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ANNUAL REPORT
2013

Table of contents

  • Page 1
    ANNUAL REPORT 2013

  • Page 2
    ... customer spending in major economies, changes in consumer tastes and preferences, changes in law, the performance of the financial markets, the levels of marketing and promotional expenditures by the group and its competitors, raw materials and employee costs, changes in exchange and interest rates...

  • Page 3
    ...We Are Management Board Report Financial and Business Review Human Resources Corporate Social Responsibility Business Risks In Control and Responsibility Statement 4 6 9 9 12 13 15 18 Corporate Governance The Corporate Governance Code Management Board Supervisory Board General Meeting Notification...

  • Page 4
    ... that NDS map format in our own server-side and device-side software. In combination with our real-time map update system, this will keep the 'on-board' NDS map up-to-date on a continuous basis. Consumer business Our European PND business held up well in 2013 and we gained market share. Although we...

  • Page 5
    ... version of our new map making platform and to have an NDS-based connected navigation application that keeps its on-board map up-to-date and which delivers a better user experience than any competing system. Harold Goddijn / Chief Executive Officer, TomTom NV ANNUAL REPORT AND ACCOUNTS 2013 / 5

  • Page 6
    ... business leverages our world-class map, traffic and navigation content and services. We also offer cloud-based products that allow developers easy access to create locationenabled applications for businesses and governments. Business Solutions Business Solutions offers fleet management solutions...

  • Page 7
    ... vehicles are managed by our ï¬,eet management solution WEBFLEET OUR PRODUCTS PNDs MAP CONTENT NAVIGATION SOFTWARE WEBFLEETFLEET MANAGEMENT SOLUTIONS GPS SPORTS WATCHES REAL-TIME TRAFFIC INFORMATION HISTORIC TRAFFIC INFORMATION LOCATION-BASED SERVICES 1991 Founded CORPORATE TIMELINE 2001...

  • Page 8
    MANAGEMENT BOARD REPORT ANNUAL REPORT AND ACCOUNTS 2013 / 8

  • Page 9
    ... first ranges of TomTom own-branded GPS sports watches into the market. The new TomTom Runner and TomTom Multi-Sport GPS sports watches are ultra-slim and feature an extralarge display, full-screen graphical training tools and the industry's Consumer Automotive Licensing Business Solutions â,¬ 567...

  • Page 10
    ... 2013, the Fiat line fit infotainment system (U-Connect) was launched with TomTom navigation software and map content, supporting the Fiat 500L and Alfa Mito. Daimler cars started to ship in Europe with our traffic services, supporting the COMAND multimedia systems for Mercedes S-, C- and GLK-class...

  • Page 11
    Management Board Report / Continued Gross result The gross result decreased from â,¬555 million in 2012 to â,¬521 million in 2013. The gross margin increased by two percentage points compared to 2012 to 54% because of higher margins on hardware products. company mapIT to its fair value, when we ...

  • Page 12
    ... and manage succession plans more effectively. Over the past few years, we have created career tracks for our Engineering, Finance and Customer Care employees. In 2013, we worked on enhancing these and building career tracks for our Map Operations teams. Outlook 2014 For the group we expect...

  • Page 13
    ... offer a product discount programme worldwide as part of our benefits package to encourage ownership of TomTom products. Supply chain management We maintain a high level of social responsibility towards our consumers, business customers, and suppliers. This includes setting targets to meet current...

  • Page 14
    ... improve internal processes for the management of environmental product compliance. community giving. Our goal is to be a positive force in the communities we are a part of around the world. For more detail on our CSR programme please refer to our CSR corporate website: corporate.tomtom.com/ethics...

  • Page 15
    ... North American market is important to us. We view maintaining and preferably growing market share as a vital element of being successful in the US market. However, macro economic conditions and competitive effects may render us unable to maintain sales volumes in North America, and retailer support...

  • Page 16
    ... and updating map databases. Maps need to be continuously updated for changes in the environment and we are continuously adding new geographies to our map database to be able to meet the needs of existing customers, bring out new products and expand into new markets. ANNUAL REPORT AND ACCOUNTS 2013...

