CapMan Oyj

743700498L5THNQWVL662022-01-012022-12-31743700498L5THNQWVL662021-01-012021-12-31743700498L5THNQWVL662022-12-31743700498L5THNQWVL662021-12-31743700498L5THNQWVL662020-12-31ifrs-full:IssuedCapitalMember743700498L5THNQWVL662020-12-31ifrs-full:SharePremiumMember743700498L5THNQWVL662020-12-31capmanplc:ReservesMember743700498L5THNQWVL662020-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember743700498L5THNQWVL662020-12-31ifrs-full:RetainedEarningsMemberiso4217:EURiso4217:EURxbrli:shares743700498L5THNQWVL662020-12-31ifrs-full:EquityAttributableToOwnersOfParentMember743700498L5THNQWVL662020-12-31ifrs-full:NoncontrollingInterestsMember743700498L5THNQWVL662021-01-012021-12-31ifrs-full:RetainedEarningsMember743700498L5THNQWVL662021-01-012021-12-31ifrs-full:EquityAttributableToOwnersOfParentMember743700498L5THNQWVL662021-01-012021-12-31ifrs-full:NoncontrollingInterestsMember743700498L5THNQWVL662021-01-012021-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember743700498L5THNQWVL662021-01-012021-12-31capmanplc:ReservesMember743700498L5THNQWVL662021-12-31ifrs-full:IssuedCapitalMember743700498L5THNQWVL662021-12-31ifrs-full:SharePremiumMember743700498L5THNQWVL662021-12-31capmanplc:ReservesMember743700498L5THNQWVL662021-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember743700498L5THNQWVL662021-12-31ifrs-full:RetainedEarningsMember743700498L5THNQWVL662021-12-31ifrs-full:EquityAttributableToOwnersOfParentMember743700498L5THNQWVL662021-12-31ifrs-full:NoncontrollingInterestsMember743700498L5THNQWVL662022-01-012022-12-31ifrs-full:RetainedEarningsMember743700498L5THNQWVL662022-01-012022-12-31ifrs-full:EquityAttributableToOwnersOfParentMember743700498L5THNQWVL662022-01-012022-12-31ifrs-full:NoncontrollingInterestsMember743700498L5THNQWVL662022-01-012022-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember743700498L5THNQWVL662022-01-012022-12-31capmanplc:ReservesMember743700498L5THNQWVL662022-12-31ifrs-full:IssuedCapitalMember743700498L5THNQWVL662022-12-31ifrs-full:SharePremiumMember743700498L5THNQWVL662022-12-31capmanplc:ReservesMember743700498L5THNQWVL662022-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember743700498L5THNQWVL662022-12-31ifrs-full:RetainedEarningsMember743700498L5THNQWVL662022-12-31ifrs-full:EquityAttributableToOwnersOfParentMember743700498L5THNQWVL662022-12-31ifrs-full:NoncontrollingInterestsMember743700498L5THNQWVL662020-12-31 2022 Annual Report 2 • CAPMAN ANNUAL REPORT 2022 • GROUP GROUP CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS Table of contents Group 3 CapMan Snapshot 4 Highlights 2022 7 CEO’s review 11 Strategy 13 CapMan’s business 17 Sustainability 22 People 27 Risks 31 Corporate Governance 34 Corporate Governance Statement 34 Board of Directors 41 Management Team 43 Report of the Board of Directors 46 Key figures 55 Key figures - CapMan Group 57 Fees and carry 58 Investment business 59 Calculation of Key Ratios 60 Financial Statements 61 Group Statement of Comprehensive Income (IFRS) 63 Group Balance Sheet (IFRS) 64 Group Statement of Changes in Equity (IFRS) 65 Group Cash Flow Statement (IFRS) 66 Notes to the Consolidated Financial Statements 67 Parent Company Income Statement (FAS) 102 Parent Company Balance Sheet (FAS) 103 Parent Company Cash Flow Statement (FAS) 104 Notes to the Parent Company Financial Statements (FAS) 105 Signatures to the Report of the Board of Directors and Financial Statements 112 Auditor’s report 113 Shares and shareholders 117 Information for shareholders 118 This report considers CapMan Plc and its subsidiaries. CapMan refers primarily to the CapMan Group. The information is as of 31 December 2022, unless otherwise stated. This report is also available in Finnish. In the event of discrepancies, the Finnish original will supersede. 3 • CAPMAN ANNUAL REPORT 2022 • GROUP GROUP CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS Group 4 • CAPMAN ANNUAL REPORT 2022 • GROUP GROUP CapMan Snapshot Highlights 2022 CEO’s review Strategy CapMan’s business Sustainability People Risks CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS 186 EMPLOYEES 40 PORTFOLIO COMPANIES 224 PROPERTIES CAPMAN SNAPSHOT A private asset frontrunner CapMan is a leading Nordic private asset expert with an active approach to value creation. We have developed hundreds of portfolio companies and real estate and created significant value over three decades as one of the private asset frontrunners in the Nordics. Our objective is to provide attractive returns and innovative solutions to our increasingly international investor base. We are setting science-based targets to reduce our greenhouse gas emissions in line with the Paris Agreement. We have a broad presence in the Nordic unlisted market through our specialised teams. Our investment strategies cover minority and majority investments in portfolio companies and real estate, and infrastruc- ture assets. We also provide wealth management solutions. Our service business includes procurement services. Our professionals are based in Helsinki, Jyväskylä, Stockholm, Copenhagen, Oslo, London and Luxembourg. Our stock is listed on Nasdaq Helsinki since 2001. Our vision is to become the most responsible private asset company in the Nordics. As a Nordic company we can be a global frontrunner. 22 FUNDS 5 €BN ASSETS UNDER MANAGEMENT CAPMAN SNAPSHOT CapMan today 1989 Capman Group Founded 30,000+ Shareholders, Listed on Nasdaq Helsinki 2022 Commitment to SBTi €5.0bn Assets under management ~55% of AUM outside Nordics ~300 Institutional investors as LPs 186 Employees 8 Investment & service teams 6 Geographic locations 14,700 employees in portfolio companies 1,225,000 m 2 of combined area in real estate 250+ Target s in portfolios HELSINKI STOCKHOLM COPENHAGEN OSLO LUXEMBOURG LONDON PRIVATE EQUITY REAL ESTATE INFRASTRUCTURE 5 • CAPMAN ANNUAL REPORT 2022 • GROUP GROUP CapMan Snapshot Highlights 2022 CEO’s review Strategy CapMan’s business Sustainability People Risks CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS Our mission We build value for the enrichment of society. Our vision Our vision is to become the most responsible private asset company in the Nordics. Our values Active ownership Active ownership is the basis for all our operations. We deliver innovative solutions proactively and with a hands- on approach. We create lasting value by working closely with all our stakeholders. Home of top performers Broad investor base and access to capital internationally and locally Attractive offering of innovative products and services Nordic sustainability frontrunner Vision: The most responsible Nordic private asset company Top investment performance through active value creation Dedication We are committed to entrepreneurial drive. We are hungry but humble and encourage continuous development and learning. High Ethics We believe in integrity and transparency. We are a reliable partner and responsible owner respecting all our stakeholders. We always consider the long-term impacts of our actions. 6 • CAPMAN ANNUAL REPORT 2022 • GROUP GROUP CapMan Snapshot Highlights 2022 CEO’s review Strategy CapMan’s business Sustainability People Risks CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS CAPMAN SNAPSHOT To become the most responsible CapMan is a pioneering private assets management and investment company. This frontrunner mindset is reﬂected in our way of working. Our roots are Nordic but our handprint and our networks are global. 2022 Highlights Growth fund made the largest exit in CapMan’s history In June, the CapMan Growth Equity Fund 2017 sold the semicon- ductor equipment company Picosun to US-based leading semicon- ductor equipment company Applied Materials Inc. The exit is the largest in CapMan’s operating history, measured by the portfolio company’s exit value. Picosun is a highly successful growth story which achieved global recognition and a loyal customer base during CapMan’s ownership period. The investment was very successful, and the exit took the first Growth fund into carry. CapMan Growth also sold its share in marketing service provider Avidly in the early autumn 2022. The fund invested in Avidly in 2018. CapMan issued a sustainability-linked bond CapMan issued a €40 million sustainability- linked bond as the first public company in Finland. The bond matures in 2027 with a fixed annual interest of 4.5%. The bond was issued under CapMan’s Sustainability-Linked Finance Framework. By setting up the Frame- work, CapMan strives to contribute to solving the major issues related to climate change and to establish a structure for integrating sustainability features in its financing. The Framework has been established in accord- ance with the Sustainability-Linked Bond Principles (SLBP). CapMan announced a new strategy – objective to double assets under management In September CapMan announced its new strategy and updated its long-term financial objectives. The company’s strategic objective is to double its assets under management to €10 billion over the next five years. Value creation for customers remains at the core of the strategy which in turn drives value creation for share- holders through growth and result improvement. Growth is sought from current investment areas and products enabled by strong investment returns, expanding international investment base, and M&A. In addition, CapMan’s vision is to be the most responsible Nordic private assets company. A commitment to responsible practices guides all the company’s operations, and the success of the sustainability strategy will be monitored through KPIs that follow GHG emissions, employee satisfaction and diversity of management. 7 • CAPMAN ANNUAL REPORT 2022 • GROUP GROUP CapMan Snapshot Highlights 2022 CEO’s review Strategy CapMan’s business Sustainability People Risks CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS CapMan Buyout’s newest fund, CapMan Buyout XI, made multiple investments during 2022. In May, the fund invested in Nordic lift modernisation market leader Hydroware. The company has a successful history of strong growth and is currently expanding in the large and growing traction lift market. Buyout’s objective is to expedite the company’s growth story and international expansion. In June, the fund invested in award-winning Finnish architectural firm SARC Architects. The firm is one of the leading architectural firms in Finland, specialised in demanding architectur- al projects and the development of urban en- Special Situations continued its strategy and made two new investments CapMan’s first Special Situations fund made two new investments in 2022. In September the fund invested in Niemi Services, the leading moving and logistics services provider in Finland. The company is a forerunner in sustainability; its fleet runs on 100% fossil-free fuel, and it has made investments in developing services based on circular economy. The fund’s objective is to support the company’s growth as the lead- ing moving and logistic services provider in Finland. In December, the fund invested in building technology services contractor Aro Systems. The company is one of the leading electrical and HVAC project service contractors and technical building service and maintenance providers in Finland. The building technology market is growing and undergoing rapid transition. The fund’s target is to develop the company as a frontrunner in energy efficient solutions. The €77 million Special Situations Fund has made five investments to date and continues investing. CapMan’s second Growth fund continued with the successful strategy of the first fund, making two investments in interesting growth companies. In the spring 2022, the fund invested in multi-cloud company Cloud2. Most larger companies today use a mini- mum of two public clouds and the ongoing cloud transformation trend has accelerated Cloud2’s strong growth. CapMan Growth banks on the growth of the public cloud market and Cloud2’s broad expertise. In October the fund invested in growing finan- cial management software company Fennoa, whose revenue and profitability has increased tenfold during the last few years. The growth has first and foremost been driven by the high-quality solution which the company develops continuously. The Growth team aims to continue developing the company together with its owners towards a market leader posi- tion. The €97 million 2020 vintage fund has significant dry powder remaining for new and add-on investments. CapMan’s newest Growth fund invested in multi-cloud services and financial management software vironments. Buyout aims to support SARC in further developing and growing their business towards becoming an even more prominent player in their field. Later in the summer, the fund invested in fast-growing cybersecurity and IT services provider Netox. The company still holds a relatively small market share and is in an excellent position to continue its accelerated growth. Buyout’s target is to develop the company’s ways of working to enable future growth. The €190 million fund continues investing. Buyout VIII exited the fund’s final portfolio company Fortaco Group. Multiple investments in Buyout’s newest fund 8 • CAPMAN ANNUAL REPORT 2022 • GROUP GROUP CapMan Snapshot Highlights 2022 CEO’s review Strategy CapMan’s business Sustainability People Risks CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS CapMan divested its subsidiary JAY Solutions CapMan Plc and minority owners of JAY have sold JAY Solutions Oy to Swedish Bas Invest Ab and JAY’s management. In 2020, JAY’s busi- ness was separated from the wealth advisory business in order to develop JAY from a wealth advisory support function into an independent provider of analytics and reporting services. JAY had 20 employees at the end of 2022 and a turnover of MEUR 2.1. The turnover has grown more than 35% p.a. since 2019. The transaction closed in February 2023. CapMan Infra established its second fund investing in the energy, transportation and digital communications infrastructure with a core/core+ focus and €400 million target size. The fund made its first investment in solar power developer Skarta Energy, aiming to transform it into an independent power producer. The development of solar energy supports the green transition, while improv- ing energy security in the Nordic countries. Skarta Energy will initially focus on solar power initiatives in Finland and its’ strategy is to build powerplants and become an independent power producer. Infra raised its GRESB evaluation score – achieved a four-star rating CapMan Infra received four stars in GRESB’s (Global Real Estate Sustainability Benchmark) annual ESG assessment of infrastruc- ture funds. CapMan Nordic Infrastructure I participated in the GRESB assessment for the second year in a row and reached sixth place among European benchmarks, advancing seven places from last year. GRESB assesses and compares the ESG performance of real assets globally and has become the go-to benchmark for asset managers and investors when it comes to reviewing ESG performance of different funds and companies. In October, CapMan Infra made the first exit from its first fund as it sold its share of Norled to its partner CBRE Investment Management. The exit was the fund’s first. Norled is one of Norway’s four leading marine transportation companies. The company is a leader in innova- tive and environmentally friendly transportation solutions and has invested significantly in new types of vessels and eco-friendly technology. CapMan Infra invested in the company in 2019 and during the fund’s ownership period, Cap- Man has built Norled into a successful com- pany by strengthening the management team, organisation, and tendering capabilities, while investing significantly into decarbonisation of the fleet. Norled’s CO2 emissions decreased by 30% from 2019 to 2021. €67.5 million CAPMAN TURNOVER 2022 (2021: €52.8 million) €55.7 million CAPMAN COMPARABLE OPERATING PROFIT 2022 (2021: €44.6 million) Infra continued investing in renewable energy, exited Norled 9 • CAPMAN ANNUAL REPORT 2022 • GROUP GROUP CapMan Snapshot Highlights 2022 CEO’s review Strategy CapMan’s business Sustainability People Risks CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS Real Estate’s value-add funds made several investments and exits 2022 was an active year in CapMan’s value- add real estate funds. Over the year the funds invested in several properties throughout the Nordics, performed exits and continued the implementation of their real estate development strategy. In spring 2022 the CapMan Nordic Real Estate I fund moved into carry as it exited Heron City, a shopping centre located in Stockholm. CapMan invested in the property in 2016 as the main owner. During its ownership period the fund made significant investments in property improvements, of which many increased the property’s energy efficiency, decreasing its annual energy usage by around 3 GWh. During 2022 the fund also exited Denmark’s only outlet village Ringsted Outlet. CapMan Nordic Real Estate II fund sold the Lybeck office building in Södra Värtan, Stock- holm and an attractive high-street retail and office property in central Oslo, which the fund transformed into a core asset with long stable income during its ownership period. Further, following comprehensive refurbish- ments, an iconic 140-year-old storage and brewery facility in the Carlsberg district of Copenhagen is transformed into a high- quality office property. CapMan leased the space to Boston Consulting Group and sold the building to German family-owned investment company, THI Investments. The CapMan Nordic Real Estate III fund, which is in its placement phase, made four investments in 2022. The fund acquired a portfolio of four office properties in Helsinki. The properties have unbeatable public trans- port connections. CapMan aims to modernise the spaces and improve the energy efficiency of the assets. In June, the fund acquired an airside logistics and last mile asset at Turku Airport. The fund invested in its first EU Taxonomy aligned project, which consists of building two residential apartment buildings in Turku, Finland. The fund invested in a land- mark hotel and office property located in the Royal National City Park in Solna, Sweden. The Residential fund becomes CapMan’s largest In June, the CapMan Residential fund reached €816 million and became CapMan’s largest fund. The fund made its first Swedish investment through its acquisition of a forward funding project in Örebro. The project includes 139 apartments scheduled for completion by the end of 2024. The project has high sustainability ambitions and a clear green profile, which includes on-site solar col- lector systems and rainwater collection areas for re-cycling rainwater within the local green areas. The project will pursue “Miljöbyggnad” green building certification at Silver level. The fund also participated in the GRESB Real Estate Assessment for the first time this year and was awarded three stars, which is an excellent result for a first-year participant. In January, the CapMan Nordic Property Income fund (non-UCITS) invested in a ware- house asset close to Gothenburg in Sweden and at the end of the year in a light industrial property in Brabrand, in the Aarhus munici- pality in Denmark. Both properties are stra- tegically excellent additions to the fund. The warehouse asset in Gothenburg is excellent from a last-mile logistics point of view and the Brabrand asset which is anchored by a mu- nicipal tenant on a long-term lease is ideally positioned to benefit from the rising demand of light industrial properties in the area. CapMan Wealth Services developed its Manager Selection offerings and made commitments to the CWS Investment Partners -programs During 2022, CapMan Wealth Services devel- oped its Manager Selection offering both on the public and private side, and thoroughly allocated its first CWS Investment Partners CWSIP -programme fund. Fundraising for the second fund was also initiated and the first investment commitments were made by the end of 2022. The CWSIP-programme invests in sought after US mid-market funds, along- side AlpInvest, a leading global private equity asset manager. By the end of 2022, the CW- SIP-programme has raised in total around €140 million. On the public equity side, there was strong demand for allocation and sustainability mandates and around €100 million was raised for the various public market-focused wealth services mandates during 2022. An iconic 140-year-old building in the Carlsberg district of Copenhagen which is being refurbished and transformed into a high-quality office property, was sold in August 2022. 10 • CAPMAN ANNUAL REPORT 2022 • GROUP GROUP CapMan Snapshot Highlights 2022 CEO’s review Strategy CapMan’s business Sustainability People Risks CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS CEO’S REVIEW Record year – our sustainability- focused strategy generates results 2022 was an exceptional year. A war in Europe, an energy crisis, the aftermath of the pandemic, rising interest rates and infla- tion impacted investment decisions, return expectations, the development of portfolio companies and assets, and the execution of projects in a complex manner, while mak- ing our operating environment challenging and difficult to predict. That said, we have successfully navigated the gusts and currents, avoided sharp rocks and arrived safely at new harbours following appropriate strategic decisions. CapMan’s result was excellent in 2022. Our turnover grew 28 per cent to €68 million and comparable operating profit 25 per cent to €56 million. The comparable earnings per share was 26 cents. This is a formidable accomplishment in uncertain conditions. Successful fundraising and continuously growing proﬁtability We succeeded with our fundraising in a chal- lenging market. Our assets under manage- ment were approx. €5 billion at the end of CapMan’s result for 2022 was the strongest over the company’s operating history. I am especially proud, that the result was made in an exceptionally difﬁcult operating environment. This demonstrates that our strategy has focused on our strengths. The building blocks of the unlisted market remain on a steady foundation. 2022 and we raised more than €650 million in new capital during the year. Increasing the share of international investors is a corner- stone of our fundraising strategy. This group of investors is especially interested in our real estate and infrastructure focused strategies. Investors coming from outside the Nordic countries account for approx. 55 per cent of our assets under management. This share has increased significantly over the past five years from approx. 10 per cent. Simultaneously, the number of smaller local investors has increased. We have a significant amount of capital to deploy, so-called dry powder, at our dispos- al. Many funds raised as of late are open to allocate capital to new opportunities and the prevailing business environment allows for making investments with a lasting impact. Management fees paid by funds and fees from services are a key component of CapMan’s earnings and are mainly directed by grow- ing assets under management. Our Service business has also continued developing well last year. The turnover of procurement service CaPS grew almost 30 per cent and the com- pany is very profitable. Fee-based profitability continued on its growth trajectory spanning several years and was at a record level at the end of 2022. We focus on the long-term growth of fee profitability and expect this development to continue also this year. Value creation in the portfolio as a driver for exits and carry Over the last year, we have realised value in our funds by selling several companies. We made our largest exit based on enterprise value at exit as our first Growth fund sold Picosun to the U.S. based Applied Materials Inc. The exit took the fund to carry and made it one of the best performing in our operating history. 11 • CAPMAN ANNUAL REPORT 2022 • GROUP GROUP CapMan Snapshot Highlights 2022 CEO’s review Strategy CapMan’s business Sustainability People Risks CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS Our first Nordic value-add real estate fund also started generating carried interest in 2022. We receive carried interest from each new exit from a fund in carry and the share of this income stream has increased significantly compared to the past few years. In addition to funds already in carry, CapMan manages several funds that are approaching carry. The foundation for good exits is in successful value creation, which is demonstrated among others by the fair value changes of investments made from the balance sheet mainly into our own funds. In 2022, the fair value of our investments increased 25 per cent, which is very commendable given that the OMX Nordic Mid Cap index, which represents the devel- opment of the Nordic mid-cap stock market, decreased 27 per cent over the same period. A vision founded in sustainability CapMan’s vision is to be the most sustain- able private asset company in the Nordics. This vision includes our own activities as well as those of our funds under management, through which our impact has a wide reach through 40 portfolio companies and over 200 properties. As a Nordic company we can be a frontrunner globally. How do we execute this vision? Climate change and its prevention is perhaps one of the most critical challenges facing human- kind. Through our own activities, we want to impact solutions that mitigate climate change. In the beginning of 2022 we com- mitted to the Science Based Targets initiative and are now establishing a roadmap to reach carbon neutrality. As an active owner, CapMan can promote the green transition and the wellbeing of employees and tenants in our portfolio companies and properties. On the social side, we are committed to main- taining a high level of employee satisfaction and to promote a diverse and inclusive work- place. We achieved an eNPS score of 58 in our latest employee satisfaction survey, which signifies that our employees are very happy to recommend CapMan as an employer. We have included steps in our recruitment processes to better take into account the diversity of candidates and want to be an attractive em- ployer also in the future. The growth prospects for the private asset industry support CapMan’s growth strategy In 2022, we reached many of the objectives that we had established over the previous strategy period. We grew assets under management, expanded our investor base and brought several new products to market. Over the past five years, we have established several new strategies that invest in the unlist- ed market and almost ten new funds. Following these accomplishments, we launched our new strategy in autumn 2022. The cornerstones of this strategy are based on a fast-changing society, the demands of our customers and our own strengths. As an active investor, CapMan promotes the green transition in our portfolio companies and properties. CapMan’s strategic objective is to double assets under management to €10 billion over the next five years. This ambitious objective is made possible by several years of work to expand the product portfolio and grow the customer base. Our objectives are based on our own compet- itive advantages and still positive long-term market outlook. Despite slowing growth and general economic distress, the trends that support the private assets market remain strong over the long term. Based on recent research by Preqin, the global growth of unlisted assets under management is set to slow compared to the last three years, but still remain at a strong 12 per cent p.a. over the next five years. Investments in growth and internationalisation position us to meet our long-term objectives Following the new strategy, we also updated our long-term financial objectives. The com- bined growth objective for the Management Company and the Service business before car- ried interest income was raised to 15 per cent p.a. on average from the previous 10 per cent p.a. Our equity ratio target is more than 50 per cent compared to more than 60 per cent previously. The objective for return on equity is more than 20 per cent p.a. on average and remained unchanged. CapMan’s objective to pay an annually increasing dividend to its shareholders also remained unchanged. These objectives reflect our long-term outlook as well as a step-up in our ambition level. We achieved all targets at the end of 2022. This is my last review as CEO of CapMan. In February 2023, I announced my transition to CapMan’s Board of Dircetors as executive Chair of the Board, conditional on the decision of the Annual General Meeting. I am proud of the current state of our company and of everything that we have accomplished together. Results have grown since 2016 and we have raised our dividend for 10 consecutive years. The total return of CapMan’s share has been approx. 20 per cent p.a. over the past six years. Over the next few years, we continue to focus on growth and on broadening and internation- alising our business in accordance with the strategy defined in 2022. At the core remains active and responsible value creation work for the enrichment of our customers, employees, shareholders and society. Joakim Frimodig CEO 12 • CAPMAN ANNUAL REPORT 2022 • GROUP GROUP CapMan Snapshot Highlights 2022 CEO’s review Strategy CapMan’s business Sustainability People Risks CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS STRATEGY A new strategy and its drivers 1. Deliver top investment performance through active value creation 2. Scale up existing strategies and products 3. Integrate ESG as a core theme in all business activities 4. Develop CapMan as the home of top performers and attract the best talent in the industry 5. Drive shareholder value through a combination of growth and improved earnings quality 6. Explore new products and M&A in order to accelerate strategic agenda Ambition to double AUM to €10 billion in 5 years CapMan launched a new strategy in 2022. Our vision is to be the most responsible private asset company in the Nordics. Our strategic objective is to double our assets under management (AUM) to €10 billion in ﬁve years. Our new strategy is built around the following six focus areas, which will contribute towards the objective: 1. Deliver top investment performance through active value creation. Attractive returns create satisfied customers and are a foundation for the continuation of our business. 2. Scale up existing strategies and products. In addition to closed-end funds we have significantly increased the share of open-ended funds and mandate based solutions in our product portfolio. We have also introduced new strategies investing in the unlisted market alongside more traditional Buyout and real estate investing. 3. Integrate ESG as a core theme in all business activities. In order to create long-term value, we take sustainability and the requirements of various stakeholders into account in our business. 4. Develop CapMan as the home of top perform- ers and attract the best talent in the industry. Professionals with vision are the foundation of our business and we invest in employee well-being and the development of expertise. 5. Drive shareholder value through a combination of growth and improved earnings quality. By growing our business profitably, we look after the needs of our shareholders. 6. Explore new products and M&A in order to accelerate strategic agenda. We are well- positioned to accelerate our growth also through strategic transactions. STRATEGIC FOCUS AREAS AND OBJECTIVES Through these focus areas we create active value for our fund investors and our share- holders. A growing unlisted market that continues to interest an international investor base supports the execution of our strategy. 13 • CAPMAN ANNUAL REPORT 2022 • GROUP GROUP CapMan Snapshot Highlights 2022 CEO’s review Strategy CapMan’s business Sustainability People Risks CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23E 24E 25E 26E TYÖNUMERO 5 PRIVATE EQUITY & CREDIT €2.7bn 2016 €5.0bn NOW NEW PRODUCTS AND M&A €10bn TARGET Phase 1: Phase 2: Phase 3: Phase 4: Phase 5: Founding, Pioneer since 1989 Expansion into new markets Post-financial crisis era Re-focus on growth Acceleration and scale-up 10,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 € million REAL ESTATE DEVELOPMENT OF EXISTING STRATEGIES & PRODUCTS INFRA AND OTHER STRATEGY An ambitious target to double AUM Over the past six years, we have successfully grown our assets under management especially from large international institutions as well as smaller local institutions. The growth in assets under management is based on scaling up existing strategies and products as well as the introduction of potential new products and M&A. 14 • CAPMAN ANNUAL REPORT 2022 • GROUP GROUP CapMan Snapshot Highlights 2022 CEO’s review Strategy CapMan’s business Sustainability People Risks CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS TYÖNUMERO 4 2017 2022 Earnings mix  Carry  Fee income  Investment business 11% 29% 17% 15% 72% 56% TYÖNUMERO 3 2017 2022 10% 55% Broadened investor base: AUM by geography  Nordic  International 90% 45%  2017  2022 TYÖNUMERO 1TYÖNUMERO 1 Turnover, M€ EBIT, M€ +133% AUM, Bn€ Growth 68 +79% 68 31 56 24 5.0 2.8 +117% STRATEGIC OBJECTIVES AND MILESTONES 2017–2022 CapMan’s business has undergone a fundamental transition CapMan’s previous strategy was launched in 2018 with an objective to return CapMan to profitable growth. Over the past five years, CapMan has almost doubled assets under manage- ment and more than doubled our turn- over and comparable operating profit. The share of international investors has also increased. In addition to closed- end funds, we also manage more open-ended funds and mandates. As a result of the growth strategy and new products, the earnings mix has become more attractive. The consistent growth in fee-based profits has resulted in more predictable operating profits. Investment income was also very strong in 2022. The past five years have included a pan- demic, a war on European soil and an unstable economic outlook. In light of these developments, the achievements during this past strategy period can be considered very successful. TYÖNUMERO 2 2017 20222022 4% 51% New products & investor demand: AUM by product type  Closed-end funds  Open ended 96% 49% * Comparable. 15 • CAPMAN ANNUAL REPORT 2022 • GROUP GROUP CapMan Snapshot Highlights 2022 CEO’s review Strategy CapMan’s business Sustainability People Risks CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS TYÖNUMERO 17 2018 2019 2020 20222021 Comparable earnings/share and dividend/share, € 4  Comparable earnings/share  Dividend/share 0.25 0.25 0.20 0.15 0.10 0.05 0.00 0.26 0.05 0.17 0.12 0.12 0.13 0.21 0.03 0.15 0.14 The AGM approved a distribution of 17 cents per share year 2022 2017–2022 CAGR: 17% 2017–2022 AVERAGE: 17%  2017–2022 AVERAGE: 56%  STRATEGY Long-term ﬁnancial objectives achieved Growth of the Management Company and Services business 1 Average annual growth objective >15% 2022: 16% Return on equity Average annual growth objective >20% 2022: 32% Equity ratio Average annual growth objective >50% 31.12.2022: 53% Dividend distribution objective The company’s objective is to pay an annually increasing dividend to its shareholders. Distribution has grown every year since 2012 60 50 40 30 20 10 0 2018 2019 2020 20222021 TYÖNUMERO 19 Equity ratio, % 52.7 58.7 59.9 53.3 51.9 35 30 25 20 15 10 5 0 TYÖNUMERO 18 2018 2019 2020 20222021 Comparable ROI and ROE, %  Comparable Return on Equity (ROE)  Comparable Return on Investment (ROI) 32.4 6.8 24.4 6.7 13.5 16.0 21.2 29.4 6.3 5.2 60 50 40 30 20 10 0 2018 2019 2020 20222021 TYÖNUMERO 20 Fees from Management Company business and Services, M€ 57.4 31.9 41.6 49.4 41.4 4 As per the proposal of the Board of Directors to the 2023 AGM. 3 Average calculated as average of annual ratios. 2 Excluding items affecting comparability, average calculated as average return divided by average equity. 1 Management Company and Service business excluding carried interest income and items affecting comparability. 16 • CAPMAN ANNUAL REPORT 2022 • GROUP GROUP CapMan Snapshot Highlights 2022 CEO’s review Strategy CapMan’s business Sustainability People Risks CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS Ownership in CapMan Plc Limited partnership in funds Shareholders per type BUSINESS Organisation and stakeholders CapMan Group: 190 employees 6 ofﬁces SHAREHOLDERS (~30,000) LIMITED PARTNERS (~300 fund investors) Funds Fair value changes & returns Fund management responsibility Management fees Carried interest Services Service fees Procurement service members A total of 14,700 employees in 40 portfolio companies A total of 1,255,000 m 2 in lettable area 22 funds Capital calls Returns LPs per type Direct stake in funds through balance sheet CapMan Plc Group functions Balance Sheet Service businesses Investment operations Fund management Other management CapMan Group consists of the parent company CapMan Plc and its subsidiaries and majority-owned companies. These subsidiaries are management and/or advisory companies for funds that invest in private assets, or investment companies, among others. CapMan raises capital for its funds under management primarily from institutional investors and the capital is invested according to the fund strategy in Nordic companies, real estate and infrastructure. The portfolio companies and assets are managed and developed by CapMan and sold typically in 4-6 years to an industrial buyer or another investor, or they are floated on a public exchange. In addition, CapMan’s organisation includes a company offering procurement services for Finnish and Swedish companies, as well as corporate functions to support the fund advisory, fund management and other activities. The company’s own procurement consists mainly of services and IT systems.  Pension funds 43%  Fund of funds 20%  Insurance companies 5%  Corporate investors 12%  Government agencies 5%  CapMan 3%  Trusts 5%  Family offices & private individuals 1%  Others 6%  Finnish Private Individuals 53%  Other 29%  Finnish Institutional Owners 14%  Foreign Institutional Owners 2%  Nominee-registered 2% • Owners – Shareholders of CapMan Plc • Employees – CapMan’s current and potential employees • LP:s – Investors in funds managed by CapMan • Banks – Providers of financing for CapMan Group, portfolio companies and real estate • Portfolio companies – Current and potential portfolio companies, their owners, employees, customers, supply chains and other stake- holders • Tenants – Current and potential tenants and users of real estate • Others – Media, industry associations etc. CAPMAN’S KEY STAKEHOLDERS 17 • CAPMAN ANNUAL REPORT 2022 • GROUP GROUP CapMan Snapshot Highlights 2022 CEO’s review Strategy CapMan’s business Sustainability People Risks CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS BUSINESS CapMan’s investment and service teams REAL ESTATE CapMan Real Estate executes both value add and stable income-focused investment strategies across all major property sectors in Sweden, Finland, Denmark and Norway. The team’s active value-add funds seek to acquire transitional properties in the most liquid Nordic markets where an asset can be en- hanced by active rental and cost management, investments in redevelopment, change of use, or repositioning. The funds and mandates targeting stable income generation seek well-located, high-quality investments that generate attractive risk-adjusted returns for our investors across market cycles. CapMan’s Nordic Real Estate operations include over 60 committed real estate investment professionals. CapMan’s real estate funds hold approx. 55 assets comprising 224 individual properties. Team size: 63 Team location: Finland, Sweden, Denmark, Norway, United Kingdom Investment focus: Finland, Sweden, Denmark, Norway Value-add strategy • Active funds: 3 • Raised: €1,262 million Income-focused strategies • Active funds and mandates: 5 • Raised: €1,840 million * Including hotel, logistics and residential real estate funds. INFRASTRUCTURE CapMan Infra invests in energy, trans- portation and digital infrastructure assets generating predictable cash flows. CapMan Infra is a dedicated and active owner seeking to drive operational improvements and offers tailored solutions to local infrastructure asset owners and partners in the Nordic countries. The team of twelve infrastruc- ture professionals is based in Helsinki and Stockholm. CapMan Infra has two funds, one established in 2018 and one in 2022. In addition to the fund, the team also manages two investment mandates. Team size: 12 Team location: Finland, Sweden Investment focus: Finland, Sweden, Denmark, Norway Funds • Active funds: 2 • Raised: €379 million Mandates • Mandates: 2 • Raised: €136 million CapMan manages funds investing in private assets across investment areas. 18 • CAPMAN ANNUAL REPORT 2022 • GROUP GROUP CapMan Snapshot Highlights 2022 CEO’s review Strategy CapMan’s business Sustainability People Risks CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS CapMan Buyout makes majority invest- ments in mid-sized unlisted companies in the Nordic countries. The team is based in Helsinki and Stockholm. The team manages Buyout funds and looks for interesting growth stories, niche market leaders, winning company cultures and pas- sionate entrepreneurs. Buyout is a generalist investor–the prospects to grow into a best- in-class company is the differentiating factor instead of industry or sector. CapMan Buyout funds hold twelve portfolio companies. Team size: 12 Team location: Finland, Sweden Investment focus: Finland, Sweden Active funds: 3 Raised: €729 million CapMan Growth makes significant minority investments in Nordic growth stage companies that have ambitious growth and expansion goals. As active investors, the team works closely with management and owners to help realize their growth ambitions. Through its funds, CapMan Growth can provide capital for recruiting, M&A, internationalisation, and other growth initiatives. In addition, the funds can acquire shares from owners helping realize some value from their business while maintaining control. Team size: 7 Team location: Finland, Sweden Investment focus: Finland Active funds: 2 Raised: €183 million CapMan Special Situations pursues event-driven invest- ment situations by providing flexible capi- tal solutions and strong operational capability to deliver step-change performance improve- ments. The team specializes in demanding strategic and operational turnarounds, finan- cial restructurings, and corporate carve-outs in which executional certainty can be assured with substantial value creation and controlled risks. The focus is on mid-sized private and public companies that are headquartered in Finland. CapMan Special Situations is Cap- Man’s newest investment strategy that was launched in 2020. Team size: 5 Team location: Finland Investment focus: Finland Active funds: 1 Raised: €77 million CapMan’s Credit’s investment activities are managed by Nest Capital, an independ- ent partnership of CapMan Group. Nest Capital provides private debt, mainly in the form of senior and sub- ordinated loans, to small and medium-sized companies across the Nordic countries. Over the years, Nest Capital has raised three funds with total commitments of more than €300 million. Team size: 2 Team location: Sweden, Finland Investment focus: Finland, Sweden, Denmark, Norway Active funds: 2 Raised: €209 million PRIVATE EQUITY AND CREDIT 19 • CAPMAN ANNUAL REPORT 2022 • GROUP GROUP CapMan Snapshot Highlights 2022 CEO’s review Strategy CapMan’s business Sustainability People Risks CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS WEALTH MANAGEMENT CapMan Wealth Services (CWS) offers comprehensive wealth management services for public and private markets, providing investors unparalleled access to the best solutions through their independent Manager Selection process. The team serves mainly family offices, institutional investors, and high net worth individuals. In 2021, CWS launched its first programme that invests in private equity, CWS Investment Partners (CWSIP). Altogether €140M have been raised to the programme. Team size: 12 Team location: Finland, Sweden AUM: €597 million SERVICE BUSINESS CaPS (CapMan Procurement Services) is a service driving down costs on non-strategic products and services for our member companies in Finland, Sweden, and the Baltics. The service tenders out the procurement of its member com- panies achieving significant savings and benefits. Each ye ar, over 300 member companies use CaPS procurement services. In addition to volume deals, CaPS services include a digital employee benefit scheme and an ESG-reporting system. Team size: 9 Team location: Finland, Sweden, the Baltics CapMan serves investors that seek a comprehensive approach to wealth management as well as growing companies that want to make their procurement more effective. 20 • CAPMAN ANNUAL REPORT 2022 • GROUP GROUP CapMan Snapshot Highlights 2022 CEO’s review Strategy CapMan’s business Sustainability People Risks CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS GROUP FUNCTIONS: BUSINESS Overview of business areas and functions Management Company business Service business * Investment business PRIVATE EQUITY JA CREDIT REAL ESTATE INFRA STRUCTURE WEALTH SERVICES GROUP MANAGEMENT FINANCE LEGAL & COMPLIANCEFUND OPERATIONS RISK & VALUATION ESG FUND IR HR COMMUNICATIONS IT * In 2022, CapMan’s Service business included the reporting and analytics service JAY Solutions. The subsidiary and the business were sold on 1 February 2023. CAPMAN WEALTH SERVICES Wealth advisory service FUNDS Nordic mid- market infrastructure investor MANDATES Tailored structures and individual assets CAPS Procurement service RESIDENTIAL Stable rental returns from Nordic growth centres SOCIAL Stable returns from social real estate INCOME Light industrial and other commercial properties with attractive income profile HOTELS Stable long-term income from Nordic hotels with strong operators SPECIAL SITUATIONS Investor pursuing event-driven investment situations CREDIT Mezzanine in the Nordics BUYOUT Nordic pioneer in majority investments GROWTH Significant minority investor INVESTMENTS Investments from balance sheet VALUE ADD Active value-add manager 21 • CAPMAN ANNUAL REPORT 2022 • GROUP GROUP CapMan Snapshot Highlights 2022 CEO’s review Strategy CapMan’s business Sustainability People Risks CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS SUSTAINABILITY A sustainability strategy based on materiality At CapMan, we strive to be a positive inﬂuence in society and a role model for our investors, portfolio companies and collaboration partners. We are guided by our mission to build value for the enrichment of society. During 2022, we signiﬁcantly strengthened our sustainability organisation, capabilities and expertise on the road towards becoming the most responsible private asset company in the Nordics. Sustainability management & governance By including sustainability as one dimension for value creation and risk mitigation, CapMan can create sustainable value for its stakeholders while driving change through active ownership. CapMan’s Board of Directors has the ultimate responsibility for the strategic development of CapMan’s sustainability performance. The CEO and the rest of the Management Group keep the Board informed of CapMan’s operations, including ESG issues and developments which can be of significance to CapMan’s shareholders. Given CapMan’s integrated approach to sustainability, the internal responsibility for sustainability topics is embedded with business decisions overall. The responsi- bility for integrating sustainability with decision-making lies with the Management Group and the knowhow of CapMan’s Management Group is evolving. CapMan’s ESG Director drives the overall integration and implementation of ESG matters at CapMan. Further, the ESG team has dedicated professionals that are responsible for ESG implementation at Real Estate, Private Equity and Infrastructure strategy levels. The ESG Director leads a dedicated ESG Working Group. This Group includes members from the investment teams as well as Our vision is to become the most responsible private assets company in the Nordics all relevant Platform teams, who provide expertise from their respective investment areas and platform functions and also work to develop sustainability capacity within their teams. International initiatives and commitments CapMan respects, protects and promotes internationally proclaimed human rights in its operations. CapMan upholds the Universal Declaration of Human Rights (UDHR), UN Guiding Principles on Business and Human Rights (UNGP), International Labour Organisation’s (ILO) Declaration on Fundamental Principles and Rights at work, as well the Organisation for Economic Co-operation and Development’s (OECD) Guidelines for Multinational Enterprises. CapMan is a member of the UN Global Compact (UNGC) and has been a signatory to the Principles of Responsible Investments (PRI) since 2012. The entire organisation is guided by these international standards to assess its operations, including our engagement with portfolio companies, investors and other stakeholders. CapMan is a member of Finsif and Swesif, network organisations that promote sustainable invest- ment in Finland and Sweden, respectively. 