Annual Review 2013

family company & INDUSTRIAL OWNER “A year of mergers and acquisitions”

Contents Oras Invest in brief ...... 1 Portfolio companies ...... 16 Oras Invest year 2013 ...... 2 Oras Group ...... 16 Message from the CEO ...... 4 Uponor ...... 18 Oras Invest story ...... 6 Tikkurila ...... 20 Mission ...... 8 Kemira ...... 22 Megatrends ...... 9 Long-term objectives ...... 24 Oras Invest strategy ...... 10 Summary of Financial Statements ...... 25 Vision ...... 12 Parent company income statement ...... 26 Values ...... 13 Parent company balance sheet ...... 27 Oras & Hansa ...... 14 Parent company cash flow statement ...... 28 Board of Directors ...... 30 Personnel ...... 31 Corporate Governance ...... 32

Graphic design and layout Kreab Gavin Anderson Photos Mika Malo Art work in the pictures Erkki Paasikivi, from the book Metalli ja vesi (1988), original photos by Pentti M. Valmunen A.R.P.S Print work Erweko, Helsinki 2014

Oras Invest Ltd’s Annual Review and full Financial Report 2013 are available in PDF-format in English and Finnish on the company website orasinvest.fi Oras Invest in brief

Oras Invest in brief Oras Invest in brief Oras Invest is a family-owned company with almost 70 years of industrial entrepreneurship tradition. Its current industrial holdings are Oras Group, Uponor, Kemira and Tikkurila. At the end of 2013 the net asset value of Oras Invest totaled EUR 776 million.

Oras Invest holdings

Oras Group Uponor Tikkurila Kemira 100% 23% 18% 18% Since 1945 Since 1999 Since 2010 Since 2007

Aggregate key figures 2013

NET SALES EMPLOYEES OPERATING IN EUR 3.9 billion 13,443 average number 40 countries

Annual Review 2013 1 Oras Invest year 2013

Oras Invest year 2013

Year 2013 in a nutshell

The 100% family-owned faucet company Oras Group doubled its size by acquiring Hansa.

The net asset value of Oras Invest grew by 20% to 776 million euro, while our debt compared to the market value of investments was 16%.

The aggregate revenue of our companies was 3.9 billion, and they employed 13,443 people in 40 countries.

2 Creating wealth to the society The aggregate contributions of our holdings in 2013

Revenue from customers EUR 3,984 million

AW MATERIALS, GOO S OF R DS & S LIER ERV PP ICE SU S EUR 2,904 million EMPLOYEES

EUR 581 million

SOCIETY EUR 147 million

EUR 44 million BANKS

Dividends EUR 148 million to 66,874 shareholders

Oras Invest key figures 2013 2013 2012

Net profit, EUR 27.4 million 28.1 million Shareholders’ equity, EUR 485.0 million 459.1 million Balance sheet total, EUR 635.6 million 639.8 million Equity-to-assets ratio 76% 72% Gearing 30% 37% Net asset value (NAV)*, EUR 776 million 617 million Total shareholder return (TSR) 26% 49% Debts-to-investments at market value -ratio 16% 22%

*NAV= Market value of Uponor, Tikkurila and Kemira on December 31, 2013 (Oras Group + Hansa proforma) EBITDA × 8 – net debt

Annual Review 2013 3 Message from the CEO

Message from the CEO

A year of mergers & acquisitions

n 2013, the markets remained volatile, experiencing major and trimming our organizations, is now paying off. Lately, our fluctuations even at monthly level. Whereas the markets companies have made a clear switch to investment mode. were buoyant in the summer months, there was a return In general, all of our companies endured the economic to reality as Christmas approached. As in the previous uncertainty of 2013 fairly well. However, the fight for market year, Q4 was disappointing. Planning for the future was share is only intensifying in markets that have continued to Ihampered by zero visibility and low or zero predictability in suffer from low or zero growth. The European building market the markets. While the markets provided little excitement, a remains weak and demand is being hampered by caution hands-on approach was required within our companies. Years among consumers. On a more positive note, expansion in the of streamlining finally paid off, in the form of growth-oriented US markets is driving growth; Uponor and Kemira were able to activity. benefit from the lively US market in 2013. Our portfolio of owned companies has grown into an Oras Group has renewed itself last year due to the optimal balance between our two core industries, water and acquisition of Hansa (more on p. 15). The key figures include building, even if the roots of our family company lie in the Hansa’s Q4 financial results. The Group’s revenue totaled faucet business. Oras Group had an exciting year, doubling in 156.7 million euro in comparison with the previous year’s 131.1 size with the acquisition of Hansa. Uponor – the plumbing and million euro. The EBIT margin declined to 5.6% (13.1%), due to indoor climate solutions provider – grew through a merger one-time costs and asset amortizations related to the Hansa as the joint venture with KWH Pipe began operations in July. acquisition. Gearing rose to 53.4% (15.2%) due to acquisition Kemira – the global water chemicals company – has been busy loans. Coordinated and decisive steps are being taken towards with both, strategic acquisitions and divestments. For Tikkurila full integration of the new Oras Group, with the goal of creating – the decorative paints company – last year was more or less one unified company with two strong and highly recognized business as usual. brands: Oras and Hansa. The Oras Group is on its way to becoming a major European player in the sanitary fittings Solid performance industry. As our family company approaches 70 years of age, it is worth Uponor had a busy year integrating the merged infra- looking back on what we have achieved as an industrial owner. structure business. Revenue grew to 906.0 (811.5) million euro We are currently preparing a book on our history, which we (including the H2 financial results of KWH Pipe). Uponor’s EBIT will publish next year. Our focus has always been on building margin came to 5.5% (7.1%) while gearing fell to 33.7% (45.4%). A companies with healthy balance sheets, a steady positive new company, Uponor Infra, was created from the joint venture, cash flow and sustainable profitability. Shifting the focus to with ownership divided between Uponor at 55.3% and KWH growth can only succeed once a solid foundation has been Group at 44.7%. laid. Last year showed that our companies are capable of stable Kemira recorded revenue of 2,229 million euro (2,241) in growth without risking their profitability. The effort invested 2013. Its operative EBIT margin increased to 7.4% (6.9%), driven by our management teams in recent years, in streamlining by higher sales volumes and fixed cost savings related to