  • Page 17
    ... or otherwise fail to meet our customers' expectations in relation to privacy matters. Performance of real-time services We provide fleet management services, live traffic information and sales via our web store on a 24-hour basis. To provide these services to our customers we rely on our own, as...

  • Page 18
    ... with a description of the principal risks and uncertainties that the company faces. Amsterdam, 11 February 2014 The Management Board Harold Goddijn / Chief Executive Officer Marina Wyatt / Chief Financial Officer Alain De Taeye / Member of the Management Board ANNUAL REPORT AND ACCOUNTS 2013 / 18

  • Page 19
    CORPORATE GOVERNANCE ANNUAL REPORT AND ACCOUNTS 2013 / 19

  • Page 20
    ... substantial change to the company's corporate governance structure will be explained to the shareholders at a General Meeting. TomTom's Articles of Association provide that a binding nomination for the appointment of members of the Management Board or of the Supervisory Board may only be set aside...

  • Page 21
    ... with the company's Remuneration Policy for the Management Board. This policy was adopted in 2009 and amended by the Annual General Meeting in 2011. The Supervisory Board must present any plan providing for the remuneration of the members of the Management Board in the form of shares and options...

  • Page 22
    ... the General Meeting. Members of the Supervisory Board are not authorised to receive any payments under the company's pension or bonus schemes or under the option or share plans. The annual remuneration of the Supervisory Board and sub-committees membership remained unchanged during 2013. The annual...

  • Page 23
    ...six months after the end of each financial year. The Annual General Meeting is convened by public notice via the company's corporate website: corporate.tomtom.com/agm.cfm. The compilation of the annual report is a recurring agenda item, as are the adoption of the annual accounts and the release from...

  • Page 24
    ... the voting power of any shareholder whose objective was to gain control of the company. In addition to the Call Option, a resolution was passed during the 2012 Annual General Meeting to extend the authority of the Management Board until 26 October 2013 to issue preferred shares and to grant rights...

  • Page 25
    ...100% direct shareholder of Flevo Dasym BV and Flevo Janivo BV. Article 10 of the EU Takeover Directive Decree The Management Board states that all the information required under Article 10 of the EU Takeover Directive Decree is disclosed in the Corporate Governance section of this annual report, to...

  • Page 26
    PROFILES ANNUAL REPORT AND ACCOUNTS 2013 / 26

  • Page 27
    ... company Blackwell's. In 2002, Marina was appointed Chief Financial Officer of Colt Telecom PLC. Current other positions Non-Executive Director of Shanks Group PLC ALAIN DE TAEYE (56) Member of the Management Board Nationality Belgian Year of first appointment 2008 Current term of office AGM 2012...

  • Page 28
    ... Date of first appointment Current term of office Former positions Current positions Belgian 13 May 2005 AGM 2012 - AGM 2016 Member of the Board of Directors of Koninklijke KPN NV, Chief Executive Officer of Kroymans Corporation BV and Chief Executive Director of Liquavista BV Non-Executive...

  • Page 29
    ...Koninklijke FrieslandCampina NV and AMSTERDAM MUSEUM Audit Committee (Chairman) Committees PETER WAKKIE (65) Nationality Date of first appointment Current term of office Former positions Current positions Dutch 28 April 2009 AGM 2013 - AGM 2017 Member of the Executive Board of Koninklijke Ahold NV...

  • Page 30
    SUPERVISORY BOARD REPORT ANNUAL REPORT AND ACCOUNTS 2013 / 30

  • Page 31
    ... the strategy of the business units designed to achieve the targets; • The annual budget; • The (quarterly) financial results; • The progress on the R&D programme; • Press releases; • Corporate social responsibility; • The legal compliance programme; • Human resources; • Corporate...

  • Page 32
    ...2013 on providing feedback and input on the company's progress towards achieving its key objective to make available componentised map, navigation and traffic products for its consumer, automotive, licensing and fleet management customers. The Supervisory Board also focused attention on TomTom's new...

