AnnuAL report 2012...Share price on October 31 EUR 0.67 0.90 Market capitalization on October 31 EUR...

AnnuAL report 2012

AImInG to BALAnCe the BusIness portfoLIo

teLe-CommunICAtIon

eLeCtrIC VehICLes

IndustrIAL eLeCtronICs

teLeCommunICAtIonmain market

eLeCtrIC VehICLesLong-term growth market

IndustrIAL eLeCtronICsgrowth market

In order to strengthen growth potential with a more diverse

business portfolio than before, efore has expanded its target

markets to include DC/DC converters and chargers for electric

vehicles in addition to power products for telecommunication

and industrial electronics. In the fi scal year 2012, balancing of

the business portfolio was continued by increasing sales in the

industrial electronics sector. efore’s goal is to grow and to be an

important partner for its customers in its chosen target markets.

efore AnnuAL report 2012

Contents

efore GroupEfore in brief 1Customer groups 2Strategy 4Fiscal year 2012 in brief 5Review by the President and CEO 6

BusIness AreAsTelecommunication 8Industrial electronics 11Electric Vehicles 14

CorporAte responsIBILItYFinancial responsibility 17Social responsibility 18Environmental responsibility 20

fInAnCIAL stAtements Report of the Board of Directors 23Consolidated income statement 27Consolidated balance sheet 28Consolidated cash flow statement 30Consolidated statement of changes in equity 31Notes to the consolidated financial statements 32Income statement for the parent company 55Balance sheet for the parent company 56Parent company’s cash flow statement 58Accounting policies for the financial statements of parent company 59Notes to the financial statements, parent company 60Group key figures 66Calculation of key figures and ratios 69Shares and shareholder 70Signatures for the financial statements and the report by the Board of Directors 75Auditor’s report 76

CorporAte GoVernAnCeCorporate Governance Statement 77Board of Directors 81Executive Management Team 82

Information for shareholders 83Contact details 84

Efore Group is an international company which develops and pro-duces demanding power products. Its products guarantee reliable high-quality power supply in demanding con ditions. Efore is a global partner providing power products for telecom, industrial electronics and electric vehicles. In its own product development the company concentrates on minimizing the consumption of energy in customers’ appli cations and on improving energy efficiency and environmental friendliness.

Efore’s head office is located in Finland, product development and marketing units in Finland, China and Sweden and a production unit in China. In the fiscal year ending in October 2012, consolidated net sales totaled EUR 78.1 million and the Group’s personnel averaged 888. The company’s share is quoted on the Nasdaq OMX Helsinki Ltd.

efore In BrIef

EforE’s locations

1


industrial ElEctronics

ElEctric VEhiclEs dc/dc-converters

Battery chargers

Efore’s power products are used in the control of industrial robots, for instance.

Efore’s telecom products are powering the base station radio.

Products and services

Products and services

Designing and manufacturing battery chargers and DC/DC-converters for electric vehicles and plug-in hybrid vehicles.

BusIness AreAs

Solutions include e.g.• single and multi-output AC/DC and DC/DC power supply units • power distribution units• connection units • integrated power supplies for base station modules.

One-stop shop type of PWB assembly and box build manufacturing based on customer design are also part of the service.

tElEcommunication Products and services

Developing and manufacturing customised power products and power supply systems for different industrial appli cations, for instance in the control of industrial robots and the control and man-agement of electricity transmission and distribution. Part of Efore’s services is an efficient one-stop shop type of PWB assembly and box build manufacturing.

2


strengths market potential focal development areas



tElE

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nic

atio

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str

ial

ElEc

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nic

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• Solid track record• Competitive product platforms• Customized products

• Deep understanding of power electronics • Strong understanding of customer applications• Synergy with telecom products

• Expertise in products for demanding conditions• Same/similar product platforms as for telecom

and industrial products• Customized products

Demand for wireless broadband networks is grow-ing rapidly. Mobile data traffic is expected to double annually over the coming years. Data traffic growth creates excellent market opportunities as invest-ments in telecommunication network capacity increase significantly.

Growing hybrid vehicles market offers a market potential which in the longer term will be further boosted by electric vehicles becoming more com-mon.

Power solutions that support energy savings in future wireless mobile networks in a cost-effective way. • Power efficiency and long life-time in outdoor

applications are key drivers.

High-efficiency liquid-cooled power conversion products for demanding automotive solutions.• High power efficiency results in energyefficient

products with less cooling requirements and smaller size that allows flexible on-board installa-tion. High reliability and safety are key drivers, as well.

BusIness AreAs

Focus on technologies for rugged products capable of reliable operation in demanding industrial environments. • Design flexibility is a key element to ensure the

capability to serve a wide range of customer requirements.

Efore’s products are used by global high-technology system and equipment suppliers in various indust rial fields. Extensive customer base enables high market potential.

3


We concentrate on power products that demand top-grade design.

We cooperate closely with our customers in the design and manufacture of demanding power products.

our growth strategy focuses on the markets where our core competence is most desired.

our target markets are telecommunication, industrial electronics and power electronics for electric vehicles.

our product development focuses on optimizing the consumption of energy in our customers’ applications and on improving energy efficiency as well as environmental friendliness.

strAteGIA

Strategy SummaryA deep understAndInG

of Customer needs Is At the Core of

our strAteGY

saving energy with efficiency

Customer Intimacyprofitabilityprofessional and Innovative personnelGrowth

the best power partner

values

Mission

vision

4


Group key figures 2012 2011

Net sales EUR million 78.1 88.0Results from operating activities EUR million -2.6 4.1% of net sales % -3.3 4.6Result before taxes EUR million -3.0 4.5Result for the period EUR million -2.3 3.4

Return on equity (ROE) % -10.5 15.5Return on investment (ROI) % -9.9 17.5Cash flow from business operations EUR million 2.6 4.3Net interest-bearing liabilities EUR million -2.3 -3.9Solvency ratio % 47.7 48.3Gearing % -11.3 -16.3

Earnings per share EUR -0.06 0.09Equity per share EUR 0.52 0.60Dividend per share EUR 0.00 0.00Distribution of assets 0.00 0.05

Share price on October 31 EUR 0.67 0.90Market capitalization on October 31 EUR million 26.1 35.6Personnel, average 888 960

fIsCAL YeAr 2012 In BrIef

the fiscal year 2012 was especially characterized by strong fluctuations in the demand for telecom products.

A great deal of investments were made in the development of future products, and investment in product and technology development represented 9.4% of net sales.

Industrial electronics deliveries for the whole fiscal year increased by approximately 8% year-on-year.

In order to improve profitability and competitiveness in the industrial sector, the estonia factory was closed and production was transferred to the China factory.

the solvency ratio and liquidity remained strong.

Customer projects in eV power electronics were progressing according to plan and cooperation with Chinese companies in the eV industry was expanded.

net sales by geographical area *

EMEA 53.8%APAC 30.5%Finland 14.1%Americas 1.6%

Telecommunication 76.6%

Industrial electronics 23.4%

net sales by customer group solvency ratio, %

0 10 20 30 40 50

2010

2011

2012

49.7

48.3

47.7

personnel by geographical area

0 250 500 750 1000

2010

2011

2012

APAC EMEA

653

694

714

234

213

90

APAC: Asia-Pacific, EMEA: Europe, Middle East and Africa, Americas: North, Central and South America

* Final geographical distribution of Efore’s products deviates from the before mentioned as Efore’s customers distribute further the products from the logistics centres to other markets.

5


6

the demand for our products in the telecom market was expected to continue to be strong until the end of 2011. However, this did not happen, with economic uncertainty in the Eurozone decreasing operators’ network investments and a high number of products remaining in our customers’ stocks. The balancing of stocks was refl ected in the demand for new products. However, by the end of the

second quarter of our fi scal period at the end of April, the situation had mainly normalized. A corresponding fl uctuation in demand was not seen in the industrial electronics sector, and our business grew towards the end of the fi scal period.

Ceo’s reVIeW

BALAnCInG the BusIness portfoLIo Is our KeY oBjeCtIVe For us, 2012 was a two-fold year in our main market, telecom power supply solutions. the year got off to a weak start with customers consuming their oversized stocks accumulated late in the previous year, but the situation normalized by the middle of our fi scal pe-riod. We continued the measures aiming to balance our business portfolio in accordance with our strategy.

6

Ceo’s reVIeW


7

Stronger latter half of the yearThe slump in the telecom sector weakened the development of our business early in the fiscal period. The stronger latter half of the year was not quite enough to compen-sate for the soft start of the fiscal period, and our net sales fell short of the previous year, leading to a slightly negative result without one-time costs.

In December 2011, we decided to dis-continue production at the Estonian factory and centralize our production in the Chi-nese factory in order to improve the profit-ability and competitiveness of the industrial sector. The transfer of production to China proceeded as planned and was completed by the end of the fiscal year. In addition, we centralized our Chinese product develop-ment to Suzhou in order to facilitate project management.

Growth trend in data traffic continues Despite short-term fluctuations in data traffic infrastructure investments, the vol-ume of traffic in networks is continuing its rapid growth. Over 70% of the phones sold in developed economies are smartphones, and with an increasing number of manu-facturers launching tablet computers, their use is also becoming more common at a

rapid rate. The increased use of terminal devices is increasing the demand for wire-less services and creating new network business models for all industries. It has been estimated that the data traffic in wire-less networks will multiply over the next five years.

How quickly operators will invest in new network technologies will have effects on the further development of our telecom business. Such investments were high in North America in 2012, which increased our net sales in the telecom sector. In this respect, the development has also been faster in Japan and Korea compared to Eu-rope, where there are few 4G networks in use for the time being.

Balancing the business portfolio is our key objectiveOur investments in research and develop-ment and conversion into products are sig-nificant. In the past financial year, we spent 9.4% of our net sales on the development of new products. The high level of investments is associated with our business model, where most of our products, especially in the telecom sector, have been customized to specific customer applications. With the life cycles of telecom products becoming shorter, these investments will comprise

Ceo’s reVIeW

uct family expanded and now also includes liquid-cooled solutions.

Aiming for growthWe will continue to balance our business portfolio by growing in the industrial elec-tronics sector during this fiscal year. As we have announced earlier, we are investigat-ing opportunities for acquisitions in addi-tion to organic growth opportunities. We are currently also developing numerous large telecom projects for 2014.

In spite of the uncertainty of the global economy, our expectations for 2013 are positive. Our strong balance sheet provides security and flexibility for implementing our strategy in challenging times. We believe that balancing the business portfolio and cost structure will enable the improvement of profitability over the long term.

I would like to extend my gratitude to our personnel as well as customers, share-holders and partners for their remarkable contribution during the fiscal year.

Vesa VähämöttönenPresident and CEO

a rather large fixed cost with the revenue generated only 6–12 months after the prod-ucts have entered production.

The life cycles of industrial electronics products are clearly longer than in the tele-com sector, and standard products that can be delivered to different customers without the need for changes are also commonly used. We aim to build the industrial sector into a business area that balances out the rapid changes in demand in the telecom sector. This could already partly be seen during the fourth quarter of the past fiscal year, with the industrial electronics sector growing clearly while the telecom sector underwent a slight decrease. Industrial electronics deliveries for the whole fiscal year increased by approximately 8% year-on-year.

The market breakthrough for electric vehicles will take longer than estimated a year ago, which is first and foremost due to the immaturity of battery technology. For instance, the Chinese government has lowered its forecast on the increase in the number of electric vehicles in the next few years. On the other hand, several recharge-able hybrid cars have been showcased.

Several customer projects were under-way in China during the 2012 fiscal year, and they will continue this year. Our prod-


88 teLeCommunICAtIonefore is a leading power product supplier for the

wireless telecommunications sector. Demand for

wireless broadband networks is growing as data

traffi c increases accelerated by new services and

advanced terminal devices, such as smartphones

and tablets.


the increasing number of new devices and applica-tions creates pressure for telecommunication network performance and requires

more developed telecommunication net-work technology and capacity. It has been estimated that the data traffi c in wireless networks will increase tenfold over the next fi ve years.

In the longer term, the growth of mo-bile data traffi c will be further boosted by wireless Internet access on a new devices. Examples of new devices using Internet-based services include cars, household appliances, power and surveillance sys-tems in houses as well as various auto-matic vending machines. In addition, more and more people are watching videos on a smartphone or a laptop. Mobile devices must be more effi cient than before, and consequently they generate more data traf-fi c.

Customer-oriented operationsEfore’s success in the telecommunications sector is based on special expertise and long-term customer relationships. Efore’s services encompass the entire lifecycle of power supply solutions, from product devel-opment and design all the way to mainte-nance services. Close cooperation with the customer often begins in the early stages of the project when the product is just be-ing defi ned. The customer gets the biggest

benefi ts when Efore is already involved at the concept design stage, helping the cus-tomer to prepare specifi cations and opti-mizing technical requirements of a power product for the application in question in a cost-effective manner.

Efore’s power products designed for telecommunication needs are suited to demanding environmental conditions and provide excellent effi ciency. The company’s power solution supply units ensure the un-interrupted operation of wireless telecom-munication network base stations, for ex-ample. Leading companies in the industry, such as Ericsson, Nokia Siemens Networks and Cassidian, use Efore’s products.

Production centralised in SuzhouEfore manufactures the products it designs at the Suzhou production plant in China. The location of the production plant is op-timal, as many of Efore’s telecommunica-tions customers as well as electronic com-ponent suppliers are located near.

New products for key technologiesDuring the fi scal year, demand for Efore’s telecommunications products was espe-cially boosted by strong development of the North American network market. In addi-tion, the product portfolio of existing cus-tomers was expanded because the product needs of customers increased as LTE tech-nology became more commonly used.

The strong growth of network data traf-fi c creates a positive outlook for Efore’s main market. WCDMA/HSPA (3G) and LTE (4G) technologies play a key role in increas-ing mobile data transfer, and Efore’s main products in the telecommunications sector have been designed with these technolo-gies in mind.

Innovative product and technology developmentIn addition to its own product and technol-ogy development, Efore co-operates active-ly with research institutes, universities and customers. This contributes to technologi-

teLeCommunICAtIon

tekes funds spearhead r&D and innovation projects. efore is actively taking part in challenging r&D projects in cooperation with national and european universities, research centres and industrial partners. the key to success for such cooperation is a balanced consortium including various types of organizations, from diff erent countries and with complementary skills. as such, efore is a key partner in Opera-Net and Opera-Net 2 projects, which are part of the industry-driven Celtic-Plus european re-search initiative targeting end-to-end solutions and aiming toward energy effi ciency in wireless networks.Pekka ollikainen, senior Technology adviser, Tekes – the Finnish Funding agency for Technology and innovation

Innovative co-operation with Tekes

cal development of Efore’s power electron-ics products and thus strengthens Efore’s competitiveness. In February 2012, Efore was awarded “the Excellence Award 2012 in Silver” in co-operation with European partners for its work on power effi ciency optimization in mobile radio networks in the OPERA-Net research project of the Eu-ropean co-operation network EUREKA.

The Opera-Net project continues in the form of the Opera-Net 2 research project which aims to reduce the environmental impact of 3G and 4G networks by improving both the power and the material effi ciency.

ECEWA, a strategic Sino-Finnish col-laboration project funded by Tekes – the Finnish Funding Agency for Technology and Innovation, develops new, cost and energy effi cient solutions for future broad-band networks. The research consortium consists of academic and industrial part-ners from Finland and China.

9

serVICes for the entIre poWer produCt LIfe CYCLe

Local support for customers as they strive for success

my Finnish parents moved to Sweden when I was a child, and I have lived here ever since. Before joining efore in 2011, I held several positions at ericsson and emerson Network Power. today I work as VP Key ac-count management responsible mainly for ericsson.

Working close to our customers in Sweden, we are able to hear their needs clearly and communicate them to the efore organization. this makes it possible for us to respond individually, quickly and accurately to all our customers’ needs. I’ll give you an example. One of our telecom customers was getting strange readings from our power module when measuring a complete system in a test laboratory. Our engineer was able to go to the lab immediately and help out in analysing the data. as this was quite a complex issue, our engineers in Finland

teLeCommunICAtIon

and China helped him to solve the problem. In the end, no harm was caused to the customer and the deliveries were carried out successfully.

During 2012, we also established a global support network from sales to our customers’ key locations to be able to provide high quality service when and where needs occur. Our customers measure our performance in several areas, from technology development to after sales and we have reached an “excellent” rating in these audits.

Our customers are global leaders in their fi elds. to earn their trust also in the future, we must keep de-veloping our operations. this can only be achieved through a team playing well together and focusing on areas important for our customers.

“ouR

CusToMeRs

aRe GloBal

leaDeRs in

THeiR FielDs.”

Ari KemppainenVice President,Key Account Management Stockholm

10

Efore’s power distribution unit is especially developed for the mobile network base station and it enables pow-ering and remote control of 11 devices.

“ouR

CusToMeRs

aRe GloBal

leaDeRs in

THeiR FielDs.”

Ari KemppainenVice President,Key Account Management Stockholm

10


11

IndustrIAL eLeCtronICsefore’s power products are used by industrial

players and system integrators representing the

world’s top technology. In the near future,

demand for industrial power electronics will grow,

thanks to the increasing use of renewable energy

sources and the construction of smart grids.



Long-term collaboration with Aalto universityCollaboration between efore and the Institute of Intelligent Power electronics (IPe) at aalto university has its roots in the late 1990s. efore is a founding member of the IPe Board, and, in this advisory position, has contributed signifi cantly to steering power and in-dustrial electronics research and education at aalto university. the actual research cooperation has been realized through joint proj-ects, where efore has typically brought challenging r&D topics for IPe researchers to study, and the research groups have provided leading edge solutions for future efore products. moreover, the new graduates from these joint projects are highly qualifi ed potential employees for efore. the Institute of Intelligent Power electronics greatly values such a fruitful and mutually benefi cial collaboration, and looks forward to exciting collaboration opportunities.Dr. seppo J. ovaska, Professor, aalto university, school of electrical engineering

12

Customers typically use Efore’s products in the con-trol of industrial robots and the control and manage-ment of electricity trans-

mission and distribution grid. As the key characteristics of power supplies include reliability and a long lifecycle, they require state-of-the-art expertise from the design-ers.

Versatile integration expertise The OPUS DC power systems designed by Efore are an example of the company’s in-dustrial integration expertise at its best. DC power systems have been designed particu-larly for battery secured power supply and they are used in various industrial process control and automation systems as well as in telecom network sites and data centres. In addition to standard solutions, there are

also customized systems available as well as components for customers’ own DC sys-tems.

Electromagnetically protected power supply system cabinets delivered for the Finnish state administration’s security network project (TUVE) are an example of Efore’s product reliability and strong inte-gration expertise. The fi rst system cabinets for the Finnish Defence Forces’ project were delivered in 2011. Deliveries continued in 2012 and will also continue in 2013 within the framework of the existing procurement contract. The TUVE project aims to ensure the security and usability of information communications of the State’s management and security offi cials in all circumstances.

Efore also offers assembly of printed circuit boards and box build of products de-signed by its customers or a third party to the healtcare sector for instance. One ex-

ample of this is the long-term co-operation with the Finnish dental equipment manu-facturer Planmeca Oy.

New product applicationsIn the 2012 fi scal year, Efore continued to balance its business portfolio according to its strategy. The customer base was ex-panded and co-operation with existing cus-tomers, such as ABB Marine, was intensi-fi ed. Efore delivers to ABB Marine OPUS DC power systems that are designed especially for marine industry.

In addition, co-operation with Millog Oy, a company providing maintenance and sup-port services for the Finnish Army, Navy and Air Force, was deepened during the fi scal year. DC power systems for armored and caterpillar vehicles, developed as a result of this co-operation, are a new fi eld for Efore and complement its industrial electronics product portfolio excellently.

Centralized productionThe production of Efore’s power supply solu-tions is based on standardized components and modules. Consequently, production ca-pacity can be adjusted fl exibly according to demand, quickly and with reasonable costs. In order to improve Efore’s profi tability and competitiveness of its industrial business, Efore discontinued production at the Esto-nian plant during the 2012 fi scal year and centralized production to its Chinese pro-duction plant.

The Chinese production plant is also home to the material sourcing which en-ables good connections to the material sources and ensures availability of compo-nents.

High-quality electricity with the aid of power electronics The market for industrial power electron-ics is growing moderately but steadily. In the near future, growth will be strongest in power electronics required by renewable energy sources and smart grids.

Several studies have shown that in the next decade, hundreds of billions of euros will be invested in the construction of smart grids in the EU region alone. Even bigger investments in smart grids, amounting to several billions, are planned in China, the United States, Japan and Korea. In smart grids, Efore’s products are used in manage-ment of electricity transmission and distri-bution grids, for example.

reLIABLe And hIGh-QuALItY poWer produCts

advanced technologies – the key to efore’s competitiveness

I have spent most of my 20 years of professional life in Finland, leading advanced energy management and power conversion r&D in Nokia and St-ericsson since receiving my PhD in Power electronics from the Hel-sinki university of technology. I was hired in 2009 to lead efore’s global technology development function. We have technology development teams both in Fin-land and in China. I spend most of my time in Finland and travel frequently to China and Sweden for meetings with our people and customers.

the target of our global technology development is to ensure efore’s long term competitiveness and to strengthen our position as a trusted partner for our cus-tomers. Our main focus is on developing new technolo-gies, modules and platforms that enable us to reduce the time to market of our future products.

efore’s three business areas have technical syner-gies and often also face similar challenges. to maximize development effi ciency, we aim to develop common technology platforms for them as often as applicable.

For instance, during the past couple of years we have been developing a new digital control platform for pow-er supply units. the result can be utilized in all business areas and the fi rst application will most likely be a new generation of industrial rectifi ers.

Furthermore, an important part of our work is tech-nology roadmapping, identifying future development needs. We monitor technology trends and have regular technical meetings with our customers where people from both our technology and product development teams participate. Our external cooperation also in-cludes advanced r&D projects with industrial partners, universities and research institutions.

the best moments in my work are those when we can surprise our customer positively. On one occasion, we presented a prototype of a new technology plat-form sooner than the customer had expected. He was so happy that he had a picture taken with two members of our team holding this device in his arms like an early Christmas present.


“THe TaRGeT oF ouR

GloBal TeCHnoloGY

DeveloPMenT is To

ensuRe eFoRe’s

lonG TeRM

CoMPeTiTiveness.”

Vlad GrigorePhD, Vice President and Chief Technology Offi cer, Espoo

13

For instance, during the past couple of years we have been developing a new digital control platform for pow-er supply units. the result can be utilized in all business areas and the fi rst application will most likely be a new

Furthermore, an important part of our work is tech-nology roadmapping, identifying future development needs. We monitor technology trends and have regular technical meetings with our customers where people from both our technology and product development teams participate. Our external cooperation also in-cludes advanced r&D projects with industrial partners,

the best moments in my work are those when we can surprise our customer positively. On one occasion, we presented a prototype of a new technology plat-form sooner than the customer had expected. He was so happy that he had a picture taken with two members of our team holding this device in his arms like an early

GloBal TeCHnoloGY

DeveloPMenT is To

ensuRe eFoRe’s

lonG TeRM

CoMPeTiTiveness.”

