CapMan Plc Group Interim Report 1 January - 31 March 2005

Business

CapMan’s core business is private equity fund management and advisory services. The Group’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.

The returns from direct fund investments will have a greater impact on the Company’s result in the future. According to the decision adopted by the Board of Directors on 9 May 2005, CapMan’s objective is to increase investments from its balance sheet from the previous level of about 3–5% to 5–10% of the total capital in future CapMan funds investing directly in portfolio companies.

Financial performance in January–March 2005

CapMan’s turnover for the first quarter of 2005 increased compared to the comparative period and was MEUR 5.5 (MEUR 5.3). Management fees from the funds increased to MEUR 5.3 (MEUR 4.3). The growth in management fees resulted from CapMan Mezzanine IV fund’s management fees, 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.

During the review period there were no exits from funds already generating carry and CapMan did not receive carried interest income (MEUR 0.9 in January–March 2004).

Returns on direct fund investments from CapMan’s own balance sheet totalled MEUR 0.5 (MEUR 0.2), of which unrealised gains and losses associated with the investments were MEUR 0.5 (MEUR 0.2).

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

Operating profit for the period was MEUR 1.0 (MEUR 0.7) and profit after taxes and minority interests was MEUR 1.2 (MEUR 0.5). Earnings per share was 1.7 cents (0.7 cents).

Shareholders’ equity per share was 56 cents (59 cents) and CapMan’s cash assets on 31 March 2005 totalled MEUR 16.3 (MEUR 14.9). The Company has no interest-bearing debt. The equity ratio was 81.2% (93.7%), return on equity 2.9% (1.2%) and return on investment 3.9% (2.4%).

Fundraising

CapMan held the final closing of CapMan Mezzanine Fund IV with MEUR 240 in total commitments at the close of the review period on 31 March 2005. 33 institutional investors invested in the fund, which 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. The target sizes are MEUR 375 for the CapMan Buyout VIII fund and MEUR 100 for the CapMan Life Science IV fund. Fundraising for the next technology fund is expected to commence in 2006. CapMan also continues to study the possibilities to establish a Finnish private equity real estate fund and to negotiate the matter with institutional investors.

Capital under management

As at the close of the first quarter, CapMan managed/advised MEUR 1,376.1 (MEUR 1,154.9) in funds making direct investments in portfolio companies. The growth in capital under management resulted from fundraising for the Mezzanine IV fund that was established in July 2004.

Capital under management by associated company Access Capital Partners

CapMan Plc’s associated company Access Capital Partners managed/advised MEUR 905.1 (MEUR 570.1) in total assets in two funds of funds and private equity investment mandates at the close of the first quarter. Private equity investment mandates are authorisations committed by institutional investors to Access for the implementation of dedicated private equity investment programs. During the period under review Access received a MEUR 250 mandate from the New York State Common Retirement Fund, which substantially raised the total private equity investment mandates managed/advised by Access to MEUR 377.8 (MEUR 42.8). The funds of funds managed/advised by Access Capital Partners, Access Capital Fund and Access Capital Fund II, total MEUR 250.3 and MEUR 277.0 in commitments.

During the period under review, Access Capital Partners also commenced preparations to raise two new funds of funds. 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–March

In the first quarter of 2005, the funds made one new investment in SciBase AB, one substantial follow-on investment in Northlight Optronics AB and several smaller follow-on investments, investing a total of MEUR 7.2 in all. The funds exited in total from five companies during the review period: Netseal Oy, NeoPharma AB, Entific Medical Systems AB, Normet Corporation and AudioNord International A/S. Additionally, Mehiläinen Oyj repaid its mezzanine loan. Exits at acquisition cost (including partial exits and mezzanine loan instalments) for the period totalled MEUR 33.8. The realisations of investments during the first quarter do not impact on CapMan’s result for 2005, but the exit from Finndomo that was announced in April after the close of the period will contribute about MEUR 5.0 to CapMan’s result in 2005.

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 more detail in appendix 4.

Status of CapMan funds as at 31 March 2005

Investments in portfolio companies at acquisition cost totalled MEUR 551.0 at the end of the period under review. Several of the portfolio companies in the funds making direct investments offer substantial upside potential. The portfolios also include companies that have higher risk levels than at the time of initial investment.

