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AnnuAl RepoRtMAckMyRA SvenSk WhiSky AB

2013

MackMyra annual report 2013

02.

Mackmyra in briefMackmyra Svensk Whisky AB was founded in 1999 and is Sweden's first producer of malt whisky. The company’s operations are based in Mackmyra Whisky Village just out-side the city of Gävle. Mackmyra’s vision is to be the natural choice for new whisky experiences. The business concept is for people who enjoy the finer things in life to be offered an attractive range of whisky and whisky-related products via the strong Mackmyra brand.

Mackmyra’s business model is based on inspiring strong commitment among customers who become ambassadors for Mackmyra and actively participate in marketing the company’s products and experiences.

Mackmyra Whisky Village is the hub for both whisky production and the experience and cask offering that form an important part of the company’s strategy. Beginning in 2014 senior management and administration are also based in Mackmyra Whisky Village. Ageing takes place in Bodås mine, Mackmyra Whisky Village, Fjäderholmarna, Häckeberga Manor and Smögen, as well as on the German estate of Gut Basthorst outside Hamburg.

The personal cask is the company's first whisky product and was launched in 2002. The concept involves customers creating their own malt whisky, which Mackmyra stores in a 30-litre cask. Customers can monitor the cask through the entire process, from filling to ageing, and finally bottling.

Mackmyra’s bottled whisky has been sold at Systembolaget and in restaurants since 2006. Today Mackmyra offers a broad product portfolio of whisky in high-end segments on the market. Products in the super-premium and premium segments are offered in the ordinary product range at Systembolaget. Sales outside Sweden take place primarily in Scandinavia and Germany, in trade with neighbouring countries around the Baltic Sea, and through duty free and Travel Retail outlets. In addition, Mackmyra can be found represented in several select markets, such as Canada.

Mackmyra has about 6,000 shareholders and its Class B shares are listed on NASDAQ OMX First North.

contentS

Mackmyra in brief 03.

the year in brief 03.

ceo’s report 04.

Business model 06.

Market overview 09.

customer offering 12.

production 16.

Multi-year summary 19.

Board of Directors 20.

Management 21.

Report of the Board of Directors 22.

Financial statements 28.

Supplemental disclosures 32.

notes to the financial statements 34.

Signatures of the 38. Board of Directors

Auditors’ report 39.

the share and shareholder relationships 40.

Glossary & definitions, 41. addresses and calendar

MAckMyRA in BRieF


03.

the year in briefSekM 2013 2012

Net sales, SEKm 82.4 82.3

Revenue growth 0% 1%

Net sales excluding alcohol tax, SEKm 64.3 63.9

Revenue growth excluding alcohol tax, SEKm 1% 3%

Sales Bottles, SEKm 36.1 33.8

Sales Casks and Experiences, SEKm 28.2 30.1

Gross profit/loss, SEKm 44.2 47.3

Gross profit margin, percent 69% 74%

Operating profit/loss, SEKm -17.3 -1.7

Restructuring costs, SEKm -9.1 -

Profit/loss after tax, SEKm -24.1 -5.3

Earnings per share, basic, SEK -5.90 -1.31

Net sales after alcohol tax showed an inadequate increase, mainly due to lower cask sales than in 2012. The decrease in operating income can be explained by a lower gross profit margin due to a lower share of cask sales, restructuring costs and slightly higher selling expenses, primarily related to the investment in northern Germany, as well as the expansion of visitor activities in Mackmyra Whisky Village. Restructuring costs of SEK 9.1 million mainly relate to impairment losses and provisions attributable to the Mackmyra Bruk facility, which is no longer permanently used for distilling.

the yeAR in BRieF

eventS AFteR the enD oF the yeAR

Decision on powerful action programme

Board of Directors decided on 19 February to implement a powerful action programme to increase sales, reduce costs and improve cash flow. The programme will be carried out in 2014 and part of 2015 and entails annual savings of approximately SEK 20 million in addition to earlier decisions. The savings effect in 2014 is estimated at around SEK 10 million after restructuring costs. The action programme focuses on:

• Strengthening a regional market presence for the sale of

bottles, casks and experiences.

• Strengthening the dialogue with customers and ambassadors.

• Moving headquarters and administration to Gävle.

• Taking advantage of the strength of a well-stocked maturation

storage facility for sales of older whisky, which would make it

possible to reduce the distillation rate to a volume of less than

100,000 bottles in 2014.

• Reducing the number of employees by about 15 full-time

positions through layoffs and attrition within the functions of

management, administration, marketing and production.

Board proposes fully underwritten rights issue of about Sek 22 million

The rights issue, which was proposed on 18 March 2014, together with the ongoing action programme, will entail creating conditions for higher growth with profitability and a positive cash flow. The growth of both the business and maturing stock in recent years means that Mackmyra is now well equipped to meet current and future demand.

The company's principal shareholders and the Board have jointly undertaken to subscribe for new shares representing their common share of the rights issue. In addition, an underwriting agreement for SEK 14 million was signed with an external party, which means that the proposed rights issue is fully underwritten. The subscription period runs from 30 April until 14 May 2014.

The reason for the issue is to fund the operation's cash flow during implementation of the action programme to achieve a return to a positive cash flow, which is estimated to have had full effect at the end of the year, as well as to build up a liquidity cushion to mitigate seasonal fluctuations in sales. The action package also includes initiatives to accelerate growth, including through expansion of the sales organisation and further development of the new bridgehead in northern Germany.

In addition to the injection of new equity provided by the issuance, the Company has renegotiated credit terms and agreed with the lenders for new loans totalling SEK 12 million in 2014.

eventS DuRinG the yeARDuring the year Mackmyra increased its focus on strength-ening cash flow, in part by reducing the distilling rate to a clearly lower level. Mackmyra currently has a well-developed maturing stock, which means that the lower rate of distilling will not jeopardize future supply capacity.

• A decision was taken to streamline operations by reducing the rate of distilling and concentrating sales to a few markets with an increased market presence.

• The Special Series culminated with the commercial success of Special:10 Kaffegök.

• Mackmyra's whisky was awarded gold and silver medals by the IWSC for Special:10 Kaffegök, Svensk Rök, Moment Mareld and Moment Glöd.

• Mackmyra’s new smoky whisky, Svensk Rök, won a contract at Systembolaget and was well-received when launched in the second half of the year.

• Mackmyra launched its first Swedish ten-year whisky.

• Midvinter, Mackmyra’s winter whisky, was launched in a limited edition for Systembolaget.

• Operations for cask and bottle sales were established in northern Germany at Gut Basthorst outside Ham-burg.

• A new visitor centre opened at Mackmyra Whisky Village.

• Mackmyra’s Master Blender Angela D'Orazio was named “Whisky Ambassador of the Year” at the Icons of Whisky Awards in London.


04.

Dear shareholders,

FoRWARD-lookinG MeASuReS FoR pRoFitABility AnD GRoWth

We are now well into 2014 as I look back on 2013, a year that placed new demands on our capacity for adaptation and innovation in administration, produc-tion and marketing.

With hindsight I can conclude that we advanced too quickly in 2012 and 2013, with respect to both accu-mulation of costs and rate of investment. Mackmyra’s expansion into the world took more time and energy than we had expected, causing us to spread our resources too thin and lose focus on neighbouring markets. As a result we did not achieve the sales growth that we needed in 2013 to balance our increased costs after investments in the Gravitation Distillery, Mackmyra Whisky Village and a rapidly growing matur-ing stock.

To rectify the situation, we are now working on a broad front to improve our customer relationships, increase our market presence and run our sales more efficiently. We will do so both by assigning our sales representatives clear responsibility for our regions in Sweden and northern Germany, and by increasing our sales force. At the same time we are adapting and streamlining our organisation and are therefore concentrating our administration and management to our home base in Mackmyra Whisky Village outside Gävle.

Another consequence of these measures is that we will no longer build our maturing stock at the same rate as previously. Only small volumes will be distilled in 2014. Instead, we focus all resources on

more efficient sales of our casks and finished whisky in the markets we have chosen to prioritise.

Unfortunately the change process has also had consequences for our employees. As a result of the action programme decided in February 2014 we are reducing the number of staff by 15 FTEs. However, we have largely been able to solve the staff cuts through attrition.

I am aware that the restructuring measures now being implemented are very serious for everyone involved. At the same time I am convinced that they are necessary and that they will enable us to

continue to grow the company based on actual market conditions.

In parallel with the ongo-ing work, Mackmyra’s Board of Directors an-nounced a rights issue of SEK 22 million. Together with the ongoing action programme it will create

conditions for both higher growth and profitability, as well as a positive cash flow. An issuance such as the one the Board proposed also creates a buffer that allows us to more easily manage the seasonal varia-tions of our sales.

We hAve MAny StRenGthS

We must not forget that Mackmyra has large asset values. Our whisky is an innovative world-class single malt whisky. We have a well-stocked inventory of whisky that continues to mature at its own pace and that only improves with time. For Christmas 2014, we will deliver our first ten-year whisky. Many people have already pre-ordered this whisky to ensure they will be able to take part in this taste experience.

We have a well-stocked inventory of whisky that continues to mature at its own pace and that only improves with time.

ceo'S RepoRt


05.

Our ambassador and regional model is an important tool for us to reach both existing and new consumers. Over the years, we have sold over 12,000 personal whisky casks to a growing and enthusiastic ambassador group. Our new visitor centre at Mackmyra Whisky Village opened in the autumn of 2013. We also have regional whisky event centres in four metropolitan areas, including one outside Sweden in Gut Basthorst, near Hamburg, Germany. The intention is that our regional presence will attract new consumers and that our Gut Basthorst initiative will serve as a bridgehead into northern Germany and Europe.

We expect 2014 to be a year of hard work and concentra-tion on our core business. Through hard work we will implement the necessary changes, increase our market presence and generate long-term profitability. Through concentration we will increase sales in existing markets and maintain a high quality of product development so that we can garner new awards and raise awareness of our brand and our products. I look forward to the coming year and would like to take this opportunity to thank our employees, customers, ambassadors and owners for their efforts and the good work done in 2013. We look forward to a successful 2014!

Magnus DandanellCEO Mackmyra

1998 The founders, eight old classmates, hold a reunion at a cottage in Sälen. Each one brings a bottle of single malt whisky and the idea of creating the first Swedish whisky is born late one night.

1999 Mackmyra Svensk Whisky AB formed in March 1999. A pilot distillery with the necessary licenses is started the same year. The first raw whisky is distilled on 18 December 1999.

2000 Visitor and experience activities are launched at Mackmyra Bruk.

2001 A commercial-scale distillery is built at Mackmyra Bruk.

2002 Mackmyra Reserve is developed and launched.

2003 Mackmyra’s main warehouse opens in Bodås, outside Hofors.

2004 Distillery production gradually increases up to the equivalent of 500,000–600,000 bottles a year.

2005 The first bottles of Mackmyra Reserve are sold to Systembolaget in December.

2006–2007 The first bottles of Bottled (Mackmyra Prelude) are sold at Systembolaget and in duty-free shops.

2008 Mackmyra – The First Edition, the company’s first regular bottled product, is launched.

2009 The company presents Vision 2009, its new long-term strategic plan for Mackmyra Whisky Village.

2010 Construction and grand opening of the Forest Store, the first building at Mackmyra Whisky Village. Mackmyra Brukswhisky (The Swedish Whisky) is launched.

2011 The first bottles are sold in New York and the Gravity-fed Distillery opens. The shares are listed on First North NASDAQ OMX in Stockholm.

2012 Casks are filled with the first drops from the Gravity-fed Distillery. Mackmyra is named “European Spirits Producer of the Year” and makes an important breakthrough into the Canadian market.

2013 Svensk Rök, the first smoky Swedish whisky, is launched. Mackmyra’s visitor centre is com-pleted in the Whisky Village and Mackmyra establishes a beachhead in northern Germany.

MAckMyRA'S hiStoRy

ceo'S RepoRt


06.

Focus on sales and existing markets in 2014

viSion

To be the natural choice for new whisky experiences.

