CapMan Plc Group Interim Report 1 Jan – 30 Jun 2004  
^{The level of investment activities remained high, exit markets are improving}

Jan-Jun 2004 in brief:

-          CapMan continued to focus its investment activities as expected on making new investments and developing the existing portfolio. The sum of new and follow-on investments in portfolio companies increased almost 90% compared to the comparative period of 2003, totalling MEUR 56.1 (MEUR 29.9). The most substantial exit during the period was the sale of Lohja Caravans Oy Ab, which has a positive effect of MEUR 0.9 on CapMan’s result for the year.

-          CapMan launched operations in the Oslo office and made its first investment in Norway. Investment teams in Stockholm and Copenhagen were strengthened.

-          CapMan commenced fundraising for the new CapMan Mezzanine IV Fund during the first half of 2004. Commitments in the fund totalled MEUR 105 at the first closing in July, after the close of the review period.

-          The Senior Partners and other employee owners of CapMan reduced their shareholdings in the Company to improve the liquidity of the share. Their combined ownership in the CapMan Plc fell from 69.7% to 56.3% of shares as a result of the share sales that were made on 2 March 2004.

Future outlook:

-          Opportunities for exits from portfolio companies in all business sectors are expected to improve in the second half of 2004, due to the pick up in mergers and acquisitions and re-activating IPO markets in Nordic countries. The funds investing directly in portfolio companies have several exit discussions underway, but the outcome and effect on CapMan's 2004 result cannot be estimated at this stage.

-          The funds managed/advised by CapMan have substantial investment capacity. Therefore investment activities are expected to continue actively, as far as making new investments and developing the existing portfolio is concerned.

BUSINESS

CapMan’s core business is private equity fund management and advisory services. The interim report is divided into two sections: the investment activities of the funds managed/advised by CapMan and CapMan Group’s financial performance and events in the review period.

FUNDS MANAGED/ADVISED BY CAPMAN

The main investment activity of CapMan's funds comprises direct investments in portfolio companies in Finland, Sweden, Denmark and Norway. Direct investments include mid-sized buyouts, technology investments and investments in the life science sector. Buyouts are made in manufacturing, service and retail industries; technology investments focus on strong growth companies in the ICT sector; and life science investments focus on companies specialising in medical technology.

CapMan also has a 47.5% stake in Access Capital Partners, a fund of funds manager/advisor based in Paris and Guernsey. Access Capital Partners manages/advises two funds that invest in mid-sized buyout and technology funds throughout Europe. In addition it manages/advises private equity investment mandates.

Capital under management and investment capacity

As at 30 June 2004, CapMan managed/advised MEUR 1,157.1 (MEUR 1,125.3) in funds making direct investments in portfolio companies. When considering the assets managed/advised by Access Capital Partners, which are MEUR 573.0 (MEUR 527.3) in total, the total capital managed/advised by CapMan at the end of the review period amounted to MEUR 1,730.1 (MEUR 1,652.6) in capital calculated as total commitments in the funds.

Investments in portfolio companies at acquisition cost totalled MEUR 580.1 as at 30 June 2004. Of this, MEUR 441.1 or 76.0% was invested in buyouts, MEUR 114.4 or 19.7% in technology companies and MEUR 24.6 or 4.3% in life science companies. Several of the portfolio companies in the funds making direct investments offer substantial upside potential. At the same time the portfolios include companies that have higher risk levels than at the time of the initial investment.

Excluding realised and estimated future expenses and including the capital committed in CapMan Mezzanine IV Fund at the first closing in early July, CapMan has an investment capacity of about MEUR 400 for new and follow-on investments in portfolio companies.

Investments in portfolio companies from Jan-Jun

CapMan's funds investing directly in portfolio companies made five new investments, two substantial follow-on investments and several smaller follow-on investments in the review period (3 new investments, 2

substantial follow-on investments and several smaller follow-on investments in the comparative period of 2003). All in all, MEUR 56.1 (MEUR 29.9) was invested by CapMan funds in the first half of 2004.

Q2 Investments

In April, CapMan Equity VII and Swedestart Tech funds invested in Finnish technology company Solid Information Technology Oy, which develops advanced embedded data management software solutions. The investment was made together with funds managed/advised by Apax Partners.

CapMan Equity VII and Swedestart Tech funds invested in Swedish technology company Technology Nexus Product Sourcing AB (NPS) in April. NPS develops advanced hardware and software solutions and is specialised in a new generation of communicating solutions called M2M (Machine-to-Machine).

Finnmezzanine Fund III invested in Norwegian transaction processing company EuroProcessing International ASA (EPI) in May. At the same time, the Nordic private equity investor Reiten & Co Capital Partners V made an add-on investment in the company. EPI is the first Norwegian investee company in CapMan’s portfolio.

