Annual Report • Mar 9, 2009
Annual Report
Open in ViewerOpens in native device viewer
| CAPMAN AS A COMPANY | |
|---|---|
| CapMan in brief | 1 |
| CEO's review | 2 |
| Strategy and objectives | 4 |
| CapMan's business | 6 |
| Financial objectives and Group key fi gures | 8 |
| CapMan 20 years | 10 |
| Investment approach | 12 |
| CAPMAN FUNDS | |
| Fund investors – Our clients | 14 |
| Funds under management | 15 |
| Access Capital Partners | 22 |
| INVESTMENT AREAS | |
| CapMan Buyout | 24 |
| CapMan Technology | 26 |
| CapMan Life Science | 28 |
| CapMan Russia | 30 |
| CapMan Public Market | 32 |
| CapMan Real Estate | 34 |
| Portfolios of the CapMan funds | 36 |
| CORPORATE SOCIAL RESPONSIBILITY AND PERSONNEL |
|
| Corporate social responsibility | 38 |
| Personnel | 39 |
| Values | 40 |
| CORPORATE GOVERNANCE AND FINANCIAL STATEMENTS |
|
|---|---|
| Corporate governance | 42 |
| Board of Directors | 45 |
| Management Group | 46 |
| Report of the Board of Directors | 48 |
| Consolidated fi nancial statements | 52 |
| Parent Company fi nancial statements | 70 |
| Calculation of key ratios | 75 |
| Signatures to the Report of the Board of Directors and Financial Statements |
75 |
| Auditor's report | 76 |
| Summary of CapMan's releases in 2008 | 77 |
| SHAREHOLDER INFORMATION | |
| Shares and shareholders | 78 |
| Information for shareholders | 80 |
The illustrations used in the Annual Report are based on a selection from CapMan's 20-year history.
Photos on pages: 4, 10–11, 13, 37 and 41: CapMan's photo archives Photos on pages: 10–11 and 23: CapMan's current and exited portfolio companies Photos on pages: 3–4, 10–11, 13, 23–34 and 41: Heikki Tuuli, Studio Heikki Tuuli
CAPMAN FUNDS INVESTMENT AREAS AND FINANCIAL STATEMENTS CAPMAN AS A COMPANY CORPORATE SOCIAL RESPONSIBILITY AND PERSONNEL
CORPORATE GOVERNANCE
SHAREHOLDER INFORMATION
CapMan is one of the leading alternative asset managers in the Nordic countries and Russia.
Active ownership is the cornerstone of our investment activities.
CapMan is one of the leading alternative asset managers in the Nordic countries and Russia, and manages capital of €3.4 billion invested in its funds by institutional investors. CapMan has six investment areas (CapMan Buyout, CapMan Technology, CapMan Life Science, CapMan Russia, CapMan Public Market, and CapMan Real Estate), each of which has its own dedicated investment team and funds. CapMan employs altogether over 140 professionals in Helsinki, Stockholm, Copenhagen, Oslo and Moscow. The company was established in 1989, and its B shares have been listed on the Helsinki Stock Exchange since 2001.
27 portfolio companies
Capital under management in technology funds amounted to €294.6 million
24 portfolio companies
Capital under management in life science funds amounted to €88.0 million on 31 December 2008
12 portfolio companies
Capital under management in CapMan Russia fund amounted to €118.1 million on 31 December 2008
2 portfolio companies
Capital under management in CapMan Public Market fund amounted to €106.0 million on 31 December 2008
6 investment professionals
Capital under management in real estate funds amounted to €1,640.5 million on 31 December 2008
2
CORPORATE GOVERNANCE
SHAREHOLDER INFORMATION
CapMan Plc Annual Report 2008
For CapMan, 2008 was a year of mixed feelings. We achieved our strategic goals and our management company business was profi table. Conversely, the net loss for the fi nancial year caused by negative changes in the fair value of fund investments was a great disappointment. Overall the past 18 months has seen a drastic change in the market environment. Although the core of success in private equity is active ownership, the fi nancial crisis clearly impacted our operations.
The establishment of two new investment areas, CapMan Russia and CapMan Public Market, and the expansion of real estate operations to hotel properties were important successes in 2008. The Norum acquisition made concrete our plans to expand into Russia, where the country's emerging private equity market holds considerable growth potential. The CapMan Russia team has more than a decade's experience in Russian private equity, placing us in a good position to support also our Nordic portfolio companies' projects in Russia.
Our second new investment area, CapMan Public Market, started operating in July. Our belief in the viability of our Public Market concept, creating value in listed markets utilising private equity style ownership, has gained even further strength. Listed companies have a clear need for goal-oriented and active ownership, and increasingly also a need to strengthen their capital structure. We expect that CapMan Public Market will make its fi rst investments in spring 2009. This market also has strong growth potential.
We expanded our real estate operations to include investments in hotel properties, acquiring altogether 39 hotels in conjunction with establishing the €845 million CapMan Hotels RE fund. The fund is characterised by having a stable and predictable cash fl ow from a few large hotel operators. Fundraising for the CapMan Buyout IX fund started in early autumn, and the fi rst closing held in December was an outstanding success despite the challenging fundraising climate.
An important factor in evaluating the health of our business is to pay attention to our management company business, which is sound and profi table. Management fees and income from real estate consulting cover operating expenses. Nevertheless we cannot, of course, be content with the loss in 2008. In particular, the negative changes in the fair value of our own fund investments contributed to the poor overall result, and the deteriorating market situation depressed carried interest income. Our own fund investments and potential future carried interest still hold great upside. It is regrettable for shareholders that the expansion of operations and the strong growth in capital under management have not yet been refl ected in profi ts and the share price. Our share should continue to be evaluated over a time span of at least two to three years.
A part of our strategy has been to invest in our own funds to support growth. In future we will pursue growth from our existing business portfolio, and large add-on commitments to funds will not be needed. In 2008 we continued to follow our strategy and made commitments to our own new funds, which combined with postponed exits was refl ected in CapMan Plc's fi nancial position. When formulating the strategy of own fund investments, our forecasts for cash fl ows receivable from funds investing in portfolio companies, both in carried interest and in realised returns from earlier fund investments, have been higher than the actual cash fl ows received in 2007 and 2008. Market volatility also derailed the Access acquisition agreed in July, which would have introduced substantially more funds for fi nancing fresh investment commitments and growth. To improve our fi nancial position, we issued a hybrid bond in December to fi nance fund investments. The bond issue will also strengthen our equity ratio and our capacity to operate through even a prolonged recession.
Public discussion about private equity in early 2009 has focused on analyses of how well companies owned by private equity investors, and indeed the whole private equity industry, will survive the current crisis. The impact of the recession will undoubtedly be felt also in the operations of private equity backed companies. CapMan has some 60 portfolio companies, and it is not unlikely that some of them will face diffi cult decisions relating to, for instance, restructuring and cutting down workforce. If so, we want to make such diffi cult ownership-related decisions in collaboration with the management and employees, and in a way that safeguards the long-term viability of our portfolio companies. The good cooperation with Nordic banks, which we have enjoyed for some decades now, is also important to us.
For many of our portfolio companies, the prevailing market situation will also present opportunities. The next few years will see restructuring in many sectors, which will force companies to seek new operating models and improve their cost effi ciency to remain competitive. As an active owner, CapMan is in a position to act as a consolidator of interesting sectors and to support its portfolio companies in making acquisitions and managing change.
We believe that 2009 will continue to be a diffi cult year for the whole alternative asset class, but we are strongly convinced that the industry will prosper in the long term. The industry's growth over the last few years was fuelled by institutions' larger allocations, the ready availability of bank fi nancing, and the corporate sector's steadily growing results, and as a consequence, higher valuation levels and returns. In the longer term, however, growth will be based on the unique ownership concept, i.e. the ability to successfully take companies through the different stages of growth. Those players whose value creation is based on genuine value-adding work will best survive the current market situation. CapMan has successfully taken active ownership practices into real estate investment and, more recently, listed markets.
In 2009 CapMan will celebrate its 20th anniversary. During the twenty year-history CapMan has itself undergone several stages of growth. Originally CapMan was a small company owned by institutions. In 1993 its employees made an MBO, and in 2001 CapMan became a listed company. Today CapMan is truly international in terms of its operations and ownership, which still possesses a strong entrepreneurial element through key personnel's signifi cant holdings in the Company. We have experienced different business cycles and market situations, from which we have gained the expertise needed to develop both CapMan and our investments.
As CEO my main goals in 2009 are to safeguard CapMan's growth potential by enhancing the competitiveness of our existing investment areas, and to strengthen our ability to take full benefi t out of the operational platform created.
I would like to thank fund investors, the management and employees of portfolio companies, shareholders and CapMan's personnel for their cooperation in 2008 and for their commitment to our common goals.
Heikki Westerlund CEO, Senior Partner
Our mission is to create superior fi nancial returns. We act as a high quality service provider by investing capital in companies, properties or other targets within private equity and the alternative asset class. The lasting value of these investments is created by growth, change and active ownership.
Our vision is to be the preferred private equity and alternative assets partner for institutional investors globally and entrepreneurs locally.
SHAREHOLDER INFORMATION
5
CapMan is an alternative asset manager and manages capital raised from institutional investors in its funds. The cornerstones of the company's strategy are active ownership in all of its operations, institutional approach that enables growth, and direct investments in funds managed by the Group.
In 2008 CapMan fi nalised two strategic projects, and in doing so expanded its operations into Russia through the Norum acquisition, and into investments in listed markets through the establishment of the new Public Market fund. In both of these markets CapMan can exploit its existing management company and investment expertise, and also increase the value of investments through active ownership. In addition, both markets offer substantial growth potential in capital under management.
CapMan's earlier growth has also been based on launching new fund products and on geographical expansion of operations. Buyout investments have been a part of CapMan's portfolio since 1989, mezzanine and technology investments since 1995, life science investments since 2002, and real estate investments since 2005. CapMan's current portfolio thus includes altogether seven fund products. The company expanded in the Nordic countries in 2001 to 2004, establishing offi ces in Copenhagen, Stockholm and Oslo.
CapMan's objective over the next few years is to fully exploit the current business portfolio and to continue its growth through the existing investment areas.
Active ownership is one of CapMan's values. It means not only actively developing investments but also actively shouldering responsibility in all of CapMan's operations.
Alongside active ownership and a broad portfolio of fund products, CapMan's local presence in all the Nordic countries as well as in Russia distinguishes it from its competitors. A local presence combined with CapMan's recognised brand produces synergies in investment operations as well as at the fund investor interface in fundraising and reporting.
CapMan's three service teams – Investor Services, Group Finances and Accounting, IT and HR and Offi ce Services – support partnership-style investment teams and provide fund investors and other stakeholders with fi rst-class fundraising, reporting, performance monitoring and administrative services. The organisational structure allows our investment professionals to fully concentrate on the fund's investment operations and developing the value of investments. It also enables easy introduction of new fund products to our portfolio.
The third cornerstone of CapMan's growth strategy is investments from our own balance sheet in funds managed by the Group. CapMan is a signifi cant investor in the funds it manages, and the Company's aim is to invest in its future funds 2–10% of their
CapMan's success in future will continue to be founded on growth, high quality service, dedicated and professional staff and a leading position as an alternative asset manager in the Nordic countries and Russia.
6
CapMan's operations consist of raising new funds and the funds' investment activities. The Company's income derives principally from management fees from the funds, carried interest income from funds generating carried interest and returns on direct fund investments. The CapMan Plc B shares have been listed on the Helsinki Exchange since 2001.
CapMan has two business areas: CapMan Private Equity, which manages private equity funds that invest in portfolio companies, and CapMan Real Estate, which manages funds that invest in real estate and also provides real estate consulting. The funds investing in portfolio companies focus on fi ve investment areas: middle market buyouts (CapMan Buyout), investments in expansion and later stage technology companies (CapMan Technology), life science investments in companies specialising in medical technology and health care services (CapMan Life Science), investments in mid-sized companies based in Russia (CapMan Russia) and investments in signifi cant minority stakes in listed mid-cap companies (CapMan Public Market). CapMan Russia's investment focus is in Russia, while CapMan Real Estate focuses mainly on Finland and the other teams on the Nordic countries.
A prerequisite for CapMan's business is successful fundraising. The precondition for fundraising is that returns on capital invested fulfi l the fund investors' return targets. Continuity of operations in the longterm depends on successful investment activities, which are related to successful value creation in the investment targets and realisation of value increase through exit.
The success of fundraising and investment activities depends largely on the expertise of employees responsible for these areas as well as the high quality of reporting, control and administrative
processes.
CapMan's main components of income are described on the next page. Of the income components, management fees can be forecast with relative accuracy, as funds' operating periods are long and management fee percentages have been agreed for the whole period. The timing of carried interest and returns on fund investments is more sporadic.
How to analyse carried interest potential depends on which stage of its life cycle a fund is in. The development of individual portfolio companies should only be monitored when examining funds that are already generating carried interest, and through which the impact of individual investments on carried interest can be evaluated. When examining funds that are not yet generating carried interest, the overall development of funds' portfolios should be monitored instead of individual portfolio companies. Attention should be paid to the ratio of paid-in capital and distributed cash fl ow to investors as well as to the current portfolio at fair value. Each fund typically contains 10 to 15 investments and therefore a fund's success is not dependent on the success or failure of an individual investment. When a fund is in carry, CapMan receives carried interest on all the fund's cash fl ows.
Changes in fair value of CapMan's own fund investments should also be monitored at the fund level. As the proportion of investments made from CapMan's balance sheet grows, valuation changes of an individual investment will have a greater impact on CapMan's result, either through fair value changes or through realised returns.
CapMan funds typically have a 10-year life cycle and most investment targets are held for 4 to 6 years. CapMan's objective is to invest steadily across economic cycles, but market fl uctuations nevertheless affect the number of investments and exits.
The long-term nature of funds and investment activities also has an impact on CapMan Plc's fi nancial development. More carried interest is likely to be generated during good exit years than during poor ones. Different sources of income and funds in different stages of their life cycles, however, even out fl uctuations in CapMan's income.