BuSineSS concept

For people who enjoy the finer things in life in Sweden, the Nordic region and the rest of the world to be offered an attractive range of whisky and whisky-related products via the strong Mackmyra brand.

opeRAtionAl GoAlS 2014–2016

• Increase sales growth with profitability and a positive cash flow by strengthening our position in established markets and by concentrating our market presence to Sweden, the Nordic countries and northern Germany.

• Increase knowledge of Mackmyra Whisky Village and Mackmyra’s other tourist destinations for whisky experiences.

• Increase the number of ambassadors, i.e. those who are shareholders and/or cask owners and who spread awareness of the Mackmyra brand and products.

• Strengthen the Mackmyra brand through clearer communication.

Concentrate and simplify the sales and marketing organisation beginning in 2014. Increase the number of regional sales representatives and concentrate efforts to the Scandinavia and northern Germany. Mackmyra will also be able to take advantage of the strength of a well-stocked maturation storage facility for sales of older whisky. Focus communication with the market and customers on strengthening the dialogue, which to date has been one of Mackmyra’s critical success factors in previous years.

BRAnD plAtFoRM

The brand platform, which was updated in 2013, forms the foundation of the company’s activities and also functions as a basis for choosing the company’s direction and product development. Using the brand platform as a foundation ensures that all company activities pull in the same direc-tion, which will strengthen the brand and increase the relevancy of the offer.

MARket StRAteGy

Since it was founded, Mackmyra has worked on gradually introducing the brand and products. At its inception in 1999 Mackmyra chose to build up its customer base and demand by offering visits to Mackmyra’s various destinations for whisky tastings and sales of personal whisky casks. This strategy also led to greater demand at Systembolaget, which in 2006 decided to accept Mackmyra’s first bottlings for its product range. Since its inception Mackmyra has successfully developed communication with customers and ambassadors.

The Swedish market forms the core of the business and is essential for continued expansion abroad. It is therefore im-portant for Mackmyra to grow on the Swedish market and to develop its position as a leading brand in the high-end segments. Mackmyra will use its Swedish base to establish the brand in the Nordic countries and in northern Germany.

In connection with the selection of Mackmyra as European Spirits Producer 2012, a decision was taken to increase sales activities in Europe. As part of this strategy the German subsidiary Mackmyra Swedish Whisky GmbH was founded in 2013 and a collaboration began with German Gut Basthorst. As a result, in 2014 Mackmyra is establishing a maturation storage facility for personal casks in northern Germany, which should be seen as a base for continued ex-pansion of both casks and bottles in the European market.

MiSSion

Here comes the new* school in terms of high-quality whisky!!

viSion

The natural choice for whisky experiences.

vAlueS

Long-term approachAuthenticityCreativityExperienceHigh quality

pRoDuct

Craftsmanship and a high-class

whisky experience

poSitioninG

Innovation, openness, traceability and local

ingredients

Style

Committed Targeted

ChallengingSmall-scale

Produced by craftsmen

* Combination of new and old: age is not an end in itself. Good, local ingredients, traceability, craftsmanship using new technology, no additives,

maximum volume, hygienic and the opportunity to create personally designed malt whisky.

We DeMAnD

MoRe!

BuSineSS MoDel


07.BuSineSS MoDel

GRoWth StRAteGy

Prior to 2014, Mackmyra redirected its growth strategy from selling bottled products in several diverse markets to a regional and ambassador model in which Mackmyra’s sales representatives will efficiently work in a few regional markets with casks, bottles and experiences. As sales increase, the number of sales representatives and regions will be increased. The strategy involves developing close contacts with ambassadors and existing target groups, which also increases the number of end consumers.

In Sweden, sales of personal casks and experiences largely drove demand for bottled products. Mackmyra believes that a similar potential can be found beyond the country’s borders, mainly in Europe.

pRoDuct DiFFeRentiAtion

Mackmyra offers mature malt whisky in different bottlings and editions, in casks and in bottles. The company is also working with product differentiation by developing whisky-related products.

cuStoMeR RelAtionShip

Mackmyra’s business model is based on close collaboration with cask customers, retailers and distributors. The am-bassadors spread the message about Mackmyra and their personal experiences, thereby helping to increase brand and product awareness both in Sweden and abroad.

Mackmyra works through several different channels, both to provide customers with the opportunity to come into contact with the brand and the products, and to further strengthen the sense of unique products. The most impor-tant channels for building relationships with these custom-ers are visits to the Whisky Village, at our tourist destina-tions for various types of events, such as whisky tasting, and various digital channels.

For the bottled products, Mackmyra primarily works in Sweden and internationally through its distributors and local retailers, who then own the customer relationship. Market-ing that takes place via ambassadors and Mackmyra Whisky Village also helps strengthen customer relationships with this group in the long term, primarily from a Swedish and Nordic perspective, and since 2013 in northern Germany as well.


08. BuSineSS MoDel

StRAteGic ReSouRce

A well-developed maturity stock

Mackmyra is working with a long-term approach to estab-lish its brand and increase sales. Delivery capacity over time is a key demand from buyers around the world. Whisky producers must guarantee a long-term supply of mature whisky for bottling in order to achieve broad distribution.

Mackmyra currently has the strength of a well-developed ma-turing stock for an innovative world-class single malt whisky and regularly garners international awards. Whisky improves with time as it is stored and in 2013 Mackmyra launched its first age-determined whisky - the first Swedish ten-year whisky. The age structure of the maturing stock at Mackmyra is well equipped to meet current and future demand.

Mackmyra’s ambassador and regional model

Mackmyra’s regional model entails unique direct contact with the end customer. Regional sales of casks also drive de-mand for Mackmyra’s bottles and experiences. Through sales of its 30-litre casks, Mackmyra now has a large and enthu-siastic ambassador group in Sweden. The company believes that this group can be expanded through the regional model, both in Sweden and in the neighboring markets where Mackmyra is active. A first step was taken in 2013 with the establishment of the business at Gut Basthorst in northern Germany. Since its inception Mackmyra has sold over 12,000 30-litre casks of high-quality single cask whisky.

Mackmyra Whisky village and other tourist destinations

Experience centres and tourist destinations are a growing trend worldwide. Mackmyra’s various tourist destinations provide the opportunity for personal meetings with custom-ers and ambassadors. Mackmyra Whisky Village is the cen-tral focus of visitor operations and is strategically important for the brand. The new distillery, which is also located there, is designed for visitors who can closely follow the various stages of the distilling process. The Whisky Village also has a smoking facility, floor maltings and whisky storage that create a total experience. The restaurant offers both whisky-related food experiences and whisky tasting.

At the regional tourist destinations-- Fjäderholmarna, Smögen, Häckeberga, Mackmyra Whisky Village and Gut Basthorst – the Mackmyra customer encounters whisky tasting and tours of the respective facility.

Revenue MoDel

Approximately half of the company’s sales are attributable to bottles and half is attributable to casks and experiences. With bottle sales, production is related to the maturing stock, while with sales of casks and experiences produc-tion is based on orders. The latter case creates a positive cash flow, which partially offsets the capital tied up in the mature stock required for the sale of bottles.

pRice StRuctuRe SCHEMATIC DIAGRAM

Approx. 5% Approx. 10% Approx. 20% Approx. 15% Approx. 50%

Barley/malt delivery

Distilling & filling of casks

together with customers

1 week

Cask maturation

Around 5 years

Bottling/ finished

stock

2–8 weeks

Gross margin

Cost of production up to the dotted line is recognised as maturing stock on the balance sheet. This chart is for illustration purposes only and percentages represent an example that changes depending on the product.


09.MARket oveRvieW

local raw materials, craftsmanship and personal style benefit Swedish whiskyReGulAtion AnD hiStoRy

The Swedish market for alcoholic beverages is governed by Swedish alcohol legislation, which applies to both the market and the participants who are active in production and sales.

Today the Swedish market is made up of a large number of importers and a number of domestic producers, while sales take place principally via Systembolaget and to some extent through private imports. Opportunities for marketing are extremely limited. Under Swedish alcohol legislation, there is a complete ban on the marketing of alcoholic drinks on Swedish radio and TV, and all marketing must observe par-ticular moderation and may not be “overbearing or selective or encourage the consumption of alcohol”.

Sweden currently has one of the highest alcohol taxes in the world. There are strong drivers working to harmonise alcohol taxation within the EU, but it is not clear how this will affect Swedish tax legislation in the field.

the SWeDiSh WhiSky inDuStRy

Interest in producing Swedish whisky is growing and there are currently around ten Swedish distilleries. In addition to Mackmyra, a few of them have products that are ready for the market. Some have a business model that is similar to Mackmyra’s, with small casks that are sold to private individuals.

Mackmyra’s whisky is positioned in the high-end price seg-ments and competes with both Scottish malt whisky and premium-priced whisky from, for example, Japan. In the price segment over SEK 350, Mackmyra Brukswhisky is on Systembolaget’s top ten list in terms of sales. The higher price segments entail better margins, though also lower volumes since demand is lower. Mackmyra has positioned itself in these segments with The First Edition, Moment and the Special Series and its successor (Midwinter). These products also hold top positions in terms of sales in their respective price segments at Systembolaget.

the SWeDiSh MARket

Over the course of the year Systembolaget’s total sales of malt whisky climbed 2-3 percent over the previous year. Growth in volumes was primarily seen in the price segment SEK 450-700, while other price segments showed a decline compared with 2012.

In 2013 Systembolaget introduced a new model for its range of products in which the choice of products for the fixed range is based on customer demand to a greater degree than previously.

the inteRnAtionAl WhiSky MARket

The largest markets are India, the US, France, the UK, Japan, Spain and Canada. With the exception of India, the largest volumes are mainly produced in Scotland, Ireland, the US and Canada.

According to research company Euromonitor International, the global whisky market is growing by up to 5% a year. This growth is mainly occurring in the emerging markets in Asia and the Pacific, especially China and India. Euromonitor predicts that interest in more exclusive whiskies will grow.

Awards and prizes are an important part of marketing for both the Swedish and the international markets. In 2013 Moment Glöd was awarded the International Wine and Spirits Competitions (IWSC) Outstanding Gold medal, while Svensk Rök, Moment Mareld and Special:10 Kaffegök were awarded the Outstanding Silver medal.

neW WoRlD WhiSky

In terms of the global market, the IWSR believes that New World whisky producers will continue to take market share up until 2016, which means that Scotland, the US and Canada will lose market share, while Ireland and India will grow. The potential domestic market is huge for Indian producers.

Irish whisky has shown strong growth in Europe, but its market share in Asia and Latin America is much more modest. A number of Irish distilleries have launched a classic category with a modern twist, “single pot still”, which marks a return to the origin with the use of both malted and unmalted barley.


10. MARket oveRvieW

MAckMyRA AnD SySteMBolAGet top-SelleRS 2013

# WhiskySek/

bottle percentage of sales value

exclusive• Moment

• Price over SEK 1,000

1 Highland Park Norse Gods Loki 1,399 16%

2 Octomore 06.1 Scottish Barley 1,399 12%

5 Mackmyra Moment Mareld 1,195 6%

7 Mackmyra Moment Morgondagg 1,095 5%

limited edition• Special

• Price between SEK 450–800

1 Mackmyra Special:10 kaffegök 598 23%

2 Ardbeg 799 15%

3 Mackmyra Midvinter 598 15%

4 Spirit of Hven Single Malt Whisky Seven Stars 795 5%

Super premium• The First Edition


1 Lagavulin 16 Years 579 11%

2 Mackmyra the First edition 498 11%

3 The Macallan 12 Years 499 10%

4 Ardbeg Ten Years 485 8%

premium• Mackmyra Brukswhisky


1 Laphroaig 10 Years 399 11%

2 Bowmore 12 Years 409 9%

3 Highland Park 12 Years 399 9%

6 Mackmyra Brukswhisky 399 6%

Source: Systembolaget’s sales statistics 2013.

tRenDS AnD MARket SituAtion

The two trends towards “premiumisation” and "connois-seurship” are driving the market for single malt. Premium consumers seek origin, traceability and craftsmanship, which offers opportunities for New World whisky and has led to an increase in the number of micro-distilleries. The volumes are still small, but the trend drives interest in whisky, and in new production styles.

