CapMan Plc Group Interim Report 1 January – 30 June 2005
^{Several exits and a new private equity real estate fund for CapMan}

Accounting principles

The Interim Report is prepared in accordance with IFRS standards. Quarterly comparative figures for the 2004 income statement and balance sheet in accordance with IFRS and Finnish accounting standards (FAS) are reported in the stock exchange release dated 2 May 2005.

Figures for the companies Realprojekti Oy and Realprojekti Kiinteistökehitys Oy that were acquired on 20 June 2005 in connection with the establishment of real estate operations have not been consolidated with the Group’s figures for the period under review, as they are not considered to have a significant effect on the Group’s result and balance sheet as per 30 June 2005. Figures for CapMan Real Estate I Fund are included in the funds’ figures.

Business

CapMan’s core business is private equity fund management and advisory services. The funds under management invest mainly in unlisted Nordic companies or real estate assets. CapMan Plc’s income derives from management fees from the funds, carried interest from funds generating carried interest, returns on direct fund investments made from CapMan Plc’s own balance sheet and a share of the result of associated companies.

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 6–8%. Carried interest is typically 20–25% of the fund’s cash flow through exits from its portfolio companies. 20–30% of the possible carried interest generated by the funds which are established in 2004 or later will be distributed to the specific investment team in question.

The returns from direct fund investments will have a greater impact on the Company’s result in the future, as CapMan’s objective is to invest 5-10% of the total capital in future CapMan funds investing in portfolio companies.

Expansion of operations into private equity real estate funds

CapMan Plc’s subsidiary CapMan Real Estate Oy and nine Finnish institutional investors established the private equity real estate fund CapMan Real Estate I Ky on 20 June 2005. The fund has a final size of MEUR 500 and its investment focus is on commercial properties in the Helsinki metropolitan area. The expansion of business operations into private equity real estate funds is a significant strategic step for CapMan.

In connection with the establishment of the real estate fund CapMan Plc acquired the Realprojekti companies, which act as advisor to the fund’s management company CapMan Real Estate Oy and continue their previous consulting business. CapMan Plc owns 80% of the aforementioned companies and real estate consulting company Corintium Oy owns 20%. CapMan Plc financed the acquisitions with cash and a share issue of 181,818 new B shares to the owner of Realprojekti Oy, Markku Hietala Holding Oy. The share issue was entered to the Trade Register on 29 June 2005 and the shares were subject to public trading as of 8 July 2005.

CapMan Plc’s business areas

Following the establishment of CapMan Real Estate I Ky, CapMan provides management and advisory services in two main business areas: funds making investments in portfolio companies (CapMan Private Equity) and private equity real estate funds making investments in real estate assets (CapMan Real Estate). Investments by CapMan funds investing in portfolio companies focus mainly on the Nordic countries in three investment areas, which are middle market buyouts (CapMan Buyout), investments in IT and communications sectors (CapMan Technology) and life science investments in medtech companies (CapMan Life Science).

For CapMan Group’s figures, information on each business area will be reported in its own segment as of the Interim Report for the period January–September 2005. For fund figures, the division into segments has already been used in this Interim Report. Associated company Access Capital Partners has been included in the Group’s figures under CapMan Private Equity. As for funds, Access’ figures have been presented separately.

Financial performance in January - June 2005

CapMan’s turnover for the first half of 2005 increased compared to the comparative period and was MEUR 15.9 (MEUR 9.8). Management fees from the funds increased to MEUR 9.9 (MEUR 8.6). The growth resulted from management fees received from CapMan Mezzanine IV Fund, for which commitments received during the review period were also entered regressively from the establishment of the fund on 2 July 2004. The regressively entered one-off item totalled MEUR 0.5.

Carried interest income received by CapMan Plc from funds generating carry totalled MEUR 5.7 (MEUR 1.0).

Returns on direct fund investments from CapMan’s own balance sheet totalled MEUR 0.8 (MEUR –0.1), of which unrealised profits and losses associated with the investments were MEUR 0.8 (MEUR –0.1).

The share from the result of CapMan’s associated companies was MEUR 0.0 (MEUR 0.1).