CORPORATE GOVERNANCE
SHAREHOLDER INFORMATION
CapMan Plc Annual Report 2008
7
| CapMan Plc's direct fund investments | ||||
|---|---|---|---|---|
| Management fees | Carried interest | Returns on direct fund investments | at fair value as at 31 December 2008, €53.1 million |
|
| Management fees paid by the funds are typically determined during the investment period by the original fund size and thereafter on the basis of the remaining portfolio at acquisition cost. Annual management fees for equity funds are typically 1.5–2.5% of the funds' total commitments and for mezzanine funds 1.25–1.5%. Real estate funds typically have lower management fees than equity and mezzanine funds. CapMan's objective is that management fees and income from real estate consulting cover the Group's operating expenses. |
As a management company, CapMan receives carried interest after the fund has returned its paid in capital and annual preferential return stated in fund agreements (usually 7–8% p.a.) to investors. CapMan's share of carried interest (a fund's cash fl ow through exits from its investee targets) is typically 20–25% for funds established before 2004. A share of carried interest received from funds established in or after 2004 is distributed to the members of the investment team responsible for the fund's investment activities, so CapMan's share of carried interest is typically 10–15% for these funds. Carried interest income is explained in more detail on pages 16–18. There may be volatile yearly fl uctuations in carried interest income according to whether exits are made by funds that are generating carried interest. |
CapMan Plc has been a substantial investor in the funds managed by the Group since 2002. The Group's objective is to invest in its future funds 2–10% of their original capital depending on the fund's demand and CapMan's own investment capacity. Part of the investments is fi nanced with debt fi nancing, with the aim of boosting return on equity. Another goal of own fund investments is to even out fl uctuations, as returns on fund investments are refl ected in the result faster than carried interest. The profi t impact of investments is seen via realised returns as well as via fair value changes. |
Buyout 53% Mezzanine 4% Technology 15% Life Science 4% Russia 4% Real Estate 9% Funds of funds (Access) 11% |
Management fees have increased as a result of growth in capital under management
* Minority interest for 2007 was €7.6 million.
Increasing fund investments and commitments from CapMan's balance sheet…
Income of investments in funds Fair value gains/losses of investments CapMan Plc Annual Report 2008
8
Return on equity (ROE), % Return on investment (ROI), %
Earnings/share Dividend/share
9
| IFRS | IFRS | IFRS | IFRS | IFRS | |
|---|---|---|---|---|---|
| M€ | 2004 | 2005 | 2006 | 2007 | 2008 |
| Turnover | 27.7 | 28.7 | 38.0 | 51.6 | 37.1 |
| Management fees | 17.8 | 20.3 | 24.9 | 24.6 | 29.6 |
| Carried interest | 9.1 | 6.6 | 9.4 | 23.6 | 4.1 |
| Income from fund investments | 0.2 | 0.5 | 0.9 | 0.5 | 0.3 |
| Income from real estate consulting* | 0.9 | 2.0 | 2.1 | 2.4 | |
| Other income | 0.6 | 0.4 | 0.8 | 0.8 | 0.7 |
| Other operating income** | 0.1 | 0.1 | 0.7 | 0.2 | 0.1 |
| Operating expenses | –18.9 | –21.9 | –26.6 | –27.7 | –29.8 |
| Fair value gains/losses of investments | –0.4 | 1.6 | 3.5 | 5.7 | –13.7 |
| Operating profit/loss | 7.4 | 8.4 | 15.6 | 29.8 | –6.3 |
| Financial income and expenses | 0.5 | 0.8 | 0.4 | 1.1 | –2.0 |
| Share of associated companies' result | 0.4 | 0.3 | 1.3 | 1.9 | –2.4 |
| Profit/loss for the financial year | 4.9 | 7 | 12.4 | 24.2 | –8.1 |
| Return on equity (ROE), % | 11.1 | 14.8 | 23.4 | 38.9 | –11.8 |
| Return on investment (ROI), % | 18.9 | 20.2 | 29.9 | 44.2 | –6.3 |
| Equity ratio, % | 88.8 | 85.8 | 71.6 | 57.6 | 50.3 |
| Dividend paid*** | 4.5 | 5.3 | 9.3 | 12.8 | 0.0 |
| Personnel (at year-end) | 74 | 87 | 98 | 110 | 141 |
Cumulative cash fl ows during a fund's life cycle
* Income for the period July–December 2005.
** Capital gain from sale of Access Capital Partners shares (12.5% of shares) in 2006 amounts to €0.6 million.
*** Board of Directors' proposal to Annual General Meeting for 2009.
In 20 years CapMan has established its position as one of the leading alternative asset managers in the Nordic countries and Russia.
CapMan was established at the end of the 1980s at the same time when the private equity industry was emerging in other Nordic countries also. The Company's operations started to grow strongly in the mid-1990s, since when new funds have been established almost every single year. Growing
Domestic presence 1989 –2001
customer demand and increasing internationalisation in the investor base, combined with the need for active and long-term ownership, has fuelled this growth.
CapMan was among the fi rst companies in the industry to become listed, on 2 April 2001. Listing enabled CapMan to expand into other Nordic countries during 2001 to 2004.
Over the past two decades, private equity has consolidated its position in the fi nancing of M&A and growth. In recent years, private equity real estate funds have gained an established position in the allocations of institutional investors that invest in real estate. Long-term prospects for the industry are promising. CapMan's values High Ethics, Dedication and Active Ownership, combined with the expertise of CapMan personnel responsible for management and investment activities, form the keys to CapMan's success also in the future.
CapMan Days has been arranged for the entire Group every year since 2002. The Nordic teams then were headed by Lennart Jacobsson (left), Jan Lundahl (centre) and Heikki Westerlund (right).
Ari Tolppanen, CapMan's longstanding CEO and current Chairman of CapMan Plc's Board at a stakeholder event in Stockholm in May 2003.
ScanJour is one of CapMan's latest investments in Denmark.
SIJOITUSALUEET
CAPMAN AS A COMPANY CORPORATE SOCIAL RESPONSIBILITY AND PERSONNEL
CORPORATE GOVERNANCE CAPMAN FUNDS INVESTMENT AREAS AND FINANCIAL STATEMENTS SHAREHOLDER INFORMATION
3,500
M€
3,250
3,000
2,750
2,500
2,250
2,000
1,750
1,500
1,250
1,000
750
0
Nordic presence 2001–2007 Expansion to Russia 2008
2008
Russia Public Market
1999
CapMan participated in establishing associated company Access Capital Partners.
The exit from Setec in 2005 returned the original investment by over six fold to investors in CapMan funds. was arranged in Stockholm in 2007. Sweden's former Prime Minister Göran
2000 2001
CapMan Plc was listed. Expansion into Denmark.
One of CapMan's most active investment years, with investments in companies such as Karelia Corporation.
Cargo Partner, a portfolio company
in consolidating industries.
since 2008, is an example of investments
LISTING 2005 2006 2007 CapMan established a €845 million hotel fund. Expansion into Russia and into investments in listed markets. Region Avia Airlines was CapMan's first investment in Russia. CapMan expanded into Norway. Sale of Eltel Networks – one of CapMan's most successful exits in the 2000s. Operations expanded into Sweden. The first Nordic fund, CapMan Equity VII, was established. Synerco was one of CapMan's first buyout investments in Sweden. Life Science Real Estate Persson was the key note speaker at the event.
2002 2003 2004 In response to growing customer demand, CapMan expands into private equity real estate funds.
Highly successful exit from CapMan Real Estate I fund's portfolio.
500
CapMan's principal aim is value creation in its investment targets. In practice, this means increasing the value of investments through growth, improved profi tability and stronger strategic position.
CapMan's objective is to create lasting and longterm added value through growth, change and active ownership. CapMan is always a decision-making owner of its portfolio companies, with real possibility to infl uence their development. Portfolio companies' executives are always involved as owners, and play a key role in the company's development.
CapMan's investment professionals are actively involved in defi ning the company's strategy, analysing potential acquisitions, and in implementing M&A and international expansion. They work in close cooperation with the company's Board, management and other owners and monitor and react to changes in the company's fi nancial status, risk management and business environment. In their daily work the investment professionals utilise their previous experience in management, industry and fi nancing.
Value creation in real estate funds is based on a well-structured portfolio as well as on active development of single properties and real estate development targets through property management, building, new service concepts and active leasing methods. The extensive consulting expertise of the Real Estate team is utilised in the value creation.
Value increase is realised through exits from investment targets, typically 4 to 6 years from the time of initial investment.
The investment areas' common private equity value creation toolbox is important in developing portfolio companies. In addition to shared tools, the investment teams have complementary sector-specifi c competence, in-depth knowledge of technologies and treatment methods, and geographical experience in the Nordic countries and Russia.
The broad-based competence of different investment teams has been exploited in, for instance, syndicated investments in the technology and healthcare sectors.
CapMan is the only private equity investor with investment teams and offi ces in all the Nordic capitals as well as Moscow. A local presence and local contact networks spread information about potential investments to all the teams, and allow a comprehensive comparison of portfolio companies' value creation potential on a wide geographical level before any investment decisions are made.
The investment teams' extensive network includes representatives, entrepreneurs and other partners of various industries in all operating countries, and provides resources for operative management and boardwork.
The expertise of CapMan's investment professionals is complemented by CapMan Advisor Network, which comprises business leaders with long careers. Senior Advisors work full-time in CapMan's offi ces to promote the aims of CapMan, its portfolio companies and its real estate investments. Industrial Advisors participate part-time in CapMan's operations. The main duties of the Advisors are to generate new deal fl ow across different industries and countries, to assist in analysing industries, and to promote value creation in portfolio companies and real estate. They also assist in identifying suitable acquisition targets, business partners and market opportunities for the portfolio companies, as well as suitable owners in the exit stages. CapMan adopted the Advisor concept in the late 1990s.
• Active owner that creates value through market and profi t analyses, functional planning, planning of business ideas as well as through control of planning, project management and construction management.
• Active owner that creates value through property management, new service concepts and active leasing operations.
* Indexed average proportion of each value creation driver. Based on 32 partially realised and fully realised investments from equity funds. Calculations simplified to some extent.
INVESTMENT AREAS
CORPORATE SOCIAL CAPMAN AS A COMPANY RESPONSIBILITY AND PERSONNEL
CORPORATE GOVERNANCE AND FINANCIAL STATEMENTS SHAREHOLDER INFORMATION
| cias tardantina valit | destroyer. Toda and analysis harmony | kalinszowan a Kaiswai Boson. | |
|---|---|---|---|
| any, Johns Allmay anta percentary star |
because following a systematically sub- LEASE THINKING MANAGER |
Capitan Dr Automot \$30 mil. mit refrankrig |
the flurepe phyrics involved- preference |
| ploteint, Tukinta. Alumni philadeaux colors increased additionally of all years down a teamskillenning malls at on Auctionaceaean ex-packdoulers lines printed with June Art Joseph At Adapt prilipliers lickilides Brand modeledge |
in it redeems relations a chrokeopolist melencherel anniversity programs (Senior) Secretary, report in Historicansky a la ciudad de reprimeiro The department with structural acts on montage to better percentations. This al executive valuation on valuable validation. Tokyotan inclu inclusiv insurance de cristale ribolo |
Remotes Associati announced the company of the state and Toyota meeting Statesto C granum (Woods) and discon Hardcas Fascis A. Allege Officers and Capital Indian series demandants ING FRANKS STATISTICS CORRECTE |
Witness predain Carlifornia (4) hitchcole hale of a take an one announcement behind a validing and Auchildea service Liberalities disclose da situazione di pos- Weapons relative rest disease cashe medidate has investorated to environment relations themes. 46. In former construction between 1 week and adults design |
Investor Services team of 24 professionals is responsible for fundraising, fund administration and business communications for CapMan funds. The team also serves stakeholders in CapMan Plc's share by taking care of the Group's financial communications and investor relations, monitors portfolio companies' and funds' performance and is responsible for legal matters on behalf of the funds and Group. Photo: Mari Reponen (left), Heli Rantala, Martti Timgren, Jerome Bouix, Sanna Loikkanen and Andrei Novitsky.
Launching new fund products has largely contributed to CapMan's growth. CapMan Russia fund was transferred to CapMan's management in summer 2008, on finalisation of the Norum acquisition. The latest buyout fund CapMan Buyout IX was established in December 2008.
At the end of 2008, over 120 institutions had invested in CapMan funds. One third of investors is from outside Finland. Photo: Limited Partners Day in Stockholm in 2007.
Mezzanine financing has been included in CapMan's product portfolio since 1995. The latest mezzanine fund, CapMan Mezzanine IV was established in 2004 with €240 million fund size. Photo: Marketing material from the 1990s.
| CapMan funds | |
|---|---|
| 3,407.5 € million |
Capital under management at the end of 2008 |
| +56 % |
Growth in capital under management in 2008 |
| +4 | Four new funds in 2008 |
| 20 | Funds under management include 14 equity funds, 3 mezzanine funds, and 3 real estate funds |
CapMan's clientele comprises institutions investing in the Group's funds. The number of fund investors has grown and internationalised along with new funds. At the end of 2008, there were over 120 investors in CapMan funds.
The largest investors in CapMan funds are pension institutions, and life assurance and non-life insurance companies. In recent years an increasing number of international funds of funds have joined CapMan funds. CapMan Plc is also a substantial investor in the funds managed by the Group.
Most investors have invested in several funds. The amount of individual investment commitments has also risen over the years, alongside growth in fund sizes. At the end of 2008, the aggregate capital invested by the fi ve largest investors was approximately €1 billion. Typically a single investor has committed at maximum 20% of the total size of the fund.
Nordic institutions are well represented in the CapMan funds. An important aim for CapMan's fundraising team is to further internationalise the existing investor base. Alongside Nordic institutions, several European and US investors have invested in the funds over the past years. The fundraising team continued to meet potential new international investors in 2008, thus laying a solid foundation for future fundraising. All in all the fundraising team met investors in more than 300 meetings during the year.
Over the years CapMan has developed new types of funds to meet customer demand. Several CapMan funds have been the fi rst funds of their type in their domestic Nordic markets. In response to customer demand and growth potential for new products, CapMan launched the CapMan Hotels RE, CapMan Russia and CapMan Public Market funds in 2008. CapMan also established its ninth buyout fund, CapMan Buyout IX. Capital amounting to more than €1 billion was raised for the new funds in 2008, and the fundraising for all of them will continue in 2009.
In the more advanced private equity markets, such as in the US and UK, institutional investors allocate some 7–15% of their assets in the alternative asset class. The proportion among Nordic investors is on average 5%, but with substantial variation between countries. Several investors in the Nordic countries and Central Europe are just starting to invest in private equity.
