Compensation

When considering the remuneration elements, the Remuneration Committee and the Board of Directors have primarily applied principles of fairness and competitiveness, balancing of interests of shareholders, fund investors as well as employees, and promoting as well as strengthening the performance culture both short and long term.

CapMan's Remuneration Statement

Please read the full Remuneration Statement in PDF format here. The Statement has been approved by the CapMan Board of Directors on 31 January 2018.

Remuneration Statement and Report

Confirmed by the Board of Directors on 31 January 2018.

Remuneration Statement of CapMan Plc (“CapMan”) has been prepared in accordance with the Finnish Corporate Governance Code (the “Code”), which entered into force on 1 January 2016. The statement includes the information required by the Code to be disclosed in the remuneration report i.e. information on the remuneration and other financial benefits paid to the directors, the CEO, and any other executives during the previous financial period. The Code is publicly available on the website of the Securities Market Association at www.cgfinland.fi/en/.

When considering the remuneration elements set out in this Remuneration Statement, the Remuneration Committee and the Board of Directors have primarily applied principles of fairness and competitiveness, balancing of interests of shareholders, fund investors as well as employees, and promoting as well as strengthening the performance culture both short and long term.

Board of Directors

Decision-making process and main principles of remuneration

The remuneration of the members of the Board of Directors (the “Board”) is confirmed by the Annual General Meeting (the “AGM”). The Nomination Committee makes the proposals regarding the remuneration of the Board members. According to the decision of the AGM 2017, the monthly fee of the Chairman of the Board of Directors is EUR 4,000 (2016: EUR 4,000), the monthly fee of the Vice Chairman is EUR 3,200 (2016: EUR 3,200) and monthly fee of the members of the Board is EUR 2,800 (2016: EUR 2,800. Based on the AGM resolution, approximately 40 per cent of the total amount of the monthly remuneration will be paid in CapMan Plc's shares purchased at a price formed in public trading and 60 per cent of the total amount of the monthly remuneration will be paid in cash. The shares were purchased within two weeks from the release of the company's interim report 1 January-31 March 2017. The company will cover the possible transfer tax. The members of the Board of Directors shall retain the shares they have received as Board remuneration until the end of their Board membership.

The Chairmen of the Board and Board’s Committees are paid a meeting fee of EUR 800 per meeting (2016: EUR 800) and the members of the Board and Board’s Committees are paid meeting fee of EUR 400 per meeting (2016: EUR 400). All members of the Board shall be reimbursed for reasonable travel expenses in accordance with the company´s travel compensation policy.

Remuneration and other financial benefits paid to the directors in 2017 are described in the Remuneration Report below.

Biographical details of the members of the Board

The biographical details of the current members of the Board are available at the company’s website in Board of Directors and Insider management.

Remuneration of the members of the Board in 2017

Name

Board
fee paid in cash, €

Meeting
fees, €

Board fee paid in shares, €

Board fee paid in shares, No

Financial benefits pertainign to an employment or service contract, €

Andreas Tallberg*

Chairman

18,800

5,600

19,199

11,530

0

Karri Kaitue

Vice Chairman

27,040

14,800

15,359

9,224

20,000

Nora Kerppola

Vice Chairman

22,760

8,800

13,439

8,071

0

Ari Tolppanen

Member

21,560

7,200

13,439

8,071

0

Mammu Kaario*

13,160

3,200

13,439

8,071

0

Dirk Beeusaert**

8,400

4,800

0

0

0

Claes de Neergaard**

8,400

5,600

0

0

0

*) Elected to the Board in the AGM held on 15 March 2017.

**) Board member until the AGM held in 15 March 2017.

Financial benefits of the Board members pertaining to employment relationship or service contract

Karri Kaitue was paid a consultancy fee of EUR 20 000 in 2017. No financial benefits pertaining to employment relationship or service contract were paid to other Board members in 2017.

Participation of the Board members in share-based remuneration schemes

Except the partial payment of Board remuneration with CapMan shares reported in the table above, the Board members do not currently participate in share-based remuneration schemes.

CEO and Management Group

Decision-making process and main principles of remuneration

The Board of Directors of CapMan confirms the overall remuneration principles and elements covering the CEO and Management Group members on an annual basis. The Board’s Remuneration Committee, consisting of at least two independent Board members and non-executives, prepares remuneration-related matters for the Board.

Currently, the total compensation program of the CEO and Management Group consists of a monthly fixed salary, fringe benefits (such as lunch, sports and phone benefit), additional pension insurance, performance bonuses as short-term incentives (STI) and stock option programs or other share-based schemes as long-term incentives (LTI).

Any adjustments to the CEO’s salary and other compensation can only be made with the Board’s approval. The monthly salaries of the Management Group members can be increased on the basis of a proposal by the CEO and subsequent approval by the Board.