The growing interest in New World whisky, and its craftsman-ship and small-scale production, benefits Mackmyra, which uses local ingredients and has its own distinct style, which people are demanding. As a result of building up maturing stock in recent years Mackmyra now has a significantly higher delivery capacity than many of the distilleries that have recently started operations.

Mackmyra is represented in both the Nordic region and elsewhere in Europe, as well as in Canada. However, Mackmyra has chosen to focus its resources in the coming period on further developing and strengthening its market presence in the immediate area. One example of this strat-egy is Mackmyra’s German subsidiary and the cooperation agreement signed with Gut Basthorst in northern Germany in autumn 2013, which makes the cask offering available in much of the European market.

Mackmyra’s products have been well received to date by a number of markets outside Sweden. Its international sales are relatively small, but this means that the brand is gradually being developed, which is important in order to increase sales over time.


11.MARket oveRvieW

pRice iS BASeD on FouR FActoRS

• Alcohol tax (regulated by legislation in each country)

• Value Added Tax (regulated by legislation in each country)

• Distribution costs (logistics costs and compensation to importers, agents and retailers.

• Production costs

Costs for marketing, which also influence the price for customers, may be taken into account by the manufacturer, importer or distributor, and varies from case to case.

In Sweden, retail is regulated by Systembolaget, which charges relatively low distribution and retail margins. Abroad, high taxes on alcohol are often replaced by higher distribution, import and retail costs. This also applies to the duty-free markets where the tax is not relevant, but where compensation to the distributor is usually higher.

Revenue DiStRiBution peR Bottle SolD

Distributor (SEK of retail price)

SEK

500

400

300

200

100

0

Systembolaget (SEK)

VAT (SEK)

Alcohol tax (SEK)

SEK

500

400

300

200

100

0

The chart illustrates the revenue distribution of whisky in all price categories for sales in Sweden, with lower consumer prices on the left and higher consumer prices on the right.


12. cuStoMeR oFFeRinG

Mackmyra’s customer offering is based on the ambassador and regional model, which entails unique direct contact with the end customer and where regional sales of casks also drives demand for Mackmyra’s bottles and experiences.

cASkS AnD expeRienceS

Casks and experiences are a cornerstone of Mackmyra’s offering. Through sales of personal 30-litre casks and the associated experience with visits, whisky tasting and pick-up, Mackmyra gains natural ambassadors who strengthen and spread awareness of the brand on the market.

The offering enables customers to create and store their unique malt whisky in one of Mackmyra’s warehouses: The Forest Store in Mackmyra Whisky Village, the Archipelago warehouse on Fjäderholmarna, the West Coast warehouse in Smögen, the manor warehouse at Häckeberga Manor in Skåne, the Germany warehouse for Gut Basthorst outside Hamburg, or the Mine warehouse in Bodås mine.

casks offering – personal casks

Since its inception in 2002, Mackmyra has sold over 12,000 casks to customers, mainly in Sweden. Thousands of casks have been bottled and the bottles delivered to customers. Customer surveys indicate that 95 percent of customers are satisfied or more than satisfied with their whisky experience.

In the offer, customers can sign up for a personal 30-litre cask and choose the recipe and type of oak barrel used for ageing. Customers pay at sign-up and the price includes storage during ageing and insurance.

When the distillate is produced customers fill their casks, after which they can see the casks placed in the warehouse. The ageing period is usually about five years during which time customers can taste their whisky and monitor the development to finished malt. Customers are also invited to participate in various events that Mackmyra arranges during the period. Mackmyra bottles the whisky when the customer decides it is ready. Up until 2013 deliveries were available either in Sweden or via Juuls Vinhandel in Den-mark. In 2014 delivery is also available in Hamburg and at Gut Basthorst in Germany.

experiences – Mackmyra Whisky village

Mackmyra Whisky Village provides both cask customers and others who are interested with the opportunity to see and experience Mackmyra from the inside. The Gravitation Distillery in the Whisky Village was built to be able to receive visits with guides and customers. Others who are interested can also visit and follow the production process from distillation to ageing, and can also taste the products.

customer offering


13.cuStoMeR oFFeRinG

operations and Sales 2013

Sales in Casks and Experiences decreased in 2013 by 6 percent (+3) to SEK 28.2m (30.1). The Extra Rök cask sales campaign did not live up to expectations and had a negative impact on sales. Measures were taken to increase cask sales by increasing the company’s regional presence, further developing the cask concept and establishing operations at Gut Basthorst.

In late September Mackmyra launched Sweden’s first ten-year whisky. The whisky was produced in a limited edition and will be delivered for Christmas 2014 in boxes of twelve 50-cl bottles. The whisky has been stored for nine years in 200 litre casks and then aged for another year in 100-litre “first fill quarter casks”.

The establishment at Gut Basthorst developed accord-ing to plan. A cooperation agreement was reached in the fall under which Mackmyra leases a small warehouse for maturation of 30-litre casks. The warehouse is expected to be ready for use during the first quarter of 2014. This means that in spring 2014 Mackmyra will have a base for sales and marketing of Casks and Experiences in northern Germany.

The new visitor centre at Mackmyra Whisky Village was completed in mid-October and commissioned in the autumn. The visitor centre has a bar and restaurant with seating for 60 guests, as well as a small conference facility that in-creases opportunities for various types of whisky tastings. The Mackmyra visitor centre, with access to the distillery, warehouse and restaurant, enhances the customer experi-ence and brand and is therefore an important part of the overall marketing of Mackmyra’s different offers.

BottleS

Mackmyra’s bottled whisky has been stocked in System-bolaget’s product range and in pubs and restaurants in Sweden since 2006. Mackmyra now has a broad product portfolio with a focus on higher-end price segments. The base consists of Mackmyra Brukswhisky, The First Edition and Svensk Rök, all of which are available in Systembola-get's regular line of products and are supplemented with limited editions in which each bottling has an individual and unique character.

In addition to whisky, Mackmyra produces whisky products that build on Mackmyra’s knowledge of whisky-making. These products are the whisky liqueur Bee and the barley distillate Vit Hund.

operations and Sales 2013

In 2013 bottle sales rose 7 percent (-1) to SEK 36.1m (33.8) compared with 2012. At the same time, the number of bot-tles sold decreased by 2 percent (+15) to 201,000 (205,400), which means that the average sales price per bottle rose.

Svensk Rök, which was launched in September 2013, complements the product portfolio in a segment in which Mackmyra was not previously represented. Svensk Rök was initially available for limited distribution at Systembolaget, but it will reach full distribution in March 2014, and is thus expected to contribute to an increase in Mackmyra sales of bottles.

The First Edition retained its strong market position and in 2013 it was one of the market leaders in its price segment. However, fourth quarter sales volumes of The First Edition and Mackmyra Brukswhisky were lower compared with the corresponding period in 2012, which may be attributable in part to the launch of Svensk Rök.

In November Systembolaget launched Mackmyra’s new winter whisky, Midvinter, in its temporary line of products. Midvinter was the first edition in a new freestanding series that replaced the popular Mackmyra Special series. Mackmyra Midvinter sales were primarily aimed at Systembolaget, where volumes reached good levels. Overall, however, sales volumes for Midvinter were lower than the previous year's volumes for the Special Series. Sales volumes for the whisky liqueur Bee for 2013 were on a par with the previous year.


14. cuStoMeR oFFeRinG

AWARDS AnD RecoGnition

The quality of Mackmyra whisky was recognized in 2013 by the IWSC, which awarded Mackmyra whisky four medals:

•Moment Glöd outstanding Gold

•Svensk Rök outstanding Silver

•Moment Mareld outstanding Silver

•Special:10 kaffegök outstanding Silver

Market developments in 2013

The majority of the company's sales of bottled products take place in Scandinavia, within Travel Retail and in trade with neighbouring countries around the Baltic Sea. Mackmyra has continued to concentrate activities to these markets, as well as to northern Germany. Other markets are handled through partners and distributors.

Germany

Collaboration was initiated with Whisky-Max for distribution and sales of bottles in Germany. This partnership enables Mackmyra to make a concerted effort for both casks and bottles in northern Germany. The number of bottles sold was at a relatively low level, but rose in the last quarter. Collaboration was initiated with Gut Basthorst which in the future will be the centre of sales and marketing of casks and experiences on the northern German market.

Rest of europe

The number of bottles sold in France and the UK increased in 2013. However, volumes remained at relatively low levels and the trend shows that establishment of a presence in these markets has taken longer than expected. Collaboration with the distributor Valora Trade ended in the fourth quarter, and efforts are underway to find a new partner in Denmark.

north America including canada

The number of bottles sold in Canada decreased in 2013. The Canadian alcohol monopoly LCBO has carried The First Edition in its regular product range since January 2013.

* LCBO is the Canadian province of Ontario's equivalent of the

Swedish Systembolaget and the largest purchaser of alcoholic

beverages worldwide, with over 600 stores.

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

Quarter 1 Quarter 2 Quarter 3 Quarter 4

2011 2012 2013

SAleS peR quARteR NuMBER OF BOTTLES

Sweden

The number of bottles sold increased by one (1) percent in 2013 compared with 2012. Svensk Rök added new volumes, while The First Edition and Mackmyra Brukswhisky showed slightly lower volumes compared with 2012. The First Edition has a strong market position and is one of the market leaders in its price segment. Sale volumes within HoReCa (Hotel, Restaurants, Catering) were on a lower level compared with the previous year.

Border trade and travel Retail

The number of bottles sold in 2013 decreased by about 15 percent. Border trade around the Baltic Sea increased in volume in 2013, while traditional Travel and Retail (airports, ferries and similar) declined. This trend is primarily the result of ongoing restructuring of previous collaborations, and because the product Midwinter was not sold on the export market. However, the agreement with Five Eyes in Travel Retail is expected to gradually increase sales and at the same time free up Mackmyra’s own sales resources.


15.

ouR WhiSky

liMiteD eDitionS

otheR pRoDuctS MAckMyRA ReSeRve

cuStoMeR oFFeRinG

Our productsThe Mackmyra product portfolio focused on higher-end price segments. The base consists of Mackmyra Brukswhisky, The First Edition and Svensk Rök, all of which are available in Systembolaget's regular line of products and are supplemented with limited editions in which each bottling has an individual and unique character.

In addition to whisky, Mackmyra produces whisky-related products such as the whisky liqueur Bee and the barley distillate Vit Hund.

Mackmyra Reserve, the 30-litre cask, is central in the Mackmyra product range. In the cask offering, customers can sign up for a personal cask and choose the recipe and type of oak barrel used for ageing.


16. pRoDuction

production and product development

Mackmyra’s Gravity-fed Distillery was designed for efficient production and to be able to receive groups of visitors. At 35 meters high, the distillery has become something of a landmark, and above all it enables Mackmyra to use gravity in the distillation process.

DiStillinG

In 2013 Mackmyra distilled a total of 765,000 bottles (1,001,000), 90 percent (60) of which were distilled in the new distillery at Mackmyra Whisky Village. The original distillery at Mackmyra Bruk is no longer used for ongoing distilling, but only when necessary and mainly for market-ing activities, experiences and possibly special production.

Distilling worked well during the year and the quality of the distilled spirit was high and consistent. The majority of the distilled spirit produced was put into casks to form the basis of Mackmyra’s whisky products. Around ten percent of the volume was used for casks ordered by customers.

MAtuRAtion StoRAGe

In order for distilled spirit to be called whisky, it must be aged in oak casks for at least three years. The spirit is usually aged for five years or more before the end-product is ready. Mackmyra’s whisky is usually delivered after ageing for five years, but certain products undergo a longer maturation process. One example is Mackmyra’s first ten year whisky, which was launched in 2013.

Sufficient production capacity and well-filled stocks are essential, not only to meet increased demand but to attract retailers and distributors who require stability and reliable supply. However, large stocks result in more capital being tied up, which has a negative effect on cash flow as stocks are being built up.

Maturing stock is valued at the balance sheet date at pro-duction cost or the net realisable value, whichever is lower. This means that the maturing stock is never valued higher than the actual production cost. Production costs include the cost of storage until the whisky is ready for sale.

