Listing of EUR 35,000,000 Senior Secured Bonds due 2018 The Bonds are represented by units in denominations of EUR 100,000

Transcription

1 Listing Prospectus 26 May 2015 Listing of EUR 35,000,000 Senior Secured Bonds due 2018 The Bonds are represented by units in denominations of EUR 100,000 On 30 May 2014, Elematic Oy Ab (currently Elematic Oyj) (the Issuer or the Company ) issued senior secured bonds with an aggregate nominal amount of EUR 35,000,000 (the Bonds ) mainly to domestic and international institutional investors. The Bonds are represented by units in denominations of EUR 100,000. The rate of interest of the Bonds is per cent per annum. This document (this document and the documents incorporated herein by reference jointly referred to as the Listing Prospectus ) has been prepared solely for the purpose of admission to listing of the Bonds to trading on regulated market on NASDAQ OMX Helsinki Ltd (the Helsinki Stock Exchange ) and does not constitute any offering of the Bonds. This Listing Prospectus has been drawn up in accordance with the Finnish Securities Markets Act (746/2012) (the Finnish Securities Markets Act ), the Decree of the Finnish Ministry of Finance on the Prospectus referred to in Chapters 3 to 5 of the Finnish Securities Market Act (1019/2012), the Commission Regulation (EC) No 809/2004, as amended, in application of the Annexes VI, IX and XIII thereof, and the regulations and guidelines of the Finnish Financial Supervisory Authority (the FIN-FSA ). The FIN-FSA, which is the competent authority for the purposes of Directive 2003/71/EC (as amended by Directive 2010/73/EU, the Prospectus Directive ) and relevant implementing measures in Finland, has approved this Listing Prospectus (journal number 35/ /2015) but assumes no responsibility for the correctness of the information contained herein. Application has been made for the Bonds to be admitted to public trading on the Helsinki Stock Exchange (the Listing ), and the Listing is expected to take place on or about 29 May Besides filing this Listing Prospectus with the FIN-FSA and the application to the Helsinki Stock Exchange, the Issuer has not taken any action, nor will it take any action to render the public offer of the Bonds or their possession, or the distribution of this Listing Prospectus or any other documents relating to the Bonds admissible in any other jurisdiction than Finland requiring special measures to be taken for the purpose of public offer. The Bonds have not been, and will not be, registered under the U.S. Securities Act 1933, as amended (the Securities Act ) or with any securities regulatory authority of any state of the United States. The Bonds may not be offered, sold, pledged or otherwise transferred directly or indirectly within the United States or to, or for the account or benefit of, U.S. Persons (as defined in Regulation S under the Securities Act ( Regulation S )), except to a person who is not a U.S. Person (as defined in Regulation S) in an offshore transaction pursuant to Regulation S. The Issuer or the Bonds have not been assigned any credit ratings at the request or with the co-operation of the Issuer in the rating process. Investment in the Bonds involves certain risks. The principal risk factors that may affect the ability of the Issuer to fulfil its obligations under the Bonds are discussed under Risk Factors below.

2 IMPORTANT INFORMATION In this Listing Prospectus, Elematic and the Group refer to Elematic Oyj and its consolidated subsidiaries, except where the context may otherwise require. All references to the Issuer or the Company refer to Elematic Oyj. This Listing Prospectus should be read in conjunction with all documents which are deemed to be incorporated herein by reference and such documents form part of this Listing Prospectus. See Documents Incorporated by Reference. Pareto Securities AB was acting for Elematic as the arranger and lead manager in the issuance of the Bonds. Pareto Securities AB was not acting for anyone else in connection with the Bonds issue. Without prejudice to any obligation of Elematic to publish a supplement to prospectus pursuant to applicable rules and regulations, neither the delivery of this Listing Prospectus nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of Elematic since the date of Listing Prospectus or that the information herein is correct as of any time subsequent to the date of Listing Prospectus. In making an investment decision, each investor is advised to rely on their examination, analysis and enquiry of Elematic and the Terms and Conditions of the Bonds, including the risks and merits involved. Elematic or any of its respective affiliated parties or representatives is not making any representation to any offeree or subscriber of the Bonds regarding the legality of the investment by such person. Investors are advised to make their independent assessment of the legal, tax, business, financial and other consequences of an investment in the Bonds. No person has been authorised to give any information or to make any representation not contained in or not consistent with this Listing Prospectus or any information supplied by Elematic or such other information as is in the public domain and, if given or made, such information or representation should not be relied upon as having been authorised by Elematic Nothing contained in this Listing Prospectus is, or shall be relied upon as, a promise or representation by Elematic as to the future. Investors are advised to inform themselves of any press releases published by Elematic since the date of this Listing Prospectus. The distribution of this Listing Prospectus may, in certain jurisdictions, be restricted by law, and this Listing Prospectus may not be used for the purpose of, or in connection with, any offer or solicitation by anyone in any jurisdiction in which such offer or solicitation is not authorised or to any person to whom it is unlawful to make such offer or solicitation. No actions have been taken to register or qualify the Bonds, or otherwise to permit a public offering of the Bonds, in any jurisdiction outside of Finland. Elematic expects persons into whose possession this Listing Prospectus comes to inform themselves of and observe all such restrictions. Elematic does not accept any legal responsibility for any violation by any person, whether or not a prospective purchaser of Bonds is aware of such restrictions. In particular: the Bonds may not be offered, sold, resold, transferred or delivered, directly or indirectly, in or into the United States, Australia, Canada, Hong Kong, Japan, Singapore or any other jurisdiction in which it would not be permissible to offer the Bonds; and this Listing Prospectus may not be sent to any person in the aforementioned jurisdictions. This Listing Prospectus has been prepared in English only. The Bonds are governed by and construed in accordance with the laws of Finland. Any dispute arising in relation to the Bonds shall be settled nonexclusively by Finnish courts. The Bonds Agent and the Bondholders may take proceedings against the Issuer in any court which may otherwise exercise jurisdiction over the Issuer or any of its assets. 1