22 • CAPMAN ANNUAL REPORT 2022 • GROUP GROUP CapMan Snapshot Highlights 2022 CEO’s review Strategy CapMan’s business Sustainability People Risks CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS Climate-speciﬁc initiatives CapMan has committed to the Science Based Targets initiative, using the Private Equity Sector Science-Based Targets Guidance, which includes investments in private equity, infrastructure and real estate. CapMan is in the process of establishing a net- zero roadmap including a target year for when CapMan will be net- zero. To this end, CapMan is setting short-term emission reduction targets by 2027 and 2032 on a 2021 baseline. These developments are in line with CapMan’s value of being an active owner that drives the green transition throughout the portfolio. CapMan has committed to the initiative Climate International, which is supported by the PRI. As part of the initiative, CapMan will contribute to the objective of the Paris Agreement to limit global warming to well-below two degrees Celsius by integrating climate change analysis into investment processes. As part of the initiative, CapMan actively engages with portfolio companies to reduce their greenhouse gas emissions, contrib- uting to an overall improvement in sustainability performance. This is done by identifying companies and assets where climate change poses a material risk and measuring their carbon footprint. CapMan further engages with management teams of portfolio companies to develop emissions reduction and climate change action plans. Social initiatives CapMan is a member of Level 20, a network that promotes di- versity and inclusion within the private equity industry. CapMan promotes the objectives of Level 20 through its recruitment and promotion practices as well as through participation in events. Materiality analysis In order to focus on the topics where CapMan can have the biggest impact, CapMan builds its sustainability agenda around a materiality framework. CapMan assesses its business areas, engages with stakeholders and monitors global topics and policy developments to identify key sustainability topics for further follow-up and disclosure. Material sustainability topics are those factors that have a direct or indirect impact on CapMan’s ability to create, preserve or erode economic, environmental and social value for the company, its stakeholders and society at large. CapMan’s materiality analysis was conducted in 2022 based on stakeholder interviews, including interviews with investors and board members, internal surveys, review of industry standards and best-practices, and the assess- ment of CapMan’s role in the value chain and overall society. Seven topics were identified as material for CapMan Group. Diversity and equity are seen as the most material topics, followed by governance in investment practices, board diversity and business ethics and integrity. the impact of travel habits on climate change is a material environmental topic. The resulting materiality map forms CapMan’s current priorities and ambitions for sustainability. CapMan sets annual and long- term targets that follow these materiality topics. The materiality assessment is revisited on an annual basis. CapMan also extends the materiality analysis to its investments and takes into account the specific characteristics of each investment area. Material topics for CapMan Group Environmental • Climate change – The effect of travel habits and energy use and efficiency on emissions Social • Diversity and equity – Diversity and equity among CapMan employees, as well as non-discrimination at the workplace • Attractive workplace – Employee wellbeing, talent development and retention and performance-based remuneration Governance • Good governance in investment practices – Active ownership • Board diversity • Business ethics and integrity – Compliance with laws and regulations and codified ethical business practices that are rooted in CapMan’s values • Tax responsibility – The impact of tax revenue and transparency of taxation The material topics serve as the basis for CapMan’s ESG strategy, including ESG processes and priorities. Themes for CapMan’s ESG work: E: Climate conscious and resource efficient operations S: Meaningful work in an inclusive workplace G: Accountability & executive level diversity 23 • CAPMAN ANNUAL REPORT 2022 • GROUP GROUP CapMan Snapshot Highlights 2022 CEO’s review Strategy CapMan’s business Sustainability People Risks CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS External and internal factors provide inputs for materiality analysis Sifniﬁcant ESG achievements in 2022 CapMan has made signficant strides in the execution of its ESG strategy. In 2022, CapMan has established an ESG organisation and created a stable foundation on which to build its ambitious ESG vision. The achievements in 2022 work to establish a solid roadmap for CapMan’s continued ESG efforts. Resources CapMan has worked to increase and institutionalise ESG know- how at Group level as well as in its investment teams. At the end of 2022, three employees were dedicated to ESG management full time. In addition, both investment professionals and Platform employees participate in ESG-related projects and functions. Policies, guides and tools CapMan updated its ESG Investment Policy to describe CapMan’s approach and commitment towards the integration of ESG within CapMan’s investments. CapMan formalised its Restriction list to identify companies and activities, in which investment is restricted due to the adverse characteristics of such activities. CapMan developed a comprehensive ESG due diligence and value creation tool to be used for assessing ESG risks and value creation opportunities from a materiality perspective through- out the investment process. The tool is used by the Buyout, Growth, Special Situations and Infra teams. CapMan established a Policy library for portfolio companies that cover all relevant social and governance topics to use as guidance for establishing relevant and sufficient policies in their own operations. Training & upskilling CapMan has held 39 internal training sessions on ESG topics, such as Science Based Targets and ESG value creation oppor- tunities, throughout the year to increase in-house expertise and awareness. CapMan also held training sessions for portfolio companies. Persons involved in ESG policy, investment decisions and reporting have also participated in industry specific external ESG training in order to address specific ESG topics. CapMan works together with consultants and service providers to improve its understanding of the application of ESG topics and material- ity. Further, CapMan has served as an expert speaker at industry events and participated in seminars and conferences on sustain- able investment as well as updates from regulators, which has provided valuable insights, as well as networking and information sharing opportunities with industry peers. Ratings and achievements PRI ratings for 2021 were published in 2022 and CapMan scored well also within the renewed reporting framework: • Investment & Stewardship Policy 4/5 stars (median 3/5 stars) • Private Equity 4/5 stars (median 3/5 stars) • Real Estate 4/5 stars (median 3/5 stars) • Infrastructure 5/5 stars (median 3/5 stars) The full assessment is available on CapMan’s website. CapMan has systematically worked to complete and improve scoring in the GRESB (Global Real Estate Sustainability Bench- mark) assessment covering real assets globally. In 2022, CapMan received the following scores (based on assessment of 2021 data): • CapMan Nordic Infrastructure I Fund 4/5 stars, 6th place among European benchmarks. • CapMan Real Estate Residential Fund 3/5 stars • CapMan Hotels II Fund 2/5 stars • CapMan Nordic Property Income Fund 2/5 stars CapMan established Group-level ESG targets for 2022 for the first time as described in the following table. VISION: The most responsible private asset company in the Nordics General megatrends Company activities Values Stakeholder priorities Targets specify definitions of each theme and provide a measurement for a successful outcome Based on the outcome of the materiality analysis three to five themes identified Materiality analysis forms the basis for our sustainability work and priorities Development of the sustainability strategy THEMES: E: Climate conscious and resource efficient operations S: Meaningful work in an inclusive workplace G: Accountability & executive level diversity MATERIALITY: Climate change I Diversity & Equity I Attractive workplace I Good governance I Board diversity I Business ethics I Tax responsibility TARGETS 24 • CAPMAN ANNUAL REPORT 2022 • GROUP GROUP CapMan Snapshot Highlights 2022 CEO’s review Strategy CapMan’s business Sustainability People Risks CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS CapMan will provide further sustainability disclosures regarding the ESG development of the Group as well as the investments of its funds under management in its sustainability report to be published in the Spring 2023. The report will also include a review of sustainability developments in portfolio companies and of assets. SUSTAINABILITY CapMan Group ESG targets 2022–2023 Theme Target 2022 Achieved Target 2023 Measuring achievement Long-term target Climate conscious and resource efficient operations Commit to 1.5-degree science-based target Follow with a net-zero commitment Commitment to SBTi in February 2022 1.5 degree aligned emission reduction targets submitted in November 2022 Establish a roadmap for reaching carbon neutrality at CapMan Define the year CapMan will be Net-Zero Roadmap for CapMan including investments finalised Year when CapMan will be net zero decided Net-zero economy Meaningful work in an inclusive workplace Employee satisfaction eNPS survey above 40 Create policy & process or diversity & Inclusion Employee satisfaction eNPS at 58 Diversity, Equity and Inclusion programme – policies established and process started Sustain employee satisfaction high & further increase inclusion across CapMan and so as to remain an attractive employer Employee satisfaction eNPS above 50 Diversity, Equity and Inclusion programme implemented More diverse work forces and decision makers More meaningful jobs Accountability & Executive Level Diversity Develop employee remuneration to include ESG targets Develop a process to reach equal gender representation in the management group, at partner level and throughout the organisation ESG targets included in variable remuneration Awareness raised in the Management Group considering Diversity, Equity and Inclusion Leverage the high standards of professional con- duct by requiring the same from all CapMan suppliers Responsible supply chain management developed and implemented More diverse board representation ESG factors integrated into decision making 25 • CAPMAN ANNUAL REPORT 2022 • GROUP GROUP CapMan Snapshot Highlights 2022 CEO’s review Strategy CapMan’s business Sustainability People Risks CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS Sustainability disclosures for CapMan as an alternative investment fund manager CapMan Plc subsidiary CapMan AIFM Oy (“CapMan AIFM”), CapMan alternative investment fund manager, discloses information in accordance with the Sustainable Finance Disclosure Regulation (2019/2088) (the “SFDR”). CapMan assess the taxonomy eligibility of its Real Estate funds according to the Taxonomy Regulation (2020/852). Taxonomy alignment of Real Estate funds Transparency of sustainability risk policies CapMan AIFM integrates sustainability risks in its decision-making process, as referred to under Article 3 of the SFDR. Sustainability risk means an environmental, social or governance event or condi- tion that, if it occurs, could cause an actual or a potential material negative impact on the value of the investment. Environmental risks can relate to, among others, to climate-related risks (physical and transitional), biodiversity or pollution. Social risks can relate to for instance safety and well-being, human rights in the supply chain, and employee or tenant satisfaction or others. Governance risks can relate to for example inadequate management of ESG, management incentives, corruption, bribery, cybersecurity, or data privacy. The potential sustainability risks to which any investment is exposed may cause a negative impact on the value of investments. Before any investment decisions are made, and as part of its over- all investment analysis, CapMan will identify the material sustain- ability risks associated with the proposed investment. Investment decisions will then be made by referencing the relevant investment policies and objectives, including an action plan for mitigating any sustainability risks at asset level. Description of and policies to identify and prioritise sustainability risks are included in CapMan’s ESG Investment Policy. CapMan further restricts investments in certain sectors and activities as detailed in its Restriction list. Both documents are available online at www.capman.com/sustainability Transparency of adverse sustainability impacts CapMan AIFM considers principal adverse impacts on sustainability impacts of its investment decisions as described by Article 4 of the SFDR. Sustainability factors may impact the revenue and cost structure of target investments directly, or have external impacts, such as impact- ing the quality of life for community stakeholders or perceived value for customers. Accordingly, they also impact return on investment. CapMan strives to integrate sustainability factors with its general core business, creating a strong culture that drives sustainable practices both at CapMan and in its portfolio companies and real estate. These principal adverse impacts are identified and prioritised through CapMan’s due diligence processes, which are detailed in CapMan’s ESG Investment Policy. CapMan AIFM reviews the principal adverse impacts annually and discloses the information in its Principal Adverse Impacts Statement. For the full sustainable finance disclosure regulation statement as well as the principal adverse impacts statement, please visit www.capman.com/sustainability/sfdr-statement/ Turnover CAPEX OPEX BVK-mandate 100% 100% 100% CapMan Nordic Real Estate I 100% 100% 100% CapMan Nordic Real Estate II 97% 100% 91% CapMan Nordic Real Estate III 99% 100% 97% CapMan Nordic Property Income 100% 100% 100% Hotels II 100% 100% 100% CapMan Residential 100% 100% 100% Kokoelmakeskus 100% 100% 100% 26 • CAPMAN ANNUAL REPORT 2022 • GROUP GROUP CapMan Snapshot Highlights 2022 CEO’s review Strategy CapMan’s business Sustainability People Risks CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS One CapMan Family • We share the same values, believe in each other and set the bar high. • We foster entrepreneurial attitude with trust and flexibility. • Teamwork takes us to success. Societal impact • We get to make a difference and drive change in society. • We create sustainable long-term value. • We are a responsible employer and make sustainable choices. Career landscape • This is a home of top performers. • We work with the best people, and top companies and partners. • We get to operate, learn and grow on a wide scope. Personal drive & Remuneration • We are purpose-driven and purpose-led. • We support the growth and wellbeing of each individual. • We reward success. PEOPLE Our value-driven people strategy CapManians are characterised by their ambitious and entrepreneurial attitudes and inspired, forward-looking way of working. By aligning work with our values and providing meaningful jobs, we strive to attract and retain the best talent in the industry. Updated People Strategy In 2022, CapMan’s People Strategy was updated to align with the new business strategy. The People Strategy is one of the six strategic focus areas of the company. The basis for the strategy work was to identify the unique char- acteristics of our culture and highlight new priorities to serve business goals and the requirements of our operating environ- ment. Team leaders and employees around the organisation participated in the work. Multiple discussions and workshops resulted in a common understanding and commitment. Our goal is to develop CapMan as the home of top performers and attract the best talent in the industry. We foster a culture where high professionalism and ambition unite with low hierar- chy and fruitful collaboration with colleagues. At the core of the People Strategy is our Employee Value Proposition, defined by the four dimensions of the Strategy. CapMan endeavours to offer its employees interesting career prospects and an opportunity to influence society by working in a successful organisation where people are cared for, and where success is rewarded. CapMan People Strategy 2022 One CapMan Family Societal impact Personal drive & Remuneration Career landscape We believe that an employee experience based in inspirational and motivating work will result in enrichment of society. Thus, we have a unique opportunity as an employer to provide truly meaningful work. Diversity at CapMan CapMan aims to recruit people who combine talent, education and skills with great attitude and drive. We also believe that Diversity Equity and Inclusion (DEI) bring value to our organisa- tion in the form of diverse views and ideas, which are inextrica- bly linked to our success. CapMan is committed to promoting an equal distribution of genders across all positions and career steps in the company. This is supported by a recruitment process and a framework for promotions and internal recruitments that prioritises the experience and knowledge needed in the position as selection criteria over gender, age or other non-job-related traits. When recruiting, we aim to consider different backgrounds and strengths while challenging our unconscious biases and ideas of ideal candidates to utilise the whole competence potential. We expect understanding of DEI also from our recruitment partners and other service providers. In 2022, discussions regarding personnel diversity and creating a strategy for its 27 • CAPMAN ANNUAL REPORT 2022 • GROUP GROUP CapMan Snapshot Highlights 2022 CEO’s review Strategy CapMan’s business Sustainability People Risks CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS development took place throughout the organisation and also on Management Group level. Our goal is to continuously increase diversity, especially on a decision-making level. We have zero tolerance for harassment and bullying both at the office and at personnel and customer events. All employees must be familiar with this policy and recognize every person’s right to be treated with dignity and respect. All employees are aware of how to report suspected discrimination, bullying or harassment according to CapMan’s Fairness Procedure and Whistleblower Policy. CapMan will always investigate any com- plaint of discrimination, bullying or harassment sensitively and without prejudice. All complaints are taken seriously and must always be made in good faith. Continuous learning and development Leadership training We believe that all success is based on good leadership, and we seek to ensure that CapMan leaders have all the needed capa- bilities and competencies for responsible leadership. In 2022, CapMan arranged leadership trainings as live events and online sessions. Online events offer flexibility and reduce the need for travel. On the other hand, we appreciate the added value of face-to-face encounters. The trainings consisted mostly of group sessions focusing on leadership principles and sharing of best practices. In autumn, a two-day training event brought CapMan team leaders together to discuss the new People Strat- egy and its implementation. Manager briefs During the pandemic, we established a habit of holding regular Team Leader events, so-called Manager Briefs, by People Operations to meet colleagues, share information and catch up on current leadership topics. In 2022, altogether eight events were held. Negotiation and presentation skills During 2022, the negotiation and presentation skills training programme launched a year earlier was continued. The training is designed to develop and strengthen negotiation and selling skills and provide tools for strong presentation and commu- nication especially for investment professionals. Training programmes were organised in Helsinki and Stockholm. The trainings focused on working in small groups with a coach- ing approach to develop interaction and the culture of giving feedback. Introduction days CapMan has organised two-day introductory events for new employees for a number of years. In 2022, the Introduction Days resumed as live events in Helsinki after several years of online-only events due to restrictions caused by the pandemic. At the Introduction Days, the joiners obtain a comprehensive overview of CapMan’s business areas, culture and organisation. The event also includes team activities and a dinner. The event is held semi-annually, and in 2022 approximately 60 employees across all CapMan offices participated in the events. The events were highly appreciated especially due to the chance to meet colleagues around the organisation. Fostering togetherness Multiple internal personnel events were organized at the CapMan offices in 2022 to create possibilities for networking in an infor- mal atmosphere. After the pandemic, regular breakfast events were a popular option to meet with colleagues. In November, the whole company gathered in Stockholm to spend a day together at the annual CapMan Day. Before the Holidays, the children of our employees were invited to the Helsinki office to enjoy a Christmas-themed breakfast complete with little presents. Further policies and procedures related to diversity and learning and development are described in CapMan’s People Policy, which is available on the website. Job satisfaction & engagement High level of motivation Personal drive Enrichment of society Target achievement High performance - high retention Value creation 28 • CAPMAN ANNUAL REPORT 2022 • GROUP GROUP CapMan Snapshot Highlights 2022 CEO’s review Strategy CapMan’s business Sustainability People Risks CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS TYÖNUMERO 13 CapManians – By geography  Finland 76%  Sweden 12%  Denmark 5%  UK 4%  Luxembourg 1%  Norway 1% CapManians in ﬁgures 186 CAPMANIANS 16% INCREASE IN FTES IN 2022 * Based on the annual FTE number, which describes the full-time equivalent number of employees. 39 NEW CAPMANIANS JOINED DURING 2022 TYÖNUMERO 14 CapManians – By age  –25yr 6%  26–35yr 43%  36–45yr 31%  46–55yr 15%  Over 55yr 5% 200 150 100 50 0 2018 2019 2020 2022 2021 TYÖNUMERO 15 Growth in number of employees 117 147 146 186 161 * Based on the annual FTE number, which describes the full-time equivalent number of employees. CapManians – Investment professionals  Women 15%  Men 85% TYÖNUMERO 11B CapMan – All employees  Women 60%  Men 40% TYÖNUMERO 11 CapMan – Senior and executive positions  Women 25%  Men 75% 29 • CAPMAN ANNUAL REPORT 2022 • GROUP GROUP CapMan Snapshot Highlights 2022 CEO’s review Strategy CapMan’s business Sustainability People Risks CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS Employee Survey Siqni Culture Survey: work satisfaction at CapMan is on a good level The Siqni Culture Survey was carried out in September 2022 in all offices. The survey reviewed the most meaningful factors at work and their realization for CapMan employees. Addition- ally, the survey included general job satisfaction and eNPS (Employee Net Promoter Score) assessments. The response rate was 87%, which indicates high commitment among employees towards the survey. Based on the results of the survey, work well-being at CapMan is on a good level. The overall outcome of general job satisfac- tion was 84/100, whereas in 2020 it was 80/100. The employ- ees were very willing to recommend CapMan as an employer: the total eNPS score of the organisation was 58 (2020: 41). The eNPS target score was 40, which is generally considered to be an excellent outcome. In the future, the company’s eNPS target is to maintain a level of eNPS over 50. Hybrid work During 2022, the company applied a Hybrid Work Model. At CapMan, the office is considered our main hub, but each team defines the optimal amount of office work and remote work, and practices are discussed together. During weekdays from Monday to Thursday, approximately 60% of Cap Manians worked at the office, whereas approximately 40% of the employees worked from the office on Fridays. CapMan was awarded a Future Workplaces Certiﬁcation 2022. The Certiﬁcation is granted by Siqni to companies who are leading their culture with exceptional employee insight. The Certiﬁcate requires excellent overall performance in the employee satisfaction survey. 58 – ENPS SCORE DEPICTING EMPLOYEES’ WILLINGNESS TO RECOMMEND CAPMAN AS A WORKPLACE (41 in 2020) 30 • CAPMAN ANNUAL REPORT 2022 • GROUP GROUP CapMan Snapshot Highlights 2022 CEO’s review Strategy CapMan’s business Sustainability People Risks CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS RISK ASSESSMENT RISKS Risk management process and key risk categories CapMan faces many different risks and uncertainties, which could if realised affect its strategic direction, ﬁnancial position, earnings, operations and reputation. Assessment and management of risks is an integral part of CapMan’s ability to conduct its operations in a successful manner. CapMan classiﬁes risks according to various categories and identiﬁes principal risks for each category. CapMan performs an annual review of the risk environment and reports on any material developments quarterly. Risk management strategy and process Risk management constitutes a significant part of CapMan’s corporate governance. Risk needs to be managed rather than avoided and consideration of risk should not stifle innovation. Rather, consideration of risk should enable CapMan to make better decisions. As the risk definition includes both positive and negative effects of uncertainty on company objectives, harnessing oppor- tunities, as compared to only managing threats, should be considered as part of risk management. The Board of Directors decides on the risk appetite and risk tolerance with the target to ensure continuity of operations and to optimise CapMan’s ability to meet its objectives The Chief Operating Officer, supported by the independent Risk & Valuation team, has day-to-day responsibility for the implementation and continuous development of the risk management process. Risk management objectives Risk management at CapMan aims to • Set the risk appetite and tolerance in accordance with CapMan’s strategy; • identify and assess key risk factors in CapMan’s operations and business environment; and • manage these risk factors to allow CapMan to achieve its strategic and financial objectives. Further risk management objectives • Ensure the safety and wellbeing of employees; • ensure the continuity of business operations; • increase risk awareness throughout the organisation; • protect the reputation of CapMan, its personnel and investors; • effectively allocate resources for risk treatment; and • identify opportunities. Risk identiﬁcation Risk analysis Risk evaluation RISK TREATMENT COMMUNICATION AND CONSULTATION ESTABLISHING THE CONTEXT MONITORING, REVIEW AND REPORTING CapMan’s risk management process 31 • CAPMAN ANNUAL REPORT 2022 • GROUP GROUP CapMan Snapshot Highlights 2022 CEO’s review Strategy CapMan’s business Sustainability People Risks CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS 1. Strategic risk Strategic risks occur when, for internal or external reasons, the company is unable to achieve its strategic targets, or the chosen strategy proves incorrect or ineffective. Strategic risk management at CapMan is a part of the over- all Group strategy development. For example, strategic risks are considered when evaluating which businesses, investment strategies or funds are pursued, what kinds of investors or clients are targeted with different products and services, how concentrated the customer base is, or how to ensure business continuity. Moreover, as CapMan’s success is based on skilled and motivated personnel, who may be difficult to replace or Key risk categories CapMan categorises its risks and identifies the following principal risks for each category: Risk category Principal risks 1. Strategic risk • Failure to achieve strategic or performance targets • Failure to select the correct strategy in a competitive environment • Failure to recruit key personnel • Failure to scale the business 2. Financial risk • Poor financial performance • Insufficient liquidity position • Failure to obtain fincancing 3. Market risks • Interest rate, inflation and asset price volatility • Changes in customer preferences 4. Operational risks • Cyber threats and system errors • Inadequate or failed processes or controls • Corruption, fraud or criminal behaviour • Mistakes 5. Regulatory risks • Adverse changes in the regulatory environment 6. Sustainability risk • Physical and transition risks of climate change • Inefficient procedures to address safety and well-being • Human rights risks in the supply chain 7. Reputational risk • Negative public perception The drivers of principal risks under each risk category are further described below. recruit, a people strategy together with continuous succession planning are a key part of strategic risk management. CapMan aims to have a diversified portfolio of businesses with entrepreneurial teams and a diversified customer base. Strategic risks and targets are continuously monitored by senior manage- ment and Board of Directors. 2. Financial risk Financial risk refers to risks impacting the financial position and/or performance of the company. CapMan’s turnover is to a large extent based on long-term agreements and therefore risk levels are relatively low in the short term. Similarly, the majority of the cost base is fixed in the short term. Therefore, the biggest drivers for financial risk for CapMan are returns of fund investments as well as the timing and magnitude of carried interest, both of which have significant exposure to market risk as well as the perfor- mance of individual funds and portfolio assets. Monitoring and managing these underlying risks is a key activity of all investment teams. The risks are also monitored by the Risk & Valuations team on a continuous basis. Another key financial risk for CapMan is Group liquidity and financing, as CapMan typically has sizeable off-balance sheet liabilities relating to the commitments made to funds. Financial risks are actively managed by continuous follow-up of the liquidity position and cash flow forecasts and by maintain- ing sufficient liquidity buffers relative to open commitments. CapMan has long term financial objectives, including targets for growth, return on equity and equity ratio, which are continuous- ly monitored and regularly reported to senior management and Board of Directors. CapMan also has a revolving credit facility to ensure its ability to cover unexpected cash requirements. The company targets a long maturity profile for debts by actively managing its credit portfolio in order to secure long-term debt financing at attractive terms also in the future. 3. Market risk Market risk refers to the risk of losses arising from movements in market prices, or the risk that the market or customer behaviour changes in a way that makes CapMan’s business model or product/service offering sub-optimal. CapMan is exposed to significant market risk both due to its significant investments in funds, as well as due to its reliance on the international fundraising market in raising capital for its funds under management. Market risk may also impact the timing and magnitude of carried interest by causing delay or value impair- 32 • CAPMAN ANNUAL REPORT 2022 • GROUP GROUP CapMan Snapshot Highlights 2022 CEO’s review Strategy CapMan’s business Sustainability People Risks CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS ment of exits from the funds. Market risk is part of operating in the finance industry and can be only partially mitigated. CapMan aims to have a diversified portfolio of businesses and investment strategies, covering multiple asset classes and geographies. CapMan has also strategically improved its earnings mix by launching different types of funds and also services less dependent on the financial markets. Investments to funds and the diversification as well as income from different business areas are monitored as part of executing CapMan’s strategy and each time new investments are decided. 4. Operational risk Operational risk refers to the risk of loss resulting from inade- quate or failed internal processes or systems, human error or from external events. For CapMan, the most important operational risks relate to cyber and IT systems, compliance with often complex regulations and agree- ments, fraud, corruption or other criminal behaviour, and mistakes or human error. CapMan has continuous process to monitor and manage opera- tional incidents and risks. Issues are actively managed and there are controls in place to mitigate risk for the most critical functions. CapMan implements Anti-Money Laundering (AML) policies and procedures designed to prevent and detect money laundering, bribery and corruption and related activities. The activities involve KYC (Know Your Customer) procedures on fund investors and portfolio companies. These topics are covered by regular trainings for employees. CapMan works together with reputable insurance brokers to ensure reasonable insurance coverage for potential liability that might result from any material conventional operative incidents. 5. Regulatory risk Regulatory risk refers to the risk of adverse changes in the regulatory environment. Fund and wealth management are regulated industries and Cap- Man has subsidiaries that are regulated under AIFMD or MiFID re- gimes. There are also several other laws and regulations that may impact CapMan’s operations or strategy. CapMan has a dedicated Compliance function, supported by Risk & Valuation, Legal and ESG teams, to monitor regulatory changes in co-operation with external advisors. In fund and investment structuring CapMan also uses advisors to ensure up-to-date understanding of the latest reg - ulations, including concerning taxation. CapMan does not practise aggressive tax planning. The most significant ongoing regulatory developments that impact the finance industry in Europe are related to sustainability. CapMan continues to monitor and adapt to sustainability-related and other regulation that impacts the industry. 6. Sustainability risk Sustainability risk refers to environmental, social or governance events or conditions that, if they occur, could cause a material negative financial impact, or negatively impact the environment or the people involved in CapMan’s operations or portfolio, and/ or other stakeholders. CapMan has limited direct sustainability risk, due to limited scope of operation and lack of any manufacturing operations. However, CapMan AIFM integrates sustainability risks in its decision-making process, as referred to under Article 3 of the SFDR. Environmental risks can relate to, among others, to climate-related risks (physical and transitional), biodiversity or pollution. Social risks can relate to for instance safety and well-being, human rights in the supply chain, and employee or tenant satisfaction or others. Governance risks can relate to for example inadequate management of ESG, management incen- tives, corruption, bribery, cybersecurity, or data privacy. The potential sustainability risks to which any investment is exposed may cause a negative impact on the value of investments. Cap- Man AIFM considers principal adverse impacts on sustainability impacts of its investment decisions as described by Article 4 of the SFDR. On a Group level, sustainability risk may also con- tribute significantly to reputational risk, in the event that there would be a significant incident – even when the direct financial impact on CapMan is limited due to low exposure through own investments. CapMan is committed to multiple sustainability reporting initiatives to make its sustainability actions more transparent. CapMan has implemented a restriction list to restrict or exclude certain activities or industries from the investment scope. 7. Reputational risk Reputational risk is the risk of negative publicity, poor public perception or uncontrollable events to have an adverse impact on CapMan’s reputation, thereby affecting its ability to meet strategic or financial objectives or reducing shareholder value. Reputational risk is a core risk for CapMan, since the business mainly relies on mutual trust between business parties. Realisa- tion of reputational risk could impact fundraising and deal flow as well as the ability to attract and retain key employees, all of which could have substantial impact on CapMan’s performance. CapMan aims to build an ethical culture and has identified high ethics as one of its values. CapMan has a Code of Conduct and other policies in place to guide its employees beyond being compliant with laws and regulations. CapMan also has controls, such as a Whistleblowing Channel, in place and aims to maintain a continuous dialogue with relevant stakeholders. 33 • CAPMAN ANNUAL REPORT 2022 • GROUP GROUP CapMan Snapshot Highlights 2022 CEO’s review Strategy CapMan’s business Sustainability People Risks CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS CAPMAN PLC Corporate Governance Statement 2022 CapMan Plc (“CapMan”) complies with the Finnish Corporate Governance Code 2020 for listed companies issued by the Securities Market Association which entered into force on 1 January 2020 (the “Code”). CapMan complies with all of the recommendations of the Code. This Corporate Governance Statement (the “Statement”) has been prepared in compliance with the Code’s Corporate Governance reporting guidelines, it has been reviewed by the Audit Committee of CapMan’s Board of Directors (the “Board”) and it is issued separately from the report by the Board. CapMan’s corporate governance model also follows the Finnish laws, the Articles of Association of the company and the rules and directions of Nasdaq Helsinki Ltd. The Code is publicly available on the website of the Securities Market Association at www.cgfinland.fi/en. For further information regarding CapMan’s corporate governance, please visit the company’s website at https:// www.capman.com/shareholders/governance/. 1 CapMan’s governance model CapMan is a Finnish public limited liability company headquartered in Helsinki, Finland. The parent company CapMan Plc and its subsidiaries form CapMan group. CapMan’s shares are publicly listed in Nasdaq Helsinki. CapMan’s governance model consists of the General Meeting of shareholders, the Board of Directors and the CEO. In the operative management of the company the CEO is assisted by the management group. 2 General Meeting of the shareholders and the Articles of Association The highest decision-making power at CapMan is held by the General Meeting of sharehold- ers. Among other things, the General Meeting adopts the financial statements, decides on distribution of assets based on the proposal of the Board, elects the members of the Board and the auditor, decides on the discharge from liability and on amendments to the Articles of Association. The notice to the General Meeting, the documents to be presented and the pro- posals for the General Meeting are published on the company’s website and, if needed, as a stock exchange release three weeks prior to the General Meeting at the latest. In 2022, CapMan’s Annual General Meeting (AGM) was held on 16 March in Helsinki. In order to curb the spread of the Covid-19 pandemic, the General Meeting was organized without shareholders’ and their proxy repre- sentatives’ presence at the General Meeting venue. Shareholders were able to participate in the meeting and use their shareholder rights only by voting in advance, by submitting counterproposals in advance and by asking questions in advance. In total 72 shareholders representing approximately 31% of the reg- istered share capital and voting rights voted in advance. The decisions are available on the company’s website at https://www.capman. com/shareholders/general-meetings/. CapMan’s Articles of Association and material related to the General Meeting are available on the company’s website at the address: https://www.capman.com/sharehold- ers/governance/. 3 Shareholders’ Nomination Board CapMan Plc’s 2018 AGM decided to establish a Shareholders’ Nomination Board to prepare future proposals concerning the election and remuneration of the members of the Board to the General Meeting. The AGM also adopted a Charter for the Nomination Board. The Share- holders’ Nomination Board shall serve until further notice. The term of office of the mem- bers of the Shareholders’ Nomination Board expires annually after the new Shareholders’ Nomination Board has been nominated. The Shareholders’ Nomination Board con- sists of representatives nominated by the four largest shareholders of the company and the Chairman of CapMan Plc’s Board, serving as an expert member. As an expert member the Chairman of the Board of CapMan Plc does not take part in the decision-making of the Shareholders’ Nomination Board. The following members were nominated to the Shareholders’ Nomination Board in September 2022: Stefan Björkman (Managing Director of Föreningen Konstsamfundet r.f., representative of Silvertärnan Ab) (Chairman of the Nomination Board), Mikko Mursula (Chief Investment Officer of Ilmarinen Mutual Pension Insurance Company), Ari Tolppanen (Chairman of the Board of Oy Inventiainvest Ab) and Mikko Kalervo Laakkonen. Addition- ally, Andreas Tallberg, the Chairman of the Board of CapMan Plc, served as the expert member on the Shareholders’ Nomination Board. The Nomination Board convened three times in 2022. The Nomination Board conducted an evaluation of the Board work, discussed, in particular the size, composition and diversity of the Board and the areas of expertise that are deemed most beneficial for the company. The Nomination Board also reviewed the remuneration of the Board and gave its proposals to the Annual General Meeting on 26 January 2022. The proposals were published as a stock exchange release. The Charter of the Shareholders’ Nomina- tion Board is available on CapMan’s website at: https://www.capman.com/shareholders/ governance/nomination-board/ 4 Board of Directors 4.1 Composition of the Board of Directors All members of the Board are elected yearly by the Annual General Meeting. There is no specific order for the appointment of Board members in the Articles of Association. According to the Articles of Association, the Board comprises at least three and at most nine members, who do not have deputies. Members are elected for a term of office, which starts at the close of the Annual General Meeting at which they were elected 34 • CAPMAN ANNUAL REPORT 2022 • CORPORATE GOVERNANCE GROUP CORPORATE GOVERNANCE Corporate Governance Statement Board of Directors Management Team REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS and ends at the close of the Annual General Meeting following their election. The Board elects a Chair and a Vice Chair from among its members. The Shareholders’ Nomination Board makes the proposals on the composi- tion of the Board and the remuneration for the Board and Committee Members to the Annual General Meeting. The Shareholders’ Nomination Board’s proposals are typical- ly published as a separate stock exchange release and are also included in the notice to convene the Annual General Meeting. The Annual General Meeting held on 16 March 2022 elected six members to the Board of Directors. Mr. Johan Bygge, Ms. Catarina Fagerholm, Ms. Mammu Kaario, Mr. Olli Liitola, Mr. Johan Hammarén and Mr. Andreas Tallberg were re-elected to the Board. Mr. Eero Heliövaara had announced that he was not available for re-election. At its organisational meeting on 16 March 2022, the Board elected from among its members Andreas Tallberg as its Chair and Mammu Kaario as Vice Chair. The biographical details of the Board mem- bers are presented in the table on page 7. 4.2 Diversity of the Board of Directors The company values that its Board mem- bers’ have diverse backgrounds taking into account the competencies that are relevant for CapMan’s business, such as know-how of the financial sector. The aim is that the Board consists of representatives of both genders and different age groups, that the Board members have versatile educational and pro- fessional backgrounds and that the Board of Directors as a whole has sufficient experience on an international operating environment. The company considers that the com- position of its Board is in its current form sufficiently aligned with the objectives set for the diversity of the Board composition. In 2022 both genders were represented in the Board (33% female, 67% male), the members were between 53 and 66 years of age, their educational backgrounds were relevant to the company’s operations, and they had experi- ence on both international and local operating environments. 