Although many institutions have temporarily frozen new investment commitments owing to the economic crisis, in the long run investors have indicated to increase their commitments in the alternative asset class. The underlying reason for this is institutions' desire to fi nd higher-performance investment targets to supplement their conventional share and loan portfolios.
The main subcategories of the alternative asset class are private equity, real estate and hedge funds, the fi rst two of which are included in CapMan's product portfolio. In recent years, institutions have made their largest allocations to buyout funds, while their interest in European venture capital funds has been limited. This trend is expected to continue. Also investors' interest in the real estate sector continues to grow, and growth in real estate investment allocations is expected – particularly through funds making indirect real estate investments.
The fundraising environment has undergone profound changes over the past few years. 2006 and 2007 were record years for European fundraising. In 2007 nearly €80 billion was raised for private equity funds. Preliminary statistics indicate that the majority of the capital raised for European private equity funds in 2008 was raised in the fi rst half of the year. As a consequence of the fi nancial crisis, the fundraising climate became very challenging in the second half of the year. 2009 is generally forecast to be a diffi cult year for fundraising, and the length of fundraising processes is expected to be prolonged.
CapMan's strengths in the current market situation are the Group's proven track record, long history, wide product range, and loyal investor base.
* Includes only the proportion of funds' equity financing, €1,958.3 million. Taking into account real estate funds' shares of liabilities, the funds' original investment capacity was €3,248.3 million as at 31 December 2008. More information on the CapMan funds is given on pages 15–19.
CAPMAN AS A COMPANY INVESTMENT AREAS AND FINANCIAL STATEMENTS CAPMAN FUNDS CORPORATE SOCIAL RESPONSIBILITY AND PERSONNEL
CORPORATE GOVERNANCE
SHAREHOLDER INFORMATION
Capital under management in the CapMan funds grew by 56% in 2008 as a result of the establishment of the new CapMan Hotels RE, CapMan Russia, CapMan Public Market and CapMan Buyout IX funds.
Buyout funds Mezzanine funds
500 0
At the end of 2008 altogether €1,767.0 million (€1,394.3 million on 31 December 2007) of the capital under CapMan's management was in private equity funds that invest in portfolio companies, and €1,640.5 million (€795.7 million) in real estate funds.
The capital in funds making investments in portfolio companies is divided into equity funds and mezzanine funds. At the end of 2008 capital in equity funds amounted to €1,480.6 million, and in mezzanine funds to €286.4 million.
Capital under management refers to the funds' remaining investment capacity and the invested capital at acquisition cost. The fi gure does not include invested capital from which a fund has already exited. Capital under management increases through funds' fundraising and decreases through exits.
At the end of 2008 CapMan managed 20 private equity funds. Some of these funds are already in or approaching the phase of generating carried interest (carry) while some are still in the active investment or fundraising phase.
Funds in carry represented some 8% of capital under management in the CapMan funds on 31 December 2008. Exits from these funds will generate carried interest income for CapMan, and with the exception of the CapMan Real Estate I fund, their investment activities have terminated.
Roughly 8% of the capital under management at the end of 2008 was in funds that are expected to transfer to carry during 2009–2010. This group includes funds that are still actively making add-on investments in their existing portfolio companies. In the medium-term, these funds have signifi cant potential for value increase.
Funds that typically have raised funds over the past fi ve years and are still in the active investment
Real Estate funds
phase form the largest group, some 80%, of capital under management.
The remainder, representing approx. 3% of capital under management, have limited carried interest potential for CapMan. Carried interest potential is limited because of the funds' small portfolio size, the funds are not expected to transfer to carry, or CapMan's carried interest percentage in the funds is low.
Of the capital under management in funds investing in portfolio companies €875 million, or roughly one-half, was available for new investments and for add-on investments in existing portfolio companies at the end of 2008. Real estate funds had remaining investment capacity of €320 million for new investments and commitments. In addition real estate funds had €95 million for commitments to real estate acquisitions and projects.
Russia fund Public Market fund
99 00 01 02 03 04 05 06 07 08
Aggregate fund portfolio at fair value (€1,990 million) by fund life cycle phase and remaining investment capacity (€1,290 million).
Funds generating carried interest 5%
Funds that are expectet to transfer to carry during 2009–2010 8%
Other funds not yet in carry 46% Funds with limited carried interest potential to CapMan 2%
Remaining investment capacity for new investments 39%
Capital under management 1999–2008
Technology funds Life Science funds
CapMan categorises the funds it manages into four different groups, according to their carry phase. Funds that invest in portfolio companies and real estate funds are studied separately.
A private equity fund has a limited and predetermined life cycle, usually 10 years. The funds make investments in selected portfolio companies or
Funds investing in portfolio companies as at 31 December 2008, M€
properties mainly during the fund's fi rst 3 to 4 years of operation. One fund may comprise several parallel funds, which may have different investment focuses or portfolios. A dedicated team is responsible for the fund's investment activities.
CapMan has an active role in the development of investments. The ownership period is on average 4 to 6 years, after which CapMan exits from the investment, for instance through a trade sale or a real estate portfolio sale. Following an exit, the invested capital and return are returned to the private equity fund, to be distributed to the fund's partners, i.e. the investors and management company, according to the agreed profi t distribution policy. The funds' limited partnership structure enables investors to receive interest, dividends and capital gains throughout the fi nancial year as funds exit from their portfolio companies and properties.
The fund's management company or general partner receives an annual management fee for the fund's entire period of operations that is based on the fund's original size during the fund's investment period and thereafter on the acquisition cost of the fund's portfolio. If the fund has operated successfully, the management company can receive also carried interest income from the fund.
The continuity of the management company's business is assured by establishing new funds as the previous funds become fully invested.
Of the CapMan funds, Finnventure II, III and V, the Fenno Program, Finnmezzanine II B and CapMan Real Estate I were in carry on 31 December 2008. Carried interest income from these funds amounted to €4.1 million in 2008. Since it fi rst started operating, CapMan has received a total of €89.2 million in carried interest from funds now in carry and funds that have terminated operations, including minority interests.
The CapMan Equity VII A, B and Sweden funds as well the Finnmezzanine III A and B funds are expected to transfer to carry during 2009–2010.
Carried interest refers to the distribution of the profi ts of a successful private equity fund among investors and the management company responsible for the fund's investment activities. In practice, carried
| Established/generating | Fund | Paid-in | Remaining | Fund's current portfolio | Net cash | Distributed cash flow | Hurdle rate, | CapMan's share of | |||
|---|---|---|---|---|---|---|---|---|---|---|---|
| carried interest since | size | capital | commitment | at cost | at fair value | assets | to investors | to management company (carried interest) |
IRR % p.a | cash flow, if the fund generates carried interest |
|
| Funds generating carried interest | |||||||||||
| "Old funds", total 1) | 58.6 | 57.4 | 1.2 | 3.1 | 0.1 | 0.2 | 180.1 | 44.2 | – | 20–35% | |
| Finnventure Fund V | 1999/2007 | 169.9 | 164.0 | 5.9 | 48.5 | 23.5 | 1.1 | 237.7 | 5.3 | – | 20% |
| Fenno Program, total 2) | 1997/2005 | 59.0 | 59.0 | 0.0 | 10.7 | 6.3 | 0.1 | 123.2 | 8.7 | – | 10–12% |
| Total | 287.5 | 280.4 | 7.1 | 62.3 | 29.9 | 1.4 | 541.0 | 58.2 | |||
| Funds expected to transfer to carry during 2009–2010 | |||||||||||
| CapMan Equity VII A | 2002 | 156.7 | 135.9 | 20.8 | 84.7 | 117.7 | 3.6 | 92.4 | 8% | 20% | |
| CapMan Equity VII B | 2002 | 56.5 | 54.2 | 2.3 | 34.3 | 55.9 | 2.3 | 41.9 | 8% | 20% | |
| CapMan Equity Sweden | 2002 | 67.0 | 58.1 | 8.9 | 36.2 | 50.4 | 1.5 | 39.8 | 8% | 20% | |
| Finnmezzanine Fund III A | 2000 | 101.4 | 98.8 | 2.6 | 32.1 | 31.9 | 2.9 | 103.1 | 7% | 20% | |
| Finnmezzanine Fund III B | 2000 | 20.2 | 19.8 | 0.4 | 8.4 | 10.0 | 0.4 | 18.6 | 7% | 20% | |
| Total | 401.8 | 366.8 | 35.0 | 195.7 | 265.9 | 10.7 | 295.8 |
Established/generating carried interest since: Year when the fund was established or transferred to carry.
Total capital committed to the fund by investors, i.e. the original size of the fund.
Total capital paid into the fund by investors as at 31 December 2008.
Difference between the original size of the fund and the paid-in capital. Remaining capital that the fund has available for new investments and expenses (including management fees).
Fund's current portfolio at fair value:
The funds' investments in portfolio companies are valued at fair value in accordance with the International Private Equity and Venture Capital Valuation Guidelines (IPEVG). The valuation
principles for determining fair value are described in more detail on page 20.
When assessing an investor's share, the fund's net cash assets must be taken into account as well as the fair value of its portfolio. In the CapMan Mezzanine IV fund, net cash assets may be negative due to a credit facility used in the fund.
For investors, cash flow means repayments of principal as well as profits distributed by funds. The aggregate cash flow received by the management company from the fund (carried interest) as at 31 December 2008.
SIJOITUSALUEET
CORPORATE GOVERNANCE
SHAREHOLDER INFORMATION
interest means the share of funds' cash fl ows received by the management company after the fund has fully transferred to carry.
Typically in the private equity industry recipients of carried interest are investment professionals in the management company responsible for the fund's investment activities. In CapMan's case, carried interest is distributed between CapMan Plc and the team responsible for the fund's investment activities.
To transfer to carry, a fund must return paid-in capital and pay a preferential annual return on this (hurdle rate, typically 7–8% IRR p.a.). When the fund has transferred to carry, the remainder of the cash fl ows are distributed between the investors and the management company. When a fund is generating carried interest, the management company receives carried interest income from all of the fund's cash fl ows even if an exit was made at lower value than its acquisition cost. A typical distribution of carried interest income is 80% to investors, and 20% to the management company. The average time taken for CapMan funds to transfer to carry is 6.6 years.
When analysing how quickly funds can transfer to carry, the ratio of cumulative cash fl ows already received by investors to paid-in capital should be examined. The fair value of the portfolio, including any net cash assets of the fund, tells the distributable capital to investors at the end of the review period. When estimating the necessary cash fl ow, it should be noted that some of the funds have capital that is not yet paid in. After the previous distribution of profi ts, any new capital paid in, as well as any annual preferential returns on it, must however be returned to investors before the new distribution of profi ts can be paid.
In the private equity industry, carried interest is a typical structure for aligning the interests of investors and the management company, typically its investment professionals. The earnings potential from carried interest is very signifi cant for the management company, so it is in its interests to handle investment activities as profi tably as possible. Investors also benefi t from an investment professional having a large
| Funds investing in portfolio companies as at 31 December 2008, M€ | ||
|---|---|---|
| ------------------------------------------------------------------- | -- | -- |
| Established | Fund size |
Paid-in capital |
Remaining commitment |
at cost | Fund's current portfolio at fair value |
Net cash assets |
to investors | Distributed cash flow to management company (carried interest) |
Hurdle rate, IRR %. p.a. |
CapMan's share of cash flow, if the fund generates carried interest |
||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Other funds not yet in carry | ||||||||||||
| CapMan Equity VII C | 2002 | 23.1 | 16.7 | 6.4 | 9.5 | 7.1 | 0.4 | 7.0 | 8% | 20% | ||
| CapMan Buyout VIII Fund 3) | 2005 | 440.0 | 300.5 | 139.5 | 264.1 | 222.7 | 2.8 | 8% | 14% | |||
| CapMan Life Science IV Fund | 2006 | 54.1 | 23.5 | 30.6 | 14.5 | 10.3 | 0.8 | 8% | 10% | |||
| CapMan Technology 2007 3) | 2007 | 142.3 | 40.3 | 102.0 | 32.7 | 30.0 | 0.9 | 8% | 10% | |||
| CapMan Russia Fund 4) | 2008 | 118.1 | 21.1 | 97.0 | 16.8 | 16.8 | 0.0 | 8% | n/a | |||
| CapMan Public Market Fund 5) | 2008 | 106.0 | 1.3 | 104.7 | 0.0 | 0.0 | 0.2 | 10% | ||||
| CapMan Buyout IX Fund | 2008 | 203.0 | 0.0 | 203.0 | 0.0 | 0.0 | 0.0 | 8% | 10% | |||
| Finnmezzanine Fund III C | 2000 | 13.9 | 13.9 | 0.0 | 3.8 | 2.8 | 2.0 | 12.9 | 7% | 20% | ||
| CapMan Mezzanine IV 6) | 2004 | 240.0 | 131.1 | 108.9 | 148.1 | 140.2 | –38.2 | 28.8 | 7% | 15% | ||
| Total | 1,340.5 | 548.4 | 792.1 | 489.5 | 429.9 | –31.1 | 48.7 | |||||
| Funds with limited carried interest potential to CapMan |
Funds with limited carried interest potential to CapMan 7), 8) 277.7 262.1 15.6 78.5 50.8 3.6 174.7
= the fund was in the active investment phase on 31 December 2008.
= the fund was in the fundraising phase on 31 December 2008.
1) So-called "Old funds": Finnventure Fund II (established 1994, transferred to carry 1997), Finnventure Fund III (established 1996, transferred to carry 2000), Finnmezzanine Fund II B (established 1998, transferred to carry 2006).
4) CapMan Russia fund was transferred under CapMan's management on 27 August 2008 on completion of the Norum acquisition. CapMan Plc's share of carried interest will depend on the final size of the fund and will be announced in conjunction with notification of the final fund size.
to the next bond issue. Distributed cash flow includes payments to both bond subscribers and the fund's partners.
7) Funds with limited carried interest potential for CapMan: Finnventure Fund IV, Finnventure Fund V ET, Swedestart Life Science, Swedestart Tech , Finnmezzanine Fund II A, B and D.
8) Currency items are valued at the average exchange rate on 31 December 2008.