4 Lately, our companies have made a clear switch to investment mode. President and CEO, Jari Paasikivi the “Fit for Growth” restructuring program. Despite its decline in revenue, Kemira reported an increase in organic growth. Kemira’s gearing is steadily reducing, falling to 40.6% (42.2%) at the year-end. Wolfgang Büchele announced his departure as CEO, effective from the beginning of May 2014. Importantly from our perspective, continuity has been ensured by Wolfgang’s commitment to continue developing Kemira, as a member of the Board of Directors. Kemira’s Board of Directors appointed Jari Rosendal, 48, M. Sc. (Eng.) as Kemira Oyj’s President and Chief Executive Officer as of May 1, 2014. Tikkurila recorded a solid result after the previous year’s record-breaking figures. Despite a decline in revenue, the company managed to maintain its healthy profitability. Tikkurila’s revenue totaled 653.0 million euro (670.4) and its global competition. The talent and expertise found within our EBIT margin was 11.1% (11.0%). Due to strong cash flow, gearing companies must be continuously improved. Growth opportu- almost halved to 23.4% (40.6%). nities are created by people working towards common goals. Oras Invest recorded a solid performance in 2013. Profit for Such goals should consist of an improved offering and better the reporting period was 27.4 (28.1) million euro. Our net asset value propositions for existing and new customers. Strategic value grew by 20% to 776 million euro (617) and the total share- acquisitions, technological innovation, world-class R&D and holder return was 26% (49%). Our incoming divided stream investment in new production technologies are some of the from 2013 will be approximately 32 (32) million euro, which is in key performance indicators of future success. We continue line with our expectations. We have further strengthened the our persistent work in support of the healthy and sustainable balance sheet in accordance with our strategy. Oras Invest’s growth of our companies. equity-to-assets ratio improved to 76% (72%) and gearing reduced to 30% (37%). I would like to express my warm thanks to each and every one of the 13,443 people working with our companies worldwide Continuous development of our business model for making 2013 a success. In addition, I would like to thank all We expect demand to remain flat in most of our main markets of our board members for their support and foresight, and all of in 2014. In addition, the political tensions between Russia our partners for their trust. and Ukraine will make the markets more nervous. However, revenue growth remains the number one focus in all of our March, 2014 companies. In mature markets, top line growth can only be achieved by gaining market share. As an industrial owner, one of our key responsibilities is to ensure that our companies’ personnel is sufficiently competent in the face of intensifying Jari Paasikivi

Annual Review 2013 5 Oras Invest story

Oras Invest story

Our story – the makings of an Industrial Owner

The pioneer entrepreneur products, steady revenue growth and expansion into new Our family business originated in 1945 in the small town of markets ensured profitability and provided a solid platform for Rauma, on the West coast of Finland. The founders – Erkki and strategic acquisitions. Oras first acquired a faucet manufacturer Irja Paasikivi and Kosti Oras – set up a small metal workshop in in Germany, then its largest national competitor, followed by a Irja’s fathers’ basement, right after the end of the Second World Norwegian rival. War. The company was named after Irja’s father, who helped out In 1995, Oras announced an ambitious growth-strategy, by financing the initial stages. “Vision 2005”. The company intended to conquer the European By the 1950’s, serial production was well under way – Erkki markets and triple its revenue. Steps in this direction were taken had managed to acquire a batch of surplus grenade shells based on advances in R&D, as Oras became the first European from Ammus Oy. These were processed into radiator pipe faucet manufacturer to introduce an electronic faucet. The connectors, establishing the combination of metal and water company’s name and trademark had developed into a widely that became a hallmark of the company. The era between the recognized and valued brand, associated with durability, 1950’s and 1970’s marked not only the growth of Oras, but also innovation and attractive design. A further acquisition was Finland’s growth as it rose from the ruins of the war. made in Poland. The Vision, however, proved too complex to By the end of the 1970’s, Oras was already well known as implement and the owners stepped back and took a broader the manufacturer of the single-lever faucet. As a respected look at the industry. At the same time, Fortum Oyj, the newly employer, it had brought a new industry to its local area and established energy giant, was seeking a new Finnish owner for showed true entrepreneurial spirit. The first steps towards its plastic pipe business. internationalization had been taken, not only in the form of exports, but more significantly by importing know-how and Industrial Owner competence. With the help of a German partner, Erkki Paasikivi Oras became the largest owner of Uponor in 1999, heralding built Oras’ s first foundry from scratch. the beginning of its era of industrial ownership. Pekka Paasikivi became Chairman of the Board of Uponor, introducing The growth, internationalization and acquisitions business-idea based thinking and a single-brand strategy. The 1980’s saw Oras expand and grow into the Nordic market The owner’s approach was active and its commitment visible. leader and one of the largest faucet manufacturers in Europe. Uponor’s shares had been purchased at a favorable time and Together with the management, the owners developed a the share price had consistently gained value, with the steadily clear business idea for the company. Alongside innovative growing dividend stream peaking in 2006. At the same time,

