAL INSTRUMENTS

The main objective of the Group's financial risk management is to reduce the impacts of price fluctuations in financial markets and other factors of uncertainty on earnings, cash flows and balance sheet, as well as to ensure sufficient liquidity. The Board has approved the Group's risk management principles and CEO is responsible, together with the Group's finance management, for development and implementation of financial risk management procedures.

In 2013, the Group continued to develop its risk management processes. Group Risk Management, consisting of the Group CFO and Group Treasurer, review financial risks on regular basis to manage Group's financial risk position and decide on necessary actions to manage financial risks. Global economy and financial markets were in uncertain conditions in 2013 and Group Risk Management continued monitoring and management of foreign exchange, interest rate, liquidity and counterparties' solvency risks.

Financial risks consist of market risks, credit and default risks and liquidity risks. This note also presents the Group's capital management.

MARKET RISKS

The Group's market risks are mainly caused by changes in foreign exchange and interest rates. These changes may have a significant impact on the Group's earnings, cash flows and balance sheet. The Group is also exposed to market price changes of certain raw materials, mainly metals and plastics, which are priced on commodity markets.

1. Foreign exchange risk

Major part of the Group's sales and expenses are in euros and US dollars. Group Risk Management monitors regularly the balance between Group's foreign currency sales and expenses as well as the development of the key currencies. Income and expenses within different currencies net each other out to some extent, creating an effective natural hedge in this respect. The Group's Board of Directors has defined a foreign exchange risk management policy. According to the policy, FX transactions of the following 12 months are systematically hedged.

In order to mitigate adverse impacts of foreign exchange movements on sales and purchases as well as forecasted cash flows and firm commitments, the Group uses derivative instruments. Derivative instruments are in most cases short term and with aim to hedge some proportion of the next season's foreign currency nominated sales or purchases. Instruments used may consist of foreign currency forward contracts, option contracts or combination instruments. Business units do most of their currency hedging against the Group's parent company. Group Risk Management monitors the Group's consolidated risk position and exercises external derivative instruments in line with the policy issued by Board of Directors.

Group does not apply hedge accounting (IAS 39) for the currency derivatives made to fix exchange rates of sales and purchases, but the derivatives are used for the purpose of reducing adverse impacts of market price changes on net earnings and cash flow. All derivatives are revalued at fair value on each balance sheet date. The underlying hedged foreign currency denominated transaction will however take place at a later date. As hedge accounting is not applied, these derivatives cause timing differences between the Group's exchange gains/losses and sales/ purchases.

Currency derivatives used by the Group at the end of 2013 were forward contracts and option instruments. The fair values of the derivatives are computed using regular valuation models by the Group. Changes in fair value of currency derivatives to hedge purchases and sales are recognized in the income statement. In 2013, these operative currency derivatives had an income statement effect of EUR 0.7 million (2012: EUR -0.4 million). Fair values of currency derivatives are summarized under section 4. Derivatives.

As a result of sales and purchases in foreign currencies as well as operations in several jurisdictions, Group has foreign currency denominated receivables and payables. These are revalued at each balance sheet date and consequently exposed to foreign exchange rate movements. Depending on whether foreign currency monetary receivables and payables relate to sales and purchases or financial items, the foreign exchange gains/losses are booked in the income statement either above or below operating profit.

Group Risk Management regularly monitors the balance between foreign currency denominated monetary receivables and payables and takes actions to increase or decrease the hedge if necessary and financially feasible.

The Group has its external debt portfolio partly in different currencies and it aims to use them to partially hedge foreign exchange impacts from intra-group loans. Also currency derivatives are used for heding foreign exchange impacts from intra-group loans. The purpose of these hedges is to reduce the adverse impact of currency movements on the Group's net income and equity.

The Group has net investments in subsidiaries whose equity is in foreign currency and thus exposed to foreign exchange rate movements when translated into euro. At the end of 2013, the Group did not hedge any of its net investments in foreign currency subsidiaries. During 2013, the Group hedged partially its net investments in USD currency denominated subsidiaries using equivalent currency loans.

The most relevant non-euro-denominated equities not subject to equity hedging are in HKD, USD and CAD currencies.

Group Risk Management monitors regularly the amounts of foreign exchange nominated net investments and decides on equity hedging actions accordingly.

Hedging of net investments in foreign subsidiaries

2013
	TOTAL NET INVESTMENT (CURRENCY MILLION)	LOANS USED FOR HEDGING (CURRENCY MILLION)	TOTAL NET INVESTMENT (EUR MILLION)	LOANS USED FOR HEDGING (EUR MILLION)	HEDGE RATE (%)	BOOKED IN TRANSLATION DIFFERENCE IN EQUITY (EUR MILLION)
USD	35.1		25.4			-0.1
Other			88.6
TOTAL			114.0			-0.1
2012
	TOTAL NET INVESTMENT (CURRENCY MILLION)	LOANS USED FOR HEDGING (CURRENCY MILLION)	TOTAL NET INVESTMENT (EUR MILLION)	LOANS USED FOR HEDGING (EUR MILLION)	HEDGE RATE (%)	BOOKED IN TRANSLATION DIFFERENCE IN EQUITY (EUR MILLION)
USD	40.4	12.9	30.6	9.8	32.0	0.1
JPY	157.4		1.4			0.1
Other			67.8			0.1
TOTAL			99.8	9.8	9.8	0.3

Exposure to foreign exchange risk from transactions

Below is presented the foreign currency exposure in companies whose functional currency is other than the currency under analysis. The connections possibly prevailing between different currencies are not taken into account, e.g. US dollar and Hong Kong dollar are considered as separate currencies in this analysis.

Balance sheet items include both Group's external and internal items. Income statement items do not include internal items to the extent reported currency is foreign currency for both transaction parties and hence does not expose the Group to foreign exchange risk.

	The positions of other currencies are smaller.
--	------------------------------------------------

2013
EUR MILLION	USD	CNY	EUR
Foreign currency trade receivables Dec. 31.	18.3		0.1
Foreign currency trade payables Dec. 31.	-19.9	-2.4	-3.2
Foreign currency loans receivable Dec. 31.	47.2	0.3	4.9
Foreign currency loans payable Dec. 31.	-58.8		-10.0
Foreign currency cash and cash equivalents Dec. 31.	4.8	0.4	0.4
NET EXPOSURE IN BALANCE SHEET DEC. 31.	-8.5	-1.8	-7.8
Actual foreign currency sales and purchases Jan. 1 – Dec. 31	52.8	0.3	-10.3
Actual foreign currency expenses Jan. 1 – Dec. 31	-77.1	-14.3	-12.4
NET EXPOSURE IN THE INCOME STATEMENT JAN. 1 – DEC. 31	-24.3	-14.0	-22.7
Currency derivatives Dec. 31. 2)	15.5
NET EXPOSURE	-17.3	-15.8	-30.4

2012

EUR MILLION	USD	CNY	EUR
Foreign currency trade receivables Dec. 31.	12.4		0.2
Foreign currency trade payables Dec. 31.	-16.4	0.0	-2.3
Foreign currency loans receivable Dec. 31.	30.1		5.5
Foreign currency loans payable Dec. 31. 1)	-31.6		-6.9
Foreign currency cash and cash equivalents Dec. 31.	7.4	0.0	0.4
NET EXPOSURE IN BALANCE SHEET DEC. 31.	1.9	0.0	-3.1
Actual foreign currency sales and purchases Jan. 1 – Dec. 31	35.3	-0.2	-9.0
Actual foreign currency expenses Jan. 1 – Dec. 31	-59.3	-6.0	-11.1
NET EXPOSURE IN THE INCOME STATEMENT JAN. 1 – DEC. 31	-24.0	-6.2	-20.1
Currency derivatives Dec. 31. 2)	10.7
NET EXPOSURE	-11.5	-6.2	-23.2

1) Excluding loans used for hedging net investments in foreign subsidiaries. 2) Currency derivatives are used to hedge a portion of purchases in foreign currency.

Sensitivity analysis

The effect of a 10% weakening of USD, HKD, CNY, AUD, NOK, CAD, SEK and RUB (against euro) in euro based on the following assumptions and factors:

• • The sensitivity analysis is based on change of value in a single analyzed currency and assumes other variables (including values of other currencies) to remain unchanged. The connections possibly prevailing between some currencies are not taken into account.
• • The sensitivity is analyzed against income statement and balance sheet conversion rates prevailing at Dec. 31.
• • The analysis includes the effect of income statement transactions made in the analyzed currency between Jan. 1 and Dec. 31 in Group companies, whose functional currency is other than the analyzed currency (so called transaction impact) as well as in Group companies, whose functional currency equals to the analyzed currency (so called translation impact). The analysis takes into account the currency forward contracts in

place at Dec. 31. The sensitivity analysis of income statement transactions excludes Group's internal items as these net out.

• • The sensitivity analysis includes the effect of valuation of the most significant financial assets and liabilities included in the balance sheet as per Dec. 31 in companies whose functional currency is other than the analyzed currency. The balance sheet items include both Group's external and internal items.
• • The sensitivity analysis includes the effect of the translation of subsidiaries' equity as per Dec. 31 in subsidiaries, whose reporting currency equals to the analyzed currency.
• • The tax effect included in the sensitivity analysis is calculated by using the Group's total effective tax rate. Translation differences in equity do not include any tax effect.
• • Below are analyzed the effect of most relevant currencies.

2013

EUR MILLION	USD	HKD	CNY	AUD	NOK	CAD	SEK	RUB
Operating profit	0.2	0.1	1.6	-0.4	-0.3	-0.9	-0.4	-2.4
Net income (net of tax)	0.7	0.1	1.2	-0.3	-0.2	-0.7	-0.7	-1.9
Equity (net of tax) 3)	-2.5	-2.6	0.0	-0.4	-0.3	-1.1	-0.4	-0.7
2012

EUR MILLION	USD	HKD	CNY	AUD	NOK	CAD	SEK	RUB
Operating profit	3.2	0.3	0.6	-0.5	-0.5	-1.3	-0.4	-4.4
Net income (net of tax)	1.8	0.2	0.4	-0.4	-0.5	-0.9	-0.3	-3.3
Equity (net of tax) 3)	-2.4	-2.7	0.0	-0.4	-0.5	-1.1	-0.1	-0.1

3) Without the effect of net income.

A 10% strengthening would have a deviant opposite effect due to currency derivatives. The opposite effect on operating profit would be the following: USD: EUR 0.3 million bigger, and RUB: EUR -0.1 million smaller.

2. Interest rate risk

The Group has interest-bearing borrowings and interest rate swaps, where the interest is variable and connected to market rates. Consequently the Group is exposed to changes in market interest rates.

		2013		2012
EUR MILLION	NON CURRENT	CURRENT	NON CURRENT	CURRENT
Loans from financial institutions with fixed interest rate	0.0	0.0	0.1	0.0
Pension loans with fixed interest rate		0.1	0.1	2.1
Loans from financial institutions with variable interest rate	39.1	30.1	78.4	25.3
Commercial paper program with variable interest rate		47.5		28.0

The Group's borrowings are mainly in euros and US dollars, which have a substantial contribution to the overall interest rate risk. The Group's borrowings are almost fully flowing through the Group's parent company, which is consequently managing the Group's overall interest rate risk. The Group's interest rate risk is monitored as cash flow and fair value risks. Group Risk Management analyzes regularly the interest rate risk and agree

on actions if needed. These actions may include changing the currency split of the external loan portfolio, selection between different sources of loan financing, changing the interest rate periods as well as entering into derivative financial instruments available to manage the interest rate risk. The Group does not have a fixed policy on how interest rates are fixed to different time periods, but this is decided based on prevailing market conditions.