18
stake in maximising returns. Transferring to carry and carried interest are based on realised cash fl ows, not on a calculated and as yet unrealised return. CapMan's share of carried interest CapMan's share of cash fl ows received from funds in carry is 20–25% for funds established before 2004, and 10–15% for funds established after 2004. The lower share in respect of newer funds is because clarifi es the distribution of profi t and allocates carried interest more accurately to the teams responsible for investment activities. Debt fi nancing included in investment capacity of real estate funds CapMan's real estate funds operate broadly along the same principles as funds that invest in portfolio companies. Their investment capacity, however, level. The proportion of debt in real estate funds is
investment teams now directly receive a share of the carried interest from funds for whose investment operations they are responsible for, whereas earlier this was paid to CapMan and distributed to the teams in the form of bonuses. The current practice includes a proportion of debt, with which new real estate investments are fi nanced. In real estate funds, as well as in CapMan Mezzanine IV fund which includes a securitized part, leveraging with debt is used at the fund level whereas
in the other funds it is used at the portfolio company
agreed with investors in advance, and ranges between 60% and 75%. The proportion of debt fi nancing in portfolio company investments is lower, and varies considerably between investments. Unlike in funds investing in portfolio companies, in real estate funds management fees are also paid for committed debt capital. In all the funds, carried interest is calculated on equity.
Number of real estate investments as at 31 December 2008
| Established/generating carried interest since |
Capital structure | Investment capacity |
Paid-in capital |
Remaining commitment |
at cost | Fund's current portfolio at fair value |
Net cash assets |
to investors | Distributed cash fl ow to management company (carried interest) |
Hurdle rate, IRR % p.a. |
CapMan's share of cash fl ow, if the fund generates carried interest |
||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Funds generating carried interest | |||||||||||||
| CapMan Real Estate I 1) | 2005/2007 equity and bonds | 200.0 | 165.0 | 35.0 | 44.4 | 46.2 | 187.1 | 27.4 | 10.5% | 26% | |||
| debt financing | 300.0 | 252.1 | 47.9 | 102.1 | 102.1 | ||||||||
| total | 500.0 | 417.1 | 82.9 | 146.5 | 148.3 | –1.3 | 187.1 | 27.4 | |||||
| Other funds not yet in carry | |||||||||||||
| CapMan RE II | 2006 | equity | 150.0 | 68.1 | 81.9 | 72.7 | 72.9 | 0.5 | 10% | 12% | |||
| debt financing | 450.0 | 199.4 | 250.6 | 198.2 | 198.2 | ||||||||
| total | 600.0 | 267.5 | 332.5 | 270.9 | 271.1 | –7.0 | 0.5 | ||||||
| CapMan Hotels RE 2) | 2008 | equity | 304.9 | 269.1 | 35.8 | 268.3 | 249.9 | 10.8 | 8% | 12% | |||
| debt financing | 540.0 | 526.0 | 14.0 | 544.8 | 544.8 | ||||||||
| total | 844.9 | 795.1 | 49.8 | 813.1 | 794.7 | 4.5 | 10.8 | ||||||
| Total | 1,944.9 | 1,479.7 | 465.2 | 1,230.5 | 1,214.1 | –3.8 | 198.4 | 27.4 |
Established/generating carried interest since: Year when the fund was established or transferred to carry.
The fund's original investment capacity taking into account investors' commitments and the agreed debt financing.
Total capital paid into the fund by investors and available debt as at 31 December 2008.
Difference between the original size of the fund and the calledin capital and also the difference between available and used debt capacity. Remaining capital that the fund has available for new investments and expenses (incl. management fees).
The fair value of funds' investments in real estate is based on appraisements by external experts. The valuation principles for determining fair value are described in more detail on page 20.
When assessing an investor's share, the fund's net cash assets must be taken into account as well as the fair value of its portfolio. The net cash assets of real estate funds do not include senior debt, which is presented in a separate row in the table.
For investors, cash flow means repayments of principal as well as profits distributed by funds. The aggregate cash flow received by the management company from the fund (carried interest) as at 31 December 2008.
CAPMAN AS A COMPANY INVESTMENT AREAS AND FINANCIAL STATEMENTS CAPMAN FUNDS CORPORATE SOCIAL RESPONSIBILITY AND PERSONNEL
CORPORATE GOVERNANCE
SHAREHOLDER INFORMATION
CapMan Plc Annual Report 2008
19
Most of the CapMan funds have succeeded well compared to European private equity benchmarks.
CapMan has succeeded well in exploiting prevailing market conditions for funds that started operating between 1990 and 1997. In the mid-1990s, funds in the active investment phase made many investments and the value increase potential related to the investments was realised in the active exit market prevailing at the end of the 1990s.
Buyout investments by funds established in the 2000s have been made at reasonable prices and the investments' values have primarily developed in line with expectations. Towards the end of 2008, the fair values of the funds' portfolios dropped as a result of the general market development, which is also refl ected in the funds' return multiples. The negative development in fair values was mainly due to the substantial reduction of the multiples of portfolio companies' listed peers used in company valuations.
The technology boom at the turn of the millennium raised the value of technology investments. CapMan's investments at that time were made at high valuation levels, which is particularly evident in the IRRs and return multiples of technology funds during the period. Since then investments in technology funds have been made at reasonable valuation levels.
The analysis includes equity funds only. The funds established during 2007–2009 are not comparable with more mature funds due to their short operating history and are excluded. Early-stage expenses strain new funds' net returns as can be observed from the theoretical example of a private equity fund on page 9. The mezzanine funds are also excluded from the analysis since the nature of their investment activities is not directly comparable with those of equity funds.
| Fund | Operations started |
Operations ended |
Fund size, M€ |
Net return to investors (IRR% p.a.) (target 15%) |
Return multiple to investors (net) |
|---|---|---|---|---|---|
| Funds that have terminated operations | |||||
| Finnventure Fund I | 1990 | 2005 | 11.1 | 15.4% | 3.0 |
| Fenno Program/Other | 1994 | 2006 | 21.5 | 9.0% | 1.8 |
| Swedestart II | 1997 | 2006 | 26.2 | 168.5% | 6.5 |
| Alliance ScanEast Fund L.P. | 2001 | 2004 | 6.0 | 73.7% | 6.4 |
| Operational funds | |||||
| Finnventure Fund II | 1994 | 11.9 | 55.7% | 3.5 | |
| Finnventure Fund III | 1996 | 29.7 | 63.3% | 3.9 | |
| Fenno Program/Fenno Fund | 1997 | 42.5 | 15.3% | 2.1 | |
| Fenno Program/Skandia I | 1997 | 8.4 | 17.8% | 1.6 | |
| Finnventure Fund IV | 1998 | 59.5 | 4.0% | 1.4 | |
| Finnventure Fund V | 1999 | 169.9 | 10.4% | 1.7 | |
| Finnventure Fund V ET | 2000 | 34.0 | – | 0.4 | |
| Swedestart Tech | 2001 | 70.6 | – | 0.8 | |
| Swedestart Life Science | 2001 | 42.3 | – | 0.4 | |
| Fenno Program/Skandia II | 2001 | 8.1 | 44.6% | 3.2 | |
| CapMan Equity VII A | 2002 | 156.7 | 13.2% | 1.5 | |
| CapMan Equity VII B | 2002 | 56.5 | 16.1% | 1.6 | |
| CapMan Equity VII C | 2002 | 23.1 | – | 1.0 | |
| CapMan Equity VII KB | 2002 | 67.0 | 13.3% | 1.4 | |
| CapMan Buyout VIII | 2005 | 440.0 | – | 0.8 | |
| CapMan Life Science IV Fund | 2006 | 54.1 | – | 0.5 |
| Fund | Operations started |
Fund size, M€ |
Net return to investors (IRR% p.a.) (target 15%) |
Return multiple to investors (net) |
|---|---|---|---|---|
| Operational funds | ||||
| CapMan Real Estate I | 2005 | 200.0 | 28.2% | 1.4 |
| CapMan RE II | 2006 | 150.0 | – | 0.9 |
The year when operations started differs to the year the fund was established with respect to the following funds: Finnventure Fund V ET (established in 1999), Swedestart Tech and Swedestart Life Science (established in 2000), and Fenno Program/Skandia II and Others (established in 1997).
Total capital committed to the fund by investors, i.e. the original size of the fund. As an exception to the other tables, the senior loan has not been taken into account in CapMan Real Estate I fund's size, which totals €500 million, including the loan. The senior loan has not been taken into account in CapMan RE II fund's size, which totals €600 million, including the loan.
Net return to investors:
Internal rate of return IRR% p.a. to investors as at 31 December 2008 = Return to investors IRR p.a., cumulative cash flow between investors and fund + portfolio.
Return multiple (net) to investors = (cash flow to investors + value of the current portfolio)/paid-in capital on 31 December 2008. Investors' share of the portfolios includes investments and any liquid assets. Portfolios are valued at fair value in compliance with the International Private Equity and Venture Capital Valuation Guidelines (IPEVG).
The table is presented in more detail on CapMan's website at www.capman.com/En/Funds/Keyfiguresforfunds/.
Valuation in our asset class is based on international valuation guidelines that are widely used and accepted within the industry and investors. CapMan always aims at valuing funds' investments at their actual value.
Fair value is the best estimate of the amount for which an investment could be exchanged on the reporting date in an arm's length transaction between knowledgeable and willing parties. CapMan follows International Private Equity and Venture Capital Valuation Guidelines (IPEVG) to determine the value of its portfolio companies. The guidelines also address IFRS and US GAAP requirements. There are several evaluation methods according to these guidelines – e.g. the price of recent investment, earnings multiples and market-based peer group multiples. The valuation method used depends on the status of the company, particularly on whether the company has a positive cash fl ow.
Typically, companies with a positive cash fl ow are valued at the acquisition cost for the 12 months following the investment. After that, the valuation is based on their operating income as well as on their listed peers' multiples. Peer companies are selected separately for all portfolio companies generally at the time of investment, and are kept as far as possible unchanged for the whole investment period. A peer group can reasonably be changed if the company or the sector it operates in substantially changes. The fair value obtained from peer group multiples can be adjusted according to the factors of the specifi c company to ensure inclusion of the qualities of the company being valued. Thus, the fair value can be discounted by, for instance, 25% owing to the small size or lack of liquidity of the portfolio company. The value based on the peer group's multiples can also fl uctuate considerably in the short-term.
Investments in early stage companies are typically venture capital investments in companies with a cash fl ow that is still negative. The value of these investments is typically also their valuation level at the time of the investment for the fi rst 12 months following the investment. If the business operations of the portfolio company do not develop as expected or deviate from the value creation plan, a write-down of the value is always considered.
In the case of all portfolio companies, third party transactions with their multiples and price indications obtained in exit negotiations can affect the fi nal valuation level.
Investments in real estate are valued at fair value based on appraisals made by external experts, who follow International Valuation Standards (IVS). The method most appropriate to the use of the property is always used, or a combination of such methods.
The income method refers to determining the fair value of a property on the basis of the income receivable from it during its economic lifetime. It is based on capitalisation of annual income return at an appropriate yield.
In the sales comparison value method, the value is determined on the basis of comparable transactions in the market conditions prevailing in the specifi c market area. The object of the transaction in a comparable transaction corresponds in its average value factors to the property being appraised.
The cost method is based on the acquisition and production costs of the property. This method is mainly used when suffi cient market information for applying the other methods is unavailable.
investments are made according to IFRS standards.
CAPMAN AS A COMPANY INVESTMENT AREAS AND FINANCIAL STATEMENTS CAPMAN FUNDS CORPORATE SOCIAL RESPONSIBILITY AND PERSONNEL
CORPORATE GOVERNANCE
SHAREHOLDER INFORMATION
CapMan Plc Annual Report 2008
21
Funds investing in portfolio companies invest mainly in unlisted companies operating in the Nordic countries or Russia, as well as in listed Nordic companies. The investment focus of real estate funds is on commercial properties, property development projects and hotels, mainly in Finland.
Funds investing in portfolio companies made eight new investments and several add-on investments amounting to €232.6 million in 2008, of which addon investments accounted for one-third. The new investments were Barnebygg Gruppen, Cargo Partner Group, Cederroth International AB, The New Black Oy (Varesvuo Partners Oy), Accanto Systems (LTE Innovations Oy), Crayon Group, Region Avia Airlines and Russia Baltic Pork Invest A/S. Altogether there were 59 companies in the CapMan funds' portfolio on 31 December 2008.
The real estate funds acquired 39 hotels, one offi ce property and one land area in 2008, and also used investment commitments given earlier for acquiring and developing real estate targets.
The aggregate value of real estate investments was €1.1 billion, of which hotels accounted for some €810 million. In addition, the funds had made commitments totalling €95 million to fi nance real estate acquisitions and projects over the next few years. The funds had a total of 57 properties in their portfolio on 31 December 2008.
Exits remained at an unprecedented low level in 2008, and came to a complete standstill towards the end of the year. Exits at acquisition cost in 2008 amounted to only €39.4 million.
* Exits include partial exits. Foreign currency items are translated for the entire period at the exchange rate on the last day of trading in 2008. The figures include transactions finalised as at 31 December 2008.
* Includes realised and estimated costs for those funds in which part of the total fund size is reserved for expenses.
22 CapMan Plc Annual Report 2008
CapMan Plc's associated company Access Capital Partners is a leading independent European manager and advisor of private equity funds of funds. The funds managed by Access invest primarily in Western European small, mid-market buyout and special situation funds and to a lesser extent late stage and buyout technology funds. At the end of 2008 Access managed assets totalling €2.5 billion.
In 2008, the capital under management in Access private equity funds of funds grew to €1.4 billion. At year-end the aggregate value of private equity mandates managed by Access was €1.1 billion, and the total capital managed by Access totalled €2.5 billion.
Access manages altogether seven funds of funds, of which the fi rst, Access Capital Fund I (ACF I), was established in 1999. The second generation funds ACF II Mid-market Buy-out and ACF II Technology were established in 2001, the third generation ACF III Mid-market Buy-out Europe and ACF III Technology Europe funds in 2005, and the fourth generation funds ACF IV Growth Buy-out and ACF IV High Growth Technology Europe in 2007 and 2008, respectively.
Access offers its investors the opportunity to diversify their investment portfolio across Europe in various high growth sectors via small to mid-market buyout funds, special situation funds and late stage as well as buyout technology funds. Access is also active in secondary investments in both markets. Owing to the changed market situation, Access expects the number of funds' investments to grow especially in the case of secondaries.
The investors in Access funds are pension funds, insurance companies and other institutional investors as well as family offi ces.