Vlad GrigorePhD, Vice President and Chief Technology Offi cer, Espoo

OPUS 7U DC power system is designed es-pecially for demanding industrial and power plant applications


eLeCtrIC VehICLes

14

eLeCtrIC VehICLesPower electronics used in electric vehicles complement

efore’s product portfolio and utilize the same technol-

ogy and core competencies as the products developed

for other target markets of the company. efore’s high

effi ciency chargers and DC/DC converters are a perfect

match for electric vehicles and plug-in hybrid vehicles.

the strict requirements that automotive industry has with

regard to moisture resistance,

for instance, correspond to

a great extent with the

requirements of telecom-

munications industry,

with which efore has over

30 years of experience.


eLeCtrIC VehICLes

efore actively supports metropolia’s electric Vehicle development activities, which aim both at educating new engineers and at boosting the transition to clean and sustainable mobility. efore products including DC-DC converters and chargers are integrated as part of the eV propulsion system on inductive charging demonstration vehicles currently being built at metropolia in Helsinki. these vehicles will be used to demonstrate the use of diff erent charging methods in the challenging Nordic climate. the co-opera-tion is expected to give important insight to usability and reliability of the various ways to charge eVs from the user point of view.sami Ruotsalainen, senior lecturer, Helsinki Metropolia university of applied sciences, Degree Programme in automotive engineering and logistics

Active co-operation with Metropolia

15

towards greener technologyAutomotive industry is in a state of signifi cant fl ux as it is moving towards utilization of

greener technology. Mostly vehicle manu-facturers have already introduced their hybrid vehicle solutions. Alongside tradi-tional fuel-saving hybrid vehicles, many ve-hicle manufacturers are launching vehicles that utilize renewable energy. Examples of these new vehicle types include plug-in hybrid and electric vehicles.

The technical properties of electric ve-hicles are at the early stages of their devel-opment trajectory. Consequently, industry players need to be fl exible when designing products and business operations. The high performance and high voltage electronics and batteries used in plug-in hybrid and electric vehicles are still in part new con-cepts to traditional car manufacturers, too.Consumer needs and expectations also pose challenges for the automotive indus-try. Consumers who are used to the usabil-ity of traditional internal combustion engine vehicles will also expect similar usability of electric vehicles in the future, which cre-ates challenges with regard to the charging, mileage and acquisition price of electric ve-hicles.

Liquid cooling plays a key roleLiquid cooling is commonly used cooling method in traditional passenger car en-

organization. Efore is currently developing new versions of electric vehicle products for customer testing. In addition, the company is looking for a suitable cooperation model enabling the access to the Chinese market.

Plug-in hybrid vehicles in the vanguardIt is taking longer than anticipated for pure electric vehicles to become more common, which is fi rst and foremost due to imma-ture battery technology. For instance, the Chinese government has halved its forecast on the increase of the number of electric vehicles on the country’s roads in the next few years. Instead, plug-in hybrid vehicles are at the moment becoming more common quickly and in the future, they will enable easy transition to a pure electric vehicle.

gines. It is a functional alternative in electric vehicles, too, for cooling engine, transmis-sion and power electronics. Indeed, it seems like nearly all electric vehicle manufactur-ers are about to adopt this technology. Ef-fi cient cooling makes it possible to increase the load of the engine or to reduce the size of the engine while keeping the same load.

During the 2012 fi scal year, Efore in-vested in the development of its electric vehicle product family and further im-provement of its liquid cooling solution by increasing power density and reducing the size. The fi rst product versions of liquid cooling solutions were delivered to cus-tomers for test use during the latter half of the 2012 fi scal year.

A fi rm foothold in the growing Chinese marketChina has recently become the largest car market in the world and it also has the po-

tential to become the largest electric vehicle market. The fact that China has reduced the tax collected for small cars is considered one underlying factor for the increase in de-mand of electric vehicles as it ensures that there are buyers interested in small, envi-ronmentally friendly cars. New solutions are urgently needed in China in order to control both air pollution and fuel consumption. The Chinese government supports an automo-tive industry that utilizes renewable sources of energy and has set a goal of increasing the number of electric vehicles on China’s roads to 500,000 by 2015 and to 1,000,000 by 2020. Smaller plug-in vehicles, such as electric scooters, have already become a commonplace phenomenon in China.

Efore has a company focusing on electric vehicle business located near its production plant in Suzhou. This makes it possible for the company to carry out close and fl ex-ible co-operation with the rest of the Efore

pLuG-In hYBrId VehICLes Are BeComInG more Common

electric vehicles a central part of China’s green drive

China is the world’s largest automobile producer and market and has the second largest number of vehicles on its roads. With our economy projected to continue growing, we face a serious task in the form of energy conservation and the reduction of greenhouse gas emissions.

For this reason, our central government has select-ed the electric vehicles industry as an emerging indus-try of strategic importance, and is taking urgent actions to increase the number of these vehicles. In addition to previous support programs, the government decided in 2012 to provide a specifi c incentive for leading car producers to speed up the development of electric ve-hicles. research and development platforms have also been established for the technologies used to produce electric cars. China has drawn up over 40 industrial standards and obtained more than 1,600 patents re-lated to these technologies.

Several thousands of purely electric passenger cars were sold in China in 2012, and during the last months of the year, their sales exceeded the number of hybrid Queennie Cha

General Manager, Suzhou

eLeCtrIC VehICLes

vehicles sold for the fi rst time. this is a remarkable mile-stone! electric buses are also being promoted widely, and hundreds of recharging stations have been built for both passenger cars and buses.

I was the fi rst employee of efore China in 1999. after a few years of working for another employer, I joined efore again in 2006, fi rst as Finance & administration manager, and then as general manager.

We have had a dedicated electric vehicles organiza-tion in China since 2011. In 2012, we successfully started co-operation on development projects with our tar-geted customers. together with them and our global technology team, we are developing two major series of products: chargers and DC-DC converters. During the year, we developed prototypes for our clients for application testing.

We have now been active in the rapidly evolving electric vehicles industry for a couple of years. Hav-ing gained important knowledge on co-operation with global car producers, we are confi dent in our potential to succeed in this new business sector.

“ouR CenTRal

GoveRnMenT is

TaKinG uRGenT

aCTions To inCRease

THe nuMBeR oF

eleCTRiC veHiCles.”

16

In the development of liquid cooled solutions, particular attention has been paid to the com-pact size and the power effi ciency of the product.

on its roads. With our economy projected to continue growing, we face a serious task in the form of energy conservation and the reduction of greenhouse gas emissions.

ed the electric vehicles industry as an emerging indus-try of strategic importance, and is taking urgent actions to increase the number of these vehicles. In addition to previous support programs, the government decided in 2012 to provide a specifi c incentive for leading car producers to speed up the development of electric ve-hicles. research and development platforms have also been established for the technologies used to produce electric cars. China has drawn up over 40 industrial standards and obtained more than 1,600 patents re-lated to these technologies.

were sold in China in 2012, and during the last months of the year, their sales exceeded the number of hybrid

GoveRnMenT is

TaKinG uRGenT

aCTions To inCRease

THe nuMBeR oF

eleCTRiC veHiCles.”

Queennie ChaGeneral Manager, Suzhou

16


CorporAte responsIBILItY

efore’s fInAnCIAL ImpACt

Customers

net sales for the fiscal period 2012 were Eur 78.1 million

taxes – puBLIC seCtor Eur +0.7 million

purchases – suppLIers Eur 55.9 million

Wages, salaries, fees and personnel costs – empLoYeesEur 15.9 million

distribution of assets – shArehoLdersEur 2.1 million

net interest costs – fInAnCe proVIders Eur 0.4 million

for Efore, the starting point of corporate responsibility is taking sustainability princi-ples into account in the com-pany’s operations. Efore prac-

tises and develops its business in a manner that improves the profitability and competi-tiveness of its operations, takes environ-mental aspects into account and meets the needs of customers and other stakeholders of the company.

Efore’s values form the foundation for corporate responsibility and guide its devel-opment. According to its values, the com-pany is committed to continuous growth and profitability improvement. Efore is committed to meeting customers’ expecta-tions as a preferred business partner. The company’s professional and innovative per-sonnel is a crucial resource for achieving these targets.

Financial responsibilityAt Efore, financial responsibility means that the company will develop and offer value-creating products for its customers, meet the owners’ profit expectations, provide employment, generate economic prosperity for various stakeholders through procure-ment and investments both locally and in-ternationally in every field of the company’s business as well as take care of the pay-ment of taxes and other duties.

In order to be able to meet the expec-tations of its stakeholders, Efore needs to practise economically sound and profitable business. Efore wants to be a reliable and desirable partner for its customers and other stakeholders.

At the end of fiscal year 2012 Efore’s solvency ratio was 47.7% and net gearing -11.3%.

17

soLIdItY — A BAsIs for BusIness operAtIons


soCIAL responsIBILItY

personnel by functions

Operations and Programmes 78%Product and Technol-ogy Development 13%Finance, Adminis-tration, Sales and Marketing 9%

Age structure of personnel

Under 30 years 62% 30–39 years 28% 40–49 years 6% Over 50 years 4%

personnel by region Gender distribution

China 89%Finland and Sweden 11%

Men 62%Women 38%

18

efore’s HR policy is based on the company’s strategy, val-ues and Code of Conduct. The company commits it-self to comply with national

legislation and regulations as well as in-ternational human rights treaties in all its operations. The aim is to create a safe work community where employees treat each other in a fair, just and equal manner.

At the end of the fiscal year 2012, Efore’s personnel stood at 804 (907), including 358 (295) temporary employees. The number of

CompetenCe deVeLopment supports AChIeVInG strAteGIC oBjeCtIVes

personnel decreased slightly compared to 2011 due to the closing down of the Pärnu unit in fall 2012. Of the employees, 89% worked in China, 11% in Finland and Swe-den. The proportion of women in the per-sonnel was 38% and that of men 62%.

Professional and motivated employees are Efore’s strength At Efore, development of competencies is based on strategic goals and the compe-tence review conducted during the fiscal year. The aim is to ensure commitment,

motivation and the continuous competence development of the personnel.

The annual competence review ensures that human resources and competences are aligned correctly with current and fu-ture needs. The focus was on the develop-ment of the personnel’s professional skills and the training of supervisors, based on the needs of business operations. During the fiscal year, the global middle manage-ment training program continued, aimed at providing supervisors with uniform lead-ership and working method development

tools. Nearly half of Efore’s middle manag-ers participated in the program during the fiscal year, and the program will continue in 2013. Cooperation in an international work-ing environment was also supported by regular IT and language training courses.

The personnel survey is an important development toolEfore’s success relies on professionally skilled, committed and healthy personnel. Employee job satisfaction is monitored with an annual personnel survey. The survey


the response rate of the personnel survey launched at the turn of the fiscal period was 75% of salaried employees. the overall score of the survey increased significantly compared to the previous year. the best grades were given to leadership and management, working atmosphere, team spirit, and internal commu-nications.

CommItted to joInt oBjeCtIVes

efore is known for its high-level competences in power electronics and strong r&d culture. Continuous improvement of competences is very important for the future success of the company

19

addresses the employees’ opinions on such matters as the working environment and atmosphere, job descriptions, motivation, supervisory work and internal communica-tion.

The response rate of the personnel sur-vey launched at the turn of the fiscal period was 75% of salaried employees. The overall score of the survey increased significantly compared to the previous year. The best grades were given to leadership and man-agement, working atmosphere, team spirit, and internal communications, while physi-cal working environment and tools were identified as development areas. The de-velopment measures taken during the fis-cal year were evident in the survey, with the grades for all areas increasing compared to the previous year.

As in the previous year, the survey re-sults and development measures proposed by the employees will be reviewed with the personnel, and they will form the basis for specifying the organizational, working environment and personnel development measures to be taken during the fiscal year 2013. The development measures will also be published on the intranet so that the

personnel will have an opportunity to moni-tor their implementation.

Network solutions make internal communications more effectiveEfore considers it important that the en-tire personnel understand Efore’s strategy and the significance of different functions in its implementation. Quarterly informa-tion and discussion events concerning the company strategy, tasks and plans for dif-ferent functions, financial performance and future prospects are arranged for the entire personnel.

The global intranet plays a significant role as an internal communication chan-nel. On the global and local intranet, the personnel can keep up to date with latest news and events. Furthermore, new net-work-based solutions and video conference premises available at all locations facilitate the communication between different loca-tions substantially. Indeed, most internal meetings and briefings are arranged with the help of network tools and video con-ferencing. These solutions have saved time and significantly reduced the number of travelling days for personnel


enVIronment

for Efore, environmental responsibility means con-tinuous development of en-vironmentally friendly, en-ergy-efficient products and

reduction of the environmental impact of its operations. Efore’s products are energy-ef-ficient and the use of materials is controlled strictly. This environmental approach cov-ers the entire product lifecycle from design to recycling or disposal of the product at the end customer.

Efore applies an environmental policy that has been communicated to all employ-

ees. The relevance of the policy is reviewed on a regular basis. Efore invests in modern technology in order to improve energy effi-ciency and protect the environment. Efore’s environmental systems are developed and maintained according to the international ISO 14001:2004 standard. Group sites are certified according to the standard. Prod-ucts meet the requirements of the Eu-ropean Union’s WEEE Directive. Efore’s products comply with the RoHS Directive, i.e. the production process is lead-free and components meet the criteria defined in the Directive. Recycling of electronic waste

is organized in cooperation with specialist companies.

Energy saving plays an important roleInternational actions targeted at more ef-ficient energy use and greenhouse gas re-duction offer several business opportunities for companies in the power supply market. There is a growing need to improve the ef-ficiency of power supplies and at the same time considerably reduce the consumption of electricity in end use. Rapid increase of data traffic in networks means increasing

electricity consumption. Developing ener-gy-saving solutions for customers is a key goal in Efore’s product development which is implementing by applying Ecodesign principles.

Intelligence in power supply enables the monitoring and optimization of power for the entire system. Improved efficiency and optimal power use mean that overall energy consumption is reduced and the supply net-work can be dimensioned for lower energy, which generates savings in network cabling and other components, as well as in sites and air conditioning.

Systematic product development workAs a result of systematic development work, Efore’s supply chains, site operations and products are of the highest international quality with regard to environmental is-sues. New methods for saving energy and minimizing the environmental impact of the company’s operations are sought continu-ously. Efore’s product development and ma-terial choices are based on the RoHS, WEEE and Ecodesign Directives of the European

Amount of hazardous waste, per product produced, g/unit

Amount of water consumption, per product produced, l/unit

0 1 2 3 4 5 6 7 0 1 2 3 4 5 6 0 2 4 6 8 10 12

2010

2011

2012

2010

2011

2012

2010

2011

2012

6.2 6.0 10.7

5.6 3.6 7.0

6.4 2.6 8.0

electricity consumption per product produced, kWh/unit

20

ContInuous deVeLopment of enVIronmentALLY frIendLY And enerGY-effICIent produCts


Union that regulate the recyclability and environmental friendliness (no substances harmful to the environment) of the selected materials as well as the length of product lifecycles, providing instructions on the dis-posal process for products and improving energy efficiency. The products also comply with the requirements of the China RoHS legislation and corresponding require-ments in several other countries.

The identification of hazardous mate-rial properties and risk management are important elements in Efore’s operations. Electrical and electronic waste is sorted and recycled. Consumption of water and electricity is measured and annual con-sumption targets are set. New methods for saving energy and minimizing the environ-mental impact of the company’s operations are sought continuously.

Fiscal year developmentThe environmental aspects and impacts of Efore’s operations as well as the company’s processes and measures aimed at limiting the environmental impacts are regularly audited. The level of environmental protec-

•the level of protection is continuously main-tained and developed in accordance with the requirements of the Iso 14001:2004 standard, customer requirements and the legislation of different countries.

•the environmental aspects and effects of operations are audited regularly.

•the level of environmental protection and emission-preventing measures are improved also from the business perspective.

•environmental awareness among suppliers, personnel and customers is promoted.

•environmental matters are communicated openly to all stakeholders.

efore ’s enVIronmentAL poLICY

Weee = Waste electrical and electronic equipmentroHS = the restriction of the use of Certain Hazardous Substances in electrical and electronic equipment

ABBreVIAtIons

tion and emission prevention is continu-ously enhanced by also taking the business impact of such measures into account.

Efore continuously reduces business flights by increasing the use of telephone and video conference facilities.

In addition, environmental aspects are included in supplier and subcontractor evaluations and they are expected to con-tinuously develop their operations towards increased environmental friendliness.

During the fiscal year 2012 the in-creased requirements of RoHS-legislation were implemented into the product devel-opment processes and the criterions of ma-terial data base as well as component base were updated accordingly.

Efore’s production process does not generate emissions to air or ground but it releases so-called greywater which is pu-rified by a specialised waste disposal con-tractor. During the fiscal period 2012 no en-vironmental damage was reported at any of the company’s sites.

21


fInAnCIAL stAtements Report of the Board of Directors 23Consolidated income statement 27Consolidated balance sheet 28Consolidated cash flow statement 30Consolidated statement of changes in equity 31Notes to the consolidated financial statements 32Income statement for the parent company 55Balance sheet for the parent company 56Parent company’s cash flow statement 58Accounting policies for the financial statements of parent company 59Notes to the financial statements, parent company 60Group key figures 66Calculation of key figures and ratios 69Shares and shareholder 70Signatures for the financial statements and the report by the Board of Directors 75Auditor’s report 76

CorporAte GoVernAnCeCorporate Governance Statement 77Board of Directors 81Executive Management Team 82

Information for shareholders 83Contact details 84

fInAnCIAL stAtements 2012


Efore Group is an international company which develops and produces demanding power electronics products.

Efore complies the Finnish Corporate Governance Code for Listed Companies issued by Securities Market Association in 2010. The Corporate Governance Statement of the Group has been disclosed as a sepa-rate report on the company’s website and in the Annual Report.

Group structure Efore Group consists of the parent company Efore Plc and its directly or indirectly wholly owned subsidiaries Efore (USA) Inc. in the United States, Efore(Suzhou) Electronics Co. Ltd in China, Efore (Suzhou) Automotive Technology Co., Ltd in China, Efore AS in Estonia, Efore AB in Sweden, Efore (Hong-kong) Co. Ltd in China and FI-Systems Oy in Finland.

Efore Management Oy, a company owned by the members of the Efore Group Executive Management Team has been consolidated in the group.

Net sales and financial development for the fiscal year Net sales for the fiscal year amounted to EUR 78.1 million (EUR 88.0 million). Net sales by customer group amounted to as follows: Telecommunication 76.6% (79.7%) and industrial electronics 23.4% (20.3%). Geographically Efore’s deliveries were to the following areas: EMEA EUR 42.0 million (EUR 32.9 million), APAC EUR 23.8 million (EUR 40.5 million), Finland EUR 11.1 million (EUR 11.9 million) and the Americas EUR 1.3 million (EUR 2.8 million) which totaled EUR 78.1 million (EUR 88.0 million). Final geographical distribution of Efore’s prod-ucts deviates from the before mentioned as Efore’s customers distribute further the products from the logistics centres to other markets.

The results from operating activities amounted to EUR -2.6 million (EUR 4.1 million).

Low demand during the first half of the fiscal year together with unfavorable prod-uct mix affected the development of the net sales and the results from operating activities. Results from operating activities

without one-time costs amounted to EUR -1.3 million.

Results from operating activities include one-time net costs of EUR 1.1 mil-lion related to closing down Estonia factory and production transfer to China as well as costs of EUR 0.2 million related to closing down Shenzhen product development unit.

Deferred tax receivables of EUR 0.9 mil-lion have been recorded in the accounts of Efore’s subsidiaries in China.

Business developmentInvestment in product and technology development during the fiscal year was EUR 7.3 million (EUR 7.6 million) representing 9.4% (8.6%) of net sales.

The fiscal year 2012 was characterized especially by strong demand fluctuation of telecom products.

Industrial sector deliveries increased about 8% year-over-year being strongest during the last quarter.

Efore is looking for a suitable coop-eration model enabling the access to the Chinese market. EV power electronics cus-tomer projects are progressing according

to the plans. During the fiscal year invest-ments in EV business were EUR 0.3 mil-lion and total operating costs were EUR 0.8 million.

Estonia factory closing and produc-tion transfer to China were completed as planned by the end of the fiscal year 2012. One-time net costs as a result from those were EUR 1.1 million.

According to Efore’s business model Efore AS will act as an Intellectual Property Rights (IPR) administration company of the group. As a result the parent company Efore Plc made an internal transaction and sold IPRs to Efore AS in October 2012. A profit of EUR 4.5 million was booked in parent company’s income statement due to this transaction.

InvestmentsGroup investments in fixed assets during the fiscal year amounted to EUR 1.7 mil-lion (EUR 4.4 million). Previous year figure includes EUR 1.7 million capacity increase investments at China factory.

Capitalized product development costs were EUR 0.4 million. At the end of the fis-

REPORT OF THE BOARD OF DIRECTORS

Personnel, average

821

1,000200 400 6000 800

2010

2011

2012

960

888

Solvency ratio, %

6020100 504030

2010

2011

2012

49.7

48.3

47.7

Gearing, %

0-20-25 -15-30 -5-10

2010

2011

2012

-13.3

-16.3

-11.3

23

FInAnCIAl STATEmEnTS

EFORE AnnUAl REPORT 2012

cal year capitalized product development costs amounted to EUR 0.6 million (EUR 0.7 million).

Financial positionThe Group’s financial position during the fiscal year was good.

The consolidated interest-bearing cash reserves exceeded interest-bearing liabili-ties by EUR 2.3 million (EUR 3.9 million). The consolidated net financial expenses were EUR -0.4 million (EUR 0.3 million). Efore sold its holding in Power Innovation Stromversorgungstechnik GmbH which improved Efore Group’s previous year net result by EUR 0.8 million.

The cash flow from business operations was EUR 2.6 million (EUR 4.3 million). The cash flow after investments was EUR 1.0 million (EUR 1.5 million).

The Group’s solvency ratio was 47.7% (48.3%) and the gearing was -11.3% (-16.3%) at the end of the fiscal year.

Liquid assets excluding undrawn credit facilities amounted to EUR 4.5 million (EUR 11.2 million) at the end of the fiscal year. The balance sheet total was EUR 43.3 million (EUR 49.9 million).

Key indicatorsGroup key indicators for three years are shown in financial statements.

Environmental policy and encumbrancesEfore’s environmental systems are devel-oped and maintained according to the inter-national ISO 14001:2004 standard. All group product development and production sites are certified according to the standard.

Products are designed to meet the requirements of the European Union’s WEEE Directive (Waste electrical and elec-tronic equipment) . Efore’s product devel-opment is based on the guidelines of EuP (Energy using Products) directive in order to minimize the use of natural resources related to the products.

Efore’s production facility is equipped for lead-free production in accordance with RoHS Directive (Restriction of the use of Certain Hazardous Substances). Also lead based production is used in order to meet product requirements.

Recycling of electronics and metal waste is done in partnership with spe-cialized companies. Chemical waste is collected and transported to companies

which are spezilialized in hazardous waste disposal.

No environmental risks or responsi-bilities having an impact on company’s financial position have been come out by the publishing of the financial statements.

