Ld Equity 2 K/S

BUSINESS REVIEW

Development in activities and the financial positionThere has been an increase in the number of transactions since 2010, and 2013 was also characterised by high activity. The number of such transactions in 2014 is expected to be at the same level or slightly higher than in 2013.Follow-on investments2013 saw a further injection of capital to Unwire ApS for the purpose of strengthening its capital base.ExitsLD Equity 2 disposed of two investments in 2013: the Reson portfolio company developing and selling equipment for industrial underwater acoustics purposes was sold in March, and the Fan Milk International running local food businesses in West Africa was sold in November.Profit for the yearThe bottom-line for 2013 is a profit of DKK 259 million (against a loss in 2012 of DKK 142 million). Fund profits were favourably affected by a positive value adjustment in connection with the sale of two portfolio companies, Reson and Fan Milk International. The income statement includes a value adjustment of investments of net DKK 286 million (negative effect of DKK 98 million in 2012). The profit for the year matches management forecasts for 2013, even if the result was negatively impacted by value adjustments in a couple of portfolio companies that were affected by adverse economic trends and tough competition.Development in portfolio companies in 2013SFK Systems A/SThe SFK Systems group is one of the leading global suppliers of high tech production facilities and equipment designed for red meat processing, primarily the pig slaughtering industry. August 2013 saw the merger of SFK Systems with Dutch Nawi B.V., whose main business activity is engineering, production, installation and servicing of processing equipment for industrial slaughtering with focus on cattle and sheep slaughterhouses in Europe. Following the merger, LD Equity 2 holds 73.5% of the SFK Systems group, and the Dutch private equity fund, Nimbus, former owners of Nawi B.V., holds 26.5%.After some years with lower investment activities in the market and strategic and capacity-related adjustments, SFK Systems has generated growth and improved profits since 2011. Both revenue and profits for 2013 are at a higher level than in 2012 due to continuous progress in SFK Systems and the acquisition of NAWI. For 2014, management expects the favourable trends seen in recent years to continue.Vernal A/SVernal was set up as a holding company in connection with the acquisitions of Tytex (medical fixation and compression textiles) and Norafin (nonvowen textiles for a large industrial market segment). Norafin was sold off in the first half of 2012, and Vernal now functions exclusively as a holding company for Tytex. In 2013, Tytex set further restructuring activities in motion and the bottom-line for 2013 was therefore affected by restructuring costs. However, the restructuring activities will result in an improvement of earnings and a reduction of debt already in 2014. Consequently, management forecasts growth in revenue and earnings for 2014 compared with 2013. Tytex is continuously striving to find new paths for development and growth.Da’core Holding A/SDa’core Holding owns the operating company, Da’core, which designs, sources and sells garden furniture, cushions and parasols for outdoor living. Since the end of 2008, Da’core has been adversely affected by economic recession and a decline in retailing resulting in a decrease in revenue and operating profits. Since the autumn of 2008, the company has on several occasions adjusted its capacity costs and sharpened its market strategy. Da’core did not live up to the budgeted expectations for 2012/13, in part because of poor weather in the spring of 2013 which is a very important time for the sale of garden furniture. This affected the entire industry and caused tougher competition. In order to counteract current market conditions, the new management of Da’core Holding has adjusted the strategic focus and the corporate cost and capital structure. In 2013, LD Equity 2 converted loans into shareholders’ equity in Da’core Holding. Management expects improved earnings for 2013/14 compared with 2012/13.JHL Holding A/S (J. Hvidtved Larsen A/S)JHL Holding owns the operating company, J. Hvidtved Larsen, whose activities include the development, production and sale of sewer cleaning units. The positive development in 2012 continued into 2013, when J. Hvidtved Larsen generated growth in revenue and earnings outmatching the forecasts. The positive effects of a focused sales and growth strategy as well as productivity improvements are expected to continue in 2014. Management forecasts growth in revenue and earnings in 2014 compared with 2013.Interbuild ApSInterbuild is a holding company for three entities: Lilleheden, manufacturers of glulam for construction purposes; Palsgaard Træ, producers of prefab building components; and Plus, which designs, sources and sells fences, playground equipment and related products. In 2013, the Danish building and construction industry saw a lower level of activity than in 2012 and was also affected by severe competition. Furthermore, the weather in the first quarter of 2013 was unusually cold. Interbuild succeeded in capturing market shares and revenues rose slightly. Earnings improved on 2012 due among other things to adjustments of capacity and fixed costs. For 2014, Interbuild forecasts a rise in revenue and operating profits as well as an improved, albeit still negative result after tax. Management expects the market to face a fairly low level of activity and strenuous competition.Bang & Olufsen Medicom A/SBang & Olufsen Medicom develops advanced drug delivery devices to customers in the pharmaceutical industry, primarily for inhalation and injection purposes. Bang & Olufsen Medicom has a number of the largest pharmaceutical companies world-wide as its customers. It is considered a leading development house and has invested substantially in its own IP platform. In 2011, after some extremely challenging years for the company, management succeeded in repositioning it in the market and optimising the delivery model. The effect of these initiatives became visible in 2012 and continued in 2013 when the company generated positive and improved operating and net profits. Based on a number of strong projects at the start of 2013 and increasing production volumes, management now foresees continuous growth in revenue and earnings for 2014.Winnie Papir A/SWinnie Papir produces gift wrapping paper for the European market, and its British subsidiary Eurowrap is a trading company selling gift wraps, gift bags, bows and ribbons, cards etc. The positive trends in Winnie Papir continued in 2013. The year outmatched expectations for the group which generated growth in revenue as well as earnings. LD Equity 2 sold off Winnie Papir on 31 January 2014.Unwire ApSUnwire develops and markets software systems for mobile phones for the facilitation and settlement of content purchases, ticketing and payments services. The company supplies a range of innovative solutions for Scandinavian companies engaged in telecommunications, media, finance and transport. Unwire’s revenue rose compared with 2012, albeit not quite as much as forecast. Earnings have dropped in recent years, the decrease among other things being due to substantial investments in international growth and an expansion of its product platform. 2013 saw tremendous cuts in costs, primarily in product development from the second half-year of 2013. Management expects the result for 2014 to be much better. LD Equity 2 provided further capital in 2013 to strengthen the company’s capital base.Bramming Plast Industri A/SBramming Plast Industri’s activities in Denmark and Poland include the processing of customised foam solutions for a variety of industrial purposes in segments such as furniture and design, HVAC and the technical and healthcare industries. Due to prolonged difficult market conditions in this line of business, the company did not achieve the improvement in activity level and earnings in 2013 as management had expected. Revenue generated in 2013 was slightly lower than in 2012 but earnings matched the 2012 level. Management foresees growing activity in 2014 resulting in an improvement of revenue and profits.kk-group a/sThe kk-group’s subsidiary, kk-electronic designs and sells control systems for the wind turbine industry and its subsidiary, Elogic manufactures distribution and control panels. With a higher level of activity in kk-electronic, the kk-group improved its revenue and earnings in 2012/13. For 2013/14, the favourable trends in kk-electronic are expected to continue and so is the positive development in Elogic.More information on investments is available on the www.majinvest.com website.- - -Capital resourcesLD Equity 2 is able to finance investments and follow-on investments from the time of investment and up to one year through bridge financing loan from financial institutions. A bridge loan must be repaid in connection with a capital call from investors. As mentioned above, the remaining capital commitment as at 31 December 2013 in the fund is DKK 424 million (DKK 488 million at 31 December 2012). Of the remaining committed capital, DKK 16 million has been allocated to specific purposes and will be called from the investors in 2014.