6 Close to 70 years of industrial experience

Oras Invest era Family business & Oras Ltd era Industrial owner

Family business Kemira Tikkurila New Uponor Oras Group BUSINESS IDEAS Acquisitions Management Entrepreneur group Net asset value Generation 1 Generation 2 Generation 3 1945 1960 1970 1980 1990 2000 2010 2012 2013 2014

the owners of Oras decided to organize the Today, Oras shares offered by the State. Operating two industrial companies under a single in the water industry and making one holding unit. Invest continues quarter of its revenue in the building Oras Invest was established to manage to be an active and industry made Kemira a strategic fit the family’s assets. From the outset, Oras with Oras Invest’s industrial portfolio. Invest had a clear strategy: to become the committed Soon after becoming Kemira’s largest largest owner of its publicly listed companies long‑term owner. owner, Oras Invest in accordance with and a majority owner in its privately owned the original plan added a fourth arm to companies, based on a long-term commitment. At this point, its portfolio, when Tikkurila was spun off by Kemira, to form an the family’s third generation owners became active through independent publicly listed company. In 2013, the new Oras board memberships. Group was created by Oras acquiring Hansa. The acquisition By 2007, Oras Invest had become a household name doubled the size of the company in terms of revenue and in the HVAC and building material industries. The owners personnel. were ready to expand into a new industry. Following a Today, Oras Invest continues to be an active and committed comprehensive investigation, Kemira was identified as an long-term owner of Oras Group, Uponor, Kemira and Tikkurila. interesting investment opportunity. Its involvement in global Each step along our almost 70-year history has contributed to water chemistry and its subsidiary Tikkurila were among the our understanding and expertise, while allowing us to take on decisive factors. Kemira’s main owner at the time, the Finnish new challenges. We have been able to take the long view and State, was prepared to reduce its ownership sufficiently to grow steadily into a significant contributor of value to society. allow Oras Invest to become the largest owner. Oras Invest Throughout its history, Oras Invest has remained under 100% saw a consolidation opportunity in Kemira and purchased the family ownership.

Annual Review 2013 7 Mission

Oras Invest mission Oras Invest focuses its ownership in industrial companies, in which it has a substantial understanding of the industry, business characteristics and development potential. We develop our companies through active Board work and close cooperation with the management. The aim is to create long-term sustainable value growth.

8 Megatrends

Megatrends

Megatrends present an opportunity

Industrial investments have a long-term impact. A committed owner must be able to form an idea of where the world is going in the midst of short-term, often opaque prospects.

dentifying megatrends is important. Long-term tendencies impact our industries, opening up opportunities and challenges. They provide the framework for long-term value creation. Oras Invest currently owns stakes in companies that Iprovide building and water treatment solutions. Oras Group, Uponor, Kemira and Tikkurila – they all have the ability to offer sustainable products and solutions to serve the needs of a dynamic world. Environmental regulations are becoming stricter, clean water is becoming more scarce, the world’s population is increasing in size, the populations of developed nations are ageing, urbanization is picking up pace, and fast-developing countries are building up their infrastructures. The translation of the requirements related to these long-term trends into future opportunities for our companies is a key theme of our active ownership work.

Annual Review 2013 9 Oras Invest strategy

Strategy

An active owner’s strategy

Committed ownership, long-term development and value growth are permanent factors of our strategy. We look beyond economic trends and work in close cooperation with the other owners, management and all interest groups.

ur family business background has had a strong influence in defining the nature and objectives of our company as an industrial owner. We have built a long-term commitment to our companies and want to develop them in a determined Omanner. Our strategy is guided by constant value creation throughout economic fluctuations, and when necessary, bold moves and preparation for challenging times. To us, active industrial ownership is long-term development of the companies we own. This also means continuous dialogue with the other owners of our companies and our closest stakeholders. We direct our earned dividends either on further investments in our current and new companies, or on strengthening our balance sheet. We strive towards value growth, which requires active work by the Boards, and constructive cooperation with the management of our companies. It is necessary – not to mention beneficial to all shareholders and interest groups – for our Boards to have the ability to create a clear image of a company’s business idea, strategies, management, and risks.

10 Basic business principles and continuous renewal

SUSTAINABLE GROWTH

BUSINESS PROFITABILITY COMPETENCE

FOUNDATION

In the case of listed companies, it is our goal to be the largest shareholder, while in In the case of the case of unlisted companies we aim for listed companies, majority ownership. We comply with good corporate it is our goal to governance. As an industrial owner, we are be the largest in a decision-making position and exert shareholder, while influence in general meetings of share- holders, Boards of Directors and committees. in other cases We participate in ensuring that the capital we aim for a structures of our companies remain healthy, giving them strength for development and majority holding. renewal, and for building a sustainable future. In order to generate continuity in our industrial ownership, we monitor the signals regarding the outlook of our industrial sectors and fluctuations in the economy and the financial markets. We assess the development opportunities and value creation abilities of our companies, while also evaluating their management’s competences.

Annual Review 2013 11 Vision

Oras Invest vision We aspire to be the most sought-after owner for industrial companies. The companies under our ownership are the best long-term performers in their industries. These companies also attract the most competent people and a committed owner base.

12 Values

Values Taking the long view, with sustainable values

Good ownership is a value and Vitality, commitment and We take responsibility for way of life understood by Oras endurance form the basis for Oras ensuring that our companies have Invest. It requires an honest, open Invest’s continuous, long-term solid ownership structures, as well as and responsible approach, respect value creation. We ensure that the great Boards of Directors and CEOs. for work, and fair play. As an active companies we own are proactive These are the basic prerequisites for industrial owner, we look beyond and able to renew themselves. Our solid value creation and constant economic fluctuations. commitment to their long-term improvement. A company will only development is tangible. We put our be able to fulfil its social responsi- competence and experience at our bility if it operates profitably on a companies’ disposal. solid base and creates value. Oras Invest values

OWNERSHIP “…is an intrinsic value and a way of life. Ownership cannot be claimed without an honest, open and responsible approach; respect for work and fair play. ”

VITALITY ENDURANCE COMMITMENT

Annual Review 2013 13 Oras & Hansa

Oras & Hansa

www.oras.com www.hansa.com

In September 2013, Oras announced an acquisition through which Hansa Metallwerke AG and its subsidiaries would join Oras Group. From 1 October onwards, the new Oras Group became a major European player in the sanitary fittings industry, occupying a strategic position in several European markets.