3 CONTENTS IMPORTANT INFORMATION...1 RISK FACTORS...5 Risks Related to General Market Conditions and Strategy...5 Risks relating to Elematic s Business Operations...6 Legal risks...9 Financials risks...10 Risks relating to the Bonds...12 RESPONSIBILITY STATEMENT...20 GENERAL INFORMATION AND INFORMATION ON THE BONDS...21 ADDITIONAL INFORMATION...22 THE OFFERING...24 TERMS AND CONDITIONS OF THE NOTES DEFINITIONS AND CONSTRUCTION Definitions Construction STATUS OF THE BONDS USE OF PROCEEDS CONDITIONS PRECEDENT TRANSFER RESTRICTIONS BONDS IN BOOK-ENTRY FORM RIGHT TO ACT ON BEHALF OF A BONDHOLDER PAYMENTS IN RESPECT OF THE BONDS INTEREST REDEMPTION AND REPURCHASE OF THE BONDS Redemption at maturity Group Company s purchase of Bonds Voluntary Total Redemption Voluntary Partial Prepayment upon a listing of the Issuer Mandatory Partial Prepayment upon a Mandatory Cash Sweep Event Mandatory Repurchase due to minimum outstanding Bond amount Change of Control Put Option Change of Control Call Option General TRANSACTION SECURITY Granting of the Transaction Security Release of Transaction Security Enforcement of Transaction Security INFORMATION TO BONDHOLDERS

4 12.1. Information from the Issuer Information from the Bonds Agent Publication of Finance Documents GENERAL UNDERTAKINGS General Distributions Listing of the Bonds Nature of Business Financial Indebtedness Disposal of Assets Negative Pledge Clean Down Period Dealings with Related Parties INCURRENCE COVENANT Incurrence Test Calculation Adjustments EVENTS OF DEFAULT AND ACCELERATION OF THE BONDS Non-Payment Other Obligations Cross-Acceleration Insolvency Insolvency Proceedings Mergers and Demergers Creditors Process Impossibility or Illegality Continuation of the Business Acceleration of the Bonds ALLOCATION OF PROCEEDS DECISIONS BY BONDHOLDERS BONDHOLDERS MEETING WRITTEN PROCEDURE AMENDMENTS AND WAIVERS APPOINTMENT AND REPLACEMENT OF THE BONDS AGENT Appointment of the Bonds Agent Duties of the Bonds Agent Limited liability for the Bonds Agent Replacement of the Bonds Agent APPOINTMENT AND REPLACEMENT OF THE ISSUING AGENT AND THE PAYING AGENT NO DIRECT ACTIONS BY BONDHOLDERS PRESCRIPTION

5 25. NOTICES TAXATION GOVERNING LAW AND JURISDICTION...61 INFORMATION ABOUT THE ISSUER...62 General...62 History and Development of Elematic...62 Business Overview...63 Organisational Structure...64 Governmental, Legal and Arbitration Proceedings...64 Material Contracts...65 FINANCIAL AND TREND INFORMATION...70 BOARD OF DIRECTORS AND MANAGEMENT...71 Board of Directors...71 Executive Board...71 Conflict of Interest...72 Corporate Governance...72 Business Address...72 SHARE CAPITAL AND OWNERSHIP STRUCTURE...73 INFORMATION ON THE GUARANTORS AND THE SECURITY PROVIDERS...74 DOCUMENTS INCORPORATED BY REFERENCE...77 DOCUMENTS ON DISPLAY