Funds’ portfolio as at 31 March 2005

Excluding realised and estimated future expenses, CapMan has an investment capacity of about MEUR 500 for new and follow-on investments in portfolio companies. Of this, approximately MEUR 380 is reserved for buyout investments, approximately MEUR 100 for technology investments and approximately MEUR 20 for life science investments.

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 Fenno/Skandia II co-managed by CapMan and Fenno Management Oy (since 2004). The initial capital in these funds (appendix 3) is MEUR 92.2 or some 6.7% of total capital in funds making direct investments in portfolio companies (MEUR 1,376.1).

Of the exits made during the review period, the sale of Normet Corporation transfers the Fenno Fund co-managed by CapMan and Fenno Management Oy closer to the point where the fund will begin to generate carried interest. The exit from Finndomo Oy that was announced in April after the close of the period moves Finnventure Fund V 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. The Company’s objective is to invest about 5–10% of the total capital in future equity funds from its own balance sheet. Fund investments for the review period totalled MEUR 2.1 (MEUR 0.7). The majority of investments were made into Access Capital Fund II, CapMan Equity VII and Swedestart Tech funds. Commitments remaining as at 31 March 2005 totalled MEUR 23.7. The commitments primarily target CapMan Mezzanine IV, CapMan Equity VII, Swedestart Tech and Access Capital Fund II funds.

CapMan’s own investments in the funds for the period 1 January–31 March 2005

* Managed/advised by CapMan’s associated company Access Capital Partners.

CapMan’s investments and commitments in the funds as at 31 March 2005

* Managed/advised by CapMan’s associated company Access Capital Partners.

Changes in management

On 15 March 2005, Heikki Westerlund, Senior Partner was appointed as the new CEO of CapMan Plc; Olli Liitola, Senior Partner and CFO was appointed Deputy CEO and CEO’s substitute; and Tuomo Raasio, Senior Partner was appointed Head of CapMan Buyout. The appointments came into effect on 31 March 2005.

The former CEO of CapMan Ari Tolppanen, Senior Partner, continues as a member of the CapMan Buyout team. He is also Chairman of the Board of Directors of CapMan Plc.

Personnel

CapMan had 73 (72) employees at the end of the first quarter. There were 45 (45) employees in Helsinki and the remainder were located in other Nordic countries. In addition there were four Senior Advisors acting as consultants for CapMan, three in Finland and one in Denmark.

Decisions adopted by the AGM

The Annual General Meeting (AGM) of CapMan Plc held in Helsinki on 31 March confirmed the 2004 financial statements and granted discharge from liability to the Board of Directors and the CEO for the 2004 financial year. The AGM decided that the Board consists of five members. Tapio Hintikka, Lennart Jacobsson, Lauri Koivusalo, Teuvo Salminen and Ari Tolppanen were elected as Board members. The organisation meeting of the Board that was held immediately after the AGM elected Ari Tolppanen as Chairman of the Board and Teuvo Salminen as Vice Chairman of the Board.

The AGM elected PricewaterhouseCoopers Oy, corporation of authorised public accountants, as the Company’s auditors with Jan Holmberg, APA (Auditor approved by the Central Chamber of Commerce), as the Lead Auditor. Terja Artimo, APA, will act as Holmberg’s deputy.

The AGM also 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 Board decided on 12 April 2005 to commence repurchasing shares at the earliest on 11 May 2005. The repurchasing of shares will continue until 31 March 2006.

Dividend

In accordance with the proposal of the Board of Directors, the AGM decided that a dividend of EUR 0.06 per share, which equals to 71% of the net profit, will be distributed to shareholders for the 2004 financial year. The record date for payment of dividend was 5 April 2005 and the dividend was paid to shareholders on 12 April 2005. CapMan Plc’s objective is to use at least 50% of the net profit either for dividend payment or repurchase of the Company’s own shares.

Increase in share capital

The share capital of CapMan Plc was increased by EUR 277 during the review period, when the share subscription of 27,700 CapMan Plc B shares with 2000A stock options was entered into the Trade Register on 14 February 2005. The Company’s share capital is EUR 747,093.30 and the total number of shares is 74,709,330 following the increase in share capital.

Trading and price development of shares and options