Most of the Group's interest-bearing liabilities have an interest period of less than one year. EUR 0.2 million of the Group's loans payable is connected to fixed interests or interest periods of 12-month or longer (2012: EUR 2.2 million).

The interest rate risk may also be managed by using interest rate swaps, where the Group pays a fixed rate and receives variable rate. As of Dec. 31 the Group had several interest rate swaps, which were designated and effective as cash flow hedges in accordance with IAS 39. The market price based fair values of interest rate derivatives are received from issuer bank. In 2013, interest rate derivatives had an equity effect of EUR 0.9 million (2012: EUR -0.6 million) and income statement effect of EUR -0.9 million (2012: EUR -0.6 million). Fair values of interest rate derivatives are summarized under section 4. Derivatives.

Sensitivity analysis

Below is presented the effect of liabilities with variable interest rate and interest rate swaps on net income and equity if there was a 1% increase in interest rates. The sensitivity analysis is based on following assumptions and factors:

• • All other variables, in particular foreign exchange rates, are assumed to remain unchanged.
• • The sensitivity is analyzed against interest rates applicable on Dec. 31.
• • The sensitivity analysis includes the liabilities and interest rate swaps with variable interest rate in force on Dec. 31.
• • The sensitivity analysis of interest rate swaps is based on calculations received from the bank.
• • The tax effect included in the sensitivity analysis is calculated by using the Group's total effective tax rate.

		2013		2012
EUR MILLION	NET INCOME (NET OF TAX)	EQUITY (NET OF TAX) 4)	NET INCOME (NET OF TAX)	EQUITY (NET OF TAX) 4)
Loans from financial institutions with variable interest rate	-0.5	1.5	-0.7	1.8
Commercial paper program with variable interest rate	-0.4		-0.2

4) Without the effect of net income.

3. Other market price risks

The Group purchases some raw-materials, which are priced on global financial markets. These include commodity metals such as copper, zinc and lead, and some plastics. The value of these purchases is still relatively low and market price risk management actions are done in each manufacturing unit locally. Group Risk Management also monitors the development of these raw-material prices. No commodity hedging is currently carried out.

The Group does not own any such publicly traded shares or securities which would be subject to market price risks. The Group's investments in available-for-sale financial instruments are insignificant and consist of real estate investments and other unlisted shares for which no clear market price exists.

4. Derivatives

		2013		2012
EUR MILLION	NOMINAL VALUE	FAIR VALUE	NOMINAL VALUE	FAIR VALUE
Operative hedges
Foreign currency derivatives	49.4	0.0	35.1	-0.4
Monetary hedges
Foreign currency derivatives	24.6	0.1	27.2	0.0
Interest rate derivatives4)	69.5	-2.0	85.0	-3.0

4) Includes also two cross-currency swaps.

The changes in the fair values of derivatives that are designated as hedging instruments but do not qualify for hedge accounting are recognized based on their nature either in operative costs, if the hedged item is an operative transaction, or in financial income and expenses if the hedged item is a monetary transaction. Some derivatives designated to hedge monetary items are accounted for according to hedge accounting.

All foreign currency derivatives mature within the next 36 months. Interest rate swaps, which are effective and mature between 2013 and 2017, generate following non-discounted cash flows, calculated based on forward interest rates and forward foreign exchange rates prevailing as per Dec. 31: EUR -1.0 million during year 2014, EUR -0.6 million during year 2015, EUR –0.1 million during year 2016, and EUR 0.0 million during year 2017.

Changes in unrealized mark-to-market

valuations for operative foreign currency derivatives EUR MILLION 2013 2012

Included in operating profit	0.3	-0.6

Operative foreign currency derivatives that are marked-to-market on reporting date cause timing differences between the changes in derivative's fair values and hedged operative transactions. Changes in fair values for derivatives designated to hedge future cash flow but are not accounted for according to the principles of hedge accounting impact the Group's operating profit for the accounting period. The underlying foreign currency transactions will realize in future periods.

LIQUIDITY RISK

Generally, the seasonality of the Group's cash flow is fairly predictable and Group's finance management monitors Group's

2013

liquidity position using the cash pooling system as well as monthly cash flow and liquidity reporting.

Group's finance management raises most of the Group's interest-bearing debt centrally. The Group seeks to reduce liquidity and refinancing risks with balanced maturity profile of loans as well as by keeping sufficient amount of credit lines available. The Group has a EUR 80 million domestic commercial paper program, which together with Group's credit limits is utilized to balance the seasonality of the Group's cash flow. The size and maturity of issued commercial papers is decided by Group Treasury, based on forecasted cash flows, status of commercial paper markets and applicable interest rates. The renewal of commercial papers upon maturity creates certain liquidity risk, which is managed by maintaining sufficient other liquidity reserves available at the maturity dates. The commercial paper program was used actively as part of Group funding and competitively priced debt was acquired through this market.

Group's loan facilities, which were renewed in 2012, include ordinary gearing ratios and net debt to EBITDA ratio covenants. The Board and Group management are monitoring the fulfillment of the bank covenants on a monthly basis. The Group does not foresee that the bank covenants would create exposures to its liquidity.

The Group's credit limits not drawn at December 31, 2013 were EUR 100.5 million (2012: EUR 73.0 million). Major part of the Group's credit limits is part of the Group's loan facilities renewed in 2012 and maturing in 2017. Group's domestic commercial paper program not sold at December 31, 2013 was EUR 32.5 million (2012 EUR 12.0 million).

Maturity of the group's financial liabilities

The following are the contractual maturities of financial liabilities, including interest payments.

TOTAL	157.0	145.9	148.6	105.6	11.5	0.8	10.5	20.1	148.6
Currency derivatives, non-hedge accounted	0.0	0.0	0.0	0.0					0.0
Interest rate derivatives, non-hedge accounted	0.1	0.1	0.1	0.1	0.1	0.0	-0.1		0.1
Interest rate and currency derivatives, hedge accounted	1.9	1.9	1.5	0.8	0.5	0.1	0.1		1.5
Derivatives, net settled 2)
Trade and other non-interest-bearing payables	38.0	26.9	26.9	26.0	0.8	0.1			26.9
Non-interest-bearing liabilities
Other interest-bearing liabilities	0.0	0.0	0.0	0.0					0.0
Finance lease	0.1	0.1	0.1	0.1					0.1
Commercial paper program	47.5	47.5	47.5	47.5					47.5
Pension loans	0.1	0.1	0.1	0.1					0.1
Loans from financial institutions	69.3	69.3	72.4	31.0	10.2	0.6	10.5	20.1	72.4
Interest-bearing liabilities
EUR MILLION	VALUE	LIABILITIES 1)	CASH FLOWS	2014	2015	2016	2017	2018	TOTAL
	CARRYING	FINANCIAL	CONTRACTUAL

2012

	CARRYING	FINANCIAL	CONTRACTUAL
EUR MILLION	VALUE	LIABILITIES 1)	CASH FLOWS	2013	2014	2015	2016	2017	TOTAL
Interest-bearing liabilities
Loans from financial institutions	103.8	103.8	109.1	26.7	11.2	11.0	0.7	59.5	109.1
Pension loans	2.2	2.2	2.2	2.1	0.1				2.2
Commercial paper program	28.0	28.0	28.0	28.0					28.0
Finance lease	0.2	0.2	0.2	0.1	0.1	0.0			0.2
Other interest-bearing liabilities	0.0	0.0	0.0	0.0					0.0
Non-interest-bearing liabilities
Trade and other non-interest-bearing payables	39.4	28.2	28.2	26.7	0.9	0.7			28.2
Derivatives, net settled 2)
Interest rate and currency derivatives, hedge accounted	2.7	2.7	4.2	1.1	1.0	0.9	0.9	0.3	4.2
Interest rate derivatives, non-hedge accounted	0.3	0.3	0.7	0.1	0.1	0.1	0.1	0.1	0.7
Currency derivatives, non-hedge accounted	0.4	0.4	0.4	0.4					0.4
TOTAL	176.9	165.8	173.1	85.3	13.4	12.7	1.8	59.8	173.1

1) The proportion of the carrying values which are classified as financial liabilities according to IAS 39.

2) Cash flows of interest rate and currency derivatives are calculated based on interest and foreign exchange rates as per Dec. 31.

CREDIT AND DEFAULT RISK

The Group followed actively credit and default risks associated with customers and other counterparties in 2013. The Group's credit and default risk portfolio did not significantly change during the course of the year. The proportional amount of Group's trade receivables, which are past due date, stayed at same levels as in 2012. Credit loss net allowances for trade receivables decreased moderately from 2012 to 2013.

The Group's accounts receivables are generated by a large number of customers worldwide. Consequently, the credit risk is spread against multiple counterparties. The credit risk management is allocated to each operative business unit. Before providing credit to any new customer, background checks are carried out. Cash, advance payments and letters of credit are also applied with new and existing customers. Customer specific credit limits and financial situation of the existing credit customers are monitored and set locally in each business unit. Customers' payment behavior is monitored regularly and delays in payments may trigger payment reminders, stopping the shipments, requirements for advance payments for future shipments and eventually legal collection procedures. In significant cases, business units consult with the CFO before final decisions. In exceptional cases, payment terms may be renegotiated.

Group Risk Management manages most of the credit and default risk related to financial instruments. It seeks to reduce these risks by limiting the counterparties to banks, which have a good credit standing. Majority of the Group's bank deposits and forward contracts have been made with the Group's leading banks (Nordea Bank Finland Plc, Pohjola Bank Plc and Skandinaviska Enskilda Banken AB (pub)). Nordea Bank Finland Plc has credit ratings of Aa3 (Moody's) and AA- (Standard&Poor's), Pohjola Bank Plc has credit ratings of Aa3 (Moody's) and AA- (Standard&Poor's) and Skandinaviska Enskilda Banken (pub) has credit ratings of A1 (Moody's) and A+ (Standard&Poor's). Group's all investments related to liquidity management are made in liquid instruments with low credit risk. For instance, commercial paper investments are not made.

The Group's maximum credit and default risk is the carrying amount of all financial assets which are disclosed in note 22.

For information on allowance for trade receivables, see note 15. An allowance of trade receivables is made when there is objective evidence (such as significant overdue of receivables and unsuccessful dunning attempts or known financial difficulties and thus increased probability of customer insolvency) that the Group will not be able to collect all amounts due according to the original terms of the receivables. The assessment and decision for allowances is done locally in each business unit on case-bycase basis.

No allowance is made on overdue trade receivables from customers, whose solvency is considered solid.

Analysis of trade receivables that where

	due but not impaired

EUR MILLION	2013	2012
Neither past due or impaired	41.6	36.2
Past due but not impaired
Less than 1 month	4.3	6.4
1–3 months	3.0	3.4
3–6 months	1.5	1.6
Over 6 months	1.9	2.0
TOTAL	52.2	49.6

CAPITAL MANAGEMENT

Rapala Group's strategic objective is profitable growth. The objective of the Group's capital management is to ensure that it maintains healthy capital ratios in order to support its business and to maximize shareholder value.

The Group manages its capital structure and makes adjustments to it taking into account changes in economic conditions and requirements of strategy implementation. To maintain or develop the capital structure, the Group may adjust the dividend payments and repayments of capital to shareholders by buying back shares, issue new shares and/or increase/decrease the amount of borrowings.