During 2013, the value of Mackmyra’s maturing stock increased by 19 percent (35) or SEK 25.9m (36.2), to a total of SEK 164.5m at 31 December 2013. The value of the maturing stock increased by only one (1) percent (10) during the fourth quarter due to a lower distilling rate during the second half of the year.

Because of the maturing stock that has accumulated over several years Mackmyra is able to adapt production to sales growth. In light of the sales growth trend seen in 2013, a decision was taken in February 2014 to reduce the distilling rate in 2014 to less than 100,000 bottles. Distilling in 2014 will largely be concentrated to the smoky distillate. The lower distilling rate will mean a significant strengthening of cash flow in 2014.

The whisky ageing process and quality largely depend on the cask in which the whisky is stored. Whisky that is bottled at Mackmyra is aged mainly in 200- and 100-litre casks, unlike many distilleries which use casks of up to 700 litres. The casks are primarily stored in the main warehouse at Bodås Mine in the province of Gästrikland. The personal customer cask, Mackmyra Reserve, is principally a 30-litre cask, which results in whisky of the highest quality after as little as three to five years of ageing.


17.pRoDuction

Mackmyra’s maturation storage facility and distillation capacity present opportunities for contract production as a complement to the ordinary activities. Mackmyra delivered a small volume of distilled spirit to a major player in the market in 2014.

continuouS eFFoRtS to ReDuce eneRGy conSuMption

Mackmyra’s environmental impact is relatively limited, but it relates primarily to two areas: production at the distillery at Mackmyra Whisky Village and transportation of finished products.

Care for the environment is an important aspect of the Mackmyra brand and philosophy. Prior to construction of the new distillery, great effort was made to design an energy-efficient and environmentally friendly production facility with high production capacity.

In the unique Gravitation Distillery, which opened in 2011, part of the process runs on gravity. Malt and water are channeled into the top of the distillery and then flow with the assistance of gravity through pipelines, fermentation vessels and boilers. At the bottom of the distillery the casks are filled with the distilled spirit to be stored in order to become whisky. This method involves careful handling of

raw materials and reduces the need for moving parts and thus cuts energy consumption and other operating and maintenance costs.

The hot water that is used comes from a biomass pellet-fired boiler. Accumulator tanks take care of excess heat which is reused in the whisky production to heat the building and hot water. A control system monitors and controls both the production processes and the building’s systems. This provides constant control and monitoring of energy consumption and environmental performance.

The solid residue that leaches from the wort before it moves on to distillation has a high energy content and is therefore used to produce biogas.

The total energy requirement for the distillery amounts to 2.2 gigawatt-hours a year, or 2.2 kilowatt-hours per bottle produced. This represents a reduction in energy consumption of 45 percent per bottle compared with the original production facility at Mackmyra Bruk.

Other environmental impacts consist primarily of trans-porting barrels between Mackmyra’s different warehouses, as well as transporting bottles. Mackmyra constantly seeks the most cost-effective and energy-efficient transport and logistics solutions.


18.

Svensk Rök was launched on 2 September 2013. Along with The First Edition and Brukswhisky, Svensk Rök is becoming part of Systembolaget’s standard product range. Svensk Rök is the first Swedish smoky single malt whisky on Systembolaget’s shelves.


19.

Five-year summary

Five-yeAR SuMMARy

Key figures 2013 2012 2011 2010 2009

Net sales, SEKm 82.4 82.3 81.7 80.3 78.6

Revenue growth 0% 1% 2% 2% 18%

Net sales excluding alcohol tax, SEKm 64.3 63.9 62.3 61.3 61.5

Revenue growth excluding alcohol tax, SEKm 1% 3% 2% 0% 16%

Gross profit/loss, SEKm 44.2 47.3 41.0 42.7 40.7

Gross profit margin, percent 69% 74% 66% 70% 66%

Operating profit/loss, SEKm -17.3 -1.7 -0.7 6.5 13.7

Restructuring costs, SEKm -9.1 - - - -

Profit/loss after tax, SEKm -24.1 -5.3 -3.8 3.5 7.8

Change in maturing stocks, SEKm 25.9 36.2 11.7 11.7 14.4

Change in maturing stocks, percent 19% 35% 13% 15% 22%

Investments, SEKm 14.6 32.7 57.7 37.0 8.8

Cash flow, SEKm 3.0 -24.4 16.3 3.2 -0.1

Liquid ratio, percent 93% 95% 151% 98% 92%

Interest coverage ratio (times) -2.6 -0.3 -0.2 5.0 8.9

Equity, SEKm 148.6 172.7 175.0 98.3 62.0

Equity per share, SEK 36.47 42.37 43.59 33.16 26.44

Equity ratio, percent 42% 54% 61% 48% 43%

Return on equity neg neg neg 4% 13%

Number of shares, basic 4,075,396 4,075,396 4,015,396 2,965,040 2,343,594

Number of shares, fully diluted 4,177,993 4,177,993 4,145,996 2,975,640 2,670,618

Earnings per share, basic, SEK -5.90 -1.31 -0.94 1.17 3.33

Fully diluted earnings per share, SEK -5.90 -1.31 -0.94 1.16 2.92

Average number of employees 53 54 49 44 38


20.

ulF MAttSSonBoard member since 2011.

Born in 1964.

Degree in Business Administration, Stockholm University PMD, Harvard Business School.

Other current assignments: Chairman of the board of Academedia and Crem International AB, Itslearning AS and Granngården AB. Board member of Bactiguard, Sanitec and Addtech AB, as well as industrial advisor to EQT.

Previous assignments: CEO of Capio AB (publ.),

CEO of Mölnlycke Health Care AB, and President & CEO Domco Tarkett Inc.(publ.).

Holdings: 15,000 Class B shares

1 Reserve cask

AuDitoRS: Principal auditor Annika Wedin, born in 1961.

Certified Public Accountants Öhrlings PricewaterhouseCoopers AB. Auditors of Mackmyra Whisky AB since 1999.

BoARD oF DiRectoRS

Board of Directors

clAS eRikSSonBoard member since 2009

Born in 1949.

Bachelor of Laws, Stockholm University

Other current assignments: Consultant, Board member of Swecon Baumaschinen and AS Factor AB.

Previous assignments: Acting President and Deputy CEO at Lantmännen agricultural cooperative.

Holdings: 420 Class B shares.

1 Reserve cask

DAviD heDMAnBoard member since 2011

Born in 1974.

Degree in Business and Economics, Stockholm School of Economics.

Other current assignments: Investments and consultant in his own company, DH Consulting AB.

Previous assignments: CEO We International AB and Executive Vice President WeSC (publ.) AB.

No shareholding.

cARl-JohAn kAStenGRenBoard member since 1999

Born in 1967.

Degree in Engineering, KTH Royal Institute of Technology.

Other current assignments: CEO of Gillesvik AB, CEO and Board member of EFIB AB, Board member of Fastighetsägarna Stockholm and member of Hyresnämnden.

Previous assignments: Administrative director and Board member of Gillesvik AB.

Holdings: 18,000 Class A shares, 43,500 Class B shares.

5 Reserve casks

cARl klinGBeRGBoard member since 2004

Born in 1961.

Degree in Business and Economics, Stockholm School of Economics.

Other current assignments: Management consultant in own company Pay&Pray AB, Board member of Scandinavian WeldTech Holding AB.

Previous assignments: CEO of Ongame/bwin Games AB.

Holdings: 32,000 Class B shares.

7 Reserve casks

MAlin löveMARkBoard member since 2010

Born in 1969.


Other current assignments: Business area manager AMF Fastigheter AB.

Previous assignments: Business developer at Atrium Ljungberg AB, business manager for real estate investments and project development at property company AP Fastigheter AB.

Holdings: 19,000 Class A shares, 37,722 Class B shares.

3 Reserve casks.


21.

MAGnuS DAnDAnellCEO

Employed in 1999. Born in 1967.


Holdings: 29,650 Class A shares, 10,389 Class B shares, 6,000 convertible debentures (K14).

3 Reserve casks and 2 Gravity casks.

MAnAGeMent

Senior executives

ulF SöDeRlunDChief Financial Officer


Business degree, Stockholm University.

Previous assignments: Many years of experience as CFO, most recently from Sundström Safety AB.

Holdings: 1,000 convertible debentures (K14).

1 Reserve cask

chARlotte ulFvin Supply Chain Manager


Degree in Engineering, Uppsala University School of Engineering.

Previous assignments: Various positions within Sandvik Materials Technology, most recently as Head of Engineering and Head of Production.

No shareholding.

2 Reserve casks.

AnGelA D’oRAzio Master blender


W.S.E.T., UK (Wine and Spirit Education Trust) and Degree in Marketing Management from IHM Business School.

Previous assignments: Own business through Scotch Malt Whisky Society in Sweden and several years’ experience judging international whisky and spirits competitions. “Whisky Ambassador of the Year” at the 2013 Icons of Whisky Awards in London.

No shareholding.

6 Reserve casks.


22.

MAckMyRA SvenSk WhiSky ABMackmyra Svensk Whisky AB (publ) was founded in 1999 and is Sweden's first producer of malt whisky. The business includes prod-uct development, manufacturing, sales and marketing of whisky, whisky-related products and experiences. Mackmyra has estab-lished the brand in the Nordic region by successfully launching the first Swedish malt whisky in a personal 30-litre cask and traditional malt whisky in the bottle. In 2010-2013, the company built a solid platform with increased capacity for manufacturing, visitor opera-tions and sales and also carried out and prepared new products/new market launches.

Business is conducted in Mackmyra Whisky Village outside Gävle, in Stockholm and in Hamburg through the parent company and its subsidiaries, Mackmyra Swedish Whisky GmbH and Mat och Upplevelser i Kungsbäck AB.

The Company has about 6,000 shareholders and Mackmyra shares were listed on NASDAQ OMX First North in December 2011. The listing and expansion of ownership are strategically important for marketing the brand and shareholders are encouraged to become customers.

SiGniFicAnt eventS 2013• Sales in 2013 did not achieve the planned level, which shifted

the focus to inventories, cash flow and distilling rate. An ef-ficiency programme was launched, including concentration of sales to a few markets for a higher market presence. In order to strengthen cash flow and create a better balance between inventory and sales, the Board decided to reduce the distilling rate. Four employees were given notice of termination, which was completed during the third quarter. The overall efficiency measures are estimated to generate annual cash savings on the order of SEK 10 million, including SEK 4-5 million in cost savings intended to improve the bottom line as of 2014. Subse-quently, a decision was taken in the fourth quarter to further reduce the distilling rate in 2014, which is expected to bring additional liquidity savings of SEK 6-8 million in 2014.

• The focus on selected markets continued; Mackmyra estab-lished a visitor centre at Gut Basthorst outside Hamburg for cask sales in northern Germany. A new permanent visitor centre opened at Mackmyra Whisky Village.

• The Special Series was discontinued in the second quarter and replaced by Midvinter, a limited edition in a new stand-alone series, that was launched in the fourth quarter.

• Mackmyra’s new smoky whisky, Svensk Rök, won a contract at Systembolaget and was well-received when launched in the second half of the year.

• Mackmyra launched Sweden's first 10-year-old whisky.

SiGniFicAnt eventS in 2014 - eFFiciency MeASuReS AnD RiGhtS iSSueThe Company decided in February 2014 to implement a powerful action programme to increase sales, reduce costs and improve cash flow. The programme, which was initiated immediately and will continue in 2014 and part of 2015, entails annual savings of about SEK 20 million in addition to earlier decisions. The savings effect in 2014 is estimated at around SEK 10 million after restructuring costs. See also events after the end of the period, page 27.

The Board also proposed that an Extraordinary General Meeting on 22 April 2014 will resolve on a fully underwritten rights issue of approximately SEK 22 million. The reason for the issue is to fund the operation's cash flow during implementation of the action programme to achieve a return to a positive cash flow, which is estimated to have had full effect at the end of the year, as well as to build up a liquidity cushion to mitigate seasonal fluctuations in sales. The action package also includes initiatives to accelerate growth, including through expansion of the sales organisation and further development of the new bridgehead in northern Germany.