4.3 Independence of the Board members The majority of the Board must be inde- pendent from the company. At least two of the members that are independent from the company shall also be independent of the company’s significant shareholders. The Board made an assessment on the independence of the Board members in its organisational meeting on 16 March 2022. According to the assessment Johan Bygge, Catarina Fagerholm, Mammu Kaario, Olli Liitola and Andreas Tallberg were independent of both the company and its significant share- holders. Johan Hammarén was non-inde- pendent of company’s significant shareholder Silvertärnan Ab through board membership, and non-independent of the company due to his employment with a group company until 2019. Shares and share-based rights of each Board member and corporations over which he/she exercises control in the company and its group companies are presented in the table on page 7. 4.4 Duties and responsibilities of the Board Under the Finnish Companies Act and CapMan’s Articles of Association, the Board is responsible for the administration of the company and the proper organisation of its operations. The Board is also responsible for the appropriate arrangement of the control of the company’s accounts and finances. The Board has confirmed a written charter for its work, which describes the main tasks and du- ties, working principles and meeting practices of the Board, and an annual self-evaluation of the Board’s operations and working methods. In accordance with the charter, the main duties of the Board were: • to convene the General Meetings of share- holders • to appoint and dismiss the CEO • to supervise the management • to approve strategic and financial objectives • to approve the budget • to decide on the establishment of new CapMan funds and the level of CapMan’s own commitments therein • to decide on fund investments to other than CapMan funds and direct investments exceeding EUR 5 million • to decide on major changes in the business portfolio • to ensure that the company has a proper organisation • to ensure the proper operation of the man- agement system • to approve annual financial statements and interim reports • to ensure that the supervision of the accounting and financial management is properly organised • to ensure that the business complies with relevant rules and regulations • to approve the principles of corporate governance, internal control, risk manage- ment as well as other essential policies and practices • to decide on the CEO’s remuneration as well as on the remuneration policy of other executives and CapMan’s key employees • to confirm the central duties and operating principles of the Board committees The Chair of the Board ensures and moni- tors that the Board fulfils the tasks appointed to it under legislation and by the company’s Articles of Association. 4.5 Work of the Board in 2022 In 2022, the Board of Directors met eight times. The Board had seven meetings in the composition as elected by the 2022 AGM and one meeting in the composition as elected by the 2021 AGM. The table on page 7 presents Board mem- bers’ attendance at the meetings in 2022. 5 Board Committees The Board may establish Committees to ensure efficient preparation of the matters under its responsibility. The Committees are established, and their members are elected from among the members of the Board in the Board’s organisational meeting to be held after the AGM for the same term as the Board. The Committees shall consist of at least three members. The charters for each committee shall be confirmed by the 35 • CAPMAN ANNUAL REPORT 2022 • CORPORATE GOVERNANCE GROUP CORPORATE GOVERNANCE Corporate Governance Statement Board of Directors Management Team REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS Board of Directors in 2022 Name Personal information Shares and share-based rights as of 31 Dec 2022 Attendance at the Board meetings Attendance at the Committee meetings Andreas Tallberg Chairman of the Board since 2017 Member of the Board since 2017 Born: 1963 Education: M.Sc. (Econ.). Main occupation: CEO of Oy G.W. Sohlberg Ab Chairman of the Remuneration Committee Expert member of the Shareholders’ Nomination Board Independent of the company and significant shareholders 11,530 8/8 Remuneration Committee: 2/2 Nomination Board: 3/3 Johan Bygge Member of the board since 2021 Born: 1956 Education: BA (Econ.) Main occupation: Board professional Member of the Audit Committee Independent of the company and significant shareholders 28,500 7/8 Audit Committee: 5/5 Catarina Fagerholm Member of the board since 2018 Born: 196 Education: M. Sc. (Econ.) Main occupation: Board professional Member of the Audit and Remuneration Committees Independent of the company and significant shareholders 73,011 8/8 Audit committee: 5/5 Remuneration Committee: 2/2 Johan Hammarén Member of the Board since 2020 Born: 1969 Education: LL.M., Bachelor of Science (Econ.) Main occupation: Managing Director, Oy Hammarén & Co Ab, board professional Non-independent of the significant shareholders and non-independent of the company 0 8/8 Eero Heliövaara Member of the board since 2018 Born: 1956 Education: M.Sc. (Eng.), M.Sc. (Business Admin.) Main occupation: Board professional Member of the Remuneration Committee Independent of the company and significant shareholders N/A 1/1 Remuneration Committee: 2/2 Mammu Kaario Member of the Board since 2017 Born: 1963 Education: LL.M., MBA Main occupation: Board professional Chairman of the Audit Committee Independent of the company and significant shareholders 38,071 8/8 Audit Committee: 5/5 Olli Liitola Member of the Board since 2019 Born: 1957 Education: M.Sc. (Tech.). Main occupation: Board professional Member of the Remuneration Committee Independent of the company and significant shareholders 2,150,000 8/8 Remuneration Committee 0/0 * ) In addition, Andreas Tallberg’s controlling interest company Oy Nissala Ab and closely associated company Oy G.W. Sohlberg Ab, and Johan Hammarén’s controlling interescompany Oy Hammarén & Co are minority owners in Silvertärnan Ab, which owns 13.5% of the shares in CapMan Plc. ** ) A member of the Board of Directors until the AGM held on 16 March 2022 36 • CAPMAN ANNUAL REPORT 2022 • CORPORATE GOVERNANCE GROUP CORPORATE GOVERNANCE Corporate Governance Statement Board of Directors Management Team REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS Board. The Chairs of the committees report to the following Board meeting on the topics discussed in the committee meetings. Also, the materials presented, and the minutes of the committee meetings are delivered to the Board for information. The committees do not have autonomous decision-making power, but the Board makes the decisions within its competence collectively. In its organisational meeting held on 16 March 2022, CapMan’s Board of Directors established an Audit and Remuneration Committee. 5.1 Audit Committee The Audit Committee has been established to improve the efficient preparation of matters pertaining to financial reporting and super- vision. The duties of the Audit Committee included: • monitoring the financial position of the company • monitoring and assessment of the financial reporting process • monitoring and assessment of the compa- ny’s internal control and risk management systems and compliance processes • monitoring and assessment of the most significant financial and tax risks • review of the company’s Corporate Govern- ance Statement • monitoring the statutory audit of the finan- cial statements and consolidated financial statements • evaluating the independence of the statu- tory auditor or audit company, particularly the provision of related services • other communications with the auditor • preparing the proposal for resolution on the election of the auditor • defining the principles concerning the mon- itoring and assessment of related party transactions • monitoring and assessment of the process- es and risks relating to IT security • evaluation of the use and presentation of alternative performance measures • monitoring and assessment of any special issues allocated by the Board and falling within the competence of the audit com- mittee. The Board has in its organisational meeting on 16 March 2022 elected Mammu Kaario (Chair), Catarina Fagerholm and Johan Bygge as members of the Audit Committee. In 2022, the Committee met five times. The table on page 7 presents the Committee members’ attendance at the meetings. All members of the Audit Committee were independent of the company and its signifi- cant shareholders. All members of the Audit Committee are experienced in demanding positions in financial administration and business management and they hold degrees suitable for Audit Committee members. 5.2 Remuneration Committee The Remuneration Committee has been estab- lished to improve the efficient preparation of matters pertaining to the remuneration of the CEO and the rest of the management team as well as the remuneration policy covering the company’s other personnel. The main duties of the Remuneration Com- mittee in accordance with the charter were to assist the Board by preparing the Board decisions concerning: • CEO remuneration • company’s executive remuneration princi- ples and individual situations as required • company’s overall principles for total com- pensation structure • Remuneration Policy and Report for the governing bodies. The Committee further contributed to: • securing the objectivity and transparency of the decision-making regarding remuner- ation issues in the company • systematic alignment of remuneration prin- ciples and practice with the company strat- egy and long-term and short-term goals The Board has in its organisational meeting on 16 March 2022 elected Andreas Tallberg (Chair), Catarina Fagerholm and Olli Liitola as members of the Remuneration Committee. The Committee convened twice in in 2022. The table below on page 7 presents the Com- mittee members’ attendance at the meetings. All members of the Remuneration Commit- tee are independent of the company and its significant shareholders. 6 Chief Executive Ofﬁcer (CEO) In 2022, CapMan’s CEO was Joakim Frimodig (born 1978, BA (Oxon)). Frimodig’s shares and share-based rights and those of the companies over which he exercises control are presented in the table on page 9. The Board elects the company’s CEO. The terms and conditions of the CEO’s service are specified in writing in the CEO’s service contract, which is approved by the Board. The CEO manages and supervises the company’s business operations according to the Finnish Companies Act and in compliance with the instructions and authorisations issued by the Board. The CEO shall see to it that the accounts of the company are in compliance with the law and that its financial affairs have been arranged in a reliable manner. Generally, the CEO is independently responsible for the operational activities of the company and for day-to-day decisions on business activities and the implementation of these decisions. The CEO appoints the heads of business areas. The Board approves the recruitment of the CEO’s immediate subordinates. The CEO cannot be elected as Chair of the Board. 7 Management Group The main tasks of the Management Group consist of (i) coordination of team strategy, fundraising, resources as well as coordination of marketing and brand, (ii) implementation of decisions by the Board and the CEO/ Management Group, (iii) supporting deci- sion-making through providing information and active participation, and (iv) spreading information within the teams and implement- ing decisions as agreed in the Management Group. The composition of the Management Group, responsibilities and the shares and share-based rights of the members of the Management Group and of the companies over which they exercise control in the end of the financial year of 2022 are presented in the table below. 37 • CAPMAN ANNUAL REPORT 2022 • CORPORATE GOVERNANCE GROUP CORPORATE GOVERNANCE Corporate Governance Statement Board of Directors Management Team REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS Management Group in 2022 Name Responsibilities Personal information Shares and share-based rights on 31 Dec 2022 Joakim Frimodig * CEO Born: 1978 Education: BA (Oxon) Shares: 1,015,500 Anna Berglind Head of People and Culture Born: 1974 Education: M.Sc. (Soc.) Shares: 221,265 Atte Rissanen CFO Born: 1987 Education: M. Sc. (Econ.) Shares: 229,718 Heidi Sulin COO Born: 1979 Education: LL.M. Shares: 108,275 Christian Borgström Head of CapMan Wealth Services Born: 1971 Education: M.Sc. (Econ.) Shares: 893,400 Antti Kummu Head of CapMan Growth Equity Born: 1976 Education: M.Sc. (Econ.), CFA Shares: 50,031 Pia Kåll Head of CapMan Buyout Born: 1980 Education: M.Sc. (Tech.) Shares: 143,400 Maximilian Marschan Head of CaPS Born: 1974 Education: M.Sc. (Econ.) Shares: 177,900 Mika Matikainen Head of CapMan Real Estate Born: 1975 Education: M. Sc. (Econ), M.Soc.Sc Shares: 162,000 Ville Poukka Head of CapMan Infra Born: 1981 Education: M.Sc. (Econ) Shares: 217,683 Mari Simula Head of Fund Investor Relations Born: 1982 Education: M.Sc. (Tech.) Shares: 353,142 * In addition, Joakim Frimodig’s controlling interest company Boldhold Oy is a minority owner in Silvertärnan Ab, which owns 13.5% of all shares in CapMan Plc. CapMan’s internal control and risk management concerning financial reporting is designed to provide, inter alia, reasonable assurance concerning the reliability, compre- hensiveness and timeliness of the financial reporting and the preparation of financial statements in accordance with applicable laws and regulations, generally accepted accounting principles and other requirements for listed companies. The objective is also to promote good corporate governance and risk management practices and to ensure the compliance with laws, regulation and CapMan’s internal policies. 9.1 General description of the ﬁnancial reporting process CapMan’s operating model is based on having a local presence in Finland, Sweden, Den- mark, Norway, Estonia, Luxembourg and the UK, and operating the organisation across national borders. CapMan’s subsidiaries and branches in eight countries report their results on a monthly or quarterly basis to the parent company. The bookkeeping function is mainly outsourced. Financial information is assembled, cap- tured, analysed, and distributed in accordance with existing processes and procedures. The group has a common reporting and consol- idation system that facilitates compliance with a set of common control requirements. The monthly accounting entries of the most significant subsidiaries and branches are transferred to the group’s reporting system on an entry-by-entry level. The other subsidiaries submit their figures either monthly or quar- terly to the group accounting to be entered to the group reporting system for consolidation. 8 Internal control and risk management The aim of CapMan’s internal control and risk management is to ensure that the company’s operations are efficient, appropriate, reliable and in compliance with regulation, and that risks associated with the company’s business and objectives are identified and appropriately monitored and managed. The group’s internal control system is an essential part of the group’s management system and consists of organization structure, policies, process- es, working instructions, allocation of tasks and responsibilities, approval authorizations, manual and automated controls, monitoring reports and reviews. The Board and the CEO are responsible for the internal control and the risk management but the internal control is conducted on all levels of the organization, in all business and support functions. Each employee is individually responsible for the compliance of policies and instructions and for reporting the faults and malpractice to his/her supervisor or other designated persons. 9 Internal control and risk management pertaining to the ﬁnancial reporting The internal control and risk management pertaining to the financial reporting process is part of CapMan’s overall internal control framework. The key roles and responsibilities for internal control and risk management have been defined in the group’s internal guide- lines which are approved and updated by the management and/or the Board of Directors of the company. 38 • CAPMAN ANNUAL REPORT 2022 • CORPORATE GOVERNANCE GROUP CORPORATE GOVERNANCE Corporate Governance Statement Board of Directors Management Team REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS The reported figures are reviewed in subsid- iaries as well as in group accounting. Group accounting also monitors the balance sheet and income statement items by analytically reviewing the figures. The consolidated accounts of CapMan are prepared in compli- ance with International Financial Reporting Standards (IFRS) as adopted by the EU. 9.2 Control and risk management of the ﬁnancial reporting process The Board has the overall responsibility for the proper arrangement of internal control and risk management over financial reporting. The Board has appointed the Audit Commit- tee to undertake the more specific tasks in relation to financial reporting process control such as monitoring the financial statements reporting process, the supervision of the fi- nancial reporting process and monitoring the efficiency of the company’s internal control. The Audit Committee also reviews regularly the main features of the internal control and risk management systems pertaining to the financial reporting process. The management of the group is respon- sible for the implementation of internal control and risk management processes and for ascertaining their operational effective- ness. The management is also responsible for ensuring that the company’s accounting practices comply with laws and regulations and that the company’s financial matters are managed in a reliable and consistent manner. The CEO leads the risk management process by defining and allocating respon- sibility areas. The CEO has nominated the group’s COO as risk manager to be in charge of coordinating the overall risk management process. The risk manager reports to the Audit Committee on matters concerning internal control and risk management. The manage- ment has allocated responsibility for establish- ing more specific internal control policies and procedures to personnel in charge of different functions. The group’s management and accounting departments possess appropriate levels of authority and responsibility to facil- itate effective internal control over financial reporting. 9.3 9.3 Risk assessment and control activities Risks related to the financial reporting process are identified through the objectives of finan- cial reporting. The risk assessment process is designed to identify financial reporting risks and to determine how these risks should be managed. Control activities based on risk as- sessments are determined for all levels of the organisation. These activities include guide- lines and instructions, approvals, authorisa- tions, verifications, reconciliations, analytical reviews, and segregation of duties. In the annual strategy process of the group, the identified risks are reviewed, the risk management control activities are mapped and effects of potential new identified risks on the strategy are evaluated. The objectives and responsibilities of the risk management process as well as the determination of the risk-appetite were updated during 2022. 9.4 Information and communication pertaining to the ﬁnancial reporting CapMan has defined the roles and responsi- bilities pertaining to financial reporting as a part of the group’s information and com- munication practices. External and internal information regarding financial reporting and its internal control is gathered systematically, and relevant information on the group’s trans- actions is provided to the management. Up- to-date information relevant for the financial reporting is presented in a timely manner to the relevant functions such as the Board and the Management Group. All external commu- nications are carried out in accordance with the group disclosure policy, which is available on the company’s website: https://www.cap- man.com/shareholders/statements-policies/ disclosure/ 9.5 The organisation and monitoring of internal control activities To ensure the effectiveness of internal control pertaining to financial reporting, monitor- ing activities are conducted at all levels of the organisation. Monitoring is performed through ongoing follow-up activities, separate evaluations or a combination of the two. Sep- arate internal audit assignments are initiated by the Board or management. The scope and frequency of separate evaluations depend pri- marily on the assessment of risks and the ef- fectiveness of ongoing monitoring procedures. Internal control deficiencies are reported to the management, and serious matters to the Audit Committee and the Board. Group accounting performs monthly consistency checks of income statement and balance sheet for subsidiaries and business areas. The group accounting team also conducts management fee and cost analysis, quarterly fair value change checks, impair- ment and cash flow checks as well as control of IFRS and other applicable regulatory changes. The Audit Committee and the Board regularly review group-level financial reports, including comparison of actual figures with prior periods and budgets, other forecasts, monthly cash flow estimates and covenant levels. In addition, the Audit Committee monitors in more detail, among others, the re- porting process (including the management’s discretionary evaluations), risk management, internal control and audit. The Risk and Valuations team, which is independent from the investment teams, is responsible for the quarterly valuation process, monitoring and forecasting fair value movements and preparing the models for and calculating carried interest income for the funds under the management of the Group. CapMan’s subsidiaries holding a license to act as alternative investment fund manager or investment firm granted by the Finnish Financial Supervisory Authority, have separate risk management and internal audit functions as required by applicable laws. The compliance function oversees that the operations of the CapMan group comply with regulation and that the group companies will adopt the relevant new regulations promptly. 39 • CAPMAN ANNUAL REPORT 2022 • CORPORATE GOVERNANCE GROUP CORPORATE GOVERNANCE Corporate Governance Statement Board of Directors Management Team REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS 10 Other information 10.1 Procedures related to insider administration CapMan complies with the Market Abuse Regulation’s (“MAR”, 596/2014) rules on managers’ transactions and insider manage- ment and the guidelines for insiders issued by Nasdaq Helsinki. In addition, CapMan has its own internal policy regarding insider man- agement. The group’s compliance function is responsible for insider administration and shall e.g. monitor that employees comply with insider rules and trading restrictions, maintain project-specific insider lists, arrange internal trainings for employees on insider rules and on disclosure responsibilities of listed companies. CapMan maintains an internal, non-public list on managers and persons closely associ- ated with them, which are, according to MAR, obliged to disclose all transactions made with financial instruments issued by CapMan. CapMan has determined the members of the Board and the Management Group (including the CEO) as managers defined in the MAR (hereinafter “Manager(s)”). Each Manager has been instructed to inform the persons closely associated with them about the obligation to disclose transactions. CapMan publishes a release on each transaction which has been executed by a Manager or his/her closely as- sociated person with the financial instruments issued by CapMan in case the total value of all transactions of this person exceeds EUR 5,000 within a calendar year. The total holding of CapMan’s shares and share-based rights of each Manager is annually published as a part of the Annual Report. CapMan maintains project-specific insider lists for the projects, as set out in MAR, which may have a significant effect on the prices of the financial instruments issued by CapMan. These project-specific insider lists are drafted and maintained in accordance with the MAR and CapMan’s internal policies and are established following a decision to delay the disclosure of inside information. The persons added to the project-specific list and other persons who possess inside information related to CapMan, are advised not to trade in financial instruments issued by CapMan. Prior to trading in CapMan’s financial instruments, each manager and employee is obliged to personally assess whether he/she is in the possession of inside information related to CapMan. CapMan’s Managers (as defined above) or employees who receive financial information related to CapMan Plc are not permitted to trade in financial instruments issued by Cap- Man during a closed period of 30 calendar days prior to the publication of CapMan’s interim reports, half year financial report or financial statements bulletin (closed period). The publication dates are announced annually over a stock exchange release. CapMan’s Managers and employees have been in- structed to inform their closely associated persons regarding closed periods and trading restrictions on CapMan’s financial instru- ments during the closed period. According to the internal trading pre-approval procedure, the Managers of CapMan group are obliged to request a written pre-approval from the group’s compliance function before trading in financial instruments issued by CapMan. CapMan’s whistleblowing channel offers a possibility to alert CapMan about suspicions of misconduct in confidence and/or anony- mously, including market abuse. The channel is available on the company’s intranet. During 2022, no whistleblowing reports were received. 10.2 Principles regarding Related Party Transactions The company does not customarily enter into transactions with its related parties which would be significant for the company and deviate from the ordinary course of business or would be conducted in deviation from customary market terms. Possible significant and out of ordinary transaction deviating from market terms would be discussed in the Board meeting. The Board also confirms the company’s principles regarding related party transactions. The related party transactions are monitored by the financial administra- tion and the legal function as part of the company’s customary reporting and control processes and the relevant persons are instructed of the related party matters. The company maintains a list of its related parties and related-party transactions are reported in the financial statements, and significant related-party transactions published as stock exchange releases, in accordance with appli- cable rules and regulations. 10.3 Audit fees Ernst & Young Oy, authorised public account- ants, acted as auditor of the company in 2022. Ms. Kristina Sandin, APA, acted as the lead auditor. The audit fees paid to the auditor amounted to 361,000 euros (293,000 euros 2021) and the fees related to other non-audit related services amounted to 12,000 euros (10,000 in 2021). 10.4 Internal audit Taking into account the nature and extent of the company’s business CapMan has not considered it necessary to organise internal audit as a separate function. The internal audit of the licensed operation has been outsourced to an external service provider. 40 • CAPMAN ANNUAL REPORT 2022 • CORPORATE GOVERNANCE GROUP CORPORATE GOVERNANCE Corporate Governance Statement Board of Directors Management Team REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS Andreas Tallberg Chairman of the Board of Directors Born: 1963 Independence: Independent board member Board Committees: Remuneration Committee (Chairman) Education: M.Sc. (Econ.) Holdings in CapMan Plc (31 December 2022): 11,530 shares Main Occupation: CEO at Oy G.W. Sohlberg AB Key Board Memberships: CapMan Oyj (Chair, 2017–) Nissala Oy (Chair) Mehiläinen (Chair) Retta Group (Chair) Rothschild Nordic AB (Member) Altor (Senior Advisor) Key employment history: Andreas Tallberg has served as the CEO of Finnish investment company Oy G.W. Sohlberg Ab since 2007. Between 1996 and 2006 he was a senior partner at EQT. Before this, he has worked in business development for Nokia Corporation, Wilson Sporting Goods and Amer Group. Tallberg also has extensive experience from board work. He has been Chairman of the Board of Glaston Oyj, Detection Technology Oyj, Staffpoint, Perlos Oyj, TG Group and Wulff Oyj. Tallberg was also the Deputy Chairman of the Board of Lite-On Mobile and a member of the Board of Directors at Handelsbanken Finland Branch. * Tallberg’s controlling interest company Oy Nissala Ab and closely associated legal person Oy G.W. Sohlberg Ab are minority owners of Silvertärnan Ab, which owns 13.5% of the shares in CapMan Plc. Mammu Kaario Deputy Chairman of the Board of Directors Born : 1963 Independence: Independent board member Board Committees: Audit Committee (Chairman) Education: Master of Laws (LL.M.), MBA Holdings in CapMan Plc (31 December 2022): 38,071 shares Main Occupation: Board professional Key Board Memberships: CapMan Plc (Deputy Chair, 2017–) Ponsse Oyj Aspo Oyj Lapti Oy Gofore Oy Puuilo Oyj SAKA Finland Group Oyj Key employment history: Mammu Kaario has more than 25 years of experience from the finance industry. She was CEO of Partnera Oy between 2016 and 2017 and an investment manager at Korona Invest between 2011 and 2016. Further, Kaario was a partner at Unicus Ltd between 2005 and 2010 and has held several financial advisory positions between 2004 and 2010. Before this, Kaario was an investment banker for 15 years at Conventum Oyj, among others. Board of Directors Johan Bygge Member of the board Born: 1956 Independence: Independent board member Board Committees: Audit Committee Education: BA (Econ.) Holdings in CapMan Plc (31 December 2022): 28,500 shares Main Occupation: Board professional Key Board Memberships: CapMan Plc (Member, 2021–) Guard Therapeutics (Chair, 2021–) Scandi Standard (Chair, 2021–) Getinge AB (Member, 2007–) AP3, Swedish National Pension fund (Vice Chair, 2019–) Lantmännen Ek För (Member, 2019–) SNS Förtroenderåd (Member 2015–) Key employment history: Johan Bygge was COO and held several senior advisory positions in EQT AB in 2011–2019. He was CFO at Investor AB in 2007–2011. In 2007, he was Acting CFO and EVP at Capio. He held several leadership positions, including EVP, CFO and Controller, at AB Electrolux in 1987–2006. He was Deputy Group Treasurer and Deputy Group Controller at Ericsson in 1983–1987. Bygge started his career as Auditor at Arthur Andersen & Co, where he worked 1982–1983. 41 • CAPMAN ANNUAL REPORT 2022 • BOARD OF DIRECTORS GROUP CORPORATE GOVERNANCE Corporate Governance Statement Board of Directors Management Team REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS Olli Liitola Member of the board Born: 1957 Independence: Independent board member Education: M.Sc. (Eng.) Holdings in CapMan Plc (31 December 2022): 2,150,000 shares Main occupation: Board professional Key Board Memberships: CapMan Plc (2019–) Harvia Group Oyj (Chair 2014–) Key employment history: Olli Liitola has over 25 years of experience in private equity. Olli Liitola has worked at CapMan since 1991 and has acted in several management positions at CapMan Group, among others as CFO and Senior Partner. Liitola has extensive experience in board work. He has served as Chairman of the Board at Lunawood Oy, Puulämpö Yhtiöt Oy and PPTH- Norden Oy and been a Member of the Board at Pretax Oy, NICE Entertainment Group Oy and Bright Group Oy. Johan Hammarén Member of the board Born: 1969 Independence: Non-independent of the company’s largest shareholders, non-independent of the company Education: LL.M., B.Sc. (Econ.) Holdings in CapMan Plc (31 December 2022): – Main occupation: Managing Director at Oy Hammarén & Co Ab, Board Professional Key Board Memberships: CapMan Plc (2020–) Fondia Oyj Aktia Bank Oyj Silvertärnan Ab Pieni Kirahvi Oy Ab (Kanniston Leipomo) Naava Group Oy, Livränteanstalten Hereditas Ab Oy Hammarén & Co Ab Key employment history: Johan Hammarén is Managing Director at Oy Hammarén & Co Ab. He was the founding partner of JAM Advisors and has held several managerial positions between 2012 and 2018. He was the founding partner of Fondia Oyj and has held several managerial positions between 2006 and 2012. He has held several legal team positions at Nokia Corporation between 2000 and 2006. * Hammarén’s controlling interest company Oy Hammarén & Co is a minority owner of Silvertärnan Ab, which owns 13.5% of the shares in CapMan Plc. Catarina Fagerholm Member of the board Born: 1963 Independence: Independent board member Board Committees: Audit Committee (Member), Remuneration Committee (Member) Education: M.Sc. (Econ.) Holdings in CapMan Plc (31 December 2022): 73,011 shares Main occupation: Board professional Key Board Memberships: CapMan Plc (2018–) Attendo AB (publ) Restel Ltd Byggmax Group AB (publ) Lekolar Group Ab Key employment history: Catarina Fagerholm served as CEO for Instru Optiikka Ltd from 2007 to 2018. She was Member of the Board, Deputy Chairman of the Board in Altia between 2008 and 2015. She was Member of the Board in Kaupan liitto during 2013–2018 and Atasun Optik during 2012–2014. During 1998-2006 she was CEO of BSH Kodinkoneet Ltd (Finland and Baltics) as well as member of the Management Group in BSH Hausgeräte Northern Europe. Between 1996–1998 Fagerholm was Country and Brand Director in Electrolux/AEG (Finland, Russia, Baltics). She has had several managerial positions in Amer Group Ltd in 1987–1996. 42 • CAPMAN ANNUAL REPORT 2022 • BOARD OF DIRECTORS GROUP CORPORATE GOVERNANCE Corporate Governance Statement Board of Directors Management Team REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS Joakim Frimodig CEO Education: BA, Oxon At CapMan since: 2016 Holdings in CapMan Plc (31 December 2022): 1,015,500 shares directly Joakim Frimodig has been the CEO of CapMan since September 2017 and a Management Group member since 2016. He joined CapMan from Summa Capital, where he worked for the past 12 years, most recently as Deputy Managing Partner. Prior to that, he worked for Alfred Berg and ABN Amro Corporate Finance. Positions of trust 2021– Board Member, LPeC – Listed Private Capital 2020– Board Member, Tukikummit Foundation 2019– Board Member, Silvertärnan Ab 2019– Chair of the Board, CapMan For Good Foundation * In addition, Joakim Frimodig’s holding company Boldhold Oy is a minority owner in Silvertärnan Ab, which owns 13.5% of all shares in CapMan Plc Anna Berglind Head of People and Culture Education: VTM, Certified Business Coach ® At CapMan since: 2018 Holdings in CapMan Plc (31 December 2022): : 221,265 shares Anna Berglind has been Head of People and Culture and member of the Management Group in CapMan from August 2018. She was Vice President, Human Resources during 2013–2018 and HR Manager during 2010–2013 at Mandatum Life. Management Team Christian Borgström Managing partner, CapMan Wealth Services Education: M.Sc. (Econ.) At CapMan since: 2019 Holdings in CapMan Plc (31 December 2022): 893,400 shares Christian Borgström is the Managing Partner of CapMan Wealth Services. He has more than 25 years of working experience in financial markets working with asset management as well as corporate analysis positions in Finland and abroad. Positions of trust 2021– Board Member, Päivikki ja Sakari Sohlbergin säätiö 2020– Board Member, Stiftelsen Rudolf och Emelie Gesellius fond sr 2019– Board Member, the Helsinki Bourse Club 2018– Board Member, WIlhelm och Else Stockmanns stiftelse sr. 2018– Board Member, Oy G.W.Sohlberg Ab 2016– Chairman of the Board, Stiftelsen Leon och Alice Borgströms minne sr. 2016– Board Member, Oy Nordic Medcom Ab 2015– Board Member, Stiftelsen Pro Helsingfors sr. 2015– Board Member, Hélenè och Walter Grönqvist stiftelse sr. 2011– Co-Chairman of the Board, Lisi Wahls stiftelse för studieunderstöd sr. 43 • CAPMAN ANNUAL REPORT 2022 • MANAGEMENT TEAM GROUP CORPORATE GOVERNANCE Corporate Governance Statement Board of Directors Management Team REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS Maximilian Marschan Managing Partner, CaPS Education: M.Sc. (Econ.) At CapMan since: 2009 Holdings in CapMan Plc (31 December 2022): 177,900 shares Maximilian Marschan is the founder of CaPS. Maximilian is responsible for the overall management of CaPS. Prior to joining CapMan in 2009, Maximilian has managed different sales and procurement organisations for more than 20 years both in Finland and abroad. Maximilian is also a member of the board at the CapMan for Good Foundation and a has for years organised fundraising for the Tukikummit foundation, which works to prevent marginalisation of children and youth. Positions of trust 2019– Board Member, CapMan for Good foundation Pia Kåll Managing Partner, CapMan Buyout Education: M.Sc. (Eng.) At CapMan since: 2016 Holdings in CapMan Plc (31 December 2022): 143,400 shares Pia Kåll joined CapMan Buyout in 2016 as a partner and was designated managing partner in 2017. Before joining CapMan, Kåll was on the Executive Board of Outotec, where she was responsible for Strategy, M&A, Marketing and Operational Excellence. Previously she worked eight years at McKinsey&Company where she was an Associate Principal. Positions of trust 2022– Board Member, Elisa Oyj 2022– Chair of the Board, Netox Oy 2020– Board Member, PDSVISION 2016– Board Member, Yrkesakademin Mika Matikainen Managing Partner, CapMan Real Estate Education: M.Sc. (Econ.), M.Sc. (Soc.) At CapMan since: 2006 Holdings in CapMan Plc (31 December 2022): 162,000 shares Mika Matikainen joined CapMan in 2006, one year after the inception of CapMan Real Estate, and became the head of CapMan Real Estate and a management group member of CapMan in 2010. Matikainen has together with his team been responsible for the expansion of CapMan Real Estate from a local Finnish player into a pan- Nordic asset manager. Simultaneously the investor base of CapMan Real Estate has internationalized substantially, now including international institutional investors from Europe, North America, and Asia. Prior to CapMan, he worked for UBS Investment Bank in London. Antti Kummu Managing Partner, CapMan Growth Education: M.Sc. (Econ.), CFA At CapMan since: 2017 Holdings in CapMan Plc (31 December 2022): 50,031 shares Antti Kummu is Head of CapMan Growth and member of CapMan management team. Antti has been a Partner of CapMan Growth since 2017 and Manging Partner since July 2021. He has 25 years of experience in working with growth companies as an entrepreneur, senior financier, growth company CFO and private equity investor and holds a long experience as board member or chairman of the board in multiple companies. Positions of trust 2020– Chair of the Board, Finnish Minerals Group Oy 44 • CAPMAN ANNUAL REPORT 2022 • MANAGEMENT TEAM GROUP CORPORATE GOVERNANCE Corporate Governance Statement Board of Directors Management Team REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS Atte Rissanen CFO Education: M.Sc. (Econ.) At CapMan since: 2017 Holdings in CapMan Plc (31 December 2022): 229,718 shares Atte Rissanen is CapMan’s CFO and responsible for strategy and business development. He has been with the Group since 2017, first as Director responsible for strategy and business development and since January 2022 in his current position. Rissanen previously held corporate finance positions at Summa Capital and EY. Ville Poukka Managing Partner, CapMan Infra Education: M.Sc. (Econ.) At CapMan since: 2017 Holdings in CapMan Plc (31 December 2022): 217,683 shares Ville Poukka has 17 years of experience in private equity and investment banking. Poukka is chair at CapMan Infras investment and ownership management committees. Poukka has been leading CapMan Infra’s investments in leading Finnish bus operator Koiviston Auto, Norwegian ferry operator Norled, and district heating companies in both Norway and Finland. He is currently member of the board in Koiviston Auto. Before CapMan Poukka worked at Danske Bank as Managing Director and was responsible for Nordic Energy and Infrastructure sector team in M&A advisory. Positions of trust 2022– Board Member, Koiviston Auto Group Mari Simula Head of Fund Investor Relations Education: M.Sc. (Eng.) At CapMan since: 2007 Holdings in CapMan Plc (31 December 2022): 353,142 shares Mari Simula has held several roles at CapMan since 2007 and before her current position, she worked as a Partner at Scala Fund Advisory. Simula has long experience from private equity fundraising, as well as business development and strategy projects. In her current role, she is responsible for group-level fundraising and fund investor relations. Prior to joining CapMan, she did research on the private equity industry at the Research Institute of the Finnish Economy, Etla. Heidi Sulin COO Education: LL.M. At CapMan since: 2021 Holdings in CapMan Plc (31 December 2022): 108,275 shares Heidi Sulin has been COO of CapMan and member of the Management Group since November 2021. Sulin holds nearly 20 years of experience working in the Nordic private equity and investment sector both from the consultant and principal perspective. She has held varied roles, ranging from interim CEO to COO, General Counsel and other supportive group functions roles which give her a wide generalist experience. Sulin is one of CapMan’s many re-joiners – she worked for the Company as General Counsel on 2007–2016. 45 • CAPMAN ANNUAL REPORT 2022 • MANAGEMENT TEAM GROUP CORPORATE GOVERNANCE Corporate Governance Statement Board of Directors Management Team REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS Report of the Board of Directors GROUP CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS Report of the Board of Directors Group turnover and result in 1–12 2022 CapMan Group’s turnover totalled MEUR 67.5 in the peri- od spanning 1 January–31 December 2022 (1 January–31 December 2021: MEUR 52.8). The 28 per cent increase in turn- over was mainly due to an increase in fee income and carried interest compared to the previous year. Operating expenses were MEUR 51.0 (MEUR 42.1) in total and consisted of personnel expenses, depreciations and amor- tisations, and other operating expenses. Personnel expenses, including employer contributions, were MEUR 34.6 (MEUR 30.6). The growth was mainly due to a high- er headcount as well as MEUR 1.4 in expenses from the early payment of the vested reward shares from the 2020 incentive plan. Depreciations and amortisations were MEUR 4.2 (MEUR 1.5) and included an impairment of goodwill in the amount of MEUR 2.6 related to the disposal of the JAY Solutions business after the financial year. Other operating expenses amounted to MEUR 11.2 (MEUR 10.0). Fair value changes of investments were MEUR +36.5 in 2022 (MEUR +33.9). Following the strong development in turnover, controlled cost development and positive fair value changes, the Group’s operating profit was MEUR 53.1 (MEUR 44.6). Operating profit excluding items affecting comparability was MEUR 55.7 (MEUR 44.6). Financial income and expenses amounted to MEUR -5.5 (MEUR -4.0). Financial expenses increased mainly due to a MEUR 1.2 write-down of loan receivables from an investment team operating in Russia and formerly part of CapMan Group. Profit before taxes was MEUR 47.6 (MEUR 40.6) and profit after taxes was MEUR 41.0 (MEUR 35.4). Profit after taxes excluding items affecting comparability was MEUR 43.6 (MEUR 35.4). Diluted earnings per share were 24.8 cents (21.4 cents). Dilut- ed earnings per share excluding items affecting comparability were 26.4 cents (21.4 cents). A quarterly breakdown of turnover and profit, together with turnover, operating profit/loss, and profit/loss by segment for the period as well as items affecting comparability are described in the Notes to the Financial Statements in section 2 Segment information. Management Company business Turnover generated by the Management Company business for the financial year 2022 totalled MEUR 55.9 (MEUR 43.6). The 28 per cent increase was mainly due to an increase in carried interest and fee income from the previous year. Fee income was MEUR 46.2 (MEUR 40.8) and grew by 13 per cent. New capital in funds and programmes, as well as other asset management services, contributed favourably to fee income for the year. Carried interest income for the year totalled MEUR 9.6 (MEUR 2.9), mainly from the CapMan Growth Equity 2017 and CapMan Nordic Real Estate funds, which transferred to carry during 2022. Of the turnover, 82 per cent was based on income booked over time (91 per cent in 2021). The comparatively lower share of turnover booked over time was due to a higher share of carried interest in 2022 compared to the previous year. Operating expenses of the Management Company business amounted to MEUR 33.6 (MEUR 30.7). Operating profit of the Management Company business was MEUR 22.3 (MEUR 13.2) and grew by 69 per cent. Service business Turnover generated by Service business totalled MEUR 11.1 (MEUR 8.6 in 2021). All turnover was based on long-term contracts and grew by 29 per cent due to growth of CaPS and JAY Solutions. CapMan and non-controlling shareholders of JAY Solutions agreed on the sale of JAY Solutions to Bas Invest AB at the end of 2022 and the transaction was completed on 1 February 2023. CapMan owned 60 per cent of JAY Solutions before the trans- action. The purchase consideration was MEUR 8, in addition to which the sellers are entitled to an additional consideration of MEUR 0.5, should JAY Solutions reach operating targets as established together with the buyer. Following the closing of the transaction after the end of the financial year, CapMan has recorded a MEUR 2.6 impairment of goodwill during the finan- cial year. The disposal of JAY Solutions is not expected to have an impact on CapMan’s financial position or results for 2023. Starting from 2023, CapMan’s Service business only includes the procurement service CaPS. Operating expenses of the Service business amounted to MEUR 7.7 (MEUR 5.1), of which 2.6 was an item affecting com- parability resulting from the disposal of JAY Solutions. The operating profit of the Service business was MEUR 3.0 (MEUR 4.2). Excluding items affecting comparability, operating profit was MEUR 5.6 (MEUR 4.2) and grew by 35 per cent. 47 • CAPMAN ANNUAL REPORT 2022 • REPORT OF THE BOARD OF DIRECTORS GROUP CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS Key figures Fees and carry Investment business Calculation of Key Ratios FINANCIAL STATEMENTS Investment business Fair value of fund investments was MEUR 169.1 on 31 December 2022 (31 December 2021: MEUR 130.0). Fair value changes were entirely driven by fund investments in 2022 and were MEUR +36.5 (MEUR +33.9), corresponding to a 25.3 per cent increase in value (1 January–31 December 2021: +26.9 per cent). The positive development of CapMan’s own funds is mainly due to completed exits and a very favourable develop- ment of many portfolio companies. Valuations have also been adjusted downward following changes in peer group valua- tions, due to which the positive fair value changes have been more modest during the second half of 2022. The valuation of external funds has increased particularly due to financing rounds and partial exits completed during 2022. CapMan invested a total of MEUR 29.3 in its funds in 2022 (MEUR 20.9). CapMan received distributions from funds totalling MEUR 27.6 (MEUR 23.5 and disposals MEUR 16.5). The amount of remaining commitments that have yet to be called totalled MEUR 89.1 as at 31 December 2022 (31 December 2021: MEUR 90.3). Capital calls, distributions and remaining commitments are detailed in the Notes to the Financial Statements in Section 17 Investments at fair value through profit and loss. Operating profit for the Investment business was MEUR 35.7 (MEUR 32.7). Table 1: CapMan’s investments booked at fair value as at 31 December 2022 Fair value 31 Dec 2022 (MEUR) Fund investments 169.1 Other long-term investments 0.4 Total 169.5 The majority of invested capital is in funds managed by CapMan. In addition to own funds, CapMan invests selectively in private market funds managed by external fund managers. This strategy provides diversification benefits as external funds are a complement to CapMan’s investments into own funds in terms of strategy and/or geography. CapMan strives to have a business connection between CapMan and external funds that CapMan invests in. Investments in portfolio companies are valued at fair value in accordance with the International Private Equity and Venture Capital Valuation Guidelines (IPEVG). Sensitivity analysis by investment area is presented in the Tables section of this report. Balance sheet and ﬁnancial position as at 31 December 2022 CapMan’s balance sheet totalled MEUR 270.5 as at 31 December 2022 (31 December 2021: MEUR 240.3). Non- current assets amounted to MEUR 188.4 (MEUR 159.8), of which goodwill totalled MEUR 7.9 (MEUR 15.3). Goodwill was written down following the disposal of JAY Solutions. Table 2: CapMan’s interest bearing debt Debt amount 31 Dec 2022 (MEUR) Matures latest Annual interest (%) Debt amount 31 Dec 2021 (MEUR) Senior bond (issued in 2018) - - 4.13% 31.5 Senior bond (issued in 2020) 50.0 Q4 2025 4.00% 50.0 Senior bond (issued in 2022) 40.0 Q2 2027 4.50% - Long-term credit facility (drawn/available) 0/20.0 Q3 2024 1.75-2.70% 0/20.0 As at 31 December 2022, fund investments booked at fair value totalled MEUR 169.1 (MEUR 130.0 as at 31 December 2021). Other financial assets booked at fair value were MEUR 0.4 (MEUR 0.4). Long-term receivables amounted to MEUR 5.5 (MEUR 10.1) and decreased due to a write-down of loan receivables from an investment team operating in Russia and formerly part of the Group, as well as the transfer of receivables from long-term to short-term, among others. Current assets amounted to MEUR 76.4 (MEUR 80.4). Cash in hand and at banks amounted to MEUR 55.6 (MEUR 65.2). The assets of JAY Solutions, including its goodwill – MEUR 5.8 – and its liabilities – MEUR 0.7 – were classified as assets held for sale and associated liabilities at the end of 2022. The disposal of JAY Solutions was completed on 1 February 2023. CapMan’s interest-bearing net debt amounted to MEUR 37.4 as at 31 December 2022 (MEUR 17.8). CapMan’s total inter- est-bearing debt as at 31 December 2022 is outlined in Table 2. 