In May, Swedestart Life Science Fund invested in Swedish biotech company InDex Pharmaceuticals AB (InDex). InDex develops RNA blocking drugs as well as diagnostic/prognostic tools for unmet medical needs within inflammation and cancer.

Q1 Investments

CapMan Equity VII and Finnmezzanine III funds invested in the Danish company Anhydro Group, which specialises in evaporation and drying technologies, in March. Substantial follow-on investments were made in Swedish technology company Northlight Optronics AB and Finnish life science company Inion Oy.

Exits by the funds from Jan-Jun

The funds managed/advised by CapMan exited in total from six companies during the first half of the year. Exits, partial exits and mezzanine loan instalments at acquisition cost totalled MEUR 33.4. During the comparative period of 2003 there were five exits totalling MEUR 28.6 at acquisition cost, including partial exits and mezzanine loan instalments.

Q2 Exits

Swedestart Tech Fund sold its shares in Swedish Displayit AB in stages from April to June. The fund became a shareholder in Displayit in January 2004, when Displayit acquired the fund’s stock in Swedish Cetevo AB and settled the deal with its own shares. The fund invested in Cetevo, a provider of solutions for heterogeneous network environments and broadcasting, in 2000.

Finnventure IV, Finnventure V and Finnmezzanine II funds sold their shares in Swedish Sweco AB in June. The funds became shareholders in Sweco in December 2003, when Sweco acquired the fund’s holding in Finnish PIC Engineering Oyj’s (PIC) parent company PI-Management Oy and settled part of the transaction with its own shares. The funds invested in consulting and engineering group PIC in 2000. The sale transfers Finnventure IV and V funds closer to the stage where they will start to generate carried interest.

In June, Finnventure V and V ET funds sold their holding in Finnish Handwise Ltd to Flander Ltd. The funds invested in Handwise, which specialises in designing and implementing mobile applications, in 2000.

There was a partial exit from the Danish distributor of hi-fi and video equipment AudioNord International A/S during the review period, as Nordic Private Equity Partners I Fund (NPEP I) sold its stake in the company to the operative management. AudioNord was the last portfolio company in the fund, and the fund’s activities will be closed and the fund dissolved by the end of 2004. NPEP I invested in AudioNord in 1996. The company is still a portfolio company of NPEP II Fund.

In the first half of June, Finnventure Fund III sold its 3.11% shareholding in Finnish Satama Interactive Oyj (Satama). The fund is considered to have exited from the company already in spring 2000, when it sold the majority of its holding in Satama.

The exits in the second quarter, with the exception of the Satama share sale, do not have a substantial effect on CapMan’s result for the year. Finnventure Fund III has been generating carried interest since 2000, and the effect of the Satama share sale on CapMan’s 2004 result is approximately MEUR 0.1.

Q1 Exits

The most significant exit during the first quarter was the sale of Finnish Lohja Caravans Oy Ab by Finnventure Fund I to a private investor group in January. The fund has been generating carried interest since 1997, and the sale has a positive effect of MEUR 0.9 on CapMan's 2004 result. Other exits in the first quarter were the Finnish manufacturer of horseshoe nails Finnhepo Oy and Finnish Ramirent Europe Oy, which conducts machinery rental business in Eastern and Central Europe. In addition there was a partial exit from the Finnish technology company SecGo Group Oy (now SecGo Software Oy). These exits do not have a substantial effect on CapMan's result for the year.

European fund investments

As at 30 June 2004, CapMan Plc’s affiliated company Access Capital Partners had MEUR 573.0 (MEUR 527.3) under management in two funds and mandates. Access Capital Fund has MEUR 250.3 in capital, and Access Capital Fund II has EUR 277.0 million in capital. In addition, Access Capital Partners manages/advises private equity investment mandates for a total consideration of MEUR 45.7. Additional information about Access Capital Partners can be found online at www.access‑capital‑partners.com.

Events after the review period

Finnventure Fund III, Finnmezzanine Fund I and Skandia I, which is one of the Fenno Program funds, sold their ownership in Finnish Kotipizza Oyj in early August. Kotipizza is a pizzeria chain operating on franchising basis. The funds owned 24.86% of Kotipizza through a holding company called Pihakozza Oy. The exit has an effect of MEUR 0.4 on CapMan’s result for 2004, as a result of carried interest income received from Finnmezzanine I fund.

CAPMAN GROUP

Financial performance in Jan-Jun 2004

CapMan's turnover in the first half of 2004 increased compared to the comparative period and was MEUR 9.9 (MEUR 9.0). Management fees from the funds remained stable at MEUR 8.6 (MEUR 8.6).