In addition to the injection of new equity provided by the issuance, the Company has renegotiated credit terms and agreed with the lenders for new loans totalling SEK 12 million in 2014. See also events after the end of the period, page 27.

net SAleS AnD pRoFit/loSSNet sales for 2013 were SEK 82.4m (82.3) including alcohol tax. Net sales excluding alcohol tax was 64.3m (63.9), which was an increase of 1% (3) compared with 2012.

Of 2013 net sales, excluding alcohol tax and adjusted for cask res-ervations, Casks and Experiences accounted for 44 percent (47) and Bottles for 56 percent (53).

Gross earnings for 2013 amounted to SEK 44.2m (47.3), with a gross profit margin of 69 percent (74). The lower gross profit margin can mainly be explained by the lower proportion of sales of Casks and Experiences.

Operating loss for 2013 was SEK 17.3m (loss: 1.7), including restruc-turing costs, which had a negative impact of SEK 9.1m related to a write-down from the previous year’s investments in the distillery at Mackmyra Bruk of SEK 4.5m, rent expense related to Mackmyra Bruk of SEK 2.8m, and provisions related to the 2013 organisational changes of SEK 1.8m. Slightly higher selling expenses over the previous year, mainly resulting from the initiative of northern Germany, have had a negative impact on operating income, as has the expansion of visitor activities in Mackmyra Whisky Village.

Net loss after tax was SEK 24.1m (loss: 5.3)

The Board of Directors and Chief Executive Officer for Mackmyra Svensk Whisky AB (publ), org.nr 556567-4610, hereby submit the Annual Report for the financial year 2013.

Report of the Board of Directors

RepoRt oF the BoARD oF DiRectoRS


23.

key figures 2013 2012

Net sales, SEKm 82.4 82.3

Revenue growth 0% 1%

Net sales excluding alcohol tax, SEKm 64.3 63.9

Revenue growth excluding alcohol tax, SEKm 1% 3%

Sales Bottles, SEKm 36.1 33.8

Sales Casks and Experiences, SEKm 28.2 30.1

Gross profit/loss, SEKm 44.2 47.3

Gross profit margin, percent 69% 74%

Operating profit/loss, SEKm -17.3 -1.7

Restructuring costs, SEKm -9.1 -

Profit/loss after tax, SEKm -24.1 -5.3

Earnings per share, basic, SEK -5.90 -1.31

casks and experiences

Sales in Casks and Experiences amounted to SEK 28.2m (30.1) for 2013, a decline of 6 percent (+3). The Extra Rök cask sales campaign did not live up to expectations and had a negative impact on sales. Measures are underway to increase cask sales by increasing the company’s regional presence, further developing the cask concept and establishing operations at Gut Basthorst, Hamburg.

Mackmyra launched a limited edition of Sweden's first 10-year-old whisky in late September. The whisky will be delivered for Christmas 2014 in boxes of twelve 50-cl bottles. Sales were robust and partly compensated for the lower cask sales.

Work related to the establishment at Gut Basthorst outside Hamburg has been underway since spring 2013. Mackmyra signed a cooperation agreement with Gut Basthorst in October under which it will lease a small warehouse for 30-litre casks on site. The warehouse is expected to be ready for use during spring 2014.

The new visitor centre at Mackmyra Whisky Village was completed in mid-October and has been in full operation since then.

Bottles

In 2013 bottle sales rose 7 percent (-1) to SEK 36.1m (33.8) compared with 2012. The average sales price per bottle increased compared with 2012, while the number of bottles sold decreased by 2 percent to 201,000 bottles.

Svensk Rök was launched in September and contributed to sales in the fourth quarter. Svensk Rök is part of Mackmyra’s regular line of products and complements Mackmyra’s product portfolio in a new market segment. Svensk Rök has had limited distribution within Systembolaget in 2013, but is expected to reach full distribution at Systembolaget in 2014. Svensk Rök is expected to benefit profitability even in conjunction with a potential reallocation of the product mix.

The First Edition continues to have a strong market position and is one of the market leaders in its price segment at Systembolaget. However, sales volumes for the year of The First Edition and Mackmyra Brukswhisky were somewhat lower compared with 2012, which may be attributable in part to the launch of Svensk Rök.

The Special series came to an end in the spring of 2013 with Spe-cial:10 Kaffegök. Special:10 was well-received by both consumers and the press, reaching higher sales volumes than the equivalent edition in 2012.

On 1 November Systembolaget launched Mackmyra’s new winter whisky, Midvinter, in its temporary line of products. Midvinter was the first edition in a new freestanding series after the popular Mackmyra Special series.

RepoRt oF the BoARD oF DiRectoRS

0

5

10

15

20

25

Quarter 1 Quarter 2 Quarter 3 Quarter 4

2011 2012 2013

SAleS peR quARteR EXCLuDING ALCOHOL TAX, SEKM

Sales are affected by seasonal variations in the industry. Opportunities to smooth seasonal variations are created, for example, through targeted marketing activities and further development of products and markets.


24. RepoRt oF the BoARD oF DiRectoRS

Below is an analysis of the age structure of the maturing stock at year-end.

MAtuRAtion AGeinG StRuctuRe THOuSANDS OF BOTTLES 31 DEC. 2013

0

200

400

600

800

1000

‹ 1 year 1–2 years 2–3 years 3–4 years 4–5 years › 5 years

Mackmyra’s maturation stock is appropriately sized to meet future demand, even when taking into account the lower distilling rate planned for 2014.

Market developments

The majority of the company's sales take place in Scandinavia, within Travel Retail and in trade with neighbouring countries around the Baltic Sea. Mackmyra has continued to concentrate activities to these markets, as well as to northern Germany. Canada and other markets are handled with external partners and distributors.

product development and quality

During the year Mackmyra developed both new products and pack-aging. Svensk Rök and Midvinter were launched in 2013. Midvinter is the first edition of a new freestanding series that took over after the Mackmyra Special series. A new design accompanied the launch of Mackmyra Midwinter. Product quality is continuously checked to ensure a consistently high quality.

The high quality of the whisky is also confirmed by the awards Mackmyra products garners in international competitions.

The quality of Mackmyra whisky was recognized in 2013 by the IWSC, which awarded Mackmyra whisky four medals:

• OutstandingGold:MomentGlöd• OutstandingSilver:SvenskRök• OutstandingSilver:MomentMareld• OutstandingSilver:Special:10Kaffegök

pRoDuction

Distilling

In 2013 Mackmyra distilled a total of 765,000 bottles (1,001,000), 90 percent (60) of which were distilled in Mackmyra Whisky Village. The distilled spirit maintains a consistently high quality and the majority of the distilled spirit was filled in casks intended for Mackmyra’s bottled products (Bottles). Around ten percent of the volume of distilled spirit was used for 30-litre casks ordered by customers.

Maturing stock

During 2013, the value of the maturing stock increased by 19 percent (35) or SEK 25.9m (36.2), to a total of SEK 164.5m as at 31 December 2013. The value of the maturing stock increased by only one (1) percent (10) during the fourth quarter, or SEK 2.4m (12.8) due to a lower distilling rate during the second half of the year.

Maturing stock is valued at the balance sheet date at production cost or the net realisable value, whichever is lower. Production costs include the cost of storage for the period until the whisky is ready for sale.

Finished whisky of the right age and recipe mix in sufficient volumes is crucial for increasing sales in a long-term perspective. Because of the maturing stock that has accumulated over several years Mackmyra is now capable to a greater degree of adapting production to sales growth. In light of the sales growth trend demonstrated in 2013, Mackmyra has decided (February 2014) to further reduce the distilling rate, down to a volume lower than 100,000 bottles in 2014. Distilling in 2014 will largely be concentrated to the smoky distillate, in part to adapt to the recently launched Svensk Rök. The lower dis-tilling rate will mean a significant strengthening of cash flow in 2014.

inveStMentSInvestments in 2013 totalled SEK 14.7m (32.7), including an investment of SEK 6.8m in the visitor centre, SEK 3.7m (6.8) in cask investments for ageing, SEK 1.1m (4.2) in warehouse facilities and SEK 3.1m (3.0) production equipment, product development and IT systems. The previous year’s investments also included SEK 11.1m in investments relating to completion of the new distillery and SEK 7.6m in development of the Whisky Village and restaurant.

cASh FloWCash flow from operating activities during 2013 was SEK -8.1m. Change in operating capital was negative at SEK 25.7m, of which the build-up of maturing stock was SEK -29.3m. Cash flow for invest-ments was SEK -14.6 and cash flow from financing was SEK 51.4.

The company’s cash flow in 2013, as in previous years, was signifi-cantly impacted by the gradual development of the company’s stocks of maturing whisky.

liquiDity AnD FinAncinG At the balance sheet date, cash and cash equivalents amounted to SEK 0.9m as at 31 December 2012. Unutilised overdraft facilities totalled SEK 1.8m, compared with SEK 7.7m as at 31 December 2012.

Mackmyra took out new loans in 2013 from credit institutions total-ling SEK 50.3m (50.3) and amortised SEK 4.5m (1.9).

As at the balance-sheet date, non-current liabilities were SEK 176.9m, compared with 125.5m as at 31 December 2012, of which SEK 143.9m (96.5) relates to bank loans and loans from credit institutions, SEK 8.2m (2.2) to utilised overdraft facility, SEK 6.5m (6.5) in convertible debentures and SEK 18.3m (20.3) in other credit including SEK 15.8m (18.8) for non-interest-bearing liabilities attributable to loans from the company’s cask owners.


25.RepoRt oF the BoARD oF DiRectoRS

After the balance-sheet date the Company renegotiated credit terms and agreed with the lenders for new loans totalling SEK 12 million in 2014.

equityThe parent company’s equity at the end of 2013 was SEK 150.3m (173.1). The Group’s equity at the end of 2013 was SEK 148.6m (172.7), which represents an equity ratio of 42% (54).

The Board proposed in March 2014 that an Extraordinary General Meeting on 22 April 2014 should resolve on a rights issue of Class B shares (“The Shares”) to raise about SEK 22m for the company.

the MAckMyRA ShAReThe shares are listed on First North. The closing share price at 30 December 2013 was SEK 31.50 (50.00). A total of 438,211 shares were sold in 2013, compared with 385,051 shares in 2012. The table below shows the share price trend in 2013.

ShARe peRFoRMAnce MAck-B. 2013

Jan

SEK

Feb Mar Apr May June July Aug Sep Oct Nov Dec0

10

20

30

40

50

60

peRMitSSince 1999 the company has held all necessary permits for the manufacturing, storage, wholesale trading and export of alcoholic drinks. Mackmyra views the authorities’ controls as an important aspect of its operations. The results of inspections carried out to date show that the company more than meets requirements, which is a strength for future growth.

incentive ScheMeSSenior executives have an incentive scheme in which the achieve-ment of budget figures and a number of key figures provides an opportunity for flexible remuneration corresponding to a maximum of three months’ extra salary. Senior executives did not receive any incentive-based compensation in 2013.

enviRonMentThe company runs a business that requires a permit under the Environmental Code in respect of the production of distilled alcoholic drinks. Emissions from the production operation consist primarily of grain residue from the mashing stage, waste water from cleaning of equipment and ethanol emissions. The company has a permit for its business under the Environmental Code. The company operates according to an environmental plan with in-house controls drawn up in consultation with the supervisory authority.

RiSk MAnAGeMentExposure to risks is part of ongoing operations. as is reflected in Mackmyra’s risk management with the overall goal of identifying and preventing risks, as well as implementing measures and im-provements to minimise potential risks, regardless of the area.

peRSonnel AnD oRGAniSAtionIn 2013 the group had an average of 53 full-time employees (54).

Corporate management during the year consisted of the CEO, sales director, CFO, master blender, marketing manager, customer rela-tions manager and deliveries manager.

Under the action programme decided in February 2014 the number of employees will be reduced by about 15 full-time positions through layoffs and attrition within the functions of management, adminis-tration, marketing and production. Corporate management will be reduced by three people.

The CEO and senior executives have a notice period of up to six months, or in accordance with legislation and agreements.


26. RepoRt oF the BoARD oF DiRectoRS

RiSk cAteGoRieS potentiAl RiSkS RiSk MAnAGeMent

Market risks The position of a specific malt whisky is defined by the taste and quality experiences of the customers. Reviews and ratings form a whole entity. A launch that does not meet qual-ity standards and/or supply capability require-ments, or that receives negative reviews, can damage Mackmyra’s market position and thus its long-term profitability.