48 • CAPMAN ANNUAL REPORT 2022 • REPORT OF THE BOARD OF DIRECTORS GROUP CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS Key figures Fees and carry Investment business Calculation of Key Ratios FINANCIAL STATEMENTS Assets under management as at 31 December 2022 Assets under management refers to the remaining investment capacity, mainly equity, of funds and capital already invested at acquisition cost or at fair value, when referring to mandates and open-ended funds. Assets under management is calculated based on the capital, which forms the basis for management fees, and includes primarily equity without accounting for the funds’ debt. The practice for calculating assets under man- agement was updated at the end of 2022 to include all fee generating assets managed by CapMan Wealth Services. The comparison period figures have been adjusted accordingly. Assets increase as fundraising for new funds progresses or as investments are executed under investment mandates and declines as exits are completed. Assets under management was MEUR 5,039 as at 31 December 2022 (31 December 2021: MEUR 4,908). The increase in assets under management was mainly due to the establishment of and commitments to new funds. The increase was modest due to completed exits, negative fair value changes in open-ended real estate funds and the liquidation of old funds during 2022. Assets under management per fund type is displayed in Table 3. Table 3: Assets under management (incl. funds and mandates) 31.12.2022 (MEUR) 31.12.2021 (MEUR) Real Estate 3,187 3,060 Private Equity & Credit 933 1,069 Infra 442 355 Other 478 424 Total assets under management 5,039 4,908 CapMan’s interest bearing net debt increased due to the issue of a MEUR 40.0 sustainability-linked bond maturing in 2027. The proceeds of the bond were used for the voluntary redemp- tion of the senior bond maturing in 2023 and general company purposes. CapMan’s bonds and long-term credit facility include financ- ing covenants, which are conditional on the company’s equity ratio and net gearing ratio. CapMan honoured all covenants as at 31 December 2022. Trade and other payables totalled MEUR 18.5 on 31 Decem- ber 2022 (31 December 2021: MEUR 16.7). The Group’s cash flow from operations totalled MEUR +6.0 for 2022 (MEUR +11.0). Withholding taxes due to the early payment of the vested reward shares from the 2020 incentive plan as well as other changes in working capital contributed to the compa- rably smaller inflows of cash from operations. CapMan receives management fees from funds semi-annually, in January and July, which is shown under working capital in the cash flow statement. Cash flow from investments totalled MEUR +2.4 (MEUR +19.2) and includes, inter alia, investments and repaid capital received by the Group. CapMan makes investments mainly through its investment company and its investments and cash on hand are classified as fund investments. Cash flow before financing totalled MEUR +8.5 (MEUR +30.2) and reflects the development in the Management Company business, Service business and Investment business. Cash flow from financing was MEUR -18.0 (MEUR -23.0) and included the drawdown and repayment of debt as well as the payment of dividends and equity repayment. Sustainability Following the updated strategy responsibility is at the core of all activities. CapMan’s vision is to become the most responsi- ble private assets company in the Nordics. A strategic objective is to integrate sustainability into all operations and implement it in the product offering, fundraising, investment activities, fund management, services and the development of personnel and work environment, among others. As part of its environmental commitment, CapMan made a commitment to set Science Based Targets in line with a 1.5 °C scenario in the beginning of 2022 and has now established a roadmap and timeline for meeting the commitment. The plan is now under validation by the Science Based Targets initiative. As part of the process, CapMan establishes interim reduction targets for 2027 and 2032 and will during 2023 define the year when CapMan seeks to reach net zero emissions. Monitoring employee satisfaction is a critical component of assessing CapMan’s social responsibility. CapMan reached an eNPS score of 58 in 2022, which reflects a high willingness among employees to recommend CapMan as an employer. The score increased from the latest achieved measurement of 41. In addition, CapMan has included guidance regarding diver- sity, equity and inclusion in its people and recruitment policies and started a process for increasing awareness regarding these topics among employees. In order to promote good governance, CapMan has intro- duced sustainability metrics as part of variable remuneration. Part of long-term share-based incentives are determined following the achievement of ESG targets. CapMan continues to integrate sustainability targets and key sustainability risks into its investment decisions. As part of the process, CapMan has developed tools that promote sustainable investment, value creation and risk management, expanded in- vestment policies and established new guidelines and process- es at both CapMan Group and portfolio companies and assets. ESG targets established in the beginning of 2022 are mon- itored at Group and investment team level and achievements for 2022 are reported as part of CapMan’s sustainability report published in Spring 2023. 49 • CAPMAN ANNUAL REPORT 2022 • REPORT OF THE BOARD OF DIRECTORS GROUP CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS Key figures Fees and carry Investment business Calculation of Key Ratios FINANCIAL STATEMENTS Key ﬁgures 31 December 2022 CapMan’s return on equity was 30.5 per cent on 31 December 2022 (31 December 2021: 29.4 per cent) and comparable return on equity 32.4 per cent (29.4 percent). Return on invest- ment was 23.1 per cent (21.2 per cent) and comparable return on investment was 24.2 per cent (21.2 per cent). Equity ratio was 52.7 per cent (53.3 per cent). According to CapMan’s long-term financial targets, the target level for the company’s return on equity is on average over 20 per cent. The objective for the equity ratio is more than 50 per cent. Table 4: CapMan’s key figures 31.12.2022 31.12.2021 Earnings per share, cents 25.1 21.9 Diluted, cents 24.8 21.4 Adjusted diluted earnings per share, cents 26.4 21.4 Shareholders' equity/share, cent 90.2 81.4 Share issue adjusted number of shares, avg. 157,560,284 156,579,585 Return on equity, % 30.5 29.4 Return on equity, comparable, % 32.4 29.4 Return on investment, % 23.1 21.2 Return on investment, comparable, % 24.2 21.2 Equity ratio, % 52.7 53.3 Net gearing, % 26.3 14.0 Proposal of the Board of Directors regarding distribution of funds CapMan Plc’s objective is to distribute an annually growing dividend to shareholders. CapMan Plc’s Board of Directors will propose to the Annual General Meeting (AGM) to be held on 15 March 2023 that a total of EUR 0.17 per share would be paid to shareholders, equivalent of a total of MEUR 26.9, from distributable funds for 2022. The distribution of funds would be divided into a dividend of EUR 0.08 per share, equivalent to a total of approx. MEUR 12.6 as well as an equity repay- ment of EUR 0.09 per share to be returned from the invested unrestricted equity fund, equivalent to a total of approx. MEUR 14.2. CapMan’s distributable funds amounted to MEUR 45.7 on 31 December 2022. The dividend would be paid in two instalments. Publication of the Financial Statements and the Report of the Board of Directors, and the Annual General Meeting for 2023 CapMan Group’s Financial Statements and the Report of the Board of Directors for 2022 will be published as part of the company’s Annual Report for 2022 in February 2023 during week 8. CapMan Plc’s 2022 AGM will be held on Wednesday 15 March 2023 at 10:00 a.m. in Helsinki. The Notice to the Annual General Meeting and other proposals of the Board of Directors to the Annual General Meeting are published by 21 February 2023 the latest. Complete financial statements, as required under the terms of the Finnish Companies Act, will be available on CapMan’s website by 21 February 2023 the latest. Corporate Governance Statement CapMan Plc’s Corporate Governance Statement will be pub- lished separately from the Report of the Board of Directors as part of the company’s Annual Report for 2022 during week 8 and will be available on the company’s website by 21 February 2023 the latest. Decisions of the 2022 Annual General Meeting Decisions of the AGM regarding distribution of funds CapMan’s 2022 Annual General Meeting (AGM) decided, in accordance with the proposal of the Board of Directors, that a dividend of EUR 0.04 per share, equivalent to a total of approx. MEUR 6.3 as well as an equity repayment of EUR 0.11 per share to be returned from the invested unrestricted equity fund, equivalent to a total of approx. MEUR 17.2, would be paid to shareholders. In total, EUR 0.15 per share would be paid to shareholders, equivalent of a total of MEUR 23.6, from distributable funds for 2021. The dividend and equity repayment were paid in two instalments six months apart. The first instalment was paid on 25 March 2022 and the sec- ond instalment was paid on 23 September 2022. Decisions regarding the distribution of funds have been described in greater detail in the stock exchange release on the decisions taken by the General Meetings issued on 16 March 2022. 50 • CAPMAN ANNUAL REPORT 2022 • REPORT OF THE BOARD OF DIRECTORS GROUP CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS Key figures Fees and carry Investment business Calculation of Key Ratios FINANCIAL STATEMENTS Decisions of the AGM regarding the composition of the Board The 2022 AGM decided that the Board of Directors compris- es six members. Mr. Andreas Tallberg, Mr. Johan Bygge, Ms. Catarina Fagerholm, Mr. Johan Hammarén, Ms. Mammu Kaario and Mr. Olli Liitola were elected as members of the Board of Directors for a term of office expiring at the end of the next Annual General Meeting. The Board composition and remunera- tion have been described in greater detail in the stock exchange releases regarding the decisions of the AGM and the organisa- tional meeting of the Board issued on 16 March 2022. Authorisations given to the Board by the AGM The 2022 AGM authorised the Board of Directors to decide on the repurchase and/or on the acceptance as pledges of the company’s shares. The number of own shares to be repur- chased and/or accepted as pledge on the basis of the author- isation shall not exceed 14,000,000 shares in total, which on the day of the AGM corresponded to approximately 8.94 per cent of all shares in the company. Only the unrestricted equity of the company can be used to repurchase own shares on the basis of the authorisation. The AGM also authorised the Board to decide on the issu- ance of shares and other special rights entitling to shares. The number of shares to be issued on the basis of the authorisa- tion shall not exceed 14,000,000 shares in total, which on the day of the AGM corresponded to approximately 8.94 per cent of all shares in the company. The authorisation shall remain in force until the following AGM and 30 June 2023 at the latest. Further details on these authorisations can be found in the stock exchange release on the decisions taken by the AGM issued on 16 March 2022. Shares and shareholders Shares and share capital There were no changes in CapMan’s share capital during 2022. Share capital totalled EUR 771,586.98 as at 31 December 2022. CapMan had 158,054,968 shares outstanding as at 31 December 2022 (156,617,293 shares as at 31 December 2021). All shares generate equal voting rights (one vote per share) and rights to a dividend and other distribution to shareholders. CapMan Plc’s shares are included in the Finnish book-entry system. Company shares As at 31 December 2022, CapMan Plc held a total of 26,299 CapMan shares, representing 0.02 % of shares and voting rights. The market value of own shares held by CapMan was EUR 71,270 as at 31 December 2022 (31 December 2021: EUR 79,949). No changes occurred in the number of own shares held by CapMan Plc during 2022. Trading and market capitalisation CapMan Plc’s shares closed at EUR 2.71 on 31 December 2022 (31 December 2021: EUR 3.04). The trade-weighted average price for 2022 was EUR 2.66 (EUR 2.78). The highest price paid was EUR 3.19 (EUR 3.27) and the lowest EUR 2.22 (EUR 2.24). The number of CapMan Plc shares traded totalled 36.2 million (31.3 million), valued at MEUR 96.4 (MEUR 87.0). The market capitalisation of CapMan Plc shares as at 31 December 2022 was MEUR 427.5 (31 December 2021: MEUR 475.3). Shareholders The number of CapMan Plc shareholders increased by 9 per cent from 2021 and totalled 30 608 as at 31 December 2022 (31 December 2021: 28,137). There were no flagging notifications in 2022. As of 31 December 2022, the Board of Directors and Management Group owned 5,873,426 CapMan shares in total either directly or through controlling interest companies, which corresponded to 3.7 per cent of all shares and votes outstanding. Details on CapMan Plc’s owners by sector and size, together with the company’s major shareholders, nominee-registered shares, and redemption obligation clauses covering company shares are presented in Section 23 Own capital and shares. Personnel CapMan employed 186 people on average in 2022 (1 January– 31 December 2021 average: 161), of whom 141 (125) worked in Finland and the remainder in the other Nordic countries, Luxembourg and the United Kingdom. The figures include 20 people (21) employed by JAY Solutions. A breakdown of personnel by country is presented in Section 5 Employee benefit expenses. 51 • CAPMAN ANNUAL REPORT 2022 • REPORT OF THE BOARD OF DIRECTORS GROUP CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS Key figures Fees and carry Investment business Calculation of Key Ratios FINANCIAL STATEMENTS Remuneration and incentives CapMan’s remuneration scheme consists of short-term and long-term incentive schemes. The short-term scheme covers all CapMan employees, excluding the CEO of the company, and its central objective is earnings per share, for which the Board of Directors has set a minimum target. CapMan has two long-term schemes consisting of in- vestment based long-term share-based incentive plans (Performance Share Plan) for key employees. In the investment based long-term share-based incentive plans the participants are committed to shareholder value crea- tion by investing a significant amount in CapMan Plc shares. CapMan’s 2020 investment-based long-term incentive plan includes one performance period that commenced on 1 April 2020 and ends on 31 March 2023. An early payment of the vested reward shares from the 2020 incentive plan was conducted in April 2022 to facilitate participants’ investment into the new 2022 investment-based long-term incentive plan. Irrespective of the early payment, the 2020 plan will remain in force until the end of its performance period on 31 March 2023 in line with the original terms. CapMan’s 2022 investment-based long-term incentive plan includes three performance periods that commenced on 1 April 2022 and end on 31 March 2023, 2024 and 2025, respectively. The participants may earn a performance-based reward from each of the performance periods and a matching reward from the 2022–2025 period. The rewards from the plan will be paid fully in company shares in 2024, 2025 and 2026. The aim of the 2022 investment-based long-term incentive plan is to align remuneration with CapMan’s sustainability agenda, to retain the plan participants in the company’s service, and to offer them a competitive reward plan based on owning, earning and accumulating the company’s shares. The prerequisite for receiving a reward on the basis of the plans is that a participant acquires company’s shares or allocates previously owned company’s shares up to the number determined by the Board of Directors. The performance-based reward from the plans is based on the company share’s Total Shareholder Return and on a participant’s employment or service upon reward payment. The Board shall resolve whether new shares or existing shares held by the company are given as reward. The target group of the plans consists of approximately 20 people, including the members of the Management Group. Additional information about remuneration schemes is presented in Section 30 Share-based payments. Other signiﬁcant events in 2022 CapMan has raised a total of MEUR 168 in the first closing of the Infra II fund. The fund invests in infrastructure in the energy, transportation and digital communications sectors in the Nor- dics consistent with the first Infra fund. The fund has a target size of MEUR 400 and fundraising for the fund continues. CapMan Residential fund grew to MEUR 816. CapMan also established a new long-term Social Real Estate fund that invests in real estate with a social policy goal in the Nordics. The first commitments for the fund are expected in the first half of 2023. The CapMan Special Situations fund reached MEUR 71 at the end of 2022. In October 2022, CapMan Infra I fund’s exit from Norled was closed. In September 2022, Growth I fund exited Avidly and Buyout VIII fund Fortaco. Scala Fund Advisory Oy, a wholly owned subsidiary of Cap- Man Plc, merged into its parent company in September 2022. Subsidiaries and foreign branches are disclosed in the Note 31. In September 2022, CapMan announced its new strategy and updated financial objectives. The new strategy was outlined during the company’s Capital Markets Day. In June 2022, the CapMan Growth Equity 2017 fund was transferred into carry following the exit from Picosun. The fund has eight assets remaining and CapMan receives carried inter- est from each exit. In April 2022, CapMan issued a MEUR 40 sustainabili- ty-linked bond. The proceeds from the bond were used for a v oluntary redemption of its MEUR 31.5 senior bond due in 2023 and general financing purposes and it significantly extended the maturity of CapMan’s loan portfolio. In April 2022, CapMan resolved on a directed share issue of 1,437,675 new shares as early payment of the vested reward shares from the 2020 incentive plan to CapMan Group management and selected key employees. The new shares were registered with the Trade Register on 4 May 2022. The 2020 in- centive plan will incur MEUR 2.0 in costs for the full year 2022, of which MEUR 1.4 for the second quarter of 2022 is related to the payment of the vested reward. The Board of Directors of CapMan Plc resolved to establish a new Performance Share Plan 2022–2025 for CapMan Group management, as well as selected Group key employees. The 2013 vintage CapMan Nordic Real Estate fund was transferred into carry. The fund has three assets remaining and CapMan receives carried interest from each exit. In March 2022, Nest Capital III, a Nordic private debt fund, held its final close at MEUR 109. Events after the end of the ﬁnancial year In February 2023, CapMan Plc and non-controlling sharehold- ers of JAY Solutions sold their share of CapMan’s subsidiary JAY Solutions to Swedish Bas Invest AB. The disposal of JAY Solutions is not expected to have a significant impact on Cap- Man’s result for 2023 or its financial position. The Board of Directors of CapMan Plc has decided to appoint Pia Kåll, M.Sc. (Eng.), (born 1980) as the CEO of the company as of 15 March 2023. Andreas Tallberg, who has served as the Chair of the Board of Directors since 2017, has announced that he is not available for re-election to the Board of Direc- tors. CapMan’s Shareholders’ Nomination Board proposes to the company’s 2023 Annual General Meeting that CapMan’s current CEO Joakim Frimodig be elected as a member of the company’s Board of Directors. The proposed members of the Board of Directors haves stated that if the Annual General Meeting decides on the composition of the Board of Directors in accordance with the proposal of the Shareholders’ Nomina- tion Board, the Board of Directors will elect Frimodig as Chair from among its members. Frimodig would serve as full-time Chair of the Board of Directors as of 15 March 2023. 52 • CAPMAN ANNUAL REPORT 2022 • REPORT OF THE BOARD OF DIRECTORS GROUP CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS Key figures Fees and carry Investment business Calculation of Key Ratios FINANCIAL STATEMENTS Signiﬁcant risks and short-term uncertainties General risks Private equity investment is generally subject to a risk of non-liquid investments, among others, which means uncertain- ty of the realisation of any increase in value, a risk concerning general economic development and market situation and a risk concerning the economy and political situation of target countries. The most significant short-term risk is the Russian invasion of Ukraine and the ongoing Covid-19 pandemic and related restrictions, which both impact general market sentiment and development and, as such also CapMan’s business. Risks related to CapMan’s business are detailed below. Market risks Investment operations carried out by CapMan are subject to general market risk. Market values can change, for example, because of fluctuations in the equity, fixed income, currency and real estate markets. Changes in market values impact the result of CapMan through the appreciations of its investment assets. Changes in the equity markets influence the valuation of un- listed portfolio companies because the valuation methods used by funds include the share values of suitable listed companies. Economic uncertainty may have a direct impact on the success of the funds administered by CapMan, on the success of Cap- Man’s investment activities, and also on the assets available for investment or solvency of the current and potential investors of the funds. Rising inflation and its potential impact on long-term interest rates may raise yield expectations and reduce willingness to invest. In addition, rising inflation may negatively impact cost efficiency in portfolio companies and at CapMan. The Russian invasion of Ukraine and the resulting increase in geopolitical uncertainty may weaken investor interest also towards the Nordic countries. Risks related to the success of the business The business operations of the CapMan Group have a material risk of failure regarding the establishment of new private equity funds and their fundraising. Successful fundraising is important to management fees and creates opportunities for receiving carried interest income in the future. For example, poor perfor- mance of investments made by funds managed by CapMan, increasing competition or reasons that are independent of CapMan may make it more difficult to raise funds from new or current investors in the future. Gaining new customers or the launch of new investment areas, products or service businesses may also fail, which may prevent or hamper the realisation of CapMan’s growth objec- tives. Large customers or customer concentration in open-end- ed funds may diminish the growth outlook of such funds, should one or several customers decide to redeem their units. Risks related to fair value changes in portfolio companies, real estate or infrastructure investments The values of portfolio companies can vary positively or nega- tively within short periods if changes occur in the peer group or in the interest in the company of potential buyers. As a result of exit processes, significant return is typically realised on successful investments also in the short term as the exit price is based on strategic value and synergies created for the buyer, and not directly on peer group multiples. The fair values of real estate and infrastructure investments may also vary between review periods based on changes in, inter alia, demand, capacity, condition or exit process. The variations are typically smaller compared to the variations in the fair value of portfolio companies. Risks related to carried interest and performance-based income The timing of exits and the magnitude of the potential carried interest income is difficult to foretell. The transaction-based fees of Wealth Services may also vary significantly from period to period. Group companies managing a fund may in certain circum- stances, pursuant to the terms of the fund agreement, have to return carried interest income they have received (so-called clawback). The obligation to return carried interest income ap- plies typically when, according to the final distribution of funds, the carried interest income received by the fund management company exceeds the carried interest it is entitled to when the fund expires. CapMan recognises revenue from carried interest, to the extent that 1) carried interest is based on realised cash flows and repayment risk is estimated to be very low, 2) CapMan is entitled to carried interest, 3) a confirmation on the amount has been received and 4) CapMan is relatively close to receiving it in cash. Returned carried interest income based on clawback conditions would, in turn, have a negative impact on CapMan’s result as a potential clawback provision may not be sufficient. Risks related to the availability or cost of ﬁnancing Other sources of uncertainty related to CapMan’s operations and business areas are related to structural changes in the business environment, and other potential events that, when realised, may trigger the materialisation of such risks. Such changes and events may be, for example, inability to retain and attract key personnel, technological development, digitalisation, sustainability risks, and cyber security risks that may lead to inability to adequately meet customer expectations, downtime of services, interrupted processes, losses as a consequence of, for example, criminal activity and/or reputational damages. In addition, changes in the regulatory environment may have a significant effect on CapMan’s business operations. 53 • CAPMAN ANNUAL REPORT 2022 • REPORT OF THE BOARD OF DIRECTORS GROUP CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS Key figures Fees and carry Investment business Calculation of Key Ratios FINANCIAL STATEMENTS The impact of the Russian invasion of Ukraine on CapMan’s business Following the Russian invasion of Ukraine, CapMan has in April 2022 written down MEUR 3.4 of investments in former CapMan Russia funds on its balance sheet as well as a MEUR 1.2 of loan receivables from an investment team operating in Russia and formerly part of CapMan Group. The balance of both items is now zero. CapMan’s operations do not have other direct links to Ukraine or Russia. The Russian invasion of Ukraine may impact CapMan’s business through, among others, the follow- ing earnings streams mainly due to the increase in geopolitical uncertainty. Management fees: Management fees per fund are deter- mined at the establishment of a fund and are paid to the management company, i.e., CapMan, twice per year based on the original fund size, including commitments, over the fund’s investment period (generally five years) following which management fees are determined based on the at-cost value of the underlying portfolio. These fees are long-term and highly predictable, and we see little volatility in the near/mid-term. Future management fees are affected mainly by new fund- raisings and exits from existing funds. If ongoing fundraising projects are postponed or delayed due to increased geopolitical uncertainty, management fee growth prospects may be affected. Exits following the end of the investment period reduce the ag- gregate at-cost price of the remaining portfolio, on which man- agement fees are based. If exits are delayed due to increased uncertainty in the market, management fees remain stable. In addition to investments in CapMan Russia funds, which have been written down, funds managed by CapMan do not have direct investments or other significant exposure to Ukraine or Russia. Fees from wealth advisory services: Fees from wealth advi- sory services are mainly based on long-term contracts and the impact of the invasion is limited for the time being. Transac- tion-based fees are more susceptible to market risk and are therefore more volatile. Carried interest income: The increased uncertainty, the impact on value creation in the portfolio and delayed exit pro- cesses due to geopolitical uncertainty may impact the timing and magnitude of carried interest from funds. CapMan does not provide guidance regarding carried interest. Service business fees: Service fees are based on long-term contracts and are less susceptible to the impact of the invasion. Investment business income: Investment business income is defined in the income statement as the change in fair value of investments and consists of both realised and unrealised changes. Due to the Russian invasion of Ukraine, CapMan wrote down the value of its fund investments in two old Russia funds. However, the geopolitical uncertainty may impact the investment business also indirectly, although mid and/or long- term impacts and their scope are difficult to assess. Because unlisted assets are valued less frequently than listed assets, the impact of short-term market shocks and volatility is in general less pronounced in these asset classes compared to the listed market. However, the effects may, in turn, take longer to pro- cess and unlisted assets may lag the listed market in the return to so-called normal levels. Financial objectives CapMan’s objective is to pay an annually increasing dividend to its shareholders. The combined growth objective for the Management Company and Service businesses is more than 15 per cent p.a. on average. The objective for return on equity is more than 20 per cent p.a. on average. CapMan’s equity ratio target is more than 50 per cent. Outlook estimate for 2023 CapMan expects to achieve these financial objectives gradually and key figures are expected to show fluctuation on an annual basis considering the nature of the business. CapMan esti- mates assets under management to grow in 2023. The com- pany’s objective is to grow operating profit excluding carried interest income and fair value changes. These estimations do not include possible items affecting comparability. Carried interest income from funds managed by CapMan and the return on CapMan’s investments have a substantial impact on CapMan’s overall result. In addition to portfolio com- pany and asset-specific development and exits from portfolio companies and assets, various factors outside of the portfolio’s and CapMan’s control influence fair value development of Cap- Man’s overall investments, as well as the magnitude and timing of carried interest. CapMan’s objective is to improve results in the long term, taking into consideration annual fluctuations related to the nature of the business. For these and other above-mentioned reasons, CapMan does not provide numeric estimates for 2023. Helsinki, 2 February 2023 CAPMAN PLC Board of Directors 54 • CAPMAN ANNUAL REPORT 2022 • REPORT OF THE BOARD OF DIRECTORS GROUP CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS Key figures Fees and carry Investment business Calculation of Key Ratios FINANCIAL STATEMENTS Key Performance Indicators for CapMan Group M€ 2018 2019 2020 2021 2022 Turnover 1) 33.5 49.0 43.0 52.8 67.5 Management fees 22.1 24.9 29.0 36.6 38.8 Sale of services 10.3 17.2 13.1 13.3 19.1 Carried interest 1.0 6.9 0.9 2.9 9.6 Other operating income 0.0 0.0 0.1 0.0 0.0 Materials and services -1.0 Operating expenses -29.1 -41.8 -35.1 -42.1 -50.0 Fair value gains/losses of investments 1) 7.6 12.2 4.4 33.9 36.5 Operating profit 12.0 19.4 12.3 44.6 53.1 Operating profit, comparable 12.0 25.0 12.3 44.6 55.7 Financial income and expenses -2.7 -1.8 -3.1 -4.0 -5.5 Profit before taxes 9.3 17.6 9.2 40.6 47.6 Profit for the financial year 8.5 15.9 6.3 35.4 41.0 Return on equity (ROE), % 2) 6.8 12.7 5.2 29.4 30.5 Return on equity (ROE), comparable, % 2) 6.8 16.0 5.2 29.4 32.4 Return on investment (ROI), % 6.7 10.5 6.3 21.2 23.1 Return on investment (ROI), comparable, % 6.7 13.5 6.3 21.2 24.2 Equity ratio, % 58.7 59.9 51.9 53.3 52.7 Net gearing, % 4.3 7.2 22.5 14.0 26.3 Dividends and return of capital paid 3) 17.7 20.0 21.9 23.6 26.9 Personnel 117 148 146 161 186 1) As of January 1, 2019, CapMan changed its accounting policy regarding classification of dividend and interest income from financial assets held for trading (“market portfolio”), and the figures for the comparison periods have been restat- ed. Dividend and interest income from market portfolio previously included in turnover has been transferred to item Fair value changes of investments. 2) CapMan has changed the calculation of Return on equity (ROE) in 2019. Return on equity is calculated as profit for the period divided by average total equity (incl. non-controlling interests). Previously, ROE was calculated as profit attribut- able to equity holders of the parent divided by average equity attributable to equity holders of the parent. The figures for the comparison periods have been restated accordingly. 3) Proposal of the Board of Directors to the Annual General Meeting for the financial year 2022. Key ﬁgures 55 • CAPMAN ANNUAL REPORT 2022 • REPORT OF THE BOARD OF DIRECTORS GROUP CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS Key figures Fees and carry Investment business Calculation of Key Ratios FINANCIAL STATEMENTS Key Ratios Per Share 2018 2019 2020 2021 2022 Earnings per share, cents 5.5 9.2 3.3 21.9 25.1 Diluted earnings per share, cents 5.4 9.0 3.3 21.4 24.8 Comparable diluted earnings per share, cents 5.4 11.6 3.3 21.4 26.4 Shareholders' equity/share, cents 82.6 85.1 72.7 81.4 90.2 Dividend/share, cents 1) 12.0 13.0 14.0 15.0 17.0 Dividend/earnings , % 1) 218.2 141.3 424.2 68.5 67.7 Average share issue adjusted number of shares 146,522 152,155 155,797 156,580 157,560 during the financial year ('000) 147,142 153,755 156,459 156,617 158,055 Share issue adjusted number of shares at year-end ('000) 147,116 153,728 156,433 156,591 158,029 Own shares (‘000) 26 26 26 26 26 1) Proposal of the Board of Directors to the Annual General Meeting for the financial year 2022. 56 • CAPMAN ANNUAL REPORT 2022 • REPORT OF THE BOARD OF DIRECTORS GROUP CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS Key figures Fees and carry Investment business Calculation of Key Ratios FINANCIAL STATEMENTS TYÖNUMERO 10 2018 2019 2020 20222021 Comparable earnings/share and dividend/share * , € * The Board of Directors propose that a total distribution of EUR 0.17/share be paid for 2022.  Comparable earnings/share  Dividend/share 0.30 0.25 0.20 0.15 0.10 0.05 0.00 0.26 0.05 0.17 0.12 0.12 0.13 0.21 0.03 0.15 0.14 Key ﬁgures - CapMan Group CapMan’s turnover and operating profit were at record levels in 2022. The company’s objective is to pay an annually increasing dividend to its shareholders. The objective for return on equity is more than 20 per cent p.a. on average. CapMan’s equity ratio target is more than 50 per cent. 60 50 40 30 20 10 0 2018 2019 2020 2022 2021 TYÖNUMERO 9 Equity ratio, % 52.7 58.7 59.9 53.3 51.9 35 30 25 20 15 10 5 0 TYÖNUMERO 8 2018 2019 2020 20222021 Comparable ROI and ROE, %  Comparable Return on Equity (ROE)  Comparable Return on Investment (ROI) 6.3 32.4 6.8 24.2 6.7 13.5 16.0 21.2 6.3 29.4 5.2 70 60 50 40 30 20 10 0 2018 2019 2020 20222021 TYÖNUMERO 16 Turnover and comparable operating proﬁt, M€  Turnover  Comparable operating profit 67.5 55.6 12.0 52.8 43.0 44.6 12.3 25.0 33.5 49.0 70 60 50 40 30 20 10 0 2018 2019 2020 20222021 TYÖNUMERO 16 Turnover and comparable operating proﬁt, M€  Turnover  Comparable operating profit 67.5 55.6 12.0 52.8 43.0 44.6 12.3 25.0 33.5 49.0 57 • CAPMAN ANNUAL REPORT 2022 • REPORT OF THE BOARD OF DIRECTORS GROUP CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS Key figures Fees and carry Investment business Calculation of Key Ratios FINANCIAL STATEMENTS Fees and carry The combined growth objective for the Management Company and Service businesses is more than 15 per cent p.a. on average. Fees have increased by approx. 17 per cent p.a. Fee profitability has increased five consecutive years. The year-to- year variation in the realisation of carried interest is significant. 60 50 40 30 20 10 0 2018 2019 2020 2022 2021 TYÖNUMERO 7 Fees from Management Company business and Services, M€ 49.4 41.4 57.4 31.9 41.6 20 16 12 8 4 0 2018 2019 2020 2022 2021 TYÖNUMERO 21 Comparable fee-based proﬁtability, M€ * Comparable operating profit of Management Company and Service Business excl. carried interest. 18.3 6.2 12.4 14.5 13.2 10 8 6 4 2 0 2018 2019 2020 2022 2021 Comparable carried interest income, M€ 9.6 6.9 1.0 2.9 0.9 58 • CAPMAN ANNUAL REPORT 2022 • REPORT OF THE BOARD OF DIRECTORS GROUP CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS Key figures Fees and carry Investment business Calculation of Key Ratios FINANCIAL STATEMENTS Investment business Investment business income is based on the change in fair values and consists of both realised and unrealised changes. In addition to investments at fair value, CapMan has made further commitments to its funds. The allocation of invest- ments between investment areas has become more diversified over the last 10 years. 60 50 40 30 20 10 0 TYÖNUMERO 25 Investments and commitments by type, M€  Investments by type  Remaining commitments Real Estate 7.6 44.0 Buyout 26.1 25.3 Growth 11.2 11.2 18.6 Infra 12.1 13.1 Special Situations 4.9 2.9 Credit 4.8 4.3 Funds of funds 18.8 16.5 External Venture Capital funds and Other 4.6 42.5 40 35 30 25 20 15 10 5 0 2018 2019 2020 2022 2021 TYÖNUMERO 24 Comparable result impact of own investments, M€ 32.7 4.0 35.7 10.4 6.5 300 250 200 150 100 50 0 TYÖNUMERO 23 2018 2019 2020 20222021 Investments and commitments, M€  Investments at fair value  Remaining commitments 169.5 126.6 129.4 89.1 98.0 103.8 130.4 116.6 90.3 109.1 100 80 60 40 20 0 TYÖNUMERO 26 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 20222011 Allocation of long-term investments from balance sheet and undrawn commitments (%)  Private Equity  Infrastructure  Real Estate  External - Venture Capital  International PE Fund of funds * The table shows the allocation of fund investments from balance sheet from 2010 onwards as well as undrawn commitments as of 31 December 2022. 31% 8% 26% 25% 10% 55% 1% 21% 9% 14% 60 50 40 30 20 10 0 TYÖNUMERO 25 Investments and commitments by type, M€  Investments by type  Remaining commitments Real Estate 7.6 44.0 Buyout 26.1 25.3 Growth 11.211.2 18.6 Infra 12.1 13.1 Special Situations 4.9 2.9 Credit 4.8 4.3 Funds of funds 18.8 16.5 External Venture Capital funds and Other 4.6 42.5 59 • CAPMAN ANNUAL REPORT 2022 • REPORT OF THE BOARD OF DIRECTORS GROUP CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS Key figures Fees and carry Investment business Calculation of Key Ratios FINANCIAL STATEMENTS Return on equity (ROE), % = Profit / loss x 100 Shareholders’ equity (average) Return on investment (ROI), % = Profit / loss + income taxes + interest expenses and other financial expenses x 100 Balance sheet total - non-interest bearing debts (average) Equity ratio, % = Total shareholders’ equity x 100 Balance sheet total - advances received Net gearing, % = Net interest-bearing liabilities x 100 Shareholders’ equity Earnings per share (EPS) = Profit/loss for the financial year - hybrid loan interest Share issue adjusted number of shares (average) Shareholders’ equity per share = Shareholders’ equity Share issue adjusted number of shares at the end of the financial year Dividend per share = Dividend paid in the financial year Share issue adjusted number of shares at the end of the financial year Dividend per earnings, % = Dividend/share Earnings/share x 100 * CapMan has changed the calculation of Return on equity (ROE) in 2019. Return on equity is calculated as annualised profit for the period divided by average total equity (incl. non-controlling interests). Previously, ROE was calculated as annualised profit attributable to equity holders of the parent divided by average equity attributable to equity holders of the parent. The figures for the comparison periods have been restated accordingly. Calculation of Key Ratios 60 • CAPMAN ANNUAL REPORT 2022 • REPORT OF THE BOARD OF DIRECTORS GROUP CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS Key figures Fees and carry Investment business Calculation of Key Ratios FINANCIAL STATEMENTS 61 • CAPMAN ANNUAL REPORT 2022 • FINANCIAL STATEMENTS GROUP CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS Financial Statements 62 • CAPMAN ANNUAL REPORT 2022 • FINANCIAL STATEMENTS GROUP CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS Group Statement of Comprehensive Income (IFRS) ............ 63 Group Balance Sheet (IFRS) .............................................. 64 Group Statement of Changes in Equity (IFRS) ..................... 65 Group Cash Flow Statement (IFRS) .................................... 66 Notes to the Consolidated Financial Statements 1. Accounting policies ............................................... 67 2. Segment information ............................................ 74 3. Turnover .............................................................. 76 4. Other operating income ........................................ 76 5. Employee benefit expenses ...................................77 6. Depreciation ......................................................... 77 7. Other operating expenses ..................................... 77 8. Adjustments to cash flow statement and total cash outflow for leases ................................. 78 9. Fair value gains/losses of investments .................. 78 10. Finance income and costs ..................................... 78 11. Income taxes ........................................................ 79 12. Earnings per share ............................................... 79 13. Assets held for sale .............................................. 80 14. Tangible assets ..................................................... 80 15. Goodwill ............................................................... 81 16. Other intangible assets ........................................ 82 17. Investments at fair value through profit or loss .......82 18. Receivables - Non-current ..................................... 83 19. Deferred tax assets and liabilities ......................... 83 20. Trade and other receivables .................................. 84 21. Financial assets at fair value through profit or loss ............................................ 84 22. Cash and cash equivalents .................................... 85 23. Share capital and shares ...................................... 85 24. Interest-bearing loans and borrowings - Non-current ...................................... 87 25. Other non-current liabilities ................................. 87 26. Trade and other payables - Current ....................... 87 27. Interest-bearing loans and borrowings - Current ..... 87 28. Financial assets and liabilities .............................. 88 29. Commitments and contingent liabilities .................89 30. Share-based payments ......................................... 90 31. Related party disclosures .......................................92 32. Financial risk management ....................................94 Parent Company Income Statement (FAS) ........................ 102 Parent Company Balance Sheet (FAS) .............................. 103 Parent Company Cash Flow Statement (FAS) .................... 104 Notes to the Parent Company Financial Statements (FAS) .............................................. 105 Signatures to the Report of the Board of Directors and Financial Statements ................................................ 112 Auditor’s report ................................................................. 