• Group's objective for capital management is to keep:
• 1. Gearing ratio below 150% and
• 1. Net interest-bearing debt to EBITDA (rolling 12 months) below 3.8.

The Group capital structure is reviewed by the Board regularly. The Group is not subject to externally imposed capital requirements other than the financial covenants set by the banks, which are derived from the above mentioned key figures. For more information on financial covenants set by the banks, see section on liquidity risks.

The Group met its objectives for capital management as presented in the table below.

For definitions of key figures, see page 48.

EUR MILLION	TARGET	2013	2012 Restated1)
Gearing %	below 150%	71.2	65.3
Net interest-bearing debt to EBITDA	below 3.8	2.9	2.8

1) See note 1

FINANCIAL ASSETS AND LIABILITIES BY 22 CATEGORIES AND FAIR VALUES

			2013			2012
EUR MILLION	CARRYING VALUE	FINANCIAL ASSETS AND LIABILITIES *	FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES *	CARRYING VALUE	FINANCIAL ASSETS AND LIABILITIES *	FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES *	NOTE
FINANCIAL ASSETS
Loans and receivables1)
Non-current financial assets
Loan receivables	3.0	3.0	3.0	3.4	3.4	3.4	15
Other interest-bearing receivables	0.0	0.0	0.0	0.0	0.0	0.0	15
Non-interest-bearing receivables	0.9	0.9	0.9	0.9	0.9	0.9	15
Current financial assets
Cash and cash equivalents	16.9	16.9	16.9	38.2	38.2	38.2	17
Loan receivables	1.0	1.0	1.0	1.1	1.1	1.1	15
Other interest-bearing receivables				1.3	1.3	1.3	15
Trade and other non-interest-bearing receivables	58.3	55.9	55.9	55.3	52.2	52.2	15
Available-for-sale financial assets
Available-for-sale investments	0.3	0.3	0.3	0.3	0.3	0.3	14
Financial assets at fair value through income statement - held-for-trading
Currency derivatives - non-hedge accounted	0.8	0.8	0.8	0.3	0.3	0.3	15, 21
Hedge accounted derivatives
Currency derivatives - fair value hedges				0.3	0.3	0.3	15, 21
FINANCIAL LIABILITIES
Financial liabilities at fair value through income statement - held-for-trading
Interest rate and currency derivatives - non-hedge accounted	0.9	0.9	0.9	1.0	1.0	1.0	21, 24
Hedge accounted derivatives
Interest rate derivatives - cash flow hedges	1.7	1.7	1.7	3.0	3.0	3.0	21, 24
Currency derivatives - fair value hedges	0.3	0.3	0.3				21, 23
Financial liabilities measured at amortized cost1)
Non-current financial liabilities
Loans from financial institutions	39.1	39.1	39.7	78.5	78.5	79.2	23
Pension loans				0.1	0.1	0.1	23
Finance lease	0.0	0.0	0.0	0.1	0.1	0.1	23
Other non-interest-bearing liabilities	0.9	0.9	0.9	1.5	1.5	1.5	24
Current financial liabilities
Loans from financial institutions	30.1	30.1	30.1	25.3	25.3	25.3	23
Commercial paper program	47.5	47.5	47.5	28.0	28.0	28.0	23
Pension loans	0.1	0.1	0.1	2.1	2.1	2.1	23
Finance lease	0.1	0.1	0.1	0.1	0.1	0.1	23
Other interest-bearing liabilities	0.0	0.0	0.0	0.0	0.0	0.0	23
Trade and other non-interest-bearing payables	37.1	26.0	26.0	37.8	26.7	26.7	24

* The proportion of the carrying value which is classified as financial assets and liabilities according to IAS 39. 1) Fair value hierarchy level 2.

FAIR VALUE HIERARCHY OF THE FINANCIAL ASSETS AND LIABILITIES MEASURED AT FAIR VALUE

				2013				2012
EUR MILLION	TOTAL	LEVEL 1	LEVEL 2	LEVEL 3	TOTAL	LEVEL 1	LEVEL 2	LEVEL 3
FINANCIAL ASSETS AT FAIR VALUE
Available-for-sale financial assets
Available-for-sale investments	0.3			0.3	0.3			0.3
Financial assets at fair value through income statement - held-for-trading
Currency derivatives - non-hedge accounted	0.8		0.8		0.3		0.3
Hedge accounted derivatives
Currency derivatives - fair value hedges					0.3		0.3
TOTAL	1.1		0.8	0.3	0.9		0.6	0.3
FINANCIAL LIABILITIES AT FAIR VALUE
Financial liabilities at fair value through income statement - held-for-trading
Currency and interest derivatives - non-hedge accounted	0.9		0.9		1.0		1.0
Hedge accounted derivatives
Interest rate derivatives - cash flow hedges	1.7		1.7		3.0		3.0
Currency derivatives - fair value hedges	0.3		0.3
TOTAL	2.8		2.8		4.0		4.0

FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES

Fair value hierarchy levels

The fair values of the financial assets and liabilities on the hierarchy level 1 are based on quoted market prices of similar financial instruments traded in an active market. Currently there are no financial instruments on level 1.

The fair values of the financial assets and liabilities on the hierarchy level 2 are based on other price information than quoted market prices for a significant part of the valuation. This information is supported by observable market inputs either directly (i.e. prices) or indirectly (i.e. derived from prices).

The fair values of the financial assets and liabilities on the hierarchy level 3 are calculated using a valuation technique based on assumptions that are not supported by available observable market data. For example management estimates are utilized in generally accepted valuation models of the financial instruments on the Level 3.

The fair value hierarchy level, into which the entire financial asset or liability is classified, is determined based on the lowesthierarchy-level information being significant for the valuation of that particular financial asset or liability. The significance of the information is estimated considering the financial asset or liability in its entirety.

No significant transfers between the hierarchy levels took place during the financial period.

Available-for-sale investments

Available-for-sale investments comprise of unlisted shares that are measured at fair value. Certain unlisted shares for which fair values cannot be measured reliably are measured at cost less possible impairment.

Derivatives

All derivatives are initially recognized at fair value on the date derivative contract is entered into, and are subsequently remeasured at fair value on each balance sheet date. Determination of fair values is based on quoted market prices and rates, discounting of cash flows and option valuation models.

Finance leases

The fair value of finance lease liabilities corresponds to their book value. The fair value of finance leases is based on discounted future cash flows. The discount rate used corresponds to that applied to similar finance leases.

Current financial assets and liabilities

Due to their short maturity, the fair value of current financial assets and liabilities is regarded as corresponding to their original carrying amount.

Non-current financial assets

The fair value of non-current financial assets is based on discounted future cash flows. The discount rate used corresponds to the market rate on the balance sheet date.

Non-current interest-bearing liabilities

On December 31, 2013, 50.0% (2012: 50.5%) of non-current loans based on floating rates was connected to one-month euribor, libor or similar and the rest to maximum six-month euribor, libor or similar. Therefore, the fair value of non-current loans based on floating rates is regarded as equaling their book value. A part of non-current loans on floating rates is hedged with separate interest rate derivatives which are described in note 21. The fair value of non-current loans on fixed rates is based on discounted future cash flows. The discount rate used corresponds to the market rate on the balance sheet date.

Non-current non-interest-bearing liabilities

Contingent considerations of business combinations and other acquisitions are recognized at fair value on the date of acquisition. Determination of fair values is based on discounted future cash flows.

INTEREST-BEARING 23 LIABILITIES

EUR MILLION	AVERAGE INTEREST RATE 2013, % 1)	2013	2012
Non-current interest-bearing liabilities
Loans from financial institutions	2.37	39.1	78.5
Pension loans			0.1
Finance lease	3.90	0.0	0.1
Derivatives		0.3
Current interest-bearing liabilities
Loans from financial institutions	2.13	20.1	15.3
Current portion of non-current loans from financial institututions	1.99	10.0	10.1
Commercial paper program	0.91	47.5	28.0
Pension loans		0.1	2.1
Finance lease	4.65	0.1	0.1
Other current liabilities	0.00	0.0	0.0
TOTAL		117.2	134.2

1) Some of the loans are subject to interest rate swaps. Average interest rates are calculated without the effect of the interest rate swaps. More information in note 21.

Fair values of financial liabilities are presented in the note 22.

INTEREST-BEARING LIABILITIES BY CURRENCY

	2013		2012
NON		NON	CURRENT
9.5	10.1	38.8	6.2
9.8	14.6	10.5	12.9
			0.3
19.8	5.0	25.3	5.1
	0.0	0.1	0.0
			0.5
	0.4		0.3
		3.7
	47.6	0.1	30.1
	0.0	0.0	0.0
	0.0	0.0	0.0
39.1	77.9	78.7	55.5
	CURRENT	CURRENT	CURRENT

FINANCE LEASE

		2013		2012
EUR MILLION	MINIMUM LEASE PAYMENTS	PRESENT VALUE OF PAYMENTS	MINIMUM LEASE PAYMENTS	PRESENT VALUE OF PAYMENTS
Within one year	0.1	0.1	0.1	0.1
1–3 years	0.0	0.0	0.1	0.1
TOTAL MINIMUM LEASE PAYMENTS	0.1	0.1	0.2	0.2
Less future finance charges	0.0		0.0
PRESENT VALUE OF MINIMUM LEASE PAYMENTS	0.1	0.1	0.2	0.2

NON-INTEREST-BEARING 24 LIABILITIES

EUR MILLION	2013	2012
Non-current non-interest-bearing liabilities
Derivatives	1.9	3.3
Other non-current liabilities	0.9	1.5
Current non-interest-bearing liabilities
Trade payables	17.2	16.1
Accrued employee-related expenses	9.8	9.2
VAT payable	1.4	1.9
Derivatives	0.7	0.7
Advances received	0.5	0.2
Other accrued expenses and deferred income	6.3	5.9
Other current liabilities	2.0	4.5
TOTAL	40.6	43.3

Other non-current non-interest-bearing liabilities include contingent considerations of business combinations and other acquisitions on the date of acquisition.

Fair values of financial liabilities are presented in the note 22.

COMMITMENTS AND 25 CONTINGENCIES

COMMITMENTS

EUR MILLION	2013	2012
On own behalf
Guarantees		0.1
TOTAL		0.1

Since Normark Sport Finland Oy, a 100% owned subsidiary of Rapala VMC Corporation, is the legal shareholder of the distribution joint venture with Shimano, the parent company has guaranteed to Shimano the fulfillment of its subsidiary's obligations related to the joint venture.

Group's lease commitments are presented in note 26.

DISPUTES AND LITIGATIONS

In 2013 the Group received a decision from the Supreme Administrative Court concerning the decision made by Finnish tax authorities in 2007 to adjust the parent company's taxation in years 2004-2005. The process to amend the parent company's taxation in years 2006-2013 following the decision of the Supreme Administrative Court is still pending. In 2013 the Group booked a receivable on the foreseen adjustment to the extent the realization of income is virtually certain. Previously the Group has booked and paid the taxes and delay payments fully in accordance to the tax authorities view, as confirmed by the Administrative Court in 2011. The cumulative disputed taxes totaled EUR 2.0 million on December 31, 2013.

The Group's management does not have knowledge of any other open disputes or litigations, which would have a significant impact on the company's financial position.