6 RISK FACTORS Investors considering investment in the Bonds should carefully review the information contained in this Listing Prospectus and, in particular, the risk factors described below. Factors possibly affecting an investment decision are also discussed elsewhere in this Listing Prospectus. Investing in the Bonds involves inherent risks. Should one or more of the risk factors described herein materialise, it may have a material adverse effect on Group s business, financial condition, results of operations and future prospects and, thereby, on Group s ability to fulfil its obligations under the Bonds as well as the market price and value of the Bonds. As a result, investors may lose part or all of their investments. In this section, a summary of certain risk factors are illustrated, namely general risks pertaining to the Group s business operations and material risks relating to the Bonds as financial instruments. This description is based on information known and assessed at the time of preparing this Listing Prospectus and, therefore, the description of the risk factors is not necessarily exhaustive. The risks involved in an investment in the Bonds are not limited to the factors identified below and the sequence in which the following risk factors are listed is not an indication of their likelihood to occur or of the extent of their commercial consequences. All investors should make their own evaluations of the risks associated with an investment in the Bonds and consult with their own professional advisers if they consider it necessary. Risks Related to General Market Conditions and Strategy Uncertain global economic and financial market conditions could adversely affect Elematic s business, results of operations, financial condition, liquidity, and capital resources The global credit crisis and the subsequent global recession that began in 2008 have had an adverse effect on general business conditions, increased unemployment and lowered business and consumer confidence. Despite the aggressive measures taken by various governmental and regulatory authorities as well as central banks around the world, the economic recovery has been slow. Recently, the general economic and financial market conditions in Europe and other parts of the world have repeatedly undergone significant turmoil due to, among other factors, the on-going sovereign debt crisis in certain European countries, particularly certain euro member countries including Greece, Italy, Portugal and Spain. It is difficult to make predictions as to how the market conditions will develop, as they are impacted by macro movements of the financial markets and many other factors, including the stock, bond and derivatives markets as well as measures taken by various governmental and regulatory authorities and central banks, over which Elematic has no control. Uncertainty remains in the global market and it cannot be ruled out that the global economy could fall back into a recession, or even a depression, that could be deeper and longer lasting than the recession experienced in the past years. Changes in the general market conditions can have a material adverse effect on Elematic s business, financial position, results of operations and future prospects and thereby, on Elematic s ability to fulfil its obligations under the Bonds as well as the market price and value of the Bonds. The economics in the various markets in which Elematic operates have been adversely affected by the uncertain global economic and financial market conditions. Economic slowdown or recessions, regardless of its depth, or any other negative developments may affect Elematic s business in a number of ways including among other things, the income, wealth, liquidity, business and/or financial condition of Elematic. Negative economic and financial developments of the kind described above may also affect Elematic s customers and their customers. In addition to Elematic s customers and their customers, the aforementioned negative economic and financial developments may affect Elematic s suppliers. Hence, abovementioned negative economic and financial developments can have a material adverse effect on Elematic s ability to fulfil its obligations under the Bonds as well as the market price and value of the Bonds. Failure of executing Elematic s strategy or failure of the strategy itself may adversely affect Elematic s growth prospects and profitability in the future Elematic operates globally producing pre-cast concrete machinery and systems and having sales in over 100 countries. Elematic s strategic objective is to continue to innovate and introduce in geographies where value applied to innovation, which yields productivity improvements and labour cost savings for customers. 5

7 Profitable growth is being sought through focusing on customer maintenance in addition to solicitation of new customers, utilizing sales force comprised of direct sales and multiple agents and expanding the range of clientele in the growing markets especially in Asia and Russia. The successful implementation of Elematic s business strategy will depend upon a number of factors, many of which are at least in part outside of Elematic s control. Elematic s failure in implementing the strategy or failure to meet the financial goals implied by the strategy can have a material adverse effect on Elematic s business, financial position, results of operations and future prospects and thereby, on Elematic s ability to fulfil its obligations under the Bonds as well as the market price and value of the Bonds. In addition, even if Elematic succeeds in implementing its business strategy, this may not improve its results of operations. Elematic may also decide to amend its business strategy and/or adapt its business strategy. This can have a material adverse effect on Group s business, financial position, results of operations and future prospects and thereby, on Elematic s ability to fulfil its obligations under the Bonds as well as the market price and value of the Bonds. Elematic operates in a highly competitive industry The pre-cast concrete machinery industry is highly competitive and includes many global companies, some of which have achieved substantial market share for their products. Although Elematic has only few competitors who challenge it across all of its product segments, the Company faces competition from a number of companies in most of its product segments, especially in wall technology segment. There can be no assurance that additional competitors will not enter Elematic s existing markets or that Elematic will be able to compete successfully against existing or new competitors. Increased competition in the markets for Elematic s products may also force Elematic to reduce its prices to remain competitive, which could cause its gross margin to decline if it is unable to offset price reductions with comparable reductions in its cost of sold machinery. If Elematic s gross margin declines, its profitability could decline and Elematic could incur operating losses that it may be unable to fund or sustain for extended periods of time, if at all. This can have a material adverse effect on Group s business, financial position, results of operations and future prospects and thereby, on Elematic s ability to fulfil its obligations under the Bonds as well as the market price and value of the Bonds. Risks relating to Elematic s Business Operations Risks relating to Project Business Modell Elematic estimates the manufacturing and planning costs in its offers to its customers. However, there can be no assurance that Elematic s estimates would be right at the time of the manufacturing due to e.g. lack of machinery or facilities in the technical specification of the project, pure calculation errors, inability to supply the tailor-made products offered, project delays leading to penalties and failures in the start-up of a plant. If any of the abovementioned or other causes lead to unexpected costs, it can have a material adverse effect on Group s business, financial position, results of operations and future prospects and thereby, on Elematic s ability to fulfil its obligations under the Bonds as well as the market price and value of the Bonds. Key personnel Elematic s development depends largely on management team and key personnel staying employed with the Group. The loss of the work contribution of a person belonging to the key employees and having comprehensive knowledge of the industry in general and of Elematic in particular can have a material adverse effect on Elematic s business, financial position, results of operations and future prospects and thereby, on Elematic s ability to fulfil its obligations under the Bonds as well as the market price and value of the Bonds. It cannot be excluded that such key personnel will leave the Group in the future, or that they will take up employment with a competing business, which could have a material adverse effect on Elematic s business, financial position, results of operations and future prospects and thereby, on Elematic s ability to fulfil its obligations under the Bonds as well as the market price and value of the Bonds. Group success also depends, to a great extent, on its ability to attract, retain and motivate quality employees throughout the organization. If Elematic is unable to attract, retain and motivate qualified employees at all levels, this could have a material adverse effect on Group s business, financial position, results of operations 6