113 Shares and shareholders ...................................................117 Information for shareholders .............................................118 Financial Statements 1,000 EUR Note 2022 2021 Management fees 38,847 36,585 Sale of services 19,072 13,341 Carried interest 9,613 2,858 Turnover 2, 3 67,532 52,784 Material and services -985 0 Other operating income 4 2 22 Employee benefit expenses 5 -34,571 -30,632 Depreciation and impairment 6 -4,180 -1,476 Other operating expenses 7 -11,236 -9,969 Fair value gains/losses of investments 9 36,547 33,912 Operating profit 53,108 44,642 Financial income and expenses 10 -5,475 -4,042 Profit before taxes 47,633 40,600 Income taxes 11 -6,585 -5,239 Profit for the financial year 41,049 35,362 Other comprehensive income: Items that may be subsequently reclassified to profit or loss Translation difference -295 -39 Total comprehensive income 40,754 35,322 Profit attributable to: Equity holders of the Company 39,616 34,320 Non-controlling interest 1,433 1,042 Total comprehensive income attributable to: Equity holders of the Company 39,321 34,281 Non-controlling interest 1,433 1,042 Earnings per share for profit attributable to the equity holders of the Company: Earnings per share (basic), cents 12 25.1 21.9 Earnings per share (diluted), cents 12 24.8 21.4 The Notes are an integral part of the Financial Statements. Group Statement of Comprehensive Income (IFRS) GROUP CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS Group Statement of Comprehensive Income (IFRS) Group Balance Sheet (IFRS) Group Statement of Changes in Equity (IFRS) Group Cash Flow Statement (IFRS) Notes to the Consolidated Financial Statements Parent Company Income Statement (FAS) Parent Company Balance Sheet (FAS) Parent Company Cash Flow Statement (FAS) Notes to the Parent Company Financial Statements (FAS) Signatures to the Report of the Board of Directors and Financial Statements Auditor’s report Shares and shareholders Information for shareholders 63 • CAPMAN ANNUAL REPORT 2022 • FINANCIAL STATEMENTS 1,000 EUR Note 31 Dec 2022 31 Dec 2021 ASSETS Non-current assets Tangible assets 14 3,571 1,754 Goodwill 15 7,886 15,314 Other intangible assets 16 100 459 Investments at fair value through profit and loss 17 Investments in funds 169,063 130,011 Other financial assets 434 393 Receivables 18 5,545 10,066 Deferred tax assets 19 1,790 1,836 188,389 159,834 Current assets Trade and other receivables 20 20,718 15,223 Financial assets at fair value through profit and loss 21 65 0 Cash and bank 22 55,571 65,207 76,353 80,429 Assets held for sale 13 5,769 0 Total assets 270,512 240,263 1,000 EUR Note 31 Dec 2022 31 Dec 2021 EQUITY AND LIABILITIES Capital attributable to the Company’s equity holders 23 Share capital 772 772 Share premium account 38,968 38,968 Other reserves 35,425 52,718 Translation difference -582 -286 Retained earnings 65,473 33,607 Total capital attributable to the Company’s equity holders 140,056 125,778 Non-controlling interests 2,088 1,616 Total equity 142,144 127,394 Non-current liabilities Deferred tax liabilities 19 8,418 4,627 Interest-bearing loans and borrowings 24 91,854 82,038 Other non-current liabilities 25 7,343 7,552 107,615 94,217 Current liabilities Trade and other payables 26 18,446 16,722 Interest-bearing loans and borrowings 27 1 112 970 Current income tax liabilities 478 959 20,036 18,652 Liabilities associated with assets held for sale 13 717 0 Total liabilities 128,367 112,869 Total equity and liabilities 270,512 240,263 Group Balance Sheet (IFRS) GROUP CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS Group Statement of Comprehensive Income (IFRS) Group Balance Sheet (IFRS) Group Statement of Changes in Equity (IFRS) Group Cash Flow Statement (IFRS) Notes to the Consolidated Financial Statements Parent Company Income Statement (FAS) Parent Company Balance Sheet (FAS) Parent Company Cash Flow Statement (FAS) Notes to the Parent Company Financial Statements (FAS) Signatures to the Report of the Board of Directors and Financial Statements Auditor’s report Shares and shareholders Information for shareholders 64 • CAPMAN ANNUAL REPORT 2022 • FINANCIAL STATEMENTS The Notes are an integral part of the Financial Statements. Attributable to the equity holders of the Company 1,000 EUR Note Share capital Share premium account Other reserves Translation difference Retained earnings Total Non- controlling interests Equity on 1 January 2021 23 772 38,968 71,416 -247 1,616 112,524 742 Profit for the year 34,320 34,320 1,042 Other comprehensive income for the year Currency translation differences -39 -39 Total comprehensive income for the year -39 34,320 34,281 1,042 Share subscriptions with options 90 90 Performance Share Plan 787 787 Dividends and return of capital -18,788 -3,131 -21,920 -328 Transactions with non-controlling interests 15 15 161 Equity on 31 December 2021 23 772 38,968 52,718 -286 33,607 125,778 1,616 Profit for the year 39,616 39,616 1,433 Other comprehensive income for the year Currency translation differences -295 -295 Total comprehensive income for the year -295 39,616 39,321 1,433 Performance Share Plan -1,126 -1,126 Dividends and return of capital -17,297 -6,755 -24,052 -1,083 Transactions with non-controlling interests 4 131 135 122 Equity on 31 December 2022 23 772 38,968 35,425 -582 65,473 140,056 2,088 The Notes are an integral part of the Financial Statements. Group Statement of Changes in Equity (IFRS) GROUP CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS Group Statement of Comprehensive Income (IFRS) Group Balance Sheet (IFRS) Group Statement of Changes in Equity (IFRS) Group Cash Flow Statement (IFRS) Notes to the Consolidated Financial Statements Parent Company Income Statement (FAS) Parent Company Balance Sheet (FAS) Parent Company Cash Flow Statement (FAS) Notes to the Parent Company Financial Statements (FAS) Signatures to the Report of the Board of Directors and Financial Statements Auditor’s report Shares and shareholders Information for shareholders 65 • CAPMAN ANNUAL REPORT 2022 • FINANCIAL STATEMENTS Group Cash Flow Statement (IFRS) 1,000 EUR Note 2022 2021 Cash flow from operations Profit for the financial year 41,049 35,362 Adjustments on cash flow statement 8 -17,632 -22,337 Change in working capital: Change in current non-interest-bearing receivables -8,054 -1,545 Change in current trade payables and other non-interest-bearing liabilities -2,215 6,087 Interest paid -3,955 -3,971 Taxes paid -3,149 -2,571 Cash flow from operations 6,044 11,025 Cash flow from investing activities Acquisition of subsidiaries 0 231 Proceeds from sale of subsidiaries 322 221 Investments in tangible and intangible assets -333 -140 Investments at fair value through profit and loss 3,039 17,522 Long-term loan receivables granted -844 -144 Receivables from long-term receivables 175 1,389 Interest received 83 91 Cash flow from investing activities 2,441 19,170 1,000 EUR Note 2022 2021 Cash flow from financing activities Share issue 0 90 Proceeds from borrowings 28 39,791 140 Repayment of long-term loan 28 -31,520 0 Payment of lease liabilities -1,189 -976 Dividends paid and return of capital -25,073 -22,244 Cash flow from financing activities -17,992 -22,990 Change in cash and cash equivalents -9,507 7,205 Cash and cash equivalents at start of year 65,207 58,002 Translation difference 244 Cash and cash equivalents at end of year 22 55,944 65,207 The Notes are an integral part of the Financial Statements. GROUP CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS Group Statement of Comprehensive Income (IFRS) Group Balance Sheet (IFRS) Group Statement of Changes in Equity (IFRS) Group Cash Flow Statement (IFRS) Notes to the Consolidated Financial Statements Parent Company Income Statement (FAS) Parent Company Balance Sheet (FAS) Parent Company Cash Flow Statement (FAS) Notes to the Parent Company Financial Statements (FAS) Signatures to the Report of the Board of Directors and Financial Statements Auditor’s report Shares and shareholders Information for shareholders 66 • CAPMAN ANNUAL REPORT 2022 • FINANCIAL STATEMENTS Notes to the Consolidated Financial Statements Group information CapMan’s business comprise of private equity fund manage- ment and advisory services, as well as investment business. In the Management Company Business, the funds managed by CapMan make investments in Nordic companies and in real es- tate and infrastructure assets in the Nordic countries. The Man- agement Company Business also includes the wealth services offered to smaller investors. The Service Business includes analysis and reporting services, and procurement services to companies. Through its investment business, CapMan invests in the private equity asset class, mainly in its own funds, but also selectively in funds managed by external fund managers. The parent company of the Group is CapMan Plc and is domiciled in Helsinki, with a registered office address at Ludvig- inkatu 6, 00130 Helsinki, Finland. The Consolidated Financial Statements may be viewed online at www.capman.com, or a hard copy is available from the office of the parent company. The Consolidated Financial Statements for 2022 have been approved for publication by CapMan Plc’s Board of Directors on February 1, 2023. Pursuant to the Finnish Companies Act, shareholders may adopt or reject the financial statements and make decisions on amendments to them at the Annual General Meeting. 1. Accounting policies Basis of preparation The Group’s financial statements have been prepared in accord- ance with International Financial Reporting Standards (IFRS) in force at December 31, 2022 as adopted by the European Union. International Financial Reporting Standards, referred to in the Finnish Accounting Act and in ordinances issued based on the provisions of this Act, are standards and their interpre- tations adopted in accordance with the procedure laid down in regulation (EC) No 1606/2002 of the European Parliament and of the Council. The notes to the consolidated financial statements have been prepared in accordance with the Finnish accounting standards as and where they supplement IFRS requirements . The preparation of financial statements in conformity with IFRS requires the Group’s management to make estimates and assumptions when applying CapMan’s accounting principles, and these are presented in more detail under ‘Use of estimates’. The Consolidated Financial Statements have been pre- pared under the historical cost convention, except for financial assets and liabilities valued at fair value through profit or loss. The information in the Consolidated Financial Statements is presented in thousands of euros. Figures in the accounts have been rounded and consequently the sum of individual figures can deviate from the presented sum figure. New and amended standards and interpretations applied in ﬁnancial year ended The Group has applied the following amended standards and interpretations that have come into effect as of January 1, 2022. They had no impact on the consolidated financial statements. • Amendments to standards IFRS 3 Business Combinations, IAS 16 Property, Plant and Equipment, IAS 37 Provisions, Con- tingent Liabilities and Contingent Assets. These amendments provide further clarifications for a more consistent application of the standards, or update references. • Annual Improvements 2018-2020. The annual improvements aim at streamlining and clarifying existing standards. The an- nual improvements contain amendments to IAS 41 Agriculture, IFRS 1 First-time Adoption of International Financial Reporting Standards, and IFRS 9 Financial Instruments. Adoption of new and amended standards and interpretations applicable in future ﬁnancial years The Group has not yet adopted the following new and amended standards and interpretations already issued by the IASB. The Group will adopt them as of the effective date or, if the date is other than the first day of the financial year, from the beginning of the subsequent financial year. These amendments have been endorsed for use by the European Union: • Amendments to IAS 12 Income Taxes: Deferred Tax related to Assets and Liabilities arising from a Single Transaction (effec- tive for financial years beginning on or after January 1, 2023). • Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2: Disclosure of Accounting poli- cies (effective for financial years beginning on or after January 1, 2023). • Amendments to IAS 8 Accounting policies, Changes in Accounting Estimates and Errors: Definition of Accounting Estimates (effective for financial years beginning on or after January 1, 2023). These amended standards are not expected to have an impact on the Group’s financial statements . 67 • CAPMAN ANNUAL REPORT 2022 • FINANCIAL STATEMENTS GROUP CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS Group Statement of Comprehensive Income (IFRS) Group Balance Sheet (IFRS) Group Statement of Changes in Equity (IFRS) Group Cash Flow Statement (IFRS) Notes to the Consolidated Financial Statements Parent Company Income Statement (FAS) Parent Company Balance Sheet (FAS) Parent Company Cash Flow Statement (FAS) Notes to the Parent Company Financial Statements (FAS) Signatures to the Report of the Board of Directors and Financial Statements Auditor’s report Shares and shareholders Information for shareholders Consolidation principles As CapMan has determined it meets the definition of an investment entity, its subsidiaries are classified either as operating subsidiaries, that are considered to be an extension of the Parent’s operations, and as such, they are consolidated or investment entity subsidiaries, that are fair valued through profit or loss. The types of subsidiaries and their treatment in CapMan’s consolidated accounts are as follows: • Subsidiaries that provide fund management services (fund managers) or manage direct investments are considered to be an extension of the Parent’s business and as such, they are consolidated; • Subsidiaries that provide fund management services (fund managers) and which also hold direct investments in the funds are consolidated and the investments in the funds are fair valued through profit or loss; • Subsidiaries that provide fund investment advisory services (advisors) are considered to be an extension of the Parent’s business and as such, they are consolidated; • Investment entity subsidiaries (CapMan Fund Investments SICAV-SIF), through which CapMan makes its own fund investments, are valued at fair value through profit or loss. Significant judgment applied by management in the preparation of the consolidated financial statements – investment entity basis CapMan qualifies as an investment entity as defined by IFRS 10, because the corner stone of its business purpose is to obtain capital from investors to its closed-end private equity funds and to provide investment management services to those funds to gain both capital appreciation and investment income. Direct investments represent a relatively small part compared to total assets under management. CapMan obtains funds from many external investors for investment purposes. Documented exit strategies exist for each fund’s portfolio investments. Each fund’s portfolio investments and the real estate investments are fair valued and such fair value information is provided both to the fund investors on reporting date and also for CapMan’s internal management reporting purposes. In addition, manage- ment has assessed that the following characteristics further support investment entity categorization: CapMan holds several investments itself in the funds, investments in the funds are held by several investors, the investors are not related parties and the investments are held mostly in form of equity. Significant judgment applied by management in the preparation of the consolidated financial statements – control over funds One of the most significant judgments management made in preparing the Company’s consolidated financial statements is the determination that Company does not have control over the funds under its management. Control is presumed to exist when a parent has power over the investee, has exposure to variable returns from the fund and is able to use its power to affect the level of returns. CapMan manages the funds against management fee received from the investors on the basis of the investment management mandate negotiated with the investors and it also makes direct investments in the funds under its management. Accordingly, CapMan was required to determine, whether it is acting primarily as a principal or as an agent in exercising its power over the funds. In the investment management mandate the investors have set detailed instructions in all circumstances relating to the management of the fund limiting the actual influence of the general partner at very low. In general, having a qualified ma- jority, investors have a right to replace the general partner and/ or fund manager. The remuneration CapMan is entitled to is commensurate with the services it provides and corresponds to remuneration customarily present in arrangements for similar services on an arm’s length basis. CapMan’s direct investment (typically between of 1% to 5%) in the funds and thus the share of the variability of the returns compared with the other investors is relatively small. As an investor in the fund CapMan has no representation nor voting rights as it has been specifical- ly excluded in the investment management mandate. Therefore, management has concluded that despite it from formal perspective exercises power over the funds by con- trolling the general partner of the fund, its actual operational ability is limited in the investment management mandate in a manner that the general partner is considers to act as an agent. Furthermore, CapMan’s exposure to variable returns from the fund and its power to affect the level of returns is very low for the reasons described above. Therefore, CapMan has determined that it does not have control over the funds under its management . Subsidiaries Subsidiaries are consolidated using the acquisition method. All intercompany transactions are eliminated in the Consolidated Financial Statements. Profit or loss, together with all other comprehensive income-related items, are booked to the owners of the parent company or owners not holding a controlling interest in the companies concerned. Non-controlling interests are presented in the Consolidated Balance Sheet under equity separately from equity attributable to the owners of the parent company. Subsidiaries and businesses acquired during the year are consolidated from the date on which the Group acquires a con- trolling interest, and in the case of companies and businesses divested by the Group during the financial year up to the date on which CapMan’s controlling interest expires. Associates An associated company is an entity in which the Group has significant influence but does not hold a controlling interest. This is generally defined as existing when the Group holds, either directly or indirectly, more than 20% of a company’s voting rights. Associated companies have been consolidated in accord- ance with the equity method. Under this, the investment in an associated company is carried in the balance sheet at cost plus post-acquisition changes in the Group’s share of the company’s net assets, less any impairment value. If the Group’s share of the loss incurred by an associated company exceeds the book value of its investment, the investment is booked at zero in the balance sheet, and losses exceeding book value are not com- bined unless the Group is committed to meeting the obligations of the company concerned. The Group’s share of the profit recorded by an associated company during the financial year in accordance with its holding in the company is presented as a separate item in the income statement after operating profit. 68 • CAPMAN ANNUAL REPORT 2022 • FINANCIAL STATEMENTS GROUP CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS Group Statement of Comprehensive Income (IFRS) Group Balance Sheet (IFRS) Group Statement of Changes in Equity (IFRS) Group Cash Flow Statement (IFRS) Notes to the Consolidated Financial Statements Parent Company Income Statement (FAS) Parent Company Balance Sheet (FAS) Parent Company Cash Flow Statement (FAS) Notes to the Parent Company Financial Statements (FAS) Signatures to the Report of the Board of Directors and Financial Statements Auditor’s report Shares and shareholders Information for shareholders Segment reporting Operating segments are reported in accordance with internal reporting presented to the chief operating decision maker. The latter is responsible for allocating resources to operating segments and evaluating their performance and is defined as the Group’s Management Group, which is responsible for taking strategic decisions affecting CapMan. Translation differences The result and financial position of each of the Group’s business units are measured in the currency of the primary economic environment for that unit (‘functional currency’). The Consolidated Financial Statements are presented in euros, which is the functional and presentation currency of the Group’s parent company . Transactions in foreign currencies have been recorded in the parent company’s functional currency at the rates of exchange prevailing on the date of the transactions; in practice a reason- able approximation of the actual rate of exchange on the date of the transaction is often used. Foreign exchange differences for operating business items are recorded in the appropriate income statement account before operating profit and, for financial items, are recorded in financial income and expenses. The Group’s foreign currency items have not been hedged. In the consolidated financial statements, the income state- ments of subsidiaries that use a functional currency other than the euro are translated into euros using the average rates for the accounting period. Their balance sheets are translated using the closing rate on the balance sheet date. All resulting exchange differences are recognised in other comprehensive income. Translation differences caused by changes in exchange rates for the cumulative shareholders’ equity of foreign subsidiaries have been recognised in other comprehensive income. Tangible assets Tangible assets have been reported in the balance sheet at their acquisition value less depreciation according to plan. Assets are depreciated on a straight-line basis over their estimated useful lives. The estimated useful lives are as follows: Machinery and equipment 4–5 years Other long-term expenditure 4–5 years The residual values and useful lives of assets are reviewed on every balance sheet date and adjusted to reflect changes in the expected economic benefits where necessary. Tangible assets include right-of-use assets measured in accordance with IFRS 16, which are disclosed in the notes. More information on these items is included in chapter Leases of Accounting Policies. Intangible assets Goodwill Goodwill acquired in a business merger is booked as the sum paid for a holding, the holding held by owners with a non-con- trolling interest, and the holding previously owned that, when combined, exceeds the fair value of the net assets of the acquisition. Write-offs are not made against goodwill, and possible impairment of goodwill is tested annually. Goodwill is measured as the original acquisition cost less accumulated impairment. The goodwill acquired during a merger is booked against the units or groups of units responsible for generating the cash flow used for testing impairment. Every unit or group of units for which goodwill is booked represents the lowest level of the organisation at which goodwill is monitored internally for management purposes. Goodwill is monitored at operating segment level . Other intangible assets Intangible assets acquired separately are measured on initial recognition at cost. Intangible assets are recognised in the balance sheet only if the cost of the asset can be measured reliably and if it is probable that the future economic benefits attributable to the asset will flow to the Group. Agreements and trademarks acquired in business mergers are booked at fair value at the time of acquisition. As they have a limited life, they are booked in the balance sheet at acquisition cost minus accumulated write-offs. IT systems are expensed on the basis of the costs associated with acquiring and installing the software concerned. Depreciation is spread across the financial life of the relevant software licences. Im- pairment is tested whenever there is an indication that the book value of intangible assets may exceed the recoverable amount of these assets. The estimated useful lives are: Agreements and trademarks 10 years Other intangible assets 3–5 years Impairment of assets The Group reviews all assets for indications that their value may be impaired on each balance sheet date. If such indication is found to exist, the recoverable amount of the asset in question is estimated. The recoverable amount for goodwill is measured annually independent of indications of impairment. The need for impairment is assessed on the level of cash-generating units, in other words at the smallest identifia- ble group of assets that is largely independent of other units and cash inflows from other assets. The recoverable amount is the fair value of an asset, less costs to sell or value in use. Value in use refers to the expected future net cash flow projec- tions, which are discounted to the present value, received from the asset in question or the cash-generating unit. The discount rate used in measuring value in use is the rate that reflects current market assessments of the time value of money and the risks specific to the asset. Impairment is recorded in the income statement as an expense. The recoverable amount for financial assets is either the fair value or the present value of expected future cash flows discounted by the initial effective interest rate. An impairment loss is recognised whenever the recoverable amount of an asset is below the carrying amount, and it is rec- ognised in the income statement immediately. An impairment loss of a cash-generating unit is first allocated to reduce the carrying amount of any goodwill allocated to the cash-generat - 69 • CAPMAN ANNUAL REPORT 2022 • FINANCIAL STATEMENTS GROUP CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS Group Statement of Comprehensive Income (IFRS) Group Balance Sheet (IFRS) Group Statement of Changes in Equity (IFRS) Group Cash Flow Statement (IFRS) Notes to the Consolidated Financial Statements Parent Company Income Statement (FAS) Parent Company Balance Sheet (FAS) Parent Company Cash Flow Statement (FAS) Notes to the Parent Company Financial Statements (FAS) Signatures to the Report of the Board of Directors and Financial Statements Auditor’s report Shares and shareholders Information for shareholders ing unit and then to reduce the carrying amounts of the other assets of the unit pro rata. An impairment loss is reversed if there is an indication that an impairment loss may have decreased and the carrying amount of the asset has changed from the recognition date of the impairment loss. The increased carrying amount due to reversal cannot exceed what the depreciated historical cost would have been if the impairment had not been recognised. Reversal of an impairment loss for goodwill is prohibited. The carrying amount of goodwill is reviewed for impairment annually or more fre- quently if there is an indication that goodwill may be impaired, due to events and circumstances that may increase the proba- bility of impairment. Financial assets The Group’s financial assets have been classified into the following categories: 1) financial assets at fair value through profit or loss 2) financial assets at amortised cost Investments in equity instruments are always measured at fair value through profit or loss. Classification of debt instruments, such as trade and loan receivables, is based on the business model for managing and for the contractual cash flow char- acteristics of these financial assets. Debt instruments of the Management Company Business and Service Business are classified as financial assets at amortised cost, because they are held solely in order to collect contractual cash flows, which are solely payments of principal and interest. Current debt instruments, included in the market portfolio of the Investment Business, are classified as at fair value through profit or loss, because they are held for trading. Non-current debt instruments included in the Investment Business are held for both selling purposes and collecting contractual cash flows (principal and interest), and the Group designates these assets as measured at fair value through profit or loss, in order to reduce inconsist- ency with regards to recognizing gains and losses of financial assets within the Investment Business, because the Group as an investment entity manages and monitors the performance of these investments based on fair values according to group’s investment strategy. Transaction costs are reported in the initial cost of finan- cial assets, excluding items valued at fair value through profit or loss. All purchases and sales of financial instruments are recognised on the trade date. An asset is eligible for derecog- nition and removed from the balance sheet when the Group has transferred the contractual rights to receive the cash flows or when it has substantially transferred all of the risks and rewards of ownership of the asset outside the Group. Financial assets are classified as current if they have been acquired for trading purposes or fall due within 12 months. Financial assets at fair value through profit or loss Fair value through profit or loss class comprises of financial as- sets that are equity instruments or acquired as held for trading, in which case they can be either equity or debt instruments or derivative instruments. Debt instruments are also classified to this class, if they are held for both selling purposes and collect- ing contractual cash flows and which CapMan as an investment entity designates as financial assets at fair value through profit or loss at initial recognition in order to reduce inconsistency with regards to recognizing gains and losses of financial assets within the Investment Business. Fund investments and other investments in non-current assets are classified as financial assets at fair value through profit or loss and their fair value change is presented on the line item ”Fair value changes of investments” in the statement of comprehensive income. Fair value information of the non-cur- rent fund investments is provided quarterly to Company’s management and to other investors in the investment funds management by CapMan. The valuation of CapMan’s funds’ investment is based on International Private Equity and Venture Capital Valuation Guidelines (IPEVG) and IFRS 13. Investments in listed shares, funds and interest-bearing securities as well as those derivative instruments that do not meet the hedge accounting criteria or for which hedge account- ing is not applied in current assets are measured at fair value through profit or loss. Listed shares and derivative contracts in current assets are measured at fair value by the last trade price on active markets on the balance sheet date. The fair value of current investments in funds is determined as the funds’ net asset value at the balance sheet date. The fair value of current investments in interest-bearing securities is based on the last trade price on the balance sheet date or, in an illiquid market, on values determined by the counterparty. The change in fair value of current financial assets measured at fair value through profit or loss as well as dividend and inter- est income from short-term investments in listed shares and interest-bearing securities are presented on the line item ”Fair value changes of investments” in the statement of comprehen- sive income, except for derivative instruments, which are used for a fair value hedge purpose. In these cases, the effectively hedging component of the derivative instrument’s fair value change is recognised in the same line item as the hedged item’s change in the statement of comprehensive income, and the remainder of the derivative’s fair value change is recog- nised as a financing cost. CapMan uses derivative instruments, such as foreign currency forward contracts, to hedge against currency changes of foreign currency denominated trade receivables, but does not apply hedge accounting to these derivatives. In these cases, the change of fair value of the de- rivative instrument that offsets an equal change of the foreign currency denominated trade receivable, being the hedged item, is recognised on the same line item as the change of the hedge item, i.e. in turnover. Financial assets at amortised cost Financial assets at amortised cost mainly include non-in- terest-bearing trade receivables and interest-bearing loan receivables of the Management Company Business and Service Business. These financial assets are held solely in order to collect contractual cash flows, and whose payments are fixed or determinable and which are not quoted in an active market. They are included in current assets, except for maturities great- er than 12 months after the end of the reporting period, which are classified as non-current assets . 70 • CAPMAN ANNUAL REPORT 2022 • FINANCIAL STATEMENTS GROUP CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS Group Statement of Comprehensive Income (IFRS) Group Balance Sheet (IFRS) Group Statement of Changes in Equity (IFRS) Group Cash Flow Statement (IFRS) Notes to the Consolidated Financial Statements Parent Company Income Statement (FAS) Parent Company Balance Sheet (FAS) Parent Company Cash Flow Statement (FAS) Notes to the Parent Company Financial Statements (FAS) Signatures to the Report of the Board of Directors and Financial Statements Auditor’s report Shares and shareholders Information for shareholders Expected credit loss of the trade receivables is evaluated by using the simplified approach allowed by IFRS 9, under which a provision matrix is maintained, based on the historical credit losses and forward-looking information regarding general eco- nomic indicators. In addition, materially overdue receivables are evaluated on a client basis. Expected credit losses of loan receivables is evaluated based on the general approach under IFRS 9. The group evaluates the credit risk of the borrowers by estimating the delay of the repayments and borrower’s future economic development. Depending on the estimated credit risk the group measures the loss allowance at an amount equal to 12-month expected credit losses or lifetime expected credit losses. Inputs used for the measurement of expected credit losses include, among others, available statistics on default risk based on credit risk rating grades and the historical credit losses the group has incurred. Credit risk of a loan receivable is assumed low on initial recognition in case the contractual payments of principal and interest are dependent on the cash proceeds the borrower receives from the underlying investments. In these cases, the borrower is considered to have a strong capacity to meet its contractual cash flow obligations in the near term. It is consid- ered that there has been a significant increase in the credit risk, if the contractual payments have become more than 30 days past due, and a default event has occurred, if the payment is more than 90 days past due, unless resulting from an adminis- trative oversight . Cash and cash equivalents Cash and short-term deposits in the balance sheet comprise cash in banks and in hand, together with liquid short-term de- posits. Cash assets have a maximum maturity of three months. Non-current assets held for sale Non-current assets, or disposal groups comprising assets and liabilities, are classified as held-for-sale if it is highly probable that they will be recovered primarily through sale rather than through continued use. The recognition criteria are regarded to be met when a sale is highly probable, the asset (or a disposal group) is available for immediate sale in its present condi- tion subject only to terms that are usual and customary, the management is committed to the plan to sell the asset and the sale is expected to take place within one year from the date of classification. As from the classification date, a non-current asset (or a disposal group) held for sale is measured at the lower of its carrying amount and fair value less costs of disposal. Once classified as held for sale, intangible and tangible assets are no longer amortised nor depreciated. Dividend payment and repayment of capital Payment of dividends and repayment of capital is decided in the Annual General Meeting. The dividend payment and repay- ment of capital proposed to the Annual General Meeting by the Board of Directors is not subtracted from distributable funds until approved by the Annual General Meeting. Financial liabilities Financial liabilities largely consist of loans from financial institutions, leasing liabilities and derivate liabilities. Financial liabilities are initially recognised at fair value. Transaction costs are reported in the initial book value of the financial liability. Financial liabilities, except for derivative liabilities, are subse- quently carried at amortized cost using the effective interest method. Derivative liabilities are measured at fair value through profit or loss. Financial liabilities are reported in non-current and current liabilities. Leases Group’s lease agreements are mainly related to facilities, company cars and IT equipment. Group applies the exemptions allowed by the standard on lease contracts for which the lease term ends within 12 months as of the initial application, and lease contracts for which the underlying asset is of low value. Exemptions are applicable to some of the leased premises, such as office hotels, and to all laptops, printers and copying machines, among others. These lease payments are recognised as an expense in the income statement on a straight-line basis. Other lease agreements are recognised as right-of-use assets and lease liabilities in the balance sheet. These agreements include long-term lease agreements of facilities and company cars. Right-of-use assets are included in tangible assets and the related lease liabilities are included in non-current and current interest-bearing financial liabilities. CapMan Group does not act as a lessor. Provisions Provisions are recognised in the balance sheet when the Group has a current obligation (legal or constructive) as a result of a past event, and it is probable that an outflow will be required to settle the obligation and a reliable estimate of the outflow can be made. The Group’s provisions are evaluated on the closing date and are adjusted to match the best estimate of their size on the day in question. Changes are booked in the same entry in the income statement as the original provision. Employee beneﬁts Pension obligations The defined contribution pension plan is a pension plan in accordance with the local regulations and practices of its business domiciles. Payments made to these plans are charged to the income statement in the financial period to which they relate. Pension cover has been arranged through insurance policies provided by external pension institutions. Share-based payments The fair value of the share-based long-term incentive plan is measured at the grant date based on the starting share price of the plan, its assumed development during the vesting peri- od, forfeiture rate and estimated dividends to be paid during the vesting period. The fair value is expensed on a straight-line 71 • CAPMAN ANNUAL REPORT 2022 • FINANCIAL STATEMENTS GROUP CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS Group Statement of Comprehensive Income (IFRS) Group Balance Sheet (IFRS) Group Statement of Changes in Equity (IFRS) Group Cash Flow Statement (IFRS) Notes to the Consolidated Financial Statements Parent Company Income Statement (FAS) Parent Company Balance Sheet (FAS) Parent Company Cash Flow Statement (FAS) Notes to the Parent Company Financial Statements (FAS) Signatures to the Report of the Board of Directors and Financial Statements Auditor’s report Shares and shareholders Information for shareholders basis over the vesting period. The accumulated amount ex- pensed is adjusted, should the forfeiture rate change or should shares allocated to the plan be sold during the vesting period. The fair value of stock options is assessed on the date they are granted and are expensed in equal instalments in the income statement over the vesting period of the rights concerned. An evaluation of how many options will generate an entitlement to shares is made at the end of every reporting period. Fair value is determined using the Black-Scholes pricing model. The terms of the stock option programs are presented in Note 30. Share-based payments . Revenue recognition Revenue from contracts with customers is recognised by first allocating the transaction price to performance obligations, and when the performance obligation is satisfied by transferring the control of the underlying service to the customer, the revenue related to this performance obligation is recognised. Perfor- mance obligation can be satisfied either at a point in time or over time. Management fees and service fees in the Management Company Business As a fund manager, CapMan receives management fees during a fund’s entire period of operations. Management fee is a vari- able consideration and is typically based on the fund’s original size during its investment period, which is usually five years. Thereafter the fee is typically based on the acquisition cost of the fund’s remaining portfolio. Annual management fees are usually 0.5-2.0% of a fund’s total commitments, depending whether the fund is a real estate fund, a mezzanine fund, or an equity fund. In the case of real estate funds, management fees are also paid on committed debt capital. The average management fee percentage paid by CapMan-managed funds is approx. 1%. Management fees paid by the funds are recognised as income over time, because the fund management service is the only per- formance obligation in the contract and it is satisfied over time. Management company business also includes wealth man- agement services to institutional clients, foundations, family offices and wealthy private clients. Fees from these services are recognised over time, when the service is provided and the control is transferred to the customer, except for success and transaction fees, which are recognised as income at a point in time, because the underlying performance obligation is satis- fied and the control of the related service is transferred to the customer at a point in time. Fees in the Service Business CapMan’s Service Business includes analysis, reporting and back office services provided by JAY Solutions and procurement services provided by CapMan Procurement services (CaPS). Fee from these services are primarily recognised over time. Some of the contracts with customers related to the fundraising services earlier included in the Service Business includes a significant financing component. When determining the transaction price in these cases, the promised amount of consideration is adjusted for the effects of the time value of money and customer’s credit characteristics. Carried interest income Carried interest refers to the distribution of the profits of a successful private equity fund among fund investors and the fund manager responsible for the fund’s investment activities. In practice, carried interest means a share of a fund’s cash flow received by the fund manager after the fund has transferred to carry. The recipients of carried interest in the private equity indus- try are typically the investment professionals responsible for a fund’s investment activities. In CapMan’s case, carried interest is split between CapMan Plc and funds’ investment teams. CapMan applies a principle where funds transfer to carry and carried interest income are based on realised cash flows, not on a calculated and as yet unrealised return. As the level of carried interest income varies, depending on the timing of exits and the stage at which funds are in their life cycle, predicting future levels of carried interest is difficult. To transfer to carry, a fund must return its paid-in capital to investors and pay a preferential annual return on this. The pref- erential annual return is known as a hurdle rate, which is typi- cally set between 7-10% IRR p.a. When a fund has transferred to carry, the remainder of its cash flows is distributed between investors and the fund manager. Investors typically receive 80% of the cash flows and the fund manager 20%. When a fund is generating carried interest, the fund manager receives carried interest income from all of the fund’s cash flows, even if an exit is made at below the original acquisition cost. Revenue from carried interest is recognised when a fund has transferred to carry and to the extent carried interest is based on realised cash flows and management has estimated it being highly probable that there is no risk of repayment of carried interest back to the fund. Carried interest is recognised when CapMan is entitled to it by the reporting date, a confirmation on the amount has been received and CapMan is relatively close to receiving it in cash. Potential repayment risk of carried interest to the funds (clawback) Potential repayment risk to the funds (clawback) is considered when assessing whether revenue recognition criteria have been fulfilled. Clawback risk relates to a situation when, in conjunc- tion with the liquidation of a fund, it is recognised that the Gen- eral Partner has received more carried interest than agreed in the fund agreement. These situations can occur, for example, if there are recallable distributions or if representations and war- ranties have been given by the vendor in the sale and purchase agreement when the fund is towards the end of its lifecycle. Potential repayment risk to the funds (clawback) is estimat- ed by the management at each reporting date. The man- agement judgment includes significant estimates relating to investment exit timing, exit probability and realisable fair value. The clawback risk is measured by using the expected value method, i.e. by calculating a probability weighted average of estimated alternative investment exit outcomes. The clawback is an adjustment to the related revenue recognised and is included in the current accrued liabilities in the consolidated balance sheet . 