THE GROUP AS A LESSEE

Future minimum rental payable under non-cancellable operating lease commitments

EUR MILLION	2013	2012
Within one year	4.9	5.8
1–3 years	6.1	5.1
3–5 years	3.7	3.0
Later than 5 years	2.1	2.7
TOTAL	16.8	16.6

The Group leases offices, warehouses and manufacturing facilities under several non-cancellable operating leases. The leases have varying terms and lengths, some of which may contain renewal options.

THE GROUP AS A LESSOR

Future minimum rental receivable under non-cancellable operating leases

TOTAL	0.1	0.1
Within one year	0.1	0.1
EUR MILLION	2013	2012

Some of the offices and warehouses that are currently not used by the Group are leased to external parties. The leases have varying terms and lenghts, some of which may contain renewal options.

RELATED PARTY 27 TRANSACTIONS

The Group's related parties include subsidiaries, associates, top management and entities with significant influence. Subsidiaries owned directly or indirectly by the parent company as well as associates and foreign branches are listed in note 31. Related party transactions between Group companies have been eliminated. Entities with significant influence are specified in section 'Shares and Shareholders'.

TRANSACTIONS AND BALANCES WITH RELATED PARTIES

EUR MILLION	SALES AND OTHER INCOME	PURCHASES		PAID RENTS OTHER EXPENSES	RECEIVABLES	PAYABLES
2013
Joint venture Shimano Normark UK Ltd.	3.0				0.1
Associated company Lanimo Oü	0.0	0.1			0.0
Entity with significant influence over the Group 1)			0.2	0.1	0.0
Management			0.3			0.0
2012
Joint venture Shimano Normark UK Ltd.	3.9				0.1	0.0
Associated company Lanimo Oü		0.0			0.0
Entity with significant influence over the Group 1)			0.2	0.1	0.0
Management	0.0		0.4			0.0

1) Lease agreement for the real estate for the consolidated operations in France and a service fee. Entity with significant influence is Viellard Migeon & Cie, who's shareholding alone and together with its subsidiary is presented in section 'Shares and Shareholders'.

EMPLOYEE BENEFITS FOR TOP MANAGEMENT

EUR MILLION	2013	2012
Salaries and other short-term employee benefits	-3.1	-2.5
Costs for share rewards	0.1	-0.1
TOTAL	-3.0	-2.6

Top management consists of members of the Board of Directors, CEO and other members of the Executive Committee. In December 2013 Isabelle De Bardies resigned from the Board of Directors due to her new executive position outside the company. In 2013 one new member was appointed to the Executive Committee and in 2012 one member left his position.

On December 31, 2013, the members of the Board and the Executive Committee held directly a total of 3 000 Company shares (on December 31, 2012: 3 000). Top management owned 0.0% (0.0%) of the issued share capital and voting rights of the company on December 31, 2013.

In 2013 and 2012, no options were granted to top management. For more information on share-based payments, see note 28 and the section 'Shares and Shareholders'. Details of top management shareholdings are given in the section 'Board and Management'.

The Group's business transactions or outstanding balances with top management or close members of their family are presented in the table 'Transactions and balances with related parties'.

EMPLOYEE BENEFITS FOR CHIEF EXECUTIVE OFFICER

TOTAL	-0.5	-0.5
Costs for share rewards	0.0	0.0
Salaries and other short-term employee benefits	-0.5	-0.5
EUR MILLION	2013	2012

In 2013, CEO's annual base salary and benefits amounted to EUR 337 635, of which EUR 37 635 was paid in cash and EUR 300 000 as personal supplementary pension insurance policy. CEO is also entitled to a profit bonus according to the principles of

the Group's senior management bonus scheme. His bonus paid in 2013 totaled EUR 73 071 accruing from year 2012. Bonus accrued for 2013 amounted to EUR 110 875. The CEO's pension security is not arranged under the statutory Finnish contribution based employee pension plan. Therefore in addition to the annual salary, CEO was paid in 2013 EUR 56 485 to arrange a pension security corresponding to the Finnish statutory employee pension plan. The retirement age corresponds to the Finnish employee pension plan. In addition, CEO has the right to receive further compensation of EUR 8 400 annually to be placed in a voluntary pension scheme or a similar arrangement. Being a member of the board, the CEO is entitled to the same compensation as the other board members, which totals to EUR 45 000 for the year 2013.

The company shall give notice at any time or using 24 months notice period and CEO shall give notice 3 or 6 months prior to terminating the service contract. The term of notice is dependent on the cause for termination of employment. If the service agreement is terminated by the company without cause, CEO is entitled to severance compensation corresponding to 24 months' salary (excluding profit bonuses).

EMPLOYEE BENEFITS FOR OTHER MEMBERS OF THE EXECUTIVE COMMITTEE

TOTAL	-2.1	-1.7
Costs for share rewards	0.1	-0.1
Salaries and other short-term employee benefits	-2.2	-1.6
EUR MILLION	2013	2012

In addition to the monthly salary members of the Executive Committee participate in the Group's senior management bonus scheme. The amount and payment of the bonus requires that the result and cash flow targets are achieved. If the targets are not achieved, payment of bonus is fully at the discretion of the Board of Directors. Bonuses awarded under the scheme are paid in two installments, the first when the audited results for the relevant financial year are known and the second after a predetermined vesting period of a few months, to encourage retention of senior management.

EMPLOYEE BENEFITS FOR BOARD OF DIRECTORS

EUR MILLION	2013	2012
Salaries and other short-term employee benefits	-0.4	-0.4
TOTAL	-0.4	-0.4

Chairman of the Board is paid an annual remuneration of EUR 100 000 and other Members of the Board of Directors an annual remuneration of EUR 45 000. The members of the Remuneration Committee do not receive further compensation. Members of the Board of Directors are reimbursed for travel expenses following the company's traveling compensation principles. Members of the Board of Directors were paid a total of EUR 370 000 for their work on the Board of Directors and the Remuneration Committee in the financial year 2013 (2012: EUR 370 000).

EARNINGS PER 29 SHARE

EUR MILLION	2013	2012 Restated1)
Net profit for the period attributable to the equity holders of the Company, EUR million	12.5	10.1
Weighted average number of shares, 1 000 shares	38 660	38 885
Diluted weighted average number of shares, 1 000 shares	38 660	38 885
Earnings per share, EUR	0.32	0.26
Diluted earnings per share, EUR	0.32	0.26

1) See note 1

For more details on the calculation of earnings per share, see accounting principles for the consolidated accounts.

During the period the Group had one share-based incentive program (2012). The original earning period (from April 1, 2012 to June 30, 2013) was prolonged by 6 months to end on December 31, 2013. The potential reward was based on the development of Rapala Group's inventory levels and EBITDA. The program ended at the end of December and no rewards materialized. The gross value of the program corresponded to the value maximum total of 235 000 company shares. The share price at the grant date was EUR 4.86.

SHARE-BASED PAYMENT RECOGNITION IN THE INCOME STATEMENT

EUR MILLION	2013	2012
Employee benefit expenses
Share-based payment programs to be settled in shares	0.3	-0.3
Social security expense liability for share-based payments	0.0	0.0
Deferred taxes	0.0	0.0
TOTAL	0.3	-0.3

SHARE-BASED PAYMENT RECOGNITION IN THE BALANCE SHEET

EUR MILLION	2013	2012
Assets
Deferred tax assets	0.0	0.0
Equity and liabilities
Equity	0.0	0.0
Social security expense liability for share-based payments 1)	0.0	0.0

1) Included in current other non-interest-bearing payables.

The Group has no knowledge of any significant events after the balance sheet date that would have a material impact on the financial statements for 2013. Material events after the balance sheet date have been discussed in the Review of the Board of Directors.

SUBSIDIARIES BY GEOGRAPHICAL AREA		COUNTRY	GROUP HOLDING (%)	NATURE OF ACTIVITY
Nordic
Normark Denmark A/S	*	Denmark	100	Distribution
KL-Teho Oy	*	Finland	100	Manufacturing
Marttiini Oy	*	Finland	100	Manufacturing
Normark Sport Finland Oy	*	Finland	100	Sourcing
Normark Suomi Oy		Finland	100	Distribution
Peltonen Ski Oy		Finland	100	Manufacturing
Rapala Shimano East Europe Oy	2)	Finland	50	Administration
Rapala VMC Iceland ehf	*	Iceland	100	Distribution
Normark Norway AS	*	Norway	100	Distribution
Remen Slukfabrikk AS		Norway	100	Administration
Vangen AS		Norway	100	Administration
Mora Ice AB		Sweden	100	Sourcing
Normark Scandinavia AB	*	Sweden	100	Distribution
Rest of Europe
FLLC Normark	2)	Belarus	50	Distribution
Rapala Finance N.V.	*	Belgium	100	Administration
Normark S.r.o.	2)	Czech Republic	50	Distribution
ACE Ltd.		UK	100	Administration
Dynamite Baits Ltd.	*	UK	100	Manufacturing
Normark Sport Ltd.		UK	100	Administration
Marttiini Oü		Estonia	100	Manufacturing
Normark Eesti Oü		Estonia	100	Distribution
Rapala Eesti AS	*	Estonia	100	Manufacturing
Rapala France SAS	*	France	100	Distribution
VMC Péche SA	*	France	100	Manufacturing
Normark Hungary Ltd	*	Hungary	66.6	Distribution
SIA Normark Latvia		Latvia	100	Distribution
Normark UAB		Lithuania	100	Distribution
Rapala B.V.	*	Netherlands	100	Administration
Normark Polska Sp.z.o.o.	*	Poland	100	Distribution
Normark Portugal SA		Portugal	100	Distribution
SC Normark Sport Romania S.r.l.		Romania	66.6	Distribution
OOO Raptech	*	Russia	100	Manufacturing
ZAO Normark	2)	Russia	50	Distribution
Normark Spain SA	*	Spain	100	Distribution
Rapala-Fishco AG	*	Switzerland	100	Distribution
VMC-Water Queen Ukraine	2)	Ukraine	50	Distribution
North America
Normark Inc.		Canada	100	Distribution
NC Holdings Inc.	*	USA	100	Administration
Normark Corporation		USA	100	Distribution
Normark Innovations, Inc.		USA	100	Sourcing
VMC Inc.		USA	100	Distribution

1) Established in 2013

2) Controlled by the Rapala Group

* Shares owned by the parent company

SUBSIDIARIES BY GEOGRAPHICAL AREA		COUNTRY	GROUP HOLDING (%)	NATURE OF ACTIVITY
Rest of the World
Rapala VMC Australia Pty Ltd	*	Australia	100	Distribution
Rapala V.M.C. Do Brazil	*	Brazil	100	Distribution
Normark Chile Ltd		Chile	100	Distribution
Kentec Gift (Shenzhen) Ltd		China	100	Distribution
Rapala VMC China Co.	*	China	100	Distribution
Rapala VMC (ShenZhen) Ltd		China	100	Manufacturing
Rapala VMC (Hong Kong) Ltd	*	Hong Kong	100	Sourcing
Willtech (PRC) Ltd.		Hong Kong	100	Manufacturing
PT Rapala Indonesia	*	Indonesia	100	Distribution
PT Rapala VMC Batam		Indonesia	100	Manufacturing
PT VMC Fishing Tackle Indonesia		Indonesia	100	Manufacturing
Rapala Japan K.K.	*	Japan	100	Distribution
Normark Kazakhstan LLP	2)	Kazakhstan	50	Distribution
Rapala VMC (Asia Pacific) Sdn Bhd.	*	Malaysia	100	Distribution
Rapala VMC Mexico S. de R.L. de C.V		Mexico	100	Distribution
Rapala VMC South-Africa Distributors Pty Ltd.	*	South Africa	70	Distribution
Rapala VMC Korea Co., Ltd	*	South Korea	100	Distribution
Rapala VMC Singapore Pte. Ltd.	1)	Singapore	100	Administration
Rapala VMC (Thailand) Co., Ltd.	*	Thailand	100	Distribution
ASSOCIATED COMPANIES AND JOINT VENTURES		COUNTRY	GROUP HOLDING (%)	NATURE OF ACTIVITY
Shimano Normark UK Ltd.	*	UK	50	Distribution
Lanimo Oü		Estonia	33.3	Manufacturing