8 and future prospects as well as on Elematic s ability to fulfil its obligations under the Bonds as well as the market price and value of the Bonds. Downward pressure on prices The markets for pre-cast concrete machinery are competitive, as mentioned above. Elematic competes with several large and mid-size companies as well as specialized manufactures. Long-term supply and demand imbalances in the market could drive down prices, and have an adverse effect on the Group s business. Economic cycles impact on the demand for, and prices of, end-use products in the industries that Elematic serves. Economic cycles have also an impact on the price development of Elematic s main raw material, steel. Elematic has not hedged steel price and any increases in it cannot, due to competition and based on agreements, be shifted to clients. Additionally, it is possible that Elematic does not succeed in pricing of its products and/or productivity development or that Elematic's existing or yet unknown competitors succeed better in their pricing or productivity development than Elematic. Materialization of any of the above risks could have a material adverse effect on Group s business, financial position, results of operations and future prospects as well as on Elematic s ability to fulfil its obligations under the Bonds as well as the market price and value of the Bonds. Failure to successfully identify and complete possible acquisitions or other restructurings or enter into joint-ventures Asia, including China and India, is one of the world s biggest growing markets for pre-cast concrete machinery. Elematic s current global customers are actively directing their growth towards these markets by, for example, forming joint ventures with the leading Asian pre-cast concrete machinery manufacturers. In addition, Elematic is studying growth opportunities in expanding its business further within the pre-cast concrete industry and seeks to expand the range of clientele in current and new market areas. As a part of its growth strategy Elematic may consider and execute acquisitions and joint ventures which are expected to boost Elematic s growth targets. Risks relating to completed and potential future acquisitions, joint-ventures or other restructurings of Elematic include unidentified liabilities of the acquired companies or businesses, the possible inability to successfully integrate and manage the acquired operations and personnel, as well as the risk that the anticipated economies of scale or synergies will not materialize. Additionally, Elematic cannot guarantee that it can successfully identify potential acquisition, joint-venture or other restructuring opportunities. The failure of Elematic to successfully identify and complete possible acquisitions, other restructurings or enter into joint-ventures, due to above mentioned reasons or otherwise, can have a material adverse effect on Elematic s financial position, results of operations and future prospects and thereby, on Elematic s ability to fulfil its obligations under the Bonds as well as the market price and value of the Bonds. Problems associated with operational efficiency and interruptions in business operations Elematic is dependent on the uninterrupted operation of its manufacturing facilities even though it mainly produces goods against received orders. However, a variety of conditions may cause customers to delay or cancel anticipated of confirmed orders and lower capacity utilization to align the production with the demand. In addition, some of the largest orders may take up to months before manufacturing can commence. Elematic s most important own manufacturing facilities are in Finland (Riihimäki, Akaa and Nastola). Elematic uses also sub-contractors to produce its machinery. If a facility is destroyed or closed for any reasons (for example a strike, fire or other accident) or the equipment is significantly damaged, or there are other severe interruptions in production, Elematic is likely to face delays in its ability to manufacture and distribute the affected products in a timely manner, which can have a material adverse effect on Elematic s financial position, results of operations and future prospects and thereby, on Elematic s ability to fulfil its obligations under the Bonds as well as the market price and value of the Bonds. 7