Access Capital Partners constitutes carefully balanced portfolios comprising high-performance European private equity funds of various different managers. The funds target companies at diverse stages of the value creation stream. When making investments, Access is looking for investment teams that have been working together successfully for several years and have a proven track record for superior returns. They must also demonstrate a strong pricing discipline together with a high level of value added to investee companies. The buyout funds vary in size between €100 million and €1 billion.
Access' European technology funds of funds invest with established teams targeting fast growing technology-oriented companies in buyout fi nancing and expansion capital. Access believes that the increased maturity of the technology sector has produced an increasing number of investment opportunities for expansion capital and buyouts in the information and communications technologies, industrial technologies, medical technologies, clean technologies, energy and media sectors.
Altogether 31 dedicated professionals form Access's multinational team, which works from offi ces in Paris, Brussels and Munich. The team is headed by Access's three managing partners Dominique Peninon, Agnès Nahum and Philippe Poggioli, who have extensive experience of European private equity investment, both in funds and directly in portfolio companies.
CapMan Plc owns a 35% holding in Access Capital Partners Group S.A., with the company's managing partners owning 65%.
| CapMan's share of carried interest, | |||
|---|---|---|---|
| Established | Fund size | if the fund generates carried interest | |
| Access Capital Fund I* | 1999 | 250.3 | 47.5% |
| Access Capital Fund II Mid-market Buy-out* | 2001 | 153.4 | 45% |
| Access Capital Fund II Technology* | 2001 | 123.5 | 45% |
| Access Capital Fund III Mid-market Buy-out Europe* | 2005 | 307.4 | 25% |
| Access Capital Fund III Technology Europe* | 2005 | 88.9 | 25% |
| Access Capital Fund IV Growth Buy-out* | 2007 | 425.0 | 25% |
| Access Capital Fund IV High Growth Technology Europe* 1) | 2008 | n/a | 25% |
| Private Equity Mandates | 2003–2008 | 1,162.0 | 25% |
| Total | 2,510.5 |
1) The fund was in the fundraising phase on 31 December 2008.
For more information ➥ www.access-capital-partners.com
CORPORATE SOCIAL CAPMAN AS A COMPANY CAPMAN FUNDS RESPONSIBILITY AND PERSONNEL
CORPORATE GOVERNANCE AND FINANCIAL STATEMENTS SHAREHOLDER INFORMATION
CapMan's investment teams share their knowhow across countries and teams. In 2007 CapMan Buyout and CapMan Life Science made a joint investment in Swedish healthcare company Proxima AB.
Brondankulma, in Helsinki's central business district, was included in CapMan's first real estate portfolio.
CapMan looks open-mindedly for investment opportunities also in non-typical sectors. CapMan Buyout invested in Norwegian Barnebygg Gruppen, a provider of outsourced daycare services, in February 2008.
The 2004 Tokmanni investment has successfully applied a buy-and-build strategy. During the period of CapMan's ownership, Finnish Tokmanni has grown from a local player into a nationwide leader in non-food discount retailing.
CapMan Technology has special expertise in supporting growth in later stage technology companies. This expertise has been exploited widely in the Danish IT2 Treasury Solutions investment closed in 2007. IT2 has shown very strong organic growth during CapMan's investment period.
+2
New investment areas CapMan Russia and CapMan Public Market
€232.6 million
€1,070.4 million
companies in 2008
Investments in portfolio
Investments in real estate in 2008
In 2008 CapMan Buyout made four new investments. The general market situation during the second half of 2008 was refl ected in our operations especially in the postponement of exits. Fundraising for the ninth buyout fund was launched in the autumn.
CapMan Buyout invests in mid-sized Nordic companies in various industries. The team has in-depth expertise in multiple sectors such as manufacturing and engineering, industrial services, retail, outsourcing and healthcare. The economic slowdown can create consolidation and other restructuring needs in some sectors, which combined with changes in the operating mechanisms of those sectors can offer new investment opportunities in the near future.
In 2008 we made new investments in daycare provider Barnebygg Gruppen, the logistics company Cargo Partner Group, wound care and hygiene products manufacturer Cederroth International AB, and TV content and commercial fi lm producer The New Black Oy. The aim of the investments in Barnebygg, Cargo Partner and The New Black is to develop the companies through aggressive growth strategy and add-on acquisitions. Value creation in Cederroth International AB is based on strong organic growth.
The year was quiet on the exit front. In May we sold staffi ng agency Staffpoint Oy. The exit delivered a threefold return on invested capital to the equity funds' investors. In July we exited from children wear manufacturer Reima Holding Oy. Also LUMENE Group's subsidiary Farmos became independent in March, enabling both companies to focus on their core business.
The exit market slowed to an almost standstill after the summer in response to the general economic climate, and no exits were made during the second half of the year.
CapMan Buyout is an active value adding owner of its portfolio companies. The main targets set for the companies are growth, improved profi tability and strengthening of strategic position.
During the second half of the year, our focus shifted to developing the existing portfolio companies. Overall, the companies performed well during 2008. The aggregate turnover grew by some 15% and operating profi t (EBITA) by some 17%. Market conditions rapidly worsened in the last quarter, however, and a clear downturn is expected in 2009.
The slowdown in the real economy will present new challenges and opportunities for developing portfolio companies. Slower growth will be seen in particular in industries linked to consumer demand. In addition, some sectors such as the automobile industry, have suffered the crisis more than others. In recent years, however, we have made investments mainly in non-cyclical sectors in which the weaker market conditions will not be felt so strongly. The changed market climate will produce strong pressure for changes in certain sectors and force some to alter their operating mechanisms. Most of our portfolio companies are in a good position to actively participate in this development and implement new investments in 2009.
Nordic buyout investments focused in 2008 on our target market – i.e. mid-market buyouts. We retained our market coverage well in this segment, and some 70% of the fi nalised deals fi tting our investment focus passed our analysis beforehand.
The changed market climate was refl ected in our operating area through banks' increased reluctance to lend and the higher price of debt fi nancing. It is probable that more equity is required in buyout investments. CapMan Buyout also has the opportunity to use its own mezzanine fi nancing, which gives a clear competitive edge in the prevailing market. We believe, also, that companies' price levels have already started to decline.
Establishment of the CapMan Buyout IX fund succeeded well in the challenging fundraising climate. After the fi rst closing, the size of the fund was €203 million in December. The fund has the same investment focus as its predecessor CapMan Buyout VIII fund.
Our strengths lie in our 20 years of operation and local presence, which enables us to grow portfolio companies organically and through acquisitions in the Nordic countries and Russia.
Our team of 24 investment professionals has wideranging experience in various industries, fi nance and private equity.
The new CapMan Buyout IX fund provides good prerequisites for new investments. Other buyout and mezzanine funds in the active investment phase also have adequate reserves for supporting existing portfolio companies and exploiting growth opportunities.
We believe that our long experience in middle market buyouts and in different economical cycles form a strong basis for successful investment operations also in the future.
M€
25
net sales of approx. €173 million and it employed some
210 people.
* Portfolio companies' turnover and number of personnel are based on 2008 estimates.
** Growth figures are based on 2007 figures and 2008 estimates. Companies that have been in the portfolio between 1 January – 31 December 2008 are included.
*** Indexed (time of investment = 100). Exits comprise partial exits, dividends, interest earnings and sales revenues.
as at 31 December 2008 Number of exits (equity funds) 40 IRR % p.a. 40.1%
Average holding period 5.4 years
Money-back multiple***
CapMan Technology actively continued its operations and made two new investments in 2008. Our portfolio companies' businesses developed favourably for the main part.
CapMan Technology 2007 fund held its fi nal closing in January 2008 and with the new fund our investment focus is to cover later stage technology companies in addition to expansion stage companies. Our portfolio companies are Nordic companies that primarily deliver industrial and business-to-business technology products, solutions or technology-based services and have proof of concept with existing customers at the time of the investment.
In addition to value creation potential, we expect expansion stage companies to have a solid business model, attractive growth scenario and a strong management team. Later stage companies are expected to have solid technology or products, a broad customer base or a few larger customers, a well-functioning revenue model, and a strong ambition to accelerate the company's growth. In addition, the company's products or services must have extensive domestic and international demand.
Value creation in portfolio companies is primarily based on growth in turnover, improved operational effi ciency, and the establishment of a strategic position. We contribute to our portfolio companies' value creation mainly via hands-on Board work.
Our investment professionals participate in portfolio companies' strategy work and provide help in M&A, recruitment of senior management and issues of internationalisation. Key personnel of the portfolio company play a major role in creating value and implementing changes.
Our team operates actively in the Nordic market, and during 2008 we analysed over 80% of the realised investments that fall within our focus. Since its establishment, CapMan Technology 2007 fund has made six new investments: three in Finland, one in Sweden, one in Denmark, and one in Norway.
During 2008 we made new investments in Nordic ICT consulting company Crayon Oy and in Finnish telecoms architecture consultancy Accanto Systems (formerly LTE Innovations Oy). We have monitored these companies over a long period, and we believe them to have good potential for value creation.
In June we sold our shares in Swedish Spintop Netsolutions AB to an industrial buyer. Owing to the nature of our operations, not all portfolio companies succeed. In October we exited from a failed investment in Swedish Animex AB. The exit market slowed to an almost standstill during the second half of 2008, and no other exits were made.
Overall, the current portfolio companies' development continued favourably, and we have supported their growth. Mawell Ltd, a Finnish provider of IT solutions for healthcare, has grown strongly during the review period after acquiring Swedish IT company Brainpool. The investment was made in syndicate with CapMan Life Science, and we have also extensively utilised the expertise of CapMan Advisor Network in developing the company. Finnish software testing and development company Flander Oy also continued its strong internationalisation by expanding its Swedish operations through an add-on acquisition.
In 2008 the aggregate turnover of our portfolio
companies increased by an estimated 21% and the aggregate number of personnel by an estimated 10%. The companies' average profi tability remained at a reasonable level. Substantial weakening of the market during the second half of 2008 slowed growth as several portfolio companies' customers postponed their investment decisions. We will closely monitor the companies' development and focus our resources on supporting them in the new market situation.
The worsening in the macro-economical climate has increased cautiousness in making technology investments too. Despite the market situation, our deal fl ow has remained at broadly the same level.
Statistics show that the number of new Nordic technology investments decreased substantially during the second half of the year. We believe that the cautious trend will continue during the fi rst half of 2009. CapMan Technology has suffi cient resources to analyse companies, and because of the new fund excellent capacity for new investments.
Our Nordic team has worked together for years with a wide technology focus and our team members have extensive experience both in private equity and in the Nordic technology industry. We believe that our wide focus and experience provide our team with the keys to success also in 2009.
CORPORATE GOVERNANCE CAPMAN AS A COMPANY CAPMAN FUNDS AND FINANCIAL STATEMENTS SHAREHOLDER INFORMATION
27
CapMan Life Science's investment operations in 2008 focused primarily on promoting the growth of the current portfolio companies. We made several strategic add-on investments and our portfolio companies developed steadily.
CapMan Life Science invests principally in Nordic medtech companies and healthcare service providers. For new investments we seek profi table companies that have the best products or services in their target market. In the medtech sector we are mainly interested in companies that market and sell medical products and equipment used for the diagnosis and treatment of diseases. Recent challenges in the medtech market include tougher market entry, a more complicated procedure for reimbursement of products from public funds, and the global slowdown in the venture capital market.
The importance of our investments in healthcare service providers has emphasized, and we expect that future healthcare trends will open up interesting investment opportunities.
We monitored the target market closely during the year, although no new investments were made. We also analysed several acquisition targets in different Nordic countries on behalf of our portfolio companies. There is strong competition for good targets in this market, especially in Sweden. The change in the general market situation has refl ected in our operating area in the form of increased cautiousness and a steep decline in the number of realised investments. The macro-economical slowdown will have an impact on companies in all industries, but the healthcare sector will not be as strongly affected as other more cyclical industries.
Our focus in 2008 was on developing current investment targets and promoting their growth. Of our portfolio companies, Proxima AB (Nacka Närsjukhus Proxima), a specialist in hospital and emergency care services in the greater Stockholm area, Curato AS, Norway's leading provider of medical imaging services and Finnish Mawell Oy, a provider of IT solutions for private and public healthcare organisations and pharmaceutical companies, grew strongly through mergers and acquisitions.
The aim of Proxima investment is to grow the company into a versatile provider of healthcare services while maintaining the company's premium quality. Over the year Proxima obtained an extended licence for acute emergency care and for existing and new surgical sectors. During the last quarter, Proxima established Proxima Diagnostics, a unit specialising in medical diagnostics, after the company won a part of Stockholm County Council's tender. The establishment of Proxima Diagnostics was supported by Curato.
The aim of the Curato investment is to expand the company's operations in medical imaging services, and also to survey the potential for expansion in other healthcare sectors. During our investment period Curato has acquired the share capital of Norwegian Sentrum Røntgeninstitutt and Norsk Teleradiologisk Senter.
Mawell strengthened its geographical position by acquiring Swedish Brainpool and by gaining several new Nordic customers. Proxima and Curato are coinvestments in syndicate with CapMan Buyout, and Mawell in syndicate with CapMan Technology. Clear synergies between our teams over the past year enabled CapMan to contribute to the consolidation of the Nordic healthcare sector.
During 2008 we exited from Prostalund AB, marketing equipment for the treatment of benign prostatic hyperplasia. The investment in Prostalund did not meet its targets mainly because the company's growth targets were not realised in the US market.
The overall development of our portfolio companies was solid. Their aggregate net sales increased by some 23% and aggregate personnel by some 18% in 2008.
The slowdown of the European and US venture capital markets was refl ected in the development of our early stage portfolio companies. They need to raise external fi nancing, and fund-raising or exits, for instance, through an IPO, have become more diffi cult. This development, however, is more an indication of changes in the fi nancial market than of an economic downturn.
The proportion of public healthcare services outsourced to the private sector has risen in the Nordic countries, and this privatisation trend is expected to continue, supported by political intent. On the other hand, companies developing new products for the European and US healthcare sector face challenges as authorities are focusing on the healthcare sector's infrastructure, which needs to be adjusted partly to the ageing population and partly to other changes in the sector. This will slow down the market penetration of new innovative products.
We believe that healthcare services providers have good potential for growth, and that we can fi nd companies in this market to supplement our current portfolio.
Our team of four has extensive experience in the life science sector. We will continue to support our portfolio companies by ensuring them suffi cient capital for growth and providing our cross-competency in medicine, healthcare and fi nancing sectors.