In the long run, the risk of increased competi-tion from other Swedish whisky brands.

Changes in legislation or new health findings could lead to reductions and/or restrictions in consumption that would impact sales.

The company’s strategy is to grow incrementally with small initial market investments.

The majority of sales currently take place in Sweden, other coun-tries in Scandinavia, within Travel Retail, border trade around the Baltic Sea and northern Germany.

Mackmyra launches its product portfolio for bottles to selected groups of customers and markets and emphasises presenting the product in its proper context. For Mackmyra casks, the risk of false expectations is lower because the customer is offered a major experience component.

With its current stocks of maturing whisky, Mackmyra has a good supply capacity. Mackmyra continuously develops the unique cask business as well as other products. More players on the Swedish market will inspire a growing interest in Swedish whisky worldwide, which is deemed to benefit Mackmyra’s long-term development.

Production risks

It is difficult to estimate what level of production and storage provides the optimal balance be-tween size of maturing stocks and future sales, since sales are at least five years in the future.

Over-estimating the sales trend can result in overproduction, leading to overly large stocks, too much tied up capital and lower returns. Low production in relation to demand could lead to depleted inventory and supply problems.

Mackmyra has adapted the distilling volume for 2014 to provide a maturing stock at a lower level. The age structure of the extensive maturing stock allows this strategy to be implemented without jeopardising delivery capacity over the next one to two years. The future distillation volume will gradually be adapted to a higher level when demand increases.

Product liability risks

Any defects in Mackmyra products could lead to demands for accountability and damages, as well as loss of credibility, which would affect the brand.

The company has extensive experience in supplying products in both bottles and casks and has built up the necessary quality control processes.

Quality assurance, complaint management and continuous improve-ment are integrated in all procedures and the company’s insurance coverage is well adapted to the business.

Dependence on permits

Risk of withdrawal and or changes in permits, or changes in legislation that would limit operations.

Since 1999 the company has engaged in licensed operations in the facilities in compliance with several laws and established rules. The company has all permits currently required for operations.

Financial risks The risk that the company’s sales and profit develop at a rate that is slower than anticipated, which may have a negative impact on cash flow.

In the future the company will export a large part of production based in foreign currencies, which will increase the element of currency effects.

Operations bind a large amount of capital in inventory and fixed as-sets. Sales variations have a major impact on the company's liquid-ity. Through the ongoing action programme, the proposed rights is-sue for 2014 and the renegotiated bank financing, the company has ensured its liquidity and financing needs to a reasonable degree for the coming year. Risk exposure to exchange rate effects is limited in current operations because most transactions are denominated in Swedish kronor. To the extent that sales are invoiced, or equipment and materials are purchased in a foreign currency, significant cur-rency risk is primarily managed using currency futures.

The strategy is to limit trade to a few currencies for controlled flows and, where possible, to take out currency forwards to minimise risk and adapt operations to exchange rates.

Dependence on key personnel

Dependence on key personnel is a critical fac-tor in a company the size of Mackmyra.

The company is in a phase in which dependence on personnel is rela-tively limited in the short term. However, new projects and launches will require utilisation of accumulated skills and experience.

Other risks Production stoppage due to fire, theft or other damage suffered by facilities and/or storage areas could cause problems in production and delivery capabilities.

The company has procedures in place and takes preventive measures to minimise such risks. The maturation warehouses are fire-resistant and divided into fire cells; they are also situated in dif-ferent geographic locations. The facilities have been equipped with adapted perimeter protection and alarms. The company’s insurance coverage is well suited for the business.


27.RepoRt oF the BoARD oF DiRectoRS

SiGniFicAnt eventS 2014

Mackmyra carries out strong efficiency measures

The Board of Directors decided on 19 February 2014 to implement a powerful action programme to increase sales, reduce costs and strengthen cash flow. The programme is initiated immediately and will continue in 2014 and part of 2015, and entails annual savings of about SEK 20 million in addition to earlier decisions. The savings effect in 2014 is estimated at around SEK 10 million after restructur-ing costs.

The action programme focuses on:

• Strengtheningaregionalmarketpresenceforthesaleofbottles,casks and experiences.

• Strengtheningthedialoguewithcustomersandambassadors.

• MovingheadquartersandadministrationtoGävle.

• Takingadvantageofthestrengthofawell-stockedmaturationstorage facility for sales of older whisky, which would make it possible to reduce the distillation rate to a volume of less than 100,000 bottles in 2014.

• Reducingthenumberofemployeesbyabout15full-timepositionsthrough layoffs and attrition within the functions of manage-ment, administration, marketing and production.

The organisation is concentrated and simplified. CEO Magnus Dandanell takes over responsibility for both marketing and sales. Increase the number of regional sales representatives and concentrate efforts to Scandinavia and northern Germany. Focus communication with the market and customers on strengthening the dialogue, which to date has been one of Mackmyra’s critical success factors in previous years.

Distillery volume for maturing stock is adapted downwards in 2014. The age structure of the extensive maturing stock allows this strategy to be implemented without jeopardising future expansion or delivery capacity. Mackmyra delivered a small volume of distilled spirit to a major player in the market in 2014 and there is prepar-edness for some contract production as a complement to regular operations.

The action programme provides Mackmyra with excellent prospects to reverse the negative financial performance that the company demonstrated in 2012–2013. This belief is based on Mackmyra’s unique market position in Casks and Experiences, strong market position at Systembolaget and in border trade, with award-winning products such as The First Edition, Mackmyra Brukswhisky and Svensk Rök.

Board proposes fully underwritten rights issue of about Sek 22 million

The rights issue, which was proposed on 18 March 2014, together with the ongoing action programme, will entail creating conditions for higher growth with profitability and a positive cash flow. The growth of both the business and maturing stock in recent years means that Mackmyra is now well equipped to meet current and future demand.

• TheBoardproposedthatanExtraordinaryGeneralMeetingon 22 April 2014 should resolve on a rights issue of Class B shares (“The Shares”) to raise about SEK 22m for the company.

• Thepurposeoftherightsissueistostrengthenthecompany’soperating capital and to create conditions for higher growth with

profitability and with a positive cash flow.

• Thecompany'sprincipalshareholdersandtheBoardhavejointlyundertaken to subscribe for new shares representing their common share of the rights issue. In addition, an underwriting agreement for SEK 14 million was signed with an external party, which means that the proposed rights issue is fully underwritten. The subscription period runs from 30 April until 14 May 2014.

• One(1)existingshareofMackmyraentitlestheholdertosub-scribe for one (1) new Class B share at a subscription price of about SEK 5.40.

• Thesubscriptionperiodrunsfrom30Aprilthrough14May2014.

The reason for the issue is to fund the operation's cash flow during implementation of the action programme to achieve a return to a positive cash flow, which is estimated to have had full effect at the end of the year, as well as to build up a liquidity cushion to mitigate seasonal fluctuations in sales. The action package also includes initiatives to accelerate growth, including through expansion of the sales organisation and further development of the new bridgehead in northern Germany.

In addition to the injection of new equity provided by the issuance, the Company has renegotiated credit terms and agreed with the lenders for new loans totalling SEK 12 million in 2014.

In recent years Mackmyra has substantially upgraded operations to allow for future sales at a higher level. Invested capital has es-sentially been used for production and storage facilities, as well as distillation of large volumes for the maturing stock. In addition, new products have been developed and launched. Furthermore, initia-tives to implement distribution in new markets have been carried out. Taken together, Mackmyra is now well equipped to meet both current and future demand.

unReStRicteD equity in the GRoupThe Group’s unrestricted equity as at 31 December 2013 amounts to SEK 109.8m (113.9).

pRopoSeD AppRopRiAtion oF pRoFitThe Board proposes that the retained earnings (SEK thousand):

Premium fund 132,130

Retained earnings 2,185

Loss for the year -22,802

111,513

be dealt with such that

the amount to be carried forward to the new accounts is 111,513

111,513

The financial performance and position of the Group and parent company are shown in the following income statement and balance sheet, cash flow statement and supplemental disclosures.


28.

income statement

FinAnciAl StAteMentS

GRoup pARent coMpAny

Sek thouSAnD note 2013 2012 2013 2012

Net sales 1 82,449 82,300 81,054 81,870

Minus: alcohol tax -18,146 -18,378 -18,146 -18,378

net sales excluding alcohol tax 1 64,302 63,922 62,907 63,492

Cost of goods sold 1,3,4,5,6 -20,090 -16,583 -20,784 -16,353

Gross profit 63,492 47,339 42,123 47,139

other operating expenses

Selling costs 3,4,5,6 -37,911 -35,293 -34,571 -34,682

Administrative costs 2,3,4,5,6 -14,499 -14,109 -14,499 -14,109

Restructuring costs -9,058 -9,058

Other operating income 0 396 0 396

operating profit/loss -17,255 -1,667 -16,004 -1,256

profit from financial investments

Other interest income and similar profit/loss items 145 400 145 400

Other interest expenses and similar profit/loss items -6,900 -5,666 -6,900 -5,660

profit/loss after financial items -24,011 -6,933 -22,760 -6,516

Tax 7 -43 1,583 -43 1,583

loss for the year -24,054 -5,350 -22,802 -4,933


29.

Balance sheet



Sek thouSAnD note 31 Dec. 2013 31 Dec. 2012 31 Dec. 2013 31 Dec. 2012

ASSetS

non-cuRRent ASSetS

tangible non-current assets

Buildings and land 8 82,823 79,021 82,823 79,021

Process equipment 9 20,061 21,513 20,061 21,513

Refurbishment expenses for other party's property 10 - 4,713 - 4,713

Inventories and conversion of premises 11 34,939 35,456 34,495 34,994

New construction in progress and advance payments in respect of tangible non-current assets 12 2,730 1,195 2,730 1,195

140,553 141,898 140,109 141,436

Financial non-current assets

Shares in subsidiaries 13 - - 1,289 475

Deferred tax 1,525 1,525 1,525 1,525

1,525 1,525 2,814 2,000

totAl non-cuRRent ASSetS 142,078 143,423 142,923 143,436

cuRRent ASSetS

Stock, etc.

Work in progress 164,524 138,671 164,524 138,671

Finished goods and goods for resale 20,742 17,310 20,511 17,245

185,266 155,981 185,035 155,916

current receivables

Trade and other receivables 15,686 14,465 12,098 14,070

Receivables with subsidiaries 0 6,464 783

Tax asset 221 1,594 221 1,594

Other receivables 1,585 2,978 1,484 2,978

Prepaid expenses and accrued income 14 1,869 2,546 1,826 2,546

19,360 21,583 22,093 21,971

cash and bank balances 3,921 927 2,192 617

totAl cuRRent ASSetS 208,547 178,492 209,321 178,504

totAl ASSetS 350,625 321,915 352,244 321,940


30.