  • Page 33
    ... the base salary levels of TomTom Management Board members with median market practice in a measured way. The base salary levels are reviewed annually, taking into account developments in the pay market and the level of position as graded within the company. ANNUAL REPORT AND ACCOUNTS 2013 / 33

  • Page 34
    ... companies. The on-target bonus percentage for the CEO position is 80% of his base salary. It is 64% of the base salary for the other members of the Management Board. All were in line with the market median level in the newly defined peer group. The maximum bonus amount may be increased to 1.5 times...

  • Page 35
    ... option plan, value only materialises by a successful execution of the company's long-term strategy by the Management Board. This is reflected by an increase of the value of the share price at vesting compared to the value of the share price at the grant date. As such, the Supervisory Board deems it...

  • Page 36
    ... website: corporate.tomtom.com/articles.cfm. Financial reporting The Supervisory Board and the Audit Committee reviewed the quarterly financial results and full-year financial statements prior to their release. Attention was paid to key accounting policies, the ANNUAL REPORT AND ACCOUNTS 2013...

  • Page 37
    ... the year. During 2013, the external auditor attended each of the four Audit The internal audit programme covers key business processes, subsidiary office reviews, the auditing of major ICT projects before go live and special requests. Working with management, Internal Audit selects the areas of the...

  • Page 38
    ... the Management Board, have signed the Financial Statements for 2013. The Supervisory Board recommends to the Annual General Meeting to adopt the Financial Statements for 2013. The Annual Report for 2013 is available at the company's offices on request and on the company's website: corporate.tomtom...

  • Page 39
    FINANCIAL STATEMENTS ANNUAL REPORT AND ACCOUNTS 2013 / 39

  • Page 40
    ... Financial Statements 1. General 2. Summary of significant accounting policies 3. Financial risk management 4. Critical accounting estimates and judgements 5. Segment reporting 6. Cost of sales 7. Remuneration of Members of the Management Board and the Supervisory Board 8. Additional information...

  • Page 41
    ... of Income for the year ended 31 December (â,¬ in thousands) REVENUE Cost of sales GROSS RESULT OPERATING EXPENSES Research and development expenses Amortisation of technology and databases Marketing expenses Selling, general and administrative expenses Stock compensation expense TOTAL OPERATING...

  • Page 42
    ...063 2012 129,193 10 -1,352 -9,617 -9,607 10,456 10,624 -168 10,456 -1,298 -2,650 126,543 126,035 508 126,543 The items in the statement above are presented net of tax. The notes on pages 46 to 78 are an integral part of these consolidated financial statements. ANNUAL REPORT AND ACCOUNTS 2013...

  • Page 43
    ... 14 15 25 381,569 803,635 25,804 2,854 9,681 1,223,543 381,569 821,233 26,770 3,880 13,610 1,247,062 Notes 2013 2012 The notes on pages 46 to 78 are an integral part of these consolidated financial statements. ANNUAL REPORT AND ACCOUNTS 2013 / 43

  • Page 44
    ... paid Corporate income taxes received/(paid) CASH FLOWS FROM OPERATING ACTIVITIES Investments in intangible assets Investments in property, plant and equipment Investments in financial fixed assets Dividends received CASH FLOWS FROM INVESTING ACTIVITIES Repayment of borrowings Proceeds of new term...

  • Page 45
    ...Change in non-controlling interest Stock compensation related movements BALANCE AS AT 31 DECEMBER 2013 1 Other reserves include Legal reserve and the Stock compensation reserve. The notes on pages 46 to 78 are an integral part of these consolidated financial statements. ANNUAL REPORT AND ACCOUNTS...

  • Page 46
    ... in Amsterdam, the Netherlands. The activities of the company include the development and sale of navigation and location-based solutions, which include among others: PNDs, sports watches, maps, traffic, navigation software and fleet management services. The consolidated financial statements...

  • Page 47
    ... where the company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with the group. All intercompany...