CASE
SHAREHOLDER INFORMATION
29
Curato provides premium medical imaging services in 12 modern centres in Norway. The company is Norway's largest private provider of medical imaging. In 2008 Curato generated net sales of approx. €52.3 million and employed some 250 people.
www.curato.no
* The figures for portfolio company turnover and personnel are based on 2008 forecasts.
** The growth figures are based on 2007 figures and forecasts for 2008. The figures include the companies that have been in the portfolio for the period 1 January – 31 December 2008.
*** Indexed (time of investment = 100). Exits comprise dividends, interest earnings and sales revenues.
CapMan expanded its operations in Russia by acquiring private equity house Norum in May 2008. Norum's team is one of the most experienced in the market. The second half of the year was a time of active integration. CapMan Russia fund's fundraising progressed well and the fund made its fi rst two investments in summer 2008.
CapMan's plans to expand its operations into Russia became concrete with the acquisition of Norum at the end of May 2008. Norum has operated in the Russian private equity sector since 1995 and is one of the most experienced players in this market. Norum now forms the CapMan Russia team that has 12 professionals, and a total of more than 100 years' experience in private equity. The team has worked together for over a decade and has offi ces in Moscow and St. Petersburg, as well as good networks in Russia's provinces.
CapMan Russia team has shown its capability to create value in portfolio companies and the team's performance-oriented operating culture is compatible with CapMan values. Combining Norum's handson experience with CapMan's extensive investment experience in Russia created one of the strongest private equity teams operating in the region.
The Norum Russia III fund, established in July 2007, i.e. the current CapMan Russia fund was transferred to CapMan's management in connection with the Norum acquisition. Fundraising, which has occupied our team during the second half of 2008, has proceeded well and the size of the fund rose to €118.1 million in November. Fundraising will continue during the fi rst quarter of 2009. We are very pleased that the fundraising of the new CapMan product progressed well despite the challenges in the current market.
CapMan Russia's investment focus is primarily on mid-sized companies operating in Russia. The fi rst investments were made in summer 2008, in Region Avia Airlines and Russian Baltic Pork Invest ASA (RBPI). RBPI is currently constructing a large pig farm in Kaliningrad, which was commissioned in autumn 2008. The team has monitored these investment prospects over a longer period. Both companies needed fi nancing primarily for fi nalising capital expenditure programs as well as expansion of operations and strategic competence to support the growth.
Our team is also responsible for six remaining investments in Norum's earlier funds. These funds and their portfolio companies are not included in the capital under management by CapMan or in the total number of CapMan's portfolio companies. We have succeeded in developing a number of our earlier portfolio companies into market leaders in their fi elds in Russia. In 2008 we successfully exited from two portfolio companies in Norum funds. In spring we sold our stake in Russia's largest ice cream manufacturer and in autumn we exited from Russia's biggest computer and console games publisher.
After the closing of the acquisition in August, we started an integration process aimed at harmonising Norum's and CapMan's procedures and key tools. The responsibility of heading the CapMan Russia team was divided between two people, in order to have adequate resources for integration, fundraising and active investment operations. Hans Christian Dall Nygård, who previously acted as Norum's Managing Director, is responsible for the investment activities of CapMan Russia and for the operative management of the team. CapMan's Senior Partner Petri Saavalainen was appointed Head of the CapMan Russia team with responsibilities that include integration of the Russian functions into CapMan Group and their further development. Mr. Saavalainen also acts as Head of the Team.
The private equity market is still undeveloped in Russia, so numerous good investment opportunities can be found in different sectors. The team looks for opportunities particularly in Russia's provinces, as well as in the Moscow and St. Petersburg areas, since the rate of growth in some regions is faster than the growth rate of the Russian economy.
The impacts of the general market slowdown are also visible in Russia. The stock market has declined signifi cantly and the banking sector faces severe problems. The decline of the oil price has a direct impact on the Russian federal budget, which will show a defi cit for 2009. Despite this, the Russian government has said that it will not cut spending and GDP is estimated to stay fl at or show small growth for 2009. While it is diffi cult to predict the short-term development of the economy, the long-term potential of the Russian economy is clear.
Since CapMan Russia is one of the few teams who emerged successfully through the rouble crisis in 1998 we are well poised to take advantage of the current market situation.
SHAREHOLDER INFORMATION
31
| CASE | CASE | ||
|---|---|---|---|
| Key strengths in value creation | Current portfolio as at 31 December 2008 |
Region Avia Airlines |
Russia Baltic Pork Invest |
| • Strong experience in the consumer product market in Russia • An extensive network in Russia and the Nordic countries • Over a decade's experience in Russian private equity • Professional Board work • Committed to Western management culture • A known partner and brand to support the portfolio companies' growth |
Number of portfolio companies 2 Portfolio at fair value, € million 16.8 |
Region Avia Airlines is a private airline operating regular and chartered services in Russia. In 2008 the company generated turnover of approx. €2.1 million and employed some 130 people. www.regionavia.ru Key information on investment • CapMan Russia fund fi rst invested in Region Avia in July 2008. • CapMan funds' holding of the company approx. 48% at the end of 2008. • The aim is the stable growth of the company |
RBPI is building a large pig farm in Kaliningrad, which was commissioned in autumn 2008. In 2008 the company employed some 100 people. www.rbpi.no Key information on investment • CapMan Russia fund fi rst invested in RBPI in June 2008. • The funds' holding in the company was approx. 37% at the end of 2008. • The aim is to build a complete production chain, |
| Development in capital under management |
Team's track record as of 31 December 2008 |
and strengthening of its market position. • Responsible investment professional: Alberto Morandi, Partner. |
from feed grain to fresh and processed pork, and capacity for 110,000 pigs. • Pork meat consumption has increased at an annual rate of 6.4% in recent years and the growth is expected to continue. |
| Number of exits from Norum I, Norum II and Asef funds 23 |
Value creation actions taken • The company acquired seven new turboprop planes |
• Responsible investment professional: Kåre Wessel, Investment Director. |
|
| M€ | IRR % p.a. 19.7% |
in the second half of 2008. • The company is currently preparing to launch regular |
Value creation actions taken |
| 140 120 100 80 60 40 20 0 2007 2008 |
Average holding period 5.0 years Money-back multiple* 300 259 200 100 100 |
scheduled services. • The company's level of profi tability in 2008 was good. |
• The pig farm was completed on schedule in autumn 2008. • The company produces pork in Russia, in compliance with European standards, for the Russian market. |
| CapMan Russia fund | 0 Time of initial investment Time of exit |
* Indexed (time of investment = 100). Exits comprise dividends, interest earnings and sales revenues.
CapMan Public Market's guiding principles are active ownership, cooperation with the portfolio company's other large shareholders and selective investments. Our operations were launched in July 2008 when the CapMan Public Market fund was established.
CapMan Public Market invests in listed Nordic companies with a market capitalisation between €100 and 1,000 million. We aim to acquire a 10–30% infl uential minority stake in the portfolio company and a seat on its Board of Directors. Over the next three years, the fund will invest in a carefully selected and defi ned group of companies.
We believe that the listed Nordic market has substantial value creation potential through private equity style ownership, and that the market is large enough to support the fund's business idea.
The support from other large shareholders and stakeholders as well as an opportunity to create a shared value creation agenda are essential in selecting investment prospects. Our investment process follows traditional private equity processes as we actively explore potential investment targets and analyse interesting industries. Our portfolio companies have strong value creation potential, and as part of the investment process, clear objectives
Our investment operations aim to generate a return typical to private equity that exceeds the stock market's returns over the long-term. For other shareholders, the fund's investment typically provides an opportunity to participate in the portfolio company's value creation together with the fund.
The main differences to traditional private equity are that our portfolio companies are publicly listed, they are developed on the stock exchange, and we hold a minority share in the company. Common features, on the other hand, are an active and targetoriented ownership style as well as the utilisation of private equity tools to create value in the portfolio companies. Compared to traditional public equity, the fund's ownership is active, long-term and highly focused.
One-third of the 1,100 or more listed Nordic companies fall within CapMan Public Market's investment focus. The wide range of industries and relatively centralised ownership, both typical to the target market, support the deal fl ow origination. In addition to share trading, share issues also provide a potential investment avenue.
Since establishing the fund, we have analysed numerous potential investment targets, in response to initiatives from listed companies, investment banks and our network, or that we have found through our own analysis. We believe that our market coverage is good, and that the amount and quality of deal fl ow will remain high also in the future.
Drastic changes in the macro-economy during 2008 lowered signifi cantly the market values of listed companies, which forms a good springboard for our investment operations. We expect to make the fi rst investments in spring 2009.
CapMan Public Market always focuses on business development and the portfolio companies' longterm value creation. We contribute to the company's strategy and make strategic initiatives. Our team is also actively involved in recruiting senior management, developing compensation schemes, as well as in planning and implementing mergers and acquisitions in cooperation with other owners and in line with the agreed value creation strategy.
We will typically exit portfolio companies through private placements targeted at institutions or institutional investors, or through partial share sales or through sale to a strategic industrial buyer. Our typical investment period is 3 to 5 years, which substantially differs from the traditionally short time span of the stock market.
We raised €106.0 million in investment commitments to our fund in a very challenging market situation. The fundraising will continue during the fi rst half of 2009.
Based on the feedback collected during fundraising, the new fund satisfi es customer demand by providing management and ownership steering for listed companies on behalf of institutional investors.
CapMan Public Market team consists of six professionals with comprehensive experience in business development, Board work and value creation in listed and unlisted Nordic companies. The team comprises people with work experience from different institutions in the listed market as well as people with wide experience in private equity and CapMan's investment approach. Our expertise is complemented by CapMan Advisor network, three members of which concentrate on exploring and developing potential targets for the fund. We are ready to offer our experience and the experience of our advisors to benefi t listed Nordic companies.
➥ CapMan Public Market team members www. capman.com
33
CapMan Real Estate expanded its investment focus to hotel properties with the establishment of a €845 million fund in January 2008. The Finnish real estate investment market slowed to an almost standstill during the second half of 2008, but the prerequisites for investments and real estate consulting remained fairly good.
The €845 million CapMan Hotel RE fund was established in January 2008, and the fund's fundraising continues in the fi rst half of 2009. In conjunction with establishing the fund, we concluded the largest hotel property transaction ever made in Finland by acquiring a portfolio of 39 hotel properties, 38 of which are in Finland and one in Sweden.
The new hotel portfolio made CapMan Real Estate Finland's largest real estate investment team in the hotel sector also. Pirjo Ojanperä has been responsible for the new hotel team's operative activities since September 2008, after Tomi Bergman was appointed Senior Advisor in CapMan. Dividum Oy, 80% owned by CapMan Plc, is an advisor to the hotel fund.
We analysed numerous potential investment targets during the year, but in most cases decided to await market developments and monitor property price levels.
In March we announced an investment in a land area in the Kivistö district of Vantaa, for which we are applying for zoning permission for retail development.
In September we announced an investment in OneMed Group Oy's new head offi ce in Helsinki, which is scheduled for 2009. We have also progressed with pending development projects, such as the Skanssi shopping centre project in Turku.
In line with our earlier commitments, we invested in Tokmanni's logistics centre in Mäntsälä, completed in August, and the Entresse shopping centre in Espoo, which was opened to the public in November. Construction of Tokmanni's logistics centre proceeded well and the project was completed on schedule. We are also very pleased with Entresse, which was opened fully leased and on schedule. In these investment targets, we utilised the comprehensive expertise of Realprojekti.
After the record set in 2007, there were no exits in 2008. Our main focus at present is on developing our current portfolios. In 2008 we made new investments and completed projects with over €1 billion.
Overall the value creation in CapMan Real Estate's investments has been good. We have developed properties by enhancing effi ciency in leasing activities and by keeping the vacancy rate below average.
During the year we thoroughly explored the value creation potential of the properties in our hotel portfolio, and launched several repair and expansion projects.
CapMan Real Estate team is organised into three sub teams that are Fund Operations, Hotel Fund, and Real Estate Consulting. The Fund Operations team actively seeks and assesses potential investment targets and is responsible for their value creation. The CapMan Real Estate team has altogether 46 members. Our investment professionals have extensive experience
in private equity and real estate business.
Realprojekti Oy, CapMan Plc's 80% owned subsidiary, acts as an advisor to the CapMan Real Estate I and CapMan RE II funds, and also provides real estate consulting.
Realprojekti specialises in real estate fund management, property development and marketing services as well as project management and construction contracting services. Realprojekti's customers include funds, large property owners, property developers, municipalities and government institutions. The company has strong expertise in demanding property development projects, shopping centre projects and commercial leasing.
Realprojekti's combination of an established market position, a professional team, and a comprehensive network give CapMan's real estate operations a defi nitive competitive edge.
Demand for Real Estate Consulting services remained high in 2008, and we became the largest provider of shopping centre management services in Finland.
A generally weaker market in 2008 substantially slowed down real estate business in Europe. The market in Finland has normalised after foreign players have concentrated on monitoring the market instead of making investments. Real estate auctions halted completely during the second half of the year. We believe that the market situation will bring realism to transaction prices and the real estate market will consequently start to recover. This new business environment may attract new companies as sellers, possibly with a portfolio of interesting investment targets that match CapMan's investment focus.
CORPORATE GOVERNANCE
SHAREHOLDER INFORMATION
CapMan Plc Annual Report 2008
• Market and profi t analyses, functional planning, planning of business ideas, control of planning, project management and construction management
• Property management, service concepts and active leasing operations
• Repair and expansion projects, leasing agreement portfolio, and cooperation with tenants
** Figures as of 31 January 2007.
*** Acquisition price indexed (time of investment = 100).
| 1,214.1 | Portfolio at fair value, € million |
|---|---|
| 768,705m2 | Aggregate gross leasable area |
| over 400 | Number of tenants |
| Number of new investments | 41 |
|---|---|
| Growth in leasable area | 517,622m2 |
| Growth in number of lease agreements |
179 |
| Vacancy rate as at 31 December 2008* |
3% |
as at 31 January 2008**
Number of exits 22 Average holding period 1.7 years Lettable area 154,309m2 Vacancy rate 3.2%
200 150 100 50 0
100 134
Time of initial investment Time of exit
Money-back multiple***
Located in Espoo, Finland, Entresse is a shopping centre providing diversifi ed daily services supplemented by interior decoration, giftware and a wide range of restaurant services. Entresse comprises over 40 retail premises and a total of some 10,000m2 of commercial space.
www.entresse.fi
Investments and commitments per property usage at cost, €1,325.2 million
As at the end of 2008, the CapMan funds had invested in altogether over 160 companies and some 80 properties, and had exited from over 100 companies and 22 properties. On 31 December 2008 the portfolio comprised 59 companies and 57 properties.