14 Oras & Hansa: one company, two brands, full integration!

ras had announced as long The creation of the beginning of the integration process. ago as 2009 that it was Ways of working, the potential synergy seeking growth through new Oras Group benefits and future development areas acquisitions – it was only a doubled the size were revealed. Over 50 professionals in matter of finding the right the faucet business worked tirelessly Otarget. When Hansa Group was put on the of the company. to identify the best practices in both market by its owners in 2010, Oras gave the companies. Based on this, the opera- idea serious consideration. Three years later and in much better tional teams proposed action plans for the integration. The condition, Hansa fullfilled the prerequisites set by Oras. In a first 100 days of integration planning confirmed the potency deal serving the interests of both the seller’s and Oras, Hansa of the original acquisition rationale. This had been based on Metallwerke AG found a home as a member of the new Oras combining two brands with the ability to achieve market Group. The acquisition brought together two complementary positions and to gain synergies in sales, operations and product companies with a clear strategic fit. portfolios that would have been unthinkable alone. The histories of Oras and Hansa are entwined – in retrospect, Oras Group now has annual net sales amounting to a it might be said that the two were meant to be together. Before quarter of a billion euro, organizations in twenty countries joining forces, both companies had a history of manufacturing and 1,400 employees. The new group has benefited from clear high-quality products, owning respected brands and remaining synergies in distribution channel expansion, in the utilization competitive by maintaining strong market positions in of complementary product portfolios and in operational complementary markets. Oras had an established leadership economies of scale. Although the speed of implementation position in the Nordic markets and Hansa was a leading brand varies across functions, the key integration is occurring in Continental Europe. The creation of the new Oras Group within the company culture. For Oras Group to succeed, the doubled the size of the company. management must steer the company in a unified, consistent Integration of Oras and Hansa began as soon as the manner and all personnel must work towards common goals in transaction was closed. Since October 2013, decisive steps have line with shared values. been taken towards the ultimate goal of one company with Oras Group’s two most valuable assets are its brands: the red two strong brands. Investigating, analyzing and understanding hot Oras and the cool blue Hansa – reflecting the color coding the stand-alone status quo at Oras and Hansa marked the for temperature control throughout the history of faucets!

Annual Review 2013 15 Oras Group Portfolio companies

Portfolio companies

www.oras.com www.hansa.com Oras Group – from a Nordic leader to a major European faucet provider

ras Group is a significant European provider of sanitary fittings: the market leader in the Nordics and a leading company in Continental Europe. On 30 September 2013 Oras acquired Hansa Metallwerke AG, a German faucet manufacturer, Owith its subsidiaries, and together the companies form the new Oras Invest’s Oras Group. Through this acquisition Oras Group became ownership a true European player in the industry, with a strategic position in several European markets and with the economies of scale 100% needed to succeed in the increasingly tough competition. Since 1945 Overview of 2013 Net sales for Oras Group totalled EUR 156.7 million (EUR 131.1 million). The operating profit of the company was EUR 8.8 million, or 5.6% of net sales (EUR 17.2 million and 13.1%). Despite a declining total market, Oras Group achieved growth in electronics and smart faucets. This meant growth in the strategically most important product groups, which strengthened the strategic position of the company. The development was especially positive in Norway and Sweden.

16 facts&figures Development of Oras Group’s 2013 marked a significant milestone in the history of the company for two reasons. Firstly, during the year Oras made a turnover 2009–2013 significant product development effort and launched a new product family Oras Optima, which represents the first wave of a new standard in sanitary fittings. The product family features EUR million smart, user friendly, water and energy saving solutions that 140 build on the distinctive capabilities of Oras Group. The initial response from the market is extremely positive. 120 Secondly, the company doubled its size through the ­acquisition of Hansa Metallwerke AG, a German faucet 100 manufacturer, and its subsidiaries. Together the companies now form the new Oras Group, as of 30 September, 2013. 80 Net sales 60 40

EUR 156.7 million 20

During the last quarter of 2013 a significant effort was made 0 by some fifty managers in the Group who participated in the 09 10 11 12 13 work of Oras Group integration workflow teams. Over the course of three months the ways of working at both companies were analyzed and best practices were identified. Future outlook Oras Group in brief No growth is expected in the main markets. There are some signs of improvement in the European economy, but the Net sales: EUR 156.7 million positive impact is likely to be seen with a lengthy delay on the Operating profit excl. non-recurring items: market of sanitary fittings. During the prolonged economic EUR 16.3 million crisis the market has become increasingly fragmented and Personnel end of the period: 1,400 new distribution channels, brands and operation models have Chairman: Jari Paasikivi emerged in the European market. CEO: Pekka Kuusniemi Through the integration of Oras and Hansa, Oras Group takes a leap from Nordic market leadership towards a position as a major European faucet provider and considerably Oras Group (pro forma 2013) strengthens its position in Continental Europe. Both Oras and Net sales: EUR 252.7 million Hansa brands will be further strengthened through careful Operating profit:EUR 22.1 million implementation of market specific strategies.