FOREIGN BRANCHES

Rapala VMC (Hong Kong) Ltd, branch office in Taiwan Normark S.r.o., branch office in Slovak Republic

1) Established in 2013 2) Controlled by the Rapala Group * Shares owned by the parent company

KEY FINANCIAL FIGURES

		2013	2012	2011	2010	2009
Scope of activity and profitability3)
Net sales	EUR million	286.6	290.7	279.5	269.4	234.6
Operating profit before depreciation and impairments	EUR million	33.6	32.7	37.7	37.4	28.9
as a percentage of net sales	%	11.7	11.2	13.5	13.9	12.3
Operating profit	EUR million	26.1	25.9	30.7	31.3	22.1
as a percentage of net sales	%	9.1	8.9	11.0	11.6	9.4
Profit before taxes	EUR million	20.6	21.0	25.2	29.5	19.9
as a percentage of net sales	%	7.2	7.2	9.0	10.9	8.5
Net profit for the period	EUR million	16.1	14.0	17.2	20.7	14.3
as a percentage of net sales	%	5.6	4.8	6.2	7.7	6.1
Attributable to
Equity holders of the Company	EUR million	12.5	10.1	14.0	18.0	12.1
Non-controlling interest	EUR million	3.6	3.8	3.2	2.8	2.2
Capital expenditure	EUR million	10.7	14.4	10.0	12.7	7.6
as a percentage of net sales	%	3.7	5.0	3.6	4.7	3.2
Research and development expenses	EUR million	1.6	2.0	2.1	2.1	2.0
as a percentage of net sales	%	0.6	0.7	0.7	0.8	0.9
Net interest-bearing debt at the end of the period	EUR million	96.3	89.9	91.1	89.9	79.2
Capital employed at the end of the period	EUR million	231.4	227.5	226.9	219.1	190.8
Return on capital employed (ROCE)	%	11.4	11.4	13.8	15.3	11.5
Return on equity (ROE)	%	11.8	10.2	13.0	17.2	13.3
Equity-to-assets ratio at the end of the period	%	44.5	42.2	43.2	42.6	42.8
Debt-to-equity ratio (gearing) at the end of the period	%	71.2	65.3	67.1	69.5	70.9
Average personnel for the period	Persons	2 428	2 127	2 208	2 317	2 259
Personnel at the end of the period	Persons	2 590	2 090	1 921	2 313	2 271

NET SALES, EUR MILLION

OPERATING PROFIT, EUR MILLION

OPERATING PROFIT MARGIN, %

PROFIT BEFORE TAXES, EUR MILLION

		2013	2012	2011	2010	2009
Share related key figures3)
Earnings per share	EUR	0.32	0.26	0.36	0.46	0.31
Fully diluted earnings per share	EUR	0.32	0.26	0.36	0.46	0.31
Equity per share	EUR	3.19	3.31	3.30	3.13	2.75
Dividend per share 1)	EUR	0.24	0.23	0.23	0.23	0.19
Dividend/earnings ratio 1)	%	74.3	88.5	63.7	49.9	61.3
Effective dividend yield 1)	%	4.62	4.74	4.07	3.35	3.82
Price/earnings ratio		16.1	18.7	15.7	14.9	16.1
Share price at the end of the period	EUR	5.20	4.85	5.65	6.86	4.97
Lowest share price	EUR	4.56	4.52	4.86	4.80	3.50
Highest share price	EUR	5.50	6.50	7.38	6.86	5.16
Average share price	EUR	4.88	5.50	6.23	5.75	4.46
Number of shares traded	Shares	3 122 353	5 679 621	6 479 735	4 051 489	3 138 597
Number of shares traded of average number of shares	%	8.08	14.61	16.65	10.38	8.01
Share capital	EUR million	3.6	3.6	3.6	3.6	3.6
Dividend for the period 1)	EUR million	9.3	8.9	8.9	9.0	7.4
Year end market capitalization 2)	EUR million	200.5	188.0	219.9	267.0	194.5
Number of shares at the end of the period excluding own shares 2)	1 000 shares	38 561	38 767	38 916	38 928	39 128
Number of own shares at the end of period	1 000 shares	907	701	552	540	340
Weighted average number of shares 2)	1 000 shares	38 660	38 885	38 928	39 038	39 208
Fully diluted number of shares at the end of the period 2)	1 000 shares	38 561	38 767	38 916	38 928	39 128
Fully diluted weighted average number of shares 2)	1 000 shares	38 660	38 885	38 928	39 038	39 208

1) Year 2013 board proposal.

2) Excluding own shares.

3) Comparative figures restated, see note 1.

EARNINGS PER SHARE, EUR

DIVIDEND PER SHARE, EUR EQUITY PER SHARE, EUR

DIVIDEND/EARNINGS RATIO, %

DEFINITION OF KEY FIGURES

Operating profit before depreciation and impairments (EBITDA) = Operating profit + depreciation and impairments
Net interest-bearing debt	= Total interest-bearing liabilities - total interest-bearing assets
Capital employed	= Total equity + net interest-bearing liabilities
Working capital	= Inventories + total non-interest-bearing assets - total non-interest-bearing liabilities
Total non-interest-bearing assets	= Total assets - interest-bearing assets - intangible and tangible assets - assets classified as held-for-sale
Total non-interest-bearing liabilities	= Total liabilities - interest-bearing liabilities
Net interest-bearing debt to EBITDA	= Net interest-bearing debt Operating profit before depreciation and impairments
Return on capital employed (ROCE), %	= Operating profit x 100 Capital employed (average for the period)
Return on equity (ROE), %	= Net profit for the period x 100 Total equity (average for the period)
Debt-to-equity ratio (Gearing), %	= Net interest-bearing liabilities x 100 Total equity
Equity-to-assets ratio, %	= Total equity x 100 Total shareholders' equity and liabilities - advances received
Earnings per share, EUR	= Net profit for the period attributable to the equity holders of the Company Adjusted weighted average number of shares
Dividend per share, EUR	= Dividend for the period Adjusted number of shares at the end of the period
Dividend/earnings ratio, %	= Dividend for the period x 100 Net profit for the period attributable to the equity holders of the Company
Equity per share, EUR	= Equity attributable to equity holders of the Company Adjusted number of shares at the end of the period
Effective dividend yield, %	= Dividend per share x 100 Adjusted share price at the end of the period
Price/earnings ratio	= Adjusted share price at the end of the period Earnings per share
Average share price, EUR	= EUR amount traded during the period Adjusted number of shares traded during the period
Year-end market capitalization, EUR	= Number of shares at the end of the period, exluding own shares x share price at the end of the period
Average number of personnel	= Calculated as average of monthly averages

PARENT COMPANY FINANCIAL STATEMENTS, FAS

PARENT COMPANY INCOME STATEMENT

EUR	2013	2012	NOTE
Net sales	31 840 744	31 815 493	2
Other operating income	47 505	162 749	3
Change in inventory of finished products and work in progress	431 950	-683 406
Production for own use	69 247	146 253
Materials and services	-13 241 290	-14 086 819	5
Employee benefit expenses	-8 919 671	-8 655 178	6
Other operating expenses	-5 447 167	-5 789 463	4
Operating profit before depreciation and impairments	4 781 317	2 909 629
Depreciation and impairments	-1 159 006	-1 083 197	7
Operating profit	3 622 312	1 826 432
Financial income and expenses	683 283	9 408 583	8
Profit before extraordinary items	4 305 595	11 235 015
Extraordinary items	1 000 000	1 900 000	9
Profit before appropriations and taxes	5 305 595	13 135 015
Appropriations	-107 051	-298 128	10
Income taxes	1 263 239	-450 643	11
NET PROFIT FOR THE PERIOD	6 461 782	12 386 244

PARENT COMPANY BALANCE SHEET

ASSETS

EUR	2013	2012	NOTE
Non-current assets
Intangible assets	668 936	818 089	12
Tangible assets	6 379 806	6 101 004	13
Investments	179 961 865	171 256 188	14
Interest-bearing receivables	343 265	5 692 026	16
Non-interest-bearing receivables	1 397 118	1 419 774	16
Total non-current assets	188 750 989	185 287 080
Current assets Inventories	7 105 504	6 743 445	15
Current financial assets
Interest-bearing	18 276 726	19 434 430	16
Non-interest-bearing	13 304 023	15 673 241	16
Cash and cash equivalents	1 077 362	7 262 152
Total current assets	39 763 614	49 113 268
TOTAL ASSETS	228 514 603	234 400 347

SHAREHOLDERS' EQUITY AND LIABILITIES

EUR	2013	2012	NOTE
Shareholders' equity
Share capital	3 552 160	3 552 160
Share premium fund	16 680 961	16 680 961
Fair value reserve	-1 694 767	-2 991 473
Fund for invested non-restricted equity	4 914 371	4 914 371
Own shares	-4 360 358	-3 355 093
Retained earnings	18 766 558	15 282 167
Net income for the period	6 461 782	12 386 244
Total shareholders' equity	44 320 707	46 469 338
Appropriations	1 264 229	1 157 177
Non-current liabilities
Interest-bearing	40 837 227	79 174 924
Non-interest-bearing	1 942 641	3 307 764
Total non-current liabilities	42 779 868	82 482 688	17
Current liabilities
Interest-bearing	108 803 672	72 588 526
Non-interest-bearing	31 346 128	31 702 618
Total current liabilities	140 149 800	104 291 144	17
TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES	228 514 603	234 400 347

RAPALA VMC CORPORATION FINANCIAL STATEMENTS 2013

PARENT COMPANY STATEMENT OF CASH FLOWS

EUR THOUSAND	2013	2012	NOTE
Net profit for the period	6 462	12 386
Adjustments
Income taxes	-1 263	451	11
Financial income and expenses	-683	-9 409	8
Reversal of non-cash items
Depreciation and impairments	1 159	1 083	7
Other items	-1 197	-1 149
Total adjustments	-1 984	-9 022
Financial items
Interest paid	-3 608	-3 485
Interest received	895	1 085
Income taxes paid	1 464	-1 435
Dividends received	4 138	13 773
Other financial items, net	176	-2 893
Total financial items	3 065	7 045
Change in working capital
Change in receivables	2 358	872
Change in inventories	-362	692
Change in liabilities	1 129	332
Total change in working capital	3 125	1 896
Net cash generated from operating activities	10 668	12 305
Net cash used in investing activities
Proceeds from disposal of tangible assets	42	413	13
Purchases of tangible assets	-1 335	-1 359	13
Acquisition of subsidiaries and joint venture	-18 468	-23 060	14
Repayment of capital	8 237		14
Change in interest-bearing receivables	3 591	-3 022
Total net cash used in investing activities	-7 933	-27 028
Net cash generated from financing activities
Dividends paid	-8 902	-8 948
Purchase of own shares	-1 005	-744
Loan withdrawals	143 935	221 066
Loan repayments		-144 738 -197 210
Group contributions received	1 900	2 300
Total net cash generated from financing activities	-8 810	16 464
Change in cash and cash equivalents	-6 075	1 741
Cash and cash equivalents at the beginning of the period	7 262	5 837
Foreign exchange rate effect	-110	-316
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD	1 077	7 262