Balance sheet



Sek thouSAnD note 31 Dec. 2013 31 Dec. 2012 31 Dec. 2013 31 Dec. 2012

equity AnD liABilitieS

equity 15

Restricted equity

Share capital 4,075 4,075 4,075 4,075

Statutory reserve 34,712 34,712 34,712 34,712

38,786 38,787 38,787 38,787

unrestricted equity

Premium fund 132,130 132,130 132,130 132,130

Retained earnings 1,758 7,118 2,185 7,118

Loss for the year -24,054 -5,350 -22,802 -4,933

109,834 133,898 111,513 134,315

totAl equity 148,620 172,685 150,299 173,102

non-cuRRent liABilitieS 16

Liabilities to credit institutions 143,882 96,473 143,882 96,473

Overdraft facility 17 8,219 2,284 8,219 2,284

Convertible debentures 18 6,504 5,496 6,504 6,504

Other liabilities 18,344 21,292 18,344 20,284

176,948 125,545 176,948 125,545

cuRRent liABilitieS

Trade and other payables 5,902 10,473 5,813 10,191

Liabilities to subsidiaries - 1,022

Other liabilities 2,948 3,257 2,154 3,257

Accrued expenses and deferred income 19 16,207 9,955 16,007 9,845

25,057 23,685 24,996 23,293

totAl equity AnD liABilitieS 350,625 321,915 352,244 321,940

Pledged assets 20 205,000 155,000 205,000 155,000

Contingent liabilities None None None None


31.

cash flow statement



Sek thouSAnD 2013 2012 2013 2012

cASh FloW FRoM opeRAtinG ActivitieS

Operating profit/loss -17,255 - -16,004 -1,256

Adjustments for items not included in cash flow

Depreciation and amortisation 16,090 - 15,981 10,420

Interest received 145 - 145 400

Interest paid -6,900 - -6,900 -5,660

Income tax paid -43 - -43 58

cash flow from operating activities -7,963 - -6,821 3,962

chAnGe in WoRkinG cApitAl

Reduction/increase in inventory -29,285 - -29,119 -35,962

Reduction/increase in trade and other receivables -1,220 - 1,972 833

Reduction/increase in current receivables 3,443 - -2,094 -1,500

Reduction/increase in current liabilities 1,373 - 1,703 -7,306

-25,690 - -27,539 -43,935

cASh FloW AFteR chAnGe in WoRkinG cApitAl -33,653 - -34,360 -39,973

cASh FloW FoR inveStMentS

Investments in financial non-current assets - - -814 -475

Investments in tangible non-current assets -14,756 - -14,654 -32,275

cash flow for investments -14,756 - -15,468 -32,750

cash flow after investments -48,409 - -49,827 -72,723

cASh FloW FRoM FinAncinG

New loans 50,000 - 50,000 48,030

Change in bank overdraft facility 5,935 - 5,935 2,284

Redemptions -4,532 - -4,532 -1,950

cash flow from financing 51,403 - 51,403 48,364

cash flow for the year 2,994 - 1,575 -24,359

Cash and cash equivalents at beginning of year 927 - 617 24,976

Cash and cash equivalents at end of year 3,921 - 2,192 617


32.

Supplemental disclosures

SuppleMentAl DiScloSuReS

AccountinG policieS

General accounting policies

The annual report has been produced in accordance with the Swedish Annual Accounts Act and the Swedish Accounting Standards Board’s General Guidelines, with the exception of BFNAR 2008:1 Annual reporting for smaller limited companies (K2 rules) and BFNAR 2012:1 Annual Accounts and Consolidated Accounts (K3 rules).

consolidated financial statements

The consolidated financial statements include subsidiaries, where the parent company directly or indirectly owns more than 50% of the votes, or in some other way has a controlling influence.

The Group’s financial accounts have been prepared in accordance with the purchase method, which means that the subsidiaries’ equity on acquisition, determined as the difference between the fair values of the assets and liabilities, is eliminated in its entirety. Owing to this, the Group’s equity only includes the portion of the subsidiaries’ equity that has arisen following the acquisition.

Intra-Group profits are eliminated in their entirety.

The parent company’s financial accounts include shares in subsidiaries at cost, with deductions for any impairment. For dividends from subsidiaries, only dividends received from profits earned after the acquisition are recognised.

Measurement principles

Assets, provisions and liabilities have been valued at cost unless otherwise stated below.

Stock

Stock is valued, applying the first in first out principle, at the lower of the cost of acquisition and the net realisable value on the balance sheet date. Most stock involves goods in progress (the maturing stock). The remainder includes

stock of finished goods and merchandise. Valuation of the maturing stock is based on normal operating capacity and actual costs for raw materials, distillation and maturation. Finished products are measured according to an equivalent principle, but with the addition of costs for bottling and packaging.

Receivables

Receivables have, after individual valuation, been posted at the amounts at which they are expected to be received.

Foreign currencies

Receivables and liabilities in foreign currency are valued at the exchange rate on the balance sheet date. Where hedging measures are implemented, such as forward contracts, the forward rate is used. Transactions in foreign currency are translated in accordance with the spot rate on the transaction date. The assets and liabilities of the Danish branch are translated at the closing rate. All income statement items are translated at average rates.

Exchange differences are recognised directly in equity. Profits and losses on receivables and liabilities of an operating nature are recorded net under other operating income or other operating expenses.

income

Sales of goods are posted when products are delivered to the customer, in accordance with the terms of sale. Sales are posted net after VAT, discounts and exchange rate differences for sales in foreign currency. Net sales include alcohol tax on sales in Sweden. The income statement also includes net sales excluding alcohol tax.

Depreciation principles for non-current assets

Non-current assets are recorded at cost minus depreciation. Expenses incurred in improving an asset’s performance over and above its original level increase the asset’s carrying amount.


33.SuppleMentAl DiScloSuReS

Expenses for repairs and maintenance are recorded as expenses. Non-current assets are written off systematically over the asset’s estimated useful life. When the depreciable amounts of assets are confirmed, each asset’s residual value is taken into account as required. The following deprecia-tion periods are applied for the company’s tangible and intangible non-current assets:

Buildings 20 years

Process equipment 10 years

Refurbishment expenses for other party's property

20 years

Inventories 5 years

Depreciation is included in the function where the asset is utilised. Most depreciation/amortisation is included in the income statement item Cost of Goods Sold. The remainder of depreciation/amortisation is included in the income state-ment items Selling Expenses and Administrative Costs.

Borrowing costs

Interest on capital borrowed to finance production of an asset that necessarily takes a substantial period of time to complete, is included in the cost to the extent that it relates to the production period. Other borrowing costs are expensed in the period to which they relate.

income taxes

Income taxes posted include tax that is to be paid or received in respect of the current year, adjustments in respect of previous years’ current tax and changes in deferred tax. Valuation of all tax assets/liabilities takes place at nominal amounts and is performed in accordance with the tax rules and tax rates that have been set or that

have been announced and will in all probability be enforced. Deferred tax is calculated according to the balance sheet method on all temporary differences that arise between posted and tax values. Deferred tax assets in respect of tax loss carryforwards are posted to the extent that it is likely that the carryforwards can be offset against any surplus in future taxation.

lease agreements

All of the company’s lease agreements are reported as operational leasing. Payments under these agreements are posted as expenses on a straight-line basis over the period of the lease.


34.

note 1 puRchASeS AnD SAleS involvinG GRoup coMpAnieS (parent company)

Parent Company

2013 2012

Purchases from subsidiaries 1,171 494

Sales to subsidiaries 13,761 374

note 2 ReMuneRAtion to AuDitoRS

Group Parent Company

2013 2012 2013 2012

Audit assignment 318 269 318 259

Audit activities in addition to the audit assignment 34 - 34 -

Tax services 141 - 141 -

Other services 10 187 10 187

503 456 503 446

note 3 leASe AGReeMentS (Group and parent company)

Leasing costs for the year totalled SEK 690k (583).

notes to the financial statementsnote 4 eMployeeS AnD StAFF coStS


Average number of employ-ees 2013 2012 2013 2012

Women 27 25 25 24

Men 26 29 25 28

53 54 50 52

Salaries, remuneration and social costs


2013 2012 2013 2012

Salaries and other remunera-tion to the Board, the CEO and executive management 6,679 4,358 6,679 4,358

Salaries and other remuneration to other employees 19,427 19,659 17,845 19,256

Pension costs for the Board and CEO 402 407 402 407

Pension costs for other employees 2,544 2,101 2,494 2,096

Other social costs 8,534 7,518 8,116 7,394

37,586 34,043 35,536 33,511

note 4 cont’d

Remuneration of the Board of Directors and senior executives (parent company)

Directors' fees/basic salary

Other remuneration Other benefits Pension costs Total

name Function 2013 2012 2013 2012 2013 2012 2013 2012 2013 2012

ulf Mattsson Chairman 132 132 118 118 250 250

Clas Eriksson Board member 44 44 44 44

Carl-Johan Kastengren Board member 44 44 44 44

Carl Klingberg Board member 44 44 44 44

David Hedman Board member 44 44 44 44

Malin Lövemark Board member 44 44 44 44

Magnus Dandanell CEO 1,027 1,010 63 67 402 407 1,492 1,484

Rest of executive manage-ment 5,300 2,996 0 0 259 234 1,458 949 7,017 4,179

total 6,679 4,358 118 118 322 301 1,860 1,356 8,979 6,133

noteS to the FinAnciAl StAteMentS


35.

note 5 GenDeR DiStRiBution in coMpAny MAnAGeMent


2013 2012 2013 2012

BOARD MEMBERS

Women 1 1 1 1

Men 6 6 5 5

7 7 6 6

CEO AND OTHER SENIOR EXECuTIVES

Women 4 4 3 4

Men 4 5 4 5

8 9 7 9

note 6 DepReciAtion oF tAnGiBle AnD intAnGiBle ASSet


2013 2012 2013 2012

Buildings -3,095 -2,322 -3,095 -2,303

Process equipment -2,304 -2,744 -2,304 -2,744

Inventories and conversion of premises -5,977 -4,927 -5,868 -4,896

Refurbishment expenses for other party's property -4,713 -477 -4,713 -477

-16,090 -10,470 -15,981 -10,420

Refurbishment expenses for other party's property includes a write-down of SEK 4,236k

note 7 tAx on pRoFit FoR the yeAR


2013 2012 2013 2012

Current tax on profit/loss for the year -43 58 -43 58

Deferred tax - 1,525 - 1,434

-43 1,583 -43 1,492

note 8 BuilDinGS AnD lAnD


31 Dec. 2013 31 Dec. 2012 31 Dec. 2013 31 Dec. 2012

Opening cost 81,968 17,901 81,968 17,901

Transferred from new construction in progress and advance payments 5,814 56,528 5,814 56,528

Purchases 1,085 7,540 1,085 7,540

Sales/disposals - - - -

closing cost 88,866 81,969 88,866 81,968

Opening depreciation -2,948 -644 -2,948 -644

Depreciation for the year -3,095 -2,303 -3,095 -2,303

Sales/disposals - - - -

closing depreciation -6,043 -2,947 -6,043 -2,948

carrying amount 82,823 79,021 82,823 79,021

note 9 pRoceSS equipMent

Group Parent Company31 DeceM-

BeR 201331 DeceM-

BeR 201231 DeceM-

BeR 201331 DeceM-

BeR 2012

Opening cost 35,906 28,902 35,906 28,902

Transferred from new construction in progress and advance payments 290 - 290 -

Purchases 562 7,600 562 7,600

Sales/disposals - -596 - -596

closing cost 36,759 35,906 36,759 35,906

Opening depreciation -14,394 -11,650 -14,394 -11,650


Disposals - 16 - 16


carrying amount 20,061 21,513 20,061 21,513

noteS to the FinAnciAl StAteMentS


36. noteS to the FinAnciAl StAteMentS

note 10 ReFuRBiShMent expenSeS FoR otheR pARty'S pRopeRty


31 Dec. 2013 31 Dec. 2012 31 Dec. 2013 31 Dec. 2012

Opening cost 9,101 9,101 9,101 9,101

closing cost 9,101 9,101 9,101 9,101


Depreciation for the year -477 -477 -477 -477

Depreciation for the year -4,236 - -4,236 -


carrying amount - 4,713 - 4,713

note 11 inventoRieS AnD conveRSion oF pReMiSeS


31 Dec. 2013 31 Dec. 2012 31 Dec. 2013 31 Dec. 2012

Opening cost 59,074 48,044 58,561 48,044

Transferred from new construction in progress and advance payments 372 - 372 -

Purchases 5,088 11,520 4,998 11,008

Sales/disposals - -491 - -491

closing cost 64,534 59,073 63,931 58,561



Sales/disposals - 18 - 18


carrying amount 34,939 35,456 34,495 34,994

note 12 neW conStRuction in pRoGReSS AnD ADvAnce pAyMentS in ReSpect oF tAnGiBle non-cuRRent ASSetS


31 Dec. 2013 31 Dec. 2012 31 Dec. 2013 31 Dec. 2012

Opening cost 1,194 50,510 1,194 50,510

Purchases 8,011 7,212 8,011 7,212

Transferred to buildings -5,814 -56,528 -5,814 -56,528

Transferred to process equipment -290 - -290 -

Transferred to inventories -372 - -372 -

closing cost 2,730 1,194 2,730 1,194

note 13 ShAReS in SuBSiDiARieS (parent company)