Annual Review 2013 17 Uponor

Portfolio companies

www.uponor.com Uponor – an international provider of HVAC, building services and infrastructure technology

ponor is one of the leading providers of indoor climate and plumbing systems for buildings and the utility infrastructures, and its products are sold in approximately 100 countries. The Group’s business is divided into three segments: Building USolutions – Europe, Building Solutions – North America, and Uponor Infra. Overview of 2013 The year 2013 was featured by the establishment of Uponor Infra Ltd, a new subsidiary company to Uponor, owned jointly by Uponor Corporation (55.3%) and KWH Group (44.7%). It began operating on 1 July 2013, thus merging Uponor’s Infrastructure Oras Invest’s Solutions and KWH Pipe’s infrastructure businesses into one ownership company. A key investment in 2013 was the expansion of manufac- 23% turing capacity in the Apple Valley factory in the U.S., increasing Since 1999 manufacturing capacity by some 15%. Major investment funds were also allocated into the manufacturing of the new seamless aluminium composite pipe and other new technologies within Building Solutions – Europe. The European building and construction markets remained challenging throughout most of 2013, influencing both the building solutions and infrastructure solutions businesses. In North America, the business environment remained healthy throughout the year, boosting new housing development in the region.

18 Uponor’s 2013 net sales from continuing operations simultaneously being alert for new business opportunities. If amounted to EUR 906.0 million, up 11.6% year on year. In the outlook remains weak, further action to cut overheads and comparable terms, net sales went down by –1.5%. other costs may become necessary in selected markets. Building Solutions – Europe had unsatisfactory net sales The Group’s net sales and operating profit (excluding any development, reflecting the challenging market conditions in non-recurring items) are expected to improve from 2013. the continent. The reasonably strong development in the third quarter of 2013 weakened in the final quarter, and the situation was adversely affected by the product approval cancellation in France in the fourth quarter. Positive progress was recorded in Building Solutions – North facts&figures America throughout 2013, and record numbers were reached both in terms of sales and production. Uponor Infra’s net sales Largest shareholders 31 Dec 2013 grew as a result of the establishment of the new joint-venture business. The largest countries, in terms of net sales, and their 22.6% respective share of consolidated net sales, were as follows: Germany 15.9%, USA 15.8%, Finland 13.8%, Sweden 9.5%, and Canada 6.1%. Consolidated operating profit came to EUR 50.2 million, 7.1% down –13.0% from the previous year. The operating profit margin came to 5.5% of net sales, down from 7.1%. Operating 62.3% 4.0% 1.7% 1.3% Net sales 1.1%

EUR 906.0 million ■ Oras Invest Oy 22.6% ■ Varma Mutual Pension Insurance Company 7.1% profit development was primarily driven by the Uponor Infra ■ Nordea Nordic Small Cap Fund 4.0% integration and transaction-related costs and the impact of the ■ Nordea Nordenfonden 1.7% French product approval case. ■ Ilmarinen Mutual Pension Insurance Company 1.3% ■ Sigrid Jusélius Foundation 1.1% Outlook ■ Others 62.3% The economic outlook in Uponor’s key markets is twofold for 2014: North America – the U.S., in particular – is expected to stay lively and offer room for reasonable construction industry Uponor in brief growth. The European markets, however, are expected to Net sales: EUR 906.0 million develop in a rather steady manner, but offering no real growth Operating profit:EUR 50.2 million in the building solutions or in the infrastructure solutions Average number of personnel: 3,649 markets. The development will continue to be fragile, and there Managing director: Jyri Luomakoski is a risk that short-term variances to the general trend may take place. Chairman of the Board: Jari Paasikivi Uponor will continue to promote its value-adding sustainable solutions, which have a tailwind of significant global Oras Invest Ltd’s holding megatrends. Uponor has kept on renewing its offering portfolio in Uponor Ltd over the last few years and expects the new products and systems solutions to offer possibilities for increased sales and Since 1999 profitability. Proportion of share capital: 22.6% The management continues to keep a sharp eye on the Proportion of voting rights: 22.6% company’s focus, cost-efficiency, and cash flow, in order to Market value of ownership: EUR 235.7 million secure a solid financial position in the longer term, while

Annual Review 2013 19 Tikkurila

Portfolio companies

www.tikkurilagroup.com Tikkurila has offered sustainable beauty since 1862

ikkurila offers a broad range of paints for consumers and professionals for surface protection and decoration. The product offering includes, among others, interior paints, lacquers, and effect products, exterior products for wood, masonry, and metal Tsurfaces, as well as a broad range of paint-related services. Tikkurila’s brands are among the best-known paint brands within their operating areas. Tikkurila is a strong regional player which focuses on the Nordic countries and Eastern Europe. The most important markets are Russia, Sweden, Finland, and Poland, which account for approximately 80% of the Group’s revenue. Tikkurila is the Oras Invest’s market leader in decorative paints in Russia, Sweden, Finland, ownership and the Baltic countries. Tikkurila relies on strong brands and sustainable products which support the life cycle philosophy. 18% A strong quality image and market leadership are the company’s Since 2010 key competitive advantages. Tikkurila has production in eight countries. The highest production capacity is located in Russia, which is the largest single market of Tikkurila. Overview of 2013 In 2013, demand for paint continued to be fairly weak, which manifested as lower sales volumes in all Tikkurila’s main markets. The decrease in sales was due to the uncertain economic situation, decline in construction, slower home sales,

20 and cautious spending by consumers. Economic growth in facts&figures Tikkurila’s key markets was fairly weak, estimated at less than one percent. Furthermore, weakened currencies reduced the Distribution of the largest share- euro-denominated revenue. On the other hand, the favorable development of the sales mix and price increases implemented holders in Tikkurila at year-end in certain markets had a positive impact on revenue which in 2013 18.1% total was slightly lower than the level of the comparison period. In 2013, operative profitability was at the same, excellent level than in the comparison period. Profitability was supported, 9.1% in particular, by the restructuring measures in recent years, streamlining of operations and the expense level which was 5.6% lower than in the comparison period. Marketing investments were slightly higher than in the comparison period, accounting 63.6% 3.6% 14% of revenue. The operating profit margin, which was