9 The failure or inability to protect Elematic s intellectual property rights Continuous innovation and improvement of products, production techniques and processes is one of the key elements for the success of Elematic s business operations. Intellectual property rights, especially patents, are an integral part of protecting Elematic s position in this regard. Elematic strives to establish and protect its intellectual property rights and to supervise the operations of third parties in the case of any intellectual property rights infringements. However, there is no certainty that Elematic s measures are sufficient in all situations. Competitors, suppliers and customers may infringe on Elematic s intellectual property rights and/or disputes may arise in relation to these. Failure to establish, manage and protect intellectual property rights, as well as any claims or demands associated with intellectual property rights, may have an adverse effect on Elematic s business, financial condition, results of operations and future prospects and, thereby on Elematic s ability to fulfil its obligations under the Bonds as well as the market price and value of the Bonds. Due to foreign legislation, Elematic may also fail to protect or be unable due to local regulations to protect its intellectual property rights in China and India. Both joint ventures ( JV ) have entered into agreements with Elematic in order to license technology and use Elematic s intellectual property rights in their businesses in China and in India. According to the JV agreement relating to the Chinese JV, if any new technology is developed by the employees of the Chinese JV during the operation of the JV, the value and ownership of such new technology shall be determined by the parties in accordance with applicable laws and regulations of China. Loss of one or more of Elematic s major agents Elematic operates in geographically diversified markets and uses agents to promote its products but offers and contracts with the clients are concluded by Elematic. Agents are not exclusive agents for Elematic, but are prohibited from promoting competitors products. Although agents can be replaced if necessary, they generally need some educating on Elematic s products which takes time. In addition, in the areas with most competition, new agents can be hard to obtain. Hence, loss of one or more of its agents, especially in Elematic s main markets could have an adverse effect on Elematic s business, financial condition, results of operations and future prospects and, thereby on Elematic s ability to fulfil its obligations under the Bonds as well as the market price and value of the Bonds. Issues relating to product safety and product liability The quality and safety of Elematic s products is critical to the success of its business. The consequences of quality or safety issues due to e.g. accidents caused by human error or sabotage could be severe. Even though Elematic s liability regarding end products is restricted to a certain extent, it cannot be ruled out that product safety or product liability claims would be made against the Group, especially against Elematic Inc. in the United States, which could disturb Elematic s operations. Such disturbances could have an adverse effect on Elematic s business, financial condition, results of operations and future prospects and thereby, on Elematic s ability to fulfil its obligations under the Bonds as well as the market price and value of the Bonds. In addition, to a certain extent, there are warranties granted by Elematic to its customers which in terms of duration goes further than the warranties from Elematic's suppliers in respect of the same goods, which means that Elematic in certain cases does not have a perfectly matched by back-to-back warranty from its supplier. Risks related to Elematic s operations in emerging markets Elematic has operations and customers world-wide, including in a number of emerging markets, such as Russia, China, India and Middle East. These markets are subject to greater political, economic and social uncertainties than countries with more developed institutional structures, and the risk of loss resulting from changes in law, economic or social upheaval and other factors may be substantial. Among the more significant risks of operating and investing in emerging markets are those arising from the introduction of trade restrictions, enforcement of foreign exchange restrictions and changes in tax laws and enforcement mechanisms. Such actions could substantially reduce or eliminate any benefits derived from operating in these markets. In addition, the resent development of the relations between Russia and Ukraine increases the uncertainty in relation to the aforementioned risks with respect to Elematic s projects in Russia. The ongoing political and military crisis in Ukraine, which started in the end of 2013, may have an adverse effect 8