PARENT COMPANY STATEMENT OF CHANGES IN EQUITY

EUR	2013	2012
Share capital Jan. 1	3 552 160	3 552 160
SHARE CAPITAL DEC. 31	3 552 160	3 552 160
Share premium fund Jan. 1	16 680 961	16 680 961
SHARE PREMIUM FUND DEC. 31	16 680 961	16 680 961
Fair value reserve Jan. 1 Gains and losses on cash flow hedges	-2 991 473 1 296 706	-2 132 705 -858 768
FAIR VALUE RESERVE DEC. 31	-1 694 767	-2 991 473
Fund for invested non-restricted equity Jan. 1	4 914 371	4 914 371
FUND FOR INVESTED NON- RESTRICTED EQUITY DEC. 31	4 914 371	4 914 371
Own shares Jan. 1	-3 355 093	-2 611 276
Purchase of own shares	-1 005 266	-743 816
OWN SHARES DEC. 31	-4 360 358	-3 355 093
Retained earnings Jan. 1 Dividends paid	27 668 412 -8 901 854	24 230 367 -8 948 199
Net income for the period	6 461 782	12 386 244
RETAINED EARNINGS DEC. 31	25 228 340	27 668 412

DISTRIBUTABLE EQUITY

DISTRIBUTABLE FUNDS	2013	2012
Retained earnings	27 668 412	24 230 367
Dividends paid	-8 901 854	-8 948 199
Purchase of own shares	-4 360 358	-3 355 093
Gains and losses on cash flow hedges	-1 694 767	-2 991 473
Net income for the period	6 461 782	12 386 244
DISTRIBUTABLE EARNINGS	19 173 215	21 321 846
Other distributable equity
Fund for invested non-restricted equity	4 914 371	4 914 371
TOTAL DISTRIBUTABLE EQUITY	24 087 586	26 236 217

PARENT COMPANY SHARE CAPITAL

	2013	2012
Shares	39 468 449	39 468 449
EUR	3 552 160	3 552 160

Each share is entitled to one vote. Info on Board's authorizations and own shares is available in the section Shares and Shareholders.

NOTES TO PARENT COMPANY FINANCIAL STATEMENTS

The financial statements of Rapala VMC Oyj have been prepared according to Finnish Accounting Standards (FAS).

Foreign currency transactions

Monetary assets and liabilities denominated in foreign currencies are translated into euros using the exchange rates at the balance sheet date and exchange differences arising from translation are recognized in the income statement.

Revenue recognition

Sales of goods and services are recognized on accrual basis when the significant risks related to goods and services sold have passed to the buyer and it is not probable that the client would return the goods. Net sales comprise of gross sales less cash discounts and sales taxes.

Research and development costs

Research and development costs are expensed as they are incurred, unless they clearly relate to developing new business areas. Such development costs are capitalized if they are separately identifiable and if the products are assessed to be technically feasible and commercially viable and the related future revenues are expected to exceed the accrued and future development costs and related production, selling and administrative expenses, and other possible costs related to the project.

Capitalized development expenses are amortized on a straightline basis over their expected useful lives, a maximum of five years.

Inventories

Inventories are valued at the lower of cost or net realizable value using the first-in, first-out (FIFO) method. The cost of finished goods and work in progress comprises of raw materials, direct labor costs including social costs and other direct costs. Inventories are shown net of a reserve for obsolete or slow-moving inventories.

Tangible and intangible assets

Tangible and intangible assets are stated at historical cost excluding accumulated depreciation according to plan. Planned depreciation is based on historical cost and expected useful life.

Land is not depreciated. Depreciation is based on the following expected useful lives:

Intangible assets	3–15 years
Buildings	10–20 years
Machinery and equipment	5–10 years
Other tangible assets	3–10 years

Pension arrangements

All of the company's pension arrangements are defined contribution plans, with the majority being local statutory arrangements. Pension costs are expensed as incurred.

Valuation of financial derivatives

All derivatives are initially recognized at fair value on the date derivative contract is entered into, and are subsequently remeasured at fair value on each balance sheet date. Fair value of standard foreign currency forwards are determined by discounting the future nominal cash flows with relevant interest rates and then converting the discounted cash flows to the foreign currency using spot rates. Determination of fair values of other derivative instruments are based on quoted market prices and rates, discounting of cash flows and option valuation models. The fair values of these instruments are either computed by Bloomberg market data tool by the company or received from the respective bank.

In cash flow hedges, changes in the fair value of derivative financial instruments that are designated and effective as hedges of future cash flows are recognized directly in equity and the ineffective portion is recognized immediately in the income statement as well as the change in fair value of the contracts that are not designated to hedge accounting.

Own shares

Own shares acquired by the company, including directly attributable costs, are presented as a deduction from the total equity on the day of trading. Purchases or subsequent sales of treasury shares are presented as changes in equity.

Cash flow statement

Changes in financial position are presented as cash flows from operating, investing and financing activities.

EUR THOUSAND	2013	2012
By destination
North America	16 402	17 928
Nordic	2 583	1 990
Rest of Europe	8 722	7 823
Rest of the World	4 134	4 074
TOTAL	31 841	31 815

The parent company's net sales consist of Lure Business which is included in Group Fishing Products in the consolidated operating segment reporting.

OTHER OPERATING 3 INCOME

TOTAL	48	163
Other income	28	140
Rental income	20	23
EUR THOUSAND	2013	2012

MATERIALS AND 5 SERVICES

EUR THOUSAND	2013	2012
Materials, goods and supplies
Purchases during the financial year	-13 085	-13 998
Change in inventory	-70	-8
External services	-87	-81
TOTAL	-13 241	-14 087

EMPLOYEE BENEFIT 6 EXPENSES

Average personnel for the period	166	167
TOTAL	-8 920	-8 655
Other personnel expenses	-492	-475
Pension costs	-1 159	-1 115
Wages and salaries	-7 269	-7 065
EUR THOUSAND	2013	2012

The remuneration of the Board of Directors amounted to EUR 370 thousand (2012: EUR 370 thousand).

OTHER OPERATING 4 EXPENSES

EUR THOUSAND	2013	2012
Maintenance	-1 404	-1 247
Selling and marketing expenses	-625	-640
Traveling expenses	-595	-626
IT and telecommunication	-433	-345
Rents paid	-289	-303
Auditors fees and services	-111	-98
Freight	-89	-52
Sales commissions	-119	-74
Other expenses	-1 781	-2 405
TOTAL	-5 447	-5 789

AUDITORS' FEES AND SERVICES

TOTAL	-111	-98
Other fees	-1
Audit fees	-110	-98
EUR THOUSAND	2013	2012

EUR THOUSAND	2013	2012
Depreciation of intangible assets
Trademarks	-92	-93
Other intangible assets	-57	-42
Depreciation of tangible assets
Buildings	-143	-147
Machinery and equipment	-867	-801
TOTAL	-1 159	-1 083

EUR THOUSAND	2013	2012
Dividend income from subsidiaries	4 137	13 450
Dividend income from third parties	1	3
Foreign exchange gains	4 208	8 886
Foreign exchange losses	-3 136	-9 202
Impairment losses
Investments in Group companies	-1 525
Interest and other financial income
Interest income	801	1 141
Other financial income	202	118
Interest and other financial expenses
Interest expense	-3 558	-3 774
Other financial expenses	-447	-1 213
TOTAL	683	9 409

FINANCIAL INCOME AND EXPENSES FROM AND TO SUBSIDIARIES

EUR THOUSAND	2013	2012
Dividend income from subsidiaries	4 137	13 450
Interest and other financial income
Interest income	796	1 126
Other financial income	202	96
Interest and other financial expenses
Interest expense	-277	-239
TOTAL	4 859	14 433

TRANSLATION DIFFERENCES RECOGNIZED

IN THE INCOME STATEMENT

EUR THOUSAND	2013	2012
Translation differences recognized in net sales	-14	210
Translation differences included in purchases and other expenses	-106	-26
Foreign exchange gains and losses in financial income and expenses	1 072	-316
TOTAL	951	-132

EXTRAORDINARY 9 ITEMS

TOTAL	1 000	1 900
Group contributions received	1 000	1 900
EUR THOUSAND	2013	2012

APPROPRIATIONS 10

TOTAL	-107	-298
Machinery and equipment	-158	-229
Buildings	48	-51
Intangible assets	3	-18
Change in depreciation difference
EUR THOUSAND	2013	2012

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

8 9 10 11 12

INCOME TAXES IN THE INCOME STATEMENT

EUR THOUSAND	2013	2012
Income taxes
Income taxes on extraordinary items	-245	-466
Income taxes on operating activities	-380	-36
Taxes from previous financial years	1 888	50
TOTAL	1 263	-451

Deferred tax assets and liabilities of the parent company are not presented in the parent company's balance sheet.

2013

		OTHER
		INTANGIBLE
EUR THOUSAND	TRADEMARKS	ASSETS	TOTAL
Acquisition cost Jan. 1	924	2 065	2 989
Disposals		-300	-300
ACQUISITION COST DEC. 31	924	1 765	2 689
Accumulated amortization Jan. 1	-286	-1 886	-2 172
Disposals		300	300
Amortization during the period	-92	-57	-149
ACCUMULATED AMORTIZATION DEC. 31	-378	-1 642	-2 020
Book value Jan. 1	639	179	818
Book value Dec. 31	546	122	669

2012

EUR THOUSAND	TRADEMARKS	OTHER INTANGIBLE ASSETS	TOTAL
Acquisition cost Jan. 1	924	7 506	8 430
Additions		117	117
Disposals		-5 570	-5 570
Reclassifications		12	12
ACQUISITION COST DEC. 31	924	2 065	2 989
Accumulated amortization Jan. 1	-193	-7 387	-7 580
Disposals		5 543	5 543
Amortization during the period	-93	-42	-135
ACCUMULATED AMORTIZATION DEC. 31	-286	-1 886	-2 172
Book value Jan. 1	732	119	851
Book value Dec. 31	639	179	818

2013

			MACHINERY	OTHER TANGIBLE	ADVANCE PAYMENTS AND CONSTRUCTION
EUR THOUSAND	LAND	BUILDINGS	AND EQUIPMENT	ASSETS	IN PROGRESS	TOTAL
Acquisition cost Jan. 1	106	4 272	17 505	44	393	22 319
Additions			80	83	1 246	1 409
Disposals			-765		-38	-803
Reclassifications		260	-259	1 189	-1 190
ACQUISITION COST DEC. 31	106	4 532	16 561	1 316	411	22 925
Accumulated depreciation Jan. 1		-3 563	-12 655			-16 218
Disposals			682			682
Reclassifications			708	-708
Depreciation during the period		-143	-783	-83		-1 009
ACCUMULATED DEPRECIATION DEC. 31		-3 706	-12 048	-791		-16 545
Book value Jan. 1	106	709	4 850	44	393	6 101
Book value Dec. 31	106	826	4 513	525	411	6 380