PersonnelThe number of the Group’s own personnel including temporary personnel averaged 888 (960) during the fiscal year and at the end of the fiscal year it was 804 (907). At the end of October 2012 more than 90% of the personnel worked outside of Finland.

Board of Directors and executive management teamIn accordance with the proposal of the Board’s Nomination Board, the Annual General Meeting on February 9, 2012 elected six regular members to the Board: Olli Heikkilä, Richard Järvinen, Tei-Hu Liu, Marko Luoma, Ari Siponmaa and Matti Vikkula. The Board of Directors selected Matti Vikkula to continue as the Chairman of the Board. Olli Heikkilä was selected as the Chairman of the Audit Committee and Marko Luoma and Matti Vikkula as mem-bers.

After hearing the major shareholders of the company, Efore’s Board of Directors decided to appoint the Nomination Board on 25 September, 2012. All the members were elected from outside the Board of Directors. Jari Suominen was elected as the Chairman and Timo Syrjälä and Leena Tammivuori were elected as members of the Nomination Board. The term of the Nomination Board shall end at the closing of the next Annual General Meeting of the company

The members of the executive man-agement team and their global spheres of responsibility are as follows: President and CEO Vesa Vähämöttönen, Panu Kaila (Oper-ations and Programs), Markku Kukkonen (Technology and Product Development), Alexander Luiga (Sales and Marketing), Olli Nermes (Finance and Administration) and Jukka Pietarinen (Industrial Business Area)

AuditorsThe Annual General Meeting held on Feb-ruary 9, 2012 appointed KPMG Oy Ab as Efore’s auditors, with Authorized Public Accountant Lasse Holopainen as principal auditor.

Return on investment (ROI), %

2010-5 0 5-10 15

1.1

17.5

-9.9

2010

2011

2012

Operating profit, mEUR

51-2 -1 0-3 2 3 4

0.0

4.1

-2.6

2010

2011

2012

netsales, mEUR

69.7

88.0

78.1

10020 40 600 80

2010

2011

2012

24



Shares, share capital and shareholdersThe total number of Efore Plc shares at the end of the fiscal year was 42,529,648 and the registered share capital was EUR 15,000,000.

In April–June 2012 the company acquired total 713,660 pcs of Efore shares according to the authorization of Annual General Meeting on 9 February 2012.

The amount of the Group’s own shares was 1,218,544 at the end of the fiscal year. In addition to this Efore Management Oy, a company belonging to Efore group owned 2,358,242 pcs of Efore shares.

The highest share price during the fis-cal year was EUR 0.94 and the lowest price was EUR 0.57. The average price during the fiscal year was EUR 0.72 and the closing price was EUR 0.67. The market capitali-zation calculated at the final trading price during the fiscal year was EUR 26.1 million.

The total number of Efore shares traded on the Nasdaq OMX Helsinki during the fis-cal year was 10.0 million and their turnover value was EUR 7.2 million. This accounted for 23.5% of the total number of shares. The number of shareholders totaled 3,235 (3,315) at the end of the fiscal year.

Flagging notificationsAs a result of the share issue directed to Efore Management Oy on January 13, 2012, Efore Management Oy’s holding of shares and voting rights in Efore Plc exceeded 5 per cent.

Distribution of assetsEfore’s Annual General Meeting on Febru-ary 9, 2012 decided, in accordance with the proposal of the Board of Directors to dis-tribute assets from the reserve for invested unrestricted equity in the amount of EUR 0.05 per share. The distribution was paid to shareholders who on the record date 14 February 2012 were on the sharehold-ers’ register of the company maintained by Euroclear Finland Oy. The distribution amounted to EUR 2.1 million and it was paid on February 21, 2012.

Authorizing the Board of Directors to resolve on the distribution of the assets of the companyEfore’s Annual General Meeting on Feb-ruary 9, 2012 decided in accordance with the proposal of the Board of Directors to authorize the Board of Directors to resolve at its discretion on a possible distribution of assets as dividend or assets from the

reserve for invested unrestricted equity if the financial position of the company supports that. The maximum aggregate amount of the distribution of assets is EUR 0.05 per share. The authorization includes the right of the Board of Directors to resolve on all other terms and conditions relating to the distribution of assets. The authorization is valid until the next Annual General Meet-ing. The authorization has not been used by the end of fiscal year 2012.

Authorizing the Board of Directors to resolve on the acquisition of the company’s own sharesEfore’s Annual General Meeting on Feb-ruary 9, 2012 decided in accordance with the proposal of the Board of Directors to authorize the Board of Directors to resolve on the acquisition of the company’s own shares, in one or several instalments, on the following terms and conditions:

Based on the authorization an aggre-gate maximum of 4,000,000 own shares constituting approximately 9.4% of all the shares in the company may be acquired by using the company’s unrestricted equity. The shares may be acquired in public trad-ing arranged by the NASDAQ OMX Helsinki Oy at the prevailing market price on the

date of acquisition, or at the price other-wise formed on the market. The Board of Directors shall resolve on all other terms and conditions relating to the acquisition of the company’s own shares. The acquisition may be concluded using, inter alia, deriva-tives and the company’s own shares may be acquired otherwise than in proportion to the holdings of the shareholders (directed acquisition). The authorization is valid until the next Annual General Meeting.

The Board of Directors of Efore Plc decided to acquire in one or several tranches an aggregate maximum of 1,000,000 of the company’s own shares in accordance with the authorization given to it at the Annual General Meeting on 9 February 2012. The Board of Directors used this authoriza-tion and in April–June 2012 the company acquired total 713,660 pcs of Efore shares according to the authorization.

Authorizing the Board of Directors to resolve on the issue of shares as well as the issue of options and other special rights entitling to sharesEfore’s Annual General Meeting on Feb-ruary 9, 2012 decided in accordance with the proposal of the Board of Directors to

Product development costs, mEUR

6.3

8420 6

2010

2011

2012

7.6

7.3

Gross investments, mEUR

5210 43

2010

2011

2012

1.6

4.4

1.8

Return on equity (ROE), %

201050-5-10-15 15

0.6

15.5

-10.5

2010

2011

2012

25



authorize the Board of Directors, in one or more transactions, decide on the issu-ance of shares and the issuance of options and other special rights entitling to shares referred to in chapter 10 section 1 of the Companies Act as follows:

The number of shares to be issued based on the authorization may in total amount to a maximum of 17,000,000 shares.

The Board of Directors decides on all the terms and conditions of the issuances of shares and of options and other special rights entitling to shares. The authorization concerns both the issuance of new shares as well as the transfer of treasury shares. The issuance of shares and of options and other special rights entitling to shares referred to in chapter 10 section 1 of the Companies Act may be carried out in devi-ation from the shareholders’ pre-emptive rights (directed issue). The authorization is effective until the Annual General Meeting in 2014.

Based on the authorization given by the Annual General Meeting on February 10, 2011 the Board of Directors offered in the directed share issue against payment 273,842 shares held by the Company for subscription by Efore Management Oy in order to expand the shareholding plan and to include a new member of the Efore Group Executive Management Team in the plan. The subscription price of the share was EUR 0.82 per share, which was the trade volume weighted average quotation of the Company’s share on NASDAQ OMX Helsinki Ltd on 9 January 2012. The share subscription period was 11 January–25 January 2012.

The Board of Directors of the company resolved to assign in aggregate 82,817 own shares held by the company as payment of the Board of Directors’ annual remunera-tion. The number of share has in accord-

ance with the resolution of the Annual Gen-eral Meeting been determined based on the average of the closing prices of the Efore Plc share March 12–22, 2012. The assign-ment of the shares took place on May 18, 2012.

Short-term risks and factors of uncertainty The market typical fluctuation in demand can cause rapid changes in Efore’s busi-ness. The most significant business risks are related to the success of key custom-ers in their markets and to Efore’s delivery capability for the key customers.

Progress of the EV power electronics projects depends on the customers’ own project schedules and the establishment of the whole market.

It has been recognized that global eco-nomic development may effect negatively on Efore’s business environment

A more comprehensive report on risk management is presented on the compa-ny’s web-sites.

Risk managementThe purpose of Efore’s risk management system is to identify the strategic, opera-tional and financial risks faced by the com-pany and any conventional risks of loss. The risks that Efore takes in its operations are risks that are encountered in pursuit of the company’s strategy and goals. Risk man-agement seeks to control these risks in a proactive and comprehensive manner. The measures taken can include risk avoidance, risk reduction, and risk transfer by insur-ance or agreement.

Management of business risksIn accordance with Efore’s operating prin-ciples, risk management forms an integral part of the company’s business processes in

all its operational units. Efore Group and its operational units assess the risks of their own operations, prepare risk management plans, and report risks in accordance with the organizational structure. Efore group defines Business Continuity plan, which is reviewed yearly.

Efore’s operational units have long-established training and development pro-grams for reducing occupational accidents and improving overall safety levels. Envi-ronmental management systems based on the ISO 14001:2004 standard and quality management tools based on ISO 9001/2000 are applied in the Group’s different busi-ness locations and form the basis for the management of environmental risks.

There are separate guidelines for data and corporate security. Risk management in procurement is based on harmonized purchasing guidelines, contract clauses, and advanced data systems.

Risk of lossEfore aims to prevent losses by observ-ing the highest standards in its operations and taking proactive risk management measures. Risks that Efore cannot man-age itself are insured. The aim is to have appropriate insurance cover for all risks of loss, such as those concerning assets, business interruption, and operational and product liability.

Management of financing risksThe principles and aims of the Group’s management of financing risks is deter-mined in the financing risk policy, which, if necessary is updated and confirmed by the Board of Directors. The management of financing risks aims at avoiding risks and cost-effective arrangements for protecting the Group from factors that may affect its performance and cash flow.

Financing risks are managed through exchange-rate and interest-rate hedging using only financial instruments with a market value and risk profile that can be reliably monitored. Management of financ-ing risks can be found on Notes to the con-solidated financial statements, 24

Events after the close of the fiscal yearEfore Plc received a notification on Novem-ber 9, 2012 that Sievi Capital Oyj’s holding of shares and voting rights in Efore Plc has exceeded 5 per cent.

OutlookThe fundamentals for long-term positive development of wireless network equip-ment industry are expected to remain unchanged and Efore estimates its posi-tion in this main market to remain strong.

Financial estimate for the fiscal year 2013Although the long term outlook is positive, due to the uncertainties in the global econ-omy combined with the telecom market fluctuation and customers’ ordering prac-tices it is not possible to provide a reliable financial estimate for the fiscal year 2013.

However, based on the available infor-mation company estimates its net sales to be on the same level with previous year.

Board of Directors’ proposal for the Annual General MeetingThe Board of Directors will propose to the Annual General Meeting on February 7, 2013 that no dividend will be paid.

26



COnSOlIDATED InCOmE STATEmEnT, IFRS, EUR 1,000Note Nov. 1, 2011–Oct. 31, 2012 Nov. 1, 2010–Oct. 31, 2011

NET SALES 1 78,122 88,032Change in inventories of finished goods and work in progress 2,295 2,543

Other operating income 2 556 220Materials and services 3 -55,927 -62,008Employee benefits expenses 4 -15,869 -15,143Depreciation and amortization 5 -2,964 -2,603Other operating expenses 6 -8,820 -6,946

OPERATING PROFIT (–LOSS) -2,606 4,093

Financing income 7 1,650 1,316Financing expenses 8 -2,094 -1,047Share of profit of associated company 9 0 116

PROFIT (–LOSS) BEFORE TAX -3,050 4,478

Income tax expense 10 708 -1,050

PROFIT (–LOSS) FOR THE PERIOD -2,342 3,428

OTHER COMPREHENSIVE INCOME Translation differences 1,390 432Total comprehensive income -951 3,860

NET PROFIT/LOSS ATTRIBUTABLETo equity holders of the parent -2,291 3,464To non–controlling interest -50 -36

TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO:To equity holders of the parent -901 3,896To non–controlling interest -50 -36

Earnings per share calculated on profit attributable to equity holders of the parent:Earnings per share, basic eur 11 -0.06 0.09Earnings per share, diluted eur 11 -0.06 0.09

All figures are rounded and consequently the sum of individual figures can deviate from the presented sum figure.

27

GROUP FInAnCIAl STATEmEnTS, IFRS


COnSOlIDATED BAlAnCE SHEET, IFRS, EUR 1,000Note Oct. 31, 2012 Oct. 31, 2011

ASSETS

NON–CURRENT ASSETSIntangible assets 12 901 1,373Tangible assets 13 6,139 6,835Trade receivables and other receivables 17 317 0Other non-current investments 6 2Deferred tax receivable 15 899 0NON-CURRENT ASSETS 8,261 8,210

CURRENT ASSETSInventories 16 14,162 13,017Trade receivables and other receivables 17 16,374 17,297Current tax asset 17 0 114Cash and cash equivalents 18 4,514 11,236CURRENT ASSETS 35,050 41,664

ASSETS 43,311 49,874

28



COnSOlIDATED BAlAnCE SHEET, IFRS, EUR 1,000Note Oct. 31, 2012 Oct. 31, 2011

EQUITY AND LIABILITIES

EQUITYShare capital 19 15,000 15,000Treasury shares 19 -2,480 -2,057Other reserves 19 19,807 21,904Translation differences 19 1,960 570Retained earnings -13,861 -11,570Equity Holders of the parent company 20,426 23,847Non–controlling interests 249 255EQUITY 20,675 24,102

NON–CURRENT LIABILITIESDeferred tax liability 15 4 9Non–current liabilities, interest–bearing 20, 21 1,525 3,256NON–CURRENT LIABILITIES 1,529 3,265

CURRENT LIABILITIESCurrent liabilities, interest–bearing 20, 21 644 4,054Trade payables and other liabilities 22, 25 19,661 17,892Current tax liability 22 0 270Provisions 23 802 291CURRENT LIABILITIES 21,107 22,506

LIABILITIES 22,636 25,772

TOTAL EQUITY AND LIABILITIES 43,311 49,874

29



COnSOlIDATED CASH FlOw STATEmEnT, IFRS, EUR 1,000Note Nov. 1, 2011–Oct. 31, 2012 Nov. 1, 2010–Oct. 31, 2011

Cash flows from operating activitiesCash receipts from customers 83,941 91,867Cash paid to suppliers and employees -81,280 -86,409Cash generated from operations 2,661 5,458Interest paid -303 -76Interest received 29 52Other financing items 451 -492Income taxes paid -235 -617

Net cash from operating activities (A) 2,603 4,325

Cash flows from investing activities:Purchase of tangible and intangible assets -1,751 -4,345Proceeds from sale of tangible and intangible assets 173 57Disposal of associated companies 0 485Dividends received and repayment of capital 0 1,015

Net cash used in investing activities (B) -1,578 -2,788

Cash flows from financing activities:Capital invest by the minority 45 0Purchase of treasury shares -482 0Proceedings from short-term borrowings 1,835 3,307Repayment of short-term borrowings -5,504 0Proceedings from long-term borrowings 0 1,102Repayment of long-term borrowings -1,723 -500Financial leasing repayment -189 -162Distribution of assets from invested unrestricted equity -2,097 0

Net cash used in financing activities (C) -8,115 3,747

Net increase (+), decrease (–) in cash and cash equivalents (A+B+C) -7,091 5,284

Cash and cash equivalents at beginning of period on Nov.1 11,236 5,892Net increase/decrease in cash and cash equivalents -7,091 5,284Effects of exchange rate fluctuations on cash held 369 59Cash and cash equivalents at end of period on Oct.31 18 4,514 11,236

30



COnSOlIDATED STATEmEnT OF CHAnGES In EqUITy, IFRS, EUR 1,000

Equity attributable to equity of the parent

Share capital

Treasury shares

Unrestricted equity reserve

Reserve for invested unre-stricted equity

Translation differences

Retained earnings

Equity holders of the parent

company

Non- controlling

interests Equity total

Equity Nov. 1, 2011 15,000 -2,057 20,865 1,039 570 -11,570 23,847 255 24,102

Comprehensive income 0 0 0 0 1,390 -2,291 -901 -50 -951

Distribution of assets from invested unrestricted equity 0 0 -2,097 0 0 0 -2,097 0 -2,097

Purchase of treasury shares 0 -482 0 0 0 0 -482 0 -482

Assignment of treasury shares 0 59 0 0 0 0 59 0 59

Capital invest by the minority 0 0 0 0 0 0 0 45 45

Equity Oct. 31, 2012 15,000 -2,480 18,768 1,039 1,960 -13,861 20,426 249 20,675

Share capital

Treasury shares

Unrestricted equity reserve

Reserve for invested unre-stricted equity

Translation differences

Retained earnings

Equity holders of the parent

company

Non- controlling

interests Equity total

Equity Nov. 1, 2010 15,000 –2,100 20,850 1,039 138 –15,034 19,895 290 20,185

Comprehensive income 0 0 0 0 432 3,464 3,896 -36 3,860

Assignment of treasury shares 0 42 15 0 0 0 57 0 57

Equity Oct. 31, 2011 15,000 -2,057 20,865 1,039 570 -11,570 23,847 255 24,102

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nOTES TO THE COnSOlIDATED FInAnCIAl STATEmEnTS, IFRS Basic information Efore Group is an international company providing services for the ICT and indus-trial automation industries. Its operations comprise of custom-designed power supply solutions, power systems, manufacturing of demanding electronics, and related ser-vice and maintenance.

Efore has its headquarters in Espoo, Finland. The Group has product develop-ment and marketing units in Finland, China and Sweden. Group’s production facility is located in China. The Group’s parent com-pany is Efore Plc which has its registered office in Espoo, Finland (registered address Linnoitustie 4 B, 02600 Espoo, Finland). The parent company Efore Plc’s share has been quoted at the NASDAQ OMX Helsinki Stock Exchange since 1989. Copies of Efore’s consolidated financial statements are available online at www.efore.fi or from the parent company headquarters at the above address.

The consolidated financial statements were authorized for issue by the Board of Directors of Efore Plc on December 12th 2012. The Finnish Limited Liability Com-panies Act permits the shareholders of a possibility to approve or reject the financial statements in the General Meeting that is held after publishing the financial state-ments. As well, the General Meeting has a possibility to amend the financial state-ments.

Accounting policies for the consolidated financial statements

Basis for preparationThe consolidated financial statements for the financial period November 1,2011–October 31, 2012 are prepared in accord-ance with the International Financial Reporting Standards (IFRSs) complying with the IAS and IFRS standards as well as the SIC and IFRIC interpretations in force on October 31, 2012. In the Finnish Accounting Act and ordinances based on the provisions of the Act, IFRSs refer to the standards and to their interpretations adopted in accord-ance with the procedures laid down in the EU regulation (EC) No 1606/2002. Notes to the consolidated financial statements are also in accordance with the Finnish accounting and company legislation.

The consolidated financial statements are prepared on the historical cost basis except for financial assets and financial liabilities measured at fair value through profit or loss, derivative financial instru-ments and share-based payments meas-ured at fair value at the grant date (granted option rights). Unless otherwise stated, all the figures in these financial statements are presented in thousands of euros.

New standards and interpretationsEfore Plc has adopted from the beginning of 2012 following new or amended standards and IFRIC interpretations. These changes have not had any material effect on the con-solidated financial statements.

• Amendments to IFRS 7 Financial Instruments: Disclosures –Transfers of Financial Assets (effective for financial years beginning on or after 1 July 2011) Amendment will increase transparency in presentation of transferred financial instruments and improve the possibili-ties of the users of the financial state-ments to get an understanding of the risks and the effect of such risks to the financial position of the entity related to transfer of financial instruments, espe-cially in cases of securitisation of finan-cial assets. Amendments to IFRS 7 are subject to endorsement by the EU. Efore estimates, this standard will not have any material impact on Efore’s future financial statements. This standard is endorsed by EU.

SubsidiariesEfore’s consolidated financial statements comprise the financial statements of the parent company Efore Plc and its subsidi-aries. Subsidiaries are companies in which Efore Plc holds, directly or indirectly, more than 50% of the voting rights or in which it has otherwise the power to govern the financial and operating policies (control). Existence of potential voting rights have been taken into account in assessment whether the control exists, when such instruments are exercisable at the balance sheet date.

Mutual shareholdings are eliminated using the purchase method. Subsidiaries are consolidated from the date when the Group’s control commences and consolida-

tion is terminated on the date on which the Group’s control ceases.

All intra-group transactions, receiva-bles, liabilities, unrealized gains and dis-tribution of profits within the Group are eliminated in the consolidation. Unrealized losses are not eliminated if the loss is a result of an impairment. The distribution of profit or loss for the financial period to the equity holders of the parent company is pre-sented on the face of the income statement.

Associated companiesAssociated companies, in which the Group holds usually between 20% and 50% of the voting rights and in which it has sig-nificant influence but not control, are con-solidated using the equity method. If the Group’s share of the associated company’s losses exceeds its holding in the company, the investment is entered into the balance sheet as zero and no consideration is given to losses in excess of that amount unless the Group has other obligations relating to the associated company. Unrealized profits between Efore and its associates are elimi-nated in proportion to the share ownership. The Group’s proportionate share of associ-ates’ profit or loss for the financial period is presented as a separate line item below operating profit. In the end of the fiscal year 31th October 2012 there were no associated companies in the group.

Translation of foreign currency itemsFigures for the performance and financial position of the Group entities are measured in a currency of each entity’s primary oper-

32



ating environment (functional currency). The consolidated financial statements are presented in euros, which is the Group’s parent company’s functional and presen-tation currency.

Foreign currency transactionsForeign currency transactions are trans-lated into the respective functional currency using the exchange rates at the date of the transaction. In practice, an exchange rate that approximates the rate at the date of the transaction is often used. Monetary for-eign currency balances at the balance sheet date are translated into functional currency using the exchange rates prevailing at the balance sheet date. Non-monetary foreign currency items measured at fair value are translated into functional currency using the exchange rates ruling at the dates that the fair value was determined. Other non-monetary items are translated using the exchange rate at the transaction date. Gains and losses arising from foreign cur-rency transactions and translation of mon-etary balances are recognized in profit or loss. Exchange rate differences arising from the translation of trade receivables denominated in foreign currencies and exchange rate differences resulting from the translation of trade payables denomi-nated in foreign currencies are presented under financial income and expenses. In addition to this other exchange gains and losses are also presented under financial income and expenses. Exchange rate differ-ences on derivatives designated as hedges of foreign currency net position are recog-nized under financial items.

Translation of the financial statements of the foreign group companiesIncome and expenses for the income statements of foreign group companies are translated into euro by using the aver-ages of the average rates of the European Central Bank for the calendar months in the financial period, while their balance sheets are translated at the closing rates at the balance sheet date. Using different exchange rates for translating the result for the financial period in the income state-ment and in the balance sheet results in a translation difference, which is recognized in equity. Translation differences arising from the elimination of the cost of foreign subsidiaries and from the translation of the accumulated post-acquisition equity balances are recognized in equity. When a subsidiary is disposed of all or partly, the relevant cumulative translation differences are transferred to profit or loss as part of the gain or loss on the sale. Translation differ-ences arisen in connection with preparation of the consolidated financial statements are presented under equity as a separate item.

Property, plant and equipmentProperty, plant and equipment are meas-ured at historical cost less accumulated depreciation and impairment.

Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment. In such cases, the cost of replacing part of such item is capitalized and the carrying amount of those parts that are replaced is expensed. Otherwise, subsequent costs are recognised in the carrying amount of the property, plant and equipment only if it

is probable that the future economic ben-efits associated with the item will flow to the Group and the cost of the item can be determined reliably. Other maintenance, repair and renewal costs are expensed as incurred.

Property, plant and equipment are depreciated on a straight-line basis over their estimated useful lives. The estimated useful lives are as follows:Machinery and equipment 3–10 yearsOther tangible assets 5 years

To other tangible assets has been included improvement expenses of rental premises. The residual values and useful lives are reviewed at least at each financial year-end and where they differ from pre-vious estimates, depreciation periods are changed accordingly to reflect the changes in the expectations of the future economic benefits.

Gains and losses on decommission-ing and disposal of property, plant and equipment are included in other operating income and expenses, respectively.

Depreciation is terminated when an item of property, plant and equipment is classified as a non-current asset held for sale in accordance with IFRS 5 Non-cur-rent Assets Held for Sale and Discontinued Operations.

Government grantsThe recognition method of grants received from the Government or other sources of public sector depends on the nature of the grant. Such grants that compensate the Group for expenses incurred are recognised as revenue in the same period in which the expenses are incurred. These grants are presented as other operating income.

Grants that compensate the Group for the acquisition of property, plant and equip-ment are recognised by deducting the grant from the cost of the asset. These grants are recognised as income in the form of lower depreciation and amortisation charge over the items’ useful lives. Government grants are recognised when there is reasonable assurance that the grants will be received and the Group will comply with the condi-tions associated with them.

Intangible assets

GoodwillGoodwill arisen from the business combi-nations represents the excess of the cost over the net identifiable assets, liabilities and contingent liabilities measured at fair value. Goodwill is not amortised but it is tested annually for any impairment. The Efore Group has not had any goodwill dur-ing the periods presented in the financial statements.

Research and development expenditureResearch expenditure is recognized as an expense in profit or loss. Development expenditure arising from designing of new or more advanced products are capitalized in the balance sheet as intangible assets from the moment the product is technically feasible, it can be applied commercially and it is expected to generate future economic benefits. Capitalized development costs comprise the material, labour and testing expenditure that are directly attributable to the process of completing the product for its intended use.

Development process proceed gradu-ally including seven predefined milestones

33



and four gate assessment. Gate assess-ments are approved by management team. Efore starts capitalization of development costs, when management team concludes that capitalization conditions in IAS 38 are satisfied.

An asset is amortised from the date it is available for use. An asset that is not yet available for use is tested annually for impairment. Capitalized development costs are measured subsequently at cost less accumulated amortisation and impairment. Capitalized development costs are amor-tised on a straight-line basis over their use-ful life that is 3–5 years.

Intangible rightsTo intangible rights have been included user rights of IT software.

Intangible assets financial leaseTo intangible assets financial lease have been included the capitalised value of financial leasing contracts from IT software.

Other intangible assetsTo other intangible assets have been included the capitalised costs from IT pro-jects. An intangible asset is initially capital-ized in the balance sheet at cost if the cost can be measured reliably and it is probable that the expected future economic benefits that are attributable to the asset will flow to the Group.

Intangible assets that have finite use-ful lives are amortised on a straight-line basis over their known or estimated useful lives. Intangible assets which have indefi-nite useful lives are not amortised but they are tested annually for impairment.

Amortisation periods for the other intangi-ble assets are as follows:Research and development expenditure 3–5 yearsIntangible rights 5 yearsIntangible assets (financial lease) 5 yearsOther Intangible assets 3 years

Non-current assets classified as held for saleNon-current assets (or disposal group) and assets and liabilities relating to discontin-ued operations are classified as held for sale if their carrying amount will be recov-ered principally through a sale transaction rather than through continuing use. The criteria for classifying an asset as held for sale is considered to be met when its sale is highly probable and the asset (or disposal group) is available for immediate sale in its present condition subject to only terms that are usual and customary, when the man-agement is committed to sell the asset and the sale is expected to be completed within one year from the date of classification. Since the classification date the assets held for sale (or disposal group) are measured at the lower of their carrying amount and fair value less costs to sell. Depreciation and amortisation on these assets is terminated at the date of classification. Those assets and liabilities belonging to a disposal group that are not in the scope of the measure-ment rules of IFRS 5 are measured also after the classification date in accordance with the applicable IFRSs.

Assets classified as held for sale, dis-posal groups, items recognised directly into equity and relating to the assets held for sale as well as liabilities including into a

disposal group are presented separately from the other items in the balance sheet.

InventoriesInventories are measured at cost or at net realizable value, whichever is lower. The cost of raw materials is determined using the weighted average cost method. The cost for finished goods and work in progress consists of raw materials, direct labour, other direct expenditure and an appropri-ate part of the variable and fixed production overheads based on the normal operating capacity. The net realizable value is the esti-mated sales price in the ordinary course of business less the estimated expenditure of completion and selling the product. Obso-lete and slow-moving inventories have been subjected to impairment in accordance with the Group’s measurement policies.

Leases

Group as lesseeLeases of tangible and intangible assets, in which substantially all the risks and rewards incidental to the ownership are transferred to the Group, are classified as finance leases. An asset acquired by way of finance lease is capitalized in the bal-ance sheet at the fair value of the leased asset at the commencement of the lease term, or at the present value of the mini-mum lease payments, whichever is lower. An item acquired by way of finance lease is depreciated or amortised over the shorter of the item’s useful life and the lease term. Lease payments are divided into finance costs and reductions of the lease liability during the lease term so, that the inter-est on the remaining liability is constant in

each financial period. Lease obligations are included in the interest-bearing liabilities.

Leases in which the lessor retains the risks and rewards incidental to the owner-ship are treated as operating leases. Lease payments made under operating leases are recognized in profit and loss on a straight-line basis during the lease term.

Impairments

Tangible and intangible assetsThe carrying values of assets are reviewed on each balance sheet date to identify any impairment. If any indications of impair-ment exist, the asset’s recoverable amount is estimated. Estimates will also be made on the recoverable amount for the follow-ing assets at least annually irrespective of whether there are any indications of impair-ment: intangible assets with indefinite use-ful lives and capitalized development costs (unfinished intangible assets). The need for impairment is considered at the cash-gen-erating unit level, which is the lowest unit level for which there are separately iden-tifiable, mainly independent, cash inflows and outflows.

The recoverable amount is the higher of an asset’s fair value less costs to sell and its value in use. The value in use repre-sents the discounted future net cash flows expected to be derived from an asset or a cash-generating unit . The discount rate is a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

An impairment loss is recognized when the carrying amount of an asset exceeds its recoverable amount. An impairment loss is entered immediately in profit or loss.

34



At recognition of the impairment loss the useful life of a depreciable or amortisable asset is reviewed. An impairment loss rec-ognized on other assets than goodwill is reversed subsequently if there has been a change in the estimates used for deter-mining the recoverable amount of an asset. The impairment loss to be reversed may, however, not exceed the carrying value the asset would have without the recognition of the impairment loss.

Employee benefits

Pension obligationsThe Group has entered into various pen-sion plans in different countries in accord-ance with local conditions and practices. The Group’s pension plans are classified as defined contribution plans. Under defined contribution plans the Group pays fixed contributions into a separate entity and will have no legal or constructive obliga-tion to pay further contributions if the payee of the contributions does not have sufficient assets to pay pension benefits in question. Payments made into defined contribution pension plans are expensed in the period to which they apply.

Share-based paymentsThose schemes paid as equity instruments are measured at fair value on the grant date and expensed on a straight-line basis over the vesting period. Corresponding amounts are recognized directly as an increase of Retained earnings in equity. The scheme’s effect on profit or loss is presented in employee benefit expenses. The expense determined on the grant date is based on a Group’s estimate on the number of options

that are assumed to vest at the end of the vesting period. The fair value is determined using the Black-Scholes option-pricing model. The Group updates the assump-tion on the final number of options at each balance sheet date. Changes in assump-tions are recognized in profit or loss. The assumptions and estimates made in con-nection with determination of the fair value relate to expected dividend yield, volatility and maturity of options, among others. Non-market conditions as profitability and certain goal for growth rate of profit are not taken into account when estimating the fair value of an option, but they have an effect on the estimates of the final number of options.

When option rights are exercised, the subscription-based payments, adjusted by possible transaction costs, are recognized in equity. Payments received for subscrip-tions of shares, based on options granted prior to the new Limited Liability Compa-nies Act in force since September 1, 2006, have been recognized in accordance with the terms of the scheme into share capital and share premium account.

Financial assets and liabilitiesThe Group’s financial assets are classi-fied into the following categories: financial assets at fair value through profit or loss as well as loans and receivables. Financial assets are classified when initially acquired on the basis of their intended use. All acqui-sitions and sales of financial assets are rec-ognized at the date of transaction. In the case of financial assets not measured at fair value through profit or loss, the trans-action costs are included in the cost. The Group derecognizes financial assets when

it has lost its right to receive the cash flows or when it has transferred substantially all the risks and rewards to an external party.

Financial assets at fair value through profit or lossIn Efore financial assets held for trading are classified into this category. Financial assets held for trading comprise quoted shares and funds acquired primarily for profit making from the short-term fluctua-tions in market prices. Those derivatives that are not financial guarantees contracts or do not qualify for hedge accounting are classified as held for trading. Both realized and unrealized gains and losses arising from fluctuations in market value are rec-ognized in profit or loss as incurred. Finan-cial assets held for trading are included in the current assets.

Loans and receivablesLoans and receivables are non-derivative financial assets with fixed or determina-ble payments that are not quoted in an active market and the Group does not hold them for trading. Loans and receivables are measured at amortised cost. They are included in current or non-current financial assets depending on their maturity. At each balance sheet date the Group assesses if there is objective evidence of impairment regarding an individual receivable or a group of receivables. The amount of any impairment is assessed primarily on the basis of the risk involved in each item. An impairment loss is recognized as expense in profit or loss.

Trade receivables are recognised in the balance sheet at their original invoic-ing value and stated less any credit losses.

The assessment of the amount of doubtful receivables and any need for impairment is based on the risk involved in each item. Trade receivables are measured at their probable value at the highest. An impair-ment loss on trade receivables is recognized if there is objective evidence that the Group will not recover all its receivables on origi-nal terms. The group recognizes impair-ment from trade receivables, when there is objective evidence that the receivable can’t be collected to full amount. Significant eco-nomic difficulties, probability of liquidation, default in payments or delays in payments over 90 days are evidence of impairment of trade receivables. The amount of impair-ment loss is recognized in income state-ment and it is measured as the difference between the asset’s carrying amount and the present value of estimated future cash discounted at the effective interest rate.

Credit losses recognized as an expense are included in other operating expenses.

Cash and cash equivalentsCash and cash equivalents comprise of cash in hand, call deposits and other highly liquid current investments that are read-ily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. Items qualifying as cash and cash equivalents have original maturi-ties of three months or less from the date of acquisition. Bank overdrafts relating in Group’s cash pool accounts are included within current liabilities.

Financial liabilitiesEfore’s financial liabilities are classified into the following categories: financial liabili-ties at fair value through profit or loss and

35



financial liabilities measured at amortised cost. Into the first-mentioned category are classified the Group’s derivative financial liabilities and into the latter the loans from financial institutions. Initially the financial liabilities are measured at fair value. Trans-action costs are included in the original cost of those financial liabilities measured at amortised cost. Financial liabilities are included in both non-current and current liabilities and they can be interest-bearing or non-interest-bearing. Financial liabili-ties are classified as current if the Group does not have an unconditional right to defer settlement of the liability for at least twelve months after the balance sheet date.

Both realized and unrealised exchange gains and losses are recognized in profit or loss under financial income and expenses as incurred. Borrowing costs are expensed as incurred.

Derivative financial instrumentsDerivative financial instruments are meas-ured both initially and subsequently at fair value. The Group uses derivatives to hedge against foreign currency risks related to the currency position of the balance sheet. The Group does not, however, apply hedge accounting as specified in IAS 39. Due to this all gains and losses, both realised and unrealised, arising from the fair value changes of derivatives are recognised in profit or loss as incurred regardless of the fact that the hedged item has not an effect on profit or loss until in the future period. Fair value changes are included under financial items in the income statement. In the balance sheet these derivatives des-ignated to hedge against foreign currency

risks are presented in current receivables or liabilities.

Trade payablesTrade payables are recognized to the origi-nal invoiced amount, which is assessed to reflect their fair value due to short maturity of trade payables.

ProvisionsA provision is recognized in the balance sheet when the Group has, as a result of a past event, a present legal or constructive obligation and it is probable that an out-flow of economic benefits will be required to settle the obligation and the amount of the obligation can be estimated reli-ably. Provisions may relate to restructur-ing operations, onerous contracts, legal cases and warranty costs, among others. A reimbursement from a third party relating to a part of the provision is recognised as a separate asset only when the reimburse-ment is virtually certain.

A warranty provision is recognized when the underlying product is sold. The amount of the provision is based on his-torical warranty data. Warranty provisions are expected to be used within two years. A restructuring provision is recognized when the Group has drawn up a detailed restructuring plan and has begun to imple-ment the plan or has provided a notification of it. A provision for onerous contracts is recognised when the unavoidable costs of meeting the obligation under the contract exceed the expected benefits to be derived by the Group from a contract.

Contingent assets and contingent liabilitiesContingent liability is a possible obligation that arises from past event and its existence will be confirmed only by the occurrence of an uncertain event that is not in the control of the group. Contingent liability is also a present obligation that arises from past events it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation, or the amount of the obligation cannot be measured with sufficient reliability. Contin-gent liability is presented in the notes to the financial statement.

Contingent asset is a possible asset that arises from past event and it’s exist-ence will be confirmed only by the occur-rence of an uncertain event that is not in the control of the group. Contingent assets is presented in the notes to the financial statements, if the inflow of economic ben-efits is reasonably certain.

Income taxesAccrual-based taxes that are based on the taxable income calculated in accordance with the local tax legislation and present tax rate in force for each company, tax adjustments for prior years and changes in deferred taxes are recognized as income taxes in the consolidated income state-ment. Income tax relating to items charged or credited directly in equity is recognised in equity, respectively.

Deferred tax liabilities and assets are recognized for the temporary differences between the carrying amounts in the bal-ance sheet and tax bases of assets and liabilities of the Group companies and on the differences arising from Group elimi-

nations. The tax rate used for determining the deferred tax liabilities and assets is the enacted tax rate at the balance sheet date for the following year in the country in question.

The most significant deferred tax assets and liabilities arise from the depreciation of property, plant and equipment relating to the Group eliminations. No deferred taxes are recognized for subsidiaries’ undistrib-uted profits to the extent that the taxes will not probably reverse in the foreseeable future.

Deferred tax liabilities are recognized at the full amount. Deferred tax assets are recognised only to the extent that it is prob-able that taxable income will be generated in the future, against which the temporary difference can be utilised.

Revenue recognition principlesRevenue from product sales is recognized when the significant risks and rewards of ownership are transferred to the buyer and the Group is no longer in possession of the products or has no control over them. Prin-cipally revenue is recognised upon delivery in accordance with the terms of delivery of the products. Revenue from services is rec-ognized in the financial period the services are rendered to the customer. As net sales is presented revenue from sales deducted by the discounts granted, indirect taxes and exchange rate differences of the sales denominated in foreign currencies.

Interest income is accounted for using effective interest method and dividend income, when the right to receive dividend is appropriately authorized.

36



Operating profitIAS 1 Presentation of Financial Statements does not define Operating Profit. The Group has a following definition: The operating profit is the total of net sales and other operating income from which expenses for material and services adjusted by change in work in progress as well as manufacturing for own use deducted by employee benefits, depreciation, amortization and impairment charges on non-current assets and other operating are subtracted. Foreign cur-rency differences related to working capital items are included in the operating profit, whereas other foreign currency differences are included in financial items.

Accounting policies requiring management’s judgments and key sources of estimation uncertainty The Management of the group makes deci-sions that relate to adoption and applica-tion of accounting principles. This concerns specially such cases, where applicable IFRS’s allow alternative recognition, meas-urement or presentation. Decisions made by the management that relate e.g. to credit losses, deferred tax assets, obsolescence of inventories and provisions for guarantees are based on generally applied models and case by case estimates. When models are used information of earlier events and pre-sent management view of the markets has been used. Assessment of individual events is based on the best available information when preparing the financial statements.

Estimates that are made in connec-tion with the preparation of financial state-ments are based on the best view of the management at the balance sheet date. Background to estimates is earlier experi-

ence and assumptions that are most prob-able at the balance sheet date that relate to e.g. expected development of sales and cost levels at the group’s economic environ-ment. The group follows the actual outcome of estimates and assumptions as well as changes in factors regularly together with business units using several internal and external information sources. Potential adjustments in estimates and assumptions are recognized during the period estimate or presumption is reassessed as well as in following periods.

Those major assessment and such uncertainties that relate to estimates at the balance sheet date that have a signifi-cant risk of resulting in a material adjust-ment to the carrying amounts of assets and liabilities within the next financial year are presented below. The management of the group has assessed that following areas are most important in respect of application of accounting principles since the applicable accounting principles are most complex and application requires use of significant esti-mates and assessments e,g, in connection with valuation of assets. In addition effect of estimates and assessments in these areas are expected to be most significant.• useful life, and thus total depreciation/

amortization periods, for different cat-egories of intangible and tangible non-current assets,

• recoverable amount for different cat-egories of intangible and tangible non-current assets,

• probability of future taxable profits against which tax deductible temporary differences can be utilized,

• net realizable value of inventories,

• fair value (collectable amount) of trade receivables,

• amount of cost provisions,• presentation of contingent assets and/

or liabilities,• actuarial assumptions applied in the

calculation of defined benefit obliga-tions,

• measurement of fair value of assets acquired in connection with business combinations, and

• future business estimates and other ele-ments of impairment testing.

New and amended standards and interpretationsEfore Plc has not yet adopted the following new and amended standards and interpre-tations. The Group will adopt them as of the effective date or, if the date is other than the first day of the financial year, from the beginning of the subsequent financial year * = Change has not yet been endorsed by the EU

• Amendments to IAS 12 Income Taxes (effective for financial years beginning on or after 1 January 2012) Amendment relates to assumption that recovery of the carrying amount of certain assets that are valued to fair value such as investment properties are assumed to be recovered through sale rather than use of the asset. Amendments to IAS 12 are subject to endorsement by the EU. Efore estimates, this standard will not have any material impact on Efore’s future financial statements. This stand-ard has not yet been endorsed by EU.

• Amendments to IAS 1 Presentation of Financial Statements (effective for finan-

cial years beginning on or after 1 July 2012) Most significant change is the requirement to classify items of Other Comprehensive Income based on if they may be reclassified to profit or loss in the future. Amendments to IAS 1 is subject to endorsement by the EU. Efore esti-mates, this standard will not have any material impact on Efore’s future finan-cial statements

• Amendments to IAS 19 Employee Ben-efits (effective for financial years begin-ning on or after 1 January 2013) In the future all actuarial gains and losses will be recognised to other comprehensive income thus corridor method will no longer be available and net interest will be based on discount rate of the pen-sion obligation. Amendments to IAS 19 are subject to endorsement by the EU. Efore estimates, this standard will not have any material impact on Efore’s future financial statements.

• IFRS 10 Consolidated Financial State-ments (effective for financial years beginning on or after 1 January 2013) IFRS 10 defines control over investee as a primary factor, when assessing of consolidation requirement. In addition standard provides further guidance how to assess control in difficult cases. IFRS 10 is subject to endorsement by the EU. Efore estimates, this standard will not have any material impact on Efore’s future financial statements. This stand-ard has not yet been endorsed by EU.

• IFRS 11 Joint Arrangements (effective for financial years beginning on or after 1 January 2013) IFRS 11 gives weight to rights and obligation in a joint arrange-ment over the legal form. Joint arrange-

37



ments can be either Joint Operations or Joint Ventures. Joint Ventures are accounted for in the future by equity method and earlier alternative to apply proportionate consolidation is no longer available. IFRS 11 is subject to endorse-ment by the EU. Efore estimates, this standard will not have any material impact on Efore’s future financial state-ments. This standard has not yet been endorsed by EU.

• IFRS 12 Disclosures of Interests in Other Entities (effective for financial years beginning on or after 1 January 2013) IFRS 12 defines disclosure requirements related to interests in other entities including entities in which a significant influence exists, joint arrangements, structured entities and other non-consolidated entities IFRS 12 is subject to endorsement by the EU. Efore esti-mates, this standard will not have any material impact on Efore’s future finan-cial statements. This standard has not yet been endorsed by EU.

• IFRS 13 Fair Value Measurement (effec-tive for financial years beginning on or after 1 January 2013) IFRS 13 set the requirements related to valuation to fair value and disclosure requirements. In addition this new standard includes defi-nition of fair value. Use of fair value as a valuation basis remains the same, but standard will contain guidance of meas-urement of fair value when it is either allowed or required in other standards. IFRS 13 is subject to endorsement by the EU. Efore estimates, this standard will not have any material impact on Efore’s future financial statements. This stand-ard has not yet been endorsed by EU.

• Revised IAS 27 Separate Financial Statements (effective for financial years beginning on or after 1 January 2013) Revised standard includes remaining requirements for separate financial statements in IAS 27 after guidance related to control have been included in new IFRS 10. Revised IAS 27 is subject to endorsement by the EU. Efore esti-mates, this standard will not have any material impact on Efore’s future finan-cial statements. This standard has not yet been endorsed by EU.

• Revised IAS 28 Investments in Associates and Joint Ventures (effective for financial years beginning on or after 1 January 2013) After IFRS 11 was published the revised standard includes requirements for both associates and joint ventures to be accounted for in accordance with equity method. Revised IAS 28 is subject to endorsement by the EU. Efore esti-mates, this standard will not have any material impact on Efore’s future finan-cial statements. This standard has not yet been endorsed by EU.

• IFRS 9 Financial Instruments (effec-tive for financial years beginning on or after 1 January 2013). New standard will be published in three phases and it is intended to replace current IAS 39 Financial Instruments: Recognition and Measurement. Changes in the first phase relate to financial assets. Dif-ferent valuation categories remain, but these have been simplified. Financial assets are divided to two valuation cat-egories; valuation based on amortised cost and valuation to fair value. Classifi-cation depends on the business model of

the entity and the nature of contractual cash flows. IFRS 9 is assessed to have a significant effect on accounting treat-ment of financial assets in the Group. IFRS 9 is subject to endorsement by the EU. Efore estimates, this standard will not have any material impact on Efore’s future financial statements. This stand-ard has not yet been endorsed by EU.

• IFRS 7 IFRS 7 (amendment) “Financial instruments: Disclosures – Offsetting Financial Assets and Financial Liabili-ties” (effective from 1 January 2013). The standard will not have any material impact on Efore’s financial reporting. The amended standard has not yet been endorsed by EU

Annual improvements to IFRSs 2009–2011 (effective from 1 January 2013) The amend-ments have not yet been endorsed by EU

Other changes in IFRS-standards and IFRIC-interpretations or new IFRIC inter-pretations are not expected to have signifi-cant effect on Efore’s future consolidated financial statements.