Net sales ■ Oras Invest Oy 18.1% ■ Ilmarinen Mutual Pension Insurance Company 9.1% EUR 653.0 million ■ Varma Mutual Pension Insurance Company 5.6% ■ Mandatum Life Insurance Company Ltd. 3.6% 11% at the Group level, improved clearly in all reporting ■ Other 63.6% segments, with the exception of Russia driven SBU East where the result was burdened by decreased revenue, a higher expense level and weaker currencies. Tikkurila in brief Future Outlook Net sales: EUR 653.0 million The economic situation in Europe is expected to improve Operating profit excl. non-recurring items: moderately in 2014. Considerable regional differences are EUR 72.6 million forecasted between Tikkurila’s different markets in private Average number of personnel: 3,262 consumption and construction volumes in 2014, but overall Chairman: Jari Paasikivi growth is estimated to remain rather weak. The GDPs in Tikkurila’s key markets, i.e. Russia, Sweden, Finland, and Poland, CEO: Erkki Järvinen are expected to grow approximately two percent, on average, in 2014. Based on these estimates, no considerable change is Oras Invest Ltd’s holding expected in the demand for Tikkurila’s products compared in Tikkurila to last year. Cost inflation is expected to continue, and investments in sales, marketing and innovation activities are Since 2010 forecasted to increase the fixed cost level. Raw material prices Share of share capital: 18.1% are forecasted to remain stable. Tikkurila expects its revenue Share of voting rights: 18.1% and EBIT excluding non-recurring items for the financial year Market value of ownership: EUR 158.6 million 2014 to remain at the 2013 level.

Annual Review 2013 21 Kemira

Portfolio companies

www.kemira.com www.waterfootprintkemira.com Delivering a profitable water pure-play

emira is a global chemicals company serving customers in water-intensive industries. We provide expertise and chemicals that improve our customers’ water, energy and raw material efficiency. Our focus is on pulp & paper, oil & Kgas, mining and water treatment. In 2012, Kemira had annual revenue of EUR 2.2 billion and around 4,900 employees. Kemira shares are listed on the NASDAQ OMX Helsinki Ltd. Overview of 2013 Kemira accomplished significant changes to transform the Oras Invest’s company to become a profitable water pure-play. Kemira ownership presented its sharpened strategy in April, making choices regarding the role of its businesses, geographical reach, 18% growth and innovation. Kemira has a unique strategy offering Since 2007 chemicals to its customers in businesses related to water quality and quantity management. Kemira divested several of its non-core businesses: the shares in the Sachtleben joint venture, ChemSolutions formic acid business and coagulant business in Brazil. On the other hand, the acquisition of 3F strengthened our position in the water quality and quantity markets. Towards the end of 2013, Kemira strengthened its asset footprint by finalizing the Nanjing factory investment in China, and Dormagen factory in Germany. These investments strengthen Kemira’s position in

22 the Chinese paper markets, and sustain the leadership position in the municipal and industrial water treatment market in EMEA. In 2012, Kemira set a target of achieving EUR 60 million cost savings through the restructuring program “Fit for Growth” by the end of 2014. The program is progressing as planned and nearly reached the full cost savings run rate at the end of 2013. “Fit for Growth” measures have significantly reduced complexity and strengthened Kemira’s balance sheet. Kemira also continued to implement Lean manufacturing that is facts&figures driving for continuous efficiency improvement and increased competitiveness through leaner processes and reduced costs. Distribution of the largest share- Furthermore, the optimization of Kemira’s manufacturing network resulted in 18 site and 2 production plant closures or holders in Kemira at year-end 2013 divestments during the year. 18.2% Kemira’s organic revenue growth was 3%, driven by higher sales volumes in the Paper segment. In the Oil & Mining, revenue in local currencies remained flat as recovered sales volumes, especially in North America were offset by continued market softness especially related to chemicals used in the 16.7% mining industry. The revenue of Municipal & Industrial was 54.4% partly impacted by the implementation of a new business model, expected to improve segment’s profitability. Kemira’s 6.1% 2.5% 2.1%

Net sales ■ Oras Invest Ltd 18.2% ■ Solidium Oy 16.7% EUR 2,229.1 million ■ Varma Mutual Pension Insurance Company 6.1% ■ Ilmarinen Mutual Pension Insurance Company 2.5% operative EBIT increased 6% driven by higher sales volumes and ■ Kemira Oyj 2.1% fixed costs savings related to the “Fit for Growth” restructuring ■ Others 54.4% program. Kemira’s operative ROCE improved significantly to 11.9% (10.0%) during the year. In addition, Kemira generated over EUR 200 million of cash flow from the operative activities and reduced the net debt by some 15% to EUR 456 million (532). Kemira in brief Future outlook Net sales: 2,229.1 Kemira will continue to focus on improving its profitability and reinforcing the positive cash flow. The company will also Operating profit:164.2 continue to invest in order to secure future growth in the water Average number of personnel: 4,632 quality and quantity management. Chairman of the Board: Jukka Viinanen In 2014, Kemira expects the revenue in local currencies and President and CEO: Wolfgang Büchele excluding acquisitions and divestments to be slightly higher than in 2013 and the operative EBIT to be higher than in 2013. Oras Invest Ltd’s holding in Kemira Since 2007 KEMIRA GUIDANCE DEFINITION Share of share capital: 18.2% Slightly higher/lower from 0% to 5% or from 0% to –5% Share of voting rights: 18.2% Higher/lower from 5% to 15% or from –5% to –15% Market value of ownership: EUR 343.9 million Significantly higher/lower more than 15% or less than –15%

Annual Review 2013 23 Long-term objectives

Long-term objectives The total shareholder return is generated by the increase of net asset value and dividend yields. Oras Invest aims to reach total shareholder return in excess of the cost of capital over a business cycle.