2012

EUR THOUSAND	LAND	BUILDINGS	MACHINERY AND EQUIPMENT	OTHER TANGIBLE ASSETS	ADVANCE PAYMENTS AND CONSTRUCTION IN PROGRESS	TOTAL
Acquisition cost Jan. 1	144	4 655	16 452	44	561	21 855
Additions		10	319		938	1 267
Disposals	-38	-532	-192		-29	-791
Reclassifications		139	926		-1 077	-12
ACQUISITION COST DEC. 31	106	4 272	17 505	44	393	22 319
Accumulated depreciation Jan. 1		-3 850	-11 913			-15 763
Disposals		434	59			493
Depreciation during the period		-147	-801			-948
ACCUMULATED DEPRECIATION DEC. 31		-3 563	-12 655			-16 218
Book value Jan. 1	144	805	4 539	44	561	6 092
Book value Dec. 31	106	709	4 850	44	393	6 101

2013

BOOK VALUE DEC. 31	178 116	1 612	234	179 962
Impairment losses	-1 525			-1 525
Repayment of capital	-8 237			-8 237
Additions	18 468			18 468
Book value Jan. 1	169 410	1 612	234	171 256
EUR THOUSAND	SHAREHOLDINGS IN SUBSIDIARIES	HOLDINGS IN JOINT VENTURES	AVAILABLE-FOR-SALE INVESTMENTS	TOTAL

2012

BOOK VALUE DEC. 31	169 410	1 612	234	171 256
Acquisitions	2 385			2 385
Additions	20 675	3		20 678
Book value Jan. 1	146 350	1 609	234	148 193
EUR THOUSAND	SHAREHOLDINGS IN SUBSIDIARIES	HOLDINGS IN JOINT VENTURES	AVAILABLE-FOR-SALE INVESTMENTS	TOTAL

INVENTORIES 15

EUR THOUSAND	2013	2012
Raw material	2 020	2 089
Work in progress	3 384	3 246
Finished products	1 702	1 408
TOTAL	7 106	6 743

RECEIVABLES ¹⁶

EUR THOUSAND	2013	2012
Non-current receivables
Interest-bearing
Loan receivables	343	5 354
Derivatives		338
Non-interest-bearing
Other receivables	1 397	1 420
Current receivables
Interest-bearing
Loan receivables	18 277	19 434
Non-interest-bearing
Trade receivables	8 930	11 148
Prepaid expenses and accrued income	1 829	2 417
Other receivables	1 725	1 613
Derivatives	821	496
TOTAL	33 321	42 219

RECEIVABLES FROM SUBSIDIARIES

TOTAL	30 520	38 139
Derivatives	2	229
Other receivables	1 725	1 613
Prepaid expenses and accrued income	12	344
Trade receivables	8 764	11 068
Non-interest-bearing
Loan receivables	18 277	18 111
Interest-bearing
Current receivables
Other receivables	1 397	1 420
Non-interest-bearing
Loan receivables	343	5 354
Interest-bearing
Non-current receivables
EUR THOUSAND	2013	2012

EUR THOUSAND	2013	2012
Non-current liabilities
Interest-bearing
Loans from financial institutions	39 635	79 050
Pension loans		125
Derivatives	252
Other non-current liabilities	950
Non-interest-bearing
Other liabilities	91
Derivatives	1 852	3 308
Current liabilities
Interest-bearing
Loans from financial institutions	28 429	22 941
Commercial paper program	47 500	28 000
Pension loans	125	2 083
Other current liabilities	32 749	19 564
Non-interest-bearing
Derivatives	743	764
Advances received	6
Trade payables	27 832	27 142
Accrued liabilities and deferred income	2 765	2 381
Other current liabilities		1 416
TOTAL	182 930	186 774

LIABILITIES TO SUBSIDIARIES

EUR THOUSAND	2013	2012
Non-current liabilities
Interest-bearing
Other non-current liabilities	950
Current liabilities
Interest-bearing
Other non-current liabilities	32 749	19 566
Non-interest-bearing
Derivatives		97
Trade payables	23 286	21 799
Accrued liabilities and deferred income	23
TOTAL	57 009	41 463

All loans included in non-current liabilities mature in less than 5 years.

PARENT COMPANY AS A LESSEE

Repayment Schedule of Non-Cancellable Operating Lease Commitments

EUR THOUSAND	2013	2012
Within one year	223	213
1-3 years	902	43
3-5 years	277
TOTAL	1402	256

COMMITMENTS AND 19 CONTINGENCIES

COMMITMENTS

TOTAL	7 623	7 094
On own behalf and on behalf of subsidiaries Guarantees	7 623	7 094
EUR THOUSAND	2013	2012

Commitments are to secure Group's loans from financial institutions and pension loans. The parent company has also guaranteed some rental agreements on behalf of subsidiaries. The company refinanced its loan facilities in April 2012, and the business mortgage related to the previous facility was released. The new loan facilities are unsecured and include normal financial covenants.

Since Normark Sport Finland Oy, a 100% owned subsidiary of Rapala VMC Corporation, is the legal shareholder of the distribution joint venture with Shimano Inc., the parent company has guaranteed to Shimano the fulfillment of its subsidiary's obligations related to the joint venture.

DERIVATIVES 20

EUR THOUSAND	2013	2012
Currency derivatives with bank
Fair value	9	-400
Nominal value	75 005	61 922
Currency derivatives with subsidiaries
Fair value	2	132
Nominal value	645	4 396
Interest rate derivatives
Fair value	-2 037	-2 970
Nominal value	69 521	84 952

In 2013, currency derivatives had an income statement effect of EUR 279 thousand (2012: EUR -344 thousand) and interest rate derivatives -364 thousand (2012: EUR -455 thousand). Hedge accounting is applied for some of the interest rate derivatives, and the change in fair value of interest rate derivative under hedge accounting has been directly booked to fair value reserve in equity.

RISK MANAGEMENT

The objective of Rapala VMC Corporation's risk management is to support the implementation of the Group's strategy and execution of business targets. This is done by monitoring and mitigating the related threats and risks and simultaneously identifying and managing opportunities.

APPROACH TO RISK MANAGEMENT

The Board evaluates the Group's financial, operational and strategic risk position regularly and establishes related policies and instructions to be implemented and coordinated by Group management. The daily risk management activities are primarily delegated to the management of business units.

The importance of risk management has increased as the Group has continued to expand its operations. Risk management continued to receive management attention in 2013. The focus of Group level risk management in 2013 was on foreign exchange risk management as well as risk management activities on liquidity, interest rate and hazard risks. Other emphasized areas were Group wide insurance programs and strategic supply chain management.

Below is a summary of key strategic, operational and financial risks as well as the main actions to mitigate these risks.

STRATEGIC RISKS

Sport fishing is a form of leisure hobby and the Group's products are competing against a wide range of other hobbies. The Group is promoting the attractiveness of sport fishing through active sales and marketing as well as brand management. By utilizing its unique research and development processes and resources, the Group is constantly developing new products to meet consumer needs and creating new needs for the consumers.

Brand portfolio and corporate reputation are among the most valuable intangible assets of the Group. The Rapala Group is actively managing its brands and their identity and securing that the value of the brands or corporate reputation are not jeopardized or violated by any means. The Group's brands are also legally protected.

Consumers relate the Group's brands to high quality, unique fishing experience, special functional features and trustworthy distribution channel. Consumers are able to differentiate illegal copy products and they don't constitute a strategic threat for the Group. The Group protects vigorously its intellectual property rights and acts against illegal copiers and distributors.

Sport fishing is dependent on availability of fresh fishing waters for fishes to live and breed. Pollution and potential environmental catastrophes are concerns for the Group. The Rapala Group is actively promoting initiatives to enhance environmental protection and increasing preparedness to comply with continuously tightening environmental regulations by taking steps to reduce the environmental impacts of its operations and products. The Group is also acting in the forefront to develop products, e.g. catch-and-release equipment, to comply with fish protection initiatives. For more details on environmental actions, see the "Corporate Responsibility and Sustainable Development" report available on corporate website (www.rapalavmc.com).

The Group faces competition in all markets where its products are sold. Due to the uniquely wide distribution network, the Group's geographical market risk is truly globally spread, evening out seasonal and local market fluctuations.

The Rapala Group has a limited amount of global competitors. The biggest competitors have significant power in their home markets, but globally the geographical scope of their operations is smaller. The Group's global distribution network is unique in the industry and difficult to imitate. Within each market, the Group's competitors are often local fishing tackle producers and distributors operating with a limited range of products and narrow geographical scope.

In some countries, competition is created by fishing tackle retailers selling private label products. Cross-border internet sales is an increasing trend and could cause some price erosion. Established fishing tackle brands' expansion into new product categories is also creating competition in some product segments. The strength of the Group's product development and brand portfolio, as well as flexibility to serve different markets with market-specific products ranges, is essential in succeeding in market competition.

The Group's production is spread out in several countries. Some of these countries have higher political risks but simultaneously provide access to competitive labor cost. The Group monitors the country risks and costs and is actively seeking ways to manage the risk of rising production and distribution costs. The establishment of the world's biggest lure factory in Batam, Indonesia secure moderate production costs for the Group.

Manufacturing of sport fishing products is not dependent on any proprietary manufacturing technologies or patents. The Group's manufacturing units are actively monitoring the development of generic manufacturing technologies and considering different production applications.

Distribution of third party fishing and outdoor products creates a material part of the Group's sales. Due to the geographical spread and multitude of the existing and potential suppliers, the Group is not critically dependent on any single product or raw material supplier. The Group's strategic partnerships with Shimano (for the distribution of mainly rods and reels) and Yao I (the producer of Group's Sufix fishing lines) have proven to be successes.

The Group's customer base is geographically and quantitatively well diversified. Customers are mostly country-specific and not operating globally. The Group is not critically dependent on any single customer: even the biggest single customer represents around 4 % of the Group's net sales. The Group is not largely engaged in direct consumer retailing. This is not considered to be a risk as consumer demand is largely driven by brand consciousness and alternative routes to market can be established when needed.

Rapala Group is expanding through organic growth as well as mergers and acquisitions. Careful target selection, proper due diligence process and post-merger integration have been and will be key issues in securing that the expansion initiatives are successful and in line with the Group's strategic objective of profitable growth.

The Board evaluates the Group's strategic risks annually as part of the strategy process and the Group management continuously monitors changes in the business environment. Strategic risk management in local jurisdictions is delegated to the management of each business unit.

OPERATIONAL AND HAZARD RISKS

The fishing tackle business has traditionally been relatively resilient to increased uncertainties and downturns in the general economic climate. The truly global nature of the Group's sales and operations spreads the market risks caused by uncertainties in the global economy.

The underlying consumer demand for the Group's products is seasonal and also impacted by unforeseeable factors such as weather. To offset and balance the seasonality, the Group is engaged in production and distribution of winter fishing and winter sports equipment. To mitigate the effects of seasonality, the Group has also expanded its own distribution network to the southern hemisphere and is developing its production planning to better respond to changes in the market demand.

Due to the seasonality in demand, the Group's product shipments concentrate annually to relatively short time periods, where supply problems could endanger the sales of the season. Similarly, lower than expected sales volumes may lead to excess inventories, as it is difficult to cancel committed orders within short notice.

There is a high level of dependency between the Group's manufacturing and distribution units and interruption at earlier stage of the supply chain could have knock-on effects throughout the rest of the Group. The importance of proper order forecasting and production planning has increased. The related risks are managed with high level of co-operation between manufacturing and distribution units, safety stocks and extensive insurance coverage. The Group-wide supply chain and logistics initiatives continued in 2013 and mitigated these risks relating to operational efficiencies.