Barnebygg Gruppen Cargo Partner Group Cederroth International AB The New Black Oy (Varesvuo Partners)
Anhydro Holding A/S Avelon Group Oy Cardinal Foods AS Curato AS* Farmos Holding Oy Finlayson & Co Oy Infl ight Service AB InfoCare AS* Komas Group Oy Lumene Group Maintpartner Oy Metallfabriken Ljunghäll AB Moventas Corporation MQ Retail AB OneMed Group Pretax Oy Proxima AB (Nacka Närsjukhus Proxima)* SMEF Group A/S Tieturi Oy* Tokmanni Oy Turo Tailor Oy Ab Walki Group Oy Å&R Carton AB
New investments in 2008 Crayon AS (Artix AS) Accanto Systems (LTE Innovations Oy)
Ascade Holding AB EM4, Inc. Exidio Ltd Fastrax Ltd Flander Oy Foreca Ltd Gammadata Holding AB Global Intelligence Alliance Group Ltd InfoCare AS* IT2 Holding ApS KMW Energi AB Locus AS Mawell Ltd* Mirasys Ltd Movial Applications Inc PacketFront Sweden AB (42Networks) ScanJour A/S Siennax International BV Silex Microsystems AB* Tieturi Oy* Tritech Technology AB XLENT AB
New investments in 2008 No investments
Aerocrine AB Curato AS* InDex Diagnostics AB Inion Ltd Jolife AB Mawell Ltd* Millicore AB Proxima AB (Nacka Närsjukhus Proxima)* Neoventa Medical AB
New investments in 2008 Region Avia Airlines Russia Baltic Pork Invest ASA
New investments in 2008 No investments
Crowne Plaza Helsinki, Helsinki Cumulus Airport, Vantaa Cumulus Hämeenlinna, Hämeenlinna Cumulus Jyväskylä, Jyväskylä Cumulus Kemi, Kemi Cumulus Koskikatu, Tampere Cumulus Kuopio, Kuopio Cumulus Oulu, Oulu Cumulus Pinja, Tampere Cumulus Rauma, Rauma Cumulus Rovaniemi, Rovaniemi Cumulus Seinäjoki, Seinäjoki Entresse Shopping Centre, Espoo Holiday Club Katinkulta, Vuokatti Holiday Club Kuusamo, Kuusamo Holiday Club Oulu, Oulu Holiday Club Saariselkä, Saariselkä Holiday Club Tampere, Tampere Holiday Club Åre, Åre Holiday Inn Garden Court, Vantaa Holiday Inn Oulu, Oulu Holiday Inn Tampere, Tampere Holiday Inn Turku, Turku Kiint. Oy Nuijamiestentie 2, Helsinki Kiint. Oy Turun Centrum, Turku
Kiint. Oy Turun Yliopistonkatu 22, Turku Land area, Kivistö, Vantaa Palace Linna, Helsinki Radisson SAS Vaasa, Vaasa Ramada Airport, Vantaa Rantasipi Aulanko, Hämeenlinna Rantasipi Eden, Nokia Rantasipi Joutsenlampi, Joutsa Rantasipi Laajavuori, Jyväskylä Rantasipi Pohjanhovi, Rovaniemi Rantasipi Rukahovi, Kuusamo Rantasipi Sveitsi, Hyvinkää Rantasipi Tropiclandia, Vaasa Scandic Plaza Turku, Turku Scandic Rovaniemi, Rovaniemi Sokos Hotel Albert, Helsinki Sokos Hotel Pasila, Helsinki Sokos Hotel Seurahuone, Kotka Sokos Hotel Vaakuna, Hämeenlinna Tokmanni Oy's Logistics Centre, Mäntsälä
Skanssi Shopping Centre, Turku Kiint. Oy Hankasuontie 3, Helsinki Kiint. Oy Helsingin Elimäenkatu 9, Helsinki Kiint. Oy Helsingin Kalevankatu 20, Helsinki Kiint. Oy Helsingin Ludviginkatu 3-5, Helsinki Kiint. Oy Helsingin Lönnrotinkatu 20, Helsinki Kiint. Oy Jyväskylän Ylistönmäentie 33, Jyväskylä Kiint. Oy Kasarmikatu 4, Hämeenlinna Kiint. Oy Malminkaari 9, Helsinki Kiint. Oy Mastolan Keskusvarasto, Vantaa Kiint. Oy Parolantie 104, Hämeenlinna Kiint. Oy Viinikankatu 49, Tampere
* Syndicated by two different CapMan teams.
SHAREHOLDER INFORMATION
Active Board work and close cooperation with companies' operative management are the prime tools of CapMan's investment professionals in developing the portfolio companies. Shown on left, a Lumene Group Board meeting.
CapMan is the only private equity investor with investment teams and offices in Finland, Sweden, Denmark, Norway and Russia.
CapMan professionals meet their clients and other stakeholders at various CapMan events. The key note speaker of the main events in 2008 was Professor Stéphane Garelli, Director of the IMD World Competitiveness Center.
| Responsibility | CapMan aims to be a responsible and ethical corporate citizen in all of its stakeholder relations |
|---|---|
| Values | CapMan's operations are guided by mutually agreed values |
| 22,000 Over |
CapMan's portfolio companies employ over 22,000 people. Portfolio companies' aggregate net turnover amounts to approx. €4.1 billion |
CapMan aims to be a responsible and ethical corporate citizen in all its stakeholder relationships. The company plays an important role in society as an asset manager for fund investors and facilitator of portfolio company and real estate development .
CapMan has an important role in society as the manager of capital invested in its funds by institutional investors. A substantial amount of capital comes from Nordic pension funds, whose commitments to current funds represent some 53% of funds' total capital. Successful investments have a direct impact on fund investors' profi ts and thus also on their stakeholders, such as pensioners. Investment principles for both funds investing in portfolio companies and in real estate are mutually agreed by CapMan and fund investors.
CapMan reports to its investors on funds' status in compliance with EVCA guidelines, applicable laws, fi nancial reporting standards, and other regulations. CapMan's regular reports cover the development of each portfolio company, each investor's investments in and commitments to funds managed by the Group, returns to investors from funds, and management fees paid to the management company. Information in respect of each investor is reported separately.
Investments in portfolio companies are valued in accordance with International Private Equity and Venture Capital Valuation Guidelines (IPEVG), while values of real estate investments are based on valuations by external specialists. Investments in portfolio companies are valued four times a year, in conjunction with CapMan Plc's quarterly reporting.
In making investment decisions, CapMan requires that portfolio companies comply with prevailing laws and guidelines, as well as with generally approved business and management principles that are socially and environmentally sustainable. The same principles apply to the development of portfolio companies. Value creation in portfolio companies is based on active and target-oriented ownership, supported by fi nancial activities. A typical private equity investment includes both equity and debt fi nancing.
CapMan's aim is to promptly notify the company's personnel and other stakeholders of any strategic changes in portfolio companies' operations. CapMan gives high priority to corporate governance and comprehensive reporting.
Real estate investments are primarily directed at growth areas and types of real estate with long-term and permanent needs – for instance, resulting from growth in residents and businesses in the area. A high proportion of investments is made in new buildings. A thorough condition assessment, which includes a soil analysis, is conducted for existing properties as part of our investment process. After the investment is made, a long-term repair programme is prepared for the property, based on the condition assessment. The implementation of the programme is monitored via individual manuals that are updated in cooperation with service providers. The maintenance manual also enables monitoring of the property's energy consumption and maintenance costs.
CapMan ranks among the fi rst listed private equity companies in the world. Because of the regulations for listed companies, a lot of information on CapMan and its operations is available.
In recent years, the private equity industry has prominently enhanced its self-regulation, with emphasis on increasing the transparency and openness of private equity funds. Organisations active in the sector, such as EVCA (Europe), DVCA (Denmark) and SVCA (Sweden), have issued their own recommendations for transparency. CapMan has followed these recommendations already for some years now.
In 2008, CapMan's portfolio companies employed over 22,000 people, and their estimated aggregate turnover was some €4.1 billion. CapMan has an investment capacity of some €850 million*, enabling development of portfolio companies and the allocation of capital to promote portfolio companies' growth, competitiveness and innovations. At yearend, properties owned by the CapMan Real Estate funds accommodated over 400 tenants.
CapMan's wide range of funds allows the company to invest in a variety of industries and geographical areas. Investments in, for instance, companies providing technology solutions for private healthcare service providers, cleantech companies in the energy sector and, on the other hand, domestic Nordic companies, help to strengthen Nordic national economies. Private equity investments also promote innovations, and facilitate the search for new solutions to the challenges posed by changing healthcare service relationships, the service society, globalisation, and climate change.
CapMan's employees actively participate in FVCA and EVCA activities to promote development of the private equity industry and enhance international cooperation. CapMan is also a partner to the Family Business Association of Finland. In addition, CapMan has supported private equity education, and was a sponsor for Helsinki University of Technology's Department of Industrial Engineering and Management's fi ve-year private equity professorship.
* Based on the remaining investment capacity of funds managed by CapMan as at 31 December 2008.
CORPORATE GOVERNANCE
SHAREHOLDER INFORMATION
CapMan Plc Annual Report 2008
39
At the end of 2008 CapMan employed in total 141 people in Helsinki, Copenhagen, Stockholm, Oslo and Moscow. The Group's success depends on its capability to recruit, develop, motivate and retain top private equity professionals in all its teams.
Recruitment in 2008 continued to be as brisk as in previous years. CapMan recruited some replacements for those leaving the company (10 persons), but mostly employees were recruited to strengthen current teams (23 persons), in particular the Real Estate team. The Public Market team was also established during the year. A total of 19 new employees joined CapMan through acquisitions in Finland and Russia.
A high priority in 2008 was smooth and rapid integration into the Group of new employees who joined the Company through acquisitions. Since none of these employees left CapMan during the integration process, we believe we were successful. Integration of employees joining the Group as a result of the Russian acquisition in August 2008 will continue in 2009.
Personnel turnover in 2008 was outbound 8% and inbound 34% of the Company's average number of personnel. The number of permanent employees (excluding short fi xed-term contracts, occasional employees and consultants) grew by 28% on the previous year. This rate of growth is expected to slow in 2009.
– CapPeople employee survey
CapMan strives to ensure employee satisfaction
and longstanding commitment to the company. CapPeople, our annual employee survey, is one tool for monitoring employee satisfaction. Some questions in the survey are the same from year to year for comparability purposes, whereas some questions are added and some changed to match the theme of the year.
In the CapPeople 2008 survey conducted in October, employee satisfaction and commitment to CapMan, both as an employer and a workplace, were ranked highly. The high response rate, 80%, also indicates that employees are committed to further development of the Company's operations.
The CapPeople 2008 survey was supplemented by an integration survey in February 2009.
At the end of 2008, CapMan had two option programs covering the company's personnel and Board members. New stock options from the 2003B programme are no longer distributed, and the existing options are quoted on the OMX Nordic Exchange in Helsinki. Stock options can still be granted from the 2008 stock option program to people within its scope. Detailed information about the employee stock option program and employee shareholdings are given on page 50.
Following common practice in the private equity investment industry, a share of the carried interest income generated by funds managed by CapMan is distributed to CapMan's investment professionals. Personnel are also entitled to invest in portfolio companies alongside the CapMan funds, through the Maneq funds.
* Internal Services comprises the Group's Finances and Accounting, IT and HR and Office Services teams
40 CapMan Plc Annual Report 2008
We believe in integrity and transparency. We are a reliable partner and we respect our stakeholders. We want to be an example of high ethics.
We are committed to reaching our objectives. We are innovative and aim to be the trendsetter for the industry. Employees are our most important resource.
We are an active industrial player with strong fi nancial know-how. We create lasting value through growth, change and professional governance. CORPORATE SOCIAL RESPONSIBILITY AND PERSONNEL CORPORATE GOVERNANCE AND FINANCIAL STATEMENTS
SHAREHOLDER INFORMATION
CapMan's first Capital Markets Day was held in Helsinki in 2006.
CapMan meets institutions investing in shares and analysts twice a year in London road shows as well as in separate meetings throughout the year. In the early days of CapMan's listing the Company participated also in the Sijoita – Invest fair in Helsinki (photo).
CapMan has been one of the first listed private equity companies in the world. The picture shows an investor presentation.
100%
The Board of Directors consists of 6 members and met 10 times in 2008. The average participation rate was 100%. The Management Group met 12 times.
€7.1 million
CapMan posted a loss for 2008 as a consequence of the negative change in the fair value of fund investments and fl uctuation in carried interest. Nevertheless, the management company business developed favourably and management fees and income from Real Estate consulting covered the operational expenses.
Analysing impact of own inve interest potential: CapMan Buyout VIII 3
CapMan Plc complies with the Finnish Corporate Governance Code for listed companies issued by the Securities Market Association of Finland in October 2008. In view of the size of the Company and its Board of Directors, CapMan deviates from the Code's recommendations for Board Committees in that it has decided not to establish any Board Committees. The Company also deviates from recommendation 41, which applies to the participation of non-executive directors in share-related remuneration schemes. CapMan Plc's Board of Directors is responsible for verifying the Group's Corporate Governance principles.
The information required by the Corporate Governance Code is available in its entirety on the Company's website www.capman.com. The complete Corporate Governance Code can be read on the Internet at www.cgcode.fi .
All members of CapMan Plc's Board of Directors are elected by the Annual General Meeting. Members are elected for a term of offi ce of one year, which starts at the close of the AGM at which they were elected and ends at the close of the AGM following their election. The Board elects a chairman and a vice chairman from among its members.
According to the Articles of Association, the Board of Directors comprises at least three and at most nine members, who do not have deputies. The present Board comprises six members. The Board convened 10 times in 2008, and all members attended all the meetings.
The duties and responsibilities of the Board of Directors are determined for the main part by the Finnish Limited Liability Companies Act. The Board of Directors has general authority to render decisions on all of those Company matters which, on the basis of legislation or the Articles of Association, are not stipulated to be decided or carried out by another executive body. In addition to the tasks set forth by legislation the Board of Directors has confi rmed a written charter for its work, which describes the main tasks and duties of the Board, the issues addressed by the Board, meeting practices, and an annual self-evaluation of the Board. In accordance with the CapMan Plc's Board's charter, the main duties of the Board are:
that the Board fulfi ls the tasks appointed to it
under legislation and by the Company's Articles of Association.