38



1. SeGmenT InFORmaTIOn (EUR 1,000)

Efore Group reports according to business segment. The business segment refers to the whole Group i.e. the figures in the business segment are consistent with the consolidated figures. Products and services sold by Efore are based on a single technology platform.

The President and CEO and the Executive Management Team are the highest opera-tional decision-makers, and they monitor the Group’s operating profit as the basis for profitability analysis and resource allocation.

The geographical areas are divided into four groups: The Americas (North, Central and South America), EMEA (Europe, Middle East and Africa), Finland and APAC (Asia, and the Pacific Region). The geographical segments are based on net sales according to the customers’ location i.e. the market areas. Assets and investments are according to the location of the items in question. Non-allocated assets contain cash and cash equivalents, interest receivables and current tax assets.

Geographical areas 2012 Americas EMEA Finland APAC Non-allocated Group

Net sales 1,256 41,978 11,074 23,814 0 78,122Assets 0 602 12,420 24,871 5,419 43,311

Geographical areas 2011 Americas EMEA Finland APAC Non-allocated Group

Net sales 2,797 32,860 11,675 40,700 0 88,032Assets 0 6,290 9,241 22,988 11,355 49,874

From net sales 2012 over 70 percent is coming from two major customer. From customer A EUR 21,962 (34,649) thousand and customer B EUR 34,326 (32,092) thousand, that totals EUR 56,288 (66,741) thousand.

Net sales consists of sales of goods EUR 76,991 (86,675) thousand and of services EUR 1,131 (1,357) thousand.

39

nOTES TO THE GROUP FInAnCIAl STATEmEnTS, IFRS


2. OTheR OPeRaTInG InCOme (EUR 1,000)2012 2011

Product development grants 119 114Gain on disposal of non-current assets, tangibles 7 -2Other income 430 108Total 556 220

3. maTeRIaLS anD SeRvICeS (EUR 1,000)2012 2011

Materials 53,268 60,553Change in inventories 1,868 306Services 791 867Total 55,927 61,726

4. emPLOyee beneFITS exPenSeS (EUR 1,000)2012 2011

Wages and salaries 13,199 13,062Pension expenses, defined contribution plans 978 819Other social security expenses 1,692 1,263Total 15,869 15,143

Information about management remuneration, other employment benefits and share-holdings are shown in Note 29. Related party transactions.

Average personnel 2012 2011Average number of personnel during fiscal year 888 960Personnel on balance sheet date 804 907

The number of own personnel including temporary personnel.

5. DePReCIaTIOn, amORTIzaTIOn anD ImPaIRmenTS (EUR 1,000)2012 2011

Depreciation and amortization by asset classDevelopment costs 470 473Intangible rights 173 183Intangible assets, finance lease 154 114Other intangible assets 35 53Machinery and equipment 1,643 1,406Machinery and equipment, finance lease 32 36Other tangible assets 456 338Total 2,964 2,603

40



6. OTheR OPeRaTInG exPenSeS (EUR 1,000)2012 2011

Rental costs 2,313 1,592Voluntary employee benefits 1,146 562Professional fees 2,014 2,191Office and administrational expenses 442 517Maintenance and operational costs 1,265 955Travel expenses 647 599Costs of entertainment 38 40Insurance expenses 76 59Marketing expenses 69 19Car expenses 117 81Other fixed expenses 346 330Losses on sales of fixed assets 347 0Total 8,820 6,946

Audit fees:KPMGAudit 32 31Tax services 57 48Other services 7 7

96 85

Other authorised accounting firmsAudit 27 26Tax services 0 2Other services 0 1

27 29

TOTALAudit 58 57Tax services 57 49Other services 7 8Total 123 114

7. FInanCInG InCOme (EUR 1,000)2012 2011

Interest income from loans and other receivables 26 53Exchange rate gains from loans and other receivables 1,622 479Gain on disposal, assets available for sale (associates PI) 0 780Other financing income 2 3Total 1,650 1,316

8. FInanCInG exPenSeS (EUR 1,000)2012 2011

Interest expenses to financial liabilities at amortised cost 363 316Exchange rate losses from loans and other liabilities 1,559 585Other financial expenses 172 147Total 2,094 1,047

Exchange differences recognized in the income statement (– loss / + gain)Net sales 0 0Purchases and other expenses 0 0Financing income and expenses 62 -105Total 62 -105

From the beginning of the fiscal year 2012 exchange rate gains and losses related to sales and purchases have been booked to financial items. Comparative figures of fiscal year 2011 have been changed according to this practice.

9. ShaRe OF PROFIT OF aSSOCIaTeS (EUR 1,000)2012 2011

Share of profit of associates 0 116

41



10. InCOme TaxeS (EUR 1,000)2012 2011

Income taxes in income statement

Tax based on taxable income for fiscal year -151 -790Taxes from previous fiscal years -38 -253Deferred taxes 897 -6Total 708 -1,050

Income taxes recognized in the consolidated income statement differ from income tax according to parent company’s tax rate as follows:

Result before taxes -3,050 4,478Taxes calculated at parent company’s tax rate (24,5%) 747 -1,164Differing tax rates of foreign subsidiaries -1,520 832Non-deductible expenditure -814 -361

Tax-exempt income 699 475Taxes from earlier fiscal periods -38 -253Changes in deferred tax liability / change in depreciation in excess of plan 0 -578Unrecognized tax on losses for fiscal year 1,562 0Other items 72 0Tax in consolidated income statement 708 -1,050

11. eaRnInGS PeR ShaRe (EUR 1,000)2012 2011

Result for fiscal year attributable to owners of parent company -2,291 3,464

Weighted average number of shares (1,000 pcs) 39,284 39,543

Effect of outstanding options 0 0Diluted average weighted number 39,284 39,543

Earnings per share, eurBasic -0.06 0.09Diluted -0.06 0.09

BasicThe earnings per share is calculated by dividing the profit or loss attributable to the owners of the parent company by the average number of shares during the fiscal year.

DilutedThe diluted earnings per share has been calculated by adjusting the average number of outstanding shares, assuming that all possible shares from the assumed exercising of the option rights are subscribed. Efore has one option program, which has three series (2005A, 2005B ja 2005C). In 31.10.2011 only 2005C-series options had subscription time left. These option rights ended 30.4.2012.

The options have a diluting effect when the subscription price of an option is lower than the share’s market price. The diluting effect is the number of shares that Efore must issue without charge because the funds obtained from the share subscriptions made with options do not cover the fair value of the shares. The fair value of Efore’s shares is determined on the basis of their average market price of the fiscal period.

42



12. InTanGIbLe aSSeTS, IFRS (EUR 1,000)

Intangible assets 2012Development

costs* Intangible rightsIntangible assets

finance leaseOther

intangible assets

Advance payments and

work in progress Total

Cost on Nov. 1 8,456 1,567 847 578 0 11,449Additions 351 10 0 0 0 360Disposals 0 -1 0 0 0 -1Reclassifications between classes 0 0 0 0 0 0Cost on Oct. 31 8,807 1,575 847 578 0 11,808 Accumulated amortization and impairment on Nov.1 -7,738 -1,212 -588 -537 0 -10,075Amortization -470 -173 -154 -35 0 -831Accumulative amortization and impairment on Oct. 31 -8,209 -1,384 -742 -571 0 -10,907

Book value on Oct. 31, 2012 598 192 105 7 0 901

Intangible assets 2011Development

costs* Intangible rightsIntangible assets

finance leaseOther

intangible assets

Advance payments and

work in progress Total

Cost on Nov. 1 8,285 1,307 606 568 0 10,767Additions 171 169 241 0 94 675Disposals 0 -1 0 0 0 -1Reclassifications between classes 0 92 0 10 -94 8Cost on Oct. 31 8,456 1,567 847 578 0 11,449 Accumulated amortization and impairment on Nov.1 -7,265 -1,028 -475 -484 0 -9,252Amortization -473 -183 -114 -53 0 -823Accumulative amortization and impairment on Oct. 31 -7,738 -1,211 -588 -537 0 -10,076

Book value on Oct. 31, 2011 718 356 259 41 0 1,373

* For year 2011 the carrying amount of unfinished development costs is 148 thousand euros. Development costs are tested for impairment during each quarter. In the test the carrying amount of development costs are compared to its recoverable amount. Recoverable amount is defined as its value of use, which is the present value of the future cash flows expected to be derived from an asset. In the end of fiscal year 2012 there were no unfinished development projects.

43



13. TanGIbLe aSSeTS, IFRS (EUR 1,000)

Tangible assets 2012Machinery and

equipmentMachinery and equip-

ment finance lease Other tangible assets Work in progress Total

Cost on Nov. 1 20,204 601 3,920 65 24,790Translation difference (+/–) 1,033 0 292 0 1,324Additions 848 43 440 148 1,478Disposals -4,202 0 -56 -88 -4,345Reclassifications between classes 11 -16 5 0 0Cost on Oct. 31 17,895 627 4,601 126 23,248

Accumulative depreciation and impairment on Nov. 1 -14,213 -549 -3,194 0 -17,956Translation difference (+/–) -556 0 -228 0 -785Accumulated depreciation on disposals 3,712 16 34 0 3,762Depreciation -1,643 -32 -456 0 -2,131Accumulative depreciation and impairment on Oct. 31 -12,700 -565 -3,844 0 -17,109

Book value on Oct. 31, 2012 5,195 62 756 126 6,139

Tangible assets 2011Machinery and

equipmentMachinery and equip-

ment finance lease Other tangible assets Work in progress Total

Cost on Nov. 1 17,265 563 3,199 379 21,406Translation difference (+/–) 303 0 75 0 377Additions 3,256 38 646 96 4,036Disposals -713 0 0 -309 -1,021Reclassifications between classes 93 0 0 -101 -8Cost on Oct. 31 20,204 601 3,920 65 24,790

Accumulative depreciation and impairment on Nov. 1 -13,541 -513 -2,788 0 -16,842Translation difference (+/–) -212 0 -67 0 -279Accumulated depreciation on disposals 946 0 0 0 946Depreciation -1,406 -36 -338 0 -1,780Accumulative depreciation and impairment on Oct. 31 -14,213 -549 -3,194 0 -17,956

Book value on Oct. 31, 2011 5,992 52 726 65 6,835

44



14. hOLDInGS In aSSOCIaTeS (EUR 1,000)2012 2011

At beginning of fiscal year 0 605Share of profit 0 116Decrease and sales 0 -720At end of fiscal year 0 0

15. DeFeRReD Tax aSSeTS anD LIabILITIeS (EUR 1,000)

Deferred tax assets Nov. 1, 2011

Recognized in income statement Oct. 31, 2012

0 899 899Total 0 899 899

Deferred tax liabilities

Cumulative depreciation in excess of plan 9 -6 4Total 9 -6 4

Deferred taxes, net -9 905 895

Deferred tax assets Nov. 1, 2010

Recognized in income statement Oct. 31, 2011

0 0 0Total 0 0 0

Deferred tax liabilities

Cumulative depreciation in excess of plan 3 6 9Total 3 6 9

Deferred taxes, net -3 -6 -9

Group companies in Finland and USA had tax losses totaling EUR 32,5 (38,3) million on October 31, 2012. A deferred tax asset was not recognized on of them because they may not be usable. EUR 5.3 million of those deferred tax assets are allocated to Finland and EUR 4.2 million are allocated to USA. The losses will expire from 2015 onwards. The parent company also has EUR 0.6 million unrecognized avoir-fiscal receivable.

In group companies in China from the fiscal loss deferred tax receivable of 0.9 MEUR has been recognized.

A deferred tax liability on the undistributed earnings of the subsidiaries has not been recorded in the consolidated accounts because the tax is not expected to be realized in the foreseeable future.

45



16. InvenTORIeS (EUR 1,000)2012 2011

Materials and supplies 5,524 6,870Work in progress 1,436 1,229Finished goods 7,202 4,918Total 14,162 13,017

In the fiscal year 2012 the reversal of previously made write-down on inventory of EUR 256 thousand was recognised. Previous fiscal year write-down on inventory amounted to EUR 504 thousand.

In the financial periods total expenses from inventories were EUR 52,841 (58,317) thousand. To this amount are included from income statement materials and change in inventories from the group materials and services and also change in inventories of finished goods and work in progress.

17. TRaDe ReCeIvabLeS anD OTheR ReCeIvabLeS (EUR 1,000)2012 2011

Long-term trade receivables 317 0Trade receivables 13,897 15,911Allowance for bad debt -1 -9Other receivables 1,830 741Prepayments and accrued income 648 653Tax Receivables, income tax 0 114Total 16,691 17,411

The book value of the receivables is essentially the same as their fair value. During the fiscal year the Group recognized write-offs of EUR 83 thousand (EUR 9 thousand) on trade receivables. Write-offs includes change in allowance for bad debt and realised bad debts.

2012 2011Allowance for bad debt Nov.1 0 25Translation difference 0 0Additions 94 0Written-off for the year -93 -25Allowance for bad debt Oct.31 1 0

Analysis of trade receivables past due:

Neither past due nor impaired 12,149 13,887Due not more than 30 days 1,372 1,283Due 31 to 60 days 383 582Due 61 to 90 days 97 159Due 91 to 120 days 156 22Due more than 120 days 56 -22Total 14,214 15,911

Trade and other receivables by currency:

EUR 6,934 5,555RMB 3,926 9,289USD 5,788 2,313EEK 43 0SEK 0 39Others currencies -1 101Total 16,691 17,297

Items included in Prepayments and accrued income:

Other accrued financial items 0 3Accrued employee benefit expenses 0 0Other items 648 650Total 648 653

18. CaSh anD CaSh equIvaLenTS (EUR 1,000)2012 2011

Cash at banks 4,514 11,236

46



19. CaPITaL anD ReSeRveS (EUR 1,000)

Number of shares, share capital and share premium account Number of shares Share capital

Acquisition of own shares

Reserve for invested unrestricted equity Total

Nov. 1, 2010 39,523,099 15,000 -2,100 20,850 33,751Assignment of treasury shares 60,614 42 15 57Shares outstanding per Oct. 31, 2011 39,583,713 15,000 -2,057 20,865 33,808

Nov. 1, 2011 39,583,713 15,000 -2,057 20,865 33,808Acquisition of treasury shares -713,668 -482Assignment of treasury shares 82,817 59Distribution of assets from invested unrestricted equity -2,097Shares outstanding per Oct. 31, 2012 38,952,862 15,000 -2,480 18,768 31,287

Total number of shares 42,529,648Own shares held by company October 31, 2012 3,576,786

The number of Efore Plc shares was 42,529,648 and the share capital EUR 15,000,000.00 on October 31, 2012. In the company’s Articles of association has not been stated highest amount of shares or share capital. All the issued shares have been paid for in full. Shares have no nominal value. The company has one type of shares. The voting right for each share is one vote per share.

Below is a description of the reserves within equity:

Other reserves

unrestricted equity reserveThe total value EUR 1,400.00 of the new shares issued in the directed share issue to Efore Management were booked to unrestricted equity reserve. The Annual General Meeting on February 9th, 2010 decided to decrease the share capital of the Efore Plc by EUR 19,450,000. The decreased amount was transferred to the unrestricted equity reserve. The parent company’s sales of treasury shares amounting to EUR 14,547.36 has been entered in the unrestricted equity reserve. According to the decision made by the Annual General Meeting February 9th 2012, in the fiscal period distribution of assets from the reserve of invested unrestricted equity was made, amounting 2,097,097.75 EUR. The distribution of assets per one share was 0.05 EUR.

Legal reserveThe legal reserve includes the proportion transferred to restricted equity in accordance with the Articles of Association or a decision by a meeting of shareholders.

Other reserves Other reserves include amounts included in the restricted equity of foreign Group com-panies.

Reserve for own sharesReserve for own shares consists of the cost of own shares. In 31.10.2012 group parent com-pany had 1,218,544 of it’s own shares. The acquisitions cost were totalled EUR 797,483.84. Efore Management Oy, group company owned by Efore management team, subscribed 273,842 of new shares in direct share issue. In 31th of October 2012 Efore Management Oy had 2,358,242 of shares. In the Group Financial Statement Efore Plc has consolidated Efore Management Oy to Group Balance sheet. Efore Plc’s shares that Efore Management has acquired are shown in equity as acquisition of own shares. Group had at 31th of October 2012 3,576,786 Efore Plc shares and the total value was EUR 2,481,114.28. The amount is reported as a reduction in equity.

Translation reserveThe translation reserve contains translation adjustments arising from the translation of the financial statements of foreign operations.

DividendsNo dividend were distributed.

47



Share-based paymentsUnder an authorization granted by the Annual General Meeting on December 16, 2004 the Board of Directors decided on March 18, 2005 to introduce a share option program aimed at committing key personnel to the company on a long-term basis. A share owner-ship program in which key personnel are obliged to acquire Efore shares with 20% of the

net income gained from share option rights and to own the shares for at least one year is incorporated in the share options.

The option rights will lapse if they have not been redeemed within the subscription period. If a person leaves the Group before the final vesting, the option rights will be lost. Forfeited options will be held for redistribution.

Share option scheme 2005 Share-based option rights 2005B 2005C Total

Option rights maximum, pcs 650,000 650,000 1,300,000Shares to be subscribed per option, pcs 1 1Subscription price 1.73 1.23Dividend right Yes YesExercisable, from Apr. 1, 2008 Apr. 1, 2009Expiration Apr. 30, 2011 Apr. 30, 2012Contractual life of options, years 4.5 5.5

Original subscription prices before dividend distribution were 1.87 (2005B) and 1.37 (2005C)

Option scheme 2005 Share-based option rights 2005B 2005C TotalWeighted

average option price

Numbers Nov. 1, 2011Option rights granted 830,000 767,000 1,597,000 1.49Option rights returned 266,000 117,000 383,000 1.58Option rights outstanding 1.11.2011 564,000 650,000 1,214,000 1.46Option rights expired in 2011 -564,000 0 -564,000Option rights outstanding 31.10.2011 0 650,000 650,000Option rights expired in 2012 -650,000 -650,000Option rights outstanding 31.10.2012 0 0 0

In fiscal periods 2011 and 2012 no new options were issued.The total effect of option rights has been booked in the previous fiscal years.

48



20. InTeReST-beaRInG LIabILITIeS (EUR 1,000)2012

Book value2011

Book value

Non-currentFinance lease liabilities, EUR 25 132Loans from financial institutions 0 1,124Pension loan 1,500 2,000Total 1,525 3,256

CurrentFinance lease liabilities, EUR 144 183Loans from financial institutions 0 3,371Pension loan 500 500Total 644 4,054

The repayment time for the pension loan is 4 years and the interest is 2,4 percent. Interest-bearing liabilities are measured at amortized cost, which is materially equivalent to fair value.

Maturity dates of non-current liabilities

2012 2013 2014 Later

Finance lease liabilities 144 25 0Loans from financial institutions 0 0 0Pension loan 500 500 1,000Total 644 525 1,000

2011 2012 2013 Later

Finance lease liabilities 183 132 0Loans from financial institu-tions 3,371 0 1,124Pension loan 500 500 1,500Total 4,054 632 2,624

21. maTuRITy OF FInanCe LeaSe LIabILITIeS (EUR 1,000)2012 2011

Finance lease liabilities - Total amount of minimum lease payments

Less than 1 year 147 1911–5 years 25 130More than 5 years 0 0

172 321

Finance lease liabilities - present value of minimum lease payments

Less than 1 year 144 1861–5 years 25 129More than 5 years 0 0

169 315

Financing expenses accumulating in the future 3 6Total amount of finance lease liabilities 169 315

Finance lease liabilities consist of lease agreements for IT software.

49



22. TRaDe PayabLeS anD OTheR LIabILITIeS (EUR 1,000)2012 2011

Current

Trade payables to associates 0 0Trade payables 16,376 13,823Other payables 1,263 1,419Currency derivatives 2 2Accruals and deferred income 2,020 2,649Income tax payables 0 270Total 19,661 18,162

Book values of trade payables belonging to category of liabilities measured at amorized cost are in essentially equivalent to fair value. Derivatives are measured at fair value based on valuations received from the counter party.

Material items included in accruals and deferred income

Current interest payable 12 15Accrued personnel expenses 1,128 2,305Other items 880 329Total 2,020 2,649

23. PROvISIOnS (EUR 1,000)2012 2011

Current provisions

Warranty provision Nov. 1 291 325Translation difference 28 11Additions 96 153Provisions used -304 -199Warranty provision Oct. 31 110 291

Provision for loss making contract Nov. 1 0 0Additions 692 0Provision for loss making contract Oct. 31 692 0

Additions 802 291

Products sold by the company have a normal 24 month warranty time. Future warranty costs relating to delivered products are recognized in the warranty provision. Actual war-ranty costs are recognized in the income statement in the fiscal year in which they arise.

Resulting from the ending of production in Pärnu Estonia, a provision for loss-making contract has been made from the rental agreement of premises (rent until 10/2013).

50



24. FInanCIaL RISk manaGemenT

The principles and objectives of the Group’s financial risk management are determined in the financing risk policy, which, if neces-sary is updated and approved by the Board of Directors. Financial risk management risks aims at avoiding risks and providing cost-effective arrangements for protecting the Group from factors that may affect its performance and cash flow.

Financial risks are managed by foreign exchange and interest rate hedging using only financial instruments with a market value and risk profile that can be reliably monitored.

Efore Group has no substantial long-term loan position. Over 70% of revenue is accumulated by two customers. Total amount of trade receivables from these two key customers were EUR 5.2 million, from which EUR 0.1 million was overdued. Matu-rity analysis of trade receivables and cur-rency exposure of trade and other receiva-bles are presented in note 17, Trade and other receivables.

Foreign exchange rate riskForeign exchange rate risk refer to the risks caused by changes in foreign exchange rates which can affect business perfor-mance or Group solvency.

Most of the Group’s sales are denomi-nated in the euro, the Renminbi and the US dollar. The operating expenses are gener-ated in the euro, the US dollar, the Swedish krona and the Renminbi. The main foreign currency surpluses and deficits are hedged according to the Group hedging policy.

Hedging is carried out by using for-eign currency loans and foreign exchange derivatives, such as forward contracts, and options. Foreign exchange dericatives have a duration of 1–3 months.

Strengthening of 10% of the Renminbi against the euro would have an -2.8 mil-lion EUR negative effect on the profit of the Group.

Weakening of 10% of the Renminbi against the euro would have an +2.8 mil-lion EUR positive effect on the profit of the Group.

Strengthening of 10% of the US dollar against the euro would have an +1.1 mil-lion EUR positive effect on the profit of the Group.

Weakening of 10% of the US dollar against the euro would have an -1.1 mil-lion EUR negative effect on the profit of the Group.

In the financial statements the equity of foreign subsidiaries is translated at the European Central Bank’s average fixing

rate on the balance sheet date. Exchange rate differences are presented in the con-solidated financial statements as transla-tion differences. The net investments in foreign operations has not been hedged.

The instrument used for hedging against exchange-rate risks and their nom-inal values at the end of the fiscal year are specified in note 25, Fair values of derivative financial instruments.