There was a rise in the amount of carried interest received by CapMan to MEUR 1.0 (MEUR 0.1), as a result of the exit from Lohja Caravans in particular. Finnventure I Fund, which exited from Lohja Caravans Oy Ab, began to generate carried interest in 1997. Finnventure III Fund, which sold its shares in Satama Interactive

Oyj, has been generating carried interest since 2000. Following the sale of their holding in Sweco AB, Finnventure IV and V funds are closer to the stage where they will start to generate carried interest.

The share from the result of CapMan's affiliated companies was MEUR 0.1 (MEUR 0.1).

Operating profit in the first half of 2004 increased as a result of the carried interest income and was MEUR 1.5 (MEUR 0.9). Profit after taxes and minority interests increased to MEUR 1.0 (MEUR 0.6). Earnings per share was 1,3 cents (0.7 cents).

Shareholders' equity per share was 57 cents (60 cents) and CapMan's cash assets on 30 June 2004 totalled MEUR 8.0 (MEUR 15.7). The Company has no interest-bearing debt. Return on equity was 2.3% (1.2%).

Personnel

CapMan had 74 (67) employees at the end of the period under review. There were 44 (46) employees in Helsinki, 17 (14) in Stockholm, 10 (7) in Copenhagen and 3 (0) in Oslo. In addition there were six Senior Advisors acting as consultants for CapMan, four in Finland, one in Sweden and one in Denmark.

Changes in ownership

On 2 March 2004, the Senior Partners and other employee owners of CapMan Plc Group sold a total of 10,000,000 CapMan Plc B shares to international and Finnish institutional investors. Following the sales, the Senior Partners and other employees of CapMan Plc hold 56.3% of shares and 77.7% of voting rights. There was one disclosure of change in ownership related to the share sale, when the combined ownership of Ari Tolppanen and Aristo Invest Oy, a corporation under his control, decreased to less than three-twentieths (3/20) or 13.5%. CapMan Plc had 6,366 shareholders as at 30 June 2004.

Decisions adopted by the AGM and dividend

The Annual General Meeting of CapMan Plc held on 1 April 2004 confirmed the 2003 financial statements, granted discharge from liability to the Board of Directors and the CEO and decided that a dividend of EUR 0.05 per share be distributed to the shareholders for the 2003 financial year. In addition, the AGM approved the authorisations of the Board to increase the Company's share capital by a maximum of EUR 35,000.00 and to acquire a maximum of 3,500,000 of the Company's own B shares.

The AGM elected the following members to the Board of Directors: Mr Tapio Hintikka, Mr Lauri Koivusalo, Mr Lennart Jacobsson, Mr Claes de Neergaard, Mr Teuvo Salminen, Mr Ari Tolppanen and Mr Vesa Vanha-Honko. The Board elected Lauri Koivusalo as Chairman of the Board and Vesa Vanha-Honko as Vice Chairman of the Board.

Shares and warrants

During the review period a total of 21,578,441 (2,313,937) CapMan Plc B shares with an approximate value of MEUR 38.2 (MEUR 3.5) were traded on the Helsinki Stock Exchange. The rise in trading is partly accounted for by the share sales made in March by the Senior Partners and other employee owners of CapMan. The share's highest trading price was EUR 1.91 and the lowest trading price was EUR 1.49, with an average price of trades of EUR 1.77. The opening price on the first day of trading for the year was EUR 1.75 and the closing price on 30 June 2004 was EUR 1.59. The market value of CapMan Plc's B shares at 30 June 2004 was MEUR 106.0 (MEUR 95.4) and the Company's total market capitalisation, including CapMan A shares, was MEUR 118.7 (MEUR 106.8).

The year 2000A warrants' highest trading price was EUR 1.20, the lowest was EUR 0.85 and the average price of trades was EUR 0.98. The opening price on the first day of trading for the year was EUR 0.88 and the closing price on 30 June 2004 was EUR 0.85. A total of 435,500 A warrants with a value of EUR 428,685 were traded from January to June. As at 30 June 2004 the warrants had not been subscribed for CapMan Plc B shares.

Share repurchase

On 26 May 2004 the Board of Directors of CapMan Plc resolved that the Company will acquire a maximum of 3,500,000 of the Company’s own B shares, on the basis of the authorisation given by the Annual General Meeting on 1 April 2004. However, the Company has not repurchased shares to date.

Events after the close of the review period

New mezzanine fund

CapMan announced the first closing of its fourth mezzanine fund at MEUR 105 after the close of the review period in early July. The focus of CapMan Mezzanine IV will be on mezzanine investments in middle market buyout transactions predominantly in the Nordic countries. Part of the fund is securitised by offering institutional investors an opportunity to participate by subscribing secured bonds listed on the Helsinki Stock Exchange.