24 Summary of Financial Statements

Summary of Financial Statements

Oras Invest Ltd’s Annual Review and full Financial Report 2013 are available in PDF-format in English and Finnish on the company website orasinvest.fi

Summary of Financial Statements Parent company income statement ...... 26 Parent company balance sheet ...... 27 Parent company cash flow statement ...... 28 Board of Directors ...... 30 Personnel ...... 31 Corporate Governance ...... 32

Annual Review 2013 25 Parent company income statement

Summary of Financial Statements

Parent company income statement fas

Oras Invest Ltd 1 Jan – 31 Dec 1 Jan – 31 Dec (EUR) 2013 2012

Net sales 949,998.00 1,650,000.00

Personnel expenses 745,639.07 772,752.56 Depreciation 90,134.86 93,958.34 Other operating expenses 802,165.14 909,721.55

Operating profit –687,941.07 –126,432.45

Financial income and expenses 23,578,242.42 22,300,113.27

Profit before extraordinary items 22,890,301.35 22,173,680.82

Extraordinary items 4,600,000.00 6,000,000.00

Profit before taxes 27,490,301.35 28,173,680.82

Appropriations 1,888.20 –1,888.20

Income taxes –121,851.63 –64,127.13

Profit for the financial period 27,370,337.92 28,107,665.49

26 Parent company balance sheet

Summary of Financial Statements

Parent company balance sheet fas

Oras Invest Ltd 31 Dec 31 Dec (EUR) 2013 2012

ASSETS

Non-current assets Intangible assets 32,816.53 51,378.76 Tangible assets 489,350.61 560,923.24 Investments in Group companies 21,942,155.51 21,942,155.51 Other investments 605,460,504.44 605,460,504.44 627,924,827.09 628,014,961.95

Current assets Long-term receivables 4,823,677.58 8,219,580.93 Current receivables 2,755,283.44 3,518,132.25 Cash and cash equivalents 53,389.46 47,063.55 7,632,350.48 11,784,776.73

Total assets 635,557,177.57 639,799,738.68

SHAREHOLDERS' EQUITY AND LIABILITIES

Shareholders' equity Share capital 6,520,500.00 6,520,500.00 Retained earnings 451,059,616.62 424,451,666.13 Profit for the year 27,370,337.92 28,107,665.49 484,950,454.54 459,079,831.62

Accumulated appropriations 1,888.20

Liabilities Non-current liabilities 78,445,483.98 121,792,133.32 Current liabilities 72,161,239.05 58,925,885.54 150,606,723.03 180,718,018.86

Total equity and liabilities 635,557,177.57 639,799,738.68

Oras Invest Ltd’s Annual Review and full Financial Report 2013 are available in PDF-format in English and Finnish on the company website orasinvest.fi

Annual Review 2013 27 Parent company cash flow statement

Summary of Financial Statements

Parent company cash flow statement fas

Oras Invest Ltd 1 Jan – 31 Dec 1 Jan – 31 Dec (EUR 1,000) 2013 2012

CASH FLOW FROM OPERATIONS

Profit before taxes and extraordinary items 22,890 22,174 Non-cash adjustments Depreciation and impairment 90 94 Financial income and expense –23,578 –22,300

Cash flow from operations before change in working capital –598 –32

Change in trade and other non-interest bearing receivables (+/–) 8 –1 Change in trade and other non-interest bearing liabilities (–/+) –150 96

Cash flow from operations before financial items and taxes –740 63

Interests paid and other financial items –4,041 –7,526 Interests received 3 16 Dividends received 27,350 29,217 Income taxes paid –152 –1,503

Cash flow from operations 22,420 20,267

28 Summary of Financial Statements

Oras Invest Ltd 1 Jan – 31 Dec 1 Jan – 31 Dec (EUR 1,000) 2013 2012

CASH FLOW FROM INVESTMENTS

Investments in intangible and tangible assets –3

Cash flow from investments 0 –3

CASH FLOW FROM FINANCING

Repayment of non-current loans –29,400 –19,800 Increase of current loans 3,000 10,739 Repayment of current loans –15 –16,000 Group contribution 5,500 6,200 Dividends paid –1,499 –1,499

Cash flow from financing –22,414 –20,360

Net change in cash and cash equivalents 6 –96

Cash and cash equivalents at 1 January 47 143 Cash and cash equivalents at 31 December 53 47

Annual Review 2013 29 Board of Directors

Board of Directors

The Chairman of the Board Eerik Paasikivi Pekka Paasikivi b. 1983, Finnish citizen, Student at the Turku b. 1944, Finnish citizen, B.Sc. (Eng) School of Economics Board memberships: Board memberships: – Chairman of the Board, Oras Invest Ltd – Member of the Board, Oras Invest Ltd since 2004 since 2010 – Member of the Board, Foundation of – Member of the Board, Erkki Paasikiven säätiö Economic Education since 2003 (foundation) since 2008, Vice Chairman of – Chairman of the Board, Kemira, 2007–2012 the Board since 2010 – Chairman of the Board, Wate Oy since 2007