  • Page 48
    ...traffic and map update services, content sales, connected navigation and fleet management services for commercial fleets. The revenue relating to the service element is recognised over the agreed or estimated service period on a straight-line basis. Multiple-element arrangements The group's product...

  • Page 49
    ... straight-line basis over the vesting period. The costs are determined based on the fair value of the granted instruments and the number expected to vest. At each balance sheet date, the entity revises its estimates of the number of instruments expected to vest. ANNUAL REPORT AND ACCOUNTS 2013 / 49

  • Page 50
    ...Internal software costs relating to development of non-core software with an estimated average useful life of less than one year and engineering costs relating to the detailed manufacturing design of new products are expensed in the period in which they are incurred. ANNUAL REPORT AND ACCOUNTS 2013...

  • Page 51
    ... a post-tax discount rate that reflects current market assessments of the time-value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there...

  • Page 52
    ...to finished products. The cost of inventories is determined using the first-in, first-out (FIFO) method, net of reserves for obsolescence and any excess stock. Net realisable value represents the estimated selling price less an estimate of the costs of completion and direct selling costs. Financial...

  • Page 53
    ... these risks, and to set appropriate risk limits and controls. Financial risk management is carried out in accordance with our Corporate Treasury Policy. The written principles and policies are reviewed periodically to reflect changes in market conditions, the activities of the business and laws and...

  • Page 54
    ... rate movements in the coming period and the acceptability of our potential exposure, our current policy is not to hedge the interest rate of our current borrowings. Accordingly, changes in Euribor may have an impact on the group's results for the coming year. ANNUAL REPORT AND ACCOUNTS 2013...

  • Page 55
    ...The estimate is based upon historical data on the return rates and information on the inventory levels in the distribution channel. The group reduces revenue for estimates of sales incentives. We offer sales incentives, including channel rebates and end-user rebates for our products. The estimate is...

  • Page 56
    .... The group's internal management reporting is structured primarily on the basis of the market segments in which the four operating segments - Consumer, Automotive, Licensing and Business Solutions - operate. Consumer generates revenue mainly from the sale of PNDs, sports watches, maps and related...

  • Page 57
    ... primarily from the sale of portable navigation devices and in-dash navigation systems and related content & services, and the royalty income generated from licensing our map database. A breakdown of the external revenue to types of products and services and to geographical areas is as follows...

  • Page 58
    ... In 2013, the bonus achievement was 131% of the on-target bonus percentage (2012: 69%). Overview of salaries, performance-related bonuses and other emoluments of the Management Board The remuneration of the Management Board members comprises of the direct remuneration paid or payable in relation to...

  • Page 59
    ... Wyatt (2012: nil). Although these expenses do not represent actual benefits paid to Management Board, they have been included, as the expenses incurred are in relation to the employment of the Management Board. The share-based awards scheme is set out in the Management Board Stock Option Plan...

  • Page 60
    ... functional areas: 2013 Research and development Marketing Sales, general and administrative TOTAL 2,265 102 1,124 3,491 2012 2,226 109 1,142 3,477 At 31 December 2013, the group had 3,671 (2012: 3,490) employees. During 2013, 2,351 of TomTom's employees worked outside the Netherlands (2012...

  • Page 61
    ...the group from adverse exchange rate fluctuations that may result from USD and GBP exposures. The interest expense relates mainly to interest paid on our borrowings and amortised transaction costs (see note 24 - Borrowings). 10. Income tax The activities of the group are subject to corporate income...

  • Page 62
    ... and hence is not comparable across companies. Basic earnings per share Basic earnings per share is calculated by dividing the profit attributable to equity holders of the company by the weighted average number of ordinary shares outstanding during the year. ANNUAL REPORT AND ACCOUNTS 2013 / 62

  • Page 63
    ...-based plans. For the stock options, a calculation is performed to determine the number of shares that could have been acquired at fair value (determined as the average annual market share price of the company's shares), based on the monetary value of the subscription rights attached to outstanding...