10 on Elematic and its business if the situation becomes more critical in the future. In addition, the crisis and any effects associated with it or other unfavorable financial, social and political developments with similar effects may have a direct or indirect effect on the general economic situation and, even more widely, the Elematic's scope of operations. Above mentioned political, cultural and legislative risks as well as Elematic s failure to protect against such risks can have a material adverse effect on Elematic s business, financial position, results of operations and future prospects and thereby, on Elematic s ability to fulfil its obligations under the Bonds as well as the market price and value of the Bonds. Labor disputes in Elematic s business operations Labor disputes in Elematic s business operations, or associated areas such as logistics, may have an adverse effect on the business of Elematic. Elematic or employers organisations may not necessarily succeed in negotiating new satisfactory collective agreements once the currently valid agreements expire. Furthermore, currently valid collective agreements concerning Elematic s personnel may not necessarily prevent strikes or work stoppages at Elematic s production facilities and labor disputes in e.g. the transport sector may prevent the distribution of Elematic s products. Labor disputes or exceptional arrangements associated with pending negotiations or collective agreements may have an adverse effect on Elematic s business, financial condition, results of operations and future prospects and, thereby, on Elematic s ability to fulfill its obligations under the Bonds as well as the market price and value of the Bonds. Environmental risks Elematic's activities may pollute soil, water course and buildings especially if a leak, accident or spillage occurs. It can also be possible that Elematic becomes a party to legal proceedings where a third party sues Elematic's customer for breaking environmental laws. Currently there are no pending claims for damages. However, a possibility for such claims cannot be excluded. Also, Elematic cannot guarantee that all the risks relating to the environment have been taken into account. The tightening of environmental regulation or the stringent application of the current regulations in countries where Elematic has activities can raise liabilities and costs that are not yet foreseeable. Above mentioned risks and other potential environmental risks can have a material adverse effect on Elematic s business, financial position, results of operations and future prospects and thereby, on Elematic s ability to fulfil its obligations under the Bonds as well as the market price and value of the Bonds. Legal risks Legal disputes Avaton Oy (formerly Elematic Group Oy) was compelled by the Turku Court of Appeals on 13 November 2013 to pay damages totalling EUR 519,545,45, the principal amount being EUR 344, and applicable default interest EUR 174, calculated from 4 August 2012 to four private individuals. The damages were awarded partly due to a dispute concerning a share purchase agreement, wherein the plaintiffs had sold the shares of X-TEC Oy Ltd. to Avaton Oy and partly due to the damage a court ordered precautionary measure had caused the claimants. The court ordered precautionary measure had been sought by Avaton Oy in connection with an earlier dispute concerning the share price in the aforementioned transaction. On December 2014, Avaton Oy was not granted leave to appeal to the Supreme Court and the case is no longer pending and the damages and default interests were paid in January In November 2012, Elematic entered into an equipment delivery agreement to Saudi Arabia with a Middle East customer. The total value of the deal was EUR 9.1 million of which EUR 1.82 million was paid as advance payment by the customer. Correspondingly, Elematic gave a bank guarantee for the advance payment. Since then, the Middle East customer has notified that the project will not be put into effect and the project has been terminated from the Middle East customer s side. Elematic still remains in the possession of EUR 1.82 million advance payment and corresponding bank guarantee which is to mature in October Elematic began engineering work in 2013 against the advance payment received, therefore, according to Elematic; a part of the advance payment belongs to Elematic. However, the bank guarantee is an on demand guarantee and the Middle East customer can request to realise it at any time at which point Elematic will demand safeguard measures from the court against the payment of the bank guarantee. 9

11 In addition to the abovementioned proceedings, the Group is exposed to different types of legal risks in its business and therefore it is possible that Elematic will in the future be a party to governmental, legal or arbitration proceedings or administrative procedure. The risks and costs relating to any potential proceedings or procedures can have a material adverse effect on Elematic s business, financial position, results of operations and future prospects and thereby, on Elematic s ability to fulfil its obligations under the Bonds as well as the market price and value of the Bonds. Changes in tax legislation and other taxation risks Tax risks relate to, among others, the changes in the tax rate and/or tax and customs legislation and processes or thereto related false interpretations or the acceptability of the Group's business transactions. Even though Elematic aims to follow all relevant tax and customs laws, there is no certainty that all tax risks would be noticeable or avoidable. It is also possible that Elematic s business decisions are reassessed by the tax authorities, which can result in an obligation to pay additional taxes and related payments. The realisation of tax risks can have a material adverse effect on Elematic s business, financial position, results of operations and future prospects and thereby, on Elematic s ability to fulfil its obligations under the Bonds as well as the market price and value of the Bonds. Elematic s insurance coverage includes limitations and may not be sufficient Elematic aims to protect itself with insurance coverage as widely as the management deems necessary based on Elematic's operations. Elematics s insurance policies are subject to exclusions of liability and limitations of liability both in amount and with respect to the insured loss events. In addition, there can be no assurance that Elematic s current insurance coverage would not be cancelled or become unavailable on reasonable on economic terms in the future. The realisation of such risks can have a material adverse effect on Elematic s business, financial position, results of operations and future prospects and thereby, on Elematic s ability to fulfil its obligations under the Bonds as well as the market price and value of the Bonds. Financials risks Elematic may not receive financing at competitive terms or at all Uncertainty in the financial market may mean that the price of the financing needed to carry out Elematic s or Elematic HoldCo Oy s ( Elematic HoldCo or Parent Company ) business will increase and that it will be less readily available. In addition to the Bonds, Elematic will need additional funds to finance its working capital needs. Adverse developments in the credit markets, as well as other future adverse developments, such as deterioration of the overall financial markets and worsening of general economic conditions, may negatively impact Elematic s and its Parent Company s ability to raise additional funds as well as the cost and other terms of funding. The failure to obtain sufficient funding for operations or the increased costs or unfavorable terms of financing could have a material adverse effect on Elematic s and its Parent Company s business, financial condition and results of operations. Further, difficulties Elematic may encounter in financing its investments may prevent the realization of its strategic plans and could result in Elematic having to forgo opportunities that may arise in the future. This could, in turn, have a negative impact on Elematic s competitive position. Elematic and its Parent Company may be required to refinance certain or all of its outstanding debt, including the Bonds. Refinancing may be required due to for example termination of a certain debt or possible breach of covenants or other conditions of Elematic s and its Parent Company s outstanding debts. Elematic s and its Parent Company s ability to successfully refinance its debt obligations is dependent on the conditions of the capital markets and the Issuer s financial condition at such time. Even if the markets and the Elematic s financial condition improve, the Issuer s access to financing sources may not be available on acceptable terms, or at all. Should any of the above factors materialise, this may have a material adverse effect on Group s business, financial position, results of operations and future prospects and thereby, on Elematic s ability to fulfil its obligations under the Bonds as well as the market price and value of the Bonds. 10