Interest rate riskInterest rate risks are caused by fluctua-tions in interest rate affecting the Group’s income, loan portfolio and cash reserves.

Interest rate risks are managed by mak-ing correct decisions on the interest periods of the liabilities and by using different types of interest rate derivative instruments.

On the balance sheet date, the Group did not have any open interest rate deriva-tives.

Liquidity riskAccording to the financing policy, liquid-ity risk management, funding and effi-cient cash management of the Group are responsibilities of the parent company. The liquidity risk is managed by adequate cash assets, partial sale of trade receivables,

credit limits and by monitoring the maturi-ties of loans.

At the end of the fiscal year the Group’s liquid assets totalled EUR 4.5 million (EUR 11.2 million). The Group’s interest-bearing liabilities totalled EUR 2.2 million (EUR 7.3 million).

The company’s financing reserves com-prised unused credit limits totalling EUR 17.9 million on October 31, 2012, from which EUR 12.4 million will expire within 11 months (at the latest) and EUR 5.5 mil-lion will expire within 7 months.

No credit limits were utilised on Octo-ber 31, 2012.

51



Financial liabilities past due, 2012Carrying amount

Contractual cash flows

6 months or less

6–12 months Later

Trade payables 16,376 16,376 16,376 0 0Loans from financial institutions 0 0 0 0 0Pension loan 2,000 2,133 253 253 1,627Finance lease liabilities 169 172 0 147 25Foreign exchange derivatives, negative fair value 2 2 2 0 0

Financial liabilities past due, 2011Carrying amount

Contractual cash flows

6 months or less

6–12 months Later

Trade payables 13,823 13,823 13,823 0 0Loans from financial institutions 4,494 5,003 3,559 46 1,397Pension loan 2,500 2,713 253 253 2,207Finance lease liabilities 315 321 0 191 130Foreign exchange derivatives, negative fair value 2 2 2 0 0

Credit and other counterparty risksEach business unit is primarily responsible for the management of their operational credit risks. Credit risk management is carried out in accordance with the Group’s credit policy and the aim is to minimize possible credit losses. Material items of trade receivables are evaluated on a counterparty basis in order to identify possible impairment.

The credit risks related to the investment of liquid assets and derivate contracts are minimized by setting credit limits for the counterparties and by concluding agreements only with leading domestic and foreign banks and financial institutions.

25. FaIR vaLueS OF DeRIvaTe FInanCIaL InSTRumenTS (EUR 1,000)2012 2011

Currency derivatives, not under hedge accountingOption contractNominal value 782 5,159Negative fair value 2 2

52



29. ReLaTeD PaRTy TRanSaCTIOnS (EUR 1,000)

The Group’s parent and subsidiary company relationships are as follows Registered office Home country Group ownership %

Share of voting rights %

Parent company ownership %

Parent companyEfore Plc Espoo Finland

Shares in subsidiaries owned by the parent company Efore Plc:FI-Systems Oy Espoo Finland 100 100 100Efore (USA), Inc. Dallas, Texas USA 100 100 100Efore AB Stockholm Sweden 100 100 100Efore (Hongkong) Co., Limited Kowloon China 100 100 100Efore (Suzhou) Automotive Technology Suzhou China 100 100 100

Shares in subsidiaries owned by FI-Systems Oy:Efore (Suzhou) Electronics Co., Ltd Suzhou China 100 100Efore As Pärnu Estonia 100 100

Investment company of the managementEfore Management Oy Espoo Finland 0 100 0

26. OPeRaTInG LeaSe COmmITmenTS (EUR 1,000)2012 2011

Group as lesseeNon-cancellable minimum operating lease payments. Less than 1 year 705 1,1021–5 years 480 762More than 5 years 0 0

1,185 1,864

The Group has rented the operating facilities it uses. The leases for the premises will expire latest on October 2013. In most cases the leases include the option to continue the lease past the original expiry date. Operating lease commitments include leases for the premises for EUR 954 thousand (EUR 1,617 thousand), rents from equipments for EUR 231 thousand (EUR 247 thousand).

27. OTheR COnTRaCTS

The Group has certain significant customer contracts that include a condition normal for the sector, according to which the parties have the right to terminate the contract if a control-ling interest in the company is transferred to a party which is a competitor of the customer.

The company has certain significant financial contract that include a condition normal for the sector, according to which the contract may be terminated if a controlling interest is transferred to another company.

28. COnTInGenT LIabILITIeS (EUR 1,000)2012 2011

For othersOther contingent liabilities 100 100

53



The following transactions were carried out with related parties 2012 2011Associates (EUR 1,000)Power Innovation GmbHPurchases 0 7Liabilities 0 0

The Group has related party relationships with members of the Board of Directors, President and CEO and other key management personnel.

Key management personnel 2012 2011Salaries and other short-term employment benefits 1,257 978Benefits after termination of employment 0 0Total 1,257 978

Granted option rights, 1,000 pcs 0 0Option rights forteited, 1,000 pcs 0 0

Remuneration, President and CEOVesa Vähämöttönen (Reijo Mäihäniemi and Vesa Vähämöttönen) 275 211

Remuneration, members of Board of DirectorsHantila Isto 0 9Heikkilä Olli 33 20Järvinen Richard 31 20Liu Tommy 29 19Luoma Marko 32 27Siponmaa Ari 31 29Syrjälä Timo 0 8Tammivuori Matti 0 9Vikkula Matti 61 57

217 199

Other key management personnel 764 568includes fees 0 0

Efore Management has total 2,358,242 Efore Plc shares. 273,842 shares were acquired through directed share issue to Efore Management in 10.1.2012. In this share issue the shares were owned by the company. The subscription price was 0.84 EUR per share. The value of the directed share issue were booked to unrestricted equity reserve and reserve for own shares. Members of the Efore management team own through Efore Management 5.5% of the Efore Plc’s shares. Efore Management has a 1,356,000 EUR loan granted by the Efore Plc. The interest rate of the loan is 3% and the loan is repaid latest 30.4.2014. The contract is valid until the end of year 2013, when it is to be annuled according to plan decided later. Contract is continued year by year if the stock exchange price of the share for year 2013 and 2014 is lower than the average acquired price by which Efore Manage-ment acquired the shares. Efore Management is not able to sell shares freely when the contract is valid. The Members of Efore Plc’s Management Group will own shares of Efore Management until the contract is annuled.

To related parties have not been granted pension commitments with special terms. No loans other than through Efore Management have been granted to the related parties. Other key management personnel comprises persons who belong to the Group’s execu-tive management team. In the financial period no options were granted to management personnel. The option rights plan terms for the management personnel are equal to the option rights directed at other personnel. All the option rights have expired in 31th Octo-ber 2012. No option rights have been granted to the members of the Board of Directors.

The Board of Directors’ fees have been paid in part in shares.

54



InCOmE STATEmEnT FOR THE PAREnT COmPAny, FAS, EUR 1,000Note Nov. 1, 2011–Oct. 31, 2012 Nov. 1, 2010–Oct. 31, 2011

NET SALES 1 46,763 41,072Change in inventories of finished goods and work in progress 3,454 3,216Other operating income 2 7,445 2,878

Materials and servicesMaterials and consumables

Purchases during the financial year 3 42,625 37,583Change in inventory 3 -108 -37Materials and consumables in total 42,517 37,547External services 3 601 771

43,118 38,318Personnel costs

Wages, salaries and fees 4 4,113 4,943Social security expenses

Pension expenses 4 803 708Other social security expenses 4 233 204

5,149 5,855Depreciation, amortization and impairments

Depreciation and amortization according to plan 5 774 823774 823

Other operating expenses 6 5,345 5,195OPERATING PROFIT (LOSS) 3,276 -3,025 Financing income and expenses

Income from group companies (dividend) 7 1,015 531Income from associated companies (dividend) 7 0 900Other interest and financial income 7 1,390 470Impairment loss on investments carried as current assets 7 0 -387Interest expenses and other financing expenses 7 -867 -405

1,537 1,110

PROFIT (LOSS) BEFORE EXTRAORDINARY ITEMS 4,814 -1,915PROFIT (LOSS) BEFORE APPROPRIATIONS AND TAXES 4,814 -1,915Income taxes

Income taxes for the period -279 -410PROFIT (LOSS) FOR THE PERIOD 4,535 -2,325

55

PAREnT COmPAny FInAnCIAl STATEmEnTS, FAS


BAlAnCE SHEET FOR THE PAREnT COmPAny, FAS, EUR 1,000

ASSETS Note Oct. 31, 2012 Oct. 31, 2011

NON-CURRENT ASSETSIntangible assets

Development costs 8 214 695Intangible rights 8 192 353Other capitalized long-term expenses 8 6 35

412 1,083Tangible assets

Machinery and equipment 8 218 270Other tangible assets 8 5 6Advance payments and constructions in progress 8 126 65

349 342Investments

Holdings in Group companies 9, 10 1,612 512Other shares and holdings 9 6 2

1,617 513CURRENT ASSETSInventories

Materials and consumables 167 59Finished goods 7,513 4,059

7,681 4,119Non-current receivables

Accounts receivables 11 317 0Receivables from Group companies 11 33,356 33,176

33,673 33,176Current receivables

Trade receivables 11 3,690 4,038Receivables from Group companies 11 2,091 3,827Other receivables 11 289 221Prepayments and accrued income 11 246 352

6,316 8,438

Cash and cash equivalents 1,993 5,037

TOTAL ASSETS 52,041 52,707

56



BAlAnCE SHEET FOR THE PAREnT COmPAny, FAS, EUR 1,000

EQUITY AND LIABILITIES Note Oct. 31, 2012 Oct. 31, 2011

EQUITYShare capital 12 15,000 15,000Other reserves 12 17,970 20,266Retained earnings 12 -1,106 1,219Profit (loss) for the period 12 4,535 -2,325

36,399 34,160LIABILITIESNON-CURRENT LIABILITIES

Pension loans 13 1,500 2,000

CURRENT LIABILITIESPension loans 13 500 500Trade payables 13 813 480Liabilities to Group companies 13 12,045 14,085Other liabilities 13 126 109Accruals and deferred income 13 658 1,373

14,142 16,548

TOTAL EQUITY AND LIABILITIES 52,041 52,707

57



PAREnT COmPAny’S CASH FlOw STATEmEnT, FAS, EUR 1,000

Nov. 1, 2011–Oct. 31, 2012 Nov. 1, 2010–Oct. 31, 2011

Cash flows from operating activities:Cash receipts from customers 59,310 45,572Cash paid to suppliers and employees -59,299 -44,512Cash generated from operations 11 1,059Interest paid -94 -77Dividends received 1,015 531Interest received 108 80Other financing items 88 -208Income taxes -206 -71

Net cash from operating activities (A) 921 1,315

Cash flows from investing activities:Purchase of tangible and intangible assets -88 -613Proceeds from sale of tangible and intangible assets 294 0Loans granted -180 -202Acquisition of subsidiaries -1,100 -400Purchased shares -4 0Disposal of associated company 0 485Proceeds from repayments of loans 0 29Dividends received and repayment of capital 0 1,015

Net cash used in investing activities (B) -1,077 315

Cash flows from financing activities:Acquisition of own shares -482 0Disposal of own shares 192 0Distribution of assets -2,097 0Repayment of long-term borrowings -500 -500

Net cash used in financing activities (C) -2,887 -500

Net increase/decrease in cash and cash equivalents (A+B+C) -3,044 1,130

Cash and cash equivalents at beginning of period on Nov. 1 5,037 3,907Cash and equivalents at end of period on Oct. 31 1,993 5,037

58



ACCOUnTInG POlICIES FOR THE FInAnCIAl STATEmEnTS OF PAREnT COmPAny, FAS

GeneralThe financial statements of Efore Plc (reg-istered office in Espoo, Finland), are pre-pared and presented in accordance with the Finnish Accounting Act and other applica-ble laws and provisions in effect in Finland (Finnish Accounting Standards, FAS).

Foreign currency itemsTransactions in foreign currencies are recognized at the exchange rate valid on the date of transaction. Foreign currency receivables and liabilities outstanding on the balance sheet date are measured using the exchange rates on the balance sheet date. Exchange gains and losses arising from ordinary business operations are rec-ognized as financial income and expenses. In addition to this exchange gains and losses on financing are recognized as financial income and expenses. Derivatives entered into for hedging currency positions related to balance sheet items are measured at fair value and the resulting fair value changes are recorded under financial items.

Measurement of non-current assetsThe balance sheet values of intangible and tangible assets are stated at historical cost less accumulated amortization, depre-ciation and impairment losses. Planned

depreciation on intangible and tangible assets is made on a straight-line basis over their estimated useful lives. Gains and losses on sales of intangible and tangible assets are included in the operating result.

The estimated useful lives for different groups of assets are as follows:Development expenditure 3–5 yearsIntangible rights 5 yearsOther non-current expenditure 5–10 yearsMachinery and equipment 3–10 yearsOther tangible assets 5 years

An impairment loss is made on the carrying value of an item of intangible and tangible assets, if it is evident that earnings expec-tations do not cover the carrying value of the asset.

Development costs relating to the larg-est individual projects are capitalized under intangible assets. The capitalized develop-ment costs are amortized over those finan-cial periods in which they generate income.

Those investments and receivables with a useful life of more than one year are pre-sented as other non-current investments and receivables.

InventoriesInventories are measured at the lower of cost and probable replacement value or

estimated realizable value. In addition to variable costs attributable to the purchase and production, the cost of inventories includes a proportion of the fixed purchas-ing and production costs. The weighted average price is used for the measure-ment of the raw materials included in the inventories.

ProvisionsFuture expenditure and losses that the com-pany is committed to cover but which have not yet realized are presented as provisions in the balance sheet. These include among other things warranty costs. Changes in provisions are included under the relevant expenses in the income statement.

Net salesThe calculation of net sales deducts from the revenue the discounts granted and indi-rect taxes.

Leasing All leasing charges are treated as rental expenditure. The unpaid leasing charges related to the future financial periods are presented as lease obligations in the notes to the financial statements.

PensionsThe pension cover of the company’s employ-ees is arranged through insurance policies in pension insurance companies. Pension costs are expensed as incurred.

Income taxesThe taxes of the fiscal year and the tax adjustments for previous fiscal years are recognized as income taxes in the income statement.

59



nOTES TO THE FInAnCIAl STATEmEnTS, PAREnT COmPAny, FAS, EUR 1,000

1. neT SaLeS In maRkeT aReaS by CuSTOmeRS2012 2011

Finland 4,707 7,416European Union, except Finland 39,553 27,918USA 1,145 690Other countries 1,359 5,048Total 46,763 41,072

2. OTheR OPeRaTInG InCOme 2012 2011

Service fee charges, Group companies 2,705 2,714Product development subsidies 119 114Others 4,622 50Total 7,445 2,878

3. maTeRIaLS anD SeRvICeS2012 2011

Materials and consumablesPurchases during the financial year 42,625 37,583Change in inventory -108 -37Materials and consumables in total 42,517 37,547External services 601 771Materials and services in total 43,118 38,318

4. PeRSOnneL COSTS2012 2011

Wages, salaries and fees 4,113 4,943Pension costs 803 708Other social security expenses 233 203Total 5,149 5,854

Management salaries and feesPresident and CEO, Members of the Board of Directors 492 410

Total personnel, averageSalaried employees 80 75

5. DePReCIaTIOn, amORTIzaTIOn anD ImPaIRmenTS2012 2011

Depreciation and amortization according to plan:Development costs 459 473Intangible assets 171 181Other capitalized expenditure 29 51Machinery and equipment 113 116Other tangible assets 2 2Total 774 823

60



6. OTheR OPeRaTInG exPenSeS2012 2011

Other operating expenses are normal expenses

Audit fees:KPMGAudit 19 19Tax services 55 48Other services 7 7Total 81 73

7. FInanCInG InCOme anD exPenSeS2012 2011

Dividend incomeFrom Group companies 1,015 531From associated company 0 900

Total 1,015 1,431

Other interest and financial incomeFrom Group companies 73 71Sales profit from associated company 0 239From others 1,317 160

Total 1,390 470

Impairment loss on investments carried as current assetes

Impairment loss on accounts receivables/loan receivables in Group companies 0 -387Total 0 -387

Interest expenses and other financial expensesGroup companies -34 -34Others -833 -371Total -867 -405

Financial income and expenses in total 1,537 1,110

The items ’financial income and expenses’ includes exchange rate gains/losses, net 745 23

Due to their financial nature, unrealized exchange rate differences related to internal items have been reported under financial income and expenses EUR 40 thousand. In the previ-ous fiscal year a corresponding item was reported under purchases EUR 101 thousand.

8. nOn–CuRRenT aSSeTS2012 2011

Intangible assetsDevelopment costs

Cost on Nov. 1 9,396 9,249Additions Nov. 1–Oct. 31 268 148Disposals Nov. 1–Oct. 31 -289 0

Cost on Oct. 31 9,375 9,397Accumulated amortization on Nov. 1 8,702 8,229Amortizations Nov. 1–Oct. 31 459 473Accumulated amortization on Oct. 31 9,161 8,702

Book value on Oct.31 213 695

Intangible rightsCost on Nov. 1 1,528 1,268

Additions Nov. 1–Oct. 31 10 260Cost on Oct. 31 1,538 1,528

Accumulated amortization on Nov. 1 1,175 994Amortization Nov. 1–Oct. 31 171 181Accumulated amortization on Oct. 31 1,346 1,175

Book value on Oct. 31 192 353

Other capitalized long-term expensesCost on Nov. 1 2,336 2,326

Additions Nov. 1–Oct. 31 0 10Cost on Oct. 31 2,336 2,336

Accumulated amortization on Nov. 1 2,301 2,250Amortization Nov. 1–Oct. 31 29 51Accumulated amortization on Oct. 31 2,330 2,301


61



2012 2011Tangible assetsMachinery and equipment

Cost on Nov. 1 6,087 5,890Additions Nov. 1–Oct. 31 69 200Disposals Nov. 1–Oct. 31 -8 0

Cost on Oct. 31 6,148 6,090Accumulated depreciation on Nov. 1 5,817 5,704Depreciation Nov. 1–Oct. 31 113 116Accumulated depreciation on Oct. 31 5,930 5,820


Other tangible assetsCost on Nov. 1 697 697Cost on Oct. 31 697 697

Accumulated depreciation on Nov. 1 691 689Depreciation Nov. 1–Oct. 31 2 2Accumulated depreciation on Oct. 31 692 691


Advance payments and constructions in progressCost on Nov. 1 65 71

Change Nov. 1–Oct. 31 60 -5Cost on Oct. 31 126 65Book value on Oct. 31 126 65

9. InveSTmenTS2012 2011

Holdings in Group companiesShares on Nov. 1 512 112

Additions Nov. 1–Oct. 31 1,100 400Book value on Oct. 31 1,612 512

Holdings in associatesShares on Nov. 1 0 361

Disposals Nov. 1–Oct. 31 0 -361Book value on Oct. 31 0 0

Other shares and similar rights of ownershipShares on Nov. 1 2 2

Additions Nov. 1–Oct. 31 4 0Book value on Oct. 31 6 2

Book value on Oct. 31Production machinery and equipment 0 219

62



10. ShaReS anD SImILaR RIGhTS OF OwneRShIP2012 2011

Subsidiary companies Book value Book valueFi-Systems Oy, Espoo Finland 3 3Efore (USA), Inc. Dallas TX USA 0 0Efore AB, Stockholm Sweden 107 107Efore (Hongkong) Co., Limited, Kowloon China 1 1Efore (Suzhou) Automotive Power Technology Co., Ltd., Suzhou China 1,500 400

1,612 512

Other shares and similar rights of ownership 6 2

11. ReCeIvabLeS2012 2011

Non-current receivables from Group companiesSubordinated loans 32,000 32,000Loan receivables 1,356 1,176Non-current receivables in total 33,356 33,176

The company has given Fi-Systems a subordinated loan of EUR 32,000,000.00. The loan period is 5 years and the interest rate 5%. In the event of liquidation on bankruptcy, the prin-cipal and interest payable to Efore Plc would have lower priority than other credits.Interest is payable only when, at the time of payment, the amount of the non-restricted equity and all subordinated loans of Fi-Systems exceeds the amount of loss recorded in the balance sheet included in the financial statements of the latest completed fiscal period or in later financial statements. If interest cannot be paid, the interest accumulated during such a fiscal period will be payable later. The loan has no security. For the loan accumulated unpaid interest is 6,803,222.22 Eur. The interest receivable is not recognized to balance sheet.

The company has given Efore Management a loan of EUR 1,356,000.00 The interest rate is 3%. The loan will be repaid in full by 30 April 2014, at the latest. Should the plan be continued by one year at a time in 2013 and 2014, the loan period may be extended respectively. During the validity of the plan, the transfer of the Company’s shares held by Efore Management Oy has been restricted.