Sixteen mainly Finnish institutional investors joined CapMan Mezzanine IV at the first closing. CapMan Plc’s own commitment to the fund is MEUR 3.0. The management fee and carried interest arrangements of the new fund are in accordance with common practice in the industry.

Changes in CapMan’s compensation system

The Board of Directors of CapMan Plc decided to enhance the Company’s compensation system so that 20-30% of the possible carried interest of CapMan’s future funds will be distributed to the members of the specific investment team in question. Targeting part of a specific fund’s carried interest to the members of a specific investment team is common practice in the private equity industry. The objective is that this practice will gradually replace CapMan’s current system, where part of the carried interest income that CapMan receives from the funds it manages/advises is paid to team members as annual bonuses based on the Company’s result.

In connection with the establishment of CapMan Mezzanine IV Fund, the Board of Directors decided that a maximum of 25% of the possible carried interest generated by CapMan Mezzanine IV in future would be distributed to the members of CapMan’s Nordic buyout team.

Kotipizza exit

As a result of the Kotipizza Oyj exit in early August the carried interest income received by CapMan increases by MEUR 0.4 to EUR 1.4 million.

ADOPTION OF IFRS STANDARD (IAS)

CapMan Plc will adopt IAS/IFRS financial reporting procedures in its interim and annual financial statements in 2005. The IFRS project team, which was established by CapMan in 2003, has reviewed differences between IFRS and FAS that affect the accounting principles used in preparing CapMan Plc's financial

statements. During 2004 the opening IFRS balance sheet and comparable data for 2004 will be calculated for the 2005 interim reports. Similarly, the necessary IT system changes will be made in order to begin IFRS reporting from the beginning of 2005. The impacts of IFRS standards will be communicated separately during 2004.

FUTURE OUTLOOK

Funds managed/advised by CapMan

Private equity investment in Europe is estimated to show growth in the mid and long term. In CapMan's home market in the Nordic area, growth is accelerated by consolidation in various sectors, privatisation of public services and functions, strong investment in research and development in technology and life science sectors, and increasing entrepreneurial activity.

CapMan will continue to focus its investment strategy on a Nordic level. The focus of the funds' investment activities will remain on developing the existing portfolio and finding new investee companies. CapMan is well positioned to continue as an active player in the private equity market in 2004, as its funds making direct investments have, including the capital committed in the new mezzanine fund, approximately MEUR 400 in capital for new and follow-on investments.

The opportunities for exits from portfolio companies in all business sectors are expected to improve in the second half of 2004, due to the pick up in mergers and acquisitions and re-activating IPO markets in Nordic countries. However, the outcome of exit discussions that are underway cannot be estimated at this stage.

CapMan Group

The Group's income derives from management fees from the funds, carried interest from funds generating carried interest, and a share of the result of affiliated companies. Returns on direct fund investments will also have a greater influence on the Company's result in the mid term. CapMan's objective is to make investments from its balance sheet corresponding to about 5% of the capital in future CapMan funds.         

The management fees CapMan receives from the funds are expected to cover the Company's expenses in 2004, and the share from affiliated companies is estimated to remain at the same level as the previous year. CapMan's result in 2004 will depend largely on exits from portfolio companies owned by funds already generating carried interest and whether new funds will begin to generate carried interest income.

As a private equity fund management company, CapMan begins to receive carried interest after the investors have regained their investment in addition to a preferred annual return, usually 6 to 8%. Carried interest is typically 20 to 25% of the fund's cash flow through exits from its portfolio companies. Five of the funds managed/advised by CapMan (see Appendix 3) are already generating carried interest. The original capital in these funds is MEUR 97.6, which represents approximately 8.4% of the total capital in CapMan funds that invest directly in portfolio companies (MEUR 1,157.1).

The funds investing directly in portfolio companies have several exit discussions underway, but the outcome and effect on CapMan's 2004 result cannot be estimated at this stage.

CapMan Plc will publish its interim report for the period 1 Jan - 30 Sep 2004 on 4 November 2004.

Helsinki 5 August 2004

CAPMAN PLC

Board of Directors

For further information please contact:

Mr Ari Tolppanen, CEO, tel. +358 9 6155 8307 or +358 500 407 343

Mr Olli Liitola, CFO, tel. +358 9 6155 8306 0r +358 400 605 040

Appendices:

Appendix 1:      Group income statement, balance sheet and cash flow statement

Appendix 2:      Turnover and profit quarterly, other information

Appendix 3:      CapMan Group funds as at 30 June 2004

The figures are in-audited.

Appendix 1:      Group income statement, balance sheet and cash flow statement