The annual performance-based incentive scheme is tied to CapMan Group’s profit level (EPS), Business Unit profit level, where applicable, as well as to the annual individual performance. The Board defines in advance an annual minimum profit level (threshold) which must be achieved to pay out any bonuses as well as a profit level at which the maximum bonuses can be paid. Payment of bonuses is in all cases always subject to individual performance of the relevant person. The CEO’s and the Management Group members’ bonuses are approved by the Board on the basis of the above criteria.

Remuneration of the CEO

The CEO Joakim Frimodig is entitled to remuneration corresponding to a monthly salary of EUR 30,000 and fringe benefits (phone, lunch and sports benefit). Additionally, he is entitled to an additional defined contribution-based pension insurance for which the company pays an annual premium of 10% of the participant’s annual salary. The retirement age of the CEO is 63 years.

The CEO’s performance incentive is defined based on actual EPS (earnings per share) of the Group achieved during the year. The prerequisites for bonus accrual include an achievement of a certain earnings level determined by the Board annually. The maximum bonus potential is capped at an amount corresponding to 12 months’ salary and the Board determines annually the earnings level on which the maximum bonus potential can be achieved.

The CEO has a mutual notice period of six months and he will be entitled to a severance fee of 12 months’ salary, if his employment is terminated by the company.

CapMan’s previous CEO Heikki Westerlund, who held the office until 3 May 2017, had a remuneration model corresponding in all material respects to the principles set out above. Westerlund was paid a severance payment in accordance with his CEO agreement. The base salary, fees and other financial benefits paid to Frimodig and Westerlund in 2017 are presented in the table below.

Remuneration of Management Group members

In addition to annual base salary and fringe benefits, certain Management Group members are entitled to an additional defined contribution-based pension insurance, for which the company pays an annual premium equivalent to 5% of the participant’s annual salary (excluding fringe benefits). The individual’s entitlement to a premium-free policy increases gradually after three years and after six years covers 100% of the cumulative additional pension saving.

The Management Group members belonging to CapMan investment teams are entitled to a Management Fee Incentive Scheme where 50% of the profit generated by the team as management fees, deducted with team costs and service fees, forms the maximum bonus pool for the team including social charges. The maximum bonus potential for Management Group members belonging to this scheme is capped at an amount corresponding to 12 months’ fixed base salary. Bonuses will be paid out only if the minimum threshold for CapMan Group’s profit set by the Board is reached.

The Management Group members not belonging to one of CapMan’s investment teams are entitled to an EPS Incentive Scheme based on actual EPS (earnings per share) of the Group achieved during the year. The prerequisites for bonus accrual include an achievement of a certain earnings level determined by the Board annually. The maximum bonus potential for Management Group members belonging to this scheme is capped at an amount corresponding to 12 months’ salary and the Board determines annually the earnings level on which the maximum bonus potential can be achieved.

The base salaries, fees and other financial benefits paid to the Management Group members in 2017 are reported in the table below.

Stock option program

Stock options are used to commit key individuals/executives to the company and reinforce the alignment of interests of key individuals/executives and CapMan shareholders. CapMan has currently two effective stock option programs, stock option program 2013 and stock option program 2016. The AGMs held on 20 March 2013 and 16 March 2016 approved the terms and conditions of the stock option programs. In the 16 March 2016 AGM, the Board was authorised to decide on the allocation of options in 2016, 2017 and 2018 under the stock option programme 2016. The allocation decisions of the Board are prepared by the remuneration committee. The terms and conditions of the programmes are available in the Stock options section on the company's website, and the number of option rights granted to the CEO and Management Group members are presented in the table below.

Biographical details of Management Group members

The Management Group’s biographical details are available in the Management section on the company’s website.

Remuneration of CEO and Management Group in 2017

Name

Salary, €

Bonus, €

Severance pay, €

Total, €

Voluntary pension payment, €

Option rights granted, €

Joakim Frimodig*
as of 4 May 2017

230,594

0

0

230,594

20,605

100,000

Heikki Westerlund
until 3 May 2017

438,525

434,604

357,600

1,230,729

30,477

0

Management Group**

1,198,420

701,108

0

1,899,528

40,218

312,500

*) Interim CEO 4 May - 31 August 2017.
**) Excluding the CEO.

Carried interest income

Carried interest income from funds established in 2004 and thereafter are divided between the investment team responsible for the funds’ investment activities and CapMan. This is a precondition from the fund investors. The objective thereof is to ensure that the interests of the investment professionals and investors are aligned and that the investment professionals are committed to the company long term by requiring significant investment in the fund. Entitlement to carried interest potential requires that the investment professional makes a capital investment in the fund.

It is common practice in the private equity industry that the majority of the carried interest income belongs to the investment teams. The fund typically starts to generate carried interest after 6 or 7 years from the establishment, provided that the original investment and a preferred annual return, which is generally 8 %, have been paid to investors. The amount of the carried interest income depends among others on fund’s overall performance i.e. on the success of the investment operations.