72 • CAPMAN ANNUAL REPORT 2022 • FINANCIAL STATEMENTS GROUP CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS Group Statement of Comprehensive Income (IFRS) Group Balance Sheet (IFRS) Group Statement of Changes in Equity (IFRS) Group Cash Flow Statement (IFRS) Notes to the Consolidated Financial Statements Parent Company Income Statement (FAS) Parent Company Balance Sheet (FAS) Parent Company Cash Flow Statement (FAS) Notes to the Parent Company Financial Statements (FAS) Signatures to the Report of the Board of Directors and Financial Statements Auditor’s report Shares and shareholders Information for shareholders Income taxes Tax expenses in the consolidated income statement comprise taxes on taxable income and changes in deferred taxes for the financial period. Taxes are booked in the income statement unless they relate to other areas of comprehensive income or directly to items booked as equity. In these cases, taxes are booked to either other comprehensive income or directly to equity. Taxes on taxable income for the financial period are calculated on the basis of the tax rate in force for the country in question. Taxes are adjusted on the basis of deferred income tax assets and liabilities from previous financial periods, if applicable. The Group’s taxes have been recognised during the financial year using the average expected tax rate. Deferred taxes are calculated on temporary differences between the carrying amount and the tax base. Deferred taxes have only been recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences can be utilised. The largest temporary differences arise from the valuation of investments at fair value. Deferred taxes are not recognised for non-tax deductible amor- tisation of goodwill. Deferred taxes have been measured at the statutory tax rates enacted by the balance sheet date and that are expected to apply when the related deferred tax is realised . Items affecting comparability and alternative performance measures CapMan uses alternative performance measures, such as Adjusted operating profit, to denote the financial performance of its business and to improve the comparability between differ- ent periods. Alternative performance measures do not replace performance measures in accordance with the IFRS and are reported in addition to such measures. Alternative performance measures, as such are presented, are derived from perfor- mance measures as reported in accordance with the IFRS by adding or deducting the items affecting comparability and they will be nominated as adjusted. Items affecting comparability are, among others, material items related to mergers and acquisitions or major develop- ment projects, material gains or losses related to the acqui- sition or disposals of business units, material gains or losses related to the acquisition or disposal of intangible assets, mate- rial expenses related to decisions by authorities and material gains or losses related to reassessment of potential repayment risk to the funds. Use of estimates The preparation of the financial statements in conformity with IFRS standards requires Group management to make estimates and assumptions in applying CapMan’s account- ing principles. These estimates and assumptions have an impact on the reported amounts of assets and liabilities and disclosure of contingent liabilities in the balance sheet of the financial statements and on the reported amounts of income and expenses during the reporting period. Estimates have a substantial impact on the Group’s operating result. Estimates and assumptions have been used in assessing the impairment of goodwill, the fair value of fund investments, the impairment testing of intangible and tangible assets, in determining useful economic lives and expected credit losses, and in reporting deferred taxes, among others. Valuation of fund investments The determination of the fair value of fund investments using the International Private Equity and Venture Capital Valuation Guidelines (IPEVG) takes into account a range of factors, including the price at which an investment was acquired, the nature of the investment, local market conditions, trading val- ues on public exchanges for comparable securities, current and projected operating performance, and financing transactions subsequent to the acquisition of the investment. These valua- tion methodologies involve a significant degree of management judgment. Because there is significant uncertainty in the valu- ation of, or in the stability of, the value of illiquid investments, the fair values of such investments as reflected in a fund’s net asset value do not necessarily reflect the prices that would actually be obtained when such investments are realised. Valuation of fund investments is described in more detail in the Note 32. Valuation of other investments The fair value of growth equity investments is determined quarterly by using valuation methods according to IPEVG and IFRS 13. The valuations are based on forecasted cash flows or peer group multiples. In estimating fair value of an investment, a method that is the most appropriate in light of the facts, na- ture and circumstances of the investment is applied. External valuations are made at least once a year to verify the fair values of growth equity investments. Goodwill impairment test Goodwill impairment test is performed annually. The most significant assumptions related to the recoverable amount are turnover growth, operating margin, discount rate and terminal growth rate. Turnover growth and operating margin estimates are based on the current cost structure and turnover generated by the current customer base. Turnover is expected to grow to the extent that can be reasonably supported by the current personnel and other resources. This means such additional turnover and costs included in the business plan that are relat- ed to future expansion – and expected to be mainly visible as new customers and increased headcount – have been removed from the cash flow forecasts when preparing the goodwill impairment test. Goodwill impairment test is described in more detail in the Note 15 . 73 • CAPMAN ANNUAL REPORT 2022 • FINANCIAL STATEMENTS GROUP CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS Group Statement of Comprehensive Income (IFRS) Group Balance Sheet (IFRS) Group Statement of Changes in Equity (IFRS) Group Cash Flow Statement (IFRS) Notes to the Consolidated Financial Statements Parent Company Income Statement (FAS) Parent Company Balance Sheet (FAS) Parent Company Cash Flow Statement (FAS) Notes to the Parent Company Financial Statements (FAS) Signatures to the Report of the Board of Directors and Financial Statements Auditor’s report Shares and shareholders Information for shareholders 2022 EUR 1,000 Management company business Service business Investment business Other Total Fee income 46,249 11,117 553 57,919 Carried interest 9,613 9,613 Turnover, external 55,861 11,117 553 67,532 Turnover, internal 83 534 -617 Materials and services -985 -985 Other operating income 2 0 2 Personnel expenses, of which -21,414 -3,331 -459 -9,368 -34,571 Salaries and bonuses -21,414 -3,331 -459 -6,641 -31,844 Share-based payment -2,727 -2,727 Depreciation, amortisation and impairment -947 -2,978 -10 -245 -4,180 Other operating expenses -6,652 -1,114 -364 -3,106 -11,236 Internal service fees -4,620 -231 4,851 0 Fair value changes of investments 36,547 36,547 Operating profit 22,312 3,015 35,714 -7,932 53,108 Items impacting comparability: Impairment of goodwill 2,600 2,600 Items impacting comparability, total 2,600 2,600 Adjusted operating profit 22,312 5,615 35,714 -7,932 55,708 Financial items -5,475 Income taxes -6,585 Profit for the period 41,049 2. Segment information CapMan has three operating segments: the Management company business, Service business and Investments business. In the Management Company business, CapMan manages private equity funds and offers wealth advisory services. Private equity funds are invested by its partnership-based investment teams. Investments are mainly Nordic unlisted companies, real estate and infrastructure assets. CapMan raises capital for the funds from Nordic and international investors. CapMan Wealth Services offer comprehensive wealth advisory services related to the listed and unlisted market to smaller investors, such as family offices, smaller institutions and high net worth individuals. Income from the Management company business is derived from fee income and carried interest received from funds. The fee income include management fees related to CapMan’s position as a fund management company, fees from other services closely related to fund management and fees from wealth advisory services. In the Service business, CapMan offers procurement services and distributes software lisences to companies in Finland, Sweden and the Baltics, through CapMan Procurement Services (CaPS) and technology-based analytics, reporting and back office services through JAY Solutions to inves- tors. Through its Investment business, CapMan invests from its own balance sheet in the private equity asset class and mainly to its own funds. Income in this business segment is generated by changes in the fair value of investments and realised returns following exits and periodic returns, such as interest and dividends. Other includes the corporate functions not allocated to operating segments. These functions include part of the activities of group accounting, corporate communications, group management and costs related to share-based payment. Other also includes the eliminations of the interseg- ment transactions. CapMan has changed the turnover specification in segment reporting so that management and service fees are combined to a single line item Fee income as of the half-year report for the current year 2022 . 74 • CAPMAN ANNUAL REPORT 2022 • FINANCIAL STATEMENTS GROUP CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS Group Statement of Comprehensive Income (IFRS) Group Balance Sheet (IFRS) Group Statement of Changes in Equity (IFRS) Group Cash Flow Statement (IFRS) Notes to the Consolidated Financial Statements Parent Company Income Statement (FAS) Parent Company Balance Sheet (FAS) Parent Company Cash Flow Statement (FAS) Notes to the Parent Company Financial Statements (FAS) Signatures to the Report of the Board of Directors and Financial Statements Auditor’s report Shares and shareholders Information for shareholders 2022 EUR 1,000 Management company business Service business Investment business Other Total Items impacting comparability: Impairment of goodwill 2,600 Items impacting comparability, total 2,600 Adjusted profit for the period 43,649 Earnings per share, cents 25.1 Items impacting comparability, cents 1.7 Adjusted earnings per share, cents 26.8 Earnings per share, diluted, cents 24.8 Items impacting comparability, cents 1.6 Adjusted earnings per share, diluted, cents 26.4 Geographical distribution of turnover: Finland 38,032 Other countries 29,500 Total 67,532 2021 EUR 1,000 Management company business Service business Investment business Other Total Fee income 40,771 8,619 536 49,927 Carried interest 2,858 2,858 Turnover 43,629 8,619 536 52,784 Turnover, internal 242 664 -906 Other operating income 19 3 22 Personnel expenses, of which -19,989 -3,371 -866 -6,405 -30,632 Salaries and bonuses -19,989 -3,371 -866 -5,618 -29,845 Share-based payment -787 -787 Depreciation, amortisation and impairment -895 -340 -15 -226 -1,476 Other operating expenses -6,086 -1,004 -333 -2,545 -9,969 Internal service fees -3,708 -413 4,121 0 Fair value changes of investments 33,912 33,912 Operating profit 13,193 4,173 32,698 -5,422 44,642 Financial items -4,042 Income taxes -5,239 Result for the period 35,362 Earnings per share, cents 21,9 Earnings per share, diluted, cents 21,4 Geographical distribution of turnover: Finland 29,379 Other countries 23,405 Total 52,784 75 • CAPMAN ANNUAL REPORT 2022 • FINANCIAL STATEMENTS GROUP CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS Group Statement of Comprehensive Income (IFRS) Group Balance Sheet (IFRS) Group Statement of Changes in Equity (IFRS) Group Cash Flow Statement (IFRS) Notes to the Consolidated Financial Statements Parent Company Income Statement (FAS) Parent Company Balance Sheet (FAS) Parent Company Cash Flow Statement (FAS) Notes to the Parent Company Financial Statements (FAS) Signatures to the Report of the Board of Directors and Financial Statements Auditor’s report Shares and shareholders Information for shareholders 2022 EUR 1,000 Management company business Service business Investment business Other Total Management fees 38,847 0 0 0 38,847 Service fees 7,401 11,117 0 553 19,072 Carried interest 9,613 0 0 0 9,613 Revenue from customer contracts, external 55,861 11,117 0 553 67,532 Timing of revenue recognition: Services transferred over time 45,622 11,117 553 57,293 Services transferred at a point in time 10,239 10,239 Revenue from customer contracts, external 55,861 11,117 553 67,532 3. Turnover Revenue from contracts with customers include management fees, service fees and carried inter- est. Management company business revenue is primarily related to long-term contracts. Manage- ment fees are typically recorded over time, whereas service fees include both transaction fees recorded at a point in time and other service fees, such as fees from wealth and asset manage- ment services, recorded over time. Carried interest is recognised at a point in time. Revenue from the Service business is based on both long-term and short-term contracts and includes solely fees recognised over time. Segment information disclosed in Note 2 provides more information on the businesses included in each reportable segment. The below table disaggregates the revenue into management fees, fees from services and car- ried interest, as well as timing of revenue recognition by reportable segment. 2021 EUR 1,000 Management company business Service business Investment business Other Total Management fees 36,585 36,585 Service fees 4,185 8,619 536 13,341 Carried interest 2,858 2,858 Revenue from customer contracts, external 43,629 8,619 536 52,784 Timing of revenue recognition: Services transferred over time 39,845 8,619 536 49,001 Services transferred at a point in time 3,783 3,783 Revenue from customer contracts, external 43,629 8,619 536 52,784 4. Other operating income EUR 1,000 2022 2021 Other items 2 22 Total 2 22 76 • CAPMAN ANNUAL REPORT 2022 • FINANCIAL STATEMENTS GROUP CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS Group Statement of Comprehensive Income (IFRS) Group Balance Sheet (IFRS) Group Statement of Changes in Equity (IFRS) Group Cash Flow Statement (IFRS) Notes to the Consolidated Financial Statements Parent Company Income Statement (FAS) Parent Company Balance Sheet (FAS) Parent Company Cash Flow Statement (FAS) Notes to the Parent Company Financial Statements (FAS) Signatures to the Report of the Board of Directors and Financial Statements Auditor’s report Shares and shareholders Information for shareholders 5. Employee beneﬁt expenses EUR 1,000 2022 2021 Salaries and wages 27,170 25,553 Pension expenses - defined contribution plans 3,894 3,564 Share-based payments 2,727 787 Other personnel expenses 780 728 Total 34,571 30,632 Remuneration of the management is presented in Note 31. Related party disclosures. Cost for the stock options granted and investment-based incentive plan is based on the fair value of the instrument. The counter-entry to the expenses recognised in the income statement is in retained earnings, and thus has no effect on total equity. More information on the share-based payments is disclosed in Note 30. 6. Depreciation EUR 1,000 2022 2021 Depreciation by asset type Intangible assets Other intangible assets 396 447 Total 396 447 Tangible assets Machinery and equipment 73 65 Right-of-use assets, buildings (IFRS 16) 1,097 932 Right-of-use assets, machinery and equipment (IFRS 16) 14 32 Total 1,184 1,029 Total depreciation 1,580 1,476 Impairment by asset type Goodwill 2,600 Total impairments 2,600 Average number of people employed 2022 2021 By country Finland 141 125 Sweden 25 25 Denmark 8 5 Norway 2 1 Luxembourg 2 1 United Kingdom 7 4 In total 186 161 By segment Management company business 109 92 Service business 30 30 Investment business and other 46 39 In total 186 161 7. Other operating expenses EUR 1,000 2022 2021 Included in other operating expenses: Other personnel expenses 1,474 1,062 Office expenses 539 542 Travelling and entertainment 1,218 542 External services 5,551 5,740 Other operating expenses 2,454 2,083 Total 11,236 9,969 Short-term lease expense (IFRS 16) 97 236 Expense for leases of low-value assets (IFRS 16) 190 134 77 • CAPMAN ANNUAL REPORT 2022 • FINANCIAL STATEMENTS GROUP CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS Group Statement of Comprehensive Income (IFRS) Group Balance Sheet (IFRS) Group Statement of Changes in Equity (IFRS) Group Cash Flow Statement (IFRS) Notes to the Consolidated Financial Statements Parent Company Income Statement (FAS) Parent Company Balance Sheet (FAS) Parent Company Cash Flow Statement (FAS) Notes to the Parent Company Financial Statements (FAS) Signatures to the Report of the Board of Directors and Financial Statements Auditor’s report Shares and shareholders Information for shareholders Audit fees Ernst & Young chain of companies: EUR 1,000 2022 2021 Audit fees 361 293 Other fees and services 12 10 Total 373 303 Non-audit services performed by Ernst & Young in 2022 was 12 thousand euros (2021: 10 thousand euros in total) and consisted of other fees and services in total. 8. Adjustments to cash ﬂow statement and total cash outﬂow for leases EUR 1,000 2022 2021 Personnel expenses 2,727 787 Depreciation, amortisation and write-downs 4,180 1,476 Fair value gains/losses of investments -36,547 -33,912 Finance income and costs 5,475 4,042 Taxes 6,585 5,239 Other adjustments -52 32 Total -17,632 -22,337 Total cash outflow for leases (IFRS 16) -1,263 -1,020 10. Finance income and costs EUR 1,000 2022 2021 Finance income Interest income from loan receivables 104 171 Exchange gains 491 142 Change in fair value of financial liabilities 250 0 Total 845 313 Finance costs Interest expenses for loans -4 139 -3 390 Change of expected credit losses -1 670 41 Change in fair value of financial liabilities 0 -414 Other interest and finance expenses -437 -547 Interest expense of lease liabilities (IFRS 16) -74 -44 Total -6 320 -4 354 9. Fair value gains/losses of investments EUR 1,000 2022 2021 Investments at fair value through profit and loss Investments in funds 36,547 33,857 Market portfolio 0 55 Total 36,547 33,912 78 • CAPMAN ANNUAL REPORT 2022 • FINANCIAL STATEMENTS GROUP CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS Group Statement of Comprehensive Income (IFRS) Group Balance Sheet (IFRS) Group Statement of Changes in Equity (IFRS) Group Cash Flow Statement (IFRS) Notes to the Consolidated Financial Statements Parent Company Income Statement (FAS) Parent Company Balance Sheet (FAS) Parent Company Cash Flow Statement (FAS) Notes to the Parent Company Financial Statements (FAS) Signatures to the Report of the Board of Directors and Financial Statements Auditor’s report Shares and shareholders Information for shareholders 11. Income taxes EUR 1,000 2022 2021 Current income tax 2,611 2,653 Taxes for previous years 131 155 Deferred taxes Temporary differences 3,842 2,431 Total 6,584 5,239 Income tax reconcilliation Profit before taxes 47,633 40,600 Tax calculated at the domestic corporation tax rate of 20% 9,527 8,120 Effect of different tax rates outside Finland 78 110 Tax exempt income -4,622 -2,638 Performance share plan -225 157 Goodwill impairment 520 Ohter non-deductible expenses 690 219 Unrecognized tax assets on tax losses and use of previously unrecognised tax losses 599 -851 Taxes for previous years 131 155 Other differences -113 -33 Income taxes in the Group Income Statement 6,585 5,239 12. Earnings per share Basic earnings per share is calculated by dividing the distributable retained profit for the finan- cial year by the average share issue adjusted number of shares, excluding shares that have been purchased by the Company and are presented as the Company’s own shares. Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. 2022 2021 Profit attributable to the equity holders of the Company, € ('000) 39,616 34,320 Profit applied to calculate diluted earnings per share 39,616 34,320 Weighted average number of shares ('000) 157,560 156,580 Treasury shares ('000) -26 -26 Weighted average number of shares ('000) 157,534 156,553 Effect of share-based incentive plans ('000) 2,170 3,994 Weighted average number of shares adjusted for the effect of dilution ('000) 159,704 160,547 Earnings per share (basic), cents 25.1 21.9 Earnings per share (diluted), cents 24.8 21.4 79 • CAPMAN ANNUAL REPORT 2022 • FINANCIAL STATEMENTS GROUP CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS Group Statement of Comprehensive Income (IFRS) Group Balance Sheet (IFRS) Group Statement of Changes in Equity (IFRS) Group Cash Flow Statement (IFRS) Notes to the Consolidated Financial Statements Parent Company Income Statement (FAS) Parent Company Balance Sheet (FAS) Parent Company Cash Flow Statement (FAS) Notes to the Parent Company Financial Statements (FAS) Signatures to the Report of the Board of Directors and Financial Statements Auditor’s report Shares and shareholders Information for shareholders 13. Assets held for sale On December 22, 2022, CapMan Plc and the non-controlling shareholders of JAY Solutions Oy, subsidiary of CapMan Plc, signed an agreement to sell their ownership of JAY Solutions Oy to Bas Invest AB and to the management of JAY Solutions Oy. The transaction was closed on February 1, 2023. CapMan had an ownership interest of 60% in JAY Solutions Oy, but the subsidiary was consolidated in full without separating non-controlling interest because of a symmetric option arrangement. Resulting from the sale, CapMan classified assets and liabilities related to JAY Solu- tions Oy as non-current assets held for sale under IFRS 5 on December 31, 2022. In conjunction with this, CapMan valued these net assets to the lower of their carrying amount and their fair value less costs on disposal and resulting from this, recorded an impairment loss of EUR 2.6 million to goodwill allocated to JAY Solutions in the financial year 2022 (see Note 15 for details). Impairment loss is reported under reportable segment Service Business (see Note 2), where JAY Solutions’ assets and liabilities held for sale are included. The sale of shares is not expected to have a signifi- cant impact on CapMan’s operating profit or financial position in 2023. Assets and liabilities related to JAY Solutions Oy have been classified as held for sale and disclosed separately in the Consolidated Balance Sheet. The carrying amounts of those assets and liabilities are presented in the below table: 2022 2021 Goodwill 4,828 Other non-current assets 134 Current assets 807 Assets held for sale 5,769 Current liabilities 717 Liabilities associated with assets held for sale 717 14. Tangible assets EUR 1,000 2022 2021 Machinery and equipment Acquisition cost at 1 January 2,347 2,389 Additions 168 9 Transfers 0 -51 Transfer to assets held for sale -8 0 Translation difference -9 0 Disposals 0 0 Acquisition cost at 31 December 2,498 2,347 Accumulated depreciation at 1 January -2,183 -2,118 Transfer to assets held for sale -73 -65 Depreciation for the financial year 3 0 Translation difference 7 0 Accumulated depreciation at 31 December -2,246 -2,183 Book value on 31 December 252 164 Right-of-use assets Machinery and equipment (IFRS 16) Additions 0 12 Depreciations -14 -32 Book value on 31 December 10 24 Leased premises (IFRS 16) Additions 2,840 194 Depreciations -1,097 -932 Book value on 31 December 3,285 1,543 Other tangible assets Acquisition cost at 1 January 23 23 Book value on 31 December 23 23 Tangible assets total 3,571 1,754 80 • CAPMAN ANNUAL REPORT 2022 • FINANCIAL STATEMENTS GROUP CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS Group Statement of Comprehensive Income (IFRS) Group Balance Sheet (IFRS) Group Statement of Changes in Equity (IFRS) Group Cash Flow Statement (IFRS) Notes to the Consolidated Financial Statements Parent Company Income Statement (FAS) Parent Company Balance Sheet (FAS) Parent Company Cash Flow Statement (FAS) Notes to the Parent Company Financial Statements (FAS) Signatures to the Report of the Board of Directors and Financial Statements Auditor’s report Shares and shareholders Information for shareholders 15. Goodwill EUR 1,000 2022 2021 Acquisition cost at 1 January 28,009 28,009 Transfer to assets held for sale -7,428 0 Acquisition cost at 31 December 20,581 28,009 Accumulated impairment at 1 January -12,695 -12,695 Impairment -2,600 0 Transfer to assets held for sale 2,600 Accumulated impairment at 31 December -12,695 -12,695 Book value on 31 December 7,886 15,314 Impairment test Goodwill is tested for impairment at least annually and has been allocated to the cash-generating units as follows: EUR 1,000 2022 2021 CapMan Wealth Services 7,412 7,412 JAY Solutions 4,828 7,428 Other 474 474 Total 12,714 15,314 JAY Solutions As JAY Solutions is considered an asset held for sale as at December 31, 2022, its recoverable amount is based on fair value less costs of disposal in the goodwill impairment test. Because the expected selling price of JAY Solutions’s shares less their disposal costs is lower than its carrying amount, an impairment loss of EUR 2.6 million was recorded and reported on the line item De- preciation, amortisation and impairment in the consolidated income statement and in reportable segment Service Business (see Note 2). The fair value of JAY Solutions is classified in the fair value hierarchy level 1, as it is based on the selling price agreed in the Share Purchase Agreement. In the previous year, impairment test of JAY Solutions was based on value-in-use and no impair- ment losses were recognised. The table further below discloses the key assumptions applied in the previous year’s impairment test. CapMan Wealth Services Recoverable amount of CapMan Wealth Services is based on value-in-use using five-year discount- ed cash flow projections based on a business plan approved by the management. Future cash flows arising from additional turnover generated by increased personnel, and thus extending the operations and enhancing the performance, have been excluded from the cash flow projections applied in the impairment test. Cash flows for the period extending over the planning period are calculated using the terminal value method. Based on the impairment test, goodwill allocated to CapMan Wealth Services was not impaired. Key assumptions applied in the impairment test based on value-in-use are set forth in the table below: 2022 2021 EUR 1,000 CapMan Wealth Services CapMan Wealth Services JAY Solutions Pre-tax discount rate 17.8% 8.9% 10.6% Average turnover growth 20.8% 18.3% 37.2% Average EBIT margin 50.6% 48.1% 38.4% Terminal growth rate 1.0% 1.0% 1.0% Discount rate takes into account listed domestic asset and wealth managers as a benchmark group. Cost of equity includes risk premiums for Finland and company size. These both have increased during the financial year. As a risk-free rate, a reference rate of Finnish 10-year govern- ment bonds has been applied, and it has increased as well during the year. The beforementioned facts results in a significantly higher discount rate for 2022 than for 2021. Of key assumptions applied in this year’s impairment test, recoverable amount is most sensitive to changes in turnover growth during the explicit forecasting period (5 years). Based on the sen- sitivity analysis, if turnover growth during the explicit forecasting period would be 18 percentage points lower, recoverable amount would equal the carrying amount of the respective cash-generat- ing unit. At the moment, recoverable amount exceeds carrying amount by EUR 22 million, and no reasonably possible change in any of the other key assumptions would lead to impairment. 81 • CAPMAN ANNUAL REPORT 2022 • FINANCIAL STATEMENTS GROUP CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS Group Statement of Comprehensive Income (IFRS) Group Balance Sheet (IFRS) Group Statement of Changes in Equity (IFRS) Group Cash Flow Statement (IFRS) Notes to the Consolidated Financial Statements Parent Company Income Statement (FAS) Parent Company Balance Sheet (FAS) Parent Company Cash Flow Statement (FAS) Notes to the Parent Company Financial Statements (FAS) Signatures to the Report of the Board of Directors and Financial Statements Auditor’s report Shares and shareholders Information for shareholders 17. Investments at fair value through proﬁt or loss Investments in funds EUR 1,000 2022 2021 Investments in funds at 1 January 130,011 116,066 Additions 29,312 19,750 Distributions -27,598 -40,047 Disposals -1 0 Fair value gains/losses of investments 36,685 34,135 Transfers 654 107 Investments in funds at 31 December 169,063 130,011 Investments in funds by investment area at the end of period Buyout 26,107 10,926 Credit 4,285 1,821 Russia 307 3,368 Real Estate 44,024 43,965 Growth Equity 18,573 19,040 Infra 12,810 10,543 Special Situations 2,925 1,853 Fund of funds 16,463 12,303 External Venture Capital funds 42,459 25,588 Other investment areas 1,110 604 Total 169,063 130,011 * The division of investment areas has been changed Investments in funds include the subsidiary, CapMan Fund Investments SICAV-SIF, with a fair value of EUR 99.4 million. The fair value included EUR 0.8 million of cash. Other financial assets EUR 1,000 2022 2021 Other investments at 1 January 393 191 Additions 46 202 Fair value gains/losses of investments -5 0 Other investments at 31 December 434 393 16. Other intangible assets EUR 1,000 2022 2021 Acquisition cost at 1 January 6,944 6,762 Additions 166 131 Transfers 0 51 Transfer to assets held for sale -494 0 Acquisition cost at 31 December 6,616 6,944 Accumulated depreciation at 1 January -6,484 -6,037 Depreciation for the financial year -396 -447 Transfer to assets held for sale 364 0 Accumulated depreciation at 31 December -6,516 -6,484 Book value on 31 December 100 459 82 • CAPMAN ANNUAL REPORT 2022 • FINANCIAL STATEMENTS GROUP CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS Group Statement of Comprehensive Income (IFRS) Group Balance Sheet (IFRS) Group Statement of Changes in Equity (IFRS) Group Cash Flow Statement (IFRS) Notes to the Consolidated Financial Statements Parent Company Income Statement (FAS) Parent Company Balance Sheet (FAS) Parent Company Cash Flow Statement (FAS) Notes to the Parent Company Financial Statements (FAS) Signatures to the Report of the Board of Directors and Financial Statements Auditor’s report Shares and shareholders Information for shareholders 19. Deferred tax assets and liabilities Changes in deferred taxes during 2022: EUR 1,000 31.12.2021 Charged to Income Statement Translation difference Charged in equity 31.12.2022 Deferred tax assets Accrued differences 1,836 -46 0 0 1,790 Total 1,836 -46 0 0 1,790 Deferred tax liabilities Accrued differences 582 684 -5 0 1,261 Unrealised fair value changes 4,045 3,112 0 0 7,157 Total 4,627 3,796 -5 0 8,418 18. Receivables - Non-current EUR 1,000 2022 2021 Trade receivables 5,188 5,661 Loan receivables 263 1,731 Interest receivables 0 135 Other receivables 83 2,539 Accrued income 12 0 Total 5,545 10,066 Non-current trade receivables are related to previously offered fundraising and advisory servic- es. Because of the significant financing component related to these receivables, the promised amount of consideration has been adjusted for the effects of the time value of money and the credit characteristics of the customer. However, no contract assets are related to these customer contracts, as the Group’s right to the amount of consideration is unconditional and subject only to the passage of time. Loan receivables include EUR 0.2 million from Äkäs Capital Oy, a related party of CapMan Plc. Allowance for expected credit losses of loan receivables is presented below separately for por- tion measured at an amount equal to 12-month and lifetime expected credit losses. As at December 31, 2022, loss allowance measured at an amount equal to lifetime expected credit losses is fully related to credit-impaired loan receivables from entities controlled by the former or current investment teams, and granted for making co-investments in funds managed by CapMan. The most significant credit-impaired loan receivables are from entities controlled by the former CapMan Russia investment team. CapMan has determined these loan receivables being credit-impaired, because the underlying funds have filed for liquidation and it seems not probable that the loans and accrued interests would be repaid to CapMan in full. The other credit-impaired loan receivables are related to loans granted to making co-investments to such funds, whose carry potential is estimated to be low, and therefore, CapMan has determined it seems not probable that the borrowing entity would repay these loans and accrued interests in full. As at December 31, 2021, the allowance measured at an amount equal to lifetime expected credit losses was related to loan receivables granted to entities controlled by investment teams, of which credit risk had increased significantly since initial recognition.” . EUR 1,000 2022 2021 Loan receivables, gross 1,848 1,805 Loss allowance, 12-month ECL -4 -1 Loss allowance, lifetime ECL -1,581 -73 Loan receivables, net 263 1,731 ECL = expected credit losses Other non-currrent receivables include primarily receivables from sold investments, whose sale proceeds will be partially received later . 83 • CAPMAN ANNUAL REPORT 2022 • FINANCIAL STATEMENTS GROUP CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS Group Statement of Comprehensive Income (IFRS) Group Balance Sheet (IFRS) Group Statement of Changes in Equity (IFRS) Group Cash Flow Statement (IFRS) Notes to the Consolidated Financial Statements Parent Company Income Statement (FAS) Parent Company Balance Sheet (FAS) Parent Company Cash Flow Statement (FAS) Notes to the Parent Company Financial Statements (FAS) Signatures to the Report of the Board of Directors and Financial Statements Auditor’s report Shares and shareholders Information for shareholders 20. Trade and other receivables EUR 1,000 2022 2021 Trade receivables 8,661 6,002 Loan receivables 815 280 Accrued income 1,648 1,305 Other receivables 9,593 7,637 Total 20,717 15,224 Loss allowance for the expected credit losses of trade receivables, based on a provision matrix, is presented below. EUR 1,000 2022 2021 Trade receivables, gross 8,770 6,076 Loss allowance -109 -74 Trade receivables, net 8,661 6,002 Expected credit losses of other receivables measured at amortised cost is insignificant, and other receivables at amortised cost do not contain credit-impaired items. With regards to contracts with customers, the Group’s right to the amount of consideration is unconditional. Therefore, they are presented as receivables and no separate contract asset is presented. Trade and other receivables by currency at end of year Trade and other receivables Amount in foreign currency Amount in euros proportion EUR 17,622 68% USD 6,751 6,330 24% SEK 14,258 1,282 5% GBP 19 21 0% DKK 5,634 758 3% NOK 2,515 239 1% 21. Financial assets at fair value through proﬁt or loss EUR 1,000 2022 2021 Fair value of derivative instruments Foreign exchange forwards 65 Total 65 Nominal value of derivative instruments Foreign exchange forwards 6,327 Total 6,327 Financial assets at fair value through profit or loss include derivative assets. CapMan uses short- term derivative instruments to hedge against currency changes in foreign currency denominated trade receivables. CapMan does not apply hedge accounting to derivative instruments and deriva- tives are initially measured at costs and thereafter to fair value at the end of the reporting period. Fair values of derivatives are based on market values or values derived from market values at the end of the reporting period (fair value hierarchy level 2). Translation difference incurred to foreign currency denominated trade receivables is recognised to turnover and that fair value change of the derivative instrument that is effectively hedging the underlying trade receivable, is recorded to turnover and the remainder of the derivative’s fair value change is recorded to financial expenses. In the comparison period, no derivative instruments were used. Loan receivables include mainly current loan receivables from related parties and other employ- ees. Accrued income includes mainly prepayments. Other receivables mainly include unvoiced sale of services, costs to be re-invoiced, income tax receivables and receivables related to sold financial assets. Changes in deferred taxes during 2021: EUR 1,000 31.12.2020 Charged to Income Statement Translation difference Charged in equity 31.12.2021 Deferred tax assets Accrued differences 2,438 -602 0 0 1,836 Total 2,438 -602 0 0 1,836 Deferred tax liabilities Accrued differences 643 -156 -2 97 582 Unrealised fair value changes 2,059 1,986 4,045 Total 2,702 1,830 -2 97 4,627 84 • CAPMAN ANNUAL REPORT 2022 • FINANCIAL STATEMENTS GROUP CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS Group Statement of Comprehensive Income (IFRS) Group Balance Sheet (IFRS) Group Statement of Changes in Equity (IFRS) Group Cash Flow Statement (IFRS) Notes to the Consolidated Financial Statements Parent Company Income Statement (FAS) Parent Company Balance Sheet (FAS) Parent Company Cash Flow Statement (FAS) Notes to the Parent Company Financial Statements (FAS) Signatures to the Report of the Board of Directors and Financial Statements Auditor’s report Shares and shareholders Information for shareholders 22. Cash and cash equivalents EUR 1,000 2022 2021 Bank accounts 55,571 65,207 Total 55,571 65,207 Cash and cash equivalents only includes bank accounts. EUR 2.0 million of bank account balances is related to the launch of a new hotel real estate fund in 2019 and is not available for use by the group . Because of some assets classified as asset held for sale (see Note 13), below reconciles the cash and cash equivalents reported in the balance sheet to the cash and cash equivalents reported in the cash flow statement: EUR 1,000 2022 2021 Cash and cash equivalents in the balance sheet 55,571 65,207 Cash and cash equivalents related to assets held for sale 373 Cash and cash equivalents in the cash flow statement 55,944 65,207 23. Share capital and shares Movements in the number of shares (‘000): Number of B shares Total At 1 January 2021 156,433 156,433 Share subscriptions with options 158 158 At 31 December 2021 156,591 156,591 Directed share issue without payment 1,438 1,438 At 31 December 2022 158,029 158,029 EUR 1,000 Share capital Share premium account Other reserves Total At 1 January 2021 772 38,968 71,416 111,156 Share subscriptions with options 90 90 Repayment of capital -18,788 -18,788 At 31 December 2021 772 38,968 52,718 92,458 Repayment of capital -17,297 -17,297 At 31 December 2022 772 38,968 35,421 75,161 Other reserves During the financial year, in conjunction with the partial early payment of the vested reward shares in performance share plan 2020-23, a total of 1,437,675 shares were issued in a directed share issue without payment. During the current and previous financial year, repaid capital was deducted from the unrestricted equity fund. During the previous financial year, additionally shares sub- scribed with option rights were recorded to the unrestricted equity fund. Share-based incentive plans are presented in Note 30. Share-based payments. Translation difference The foreign currency translation reserve includes translation differences arising from currency conversion in the closing of the books for foreign units. Dividends paid and proposal for proﬁt distribution and repayment of capital For the financial year 2021, dividend and repayment of invested unrestricted equity fund amount- ed to EUR 0.15 per share or EUR 23.6 million in total. Dividend and equity repayment was paid in two instalments, the first of which, amounting to EUR 12.5 million, was paid on March 25, 2022, and the second of which, amounting to EUR 11.1 million, was paid on September 23, 2022. The Board of Directors will propose to the Annual General Meeting to be held on 15 March 2023 that a dividend of EUR 0.08 per share, equivalent to a total of approx. EUR 12.6 million, and a repayment of invested unrestricted equity fund of EUR 0.09 per share, equivalent to a total of approx. EUR 14.2 million, would be paid to the shareholders. The aggregate amount of proposed dividends and repayment of invested unrestriced equity fund would be approx. EUR 26.9 million, and it is proposed to be paid in two instalments six months apart . Ownership and voting rights agreements A shareholder whose share of the entire share capital or the voting rights of the Company reaches or exceeds 33.3 % or 50 % has, at the request of other shareholders, the obligation to redeem his or her shares and related securities in accordance with the Articles of Association of CapMan Plc. Ownership and voting rights agreements As at 31 December 2022 CapMan Plc had no knowledge of agreements or arrangements, related to the Company’s ownership and voting rights, that were apt to have substantial impact on the share value of CapMan Plc . 85 • CAPMAN ANNUAL REPORT 2022 • FINANCIAL STATEMENTS GROUP CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS Group Statement of Comprehensive Income (IFRS) Group Balance Sheet (IFRS) Group Statement of Changes in Equity (IFRS) Group Cash Flow Statement (IFRS) Notes to the Consolidated Financial Statements Parent Company Income Statement (FAS) Parent Company Balance Sheet (FAS) Parent Company Cash Flow Statement (FAS) Notes to the Parent Company Financial Statements (FAS) Signatures to the Report of the Board of Directors and Financial Statements Auditor’s report Shares and shareholders Information for shareholders Distribution of shareholdings by number of shares and sector as at 31 December 2022 Shareholding Number of Owners % Number of shares % 1–1,000 19,788 64.65% 7,124,642 4.51% 1,001–10,000 9,498 31.03% 29,657,736 18.76% 10,001–100,000 1,212 3.96% 28,547,184 18.06% 100,001–500,000 83 0.27% 16,531,200 10.46% 500,001–1,000,000 9 0.03% 6,558,320 4.15% 1,000,001– 17 0.06% 65,951,346 41.73% Anonymous ownership 0 0.00% 3,684,540 2.33% Total 30,607 100.00% 158,054,968 100.00% of which Nominee registered 6,654,876 4.21% On the book-entry register joint account 18,709 0.01% Sector Number of shares and votes % Finnish Private Individuals 84,539,873 53.49% Other 44,577,066 28.20% Pension & Insurance 18,009,917 11.39% Fund company 5,913,507 3.74% Foundation 1,303,766 0.82% Treasury Shares 26,299 0.02% Anonymous ownership 3,684,540 2.33% Total 158,054,968 100.00% of which Nominee registered 6,654,876 4.21% On the book-entry register joint account 18,709 0.01% Source: EuroClear Finland Ltd, as at 31 December 2022. Figures are based on the total number of shares 158,054,968 and total number of shareholders 30,620. CapMan Plc had 26,299 shares as at 31 December 2022 . CapMan’s largest shareholders as at 31 December 2022 Number of shares and votes Proportion of shares, % Silvertärnan Ab 21,280,519 13.46% Keskinäinen Eläkevakuutusyhtiö Ilmarinen 9,650,326 6.11% Mikko Laakkonen 6,478,320 4.10% Keskinäinen työeläkevakuutusyhtiö Varma 3,675,215 2.33% Joensuun Kauppa ja Kone Oy 3,289,502 2.08% Vesasco Oy 3,088,469 1.95% Valtion Eläkerahasto 2,500,000 1.58% Momea Invest Oy 2,150,000 1.36% Hannu Laakkonen 1,992,742 1.26% Laine Capital Oy 1,523,348 0.96% Total 55,628,441 35.19% Nominee registered 6,654,876 4.21 % Shareholdings of management 5,873,426 3.72 % CapMan has not received any flagging notifications during year 2022. An up-date information of all flagging notifications can be found at www.capman.com 86 • CAPMAN ANNUAL REPORT 2022 • FINANCIAL STATEMENTS GROUP CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS Group Statement of Comprehensive Income (IFRS) Group Balance Sheet (IFRS) Group Statement of Changes in Equity (IFRS) Group Cash Flow Statement (IFRS) Notes to the Consolidated Financial Statements Parent Company Income Statement (FAS) Parent Company Balance Sheet (FAS) Parent Company Cash Flow Statement (FAS) Notes to the Parent Company Financial Statements (FAS) Signatures to the Report of the Board of Directors and Financial Statements Auditor’s report Shares and shareholders Information for shareholders 24. Interest-bearing loans and borrowings - Non-current EUR 1,000 2022 2021 Senior bonds 89,650 81,235 Capital loans 0 120 Lease liabilities (IFRS 16) 2,204 683 Total 91,854 82,038 On April 13, 2022, CapMan issued unsecured sustainability-linked notes in the aggregate principal amount of EUR 40 million. The notes will mature on April 13, 2027 and carry initially a fixed an- nual interest of 4.5%. In conjunction with this, CapMan redemeed the remaining EUR 31.5 million of its notes issued in 2018. These notes carried a fixed annual interest of 4.125% that was paid semi-annually. CapMan also has unsecured notes in the aggregate principal amount of EUR 50 million issued in December 2020, which will mature on December 9, 2025 and carry a fixed annu- al interest of 4.0% paid annually. Both loan agreements include covenants related to equity ratio. 25. Other non-current liabilities EUR 1,000 2022 2021 Acquisition related liabilities 6,933 7,183 Other liabilities 410 369 Total 7,343 7,552 Acquisition related liabilities consists of call and put options, which are measured at fair value through profit or loss. The change of fair value is recorded as finance income or expense. 