Operating profit for the period was MEUR 6.5 (MEUR 1.1) and profit after taxes was MEUR 5.7 (MEUR 0.7). Earnings per share was 7.6 cents (0.9 cents).

Shareholders’ equity per share was 63 cents at 30 June 2005 (54 cents at 30 June 2004) and CapMan’s cash assets totalled MEUR 12.0 (MEUR 8.0). The Company has no interest-bearing debt. The equity ratio was 88.7% (92.6%), return on equity 12.4% (1.6%) and return on investment 17.0% (3.2%).

Fundraising

Funds investing in portfolio companies

CapMan held the final closing of CapMan Mezzanine IV on 31 March 2005 with MEUR 240 in total commitments. 33 institutional investors, out of which approximately one third were new investors, invested in the fund. The fund is one of the largest mezzanine funds in the Nordic countries.

Additionally, CapMan commenced fundraising preparations for new buyout and life science funds during the first quarter of 2005. The target sizes are MEUR 375 for the CapMan Buyout VIII and MEUR 100 for the CapMan Life Science IV. Fundraising for the next technology fund is expected to commence in 2006.

Real estate funds

The first real estate fund CapMan Real Estate I Ky has a final size of MEUR 500. Nine institutional investors as well as CapMan itself invested in the fund, which is one of the first private equity real estate funds in the Nordic countries. The fund’s total capital comprises MEUR 100 of equity, a MEUR 100 bond issued by Real Estate Leverator Oyj and a MEUR 300 senior bank loan facility. Previously, a similar type of listed bond was used for the CapMan Mezzanine IV fund.

Capital under management

As at the close of the second quarter CapMan managed/advised a total of MEUR 1,872.9 in capital (MEUR 1,157.1). Of this, MEUR 1,372.9 (MEUR 1,157.1) was in funds investing in portfolio companies. The growth in capital under management resulted from fundraising for the CapMan Mezzanine IV fund that was established in 2004. Capital in the CapMan Real Estate I fund, which invests in real estate assets and was established in June 2005, totalled MEUR 500 at the end of the review period.

Capital under management by associated company Access Capital Partners

CapMan Plc’s associated company Access Capital Partners managed/advised MEUR 917.2 (MEUR 573.0) in total assets in two funds of funds and private equity investment mandates at the end of the review period. Private equity investment mandates are authorisations committed by institutional investors to Access for the implementation of dedicated private equity investment programs. There was a substantial rise in assets managed/advised by Access during the first half of 2005 as a result of a MEUR 250 mandate received from the New York State Pension Fund. At the end of the period under review, Access managed/advised in total MEUR 389.9 (MEUR 45.7) in private equity investment mandates and MEUR 527.3 (MEUR 527.3) in commitments to funds of funds.

Access Capital Partners also commenced preparations to raise two new funds of funds during the review period. The target size of Access Capital Fund III Mid-market Buyout Europe is MEUR 250 and the target size of Access Capital Fund III Technology Europe is MEUR 100.

Investments and exits by the funds in January-June

Funds investing in portfolio companies

In the first half of 2005 the funds made three new investments, two substantial follow-on investments and several smaller follow-on investments, investing MEUR 67.5 in total. There were new investments in Cardinal Foods AS, Moventas Oy (formerly Metso Drives Oy) and SciBase AB and substantial follow-on investments in Anhydro Group and Northlight Optronics AB.

The funds exited in total from nine companies during the period under review: AudioNord International A/S, Entific Medical Systems AB, Finndomo Oy, Metalplast Oborniki Sp. z o.o, NeoPharma AB, Netseal Oy, Normet Oy, Unicom Baltic and Vogue Group Oy. There were several partial exits, out of which the most significant were from AffectoGenimap Plc, Setec Oy and Tamore Group Oy. Additionally, Mehiläinen repaid its mezzanine loan. Exits at acquisition cost (including partial exits and mezzanine loan instalments) for the period totalled MEUR 60.8. The exits during the review period will impact MEUR 5.7 on CapMan’s result for 2005 as a result of carried interest income received from the funds.