2012 2011Non-current receivables

Trade receivables 317 0

Current receivablesTrade receivables 3,690 4,038Other receivables 289 221Prepaid expenses and accrued income 246 352

4,225 4,611Current receivables from Group companies

Trade receivables 789 1,470Interest receivables 54 72Prepaid expenses and accrued income 1,248 2,285

2,091 3,827

Current receivables in total 6,316 8,438

Prepaid expenses and accrued incomeParent company prepaid expenses and accrued income include the following items:

Accrued personnel costs 36 13Product development grant 58 50Other items 151 290

246 352

63



12. equITy2012 2011

Share capital on Nov. 1 15,000 15,000Share capital on Oct. 31 15,000 15,000

Own shares -599 -641Acquisition of own shares -482 0Assignment of own shares 250 42

Own shares Oct. 31 -830 -599

Other reservesReserve for invested unrestricted equity on Nov. 1 20,865 20,850

Distribution of assets -2,097 0Gain on assignment of own shares 33 15

Reserve for invested unrestricted equity on Oct. 31 18,801 20,865

Retained earnings on Nov. 1 -1,106 1,219

Profit for the period 4,535 -2,325Equity total 36,399 34,160

Calculation of distributable earnings

2012 2011Retained earnings -1,106 1,219Profit for the period 4,535 -2,325Reserve for invested unrestricted equity 18,801 20,865Own shares -830 -599Distributable earnings from equity 21,399 19,160

Parent company share capital (one type of shares) 2012 2011

Shares pcs pcs Shares on Nov. 1 42,529,648 42,529,648Purchase of own shares 713,668 0Own shares 861,535 922,149Share issue -273,842 0Assignment of own shares -82,817 -60,614Outstanding shares on Oct. 31 41,311,104 41,668,113

Parent company share capital (one type of shares) 2012 2011

pcs pcs Shares 42,529,648 42,529,648

64



13. LIabILITIeS2012 2011

Non-current liabilitiesPension loans 1,500 2,000

Current liabilitiesPension loans 500 500Trade payables 813 480Others 126 109Accruals and deferred income 658 1,373

2,097 2,462Currrent liabilities to Group

Trade payables 11,197 13,188Other liabilities 831 831Accruals and deferred income 17 66

12,045 14,085

Current liabilities in total 14,142 16,548

Accruals and deferred incomeParent company accruals and deferred income include the following terms:

Accrued bonus reserve 0 624Accrued holiday pay 599 548Accrued other personnel costs 45 77Accrued financial items 14 17Other items 0 108

658 1,373

14. COnTInGenT LIabILITIeS2012 2011

Security given on own behalfOther contingent liabilities 100 100

Security given on behalf of group companiesGuarantees 627 3,161

Rent and leasing commitments on own behalfPayable in the following financial year 386 441Payable later 145 225

Other contingent liabilitesDerivative contractsOption contracts

Nominal value 782 5,159Negative fair value 2 2

65



GROUP kEy FIGURES, EUR 1,000

KEY FIGURESIFRS2012

IFRS2011

IFRS2010

Income statementNet sales MEUR 78.1 88.0 69.7– change % -11.3 26.3 7.2Operating profit/–loss MEUR -2.6 4.1 0.0– of net sales, % % -3.3 5.0 0.0Profit/loss before taxes MEUR -3.0 4.5 0.1– of net sales, % % -3.9 5.1 0.1Profit/loss for the period MEUR -2.3 3.4 0.1– of net sales, % % -3.0 3.9 0.2Gross investments MEUR 1.8 4.4 1.6– of net sales, % % 2.4 5.0 2.3

Balance sheetNon–current assets MEUR 8.6 8.2 6.7Inventories MEUR 14.2 13.0 10.5Trade receivables and other receivables MEUR 16.0 17.3 17.5Tax Receivables, income tax MEUR 0.0 0.1 0.1Cash and cash equivalents, financial assets at fair value through profit and loss MEUR 4.5 11.2 5.9Share capital MEUR 15.0 15.0 15.0Treasury shares MEUR -2.5 -2.1 –2.1Other equity MEUR 8.2 11.2 7.3Non–current liabilities MEUR 1.5 3.3 2.6Current liabilities MEUR 21.1 22.5 17.9Balance sheet total MEUR 43.3 49.9 40.6

66



KEY FIGURESIFRS2012

IFRS2011

IFRS2010

ProfitabilityReturn on equity (ROE) % -10.5 15.5 0.6Return on investment (ROI) % -9.9 17.5 1.1

Finance and financial positionNet interest–bearing liabilities MEUR -2.3 -3.9 –2.7Gearing % -11.3 -16.3 –13.3Current ratio 1.6 1.9 1.9Solvency ratio % 47.7 48.3 49.7

Other key figuresPersonnel, average 888 960 821Salaries and wages MEUR 15.9 13.1 10.9

Product development costs (expensed) MEUR 7.0 7.4 6.1– of net sales, % 8.9 8.5 8.8Product development costs (capitalized in balance sheet) MEUR 0.3 0.2 0.2– of net sales, % 0.4 0.2 0.3Product development costs total MEUR 7.3 7.6 6.3– of net sales, % 9.4 8.7 9.0

67



KEY FINANCIAL INDICATORS PER SHAREIFRS2012

IFRS2011

IFRS2010

Earnings per share EUR -0.06 0.09 0.00Diluted earnings per share EUR -0.06 0.09 0.00Dividend/share EUR 0* 0.00 0.00Dividend payout ratio % 0.00 0.00 0.00Effective dividend yield % 0.00 0.00 0.00Distribution of assets from the reserve of invested unrestricted equity EUR 0.05 0.00 0.00

Equity per share, adjusted EUR 0.52 0.60 0.50At the end of fiscal year, October 31 EUR 0.67 0.90 0.72P/E ratio -11.49 10.27 231.88

Market value Market capitalization MEUR 26.1 35.6 28.5

TradingShares traded 1,000 pcs 9,976 17,356 8,025Trading, % % 23.5 43.9 20.3

Number of shares adjusted– average 1,000 pcs 39,284 39,543 39,600– diluted number of shares on October 31 1,000 pcs 39,284 39,543 39,600– actual number of shares on October 31 1,000 pcs 39,284 39,543 39,600– shares outstanding per October 31 1,000 pcs 38,953 39,584 39,523

Adjusted share priceslowest EUR 0.57 0.69 0.62highest EUR 0.94 1.09 0.96at the end of fiscal year EUR 0.67 0.90 0.72average EUR 0.72 0.92 0.80

*) The board of Directors (assembled to a meeting on the 12th of December 2012) will propose for the Annual General Meeting that no dividend will be distributed from financial period 2012.

GROUP kEy FIGURES, EUR 1,000

68



CAlCUlATIOn OF kEy FIGURES AnD RATIOSReturn on investment (ROI), % = Profit before taxes + interest and other financing expenses x 100Equity + interest-bearing liabilities (average)

Return on Equity (ROE), % = Profit/loss for the period x 100Equity (average)

Current ratio = Current assetsCurrent liabilities

Solvency ratio, % = Equity x 100Total assets - advance payments received - own shares *

Net interest-bearing liabilities = Interest-bearing liabilities - financial assets at fair value through profit or loss - cash and cash equivalents

Gearing, % = Net interest-bearing liabilities x 100Equity

Earnings per share = Profit or loss attributable to ordinary equity holders of the parent entityThe weighted average number of ordinary shares outstanding

Earnings per share (diluted) = Profit or loss attributable to ordinary equity holders of the parent entityThe weighted average number of diluted shares outstanding

Dividend per share = Dividend for the financial yearNumber of shares - own shares*

Dividend payout ratio, % = Dividend per share x 100Earnings per share

Effective dividend yield, % = Dividend per share x 100Adjusted share price at balance sheet date

Equity per share = Equity - own shares*Number of shares at balance sheet date

P/E-ratio = Adjusted share price at balance sheet dateEarnings per share

Market capitalization = Adjusted share price at balance sheet date x outstanding number of shares at balance sheet date

Average personnel = The average number of employees at the end of each calendar month during the accounting period

All share-specific figures are based on the issue-adjusted number of shares.When calculating per share performance measures equity is the equity attributable to the shareholders of the parent company,when calculating other performance measures equity includes equity attributable to the shareholders of the parent company and non-controlling interests.* There were own shares held by company October 31, 2012.

69



SHARES AnD SHAREHOlDERSShare capital and shares Efore share is quoted at Nasdaq OMX Hel-sinki Oy (Small Cap) under the corporate identifier EFO1V. The trading lot is one share. The total number of shares is 42,529,648. Efore’s registered share capital on October 31, 2012 stood at EUR 15,000,000.00. The shares have been entered in the book-entry securities system.

At the end of fiscal year the number of the Group’s own shares was 1,218,544.

Valid authorization of the Board of Directors The Annual General Meeting on February 9, 2012 decided, in accordance with the pro-posal of the Board of Directors, to authorize the Board of Directors to resolve at its dis-cretion on a possible distribution of assets as dividend or assets from the reserve for invested unrestricted equity if the financial position of the company supports that. The maximum aggregate amount of the dis-tribution of assets is EUR 0.05 per share. The authorization includes the right of the Board of Directors to resolve on all other terms and conditions relating to the distri-bution of assets. The authorization is valid until the next Annual General Meeting. The authorization had not been used by the end of fiscal year 2012.

The Annual General Meeting on Feb-ruary 9, 2012 decided, in accordance with the proposal of the Board of Directors, to authorize the Board of Directors to resolve on the acquisition of the company’s own shares, in one or several installments, on the following terms and conditions:

Based on the authorization an aggre-gate maximum of 4,000,000 own shares constituting approximately 9.4% of all the shares in the company may be acquired by using the company’s unrestricted equity. The shares may be acquired in public trad-ing arranged by the NASDAQ OMX Helsinki Oy at the prevailing market price on the date of acquisition, or at the price other-wise formed on the market. The Board of Directors shall resolve on all other terms and conditions relating to the acquisition of the company’s own shares. The acquisition may be concluded using, inter alia, deriva-tives and the company’s own shares may be acquired otherwise than in proportion to the holdings of the shareholders (directed acquisition). The authorization is valid until the next Annual General Meeting.

The Board of Directors of Efore Plc decided to acquire in one or several tranches an aggregate maximum of 1,000,000 of the company’s own shares in accordance with the authorization given to it at the Annual General Meeting on 9 February 2012. The Board of Directors used this authoriza-tion and in April–June 2012 the company acquired total 713,660 pcs of Efore shares according to the authorization.

Valid authorizing the Board of Directors to resolve on the issue of shares as well as the issue of options and other special rights entitling to sharesEfore’s Annual General Meeting on Feb-ruary 9, 2012 decided in accordance with the proposal of the Board of Directors to

authorize the Board of Directors, in one or more transactions, decide on the issu-ance of shares and the issuance of options and other special rights entitling to shares referred to in chapter 10 section 1 of the Companies Act as follows:

The number of shares to be issued based on the authorization may in total amount to a maximum of 17,000,000 shares.

The Board of Directors decides on all the terms and conditions of the issuances of shares and of options and other special rights entitling to shares. The authorization concerns both the issuance of new shares as well as the transfer of treasury shares. The issuance of shares and of options and other special rights entitling to shares referred to in chapter 10 section 1 of the Companies Act may be carried out in devi-ation from the shareholders’ pre-emptive rights (directed issue). The authorization is effective until the Annual General Meeting in 2014.

Based on the authorization given by the Annual General Meeting on February 10, 2011 the Board of Directors offered in the directed share issue against payment 273,842 shares held by the Company for subscription by Efore Management Oy in order to expand the shareholding plan and to include a new member of the Efore Group Executive Management Team in the plan. The subscription price of the share was EUR 0.82 per share, which was the trade volume weighted average quotation of the Company’s share on NASDAQ OMX Helsinki Ltd on 9 January 2012. The share

subscription period was 11 January–25 January 2012.

The Board of Directors of the company resolved to assign in aggregate 82,817 own shares held by the company as payment of the Board of Directors’ annual remunera-tion. The number of share has in accord-ance with the resolution of the Annual Gen-eral Meeting been determined based on the average of the closing prices of the Efore Plc share March 12–22, 2012. The assign-ment of the shares took place on May 18, 2012.

Share prices and trading The highest share price during the fiscal year was EUR 0.94, the lowest EUR 0.57 and the average EUR 0.72. The closing price stood at EUR 0.67. The market capitaliza-tion, calculated with the closing price, was EUR 26,1 million.

The number of Efore shares traded during the fiscal year stood at 10,0 million, representing 23.5% of the total number of shares on October 31, 2012. The turnover value in the fiscal year was EUR 7.2 million.

2005 share option program Under an authorization granted by the Annual General Meeting in December 2004, the company’s Board of Directors decided in March 2005 to introduce a stock option program aimed at committing key person-nel to the company on a long-term basis. A share ownership program in which the key personnel are obliged to acquire Efore shares with 20% of the net income gained from the share options and to own the

70



SHARES AnD SHAREHOlDERSChanGeS In ShaRe CaPITaL 2004–2012

Share capital Nov. 1, 2003 8,135,104 pcs 13,830 (EUR 1,000)

YearSubscription-

share-relationship

Subscription- /registering

time

Subscription-priceEUR

Newshares

pcsChange

1,000 EUR

New sharecapital

1,000 EURDivident

right

2004 On basis of options Jan. 23, 2004 7.79 600 1 13,831 2004

2004

Exchangend and targeted issue for K-shareholders,

1K:1,5A Feb. 27, 2004 0.85 529,616 450 14,281 20042004 Split 1:1, gratuitous Feb. 27, 2004 8,135,704 14,281 20042004 On basis of options Apr. 21, 2004 3.71 2,400 2 14,283 20042004 Targeted share issue Apr. 30, 2004 6.95 3,240,000 2,754 17,037 20042004 On basis of options Jun. 22, 2004 3.71 47,200 40 17,077 20042004 On basis of options Aug. 27, 2004 3.71 11,000 9 17,086 20042004 On basis of options Oct. 28, 2004 3.71 47,400 40 17,127 20042004 On basis of options Dec. 2, 2004 3.71 46,000 39 17,165 20042004 Annulment of shares Dec. 21, 2004 -238,400 -203 16,9632004 Bonus issue 1:1 Dec. 21, 2004 19,956,624 16,963 33,926 20052005 On basis of options Feb.10, 2005 1.70 616,400 523 34,450 2005

2010Decreasing of share

capital Jul.19, 2010 –19,4502010 Targeted share issue Oct.18, 2010 0.70 2,000,000 0 0 2010

Share capital 31.10.2012 42,529,648 pcs 15,000 (1,000 EUR)

Share capital 31.10.2012 42,529,648 pcs 15,000 (1,000 EUR)Own shares 31.10.2012 1,218,544 pcsShares outstanding per October 31, 2012* 41,311,104 pcs*In addition Efore Management Oy owns 2,358,242 shares of company

shares for at least one year is incorporated in the share options.

The share subscription period for cat-egory 2005A is November 1, 2007–April 30, 2010, for category 2005B, April 1, 2008–

April 30, 2011, and for category 2005C, April 1, 2009–April 30, 2012. All the option rights have expired in October 31, 2012 and options have not been used to subscribe any shares.

Management shareholding The total share ownership, of Efore Plc’s Board members and the President and CEO stood at 145,607 on October 31, 2012, which is equivalent to 0.3% of the total number of

shares and votes. Efore Plc’s Board mem-bers and the President and CEO do not own option rights.

71



DISTRIbuTIOn OF ShaRehOLDInGS by SIze OF hOLDInG, OCTObeR 31, 2012

Shares Number of

shareholders pcsProportion of

shareholders %Total number of

shares and votes pcsProportion of

shares and votes %

1–100 242 7.48 16,243 0.04 101–500 722 22.31 249,145 0.59 501–1,000 605 18.70 526,130 1.24 1,001–5,000 1094 33.81 2,806,796 6.60 5,001–10,000 242 7.48 1,867,667 4.39 10,001–100,000 285 8.81 8,099,938 19.05 100,001– 46 1.42 28,958,937 68.10 Total 3236 100.00 42,524,856 100.00 of which nominee registered 8 2,543,651 5.98

In joint account 3,304 0.01In special account 1,488 0.00Total 42,529,648 100.00

DISTRIbuTIOn OF ShaRehOLDInGS by ShaRehOLDeR CaTeGORy, OCTObeR 31, 2012

Sharespcs

Proportion of shares and votes

%

Enterprises 11,025,685 25.93Financial- and insurance institutions 8,769,182 20.62Public entities 2,118,850 4.98Households 19,801,484 46.56Non-profit organizations 464,632 1.09Outside Finland 345,023 0.81Total 42,524,856 99.99of which nominee registered 2,543,651 5.98

In joint account 3,304 0.01In special accounts 1,488 0.00Total 42,529,648 100.00

SHARES AnD SHAREHOlDERS

72




Efore Plc’s share prices and trading volume in 2008–2012

Market Capitalization, (MEUR) Number of registered shareholders

Trading volume (1,000 pcs) Share adjusted price (the last day of month) (EUR)

0 0402010 30

2008

2009

2010

2011

2012

4,0001,000 2,000 3,000

2008

2009

2010

2011

2012

2011 2012201020092008

6,000

5,000

4,000

3,000

2,000

1,000

0

1.50

1.25

1.00

0.75

0.50

0.25

0.00

73



eFORe PLC’S 20 LaRGeST ShaRehOLDeRS, OCTObeR 31, 2012

Shares, pcs

Proportion of shares and votes,

%

Evli Bank Plc 5,235,285 12.31Efore Management Oy 2,358,242 5.54Tammivuori Leena Maija 1,806,542 4.25Varma Mutual Pension Insurance Company 1,706,050 4.01Sievi Capital Oyj 1,602,054 3.77Tammivuori Matti Reino 1,416,000 3.33Efore Oyj 1,218,544 2.87Maijos Oy 1,109,597 2.61Rausanne Oy 853,971 2.01Tammivuori Pirkko Liisa 845,784 1.99Syrjälä & Co Oy 830,293 1.95Simola Jarmo Juhani 701,136 1.65Adafor Oy 482,800 1.14General Unemployment Fund YTK 443,220 1.04Aktia Capital Fund 430,812 1.01Ahomäki Timo 414,447 0.97Ilmarinen Mutual Pension Insurance Company 400,000 0.94Ohlsbom Janne 360,107 0.85Heininen Jaakko 343,601 0.81Heininen Pekka Tapani 275,441 0.65Total 22,833,926 53.7

Nominee registeredNordea Bank Finland Plc 2,265,803 5.33

Efore Plc's shares on company's posession 1,218,544 2.9


74



SIGnATURES FOR THE FInAnCIAl STATEmEnTS AnD THE REPORT By THE BOARD OF DIRECTORS

Espoo, 12 December 2012

Matti VikkulaChairman

Olli Heikkilä Tommy Liu

Marko Luoma Richard Järvinen Ari Siponmaa

Vesa VähämöttönenPresident and CEO

75



AUDITOR’S REPORTTo the Annual General Meeting of Efore PlcWe have audited the accounting records, the financial statements, the report of the Board of Directors, and the administration of Efore Plc for the financial period 1.11.2011–31.10.2012. The financial statements com-prise the consolidated statement of finan-cial position, 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 DirectorThe 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 Stand-ards (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 respon-sible 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 ResponsibilityOur responsibility is to express an opinion on the financial statements, on the con-solidated 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 pro-fessional 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 com-pany and 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 Com-panies Act or the articles of association of the company.

An audit involves performing proce-dures 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 mis-statement, 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 appropriate-ness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluat-ing 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 statementsIn 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 DirectorsIn 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 perfor-mance 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 Fin-land. The information in the report of the Board of Directors is consistent with the information in the financial statements.

Helsinki, 19 December 2012

KPMG OY ABLasse HolopainenAuthorized Public Accountant

This document is an English translation of the Finnish auditor’s report. Only the Finnish version of the report is legally binding.

76



CORPORATE GOvERnAnCE STATEmEnT 2012The obligations of Efore’s decision-making bodies are defined in accordance with Finn-ish legislation and the principles estab-lished by the Board of Directors. Efore’s corporate governance complies with the provisions of the Companies Act. In addi-tion, Efore complies with the Insider Guide-lines issued by the NASDAX OMX Helsinki Oy and the Finnish Corporate Governance Code for Listed Companies issued by Secu-rities Market Association in 2010 except a deviation from the Code’s recommendation Nr. 9 concerning the composition of the Board of Directors.

The Corporate Governance Code is publicly available, e.g. on the website of the Securities Market Association, address www.cgfinland.fi.

The consolidated financial statements were authorized for issue by the Board of Directors of Efore Plc on December 12, 2012 and are available in Annual Report at the website of Efore, address www.efore.com.

Group structureEfore Group consists of the parent company, Efore Plc, and its directly or indirectly wholly owned subsidiaries in Finland and abroad. In addition to this Efore Management Oy, a company owned by the members of the Efore Group Executive Management Team has been consolidated in the group on the basis of Efore´s control over it.

The governance and operations of the Group are the responsibility of the parent company’s decision-making bodies and authorities, which are the Annual General Meeting, Board of Directors and the Presi-dent and CEO. The President and CEO is assisted by the Executive Management

Team. The group´s operative organization is based on global functional line organiza-tions.The operations of the subsidiaries are the responsibility of their respective Boards of Directors, which comprise the Group’s President and CEO and other representa-tives of the Group’s senior management. The Group’s President and CEO is also chairman of the Board of Directors of each of the subsidiaries.

Efore Plc provides the subsidiaries with joint Group services and is also responsible for the strategic planning and finances of the Group.

Shareholders’ meetingThe functions of a shareholders’ meeting as the company’s supreme decision-making authority are defined in the Companies Act and Efore’s Articles of Association. At shareholders’ meetings, shareholders are able to exercise their right to speak and vote.

Annual General Meeting convenes annually and matters decided upon by the AGM include e.g. adopting the finan-cial statements, distribution of dividend, electing auditors and Board members and determining their remuneration and dis-charging the Board of Directors and the President and CEO from liability.

The Chairman of the Board, the Presi-dent and CEO and the Auditor shall be pre-sent at the Annual General Meeting and also other Board Members, if possible and also such persons as have been proposed for Board membership for the first time unless there is a compelling reason.

In addition to the Annual General Meet-ing, extraordinary shareholders’ meetings

may be organized as necessary. The invi-tation to the Annual General Meeting and Extraordinary General Meeting shall be published at the Company’s Internet pages at the earliest two (2) months and at the lat-est twenty one (21) days before the meeting. The Board of Directors may also decide to inform about the general meetings in one or more newspapers.

2012: Members of the Board including the Chairman as well as the President and CEO and the Auditor were present at the Annual General Meeting held on February 9, 2012.

Board of Directors

Appointing Board membersThe Annual General Meeting elects the members of the Board of Directors by sim-ple majority vote for a term of office that ends with the close of the next Annual Gen-eral Meeting following their election. The Board of Directors elects among its mem-bers a Chairman and a Deputy Chairman.

2012: On request of the Board of Direc-tors the Nomination Board, which included other persons than members of the Board, prepared a proposal concerning Board members in the beginning of fiscal year 2011. Based on the proposal of the Nomi-nation Board the Board of Directors made a final proposal of the Board composition to the Annual General Meeting. The decision meant that the Board of Directors did not appoint a new nomination committee which consists of Board members or a new nomi-nation board in order to prepare proposals to the General Meeting of the year 2012 on the composition of the Board of Directors

and fees and other financial benefits to the Board members.

Composition of the Board of DirectorsAs set out in Efore’s Articles of Associa-tion, the Board of Directors shall have no less than three and no more than ten ordi-nary members. The company’s President and CEO is not a member of the Board of Directors. The composition shall take into account the needs of the company opera-tions and the development stage of the company. A person to be elected to the board shall have the qualifications required by the duties, sufficient knowledge of finan-cial matters and business operations. A person to be elected to the Board shall have the possibility to devote a sufficient amount of time to the work.

The majority of the Board of Directors shall be independent of the company. In addition, at least two of the members repre-senting this majority shall be independent of significant shareholders of the company.

Deviation from the Code’s recommen-dation Nr 9:

Efore Plc deviates from the 2010 Code’s recommendation Nr. 9 concerning compo-sition of the Board so that at the moment both genders are not represented on the Board.

With regard to the duties and efficient operations of the board, it is important for the company that the members have ver-satile expertise and mutually complement-ing experience. Nomination Board consid-ered the possibility of proposing a suitable female candidate, in accordance with the Corporate Governance Code concerning the gender parity of the Board. The Nomination

77

CORPORATE GOvERnAnCE


Board has so far found no suitable candi-date who is also familiar with the company’s business.

2012: Composition of the Board of Directors has been the same since Febru-ary 11, 2011 and the members are:Matti Vikkula, Chairman of the Board, Inde-pendent of the company and the company’s main shareholdersOlli Heikkilä, Deputy Chairman of the Board, Independent of the company and the com-pany’s main shareholdersRichard Järvinen, Independent of the com-pany and the company’s main shareholdersTei-Hu (Tommy) Liu, Independent of the company and the company’s main share-holdersMarko Luoma, Independent of the company and the company’s main shareholdersAri Siponmaa, Independent of the company and the company’s main shareholders

Members of the Board are presented at the end of this statement.

Duties and responsibilities of the BoardThe Board of Directors has general deci-sion-making authority in all company mat-ters that are not stipulated (by law or under the Articles of Association) for the decision or action of another party. The Board is responsible for the governance of the com-pany and for duly organizing its operations. It also approves the corporate strategy, the risk management principles, the Group’s corporate values, the operating plan and related annual budget, and decides on major investments.