  • Page 64
    ...the core business activities as monitored by management. An impairment test on goodwill is performed at least on an annual basis or whenever Management identifies conditions that may trigger a risk of impairment. A segment-level summary of the goodwill allocation for our segments in 2013 and 2012 is...

  • Page 65
    ... revenue growth rate or discount rate would not reduce the headroom to nil. For Consumer and Business Solutions, a reasonably possible change in any of the above-mentioned key assumptions as well as other assumptions in the forecasted period would not cause the fair value less costs of disposal...

  • Page 66
    ...Golden Tom provides support in licensing TomTom map and traffic content in the Chinese market. WayTag is a South Africa-based company that allows people and businesses to create a unique location identifier which either refers to a fixed location or to an individual's current location. The movements...

  • Page 67
    ... 2012 -1,814 -1,856 1,163 635 9 -1,863 The following table sets out details of the age of trade accounts receivable that are not overdue, as the payment terms specified in the terms and conditions established with our customers have not been exceeded, and an analysis of overdue amounts and related...

  • Page 68
    ... by the group partly invested in short-term bank deposits with an original maturity of three months or less. The carrying amount of cash and cash equivalents approximates its fair value. All cash and cash equivalents are available for immediate use by the group. ANNUAL REPORT AND ACCOUNTS 2013 / 68

  • Page 69
    ... on a long-term basis. Stock option plans The group has adopted stock option plans for members of management and eligible employees. Under the schemes, the General Meeting has granted options to members of the Management Board to subscribe for shares. The Management Board in its turn has granted...

  • Page 70
    ... addition to the three years service condition applicable for the eligible employees. The following table summarises information about the stock options outstanding at 31 December 2013: Year of grant 2007 2009 2010 2011 2012 2013 Number outstanding at Exercise price per share Weighted average 31-12...

  • Page 71
    ... reporting date. The fair value of the stock options granted in May 2013 and May 2012 was determined by the binomial tree model. This model contains the input variables, including the risk-free interest rate, volatility of the underlying share price, exercise price, and share price at the date...

  • Page 72
    ... is based on market interest rates plus certain margin and the fact that there has been no significant change to our credit rating, we estimate the fair value of the non-current borrowing at the end of 2013 and 2012 to approximate their carrying value. The fair value of the current portion of the...

  • Page 73
    ... group generally offers warranties for its products. Management estimates the related provision for future warranty claims based on historical warranty claim information, as well as evaluating recent trends that might suggest that past cost information may differ from future claims. ANNUAL REPORT...

  • Page 74
    ... in financial assumptions Benefits paid PRESENT VALUE OF OBLIGATION AS AT 31 DECEMBER -10 0 -10 -45 6,763 -25 1,825 1,800 -87 6,572 2013 6,572 24 222 6,818 2012 4,603 5 251 4,859 The service cost and the interest cost are recognised as pension costs, while the actuarial (gains)/losses are credited...

  • Page 75
    ...The group has contracts with third-party suppliers or other business partners that include minimum royalty or revenue share payments over the duration of the contracts that range from 1 to 5 years. The total commitments under these contracts are presented below. ANNUAL REPORT AND ACCOUNTS 2013 / 75

  • Page 76
    ...to the Consolidated Financial Statements / Continued (â,¬ in thousands) Commitments less than 1 year Commitments between 1 - 5 years TOTAL 2013 7,517 11,333 18,850 2012 11,583 12,287 23,870 The company has given a guarantee as described in section 479C of the UK Companies Act to TomTom Software Ltd...

  • Page 77
    ... Shareholdings and Short Positions. In the normal course of business, the group receives map development and support services from its associate Infotech Enterprises Ltd. (Infotech). Such transactions take place at normal market conditions and the total payments made for these services in 2013...

  • Page 78
    ... at fair value through profit or loss Other financial assets/liabilities at amortised cost Total AS AT 31 DECEMBER 2013 ASSETS Other financial assets Trade receivables Cash and cash equivalents TOTAL LIABILITIES Trade payables Other financial liabilities Borrowings TOTAL AS AT 31 DECEMBER 2012...