Real estate funds

In connection with the establishment of CapMan Real Estate I, the fund purchased from institutional investors a total of 17 commercial properties in the Helsinki metropolitan area with a total value of approx. MEUR 220. The real estate portfolio at acquisition cost totalled MEUR 194.0 at the end of the review period. The remainder of acquisitions, with a total value of MEUR 26, will be finalised by the end of January 2006.

The majority of properties in the portfolio are modern or renovated office complexes. The best-known asset in CapMan Real Estate I Ky’s portfolio is the Bronda property located on Eteläesplanadi in Helsinki’s city centre.

Investments and exits at acquisition cost, MEUR

* incl. partial exits and mezzanine loan instalments

The investment and exit activities of the funds managed/advised by CapMan are described in detail in Appendix 4.

Status of CapMan funds as at 30 June 2005

Funds investing in portfolio companies

Investments in portfolio companies at acquisition cost totalled MEUR 582.7 at the end of the period under review. Several of the portfolio companies in the funds making investments offer substantial upside potential. The portfolios also include companies that have higher risk levels than at the time of initial investment. Excluding realised and estimated future expenses, CapMan has an investment capacity of about MEUR 440 for new and follow-on investments in portfolio companies. Of this, approx. MEUR 320 is reserved for buyout investments, approx. MEUR 100 for technology investments and approx. MEUR 20 for life science investments.

Real estate funds

At the close of the period under review, the funds’ investments in real estate assets at acquisition cost totalled MEUR 194.0 and commitments concerning the remainder of acquisitions which will be finalised by the end of January 2006 totalled MEUR 26. The focus of the current portfolio is on properties with a medium level risk/return profile. The vacancy rate of the properties is about 5%. Excluding realised and estimated future expenses, the fund has an investment capacity of about MEUR 280 for new investments.

Funds’ portfolio as at 30 June 2005

Funds generating carried interest

The CapMan funds already generating carried interest are Finnventure Fund I (since 1997), Finnventure Fund II (since 1997), Finnventure Fund III (since 2000), Finnmezzanine Fund I (since 2001) and the Fenno/Skandia II (since 2004) and Fenno/Skandia I (since 2005) funds co-managed by CapMan and Fenno Management Oy. The initial capital in these funds (Appendix 3) is MEUR 100.6 or some 7.3% of total capital in funds making investments in portfolio companies (MEUR 1,372.9) and 5.4% of total capital managed/advised by CapMan (MEUR 1,872.9).

During the review period, the Fenno/Skandia I fund began to generate carried interest income following the exit from Vogue Group. Exits from Normet Oy and Vogue Group Oy as well as partial exits from AffectoGenimap Plc and Tamore Group Oy transferred the Fenno Fund co-managed by CapMan and Fenno Management Oy to the stage where the next substantial cash flow received by the fund will move Fenno Fund to carry. The exit from Finndomo Oy moved Finnventure V fund closer to carry and the partial exit from Tamore Group Oy moved Finnventure IV and V funds closer to carry.

CapMan’s own investments in the funds

Since 2002, CapMan Plc has been a substantial investor in the funds managed/advised by the Group. According to the decision adopted by the Board of Directors on 9 May 2005, the Company’s objective is to invest about 5–10% of the total capital in future equity funds from its own balance sheet. Previously the level was 3–5%. The change in investment strategy, which applies to investments by equity funds investing in portfolio companies, aims to improve the Company’s return on equity and to even out fluctuations in income in coming years via returns from these investments.

As an investor CapMan gives investment commitments to the funds when they are established. Remaining commitments totalled MEUR 23.6 as at 30 June 2005. The commitments primarily target CapMan Mezzanine IV, CapMan Equity VII, Swedestart Tech and Access Capital Fund II funds. Fund investments (the used commitments) for the review period totalled MEUR 3.8 (MEUR 2.0). The majority of investments were made in CapMan Equity VII, Access Capital Fund II and Swedestart Tech funds. The fair value of cumulative fund investment made by CapMan totalled MEUR 17.2 at the end of the review period.

CapMan’s investments and commitments in the funds as at 30 June 2005, MEUR