CapMan Plc Group Financial Statements Bulletin 1 January – 31 December 2005  
^{Capital under management exceeded 2 billion euros, profit increased}

Accounting principles

The Financial Statements Bulletin is prepared in accordance with IFRS standards. 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 a 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. The share of possible carried interest that is allocated to teams varies from 20% to a maximum of 50%. The Board of Directors decides on the share of potential carried interest to be allocated to the investment team in connection with the establishment of the fund in question.

CapMan Plc’s returns on direct fund investments from its own balance sheet will have a greater impact on the Company’s result in the next few years, as since 2002 CapMan has been a significant investor in the funds managed 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 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.

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), technology investments (CapMan Technology) and life science investments (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 2005

CapMan’s turnover for year 2005 was MEUR 28.7 (MEUR 27.7). Management fees from the funds increased to MEUR 20.3 (MEUR 17.8). The growth resulted from management fees received from new funds CapMan Buyout VIII and CapMan Real Estate I as well as from CapMan Mezzanine IV, for which commitments received during the review period were also entered regressively from the previous year. The regressively entered one-off item totalled MEUR 0.5.

Carried interest income received by CapMan Plc from funds generating carried interest totalled MEUR 6.6 (MEUR 9.1), and realised returns on direct fund investments totalled MEUR 0.5 (MEUR 0.2). Fair value gains/losses associated with fund investments from CapMan’s own balance were MEUR 1.6 (MEUR –0.4). The gains were related in particular to value creation in CapMan Equity VII, where CapMan is a substantial investor (5%). The fair value of all fund investments by CapMan at 31 December 2005 totalled MEUR 20.3.

Operating expenses were MEUR 21.9 (MEUR 20.0). Operating profit for the year increased to MEUR 8.4 (MEUR 7.4).

The share from the result of CapMan’s associated companies was MEUR 0.3 (MEUR 0.4). Profit before taxes increased to MEUR 9.4 (MEUR 8.3) and profit after taxes was up to MEUR 7.0 (MEUR 4.9). Earnings per share was 9.1 cents (6.4 cents).

The sum of non-current assets in the balance sheet grew to MEUR 40.4 in 2005 (MEUR 29.5). In line with CapMan’s strategy, the sum of CapMan’s own investments increased and totalled MEUR 20.3 (MEUR 14.2). There was also an increase in receivables to MEUR 10.8 (MEUR 5.6). Of the receivables, MEUR 8.2 (MEUR 4.9) was loan receivables from Maneq funds, which make portfolio company investments along with CapMan funds and whose investors are CapMan’s investment professionals and other key personnel. Goodwill was MEUR 4.8 (MEUR 4.5), and is directed mainly at the acquisition of Swedestart Management AB in 2002. CapMan’s cash assets totalled MEUR 10.3 (MEUR 15.5). The Company has no interest-bearing debt.

Shareholders’ equity per share was 64 cents at 31 December 2005 (60 cents at 31 December 2004). The equity ratio was 85.8% (88.8%), return on equity 14.8% (11.1 %) and return on investment 20.2% (18.9%).

Turnover and profit quarterly as well as turnover and operating profit per segment for the review period are presented in Appendix 2.

Proposal of the Board of Directors for profit distribution

CapMan Plc’s objective is to use at least 50% of the net profit for dividend payment and/or repurchase of the Company’s own shares. The Board of Directors proposes to the AGM that a dividend of EUR 0.07 per share (EUR 0.06 per share), which equals to 78% (71%) of the net profit, will be distributed to shareholders for the year 2005.

Fundraising

Funds investing in portfolio companies

CapMan Plc established its eighth buyout fund CapMan Buyout VIII in November 2005. As at 31 December 2005 the fund had MEUR 313.1 in commitments from 19 institutional investors, out of which four were new. CapMan’s own commitment into the fund is 10% of committed capital, or approx. MEUR 31. The fund will invest in middle market buyout transactions in the Nordic countries. The target size for CapMan Buyout VIII is MEUR 375, and its fundraising continues in 2006. The share of possible carried interest that will be received by the Buyout team from the fund is 30%.

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. The share of possible carried interest that will be received by the Buyout team from the fund is 25%.

CapMan commenced fundraising for a new life science fund during the last quarter of 2005. 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. The aggregate share of possible carried interest that will be received from the fund by the Real Estate team and the fund’s co-manager Corintium Oy is 32%.