  • Page 79
    ... (â,¬ in thousands) Result of subsidiaries after taxation Other income and expenses after tax NET RESULT Notes B C 2013 34,923 -15,384 19,539 2012 64,444 64,280 128,724 The notes on pages 81 to 83 are an integral part of these company financial statements. ANNUAL REPORT AND ACCOUNTS 2013 / 79

  • Page 80
    ...,775 15,544 368 15,912 2,889,034 89,143 272 89,415 2,931,713 B D 2,873,122 0 2,873,122 2,842,149 149 2,842,298 Notes 2013 2012 The notes on pages 81 to 83 are an integral part of these company financial statements. ANNUAL REPORT AND ACCOUNTS 2013 / 80

  • Page 81
    ...relevant legal requirements (the Netherlands Civil Code Book 2, Part 9, sections 379 and 414) is deposited at the office of the Chamber of Commerce in Amsterdam, the Netherlands. C. Other income and expenses after tax The employees of the company comprise only of the members of the Management Board...

  • Page 82
    ... 'Intercompany payable' comprises of loans provided by subsidiaries. The interest rate on the loan during 2013 is based upon LIBOR plus a margin of 0.6% (2012: LIBOR plus a margin of 0.7%). Although no repayment period has been agreed the loan has a long-term nature. ANNUAL REPORT AND ACCOUNTS 2013...

  • Page 83
    ... and several liability for various group companies, in compliance with section 403 of Part 9 of Book 2 of the Netherlands Civil Code. Besides these declarations, TomTom NV has given a guarantee as described in article 479C of the UK Companies Act for UK subsidiary TomTom Software Ltd. In addition...

  • Page 84
    ... the called-up and paid-up capital of the company, increased by legal and statutory reserves. Subsequent events There has been no subsequent event from 31 December 2013 to the date of issue of these financial statements. Proposed appropriation of result The Management Board proposes to add the...

  • Page 85
    .... Further we report that the management board report, to the extent we can assess, is consistent with the financial statements as required by Section 2:391 sub 4 of the Dutch Civil Code. Amsterdam, 11 February 2014 Deloitte Accountants BV Signed by: B.E. Savert ANNUAL REPORT AND ACCOUNTS 2013 / 85

  • Page 86
    SHAREHOLDER INFORMATION ANNUAL REPORT AND ACCOUNTS 2013 / 86

  • Page 87
    ... Investor Relations are reported and regularly updated on our Investor Relations website. TomTom strictly adheres to applicable rules and legislation on fair disclosure. It is our goal to inform investors about the company and its management, strategy, goals and expectations in a transparent, timely...

  • Page 88
    ... 80 60 Dec-12 TomTom daily traded volume TomTom - indexed closing share price AMX - indexed value Source: NYSE Euronext Website Our Investor Relations website - corporate.tomtom.com/ investor.cfm - contains up-to-date financial information about TomTom. Investors and analysts are encouraged to...

  • Page 89
    KEY FIGURES OVERVIEW ANNUAL REPORT AND ACCOUNTS 2013 / 89

  • Page 90
    ... for acquisition-related amortisation, goodwill impairment and restructuring charges on a post-tax basis, and an â,¬80 million one-off tax gain in 2012. Calculated based on the sales/cost of sales and the number of days in the last three months of the year. ANNUAL REPORT AND ACCOUNTS 2013 / 90

  • Page 91
    DEFINITIONS AND ABBREVIATIONS ANNUAL REPORT AND ACCOUNTS 2013 / 91

  • Page 92
    ... twelve months TomTom technology engine Navigation data standard The United States and Canada Original Equipment Manufacturer Portable navigation device Software-as-a-Service Total Traffic + Weather Network TomTom Business Solutions' fleet management solution ANNUAL REPORT AND ACCOUNTS 2013 / 92

  • Page 93
    TomTom NV De Ruijterkade 154 1011 AC Amsterdam The Netherlands Tel: +31 (0)20 757 5000 www.tomtom.com