12 Counterparty credit risk When there is a risk for the Group s counterparties being unable to fulfil their financial obligations towards the Group or Elematic HoldCo, there is a credit risk. The Group s current and potential customers may get in a financial situation where they cannot pay the agreed amounts owed to the Group as they fall due or otherwise abstain from fulfilling their obligations. Credit risks within the financial operations arise, inter alia, from the investment of excess liquidity, when interest swap agreements are entered into and upon obtaining long- and short-term credit agreements. There are no guarantees that the Group s customers and other counterparties can fulfil their obligations which could affect the Group s earnings and financial position. Financial difficulties of one or more customers can have a material adverse effect on Group s business, financial position, results of operations and future prospects and thereby, on Elematic s ability to fulfil its obligations under the Bonds as well as the market price and value of the Bonds. Liquidity risks Elematic and its Parent Company aims to continuously assess and monitor the funds needed for its business so it would have enough liquidity to finance its operations and possible investments as well as for the payments of the expiring debts. However, it is possible that Elematic or its Parent Company fails in liquidity management which can have a material adverse effect on Group s business, financial position, results of operations and future prospects and thereby, on Elematic s ability to fulfil its obligations under the Bonds as well as the market price and value of the Bonds. There can be no assurance, that Elematic or its Parent Company will be able to operate in the future in such a manner that the covenants and other conditions contained in its financing agreements would not be breached nor that lenders would approve, in cases of possible future breaches of contract, to re-negotiate the financing terms without demanding repayment of the loans. In such case there is also no guarantee that Elematic or its Parent Company would be able to arrange new financing on similar terms for a financially reasonable price or at all. The breaching of financing agreements covenants and the failure to meet other contractual obligations could significantly increase financing costs and even jeopardise the continuation of the financing of Elematic or its Parent Company. The breaching of covenants could also have a negative impact upon Elematic s or its Parent Company s reputation or Elematic s or its Parent Company s other loan agreements becoming mature. The Parent Company has been in breach of certain financial covenants under the Mezzanine Facility Agreement. The breaches have been waived and the financial covenants have been amended not to be stricter than the financial covenants of the Senior Facilities. However, no breaches are outstanding on the date of this Listing Prospectus. Fluctuations in interest rates The Group and Elematic HolCo are exposed to interest risks on interest-bearing current and non-current liabilities. Changes in interest rates on the Group s or Elematic HoldCo s liabilities affect the Group s or Elematic HoldCo s results of operations. In addition, the Group s or Elematic HoldCo s results of operations and financial position are exposed to the effect of market interest rates. It is possible that Elematic fails in controlling interest rate risk and this can have a material adverse effect on the Group s business, financial position, results of operations and future prospects and thereby, on Elematic s ability to fulfil its obligations under the Bonds. Fluctuations in currency exchange rates The Group is exposed to currency risk, i.e., the risk that currency exchange rate fluctuations will have an adverse effect on cash flow, income statement or balance sheet, in many aspects of its business. Exchange rate fluctuations affect the Group s results partly when sales and purchases in foreign subsidiaries are conducted in different currencies (transaction exposure), and partly when the profit and loss accounts and balance sheet items are translated in EUR (translation exposure). Elematic has purchases and sales in number of currencies, of which the most important in addition to euro are the United States dollar (USD), Chinese Yuan Renminbi (CNY), Russian Ruble (RUB) and Indian Rupee (INR). However, approximately 80 per cent of Elematic s purchases and sales are in euro. 11

