CapMan Plc Group Interim Report 1 January – 30 September 2005  
^{Investment and exit activities remained at a high level}

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 been consolidated with the Group’s figures as of 1 July 2005.

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%. In the case of CapMan funds that were established before 2004, carried interest is typically  20–25% share of a fund’s cash flow through exits from its portfolio companies. For funds established in 2004 and thereafter, a share of carried interest will be distributed to the members of the investment team responsible for the fund’s investment activities during its life cycle (typically 10 years), in accordance with common practice in the private equity investment industry. To date, teams have been allocated a 20–30% share of possible carried interest. On 2 November 2005, the Board of Directors of CapMan Plc decided to raise the share of possible carried interest to be distributed to the investment team in question to a maximum of 50% for future technology and life science funds. The final decision on the share of potential carried interest to be allocated to the investment team is always decided by the Board in connection with the establishment of the fund in question.

The returns on direct fund investments from CapMan’s balance sheet will have a greater impact on the Company’s result in the next few years, as CapMan has been since 2002 a significant investor in the funds managed/advised by the Group. 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 to the owner of Realprojekti Oy, Markku Hietala Holding Oy.

CapMan Plc’s business areas

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).

Information on each business area is reported in its own segment in Interim Reports. Associated company Access Capital Partners has been included in the Group’s figures under CapMan Private Equity. As for funds, Access Capital Partners’ figures have been presented separately.

Financial performance in January–September 2005

CapMan’s turnover for the period January – September 2005 increased compared to the comparative period and was MEUR 21.8 (MEUR 14.8). Management fees from the funds increased to MEUR 14.9 (MEUR 13.1). The growth resulted from management fees received from CapMan Real Estate I Fund and 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 carried interest totalled MEUR 5.7 (MEUR 1.4), and returns on direct fund investments from CapMan’s own balance sheet totalled MEUR 0.2 (MEUR 0.0).

Operating profit for the period was MEUR 6.4 (MEUR 1.8).

Unrealised profits and losses associated with the investments made from CapMan’s own balance sheet were MEUR 0.8 (MEUR –0.3). The share from the result of CapMan’s associated companies was MEUR 0.1 (MEUR 0.3). Profit after taxes was MEUR 5.9 (MEUR 1.3), and earnings per share was 7.8 cents (1.5 cents).

Shareholders’ equity per share was 63 cents at 30 September 2005 (55 cents at 30 September 2004) and CapMan’s cash assets totalled MEUR 15.6 (MEUR 10.7). The Company has no interest-bearing debt. The equity ratio was 87.3% (92.4%), return on equity 12.8% (3.0%) and return on investment 17.1% (5.2%).

Turnover and profit quarterly as well as turnover and operating profit per segment for the review period are presented in Appendix 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. The fund is one of the largest mezzanine funds in the Nordic countries. 33 institutional investors, out of which approximately one third were new investors, invested in the fund.

Additionally, CapMan commenced fundraising preparations for new buyout and life science funds during the first quarter of 2005. The target size for CapMan Buyout VIII is MEUR 375, and the target size for CapMan Life Science IV is MEUR 100. 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 third quarter CapMan managed/advised a total of MEUR 1,863.5 in capital (MEUR 1,249.6). Of this, MEUR 1,363.5 (MEUR 1,249.6) was in funds investing in portfolio companies. Capital under management was increased during the review period as a result of fundraising for the CapMan Mezzanine IV fund that was established in 2004, and was decreased by the closing down of operations by Finnventure Fund I. 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 923.2 (MEUR 573.8) 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 395.9 (MEUR 46.5) 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-September

Funds investing in portfolio companies

The funds made seven new investments, six substantial follow-on investments and several smaller follow-on investments in the period under review, investing MEUR 116.1 in total. There were new investments in Aerocrine AB, Cardinal Foods AS, InfoCare Holding AS, Inflight Service AB, Moventas Oy (formerly Metso Drives Oy), ScanJour AS and SciBase AB. Substantial follow-on investments were made in Anhydro Group, Ascade AB, Distocraft Oy, Jolife AB, Northlight Optronics AB and SMEF Group A/S.

The funds exited in total from 14 companies during the period under review: AudioNord International A/S, Aurajoki Oy, Entific Medical Systems AB, Finndomo Oy, Holiday Club Finland Oy, Junttan Oy, Metalplast Oborniki Sp. z o.o, NeoPharma AB, Netseal Oy, Normet Oy, Northlight Optronics AB, Setec Oy, Unicom Baltic and Vogue Group Oy. There were several partial exits, of which the most significant were from AffectoGenimap Plc and Tamore Group Oy. Additionally, EuroProcessing International ASA and Mehiläinen repaid their mezzanine loans. Exits at acquisition cost (including partial exits and mezzanine loan instalments) for the period totalled MEUR 107.2.

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 195.8 at the end of the review period. The remainder of acquisitions, with a total value of MEUR 24.2, 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 more detail in Appendix 4.

Status of CapMan funds as at 30 September 2005

Funds investing in portfolio companies

Investments in portfolio companies at acquisition cost totalled MEUR 585.6 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 390 for new and follow-on investments in portfolio companies. Of this, approx. MEUR 285 is reserved for buyout investments, approx. MEUR 90 for technology investments and approx. MEUR 15 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 195.8 and commitments concerning the remainder of acquisitions, which will be finalised by the end of January 2006, totalled MEUR 24.2. 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 September 2005, MEUR