The Group's sales prices are primarily fixed annually or biannually, normally before each season. Sudden changes in raw material prices or foreign exchange rates may have significant impact on costs of some products. The Group aims to push increases in costs to the sales prices immediately or during a period of time. The Group's market risks and mitigation actions are analyzed in more detail in the section "Financial Risks" and in note 21 to the consolidated financial statements.

In respect of manufacturing activities, the Group is not critically dependent on any single external production factor supplier. The Group uses several subcontractors in China, but the Group is not as such critically dependent on any of these subcontractors. This risk has been further reduced as the Indonesian factory has and will take over most of the production volumes previously done by Chinese subcontractors. Availability of competent production labor is essential and the Group aims to maintain good employer reputation and labor relations.

There are significant dependencies between the Group's manufacturing units, which could cause supply problems e.g. in case of fire or other hazard. Such hazard could lead to property damages but also to business interruption losses throughout the supply chain. Therefore, the Group emphasizes hazard risk management. The Group has together with its insurance company continued to conduct annually several hazard prevention reviews to Group's key factories and distribution warehouses. Group management has also continued to build risk awareness throughout the organization.

The Group constantly develops the global insurance programs, which cover most of the Group companies. Global insurance policies, which take into account the Group's interdependency, are in place for property damage and business interruption, transportation as well as general and product liabilities. The Group has increased it's focus on mitigating fraud risk by widening the utilization of Group monitored cash pools and increased attention on internal controls.

The Board evaluates the Group's operational risks at least once a year as part of operational plans and budgets. Group management monitors and coordinates the continuous management of operational risks, which is the responsibility of the management of each business unit.

FINANCIAL RISKS

The Group's financial risks consist of market risks, credit and default risks and liquidity risks. The Board evaluates financial risks several times during the year and Group management monitors and manages them continuously. Financial risks are discussed in detail, as required by IFRS 7, in note 21 of the consolidated financial statements.

SHARES AND SHAREHOLDERS

Rapala VMC Corporation's shares have been traded on the NASDAQ OMX Helsinki since 1998. In 2013, the shares traded between EUR 4.56 and 5.50 with an average price of EUR 4.88.

Shares and Voting Rights

On December 31, 2013, the share capital fully paid and reported in the Trade Register was EUR 3 552 160 and the total number of shares was 39 468 449. The book value of a share is EUR 0.09. Each share is entitled to one vote. During the year, there were no changes in the share capital or number of shares.

Board's Authorizations

The issuance of New Shares, Transfer of the Company's Own Shares and the Issuance of Options and Special Rights

The Annual General Meeting (AGM) authorized the Board to decide on the issuance of new shares, transfer of the company's own shares and the issuance of options and special rights entitling to shares referred to in Chapter 10 Section 1 of the Companies Act.

The amount of new shares which may be issued or transferred by the Board of Directors by one or several decision shall not exceed 10 000 000 shares. The new shares may be issued and the company's own shares may be transferred against payment or without payment. The Board of Directors is furthermore authorized to issue options and special rights referred to in Chapter 10 Section 1 of the Companies Act for the holder to receive new shares or the company's own shares against payment. The amount of shares which may be issued or transferred based on the option and special rights are included in the above mentioned aggregate numbers of shares.

The new shares and the options and special rights referred to in Chapter 10 Section 1 of the Companies Act may be issued and the company's own shares transferred to the shareholders in proportion to their current shareholdings in the company or in deviation from the shareholders' pre-emptive rights by way of a directed issue if there is a weighty financial reason for the company to do so. The deviation from the shareholders' preemptive rights may be carried out for example in order to develop the company's capital structure, in order to finance or carry out acquisitions, investments or other business transactions, or in order to use the shares for incentive schemes. A directed share issue may be executed without payment only if there is an especially weighty financial reason for the company to do so, taking the interests of all shareholders into account.

The Board of Directors decides on all other matters related to the issuance of shares and special rights entitling to shares referred to in Chapter 10 Section 1 of the Companies Act. The authorization is effective until March 31, 2017.

Share Repurchases

The AGM authorized the Board to resolve to repurchase a maximum of 2 000 000 own shares by using funds in the unrestricted equity. The proposed number of shares corresponds to less than 10 per cent of all shares in the company. The shares may be repurchased to develop the company's capital structure. In addition, the shares may be repurchased to finance or carry out business acquisitions

or other arrangements, to settle the company's equity-based incentive plans, to be transferred for other purposes, or to be cancelled. The shares may be repurchased in deviation from the proportion of the shares held by the shareholders. The shares will be repurchased through public trading arranged by NASDAQ OMX Helsinki Oy at the market price of the acquisition date. The shares will be acquired and paid in pursuance of the rules of NASDAQ OMX Helsinki Oy and applicable rules regarding the payment period and other terms of the payment. The authorization is in force until the end of the next Annual General Meeting.

Own Shares

In accordance with the authorization granted by the AGM, a total of 205 908 shares were repurchased in 2013 at the average price of EUR 4.88. At the end of December 2013, the company held 907 308 own shares, representing 2.3% of the total number and the total voting rights of shares. The average share price of all repurchased own shares held by the company was EUR 4.80.

Shareholder Register

The shares of the company belong to the Book Entry Securities System. Shareholders should notify the particular register holding their Book Entry Account about changes in address or account numbers for payment of dividends and other matters related to ownership of shares.

Share-Based Incentive Plans

During the period the Group had one share-based incentive program (2012). The original earning period (from April 1, 2012 to June 30, 2013) was prolonged by 6 months to end on December 31, 2013. The potential reward was based on the development of Rapala Group's inventory levels and EBITDA. The program ended at the end of December and no rewards materialized. In 2013, no new share-based incentive plans were granted.

Management Shareholding

On December 31, 2013, the members of the Board and the Executive Committee held directly a total of 3 000 company shares and corresponding to 0.0% of all shares and voting rights. Details of management shareholdings are given on page 61.

Trading and Performance of the Company's Shares

The company share (RAP1V) is quoted on the NASDAQ OMX Helsinki. The 2013 closing price on December 31 was EUR 5.20. The highest price in 2013 was EUR 5.50, the lowest price EUR 4.56 and the average price EUR 4.88. A total of 3 122 353 company's shares were traded in 2013. This represents 7.9% of all shares on December 31, 2013.

At the end of 2013, the market capitalization of all outstanding shares, excluding own shares, was EUR 200.5 million. Earnings per share (basic) were EUR 0.32 (EUR 0.26 in 2012). For more share related key figures see page 47.

Dividend

The Board proposes to the AGM that a dividend of EUR 0.24 per share will be paid for the financial year 2013.

PRINCIPAL SHAREHOLDERS ON DECEMBER 31, 2013

SHAREHOLDERS	NUMBER OF SHARES	%
Viellard Migeon & Cie *	13 210 538	33.5
Sofina S.A.	7 500 000	19.0
Nordea Funds	4 348 061	11.0
Odin Funds	1 362 529	3.5
The State Pension Fund	1 290 000	3.3
Shimano Singapore Private Limited	889 680	2.3
Evli Funds	485 000	1.2
Tapiola Funds	450 000	1.1
Ilmarinen pension insurance company	408 899	1.0
OP Funds	228 418	0.6
Rapala VMC Oyj (own shares)	907 308	2.3
Administrative registrations	5 613 872	14.2
Other shareholders total	2 774 144	7.0
TOTAL NUMBER OF SHARES	39 468 449	100.0

* Viellard Migeon & Cie's holds together with its subsidiary De Pruines Industries 13 315 848 shares, representing 33.7% of total number and the total voting rights of shares.

SHAREHOLDERS BY CATEGORY ON DECEMBER 31, 2013

SHAREHOLDER CATEGORY	NUMBER OF SHARES	%
Private and public corporations	1 683 488	4.3
Financial and insurance companies	5 206 395	13.2
Public institutions	1 853 899	4.7
Non-profit organizations	70 191	0.2
Individuals	1 517 190	3.8
International shareholders	23 523 414	59.6
Administrative registrations	5 613 872	14.2
TOTAL	39 468 449	100.0

DISTRIBUTION OF SHAREHOLDING ON DECEMBER 31, 2013

NUMBER OF SHARES	NUMBER OF SHAREHOLDERS	%	TOTAL SHARES	%
1–100	862	31.8	58 404	0.1
101–500	1 196	44.1	331 574	0.8
501–1 000	354	13.1	290 253	0.7
1 001–10 000	246	9.1	690 340	1.7
10 001–1 000 000	44	1.6	6 046 142	15.3
1 000 001–	8	0.3	32 051 736	81.2
TOTAL	2 710	100.0	39 468 449	100.0

SHARE PRICE DEVELOPMENT IN 2009–2013, EUR

SHARE PRICE IN 2013, %

• Rapala VMC Corporation
• OMX Nordic Mid Cap

BOARD OF DIRECTORS AND MANAGEMENT

BOARD OF DIRECTORS

EMMANUEL VIELLARD

Chairman Chairman of the Board since 2005 President of Viellard Migeon & Cie Vice Chairman and Executive Vice President of Lisi Industries B.A., CPA Year of birth: 1963 Shareholding and options*: -

JORMA KASSLIN

President and Chief Executive Officer Board member since 1998 M.Sc. (Eng.) Year of birth: 1953 Shareholding and options*: -

EERO MAKKONEN

Board member since 1998 Chairman of the Board 1999–2005 B.Sc. (Eng.) Year of birth: 1946 Shareholding and options*: -

JAN-HENRIK SCHAUMAN

Board member since 1999 M.Sc. (Econ.), MBA Year of birth: 1945 Shareholding and options*: -

CHRISTOPHE VIELLARD

Board member since 2000 Chairman of Viellard Migeon & Cie Diploma ESCP Year of birth: 1942 Shareholding and options*: -

MARC SPEECKAERT

Board member since 2005 MBA Year of birth: 1951 Managing Director of Sofina Shareholding and options*: -

ISABELLE DE BARDIES

(resigned on December 4, 2013) Board member since 2011 Degree from the ESCP Year of birth 1961 Shareholding and options*: -

EXECUTIVE COMMITTEE

JORMA KASSLIN

President and Chief Executive Officer (CEO) Executive Committee member since 1998 See information in section "Board of Directors"

JUSSI RISTIMÄKI Chief Financial Officer (CFO) Executive Committee member since 2010 Shareholding and options*: -

OLLI AHO Company Counsel, Secretary of the Board and Investor Relations

Executive Committee member since 1998 Shareholding and options*: -

JUHANI PEHKONEN

Head of Lure Business Executive Committee member since 1998 Shareholding and options*: -

STANISLAS DE CASTELNAU

Head of the Fishing Hook Business and Distribution in France Executive Committee member since 2002 Shareholding and options*: -

TOM MACKIN

Head of Distribution in the US Executive Committee member since 2007 Shareholding*: 3 000 Options*: -

LARS OLLBERG

Head of Fishing Line and Accessory Business, Head of Distribution in China and Korea Executive Committee member since 2008

VICTOR SKVORTSOV Head of Distribution in Russia, Belarus and Kazakhstan Executive Committee member since

Shareholding and options*: -

February 5, 2013. Shareholding and options*:-

*Shareholdings and options on December 31, 2013.

CONTACTS

RAPALA VMC CORPORATION Arabiankatu 12 FI-00560 HELSINKI FINLAND

JUSSI RISTIMÄKI

Chief Financial Officer Tel: +358 9 7562 5435 E-mail: jussi.ristimaki@rapala.fi

OLLI AHO

Company Counsel and Investor Relations Tel: +358 9 7562 540 E-mail: olli.aho@rapala.fi

www.rapalavmc.com