13 It is possible that Elematic fails in controlling the currency risk and changes in currency positions can have a material adverse effect on Elematic s business, financial position, results of operations and future prospects and thereby, on Elematic s ability to fulfil its obligations under the Bonds as well as the market price and value of the Bonds. Commodity risk The Group is heavily dependent on the affordability and availability of certain raw materials for its operations. Trends in global economy may affect the prices and availability of raw materials. Changes in the prices of the commodities used by the Group can interfere with the Group s operations indirectly if they reduce demand for the customers products. Elematic s major commodity risk is related to steel which comprises approximately per cent of the total material costs of Elematic. It is possible that Elematic fails in controlling the commodity risk and this can have a material adverse effect on Group s business, financial position, results of operations and future prospects and thereby, on Elematic s ability to fulfil its obligations under the Bonds as well as the market price and value of the Bonds. Risks relating to the Bonds The Bonds may not be a suitable investment for all investors Each potential investor in the Bonds must determine the suitability of that investment in light of its own circumstances. In particular, each potential investor should: a) have sufficient knowledge and experience to make a meaningful evaluation of the Bonds, the merits and risks of investing in the Bonds and the information contained or incorporated by reference in this Listing Prospectus or any applicable supplement; b) have access to, and knowledge of, appropriate analytical tools to evaluate, in the context of its particular financial situation, an investment in the Bonds and the impact other Bonds will have on its overall investment portfolio; c) have sufficient financial resources and liquidity to bear all of the risks of an investment in the Bonds; d) understand thoroughly the Terms and Conditions; and e) understand thoroughly the terms set out in the Intercreditor Agreement; and f) be able to evaluate (either alone or with the help of a financial advisor) possible scenarios for economic, interest rate and other factors that may affect its investment and its ability to bear the applicable risks. Investors are exposed to a credit risk in respect of the Group and the Parent Company An investment in the Bonds carries a credit risk relating to the Group and the Parent Company. The investor s ability to receive payment under the final Terms and Conditions is therefore dependent on the Group s and/or the Parent Company s ability to meet its payment obligations, which in turn is largely dependent upon the performance of the Group s and/or Parent Company s operations and its financial position. The Group s and the Parent Company s financial position is affected by several factors, a number of which have been discussed above. An increased credit risk may cause the market to charge the Bonds a higher risk premium, which would affect the Bonds value negatively. There is no rating for the Issuer or the Bonds Neither the Issuer nor the Bonds are currently rated by any rating agency. Active trading market for the Bonds may not develop Prior to the listing of the Bonds on the NASDAQ OMX Helsinki (Helsinki Stock Exchange), there is no public market for the Bonds. Although application has been made to list the Bonds on the NASDAQ OMX Helsinki, there can be no assurance that the application will be approved. Further, even if securities are admitted to trading on a regulated market, there is not always active trading in the securities, so there are no guarantees that there will be a liquid market for trading in the Bonds or that this market will be maintained even if the 12

14 Bonds are listed. The Issuer or the Lead Manager is under no obligation to maintain a liquid market for the Bonds. The liquidity and the market prices for the Bonds can be expected to vary with changes in market and economic conditions, the financial condition and prospects of the Issuer as well as many other factors that generally influence the market prices of securities. Such fluctuations may significantly affect the liquidity and the market prices of the Bonds, which may trade at a discount to the price at which the holders purchased the Bonds. This may result in that the bondholders cannot sell their Bonds when desired or at a price level which allows for a profit comparable to similar investments with an active and functioning secondary market. Lack of liquidity in the market may have a negative impact on the market value of the Bonds. Furthermore, the nominal value of the Bonds may not be indicative compared to the market price of the Bonds if the Bonds are admitted for trading on NASDAQ OMX Helsinki. It should also be noted that during a given time period it may be difficult or impossible to sell the Bonds (at all or at reasonable terms) due to, for example, severe price fluctuations, close down of the relevant market or trade restrictions imposed on the market. Since the Bonds bear interest at a fixed interest rate, movements in market interest rates can adversely affect the value of the Bonds The Bonds bear interest on their outstanding principal at a fixed interest rate. A holder of a security with a fixed interest rate is exposed to the risk that the price of such security can fall as a result of changes in the market interest rate. Market interest rates follow the changes in general economic conditions, and are affected by, among many other things, demand and supply for money, liquidity, inflation rate, economic growth, central banks benchmark rates, implied future rates, and changes and expectations related thereto. While the nominal compensation rate of a security with a fixed interest rate is fixed during the life of such security or during a certain period of time, the current interest rates on capital markets (market interest rates) typically change continuously. In case the market interest rate increases, the market price of such a security typically falls, until the yield of such security is approximately equal to the market interest rate. If the market interest rate falls, the price of a security with a fixed interest rate typically increases, until the yield of such a security is approximately equal to the market interest rate. Consequently, the holders should be aware that movements of the market interest rate may result in a material decline in the market price of the Bonds and can lead to losses for the bondholders if they sell the Bonds. Further, the past performance of the Bonds is not an indication of their future performance. The market price of the Bonds may be volatile The market price of the Bonds could be subject to significant fluctuations in response to actual or anticipated variations in the Group s operating results and those of its competitors, adverse business developments, changes to the regulatory environment in which the Group operates, changes in financial estimates by securities analysts and the actual or expected sale of a large number of Bonds, as well as other factors. In addition, in recent years the global financial markets have experienced significant price and volume fluctuations, which, if repeated in the future, could adversely affect the market price of the Bonds without regard to the Group s operating results, financial condition or prospects. The Bonds carry no voting rights at the Issuer s General Meetings of shareholders The holders of the Bonds have no voting rights with respect to the General Meetings of shareholders of the Issuer. Consequently, in the Issuer s General Meetings of shareholders the bondholders cannot influence any decisions by the Issuer to redeem the Bonds or any decisions by the Issuer s shareholders concerning, for instance, the capital structure of the Issuer. Laws and practices applicable to the Bonds may change This Listing Prospectus and the Terms and Conditions are based on Finnish law in force at the date of issuance and the Issue Date respectively. No assurance can be given on the impact of any possible future legislative measures or changes or modifications to administrative practices. Amended or new legislation and 13