26. Trade and other payables - Current EUR 1,000 2022 2021 Trade payables 1,167 1,230 Advance payments received 571 1,200 Accrued expenses 12,994 10,947 Other liabilities 3,714 3,346 Total 18,446 16,722 The maturity of trade payables is normal terms of trade and don’t include overdue payments Advance payments received are liabilities based on customer contracts. The most significant items in accrued expenses relate to accrued salaries and social benefit expenses. Trade and other liabilities by currency at end of year Trade and other liabilities Amount in foreign currency Amount in euros Proportion EUR 14,311 78% SEK 24,294 2,184 12% GBP 774 873 5% DKK 7,140 960 5% NOK 1,233 117 1% 27. Interest-bearing loans and borrowings - Current EUR 1,000 2022 2021 Short-term bank facility Lease liabilities (IFRS 16) 1,060 930 Liabilities to non-controlling interests 52 40 Total 1,112 970 87 • CAPMAN ANNUAL REPORT 2022 • FINANCIAL STATEMENTS GROUP CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS Group Statement of Comprehensive Income (IFRS) Group Balance Sheet (IFRS) Group Statement of Changes in Equity (IFRS) Group Cash Flow Statement (IFRS) Notes to the Consolidated Financial Statements Parent Company Income Statement (FAS) Parent Company Balance Sheet (FAS) Parent Company Cash Flow Statement (FAS) Notes to the Parent Company Financial Statements (FAS) Signatures to the Report of the Board of Directors and Financial Statements Auditor’s report Shares and shareholders Information for shareholders 28. Financial assets and liabilities Financial assets 2022 EUR 1,000 Note Balance sheet value Fair value Investments at fair value through profit or loss Investments in funds 17 169,063 169,063 Other financial assets 17 434 434 Loan receivables 18 1,078 1,078 Trade and other receivables 18, 20 25,185 25,185 Financial assets at fair value 21 65 65 Cash and bank 22 55,571 55,571 Total 251,396 251,396 * Other financial assets consists of financial assets that are specifically classified as investments at fair value through profit and loss. Financial assets 2021 EUR 1,000 Note Balance sheet value Fair value Investments at fair value through profit or loss Investments in funds 17 130,011 130,011 Other financial assets 17 393 393 Loan receivables 1,731 1,731 Trade and other receivables 20 20,885 20,885 Cash and bank 22 65,207 65,207 Total 218,227 218,227 * Other financial assets consists of financial assets that are specifically classified as investments at fair value through profit and loss. Financial liabilities 2022 EUR 1,000 Note Balance sheet value Fair value Non-current liabilities 24 91,854 91,854 Non-current operative liabilities 25 7,343 7,343 Trade and other liabilities 26 18,446 18,446 Current liabilities 27 1,112 1,112 Total 118,755 118,755 Financial liabilities 2021 EUR 1,000 Note Balance sheet value Fair value Non-current liabilities 24 82,038 82,038 Non-current operative liabilities 25 7,552 7,552 Trade and other liabilities 26 16,722 16,722 Current liabilities 27 970 970 Total 107,282 107,282 88 • CAPMAN ANNUAL REPORT 2022 • FINANCIAL STATEMENTS GROUP CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS Group Statement of Comprehensive Income (IFRS) Group Balance Sheet (IFRS) Group Statement of Changes in Equity (IFRS) Group Cash Flow Statement (IFRS) Notes to the Consolidated Financial Statements Parent Company Income Statement (FAS) Parent Company Balance Sheet (FAS) Parent Company Cash Flow Statement (FAS) Notes to the Parent Company Financial Statements (FAS) Signatures to the Report of the Board of Directors and Financial Statements Auditor’s report Shares and shareholders Information for shareholders Net debt EUR 1,000 2022 2021 Cash and cash equivalents 55,571 65,207 Borrowings - repayable within one year -1,112 -970 Borrowings - repayable after one year -91,854 -82,038 Net debt -37,395 -17,801 Cash and cash equivalents 55,571 65,207 Gross debt - variable interest rates -3,196 -1,653 Gross debt - fixed interest rates -89,770 -81,355 Net debt -37,395 -17,801 Changes in liabilities arising from financing activities 2022 EUR 1,000 January 1, 2022 Cash flows Liabilities associated with assets held for sale Other changes December 31, 2022 Non-current loans and borrowings 81,354 8,259 -120 157 89,650 Non-current lease liabilities 683 -1,125 2,646 2,204 Current loans and borrowings 40 12 52 Current lease liabilities 930 -64 194 1,060 Total 83,007 7,082 -120 2,997 92,966 2021 EUR 1,000 January 1, 2021 Cash flows Other changes December 31, 2021 Non-current loans and borrowings 81,116 120 118 81,354 Non-current lease liabilities 1,496 -813 683 Current loans and borrowings 20 20 40 Current lease liabilities 888 -163 205 930 Total 83,520 -836 323 83,007 29. Commitments and contingent liabilities Securities and other contingent liabilities EUR 1,000 2022 2021 Contingencies for own commitment Business mortgage 60,000 60,000 Other contingent liabilities 2,062 2,365 Remaining commitments to funds by investment area Buyout 25,273 35,871 Credit 4,768 2,438 Russia 1,066 1,066 Real Estate 7,577 10,558 Other investment areas 2,181 3,554 Funds of funds 245 245 Growth Equity 11,171 11,298 Infra 12,127 4,952 Special Situations 4,853 3,135 CapMan Wealth Services funds 13,868 8,794 External private equity funds 4,665 6,205 External Veture Capital funds 1,316 2,224 Total 89,110 90,340 89 • CAPMAN ANNUAL REPORT 2022 • FINANCIAL STATEMENTS GROUP CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS Group Statement of Comprehensive Income (IFRS) Group Balance Sheet (IFRS) Group Statement of Changes in Equity (IFRS) Group Cash Flow Statement (IFRS) Notes to the Consolidated Financial Statements Parent Company Income Statement (FAS) Parent Company Balance Sheet (FAS) Parent Company Cash Flow Statement (FAS) Notes to the Parent Company Financial Statements (FAS) Signatures to the Report of the Board of Directors and Financial Statements Auditor’s report Shares and shareholders Information for shareholders 30. Share-based payments As at the balance sheet date, CapMan has two investment based long-term share-based incentive plans (“Share plan 2020-2023” and “Share plan 2022-25”) in force. These programs are used to commit key individuals and executives to the company and reinforce the alignment of interests of key individuals and executives and CapMan shareholders. In the investment based long-term share- based incentive plan the participants are committed to shareholder value creation by investing a significant amount into the CapMan Plc share. The investment-based long-term incentive plan 2020-23 includes one performance period. The performance period commenced on 1 April 2020 and will end on 31 March 2023. The participants may earn a performance-based reward from the performance period. The prerequisite for receiving reward on the basis of the plan is that a participant acquires company’s shares or allocates previ- ously owned company’s shares up to the number determined by the Board of Directors. The per- formance-based reward from the plan is based on the company share’s Total Shareholder Return (TSR) and on a participant’s employment or service upon reward payment. An early payment of the vested reward shares was conducted in April 2022, but irrespective of this, the plan will remain in force until the end of its performance period on 31 March 2023 in line with the original terms. The early payment and the change in the forfeiture rate resulted in an EUR 1.1 million additional expense for 2022 and EUR 0.7 million increase in the plan’s fair value. The rest of the rewards will be paid in 2023. The plan is equity-settled by nature and while the participants earn a certain gross amount of reward shares, it can be partially paid in cash to cover the withholding tax conse- quences. The Board shall resolve whether new Shares or existing Shares held by the Company are given as reward. The target group of the Plan consists of 20 persons, including the members of the Management Group. The investment-based long-term incentive plan 2022-25 includes three performance periods. The performance period commenced on 1 April 2022 and will end on 31 March 2023, 2024 and 2025, respectively. The participants may earn a performance-based reward from each of the per- formance periods and a matching reward from the 2022-2025 period. The rewards from the plan will be paid in 2024, 2025 and 2026. The aim of the plan is to align remuneration with CapMan’s sustainability agenda, to retain the plan participants in the company’s service, and to offer them a competitive reward plan based on owning, earning and accumulating the company’s shares. The prerequisite for receiving reward on the basis of the plan is that a participant acquires company’s shares or allocates previously owned company’s shares up to the number determined by the Board of Directors. The performance-based reward from the plan is based on the company share’s Total Shareholder Return (TSR) and on a participant’s employment or service upon reward payment. The plan is equity-settled by nature and while the participants earn a certain gross amount of re- ward shares, it can be partially paid in cash to cover the withholding tax consequences. The Board shall resolve whether new Shares or existing Shares held by the Company are given as reward. The target group of the Plan consists of 22 persons, including the members of the Management Group. The fair value of the investment-based incentive plans has been measured at the grant date and is expensed on a straight-line basis over the vesting period. The fair value has been calculated by applying a Monte-Carlo simulation, where the model inputs have included share price at the grant date, expected annualised volatility over the tenure of the program, risk-free interest rate, expected dividends and expected share rewards to be granted on different target share price levels. The model simulates share price development during the performance period and the resulting share rewards to be granted after reaching the share price levels defined in the conditions of the plan. In addition, lack of marketability due to the lock-up period as well as forfeiture rate have been incorporated into the measurement of the fair value as decreasing factors. The total expense recognised for the period arising from share-based payment transactions amounted to EUR 2.7 million. There were no liabilities arising from share-based payment transac- tions. As at the balance sheet date, based on the closing price of CapMan’s share, it is estimated that for the Share plan 2020-2023 and 2022-25, the shares to be withheld and paid in cash to cover withholding tax liabilities will amount to EUR 2.6 million. 90 • CAPMAN ANNUAL REPORT 2022 • FINANCIAL STATEMENTS GROUP CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS Group Statement of Comprehensive Income (IFRS) Group Balance Sheet (IFRS) Group Statement of Changes in Equity (IFRS) Group Cash Flow Statement (IFRS) Notes to the Consolidated Financial Statements Parent Company Income Statement (FAS) Parent Company Balance Sheet (FAS) Parent Company Cash Flow Statement (FAS) Notes to the Parent Company Financial Statements (FAS) Signatures to the Report of the Board of Directors and Financial Statements Auditor’s report Shares and shareholders Information for shareholders Key information on the investment-based incentive plans is presented in the below table. Investment-based incentive plans Share plan 2020–2023 Share plan 2022–2025 Grant date 16.4.2020 13.4.2022 Vesting period starts 16.4.2020 13.4.2022 Vesting period ends 31.8.2023 13.4.2024, 13.4.2025 and 13.4.2026 Grant date share price, EUR 1.764 2.420 Share price at the end of the period, EUR 2.705 2.705 Expected annualised volatility 27% 26% Assumed risk-free interest rate 0.0% 1.0% Present value of the expected dividends, EUR 0.45 0.63 Forfeiture rate assumption 0% 0% Increase in fair value of share premiums granted during the period 0.7 3.3 Fair value of the plan, EUR million 3.4 3.3 Expense recorded during the financial year, EUR million 2.0 0.8 Cumulative expense recorded for the plan, EUR million 3.3 0.8 Future cash payment related to withholding taxes, EUR million -1.0 -1.5 Number of participants in the plan 19 20 Changes in the number of share rewards during the period Share plan 2020–2023 Share plan 2022–2025 Outstanding in the beginning of the period 1.1.2022 4,417,500 0 Granted 0 3,980,848 Forfeited 15,000 42,500 Exercised 2,917,500 0 Expired 0 0 Exercised at the end of the period 31.12.2022 2,917,500 0 Outstanding at the end of the period 31.12.2022 1,485,000 3,938,348 91 • CAPMAN ANNUAL REPORT 2022 • FINANCIAL STATEMENTS GROUP CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS Group Statement of Comprehensive Income (IFRS) Group Balance Sheet (IFRS) Group Statement of Changes in Equity (IFRS) Group Cash Flow Statement (IFRS) Notes to the Consolidated Financial Statements Parent Company Income Statement (FAS) Parent Company Balance Sheet (FAS) Parent Company Cash Flow Statement (FAS) Notes to the Parent Company Financial Statements (FAS) Signatures to the Report of the Board of Directors and Financial Statements Auditor’s report Shares and shareholders Information for shareholders 31. Related party disclosures Group companies Group ownership of shares, % Parent company ownership of shares, % CapMan Plc, parent company Finland CapMan Capital Management Oy Finland 100% 100% CapMan Sweden AB Sweden 100% 100% CapMan AB Sweden 100% 100% CapMan (Guernsey) Limited Guernsey 100% 100% CapMan (Guernsey) Buyout VIII GP Limited Guernsey 100% 100% CapMan (Sweden) Buyout VIII GP AB Sweden 100% 100% CapMan Classic GP Oy Finland 100% 100% CapMan Real Estate Oy Finland 100% 100% Dividum Oy Finland 100% 100% CapMan RE I GP Oy Finland 100% 100% CapMan RE II GP Oy Finland 100% 100% CapMan (Guernsey) Life Science IV GP Limited Guernsey 100% 100% CapMan (Guernsey) Technology 2007 GP Limited Guernsey 100% 100% CapMan (Sweden) Technology Fund 2007 GP AB Sweden 100% 100% CapMan Private Equity Advisors Limited Cyprus 100% 100% RG Growth (Guernsey) GP Ltd Guernsey 100% 100% CapMan (Guernsey) Investment Limited Guernsey 100% 100% CapMan (Guernsey) Buyout IX GP Limited Guernsey 100% 100% CapMan Fund Investments SICAV-SIF Luxembourg 100% 100% CapMan Mezzanine V Manager S.A. Luxembourg 100% 100% CapMan (Guernsey) Buyout X GP Limited Guernsey 100% 100% RG Growth (Guernsey) II GP Ltd Guernsey 100% 100% Maneq 2012 AB Sweden 100% 100% CapMan Nordic Real Estate Manager S.A. Luxembourg 100% 100% CapMan Buyout X GP Oy Finland 100% 100% CapMan Endowment GP Oy Finland 100% 100% CapMan Real Estate UK Limited United Kingdom 100% Nest Capital 2015 GP Oy Finland 100% 100% Kokoelmakeskus GP Oy Finland 100% 100% CapMan Growth Equity Oy Finland 100% 100% CapMan Real Estate Manager S.A. Luxembourg 100% 100% CapMan Infra Management Oy Finland 60% 60% Group companies Group ownership of shares, % Parent company ownership of shares, % CapMan Infra Lux Management S.á.r.l. Luxembourg 60% CapMan Growth Equity 2017 GP Oy Finland 100% 100% CapMan Nordic Infrastructure Manager S.á.r.l. Luxembourg 100% 100% CapMan Infra Lynx GP Oy Finland 60% CapMan Buyout XI GP S.á.r.l Luxembourg 100% 100% CapMan AIFM Oy Finland 100% 100% Nest Capital III GP Oy Finland 100% 100% CapMan Procurement Services (CaPS) Oy Finland 93% 93% CapMan Buyout Management Oy Finland 70% 70% CapMan Hotels II Holding GP Oy Finland 100% 100% JAY Solutions Oy Finland 60% 60% CapMan Wealth Services Oy Finland 60% 60% CapMan Growth Equity II GP Oy Finland 100% 100% CapMan Special Situations GP Oy Finland 100% 100% CapMan Special Situations Oy Finland 65% 65% Nest Capital Management AB Sweden 100% 100% CM III Feeder GP S.á.r.l. Luxembourg 100% 100% CaPS Baltic OÜ Estonia 56% Maneq 2010 AB Sweden 86% 86% Maneq 2005 AB Sweden 100% 100% CapMan Residential Manager SA Luxembourg 60% 60% CMRF Feeder GP S.á.r.l. Luxembourg 60% CMRF Advisors Oy Finland 60% 60% CM Nordic Gems GP Oy Finland 100% 100% CMH II Feeder GP Sarl Luxembourg 100% 100% CapMan Nordic Infrastructure II Manager S.á.r.l. Luxembourg 100% 100% CMNPI GP II Sarl Luxembourg 100% 100% Foreign branches CapMan Real Estate Denmark, filial av CapMan AB, Sverige Denmark 100% CapMan Real Estate Oy, filial i Norge Norway 100% CapMan Procurement Services (CaPS) Oy, filial i Sverige Sweden 93% CapMan Buyout Management Oy, filial i Sverige Sweden 70% CapMan Infra Management Oy, filial i Sverige Sweden 60% 92 • CAPMAN ANNUAL REPORT 2022 • FINANCIAL STATEMENTS GROUP CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS Group Statement of Comprehensive Income (IFRS) Group Balance Sheet (IFRS) Group Statement of Changes in Equity (IFRS) Group Cash Flow Statement (IFRS) Notes to the Consolidated Financial Statements Parent Company Income Statement (FAS) Parent Company Balance Sheet (FAS) Parent Company Cash Flow Statement (FAS) Notes to the Parent Company Financial Statements (FAS) Signatures to the Report of the Board of Directors and Financial Statements Auditor’s report Shares and shareholders Information for shareholders Transactions with related parties In 2022, CapMan issued a long-term loan of EUR 210 thousand with a fixed interest rate to Äkäs Capital Oy, a controlled entity of Maximilian Marschan, member of the Management Group. Äkäs Capital Oy used the loan to purchase an additional 1.5% ownership share in CapMan Procurement Services (CaPS) Oy, a subsidiary of CapMan Plc. In 2021, CapMan Plc sold an ownership interest of 0.5% in CapMan Procurement Services (CaPS) Oy to Äkäs Capital Oy. The selling price was approximately EUR 50 thousand. Further, in 2021, Silverage Holdings Oy, a controlled entity of Christian Borgström, member of the Management Group, issued a capital loan of EUR 120 thou- sand with fixed interest rate to JAY Solutions Oy, a subsidiary of CapMan Plc. Receivables from and liabilities to related parties 1 000 EUR 2022 2021 Loan receivables, non-current, from related parties 235 9 Capital loan liability to related parties 120 120 Commitments to related parties 1 000 EUR 2022 2021 Loan commitments 112 66 Management remuneration 1 000 EUR 2022 2021 CEO Joakim Frimodig Salaries and other short-term employee benefits 453 376 Pension costs 80 65 Additional pension costs 45 38 Share-based payments 793 236 Total 1,371 715 Management group excl. CEO Salaries and other short-term employee benefits 3,483 3,135 Share-based payments 1,106 382 Total 4,590 3,517 Remuneration and fees 1 000 EUR 2021 2020 Andreas Tallberg 69 68 Johan Bygge as of March 17, 2021 44 34 Peter Ramsay until March 17, 2021 11 Mammu Kaario 55 55 Catarina Fagerholm 45 45 Eero Heliövaara until March 16, 2022 11 43 Olli Liitola 42 42 Johan Hammarén 42 42 Total 309 341 Management remuneration includes members of the board, CEO and management group. 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. The CEO and some of the Management Group members are covered by additional defined con- tribution based pension insurance. The retirement age of the CEO is 63 years. The Management Group members have allocated a total of 660,000 shares (785,000 shares in 2021) to the investment-based long-term incentive plan 2020-23 and 740,000 shares to the investment based long-term incentive plan 2022-25. The Management Group members were not granted any stock options. The Management Group and other employees have similar terms in the investment-based long-term incentive plans and stock options granted earlier . 93 • CAPMAN ANNUAL REPORT 2022 • FINANCIAL STATEMENTS GROUP CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS Group Statement of Comprehensive Income (IFRS) Group Balance Sheet (IFRS) Group Statement of Changes in Equity (IFRS) Group Cash Flow Statement (IFRS) Notes to the Consolidated Financial Statements Parent Company Income Statement (FAS) Parent Company Balance Sheet (FAS) Parent Company Cash Flow Statement (FAS) Notes to the Parent Company Financial Statements (FAS) Signatures to the Report of the Board of Directors and Financial Statements Auditor’s report Shares and shareholders Information for shareholders 32. Financial risk management The purpose of financial risk management is to ensure that the Group has adequate and effec- tively utilised financing as regards the nature and scope of the Group’s business. The objective is to minimise the impact of negative market development on the Group with consideration for cost efficiency. The financial risk management has been centralised and the Group’s CFO is responsible for financial risk management and control. The management constantly monitors cash flow forecasts and the Group’s liquidity position on behalf of all Group companies. In addition, the Group’s principles for liquidity management include rolling 12-month loan covenant assessments. The loan covenants are related to equity ratio and net gearing. During the financial year all the loan covenants have been fullfilled. The Group has a Risk and Valuation team, which monitors the performance and the price risk of the investment portfolio (financial assets entered at fair value through profit or loss) independently and objectively of the investment teams. The Risk and Valuation team is responsible for reviewing the monthly reporting and forecasts for portfolio companies. Valuation proposals are examined by the Risk and Valuation team and subsequently reviewed and decided by the Valuation Committee, which comprises at least Valuation Controller, Risk Manager and at least one CapMan AIF Manag- er’s Board of Directors. The portfolio company valuations are reviewed in the Valuation Commit- tee on a quarterly basis. The valuations are back tested against realised exit valuations, and the results of such back testing are reported to the Audit Committee annually. a) Liquidity risk Cash inflow from operating activities consists of predictable management fees and fees from the Service Business, as well as transaction-based fees and carried interest income, which are more difficult to predict. Cash outflow from operating activities consists of payment of fixed costs, in- terests and taxes, which are relatively well predictable in the short term. Liquidity management is also significantly impacted by the timing of the capital calls to the funds and proceeds from fund investments, which is difficult to predict. Therefore, the Group maintains a sufficient liquidity in order to fulfill its commitments, which are more difficult to predict. Cash from financing activities consist of proceeds from and repayment of borrowings, and payment of dividends and return of capital. Management fees received from the funds and majority of fees from the Service Business are based on long-term agreements and are targeted to cover the operational expenses of the Group. Management fees and majority of fees from the Service Business are quite reliably predictable for the coming 12 months. However, part of of the fees from the Service Business are transac- tion-based and thus more difficult to forecast. The timing and receipt of carried interest generated by the funds is uncertain and will contrib- ute to the volatility of the results. Changes in investment and exit activity levels may have a sig- nificant impact on cash flows of the Group. A single investment or exit may change the cash flow situation completely and the exact timing of the cash flow is difficult to predict. Group companies managing a fund may in certain circumstances, pursuant to the terms of the fund agreement, have to return carried interest income they have received (so-called clawback). The obligation to re- turn carried interest income applies typically when, according to the final distribution of funds, the carried interest income received by the fund management company exceeds the carried interest it is entitled to when the fund expires. CapMan has no clawback liabilities recorded at the balance sheet date. CapMan has made commitments to the funds it manages. As at December 31, 2022, the un- drawn commitments to the funds amounted to EUR 89.1 million (90.3) and the financing capacity available (cash available for use and third party financing facilities) amounted to EUR 73.8 million (83.2). The cash available includes the cash of CapMan Fund Investments SICAV-SIF EUR 0.8 million (0.2) which is reported in fund investments in the group balance sheet. On April 13, 2022, CapMan issued unsecured sustainability-linked notes in the aggregate principal amount of EUR 40 million. The notes will mature on April 13, 2027 and carry initially a fixed annual interest of 4.5%. In conjunction with this, CapMan redemeed the remaining EUR 31.5 million of its notes issued in 2018. These notes carried a fixed annual interest of 4.125% that was paid semi-annually. CapMan also has unsecured notes in the aggregate principal amount of EUR 50 million issued in December 2020, which will mature on December 9, 2025 and carry a fixed annual interest of 4.0% paid annually. Both loan agreements include covenants related to equity ratio. At the end of the financial year, CapMan has an unused long-term credit facility of EUR 20 million. CapMan has not used the credit facility during the financial year or the previous year. The long-term credit facility agreement includes a covenant related to net gearing. 94 • CAPMAN ANNUAL REPORT 2022 • FINANCIAL STATEMENTS GROUP CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS Group Statement of Comprehensive Income (IFRS) Group Balance Sheet (IFRS) Group Statement of Changes in Equity (IFRS) Group Cash Flow Statement (IFRS) Notes to the Consolidated Financial Statements Parent Company Income Statement (FAS) Parent Company Balance Sheet (FAS) Parent Company Cash Flow Statement (FAS) Notes to the Parent Company Financial Statements (FAS) Signatures to the Report of the Board of Directors and Financial Statements Auditor’s report Shares and shareholders Information for shareholders Maturity analysis 31 December 2022 1 000 EUR Due within 3 months Due between 3 and 12 months Due between 1 and 3 years Due between 3 and 5 years Due later Bonds 50,000 40,000 Accounts payable 1,167 Interests, bonds 3,800 7,474 2,303 Company acquisitions liabilities 6,933 Commitments to funds 0 11,544 6,779 590 70,198 Lease liabilities (IFRS 16) 323 976 1,089 876 31 December 2021 1 000 EUR Due within 3 months Due between 3 and 12 months Due between 1 and 3 years Due between 3 and 5 years Due later Bonds 31,520 50,000 Accounts payable 1,230 Interests, bonds 3,300 4,650 2,000 Company acquisitions liabilities 7,183 Commitments to funds 328 11,830 8,897 590 68,695 Lease liabilities (IFRS 16) 237 686 689 95 • CAPMAN ANNUAL REPORT 2022 • FINANCIAL STATEMENTS GROUP CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS Group Statement of Comprehensive Income (IFRS) Group Balance Sheet (IFRS) Group Statement of Changes in Equity (IFRS) Group Cash Flow Statement (IFRS) Notes to the Consolidated Financial Statements Parent Company Income Statement (FAS) Parent Company Balance Sheet (FAS) Parent Company Cash Flow Statement (FAS) Notes to the Parent Company Financial Statements (FAS) Signatures to the Report of the Board of Directors and Financial Statements Auditor’s report Shares and shareholders Information for shareholders b) Interest rate risk TAt the end of the financial year, interest-bearing liabilities carry a fixed interest rate. Exposure to interest rate risk arises principally from the long-term credit facility of EUR 20 million with a floating interest rate. This facility was not used during the financial year or the previous year. The interest rate of the credit facility is the aggregate of the reference rate (Euribor) and the margin, which is dependent on the Group’s net gearing and is in the range of 1.75 % to 2.70 %. The sustainability-linked senior bond issued in April 2022 carry initially an annual coupon rate of 4.500% paid annually. Failure to fulfill the agreed sustainability-linked targets by the end of 2023 could increase the interest rate by 0.500 %-points, at maximum, for the remainder of the loan term. The senior bond issued in December 2020 carry a coupon rate of 4.000% p.a., which is paid once a year. Loans according to interest rate 1 000 EUR 2022 2021 Floating rate 0 0 Fixed rate 89,770 81,355 Total 89,770 81,355 c) Luottoriski Group’s credit risks relate to trade, loan and other receivables recognised at amortised cost. The maximum credit loss of these receivables is the carrying amount of the receivable in question. There are no collaterals relating to the receivables. CapMan has some credit-impaired co-investment loan receivables from entities controlled by the former or current investment teams. Co-investment loans are determined to be credit-impaired, if the expected distributions from the underlying fund would not enable full repayment of the loan to CapMan. Events triggering an evaluation to determine, if a loan receivable is credit-impaired, are typically decreased or lost carry potential or decreased fair value of the underlying fund’s remaining investments or fund filing for liquidation. More information on the expected credit losses of receivables is presented in notes 18 and 20. Group’s loan commitments are related to co-investment loans granted to team entities, which they use in order to make co-investments to funds managed by the Group. Apart from credit-impaired loan receivables, credit risk of loan commitments is deemed low, when the repayment is subject to distributions received from the fund and the fund is capable of making distributions equaling or exceeding the needed cash for repaying the loans and accrued interests. d) Currency risk Changes in exchange rates, particularly between the US dollar and and the euro, impact the company’s performance, since a part of group’s fund investments and non-current accounts receivables are in US dollar. Any strengthening/weakening of the dollar against the euro would im- prove/weaken the fair value gains or US dollar fund investments and revenue related to US dollar nominated account receivables. CapMan has started to hedge its US dollar nominated account receivables against changes in exchange rates as of December 2022, and therefore, hedging will have a full impact as of 2023. The group does not, however, apply hedge accounting to the derivative instruments used for hedg- ing purposes. The group also has assets in Swedish kronos therefore the changes in exchange rates between the Swedish krono and the euro has also an impact to Group result. CapMan has subsidiaries outside of the Eurozone, and their equity is exposed to movements in foreign currency exchange rates. However, the Group does not hedge currency as the impact of exposure to currency movements on equity is relatively small. As at December 31, 2022, 87% of the Group’s financial assets were in euros, 10% in US dol- lars 2% in Swedish krona and 1% in other currencies. The following table presents the fair values of the foreign currency denominated financial assets. Financial assets denominated in foreign currencies, in euros 1 000 EUR SEK USD Other currencies Total 2022 6,280 26,003 1,799 34,082 2021 4,369 23,268 729 28,366 96 • CAPMAN ANNUAL REPORT 2022 • FINANCIAL STATEMENTS GROUP CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS Group Statement of Comprehensive Income (IFRS) Group Balance Sheet (IFRS) Group Statement of Changes in Equity (IFRS) Group Cash Flow Statement (IFRS) Notes to the Consolidated Financial Statements Parent Company Income Statement (FAS) Parent Company Balance Sheet (FAS) Parent Company Cash Flow Statement (FAS) Notes to the Parent Company Financial Statements (FAS) Signatures to the Report of the Board of Directors and Financial Statements Auditor’s report Shares and shareholders Information for shareholders e) Capital management Group’s aim is to have an efficient capital structure that allows the company to manage its ongoing obligations and that the business has the prerequisites for operating normally. The Return on equi- ty (ROE) and the Equity ratio are the means for monitoring capital structure. The long-term targets and dividend policy of the Group have been confirmed by the Board of Di- rectors of CapMan Plc. The targets are based on profitability (ROE) and balance sheet. The return on equity target is more than 20 per cent p.a. on average, and target for Equity ratio at least 50%. The company’s objective is to pay an annually increasing dividend to its shareholders. At the balance sheet date, CapMan has two unsecured senior bonds outstanding, of which the sustainability-linked unsecured bond of EUR 40 million, with initially fixed interest rate, will mature on April 13, 2027 and the other unsecured bond of EUR 50 million, with fixed interest rate, will mature on December 9, 2025. In addition, CapMan has a long-term credit facility of EUR 20 mil- lion available until August 5, 2024, which was not in use at the balance sheet date. The long-term credit facility agreement and senior bond agreeements include financial cove- nants related to both equity ratio and net gearing. 1 000 EUR 2022 2021 Interest-bearing loans 92,966 83,008 Cash and cash equivalents -55,571 -65,207 Net debt 37,395 17,801 Equity 142,144 127,394 Net gearing 26.3% 14.0% Return on equity 30.5% 29.4% Equity ratio 52.7% 53.3% f) Price risk of the investments in funds The investments in funds are valued using the International Private Equity and Venture Capital Valua- tion Guidelines. According to these guidelines, the fair values are generally derived by multiplying key performance metrics of the investee company (e.g., EBITDA) by the relevant valuation multiple (e.g., price/equity ratio) observed for comparable publicly traded companies or transactions. Changes in valuation multiples can lead to significant changes in fair values depending on the leverage ratio of the investee company. g) Determining fair values Fair value hierarchy of financial assets measured at fair value at 31 December 2022 1 000 EUR Fair value Level 1 Level 2 Level 3 Investments in funds 169,063 1,197 0 167,866 Other non-current investments 434 408 0 25 Current financial assets at FVTPL 65 0 65 0 * Fair value through profit or loss. The different levels have been defined as follows: Level 1 Quoted prices (unjusted) in active markets for identical assets. Level 2 Other than quoted prices included within Level 1 that are observable for the asset, either directly (that is, as price) or indirectly (that is, derived from prices). Level 3 The asset that is not based on observable market data. Non-current investments at fair value through profit or loss 1 000 EUR Level 1 Level 2 Level 3 Total Investments in funds at Jan 1 236 129,776 130,012 Additions 29,313 29,313 Distributions -27,600 -27,600 Disposals -1 -1 Fair value gains/losses 36,685 36,685 Transfers 961 -307 654 at the end of period 1,197 167,866 169,063 Other investments at Jan 1 368 0 25 393 Additions 45 45 Fair value gains/losses -5 -5 at the end of period 408 0 25 434 * Includes the change of cash and cash equivalents of the subsidiary CapMan Fund Investments SICAV-SIF, classi- fied as fund investments. 97 • CAPMAN ANNUAL REPORT 2022 • FINANCIAL STATEMENTS GROUP CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS Group Statement of Comprehensive Income (IFRS) Group Balance Sheet (IFRS) Group Statement of Changes in Equity (IFRS) Group Cash Flow Statement (IFRS) Notes to the Consolidated Financial Statements Parent Company Income Statement (FAS) Parent Company Balance Sheet (FAS) Parent Company Cash Flow Statement (FAS) Notes to the Parent Company Financial Statements (FAS) Signatures to the Report of the Board of Directors and Financial Statements Auditor’s report Shares and shareholders Information for shareholders Fair value hierarchy of financial assets measured at fair value at 31 December 2021 1 000 EUR Fair value Level 1 Level 2 Level 3 Investments in funds 130,011 236 0 129,776 Other non-current investments 393 368 0 25 Current financial assets at FVTPL 0 0 0 0 * Fair value through profit or loss. The different levels have been defined as follows: Level 1 Quoted prices (unjusted) in active markets for identical assets. Level 2 Other than quoted prices included within Level 1 that are observable for the asset, either directly (that is, as price) or indirectly (that is, derived from prices). Level 3 The asset that is not based on observable market data. Non-current investments at fair value through profit or loss 1 000 EUR Level 1 Level 2 Level 3 Total Investments in funds at Jan 1 951 115,115 116,066 Additions 20,912 20,912 Distributions -23,542 -23,542 Disposals -16,505 -16,505 Fair value gains/losses 34,135 34,135 Transfers -715 -339 -1,054 at the end of period 236 129,776 130,011 Other investments at Jan 1 166 0 25 191 Additions 202 202 at the end of period 368 0 25 393 * Includes the change of cash and cash equivalents of the subsidiary CapMan Fund Investments SICAV-SIF, classified as fund investments. 98 • CAPMAN ANNUAL REPORT 2022 • FINANCIAL STATEMENTS GROUP CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS Group Statement of Comprehensive Income (IFRS) Group Balance Sheet (IFRS) Group Statement of Changes in Equity (IFRS) Group Cash Flow Statement (IFRS) Notes to the Consolidated Financial Statements Parent Company Income Statement (FAS) Parent Company Balance Sheet (FAS) Parent Company Cash Flow Statement (FAS) Notes to the Parent Company Financial Statements (FAS) Signatures to the Report of the Board of Directors and Financial Statements Auditor’s report Shares and shareholders Information for shareholders Sensitivity analysis of Level 3 investments at 31 December 2022 Investment area Fair value MEUR 31.12.2022 Valuation methodology Unobservable inputs Used input value (weighted average) Change in input value Fair value sensitivity Growth 18.7 Peer group Peer group earnings multiples EV/EBITDA 2022 9.3x +/- 10% +/- 1.3 MEUR Discount to peer group multiples 24% +/- 10% -/+ 0.5 MEUR Buyout 26.1 Peer group Peer group earnings multiples EV/EBITDA 2022 7.4x +/- 10% + /- 2.3 MEUR Discount to peer group multiples 16% +/- 1 % -/+ 0.6 MEUR Real Estate 44.0 Valuation by an independent valuer FX rate EUR/SEK 11.1218 EUR/DKK 7.4365 EUR/NOK 10.5138 +/- 1% +/- 1% +/- 1% +/- 0.1 MEUR +/- 0.1 MEUR +/- 0.0 MEUR Infra 13.1 Discounted cash flows Terminal value EV/EBITDA 17.1x +/- 5% +/- 1.0 MEUR Discount rate; market rate and risk premium 15% +/- 100 bps - / + 1.0 MEUR Credit 4.3 Discounted cash flows Discount rate; market rate and risk premium 10% +/- 100 bps - 0.1 MEUR / value increase based on a change in the discount rate is not booked Special Situations 2.9 Peer group Peer group earnings multiples EV/EBITDA 2022 7.6x +/- 10% +/- 0.2 MEUR Discount to peer group multiples 23% +/- 10% -/+ 0.0 MEUR Investments in funds-of-funds 16.5 Reports from PE fund management company Investments in external venture capital funds 42.5 Reports from PE fund management company and possible adjustment by CapMan Company level negative adjustment for the reported value by CapMan 14% +/- 10% - 0.7 MEUR / + 0.7 MEUR 99 • CAPMAN ANNUAL REPORT 2022 • FINANCIAL STATEMENTS GROUP CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS Group Statement of Comprehensive Income (IFRS) Group Balance Sheet (IFRS) Group Statement of Changes in Equity (IFRS) Group Cash Flow Statement (IFRS) Notes to the Consolidated Financial Statements Parent Company Income Statement (FAS) Parent Company Balance Sheet (FAS) Parent Company Cash Flow Statement (FAS) Notes to the Parent Company Financial Statements (FAS) Signatures to the Report of the Board of Directors and Financial Statements Auditor’s report Shares and shareholders Information for shareholders Sensitivity analysis of Level 3 investments at 31 December 2021 Investment area Fair value MEUR 31.12.2021 Valuation methodology Unobservable inputs Used input value (weighted average) Change in input value Fair value sensitivity Growth 19.0 Peer group Peer group earnings multiples EV/EBITDA 2021 12.6x +/- 10% +/- 1.6 MEUR Discount to peer group multiples 31% +/- 10% -/+ 0.8 MEUR Buyout 10.9 Peer group Peer group earnings multiples EV/EBITDA 2021 8.2x +/- 10% + 3. 8 MEUR /- 3.7 MEUR Discount to peer group multiples 30% +/- 10% -/+ 1.9 MEUR Real Estate 44.0 Valuation by an independent valuer Infrastructure 10.5 Discounted cash flows Terminal value EV/EBITDA 17.8x +/- 5% +/- 0.8 MEUR Discount rate; market rate and risk premium 13% +/- 100 bps - / + 1.1 MEUR Russia 3.4 Peer group Peer group earnings multiples EV/EBITDA 2021 12.3x +/- 10% +/- 0.3 MEUR Discount rate; market rate and risk premium 44% +/- 10% -/+ 0.2 MEUR Credit 1.8 Discounted cash flows Discount rate; market rate and risk premium 9% +/- 100 bps - 0.1 MEUR / value increase based on a change in the discount rate is not booked Special Situations 1.9 Peer group Peer group earnings multiples EV/EBITDA 2021 16.0x +/- 10% +/- 0.1 MEUR Discount to peer group multiples 23% +/- 10% -/+ 0.0 MEUR Funds-of-funds 12.3 Reports from PE fund management company Investments in external venture capital funds 25.8 Reports from PE fund management company 100 • CAPMAN ANNUAL REPORT 2022 • FINANCIAL STATEMENTS GROUP CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS Group Statement of Comprehensive Income (IFRS) Group Balance Sheet (IFRS) Group Statement of Changes in Equity (IFRS) Group Cash Flow Statement (IFRS) Notes to the Consolidated Financial Statements Parent Company Income Statement (FAS) Parent Company Balance Sheet (FAS) Parent Company Cash Flow Statement (FAS) Notes to the Parent Company Financial Statements (FAS) Signatures to the Report of the Board of Directors and Financial Statements Auditor’s report Shares and shareholders Information for shareholders CapMan has made some investments also in funds that are not managed by CapMan Group companies. The fair values of these investments in CapMan’s balance sheet are primarily based on the valuations by the respective fund managers. No separate sensitivity analysis is prepared by CapMan for these investments. However, CapMan evaluates the significant investments individually and makes adjustments to them if necessary. Separate sensitivity analysis is prepared by CapMan for these adjustments. The changes in the peer group earnings multiples and the peer group discounts are typically op- posite to each other. Therefore, if the peer group multiples increase, a higher discount is typically applied. Because of this, a change in the peer group multiples may not in full be reflected in the fair values of the fund investments. The valuations are based on euro. If portfolio company’s reporting currency is other than euro, P&L items used in the basis of valuation are converted applying the average foreign exchange rate for corresponding year and the balance sheet items are converted applying the rate at the time of reporting. Changes in the foreign exchange rates, in CapMan’s estimate, have no significant direct impact on the fair values calculated by peer group multiples during the reporting period . The valuation of CapMan funds’ investment is based on international valuation guidelines that are widely used and accepted within the industry and among investors. CapMan always aims at valuing funds’ investments at their actual value. Fair value is the best estimate of the price that would be received by selling an asset in an orderly transaction between market participants on the measurement date. Determining the fair value of fund investments for funds investing in portfolio companies is carried out using International Private Equity and Venture Capital Valuation Guidelines (IPEVG). In estimating fair value for an investment, CapMan applies a technique or techniques that is/are appropriate in light of the nature, facts, and circumstances of the investment in the context of the total investment portfolio. In doing this, current market data and several inputs, including the nature of the investment, local market conditions, trading values on public exchanges for compa- rable securities, current and projected operating performance, and the financial situation of the investment, are evaluated and combined with market participant assumptions. In selecting the appropriate valuation technique for each particular investment, consideration of those specific terms of the investment that may impact its fair value is required. Different methodologies may be considered. The most applied methodologies at CapMan include available market price for actively traded (quoted) investments, earnings multiple valuation technique, whereby public peer group multiples are used to estimate the value of a particular investment, and the Discounted Cash Flows method, whereby estimated future cash flows and the terminal value are discounted to the present by applying the appropriate risk-adjusted rate. CapMan always applies a discount to peer group multiples, due to e.g. limited liquidity of the investments. Due to the qualitative nature of the valuation methodologies, the fair values are to a considerable degree based on CapMan’s judgment. The Group has a Risk and Valuation team, which monitors the performance and the price risk of the investment portfolio (financial assets entered at fair value through profit or loss) independently and objectively of the investment teams. The Risk and Valuation team is responsible for reviewing the monthly reporting and forecasts for portfolio companies. Valuation proposals are examined by the Risk and Valuation team and subsequently reviewed and decided by the Valuation Committee, which comprises at least Valuation Controller, Risk Manager and at least one CapMan AIF Manag- er’s Board of Directors. The portfolio company valuations are reviewed in the Valuation Commit- tee on a quarterly basis. The valuations are back tested against realised exit valuations, and the results of such back testing are reported to the Audit Committee annually. Investments in real estate are valued at fair value based on appraisals made by independent external experts, who follow International Valuation Standards (IVS). The method most appropriate to the use of the property is always applied, or a combination of such methods. For the most part, the valuation methodology applied is the discounted cash flow method, which is based on signifi- cant unobservable inputs. These inputs include the following: Future rental cash inflows Based on the actual location, type and quality of the properties and supported by the terms of any existing lease, other contracts or external evidence such as current market rents for similar properties; Discount rates Reflecting current market assessments of the uncertainty in the amount and timing of cash flows; Estimated vacancy rates Based on current and expected future market conditions after expiry of any current lease; Property operating expenses Including necessary investments to maintain functionality of the property for its expected useful life; Capitalisation rates Based on actual location size and quality of the properties and taking into account market data at the valuation date; Terminal value Taking into account assumptions regarding maintenance costs , vacancy rates and market rents. On 24 February 2022, Russia began a full-scale invasion of Ukraine that is the largest conventional military attack on a sovereign state in Europe since World War II. In response, a large number of countries (including EU, the US and UK) began applying significant further sanctions on Russia with the aim of crippling the Russian economy. The conflict itself and the sanctions imposed in response is estimated to pose a substantial economic risk for the region and internationally. Direct and indirect impact of the conflict is reflected on the fair values of investee companies in form of revised earnings and cash flow forecasts. Moreover, management’s judgement is reflected in investment recorded at fair value in the context of applying the discount rate to valuations based on peer group multiples. 101 • CAPMAN ANNUAL REPORT 2022 • FINANCIAL STATEMENTS GROUP CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS Group Statement of Comprehensive Income (IFRS) Group Balance Sheet (IFRS) Group Statement of Changes in Equity (IFRS) Group Cash Flow Statement (IFRS) Notes to the Consolidated Financial Statements Parent Company Income Statement (FAS) Parent Company Balance Sheet (FAS) Parent Company Cash Flow Statement (FAS) Notes to the Parent Company Financial Statements (FAS) Signatures to the Report of the Board of Directors and Financial Statements Auditor’s report Shares and shareholders Information for shareholders EUR Note 1.1.–31.12.2022 1.1.