Risto Paasikivi Vesa Puttonen, Dr. Frank Stangenberg-Haverkamp b. 1976, Finnish citizen, BA International b. 1966, Finnish citizen, D.Sc. (Econ.) b. 1948, German citizen, University of Freiburg/Germany, Business (RBS London) Board memberships: M.Sc. (Econ.), Ph.D. Board memberships: – Chairman of the Board, Finnish Hockey Board memberships: – Member of the Board, Oras Invest Ltd since League since 2013 – Chairman of the Executive Board, E. Merck KG, 2012 – Member of the Board, Taaleritehdas Darmstadt, Germany since 2014 – Member of the Board, Oras Ltd since 2010 since 2013 – Member of the Board Oras Invest Ltd since 2012 – Member of the Board, Erkki Paasikiven säätiö – Member of the Board, Suomi Mutual – Member of the Supervisory Board, M.A.X. Automation (foundation) since 2010 since 2013 AG, Duesseldorf/Germany until Nov 5, 2013 – Member of the Board, NextStone since 2007 – Member of the Board, Finnish Foundation for – Chairman of the Board of Travel Asset Group Ltd., Share Promotion since 2011 London/UK since 2007 – Member of the Board, Rocla since 2007 – Chairman of the Supervisory Board, Fortas AG, – Member of the Board, Oras Invest Ltd Roesrath/Germany since 2000 since 2006 30 Personnel

Personnel President and CEO Jari Paasikivi b. 1954, Finnish citizen, M.Sc. (Econ) Board Memberships: – Chairman of the Board, Kemira since 2014 – Member of the Board, Varma Mutual Pension Insurance Company since 2014 – Chairman of the Board, Oras Ltd since 2013 – Chairman of the Board, Technology Industries of Finland since 2013 – Member of the Board, Confederation of Finnish Industries since 2013 Kaj Paasikivi – Chairman of the Board, Tikkurila since 2010 b. 1968, Finnish citizen, B.Sc. (Business Administration, Woodbury University), MBA (Helsinki School of Economics) Board memberships: – Vice Chairman of the Board, Oras Ltd since 2013 – Member of the Board, Oras Invest Ltd since 2010 COO – Chairman of the Board, NextStone since 2007 Annika Paasikivi – Member of the Board, Oras Ltd since 2006 b. 1975, Finnish citizen, BA International Business (EBS London) M.Sc. Global Politics (University of Southampton) Board Memberships: – Deputy Chair of the Board, Uponor since 2014 – Member of the Board, Oras Ltd since 2012 – Member of the Board, Finow Ltd since 2007 – Member of the Board, Oras Invest Ltd, 2004–2011

Christoph Vitzthum b. 1969, Finnish citizen, M.Sc. (Econ) President and CEO, Oy Karl Fazer Ab since 2013 Board memberships: – Member of the Board, Oras Invest Ltd since 2013 – Member of the Board, NCC since 2010 CFO Executive Assistant Tuula Ylhäinen Susanne Cronstedt b. 1955, Finnish citizen, M.Sc. (Econ.) b. 1965, Finnish citizen, QBA

Annual Review 2013 31 Corporate Governance

Corporate Governance

ras Invest Ltd is a private limited company the annual general meeting at which they were elected and registered in Finland. The company follows good expiring at closing of the following annual general meeting. corporate governance practices based on the The annual general meeting held in April 2013 elected the Finnish Limited Liability Companies Act and the following six members to the Board of Directors: company’s Articles of Association. Pekka Paasikivi, Eerik Paasikivi, Kaj Paasikivi, Risto Paasikivi, Vesa OOras Invest Ltd is the parent company of Oras Invest Group. Puttonen and Frank Stangenberg-Haverkamp. In an Extra­ In that capacity, it is responsible for the development of the ordinary General Meeting held on 21. 11. 2013 Christoph Vitzthum Group, prepares the Group’s financial reporting and supports was elected to the Board. the Group in financial, legal and management matters. The Group consists of a number of independent subgroups Chief Executive Officer and companies. The decisions regarding their operations are The Chief Executive Officer is appointed by the Board of taken by each company’s own decision-making bodies. Oras Directors. The CEO plans and manages the company’s Invest exercises its ownership through representatives elected business operations and bears responsibility for the company’s by its Board of Directors in the decision-making bodies of its day-to-day management in accordance with the decisions subsidiaries and associated companies. and instructions issued by the Board of Directors. It is the CEO’s duty to ensure that the company’s accounting procedures General Meeting of Shareholders comply with the applicable legislation and that the financial The highest authority in Oras Invest is exercised by the management is conducted in a reliable manner. shareholders at general meetings of shareholders. Under the Finnish Limited Liability Companies Act, decisions made by Salaries and Remuneration general meetings of shareholders include: The annual general meeting of shareholders confirms the –– Amendments to the Articles of Association remuneration of the members of the Board of Directors for one –– Adoption of the annual accounts year at time. The Board of Directors decides on the CEO’s salary –– Dividend distribution and benefits and it also confirms the salaries and benefits for –– Election of members of the Board of Directors and the other management. decision on their emoluments –– Election of the Corporation’s auditor and decision on Supervision audit fees Oras Invest’s auditors are Ernst & Young Oy, with Minna Toivonen Authorized Public Accountant, and Heikki Ilkka The Board of Directors Authorized Public Accountant. The auditors supply the In accordance with the Finnish Limited Liability Companies Act, company’s shareholders with the statutory auditor’s report on the Board of Directors is responsible for the management of the annual financial statements. The auditors also report on the company and the proper organization of its activities. The their observations to the company’s management and Board of Board’s main duty is to direct the company’s operations in such Directors. a way that, in the long run, the yield to shareholders is secured, while simultaneously taking the expectations of various stakeholders into account. Pursuant to the Articles of Association, the Board of Directors comprises a minimum of three and maximum of seven members, elected for a one-year term starting at closing of

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Executive Assistant Susanne Cronstedt Tel. +358 40 350 5402 www.orasinvest.fi