Share of equity

Voting rights

Number of shares

Carrying amount

31 Dec. 2013 31 Dec. 2012

Mat och Upplevel-ser i Kungsbäck AB 100% 100% 500 1,072 475

Mackmyra Swedish Whisky GmbH 100% 100% 25,000 217 –

1,289 475

note 14 pRepAiD expenSeS AnD AccRueD incoMe


31 Dec. 2012 31 Dec. 2012 31 Dec. 2012 31 Dec. 2012

Prepaid rent 517 796 517 796

Prepaid insurance 147 282 147 282

Other 1,205 1,468 1,162 1,468

1,869 2,546 1,826 2,546

note 15 chAnGe in equity

parent company Share capitalStatutory

reservePremium

fundRetained earnings

Loss for the year Total

Opening amount 4,075 34,712 132,130 7,118 -4,933 173,102

Appropriation according to resolution of this year's annual general meeting:

Loss for the year -4,933 4,933 -

Loss for the year -22,802 -22,802

closing amount 4,075 34,712 132,130 2,185 -22,802 150,299


37.noteS to the FinAnciAl StAteMentS

Group Share capitalStatutory

reservePremium

fundRetained earnings

Loss for the year Total

Opening amount 4,075 34,712 132,130 7,118 -5,350 172,685

Appropriation according to resolution of this year's annual general meeting:

Loss for the year -5,350 5,350 -

Translation differences -10 -10

Loss for the year -24,054 -24,054

closing amount 4,075 34,712 132,130 1,758 -24,054 148,620

note 16 noncuRRent liABilitieS


31 Dec. 2012 31 Dec. 2012 31 Dec. 2012 31 Dec. 2012

Due within one year 8,013 4,500 8,013 4,500

Due within 2-5 years 50,126 36,761 50,126 36,761

Due in more than five years 118,809 84,284 118,809 84,284

176,948 125,545 176,948 125,545

note 17 oveRDRAFt FAcility


31 Dec. 2012 31 Dec. 2012 31 Dec. 2012 31 Dec. 2012

Credit authorised 10,000 10,000 10,000 10,000

Credit utilised 8,219 2,284 8,219 2,284

note 18 conveRtiBle DeBentuReS

convertible debenturesnoMinAl vAlue,

Sek thouSAnDSuBScRiption pRice

peR ShARe

Convertible loan 14 2,125 SEK 93


Convertible loan 16 371 SEK 70


6,504

Convertible loan 14 was subscribed in June 2012. The loan carries an interest rate of 5.5 % and can be converted to shares during the period 15 June 2016 up to and including 15 July 2017. Convertible loans 15-17 were subscribed in January 2013 and are interest-free through January 2018.

note 19 AccRueD expenSeS AnD De-FeRReD incoMe


31 Dec. 2012 31 Dec. 2012 31 Dec. 2012 31 Dec. 2012

Accrued alcohol tax 3,817 3,418 3,817 3,418

Accrued expenses, Mackmyra Bruk 3,472 - 3,472 -

Holiday pay liability 1,993 2,053 1,921 2,003

Accrued expenses, organisational changes 1,736 - 1,736 -

Accrued social security charges 1,227 1,199 1,186 1,199

Accrued interest expenses 769 541 769 541

Other 3,193 2,744 3,106 2,684

16,207 9,955 16,007 9,845

note 20 pleDGeD ASSetS


31 Dec. 2012 31 Dec. 2012 31 Dec. 2012 31 Dec. 2012

For long-term debts to credit institutions:

Company mortgages 165,000 125,000 165,000 125,000

Property mortgages 40,000 30,000 40,000 30,000

205,000 155,000 205,000 155,000


38. SiGnAtuReS oF the BoARD oF DiRectoRS

Mackmyra, 8 April 2014

Ulf Mattsson Clas Eriksson David Hedman

Chairman

Carl-Johan Kastengren Carl Klingberg Malin Lövemark

Magnus Dandanell

CEO

Our audit was submitted on 8 April 2014

Öhrlings PricewaterhouseCoopers AB

Annika Wedin Authorised Public Accountant


39.AuDitoRS’ RepoRt

RepoRt on the AnnuAl AccountS AnD conSoliDAteD FinAnciAl StAteMentSWe have conducted an audit of the annual report and consolidated financial statements for Mackmyra Svensk Whisky AB (publ) for 2013. The company’s annual accounts and consolidated financial statements are included in the printed version of this document on pages 22–38.

Responsibilities of the Board of Directors and the chief executive officer for the annual accounts and consolidated financial statements

The Board of Directors and the Chief Executive Officer are responsible for the preparation and fair presentation of these annual accounts and consolidated financial statements in accordance with the Annual Accounts Act, and for such internal control as the Board of Directors and the Chief Executive Officer determine is necessary to enable the preparation of annual accounts and consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ responsibility

Our responsibility is to express an opinion on these annual accounts and consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing and generally accepted auditing standards in Sweden. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the annual accounts and consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the annual accounts and consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the annual accounts and consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the company’s preparation and fair presentation of the annual accounts and consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Board of Directors and the Chief Executive Officer, as well as evaluating the overall presenta-tion of the annual accounts and consolidated financial statements.

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

opinions

In our opinion, the annual accounts and consolidated financial state-ments have been prepared in accordance with the Annual Accounts Act and present fairly, in all material respects, the financial position of Mackmyra Svensk Whisky AB (publ) and the Group’s financial posi-tion as of 31 December 2013 and of its financial performance and cash flows for the year in accordance with the Annual Accounts Act. The Report of the Board of Directors is consistent with the other sections

To the Annual General Meeting of Mackmyra Svensk Whisky AB (publ), corporate identity no. 556567-4610

Auditors’ report

of the annual report and consolidated financial statements.

We therefore recommend that the annual general meeting of shareholders adopt the income statement and balance sheet for the parent company and the Group.

RepoRt on otheR leGAl AnD ReGulAtoRy RequiReMentSIn addition to our audit of the annual accounts and consolidated fi-nancial statements, we have examined the proposed appropriations of the company’s profit or loss and the administration of the Board of Directors and the Chief Executive Officer of Mackmyra Svensk Whisky AB (publ) for the year 2013.

Responsibilities of the board of directors and the chief executive officer

The Board of Directors is responsible for the proposal for appropria-tions of the company’s profit or loss, and the Board of Directors and the Chief Executive Officer are responsible for administration under the Companies Act.

Auditors’ responsibility

Our responsibility is to express an opinion with reasonable assurance on the proposed appropriations of the company’s profit or loss and on the administration based on our audit. We conducted the audit in accordance with generally accepted auditing standards in Sweden.

As a basis for our opinion on the Board of Directors’ proposed appro-priations of the company’s profit or loss, we examined whether the proposal is in accordance with the Companies Act.

As a basis for our opinion concerning discharge from liability, in ad-dition to our audit of the annual accounts and consolidated financial statements, we examined significant decisions, actions taken and circumstances of the company in order to determine whether any member of the Board of Directors or the Chief Executive Officer is liable to the company. We also examined whether any member of the Board of Directors or the Chief Executive Officer has, in any other way, acted in contravention of the Companies Act, the Annual Accounts Act or the Articles of Association.

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

opinions

We recommend to the annual general meeting of shareholders that the profit be appropriated in accordance with the proposal and that the members of the Board of Directors and the Chief Executive Officer are discharged from liability for the financial year.

Gävle, 8 April 2014

Öhrlings PricewaterhouseCoopers AB

Annika Wedin Authorised Public Accountant


40. the MAckMyRA ShARe

the share and shareholder relationships

ShARe pRice AnD tuRnoveRThe shares were listed on First North with the first trading day on 16 December 2011, under the ticker symbol MACK-B. The closing share price on 30 December 2013 was SEK 31.50 (50.00). A total of 438,211 shares (385,051) were sold in 2013.

tReASuRy ShAReSMackmyra Whisky AB does not own any of the total number of shares.

ShARe cApitAlShare capital in Mackmyra Whisky AB amounts to SEK 4,015,396, and the number of shares as at 31 December 2012 was 4,075,396, made up of 276,000 Class A shares and 3,799,396 Class B shares. Each Class A share carries one vote and each Class B share carries one tenth of a vote. All shares carry equal dividend rights.

DiviDenD policyWhen the company has completed the ongoing action programme and achieved higher growth with profitability and a positive cash flow, the Board intends to propose a dividend of 30-50% of the profit after taxes, on condition that the company’s need for consolidation, liquidity and capital for continued development is satisfied. If the latter factors are not met, in the future dividends may be reduced in relation to the plan or not paid at all.

pRopoSAl to the AnnuAl GeneRAl MeetinGThe Board proposes that no dividend should be paid.

ShAReholDeRS

Shareholder class A shares class B shares capital, % votes, %

The Founders’ Group* 207,860 431,677 15.7 38.3

Lantmännen ek. för. 34,940 783,468 20.1 17.3

Fam. Rolf Klingberg 11,000 223,545 5.8 5.1

Fam. Tage Klingberg 22,200 613 0.6 3.4

Other shareholders – 2,360,093 57.9 36.0

total 276,000 3,799,396 100.0 100.0

total number of shares class A + class B: 4,075,396

The above list of major shareholders reflects the ownership structure as of 31 December 2013.

The Founders’ Group consists of the eight founders (Annika Berg, Jonas Berg, Astrid Dandanell, Magnus Dandanell, Jennie Kastengren, Carl-Johan Kastengren, Rikard Lundborg and Malin Lövemark), Spiritum Spritaktiebolag AB and the Gillesvik AB Group.

ShARe peRFoRMAnce MAck-B. 2013

Jan

SEK

Feb Mar Apr May June July Aug Sep Oct Nov Dec0

10

20

30

40

50

60

ShARe DAtANumber of registered shares at end of period: 4,075,396Number of outstanding shares at end of period: 4,075,396Earnings per share, SEK: -5.90Equity per share, SEK: 36.47Number of shareholders at end of period: 6,104


41.GloSSARy & DeFinitionS, ADDReSSeS AnD cAlenDAR

Glossary & definitions, addresses and calendar

GloSSARy AnD DeFinitionS

Angels’ share:About 3% of the whisky evaporates from the oak casks annually dur-ing storage. This is referred to as the angels’ share.

Bottle: 70 cl spirit or whisky calculated at 40% alcohol content, distributed and sold via traditional channels.

capital employed: Equity and liabilities less interest-bearing liabilities.

casks:Personal whisky cask made to order. Delivered after an average of five years of maturing in about 48 whisky bottles.

earnings per share (Sek):Profit/loss after tax, divided by the number of shares at end of year.

equity ratio (%): Equity divided by balance sheet total.

Gross profit margin (%):Gross profit divided by net sales.

interest coverage ratio (times):Profit/loss before interest expense, divided by interest expense.

liquid ratio:Total of current receivables, cash and cash equivalents, divided by current liabilities.

operating margin (%): Operating profit/loss divided by net sales.

Return on capital employed (%):Profit/loss before interest expense, divided by average capital employed.

Return on equity (%):Profit/loss after tax, divided by average equity.

ADDReSSeS

Mackmyra Svensk Whisky AB (publ)

Corporate identity number 556567-4610e-mail: [email protected]: www.mackmyra.se / www.mackmyra.com

Mackmyra Whisky village

Kolonnvägen 2SE-802 67 Gävle, Sweden

Marketing office:Maria Bangata 4A SE-118 63 Stockholm, Sweden

Telephone: +46 (0)8 - 55 60 25 80Fax: +46 (0)8 - 55 60 25 81

certified advisor:

erik penser Bankaktiebolag

Box 7405SE-103 91 Stockholm, SwedenStreet address: Biblioteksgatan 9Telephone: +46 (0)8 - 46 38 000E-mail: [email protected]: www.penser.se

FinAnciAl cAlenDAR

Publication dates for financial information

8 April 2014 Annual Report 2013

22 April 2014 Extraordinary General Meeting

16 May 2014 Interim Report, Q1 2014

17 May 2014 Annual General Meeting

27 August 2014 Interim Report, Q2 2014

18 November 2014 Interim Report, Q3 2014

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