The main duties and operating princi-ples of the Board of Directors are given in a separate working order. This refers to the declaration of a quorum at Board meetings, the writing and approval of minutes, and

the preparations needed on matters for decision.

The Board of Directors reviews its own working procedures through a regular self-evaluation process or in co-operation with the external company.

2012: The Board of Directors met 15 times during the fiscal year 2012 and the average participation rate of the Board members was 97%.

Board committeesThe Board of Directors has two committees that assist in its work; the Audit committee and the Nomination committee, but instead of the Nomination committee the Board of Directors decided to appoint Nomina-tion Board. The Board of Directors elects among its members committee members and Chairman of the committees. Exter-nal members can be also members of the Nomination Board. The committees’ work-ing orders set out the duties and operating principles for each committee. The com-mittees report their work to the Board of Directors on a regular basis

The main duties of the Audit Commit-tee are to examine the company’s finances; oversee compliance with the law and the relevant standards; monitor the reporting process of financial statements, supervise the financial reporting process, monitor the efficiency of the company’s internal control, internal audit, if applicable, and risk man-agement systems; review the description of the main features of the internal control and risk management systems pertaining to the financial reporting process, which is included in the company’s corporate gov-ernance statement; monitor the statutory audit of the financial statements and con-solidated financial statements, evaluate the independence of the statutory auditor

or audit firm, particularly the provision of related services to the company to be audited and prepare the proposal for reso-lution on the election of the auditor.

2012: The members of the Audit Com-mittee since Febuary 10, 2012 were Olli Heikkilä (Chairman), Matti Vikkula and Marko Luoma. The members of the Audit Committee until February 10, 2012 were Matti Vikkula (Chairman), Olli Heikkilä and Ari Siponmaa. The Audit Committee met 4 times during the fiscal year 2012 and the participation rate of the members was 100%.

The main duties of the Nomination Board are to prepare proposals to the gen-eral meeting on the composition of the Board of Directors and fees and other finan-cial benefits paid to the Board members.

2012: After hearing the major share-holders, Efore’s Board of Directors decided to appoint the Nomination Board in the beginning of fiscal year 2011. All the mem-bers were elected from outside the Board of Directors. Juhani Pirttisalo was elected as the Chairman and Markku Kaloniemi, Jarmo Simola and Leena Tammivuori were elected as members of the Nomination Board. Nomination Board prepared a pro-posal for a Board composition in the begin-ning of fiscal year 2011.The decision meant that the Board of Directors did not appoint a new Nomination Board to the next general meeting in 2012.

After hearing the major sharehold-ers, Efore’s Board of Directors decided to appoint the Nomination Board on 25 Sep-tember, 2012. All the members were elected from outside the Board of Directors. Jari Suominen was elected as the Chairman and Timo Syrjälä and Leena Tammivuori were elected as members of the Nomina-tion Board. The term of the Nomination

Board shall end at the closing of the next Annual General Meeting of the company. This Nomination Board met once during the fiscal year 2012 and the participation rate of the members was 100%.

President and CEOThe Board of Directors appoints the com-pany’s President and CEO and supervises his actions. The main terms and conditions governing the President and CEO’s appoint-ment are detailed in written contract approved by the Board of Directors. The President and CEO manages and super-vises Group business operations within the guidelines and directives issued by the Board of Directors, and ensures that the company’s accounting accords with the law and that the financial management system is reliable.

2012: Vesa Vähämöttönen has been the President and CEO of the company since June 1, 2010.

Executive Management TeamThe President and CEO is assisted by the Executive Management Team. The Executive Management Team comprises the President and CEO and the Executive Vice Presidents responsible for the main functions of the company. The Executive Management Team’s main responsibili-ties include implementation of the Group’s strategy and monitoring and securing a good financial performance.

The Team convenes 1–2 times per month. Composition and the areas of responsibility of the Management Team are presented at the end of this statement.

RemunerationThe Annual General Meeting decides annu-ally on the Board of Directors’ fees and on

78



Remuneration of the members of the Board of Directors for the fiscal year 2012: Annual and meeting fees

(incl. annual remuneration payable in shares)

Committee fees Total

Vikkula Matti 59,268 € 2,000 € 61,268 €Luoma Marko 30,634 € 1,500 € 32,134 €Siponmaa Ari 30,634 € 500 € 31,134 €Heikkilä Olli 30,634 € 2,000 € 32,634 €Järvinen Richard 30,634 € 30,634 €Liu Tommy 29,134 € 29,134 €

the criteria for reimbursement of Board expenses.

Board of Directors2012: The Annual General Meeting on February 9, 2012 resolved on the proposal of the Board of Directors that the annual remuneration payable to the Board mem-bers shall be as follows: EUR 42,000 to the Chairman and EUR 21,000 to the Deputy

Chairman and the other members. Approxi-mately 40 per cent of the aggregate annual remuneration is payable in shares of the company. Payment of the annual remu-neration was paid as a one time payment according to the average of the closing prices of Efore shares between March 12 and 22, 2012.

Travel and accommodation expenses were payable against receipt.

months and, under the contract, he will not receive any separate discharge fee. Upon termination of the service contract of the CEO by the Company and in the absence of breach of duties by the President and CEO, the President and CEO is also entitled to 6 month’s salary.

Remuneration system for the President and CEO and the company’s other executive managementEfore Plc’s Board of Directors approves contract terms of the CEO and the execu-tive management of the company. Efore Plc’s Board of Directors decides the perfor-mance-related pay system for the CEO and the executive management of the company yearly. The total remuneration comprises short term yearly performance related compensation and a long-term share own-ership plan as well as option scheme.

Short-term remunerationThe maximum performance-related com-pensation approved by the Board is set for President and CEO at max 40% of the yearly earnings and for the executive manage-ment team at max. 30% of the yearly earn-ings. The criteria used for assessing the performance are the Group’s performance (importance 60%) and those applying to the person’s own sphere of responsibility, and other measures of operational activ-ity (importance 40%). Performance related compensation is monitored yearly.

Long-term remunerationIn addition to performance related com-pensation there was an option scheme 2005 directed to the members of the Efore Group Executive and key persons. Target of the option scheme 2005 was to com-mit key personnel to the company on a

long-term basis. A share ownership plan, in which the key personnel was obliged to acquire Efore Plc shares with 20% of the net income gained from the stock options and own these shares for one year, was incor-porated to the stock option program. The subscription time of the last C-option right ended on April 30, 2012 The entire option scheme 2005 has expired and no shares were subscribed with this option scheme.

The Board of Directors of Efore Plc decided in 2010 on a new shareholding plan directed to the members of the Efore Group Executive Management Team. The plan enables the participants to acquire a considerable long-term shareholding in the Company. For the purpose of the share ownership, the members of the Executive Management Team have established a lim-ited company named Efore Management Oy, whose entire share capital they own. The acquisitions have been financed partly by capital investments in Efore Management by the members of the Executive Manage-ment Team and partly by a loan provided by the Company.

2012: During the fiscal year 2012 Presi-dent and CEO Vesa Vähämöttönen received a total of EUR 275,410 in salary, perfor-mance related compensation and fringe benefits out of which regular monetary salary accounted for EUR 226,240 perfor-mance related compensation EUR 48,930 and fringe benefits for EUR 240. President and CEO owns 35.4% of Efore Management Oy.

Efore Management Oy is owned by Vesa Vähämöttönen, Alexander Luiga, Panu Kaila, Markku Kukkonen, Olli Nermes and Jukka Pietarinen. Efore Management Oy owns 2,358,242 Efore shares.

Efore does not operate an incentive sys-tem under which fees are paid to the Presi-

The annual remuneration was paid by the assignment of shares held by the company, based on the authorization to issue shares decided by the Annual General Meeting of Shareholders on 9 February 2012.

In addition, a fee of EUR 1,000 per meeting was paid to the Chairman of the Board and EUR 500 per meeting to the Deputy Chairman and the other members. In addition, a fee of EUR 500 was paid to the committee members per meeting. An additional fee of EUR 1,000 was payable for attendance at a meeting in Europe or Asia requiring a one-way flight of at least 6 hours in duration.

President and CEO’s service contractThe salary, benefits and other terms of ser-vice of the President and CEO are defined

in a written service contract. Under the contract, the President and CEO is entitled to an annual performance-related bonus payment max. 40%, as defined by the Board of Directors. The Board of Directors decides each fiscal year on the targets used as the basis for the remuneration. The Board of Directors decides on the granting of stock options to the President and CEO.

The President and CEO does not have a voluntary pension insurance policy. His contract does not contain provisions on any specific age limit for early old-age pension or for resignation. Also the con-tracts of other executive management do not contain any deviation from that laid down in the acts on employment pension concerning the retirement age. The period of notice for the President and CEO is six

79



dent and CEO in the form of the company’s own shares or options.

Audit2012: The Annual General Meeting appointed KPMG Oy Ab as Efore’s auditors, with Authorized Public Accountant Lasse Holopainen as the principal auditor. The fees for auditing the financial statements of Efore Plc totaled EUR 58,386. The auditing companies charged EUR 64,400 for other services during the fiscal year 2012.

The main features of the internal control and risk management systems

Systems of internal controlThe Board of Directors is responsible that the internal control and risk management are adequately and effectively arranged. In addition, it is the responsibility of the Board to ensure that the internal control of the accounting and financial management is arranged in an appropriate manner. The Audit Committee is responsible for the control of the financial reporting process. The financial management shall inform its findings to the relevant members of the management.

The group has financial reporting sys-tems for the control of the business, finan-cial management and risks. The Board of Directors of the company has approved the management organization and principles, decision-making authorities and approval procedures, operational policies of the organizational sectors, financial planning and reporting as well as remuneration principles.

The group does not have a separate internal audit function but the internal audit is part of the group financial administration.

Local auditors shall audit the procedures of internal control in accordance with the audit plan. The representatives of the finan-cial administration shall perform certain controls when they visit the subsidiaries. The financial management shall report the findings to the President and CEO and the Audit Committee, which in turn report to the Board.

Two profit reports are prepared monthly in the group according to the reporting guidelines. The other report contains oper-ational figures and the other figures for the preparation of the profit and loss account of the group. The financial management of the largest subsidiaries is responsible for the correctness and entering of figures of the subsidiaries monthly in the reporting system. Based on these the financial man-agement of the group follows the profit and cost development and assesses monthly the gross margin for each customer group as well as the correctness of obsolescence, credit loss and warranty provisions. The capital employed is also followed monthly. In addition, R&D capitalizations are assessed quarterly in relation to the income expecta-tions of the projects. The monthly report based on the operational profit reports is delivered to the Board of Directors. In addi-tion to this group income statements and balance sheet reports are delivered to the Board of Directors four times a year.

The group financial management over-sees the centralized interpretation and application of the accounting standards (IFRS). The group’s financing and hedging against currency risks are centralized in the head office in Finland. The Audit Committee of the Board evaluates the financial state-ments and quarterly the interim statements as well as separately certain special sub-jects important for the result such as pro-

visions and R&D and warranty costs. The Audit Committee reports its findings to the Board, which monitors that the necessary measures are taken.

The principal auditor of Efore Plc is responsible for the audit and the directions and coordination of the audit in the group. The principal auditor and the management of the company prepare together annually an audit plan, which contains separately agreed focus areas and which the Audit Committee approves. The audit report required by law is issued by the auditor to the company’s shareholders in connection with the annual financial statements of the company. Furthermore, the auditor reports its findings to the Audit Committee.

Risk managementThe aim of the risk management system of Efore is to recognize the strategic, opera-tional and financing risks of the group as well as any conventional risk of loss. The risks that the group takes in its operations are risks that are encountered in pursuit of the strategy and goals. Risk management seeks to control these risks in a proactive and comprehensive manner. The meas-ures taken can include risk avoidance, risk reduction or risk transfer by insurance or agreement.

Risk management forms part of the group’s business processes in all opera-tional units. In this way the risk manage-ment process is tied to internal controls. The group and its operational units assess the risks of their operations, prepare risk management plans and report risks in accordance with the organizational struc-ture. The Audit Committee and Board of Directors address risks in connection with the addressing of other business opera-tions. Risk management is taken into con-

sideration in the group’s quality systems, which include also survival plans. There is a more detailed statement of the group’s different risks and their management which can be found in the Investor Relations sec-tion of the internet pages of the company.

Governance of insider activityEfore Plc’s public insiders are the members of the Board of Directors, the President and CEO, the company’s auditor and the mem-bers of the Executive Management Team. In addition the company has a company-specific insider register. The insider regis-ters are maintained under the supervision of Executive Vice President, Finance and Administration.

Efore Plc complies with the insider trad-ing instructions approved by the Nasdaq OMX Helsinki Oy, on the basis of which the company’s Board of Directors has approved a set of internal guidelines on insider trad-ing. According to these guidelines, invest-ments made by insiders must be long-term investments and trading must always take place at a time when the market’s infor-mation on factors affecting the share value is as complete as possible as well as the investments must be made during the time when the insider has no inside information.

The period closed to trading by insiders is always a minimum of 21 days before pub-lication of interim reports and the financial statements bulletin or publishing prelimi-nary information based thereof and ending the day following the day of the release of such a report. During other periods trad-ing with Efore securities is allowed provided that a person is not entered into a project-specific register or he/she does not oth-erwise possess inside information at that time point.

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BOARD OF DIRECTORS OCTOBER 31, 2012MATTI VIKKULAB. 1960Education: M.Sc. (Econ.)Chairman of the Board

Board member since 2009

MAIN DUTY: Scandinavian Biogas Fuels In-ternational AB, CEO since 2011

PRIMARY WORKING EXPERIENCE:Fenestra Oy, CEO 2009–2010ResCus Partners Oy, Managing Partner since 2008Ruukki Group Oyj, CEO 2007–2008

OLLI HEIKKILäB. 1959Education: M.Sc (Eng.)Deputy Chairman of the BoardBoard member since 2011

MAIN DUTY:UPM-Kymmene, Vice President since 2005

RICHARD JäRVINENB. 1964Education: M.Sc (Eng.)Board member since 2011

MAIN DUTY:Elektrobit Wireless China (Beijing), General Manager since 2010

PRIMARY WORKING EXPERIENCE:Nokia China Investment Ltd (Beijing), Site Manager and Senior Program Manager 2004–2010Nokia Ltd (Finland), Vari-ous business development

TEI-HU (TOMMY) LIUB. 1950Education: Economics, Univer-sity of GothenburgBoard member since 2011

MAIN DUTY: CG Drives and Automation, Country Manager, China since 2008

PRIMARY WORKING EXPERIENCE:Perstorp AB,e.g. Adviser to Perstorp Executive Management Team since 2001

MARKO LUOMAB. 1971Education: Tech.Lic.Board member since 2007

MAIN DUTY: Senior Research Scientist at the Aalto University/School of Elec-trical Engineering since 1999

ARI SIPONMAAB. 1959M.Sc. (Eng.)Board member since 2009

MAIN DUTY: Aura Capital Oy, Managing Partner since 2003

PRIMARY WORKING EXPERIENCE:Aura Capital Oy, Partner 2000–2003AT Kearney, Helsinki, Principal 1998–2000Gemini Consulting, Helsinki, Principal 1997–1998

Elisa Oyj, SEVP, Consumer and small enterprise BU 2006–2007Saunalahti Group Oyj, CEO 2001–2007PricewaterhouseCoopers, Part-ner 1999–2001

PRIMARY BOARD MEMBERSHIPS:AinaCom Oy, Chairman of the BoardFenestra Group Oy, Member of the BoardKristina Cruises Oy, Chairman of the BoardiTaito Oy, Chairman of the Board

Holds 40,981 Efore shares

PRIMARY WORKING EXPERIENCE:Jaakko Pöyry Consulting, Prin-cipal 2001–2005Accenture, Senior Manager 1993–2000ABB Process Automation, Account Manager & Project Manager 1987–1993


and management positions 1997–2004Tampere University of Technol-ogy, Institute of Production Engi-neering, Researcher, Assistant Researcher 1995–1997

PRIMARY BOARD MEMBERSHIPS:Finnish Chamber of Com-merce in China 2009, Chairman of the organizing committee 2009–2012Finnish Business Council of Beijing 2009, Chairman 2009–2012


Investment AB InChina (publ), Country Manager, China 1999–2000Perstorp AB, Country Manager, China 1995–1999Chinese Consulting in Scandi-navia AB, Managing Director, China 1992–1995 Tetra Pak (China) Ltd, Chief Representative, China 1983–1992


PRIMARY WORKING EXPERIENCE:Research, managerial and teaching positions at the Aalto University (formerly Helsinki University of Technology) since 1994

PRIMARY BOARD MEMBERSHIPS:Creanord Oy, Member of the Board


SIAR-Bossard, Helsinki, Consult-ant – Senior Project Manager 1991–1997

PRIMARY BOARD MEMBERSHIPS:Aura Capital Oy, Member of the BoardAW-Energy Oy, Member of the BoardBluegiga Technolgies Oy, Chair-man of the BoardContinuent INC, Chairman of the BoardConfidex Oy, Chairman of the Board


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VESA VäHäMöTTöNENB. 1966President and CEO

Education: Tech.LicEmployed by Efore since 2010

Chairman of Executive Manage-ment TeamBefore joining Efore acted as Senior Vice President, Sales and Marketing in Lite-On Mobile (ex Perlos) and was responsible

PANU KAILAB. 1955Executive Vice President, Opera-tions and Programs

Education: B.Sc.(Eng.)Employed by Efore since 2004

Before joining Efore held managerial positions in Elcoteq Networks Oyj (1999–2002) and Nokia MobilePhones Oy (1985–1999) and worked as Project Manager at the Helsinki University of Technology (1999).

No shareholding in Efore*

for global sales, marketing and customer relationships in 2006–2010. Prior to this acted as Managing Director of Flextronics ODM Finland and in 1999–2004 acted e.g. as General Manager, Europe in Filtronic Comtek


OLLI NERMESB. 1956Executive Vice President, CFO

Education: M.Sc.(Econ.)Employed by Efore since 2007

Before joining Efore, worked as Director of Finance and IT at Evox Rifa Group (2003–2007) and in Intermarketing Oy as Vice President (2001–2003) and as Director of Finance in Helvar (1997–2001).

Holds 2,000 Efore shares*

ExECUTIvE mAnAGEmEnT TEAm OCTOBER 31, 2012

ALEXANDER LUIGAB. 1965Executive Vice President, Sales & Marketing

Education: Economics, University of StockholmEmployed by Efore since 2010

Prior to Efore Luiga held several executive sales and marketing positions in the international companies such as Lite-On Mobile (ex Perlos 2003–2010), Moteco (2000–2003) and ABS Pumps International (1997–2000).


MARKKU KUKKONENB. 1959Executive Vice President, Product Development and Technology

Education: Tech.Lic.Employed by Efore since 2006

Before joining Efore held managerial positions in Salcomp Oy’s product devel-opment (1999–2005) and in Helvar Oy (1986–1999).

Holds 1,000 Efore shares*

JUKKA PIETARINENB. 1958Executive Vice President, Industrial Business Area

Education: M.Sc.(Eng.)Employed by Efore since 2009

Before joining Efore worked he has worked 26 years (1983–2009) at Nokia Siemens Net-works (and Nokia Networks) in different business management positions e.g. as Account and Sales Director and Managing Director, Nokia Czech Republic s.r.o.


*) Efore Management Oy is owned by Vesa Vähämöttönen, Panu Kaila, Markku Kukkonen, Alexander Luiga, Olli Nermes and Jukka Pietarinen. Efore Management Oy owns 2,358,242 Efore-shares. The president and CEO owns 35,4% of Efore Management Oy.

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InFORmATIOn FOR SHAREHOlDERSEfore Plc’s registered office is in Espoo, Finland. Its business identity code is 0195681–3.

Annual General MeetingThe Annual General Meeting of Efore Plc will be held on February 7, 2013 at 6 p.m. at hotel Radisson Blu Royal at the address, Runeberginkatu 2, FI-00100 Helsinki. Notice of Efore Plc Annual General Meeting including registration instructions is avail-able at www.efore.com

Board of Directors’ proposal for the Annual General MeetingThe Board of Directors will propose to the Annual General Meeting on February 7, 2013 that no dividend will be distributed.

Changes of addressThe shareholders are advised to inform about changes in their contact details to their book-entry securities account opera-tor.

Financial reports for the fiscal year Nov 1, 2012–Oct 31, 2013Efore publishes its annual report, the annual financial statements release and three interim reports. The stock exchange releases are available at www.efore.com immediately after they are published. The annual report is published at www.efore.com in pdf-format only.

Annual Report 2012 Week 3/2013Interim report 3 months March 5, 2013Interim report 6 months May 23, 2013Interim report 9 months August 30, 2013

Key share dataExchange listing:Nasdaq OMX Helsinki, The Nordic Exchange (Small Cap)Corporate identifier EFO1VTrading lot 1 shareShares October 31, 2012 42,529,648 pcsShare capital 15,000,000.00 eur

Analysts monitoring EforeThe information about analysts monitoring Efore is available at www.efore.com/inves-tors/analysts. Efore takes no responsibility for any evaluations or recommendations published by them.

Investor relationsVesa Vähämöttönen, President and CEO of the Efore Group is responsible for Investor Relations.

The objective of Efore’s investor rela-tions is to provide precise and up-to-date information on the Efore Group’s business operations and financial development. Efore publishes all investor information on Efore’s website in Finnish and English. Efore observes a four-week silent period before the publication of its results. During this time the company’s representatives do not meet investors or analysts, or comment on the company’s financial position.

Investor contactsVesa Vähämöttönen, President and CEO, tel. +358 9 478 466Sari Jaulas, Request for materials, tel. +358 9 4784 6343E-mail: [email protected]

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EFORE GROUP

Contact detailsWebsite: www.efore.comE-mail: [email protected]@efore.com

FinlandHeadoffice

Efore PlcP.O. Box 260 (Linnoitustie 4B)02601 EspooTel. + 358 9 478 466Fax + 358 9 4784 6500

China

Efore (Suzhou) Electronics Co., Ltd.Building 21 A&B, No 428 Xinglong Street,Suzhou Industrial ParkSuzhou, China 215126Tel. +86 512 6767 1500

Efore (Suzhou) Automotive Power Technology Co., Ltd.BLK 101–201B,Building 21 Suzhou International Science Park,No 328 Xinghu Street,Suzhou Industrial Park,Suzhou China 215126Tel. +86 512 6767 1500

Efore (Suzhou) Electronics Co., Ltd.Room 1605, 16th floor, Zhongyu PlazaA6 Gongti North Rd, Chaoyang DistrictBeijing, China 100027Tel. +86 10 5975 4286

Efore (Hong Kong) Co. LtdRoom 702 Hollywood Plaza610 Nathan RoadKowloonHong KongTel. +86 512 6767 1500

Sweden

Efore ABMånskärsvägen 10BSE-141 75 Kungens KurvaTel +46 72 949 2199

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Efore Plc P.O. Box 260 (linnoitustie 4B) 02601 Espoo Tel. +358 9 478 466 Fax +358 9 4784 6500 www.efore.com

AnnuAL report 2012...Share price on October 31 EUR 0.67 0.90 Market capitalization on October 31 EUR...

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