–31.12.2021 Turnover 1 5,263,341.70 6,160,794.33 Other operating income 2 1,083,303.07 171,248.39 Raw materials and services 3 0.00 -312,181.99 Employee benefit expenses 4 -9,132,098.80 -5,425,486.62 Depreciation 5 -99,398.53 -99,902.75 Other operating expenses 6 -4,041,336.19 -3,120,533.38 Operating loss -6,926,188.75 -2,626,062.02 Finance income and costs 7 19,344,116.96 721,167.76 Profit before appropriations and taxes 12,417,928.21 -1,904,894.26 Appropriations 8 0.00 8,449,936.42 Income taxes 0.00 1,981.20 Loss for the financial year 12,417,928.21 6,547,023.36 Parent Company Income Statement (FAS) 102 • CAPMAN ANNUAL REPORT 2022 • FINANCIAL STATEMENTS GROUP CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS Group Statement of Comprehensive Income (IFRS) Group Balance Sheet (IFRS) Group Statement of Changes in Equity (IFRS) Group Cash Flow Statement (IFRS) Notes to the Consolidated Financial Statements Parent Company Income Statement (FAS) Parent Company Balance Sheet (FAS) Parent Company Cash Flow Statement (FAS) Notes to the Parent Company Financial Statements (FAS) Signatures to the Report of the Board of Directors and Financial Statements Auditor’s report Shares and shareholders Information for shareholders EUR Note 31.12.2022 31.12.2021 Non-current assets Intangible assets Tangible assets Investments 9 41,656.94 94,242.75 Shares in subsidiaries 10 205,785.37 141,559.88 Investments in associated companies 11 Other investments 127,798,504.09 110,727,424.33 Investments total 34,211.38 34,211.38 10,559,049.01 10,558,185.53 Non-current assets, total 138,391,764.48 121,319,821.24 Current assets 138,639,206.79 121,555,623.87 Long-term receivables Short-term receivables Cash and bank 12 6,727,077.34 2,766,557.73 13 21,059,643.21 33,083,540.33 Current assets, total 25,218,756.17 32,456,355.12 Total assets 53,005,476.72 68,306,453.18 Vastaavaa yhteensä 191,644,683.51 189,862,077.05 Parent Company Balance Sheet (FAS) EUR Note 31.12.2022 31.12.2021 SHAREHOLDERS' EQUITY AND LIABILITIES Shareholders' equity 14 Share capital 771,586.98 771,586.98 Share premium account 38,968,186.24 38,968,186.24 Invested unrestricted shareholders' equity 32,374,156.86 49,671,049.95 Retained earnings 944,536.16 689,906.06 Profit for the financial year 12,417,928.21 6,547,023.36 Shareholders' equity, total 85,476,394.45 96,647,752.59 Liabilities Non-current liabilities 15 91,283,773.76 82,933,766.44 Current liabilities 16 14,884,515.30 10,280,558.02 Liabilities, total 106,168,289.06 93,214,324.46 Total shareholders' equity and liabilities 191,644,683.51 189,862,077.05 103 • CAPMAN ANNUAL REPORT 2022 • FINANCIAL STATEMENTS GROUP CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS Group Statement of Comprehensive Income (IFRS) Group Balance Sheet (IFRS) Group Statement of Changes in Equity (IFRS) Group Cash Flow Statement (IFRS) Notes to the Consolidated Financial Statements Parent Company Income Statement (FAS) Parent Company Balance Sheet (FAS) Parent Company Cash Flow Statement (FAS) Notes to the Parent Company Financial Statements (FAS) Signatures to the Report of the Board of Directors and Financial Statements Auditor’s report Shares and shareholders Information for shareholders EUR 1.1.–31.12.2022 1.1.–31.12.2021 Cash flow from operations Profit before extraordinary items 12,417,928 -1,904,894 Finance income and costs -19,344,117 -721,168 Adjustments to cash flow statement Depreciation, amortisation and impairment 99,399 99,903 Gain on sale of subsidiary shares -1,433,384 -90,464 Change in net working capital Change in current assets, non-interest-bearing 1,126,446 -123,559 Change in inventories 0 312,182 Change in current liabilities, non-interest-bearing -808,489 1,332,499 Interest paid -3,312,011 -3,231,057 Interest received 230,135 302,332 Dividends received 22,966,087 5,137,929 Direct taxes paid 0 6,376 Cash flow from operations 11,941,994 1,120,079 Cash flow from investments Acquisition of subsidiaries 0 -1,417,416 Cash of a dissolved or merged subsidiary 765,825 9,573 Investments in subsidiaries -17,234,994 -11,729,576 Sale of subsidiary shares 321,702 221,465 Capital reduction of subsidiaries 428,957 19,682,180 Investments in tangible and intangible assets -111,038 -59,112 Investments in other placements, net -25,383 1 Loan receivables granted -1,470,139 -4,012,050 Repayment of loan receivables 1,118,426 5,481,026 Cash flow from investments -16,206,644 8,176,091 Parent Company Cash Flow Statement (FAS) EUR 1.1.–31.12.2022 1.1.–31.12.2021 Cash flow from financing activities Share issue 0 90,303 Repayment of capital -17,296,893 -18,788,256 Proceeds from long-term borrowings 39,778,500 0 Repayment of long-term borrowings -31,520,000 0 Repayment of short-term borrowings 0 -94,600 Dividends paid -6,288,998 -3,127,876 Change in group liabilities 4,302,718 2,698,874 Group contributions received 7,807,936 5,305,000 Cash flow from financing activities -3,216,737 -13,916,555 Change in cash and cash equivalents -7,481,387 -4,620,384 Cash and cash equivalents at beginning of year 32,456,355 37,076,739 Translation difference 243,789 Cash and cash equivalents at end of year 25,218,757 32,456,355 104 • CAPMAN ANNUAL REPORT 2022 • FINANCIAL STATEMENTS GROUP CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS Group Statement of Comprehensive Income (IFRS) Group Balance Sheet (IFRS) Group Statement of Changes in Equity (IFRS) Group Cash Flow Statement (IFRS) Notes to the Consolidated Financial Statements Parent Company Income Statement (FAS) Parent Company Balance Sheet (FAS) Parent Company Cash Flow Statement (FAS) Notes to the Parent Company Financial Statements (FAS) Signatures to the Report of the Board of Directors and Financial Statements Auditor’s report Shares and shareholders Information for shareholders Notes to the Parent Company Financial Statements (FAS) Basis of preparation for parent company financial statements CapMan Plc’s financial statements for 2021 have been pre- pared in accordance with the Finnish Accounting Act. Foreign currency translation Transactions in foreign currencies have been recorded at the rates of exchange prevailing at the date of the transaction. Foreign currency denominated receivables and payables are recorded at the rates of exchange prevailing at the closing date of the review period. Investments Investments are valued at acquisition cost. If the probable fu- ture income from the investment is permanently lower than the value at acquisition cost excluding depreciation, the difference is recognised as an expense. Intangible and tangible assets Intangible and tangible assets are valued at cost less accu- mulated depreciation and amortisation according to the plan, except for assets having an indefinite useful life. Receivables Receivables comprise receivables from Group companies and associated companies, trade receivables, accrued income and other receivables. Receivables are recorded at nominal value, however no higher than at probable value. Receivables are clas- sified as non-current assets if the maturity exceeds 12 months. Financial risk management and derivative instruments The financial risk management of CapMan Group is central- ised with the parent company. The financial risk management principles are provided in the Notes to the Group financial statements under 32. Financial risk management. CapMan Plc uses derivative instruments, such as foreign exchange forwards, to hedge against currency changes incurred to its certain and significant foreign currency denominated trade receivables. Derivative instruments are measured at the lower of their cost or market value. Non-current liabilities Senior bonds maturing later than one year after the balance sheet date are recorded as non-current liabilities at nominal value. Current liabilities Bonds maturing within one year are presented as current liabil- ities and measured at their nominal value. Derivative liabilities are measured at fair value. Leases Lease payments are recognised as other expenses. The remain- ing commitments under each lease are provided in the Notes section under “Commitments”. Provisions Provisions are recognised as expenses in case the parent company has an obligation that will not result in comparable income or losses that are deemed apparent. Pensions Statutory pension expenditures are recognised as expenses at the year of accrual. Pensions have been arranged through insurance policies of external pension institutions. Revenue Revenue includes the sale of services to subsidiaries and revenue from the sale of securities, dividends and other similar income from securities classified as inventories. Revenue from services is recognised, when the service is delivered. Income taxes Income taxes are recognised based on Finnish tax law. Deferred taxes are calculated on temporary differences between the carrying amount and the tax base. Deferred taxes have been measured at the statutory tax rates that have been enacted by the balance sheet date and are expected to apply when the related deferred tax is realised. Appropriations Appropriations in the income statement consist of possible giv- en and received group contributions and possible depreciation in excess of plan, and in the balance sheet, possible accumu- lated depreciation in excess of plan. 105 • CAPMAN ANNUAL REPORT 2022 • FINANCIAL STATEMENTS GROUP CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS Group Statement of Comprehensive Income (IFRS) Group Balance Sheet (IFRS) Group Statement of Changes in Equity (IFRS) Group Cash Flow Statement (IFRS) Notes to the Consolidated Financial Statements Parent Company Income Statement (FAS) Parent Company Balance Sheet (FAS) Parent Company Cash Flow Statement (FAS) Notes to the Parent Company Financial Statements (FAS) Signatures to the Report of the Board of Directors and Financial Statements Auditor’s report Shares and shareholders Information for shareholders 1. Turnover by area EUR 2022 2021 Sale of services Finland 1,998,491 1,996,547 Foreign 3,264,851 3,797,075 Sale of securities in inventories 0 367,172 Total 5,263,342 6,160,794 2. Other operating income EUR 2022 2021 Turnover translation difference -370,371 0 Gain on sale of subsidiary shares 1,453,658 0 Other operating income 16 171,248 Total 1,083,303 171,248 3. Raw materials and services EUR 2022 2021 Change in inventories 0 -312,182 Total 0 -312,182 4. Personnel EUR 2022 2021 Salaries and wages 8,224,832 4,684,192 Pension expenses 814,879 635,511 Other personnel expenses 92,388 105,783 Total 9,132,099 5,425,487 Management remuneration Salaries and other remuneration of the CEO Joakim Frimodig 1,741,618 376,060 Board members 318,996 340,554 Average number of employees 33 37 Management remuneration is presented in the Group Financial Statements Table 31. Related party disclosures. 106 • CAPMAN ANNUAL REPORT 2022 • FINANCIAL STATEMENTS GROUP CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS Group Statement of Comprehensive Income (IFRS) Group Balance Sheet (IFRS) Group Statement of Changes in Equity (IFRS) Group Cash Flow Statement (IFRS) Notes to the Consolidated Financial Statements Parent Company Income Statement (FAS) Parent Company Balance Sheet (FAS) Parent Company Cash Flow Statement (FAS) Notes to the Parent Company Financial Statements (FAS) Signatures to the Report of the Board of Directors and Financial Statements Auditor’s report Shares and shareholders Information for shareholders 5. Depreciation EUR 2022 2021 Depreciation according to plan Other long-term expenditure 52,586 53,120 Machinery and equipment 46,813 46,782 Total 99,399 99,903 6. Other operating expenses EUR 2022 2021 Other personnel expenses 354,313 361,276 Office expenses 331,262 399,743 Travelling and entertainment 315,634 207,002 External services 1,884,903 1,798,776 Internal services 873,811 95,579 Other operating expenses 281,413 258,158 Total 4,041,336 3,120,533 Audit fees Audit 107,021 96,340 Other fees and services 18,564 10,200 Total 125,585 106,540 7. Finance income and costs EUR 2022 2021 Dividend income Group companies 22,966,087 5,743,329 Total 22,966,087 5,743,329 Other interest and finance income Group companies 720,139 710,347 Others 857,581 583,781 Total 1,577,720 1,294,128 Interest and other finance costs Impairment of shares and interests 336,851 -2,717,801 Write-down of receivables -1,184,363 -7,451 Group companies 0 -6,856 Others -4,352,178 -3,584,182 Total -5,199,690 -6,316,290 Finance income and costs total 19,344,117 721,168 8. Appropriations EUR 2022 2021 Group contributions received 0 8,449,936 107 • CAPMAN ANNUAL REPORT 2022 • FINANCIAL STATEMENTS GROUP CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS Group Statement of Comprehensive Income (IFRS) Group Balance Sheet (IFRS) Group Statement of Changes in Equity (IFRS) Group Cash Flow Statement (IFRS) Notes to the Consolidated Financial Statements Parent Company Income Statement (FAS) Parent Company Balance Sheet (FAS) Parent Company Cash Flow Statement (FAS) Notes to the Parent Company Financial Statements (FAS) Signatures to the Report of the Board of Directors and Financial Statements Auditor’s report Shares and shareholders Information for shareholders 9. Intangible assets EUR 2022 2021 Intangible rights Acquisition cost at 1 January 828,188 828,188 Acquisition cost at 31 December 828,188 828,188 Accumulated depreciation at 1 January -828,188 -828,188 Accumulated depreciation at 31 December -828,188 -828,188 Book value on 31 December 0 0 Other long-term expenditure Acquisition cost at 1 January 2,677,518 2,622,692 Additions 0 54,826 Acquisition cost at 31 December 2,677,518 2,677,518 Accumulated depreciation at 1 January -2,583,275 -2,530,155 Depreciation for the financial period -52,586 -53,120 Accumulated depreciation at 31 December -2,635,861 -2,583,275 Book value on 31 December 41,657 94,243 Intangible rights total 41,657 94,243 10. Tangible assets EUR 2022 2021 Machinery and equipment Acquisition cost at 1 January 1,215,985 1,211,699 Additions 111,038 4,286 Acquisition cost at 31 December 1,327,023 1,215,985 Accumulated depreciation at 1 January -1,097,165 -1,050,383 Depreciation for the financial period -46,813 -46,782 Accumulated depreciation at 31 December -1,143,978 -1,097,165 Book value on 31 December 183,045 118,820 Other tangible assets Acquisition cost at 1 January 22,739 22,739 Book value on 31 December 22,739 22,739 Tangible assets total 205,784 141,559 108 • CAPMAN ANNUAL REPORT 2022 • FINANCIAL STATEMENTS GROUP CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS Group Statement of Comprehensive Income (IFRS) Group Balance Sheet (IFRS) Group Statement of Changes in Equity (IFRS) Group Cash Flow Statement (IFRS) Notes to the Consolidated Financial Statements Parent Company Income Statement (FAS) Parent Company Balance Sheet (FAS) Parent Company Cash Flow Statement (FAS) Notes to the Parent Company Financial Statements (FAS) Signatures to the Report of the Board of Directors and Financial Statements Auditor’s report Shares and shareholders Information for shareholders 11. Investments EUR 2022 2021 Shares in subsidiaries Acquisition cost at 1 January 110,347,424 116,845,122 Additions 17,234,994 19,498,370 Disposals -850,765 -23,203,328 Impairments 336,851 -2,792,740 Acquisition cost at 31 December 127,068,504 110,347,424 Shares in associated companies Acquisition cost at 1 January 34,212 34,212 Disposals 0 0 Acquisition cost at 31 December 34,212 34,212 Shares, other Acquisition cost at 1 January 10,558,185 12,446,125 Additions 75,314 232,780 Disposals -4,618 -2,120,720 Impairment -69,832 0 Acquisition cost at 31 December 10,559,049 10,558,185 Investments total 137,661,765 120,939,821 The subsidiaries and the associated companies are presented in the Notes to the Consolidated Financial Statements, Table 31. Related party disclosures. 12. Long-term receivables EUR 2022 2021 Receivables from Group companies Capital loan receivables 730,000 380,000 Loan receivables 1,329,471 1,290,194 Other loan receivables 209,805 1,284,363 Accounts receivable 5,187,801 192,000 Long-term receivables total 7,457,077 3,146,558 13. Short-term receivables EUR 2022 2021 Receivables from Group companies Accounts receivable 0 74,618 Accrued income 145 0 Dividend receivables 256,320 322,270 Loan receivables 14,289,759 20,424,619 Other receivables 3,497,576 10,884,722 Total 18,043,800 31,706,230 Accounts receivable 1,435,601 630,773 Loan receivables 808,530 241,145 Other receivables 330,845 122,131 Accrued income 440,868 383,262 Short-term receivables total 21,059,644 33,083,540 109 • CAPMAN ANNUAL REPORT 2022 • FINANCIAL STATEMENTS GROUP CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS Group Statement of Comprehensive Income (IFRS) Group Balance Sheet (IFRS) Group Statement of Changes in Equity (IFRS) Group Cash Flow Statement (IFRS) Notes to the Consolidated Financial Statements Parent Company Income Statement (FAS) Parent Company Balance Sheet (FAS) Parent Company Cash Flow Statement (FAS) Notes to the Parent Company Financial Statements (FAS) Signatures to the Report of the Board of Directors and Financial Statements Auditor’s report Shares and shareholders Information for shareholders 14. Shareholders’ equity EUR 2022 2021 Share capital at 1 January 771,587 771,587 Share capital at 31 December 771,587 771,587 Share premium account at 1 January 38,968,186 38,968,186 Share premium account at 31 December 38,968,186 38,968,186 Invested unrestricted shareholders' equity at 1 January 49,671,050 68,369,002 Invested unrestricted shareholders' equity, disposals -17,296,893 -18,788,256 Share subscriptions with options 0 90,303 Invested unrestricted shareholders' equity at 31 December 32,374,157 49,671,050 Retained earnings at 1 January 7,236,929 3,821,282 Dividend payment -6,292,393 -3,131,376 Retained earnings at 31 December 944,536 689,906 Profit for the financial year 12,417,928 6,547,023 Shareholders' equity, total 85,476,394 96,647,753 Calculation of distributable funds EUR 2022 2021 Retained earnings 944,536 689,906 Profit for the financial year 12,417,928 6,547,023 Invested unrestricted shareholders' equity 32,374,157 49,671,050 Total 45,736,621 56,907,979 CapMan Plc´s share capital is divided as follows: Number of shares 2022 2021 Series B share (1 vote/share) 158,054,968 156,617,293 15. Non-current liabilities EUR 2022 2021 Senior bonds 89,650,433 81,238,545 Other non-current liabilities 1,633,340 1,695,221 Non-current liabilities total 91,283,773 82,933,766 16. Current liabilities EUR 2022 2021 Accounts payable 146,661 353,532 Liabilities to Group companies OP Corporate Bank plc; Group account 10,555,514 6,252,796 Accounts receivable 68,382 0 Accounts payable 8,543 15,009 Other liabilities 114,736 50,428 Accrued expenses 89,537 89,537 Total 10,836,712 6,407,770 Other liabilities 926,408 1,341,514 Accrued expenses 2,974,734 2,177,741 Current liabilities total 14,884,515 10,280,558 110 • CAPMAN ANNUAL REPORT 2022 • FINANCIAL STATEMENTS GROUP CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS Group Statement of Comprehensive Income (IFRS) Group Balance Sheet (IFRS) Group Statement of Changes in Equity (IFRS) Group Cash Flow Statement (IFRS) Notes to the Consolidated Financial Statements Parent Company Income Statement (FAS) Parent Company Balance Sheet (FAS) Parent Company Cash Flow Statement (FAS) Notes to the Parent Company Financial Statements (FAS) Signatures to the Report of the Board of Directors and Financial Statements Auditor’s report Shares and shareholders Information for shareholders 17. Contingent liabilities Leasing agreements EUR 2022 2021 Operating lease commitments Within one year 211,124 113,746 After one but not more than five years 97,088 63,077 Total 308,212 176,823 Other hire purchase commitments Within one year 703,098 529,955 After one but not more than five years 58,592 1,104,073 Total 761,690 1,634,028 Securities and other contingent liabilities EUR 2022 2021 Contingencies for own commitment Enterprise mortgages 60,000,000 60,000,000 Investment commitments to other funds* 250,740 250,740 Other contingent liabilities 2,044,288 2,347,089 Total 62,295,028 62,597,829 Contingencies for subsidiaries' commitments Investment commitments 207,656 643,372 Total 207,656 643,372 * Figure for the comparison period has been adjusted to include also investment commitment to fund CapMan Private Rahasto III Ky. 18. Derivative instruments EUR 2022 2021 Nominal amount of derivatives Foreign exchange forwards 6,327,027 0 Total 6,327,027 0 Fair value of derivatives Foreign exchange forwards 64,927 0 Total 64,927 0 111 • CAPMAN ANNUAL REPORT 2022 • FINANCIAL STATEMENTS GROUP CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS Group Statement of Comprehensive Income (IFRS) Group Balance Sheet (IFRS) Group Statement of Changes in Equity (IFRS) Group Cash Flow Statement (IFRS) Notes to the Consolidated Financial Statements Parent Company Income Statement (FAS) Parent Company Balance Sheet (FAS) Parent Company Cash Flow Statement (FAS) Notes to the Parent Company Financial Statements (FAS) Signatures to the Report of the Board of Directors and Financial Statements Auditor’s report Shares and shareholders Information for shareholders Signatures to the Report of the Board of Directors and Financial Statements Helsinki 1.2.2023 Andreas Tallberg Mammu Kaario Chairman Catarina Fagerholm Johan Hammarén Olli Liitola Johan Bygge Joakim Frimodig CEO The Auditor’s Note Our report has been issued today. Helsinki 1.2.2023 Ernst & Young Oy Audit firm Kristina Sandin Authorised Public Accountant 112 • CAPMAN ANNUAL REPORT 2022 • FINANCIAL STATEMENTS GROUP CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS Group Statement of Comprehensive Income (IFRS) Group Balance Sheet (IFRS) Group Statement of Changes in Equity (IFRS) Group Cash Flow Statement (IFRS) Notes to the Consolidated Financial Statements Parent Company Income Statement (FAS) Parent Company Balance Sheet (FAS) Parent Company Cash Flow Statement (FAS) Notes to the Parent Company Financial Statements (FAS) Signatures to the Report of the Board of Directors and Financial Statements Auditor’s report Shares and shareholders Information for shareholders Auditor’s report (Translation of the Finnish original) To the Annual General Meeting of CapMan Plc Report on the Audit of the Financial Statements Opinion We have audited the financial statements of CapMan Plc (business identity code 0922445-7) for the year ended 31 December, 2022. The financial statements comprise the con- solidated balance sheet, statement of comprehensive income, statement of changes in equity, statement of cash flows and notes, including a summary of significant accounting policies, as well as the parent company’s balance sheet, income state- ment, statement of cash flows and notes. In our opinion • the consolidated financial statements give a true and fair view of the group’s financial position as well as its financial performance and its cash flows in accordance with Interna- tional Financial Reporting Standards (IFRS) as adopted by the EU. • the financial statements give a true and fair view of the par- ent company’s financial performance and financial position in accordance with the laws and regulations governing the preparation of financial statements in Finland and comply with statutory requirements. Our opinion is consistent with the additional report submitted to the Audit Committee. Basis for Opinion We conducted our audit in accordance with good auditing practice in Finland. Our responsibilities under good auditing practice are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the parent company and of the group companies in accordance with the ethical requirements that are applicable in Finland and are relevant to our audit, and we have fulfilled our other ethical responsibilities in accordance with these requirements. In our best knowledge and understanding, the non-audit services that we have provided to the parent company and group companies are in compliance with laws and regulations applicable in Finland regarding these services, and we have not provided any prohibited non-audit services referred to in Article 5(1) of regulation (EU) 537/2014. The non-audit services that we have provided have been disclosed in note 7 to the consoli- dated financial statements. We believe that the audit evidence we have obtained is suffi- cient and appropriate to provide a basis for our opinion. Key Audit Matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the finan- cial statements of the current period. These matters were ad- dressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial statements. The results of our audit procedures, including the procedures performed to ad- dress the matters below, provide the basis for our audit opinion on the accompanying financial statements. We have also addressed the risk of management override of internal controls. This includes consideration of whether there was evidence of management bias that represented a risk of material misstatement due to fraud. 113 • CAPMAN ANNUAL REPORT 2022 • FINANCIAL STATEMENTS GROUP CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS Group Statement of Comprehensive Income (IFRS) Group Balance Sheet (IFRS) Group Statement of Changes in Equity (IFRS) Group Cash Flow Statement (IFRS) Notes to the Consolidated Financial Statements Parent Company Income Statement (FAS) Parent Company Balance Sheet (FAS) Parent Company Cash Flow Statement (FAS) Notes to the Parent Company Financial Statements (FAS) Signatures to the Report of the Board of Directors and Financial Statements Auditor’s report Shares and shareholders Information for shareholders Key Audit Matter How our audit addressed the Key Audit Matter Revenue recognition We refer to the accounting policies in the financial statements and the Note 3. CapMan’s turnover in consolidated group accounts amounted to 67,5 million euros. It consists of management fees, sale of services and carried interest income. The timing of revenue recognition can be judgmental as revenue may be recognized either over time or at the point in time de- pending on the circumstances and provided services. The assessment of recognized revenue includes management assumptions and estimates. Revenue recognition was determined to be a key audit matter and a significant risk of material misstatement referred to in EU Regulation No 537/2014 point (c) of Article 10(2) in respect of its timely recognition and at a proper amount. Our audit procedures to address the risk of material misstatement included, among other things, assessing that the revenue recognition principles comply to applicable accounting standards. We also identified and tested key controls relating to revenue recognition. We examined sales cutoff with analytical procedures. We supplemented our proce- dures with test of details on a transaction level on a random basis in order to ensure that the revenue has been recognized in a correct accounting period and it’s based on the corresponding agreements. In addition, we assessed the adequacy of disclosures relating to the fee and commis- sion income of the group. Key Audit Matter How our audit addressed the Key Audit Matter Valuation of non-liquid investments We refer to the accounting policies in the financial statements and the Notes 17 and 32. The Group’s investment portfolio 31.12.2022 amounts to 169,1 million euros. The investment portfolio includes mainly investments to funds managed by CapMan group companies. Determination of the fair value of funds and direct invest- ments to portfolio companies is executed using International Private Equity and Ven- ture Capital valuation guidelines (IPEV) and IFRS and the fair values are based on esti- mated cash-flows or peer-group multiples. Fair value measurement includes subjective estimations by management, specifically in areas where fair value is based on a model- based valuation. Valuation techniques for private equity funds involve setting various assumptions regarding pricing factors. The use of different valuation techniques and assumptions could lead to different estimates of fair value. Valuation of non-liquid investments was determined to be a key audit matter and a significant risk of material misstatement referred to in EU Regulation No 537/2014 point (c) of Article 10(2). Our audit procedures to address the risk of material misstatement relating to valuation of non-liquid investments included, among others, identifying and testing the controls in place over recording fair values of non-liq- uid investment. We performed additional procedures for ar- eas of higher risk and estimation, involving our valuation specialists. Our audit procedures included: • Developing an understanding of the private equity and real estate portfolios. • Reviewing the price of recent transactions and investments. • Assessing assumptions used in the valua- tions and obtaining an understanding that the valuation appropriately reflects the risks of the portfolios. • Comparing the assumptions against established policies and determining if they have been applied appropriately. • Reviewing and assessing the valuations determined by CapMan or other party. • Assessing whether the International Private Equity and Venture Capital Valua- tion Guidelines and valuation methodology of IFRS have been applied correctly. In addition, we assessed the adequacy of disclosures relating to the non-liquid investments. 114 • CAPMAN ANNUAL REPORT 2022 • FINANCIAL STATEMENTS GROUP CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS Group Statement of Comprehensive Income (IFRS) Group Balance Sheet (IFRS) Group Statement of Changes in Equity (IFRS) Group Cash Flow Statement (IFRS) Notes to the Consolidated Financial Statements Parent Company Income Statement (FAS) Parent Company Balance Sheet (FAS) Parent Company Cash Flow Statement (FAS) Notes to the Parent Company Financial Statements (FAS) Signatures to the Report of the Board of Directors and Financial Statements Auditor’s report Shares and shareholders Information for shareholders Responsibilities of the Board of Directors and the Managing Director for the Financial Statements The Board of Directors and the Managing Director are respon- sible for the preparation of consolidated financial statements that give a true and fair view in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU, and of financial statements that give a true and fair view in accordance with the laws and regulations governing the prepa- ration of financial statements in Finland and comply with stat- utory requirements. The Board of Directors and the Managing Director are also responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the Board of Directors and the Managing Director are responsible for assessing the parent company’s and the group’s ability to continue as going concern, disclosing, as applicable, matters relating to going concern and using the going concern basis of accounting. The financial statements are prepared using the going concern basis of accounting unless there is an intention to liquidate the parent company or the group or cease operations, or there is no realistic alternative but to do so. Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance on whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assur- ance is a high level of assurance but is not a guarantee that an audit conducted in accordance with good auditing practice will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements. As part of an audit in accordance with good auditing practice, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a ma- terial misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the parent company’s or the group’s internal control. Key Audit Matter How our audit addressed the Key Audit Matter Valuation of goodwill We refer to the accounting policies in the financial statements and the Notes 15 and 13. At the balance sheet date 31 December 2022, the value of goodwill amounted to 12,7 million euros representing 5 % of the total assets and 9 % of the total equity. At 31 December 2022, 4,8 million euros of the goodwill is presented as part of Assets held for sale. During financial year 2022, an impairment amounting to 2,6 million euros has been recognized. The valuation of goodwill is based on management’s estimate about the value-in-use calculations of the cash generating units. There are number of under- lying assumptions used to determine the value- in-use, including the revenue growth, EBITDA and discount rate applied on net cash-flows. Estimated value-in-use may vary significantly when the underlying assumptions are changed and the changes in above-mentioned individual assump- tions may result in an impairment of goodwill. Valuation of goodwill was determined to be a key audit matter because the assessment process is judgmental, it is based on assumptions relating to market or economic conditions extending to the future, and because of the significance of the goodwill to the financial statements. Our audit procedures regarding the valuation of goodwill included involving EY valuation specialists to assist us in evaluating methodol- ogies, impairment calculations and underlying assumptions applied by the management in the impairment testing. In evaluation of methodologies, we compared the principles applied by the management in the impairment tests to the requirements set in IAS 36 Impairment of assets standard and ensured the mathematical accuracy of the impairment calculations. We assessed the historical accuracy of man- agements’ estimations and compared the key assumptions applied by the management in impairment tests to • budgets and long-term forecasts, • information available in external sources, as well as • our independently calculated industry averages such as weighted average cost of capital used in discounting the cashflows. We also assessed the sufficiency of the disclo- sures as well as whether the disclosures about the sensitivity of the impairment assessment are appropriate. 115 • CAPMAN ANNUAL REPORT 2022 • FINANCIAL STATEMENTS GROUP CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS Group Statement of Comprehensive Income (IFRS) Group Balance Sheet (IFRS) Group Statement of Changes in Equity (IFRS) Group Cash Flow Statement (IFRS) Notes to the Consolidated Financial Statements Parent Company Income Statement (FAS) Parent Company Balance Sheet (FAS) Parent Company Cash Flow Statement (FAS) Notes to the Parent Company Financial Statements (FAS) Signatures to the Report of the Board of Directors and Financial Statements Auditor’s report Shares and shareholders Information for shareholders • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. • Conclude on the appropriateness of the Board of Directors’ and the Managing Director’s use of the going concern basis of accounting and based on the audit evidence obtained, wheth- er a material uncertainty exists related to events or conditions that may cast significant doubt on the parent company’s or the group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclo- sures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the parent company or the group to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events so that the financial statements give a true and fair view. • Obtain sufficient appropriate audit evidence regarding the fi- nancial information of the entities or business activities within the group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely respon- sible for our audit opinion. We communicate with those charged with governance regard- ing, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a statement that we have complied with relevant ethical require- ments regarding independence and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with those charged with governance, we determine those matters that were of most sig- nificance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in ex- tremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse conse- quences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Other Reporting Requirements Information on our audit engagement We were appointed as auditors by the Annual General Meeting on March 14, 2018 and our appointment represents a total period of uninterrupted engagement of five years. Other information The Board of Directors and the Managing Director are respon- sible for the other information. The other information compris- es the report of the Board of Directors and the information included in the Annual report but does not include the financial statements and our auditor’s report thereon. We have obtained the report of the Board of Directors prior to the date of this auditor’s report, and the Annual Report is expected to be made available to us after that date. Our opinion on the financial statements does not cover the other information. In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. With respect to report of the Board of Directors, our responsibility also includes considering wheth- er the report of the Board of Directors has been prepared in accordance with the applicable laws and regulations. In our opinion, the information in the report of the Board of Directors is consistent with the information in the financial statements and the report of the Board of Directors has been prepared in accordance with the applicable laws and regulations. If, based on the work we have performed on the other information that we obtained prior to the date of this auditor’s report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Helsinki February 1, 2023 Ernst & Young Oy Authorized Public Accountant Firm Kristina Sandin Authorized Public Accountant 116 • CAPMAN ANNUAL REPORT 2022 • FINANCIAL STATEMENTS GROUP CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS Group Statement of Comprehensive Income (IFRS) Group Balance Sheet (IFRS) Group Statement of Changes in Equity (IFRS) Group Cash Flow Statement (IFRS) Notes to the Consolidated Financial Statements Parent Company Income Statement (FAS) Parent Company Balance Sheet (FAS) Parent Company Cash Flow Statement (FAS) Notes to the Parent Company Financial Statements (FAS) Signatures to the Report of the Board of Directors and Financial Statements Auditor’s report Shares and shareholders Information for shareholders 117 • CAPMAN ANNUAL REPORT 2022 • FINANCIAL STATEMENTS GROUP CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS Group Statement of Comprehensive Income (IFRS) Group Balance Sheet (IFRS) Group Statement of Changes in Equity (IFRS) Group Cash Flow Statement (IFRS) Notes to the Consolidated Financial Statements Parent Company Income Statement (FAS) Parent Company Balance Sheet (FAS) Parent Company Cash Flow Statement (FAS) Notes to the Parent Company Financial Statements (FAS) Signatures to the Report of the Board of Directors and Financial Statements Auditor’s report Shares and shareholders Information for shareholders Shares and shareholders CapMan is a Nordic listed private assets management and investment company. The parent company CapMan Plc’s share has been listed on the Helsinki Stock Exchange (Nasdaq Helsinki) since 2001. CapMan had 30,608 shareholders as of the end of 2022. CapMan shares CapMan’s shares are quoted on the main list of Nasdaq Helsinki. All shares generate equal voting rights and rights to a dividend and oth- er distribution to shareholders. CapMan had a total of 158,054,968 shares as of 31 Decem- ber 2022. CapMan’s shares are included in the book entry securities register and have no nominal value. CapMan’s share capital as of 31 December 2022 was 771,586.98. Nominee-registered shareholders CapMan Plc’s foreign shareholders can register their holdings in nominee-registered book-entry accounts, for which a custodian is registered in the company’s list of sharehold- ers rather than the ultimate owner. Foreign and nominee-registered shareholders held a total of 4% of CapMan’s shares as of the end of 2021. A breakdown by sector and size of holding can be found on the Notes to the Financial Statements. Dividend policy and dividend payable for 2022 CapMan’s objective is to pay an annually increasing dividend to its shareholders. The Board of Directors will propose to the Annual General Meeting that a distribution of €0.17 per share be paid to shareholders for 2022. IR contacts CapMan’s IR contacts are the joint responsibility of the CEO, the CFO and the Communications and IR Director. The company observes a two-week silent period prior to publication of its interim reports and financial statements, during which it does not comment on the company’s financial performance or future prospects. Read more www.capman.com/shareholders/ TYÖNUMERO 23 Holding and voting rights by shareholder class  Persons discharging managerial responsibilities 3.7%  Nominee registered shareholders and other foreign ownership (non-Finnish owners) 4.3%  Finnish institutions and households 92.0% 500 400 300 200 100 0 2018 2019 2020 2022 2021 TYÖNUMERO 24 Market capitalisation, M€ 475 362 428 217 362 10 5 0 -5 -10 -15 -20 -25 -30 TYÖNUMERO 30 Jan Feb Mar Apr May Jun Jul Aug Sep Oct DecNov Share price and index development in 2022  CapMan Plc Share Price  CapMan Plc Total Return  OMX Helsinki Cap Price Return Index 118 • CAPMAN ANNUAL REPORT 2022 • FINANCIAL STATEMENTS GROUP CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS Group Statement of Comprehensive Income (IFRS) Group Balance Sheet (IFRS) Group Statement of Changes in Equity (IFRS) Group Cash Flow Statement (IFRS) Notes to the Consolidated Financial Statements Parent Company Income Statement (FAS) Parent Company Balance Sheet (FAS) Parent Company Cash Flow Statement (FAS) Notes to the Parent Company Financial Statements (FAS) Signatures to the Report of the Board of Directors and Financial Statements Auditor’s report Shares and shareholders Information for shareholders Information for shareholders Annual General Meeting 2023 CapMan Plc’s Annual General Meeting 2023 will be held on Wednesday 15 March 2023 at 10.00 a.m. EET at Kämp Symposion at the address Pohjoisesplanadi 29, 00100 Helsinki. All shareholders registered with the company’s list of shareholders maintained by Euroclear Finland Oy on Friday 3 March 2023 are entitled to attend. Shareholders can use their shareholder rights also by voting in advance (either personally or through a proxy representative). Shareholders can also submit questions in advance. For further instructions, please see our website www.capman.com/shareholders/general-meetings/ Dividend and equity repayment The Board of Directors will propose to the AGM that a total distribution of €0.17 per share, consisting of a dividend of €0.08 per share and equity repayment of €0.09 per share, will be paid for 2022. CapMan Plc’s ﬁnancial reporting in 2023 CapMan Plc will publish one half-year report and two interim reports during 2023: • Interim Report for the period 1 January–31 March 2023 on 28 April 2023 • Half-Year Financial Report for the period 1 January–30 June 2023 on 3 August 2023 • Interim Report for the period 1 January–30 September 2023 on 26 October 2023 Financial reports are published in Finnish and English. The company’s Annual Reports, Interim Reports, and stock exchange releases and press releases can be obtained electronically at the company’s website www.capman.com. The company’s website also includes other IR material. Please subscribe to CapMan’s publications by email by joining the mailing list. Analysts following CapMan Plc Evli Jerker Salokivi, tel. +358 (0)45 133 2229 Inderes Sauli Vilén, tel. +358 (0)44 025 8908 and Matias Arola +358 (0)40 935 3632 Nordea Svante Krokfors, tel. +358 (0)9 5300 5337 and Joni Sandvall, tel. +358 (0)9 5300 5484 OP Joona Tersa, tel. +358 10 252 4351 Contact person Linda Tierala Director, Communications & IR [email protected] 119 • CAPMAN ANNUAL REPORT 2022 • FINANCIAL STATEMENTS GROUP CORPORATE GOVERNANCE REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS Group Statement of Comprehensive Income (IFRS) Group Balance Sheet (IFRS) Group Statement of Changes in Equity (IFRS) Group Cash Flow Statement (IFRS) Notes to the Consolidated Financial Statements Parent Company Income Statement (FAS) Parent Company Balance Sheet (FAS) Parent Company Cash Flow Statement (FAS) Notes to the Parent Company Financial Statements (FAS) Signatures to the Report of the Board of Directors and Financial Statements Auditor’s report Shares and shareholders Information for shareholders Independent Auditor’s Report on CapMan Oyj’s ESEF-Consolidated Financial Statements (Translation of the Finnish original) To the Board of Directors of CapMan Oyj We have performed a reasonable assurance engagement on the iXBRL tagging of the consolidated financial statements included in the digital files CapManPlc-2022-12-31-fi.zip of CapMan Oyj for the financial year 1.1.-31.12.2022 to ensure that the financial statements are marked/tagged with iXBRL in accordance with the requirements of Article 4 of EU Commis- sion Delegated Regulation (EU) 2018/815 (ESEF RTS). Responsibilities of the Board of Directors and Managing Director The Board of Directors and Managing Director are responsible for the preparation of the Report of Board of Directors and financial statements (ESEF financial statements) that comply with the ESESF RTS. This responsibility includes: • preparation of ESEF-financial statements in accordance with Article 3 of ESEF RTS • tagging the consolidated financial statements included within the ESEF- financial statements by using the iXBRL mark ups in accordance with Article 4 of ESEF RTS • ensuring consistency between ESEF financial statements and audited financial statements The Board of Directors and Managing Director are also respon- sible for such internal control as they determine is necessary to enable the preparation of ESEF financial statements in accord- ance with the requirements of ESEF RTS. Auditor’s Independence and Quality Control We are independent of the company in accordance with the ethical requirements that are applicable in Finland and are relevant to the engagement we have performed, and we have fulfilled our other ethical responsibilities in accordance with these requirements. The auditor applies International Standard on Quality Con- trol (ISQC) 1 and therefore maintains a comprehensive quality control system including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements. Auditor’s Responsibilities In accordance with the Engagement Letter we will express an opinion on whether the electronic tagging of the consolidated financial statements complies in all material respects with the Article 4 of ESEF RTS. We have conducted a reasonable assur- ance engagement in accordance with International Standard on Assurance Engagements ISAE 3000. The engagement includes procedures to obtain evidence on: • whether the tagging of the primary financial statements in the consolidated financial statements complies in all materi- al respects with Article 4 of the ESEF RTS • whether the tagging of the notes to the financial statements and the entity identifier information in the consolidated financial statements complies in all material respects with Article 4 of the ESEF RTS • whether the ESEF-financial statements are consistent with the audited financial statements The nature, timing and extent of the procedures selected depend on the auditor’s judgement including the assessment of risk of material departures from requirements sets out in the ESEF RTS, whether due to fraud or error. We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our statement. Opinion In our opinion the tagging of the consolidated financial statement included in the ESEF financial statement of CapMan Oyj for the year ended 31.12.2022 complies in all material respects with the requirements of ESEF RTS. Our audit opinion on the consolidated financial statements of CapMan Oyj for the year ended 31.12.2022 is included in our Independent Auditor’s Report dated 1.2.2023. In this report, we do not express an audit opinion any other assurance on the consolidated financial statements. Helsinki 21.2.2023 Ernst & Young Oy Authorized Public Accountant Firm Kristina Sandin Authorized Public Accountant WWW.CAPMAN.COM

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