Capital under management

As at 31 December 2005 CapMan managed a total of MEUR 2,176.1 in capital (MEUR 1,280.0), of which MEUR 1,676.1 (MEUR 1,280.0) was in funds investing in portfolio companies. Capital under management in funds making direct portfolio company investments was increased during the year as a result of fundraising for CapMan Buyout VIII and CapMan Mezzanine IV funds, and was decreased by the closing down of operations by Finnventure Fund I. Capital under management 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 year.

Capital under management by associated company Access Capital Partners

CapMan Plc’s associated company Access Capital Partners managed/advised MEUR 1,076.7 (MEUR 622.5) in total assets as at 31 December 2005. Of this, MEUR 671.7 (MEUR 527.3) was in funds of funds and MEUR 405.0 (MEUR 95.2) in private equity investment mandates.

The first closing of Access Capital Fund III was held at MEUR 144.4 in November 2005. The fund consists of two separate subfunds, which are Access Capital Fund III Mid-market Buyout Europe (target size MEUR 250) and Access Capital Fund III Technology Europe (target size MEUR 100). Fundraising for Access Capital Fund III will continue in 2006. The substantial rise in assets managed/advised by Access in 2005 is also attributable to a MEUR 250 mandate received from the New York State Pension Fund in the first quarter.

Investments and exits by the funds in 2005

Funds investing in portfolio companies

In 2005 the funds made eight new investments, 11 substantial follow-on investments and several smaller follow-on investments, investing MEUR 127.3 in total. There were new investments in Aerocrine AB, Cardinal Foods AS, Flander Ltd, 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, Gammadata Mätteknik AB, Jolife AB, Locus AS, Northlight Optronics AB, SMEF Group A/S, Tieturi Oy, Tritech Technology AB and Å&R Carton AB.

The funds exited in total from 19 companies during 2005: AudioNord International A/S, Aurajoki Oy, Entific Medical Systems AB, EuroProcessing International ASA, Eutech Medical AB, Finndomo Oy, Holiday Club Finland Oy, Junttan Oy, Metalplast Oborniki Sp. z o.o, NeoPharma AB, Netseal Oy, Normet Oy, Northlight Optronics AB, Otre AB, Runaware AB, Setec Oy, Tamore Group Oy, Unicom Baltic and Vogue Group Oy. There were several partial exits, of which the most significant was from AffectoGenimap Plc. Additionally, Mehiläinen Oyj repaid its mezzanine loan. Exits at acquisition cost (including partial exits and mezzanine loan instalments) for the year totalled MEUR 118.7.

Real estate funds

In connection with the establishment of CapMan Real Estate I, the fund purchased a total of 17 commercial properties in the Helsinki metropolitan area from institutional investors. In addition the fund made a new investment in November, when it acquired Kemira’s headquarters from Kemira Oyj. The majority of properties in the portfolio are modern or renovated office complexes. The real estate portfolio at acquisition cost totalled MEUR 225.7 at the end of 2005. Some of the real estate acquisitions that were agreed on in June, at an acquisition cost of MEUR 21.3, were closed in January 2006 in accordance with preliminary contracts.

Investments and exits at acquisition cost, MEUR

* incl. partial exits and mezzanine loan instalments

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

Status of CapMan funds as at 31 December 2005

Funds investing in portfolio companies

Investments in portfolio companies at acquisition cost totalled MEUR 585.0 at the end of 2005. The fair value of investments was MEUR 630.4. The funds’ portfolios are valued to fair value in accordance with the guidelines of EVCA as described in Appendix 3.

Excluding realised and estimated future expenses, CapMan has an investment capacity of about MEUR 690 for new and follow-on investments in portfolio companies. Of this, approx. MEUR 595 is reserved for buyout investments, approx. MEUR 80 for technology investments and approx. MEUR 15 for life science investments.

Real estate funds

At the end of 2005, the funds’ investments in real estate assets at acquisition cost totalled MEUR 225.7 and the fair value of investments was MEUR 221.0. 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% and average length of lease contracts is 4.5 years. Following the real estate acquisitions that were closed in January, the fund has an investment capacity of about MEUR 250 for new investments.

Funds’ gross portfolio* as at 31 December 2005, MEUR