In view of the size of the Company and of its Board, the Board of Directors has decided to deviate from recommendations 18–33 of the Finnish Corporate Governance Code and not to establish any Board Committees. However, the Board has decided to pay special attention in its Board work to risk management, external auditing, fi nancial reporting and internal supervision.
A majority of Board members must be independent of the Company. By decision of the 2008 AGM, the members of the Board are Ari Tolppanen (Chairman), Teuvo Salminen (Vice Chairman), Sari Baldauf, Tapio Hintikka, Lennart Jacobsson and Conny Karlsson. Their biographical details are presented on the Company's website (www.capman.com).
A majority of Board members, comprising Sari Baldauf, Tapio Hintikka, Conny Karlsson and Teuvo Salminen, are independent of the Company. Lennart Jacobsson and Ari Tolppanen are not independent because they are employed by the Company and are also major shareholders in the Company.
The Board of Directors elects the CEO and the Deputy
CEO of the Company. The CEO's service contract, which is approved by the Board of Directors, specifi es the main terms and conditions of the CEO's employment relationship. The CEO manages and supervises the Company's business operations according to Finland's Limited Liability Companies Act and in compliance with the instructions and authorisations issued by the Board of Directors. Generally, the CEO is independently responsible for the operative running of the Company and for dayto-day decisions on business activities and the implementation of these decisions. The CEO also appoints the Heads of teams and makes proposals to the Board of Directors on the recruitment of his/ her immediate subordinates.
In 2008 CapMan Plc's CEO was Heikki Westerlund. The Company's Deputy CEO was Olli Liitola. The biographical details of CapMan Plc's CEO and Deputy CEO are presented on page 46 and on the Company's website.
The Management Group of CapMan makes recommendations to the CEO for decisions and for proposals to the Board of Directors on matters relating to CapMan Group's business. The CEO must notify the Management Group if he/she submits proposals to the Board of Directors that differ to the Management Group's proposals. The decisions of the Management Group are made by a majority vote. The composition
* CapMan Real Estate reports to Deputy CEO Olli Liitola.
SIJOITUSALUEET
CAPMAN AS A COMPANY CAPMAN FUNDS INVESTMENT AREAS INFORMATION CORPORATE SOCIAL RESPONSIBILITY AND PERSONNEL
CORPORATE GOVERNANCE AND FINANCIAL STATEMENTS SHAREHOLDER
CapMan Plc Annual Report 2008
43
of the Management Group, and the responsibilities and biographical details of its members are presented on pages 46–47 and on the Company's website.
CapMan also has Investment Committees, one for each fund. Investment Committees make investment proposals to the funds' Advisory Boards, and are not involved in managing the operational activities of the Company. These committees comprise the CEO, Senior Partners and other members. The CEO nominates the members of the committees. Investment proposals are always made by common decision of the members of an Investment Committee. Investment proposals by real estate funds operating in Finland are prepared by the investment team responsible for the investment, and proposals are accepted or rejected by the Board of each fund. The Chairman of the Investment Committees is the Group's CEO or a person nominated by him/her.
The remuneration of members of the Board of Directors is confi rmed by the AGM. According to the decision of the 2008 AGM, the Chairman of the Board is paid a fee of €4,000 a month, and the Vice Chairman and members of the Board are each paid a fee of €3,500 a month. Fees are not paid to members of the Board who are employed by CapMan Group. The remuneration for other than Board work paid to the Chairman of the Board and CapMan Senior Partner Ari Tolppanen amounted to €103,156.20 in 2008. The remuneration for other than Board work paid to member of the Board and CapMan's Senior Partner Lennart Jacobsson amounted to €237,300.60 in 2008.
In divergence to recommendation 41 of the Finnish Corporate Governance Code, non-executive members of the Board of Directors can participate in a share-related remuneration scheme in accordance with the decision of the AGM, in which case shareholders have the opportunity to evaluate whether such remuneration is in their interest. In 2008 no shares or share-related remuneration were assigned to members of the Board. At the end of 2008 the Company had no option programs in which Board members could participate.
The remuneration system for the CEO and other executives of the Company consists of a fi xed monthly salary, a bonus scheme linked to the Group's performance and the achievement of personal targets, possible stock options and, in the case of a Management Group member working as an investment professional, possibly also a share of the carried interest paid by the CapMan funds.
The Company's Board of Directors approves the CEO's remuneration, the annual bonus system, the distribution of options to others than members of the Board, the division of carried interest between the management company and the investment teams, and also the share-related remuneration of persons reporting directly to the CEO.
In 2008 CEO Heikki Westerlund was paid a salary and other remuneration amounting to €466,552.70, of which €345,042.70 was a fi xed amount, €115,200 was a bonus linked to fi nancial performance and the achievement of personal goals, and the remainder was a variable amount of €6,310. Deputy CEO Olli Liitola was paid a salary and other remuneration of €239,718.20, of which €157,808.20 was a fi xed amount and €81,910 was a variable amount.
The pensionable age and pension benefi ts of the CEO and Deputy CEO are mainly prescribed by the provisions of Finland's Employees' Pensions Act. Their period of notice of termination of employment is 12 months for both parties. A normal monthly salary is paid during the period of notice.
Members of the Management Group were paid salary and remuneration in 2008 amounting to €3,020,207.34, of which €1,904,547.44 was a fi xed amount and €1,115,659.90 a variable amount. The Management Group consisted of 14 members in 2008. The variable amount of salaries and remuneration paid in 2008 mainly comprised bonuses for profi ts made in 2007.
Information about the option rights distributed to
members of the Board of Directors, the CEO, Deputy CEO and other executives is presented on pages 45–47 and on the Company's website.
In accordance with the decision by the AGM, the auditor shall be remunerated as per the amount invoiced. The auditor's remuneration for the 2008 fi nancial year amounted to €133,322.
CapMan has a risk management program aimed at ensuring that the risks associated with the Company's business operations and objectives are identifi ed and evaluated, and that the Company reacts appropriately to these risks. Major risks are published, provided that the information does not contain confi dential information pertaining to CapMan's business.
The Company's Board of Directors is ultimately responsible for the proper organisation of risk management and internal control. The management is responsible for its implementation. The Group's CFO coordinates the risk management program and is responsible for drafting and updating an internal control program. The CFO reports regularly to the Board of Directors on matters concerning risk management and internal control.
The Management Group defi nes the main risks associated with business areas and other functions. The Company has an action plan that addresses the main identifi ed risks.
See Investment Committees on page 43 on the left.
Performance Monitoring team is part of the Investor Services team, and is independent of the investment teams and the Group's accounting. Performance Monitoring is responsible for collecting and reviewing the monthly reporting of portfolio companies, monitoring and forecasting the success of the Group's funds and preparing the models for and calculating the carried interest income.
Valuation Committees decide on the valuations of the funds managed by the CapMan Group. The committees comprise the Head of each investment area, the CEO, CFO and Deputy CEO. Portfolio companies are valued four times a year in conjunction with CapMan Plc's interim fi nancial reporting. The investment professionals responsible for portfolio companies make proposals on the valuations of investment targets and compile material to support the valuation level. The Group's Performance Monitoring offi cers check the correctness of the principles applied in the proposals. The task of Valuation Committees is to process valuations and ensure that the same valuation principles are consistently used in all portfolio companies, and that the principles comply with IPEVG guidelines.
Compliance audits are conducted on a regular basis with the purpose of ensuring that investments made in funds comply with the funds' Procedure Manual. The Investor Services team is responsible for compliance audits, the members of which are independent of the investment teams.
CapMan classifi es risks into four main categories, which are: external risks, operative risks, fi nancial risks, and strategic risks. Risks are also presented in the Notes to the Consolidated Financial Statements on pages 68–69.
External risks consist of prevailing or anticipated changes in the political or legal operating environment, regulations, the economy or the competitive situation.
General market changes in share prices have an impact on the fair values of portfolio companies. According to the IFRS, these valuations can be shortterm in nature and do not necessarily refl ect on the long-term returns of a fund. In order to even out the effects of economic cycles, it is important that investments are made on a sustainable valuation level, that funds' portfolios contain companies operating in non-cyclical sectors, and that portfolio companies are constantly and actively developed.
It is typical to the private equity industry that a part of the investments are fi nanced with debt fi nancing. If the investment is highly leveraged, the valuation of the fund investment can fl uctuate signifi cantly within a short period if market multiples change.
The Group's operative risks are mainly related to possible ineffectiveness or failure of processes, personnel and systems. Operative risks include legal and regulatory risks, and risks relating to IT systems, business disruption or failures in internal control. The Company's management is responsible for identifying, evaluating, controlling and reporting operative risks. To support it in this task, management has the Group's general operating principles and standards, monitoring and control programs, and division of responsibilities. The Group's CFO is responsible for internal control and for regularly reporting on internal control.
The Group has defi ned procedures, principles and methods for, among other aspects, investment activities, data protection, insider issues, personal performance evaluation, signatory rights, and invoice approval. These principles and procedures are available to personnel on the Company's intranet.
Implementing the Company's strategy depends on the Company's ability to recruit, develop and retain the best professionals in private equity in all its teams. Performance appraisals are conducted twice a year, when an individual's performance is assessed against the set targets.
Unexpected changes in the pace of investments or exits have a substantial impact on the Group's cash fl ow. An individual investment or exit can considerably change the cash fl ow situation, and the exact timing of cash fl ow is diffi cult to forecast accurately. The Company's goal is for management fees and real estate consulting income to cover the Group's operating expenses. Carried interest is used to fi nance fund commitments that are not paid in or to increase dividend payment capacity. Cash fl ow calculations for different scenarios and for different time spans are updated regularly to ensure adequate liquidity. The Group also has a credit facility for shortterm fi nancing needs.
The Group provides for interest rate risk by using both fi xed interest and fl oating interest loans for longterm debt. The fi ve-year reference rate of interest is used for loan receivables. Credit risk is limited to loan receivables from the Maneq funds, which invest alongside the Group's funds. The Maneq funds always invest in a number of portfolio companies, so credit risk only realises if the average exit multiple of portfolio companies falls below one. The Company believes that this credit risk is small. Exchange rate risk is normally low because the Group generally uses the euro in its transactions, although the exchange rate of Nordic currencies and of the Russian rouble does affect investment operations.
One of the major risks associated with CapMan's business is the failure of fundraising. Successful fundraising provides a fi rm basis for management fees and creates opportunities for carried interest over a number of years into the future. CapMan has endeavoured to minimise this risk by spreading its operations over six investment areas and fi ve countries of operation. The sensitivity of CapMan's business to fl uctuations in investor demand and to market volatility is reduced because typically a new fund is always in the active fundraising phase in one of CapMan's investment areas. A requirement for successful fundraising is success in investment activities.
CapMan is prone to investors' decisions to spread their investments over different asset classes. This risk is minimised by dividing the Group's operations into different business areas.
The Group's CFO is responsible for drafting and updating an internal control program. The CFO reports to the Board of Directors regularly on matters concerning internal control. The program also covers monitoring the legal compliance of funds and their activities, and its purpose is to ensure that:
The Head of the Fund Administration team is responsible for drafting and updating the funds' compliance program. The aim of the program is to ensure that the activities of funds managed by the CapMan Group comply with contracts, agreements and other commitments.
CapMan Plc complies with the guidelines for insiders issued by the Helsinki Stock Exchange that entered into force on 1 January 2006. CapMan has supplemented the general guidelines with its own set of internal insider guidelines, which are in part stricter than the general guidelines. An insider register extract is regularly distributed to public insiders for inspection. The Group's Senior Legal Counsel is responsible for insider issues.
According to the defi nition of public insiders specifi ed in the Securities Market Act, CapMan Plc's public insiders are the members of the Board of Directors, the CEO, Deputy CEO, members of the Management Group, and the auditors including the lead auditor. In addition, the company-specifi c insider register includes the CEO's Executive Assistant, CFO, Chief Accountant, Financial Controller, Performance Monitoring Offi cers, Communications Director, Communications Offi cers, Legal Counsels and certain members of the IT team. The insider register for CapMan Plc is held by Euroclear Finland Ltd. A list of CapMan Plc's public insiders and their holdings of shares and stock options is updated monthly on the Company's website.
CapMan Group's employees are not permitted to trade Company shares or stock options without the permission of the Group's Senior Legal Counsel. Trading is completely forbidden in the fourteen-day period prior to publication of the Company's fi nancial results. Members of the CapMan Public Market team are not permitted to trade in shares of small and mid-cap companies listed on the Nordic Exchanges. In addition, the Company's insider instructions recommend that no other persons employed by the Group trade in shares of small and mid-cap companies listed on the Nordic Exchanges.
CapMan Plc's Articles of Association state that the Company shall have one auditor (a chartered public accountant or auditor) approved by Finland's Central Chamber of Commerce. The auditor is elected by the AGM for a one-year term, which terminates at the closing of the AGM following the election. The Company complies with the provisions of Finland's Auditing Act in calculating the length of the auditor's term of offi ce. Under these provisions, in CapMan Plc's case, expiration of the prescribed time of the auditor's term of offi ce begins from the start of the fi nancial year following the entry into force of the new Auditing Act, which is the fi nancial year 1 January– 31 December 2008. CapMan Plc's auditors PricewaterhouseCoopers Oy, and lead auditor Jan Holmberg, Authorised Public Accountant, are responsible for guiding and coordinating the auditing work of the entire Group.
CapMan's Communications team serves the Company's various stakeholder groups by giving information about CapMan's strategy, operations, objectives and business environment in a way that gives a true and fair view of CapMan as an investment and as a partner.
SIJOITUSALUEET
CAPMAN AS A COMPANY CAPMAN FUNDS INVESTMENT AREAS INFORMATION CORPORATE SOCIAL RESPONSIBILITY AND PERSONNEL
CORPORATE GOVERNANCE AND FINANCIAL STATEMENTS SHAREHOLDER
CapMan Plc Annual Report 2008
Ari Tolppanen (b. 1953)
M.Sc. (Eng.) Chairman of the Board since 31 March 2005. Member of the Board since 1993, CapMan Senior Partner, CEO of CapMan Plc between 1989 – 31 March 2005. Joined CapMan in 1989.
Access Capital Partners S.A. (Chairman of the Supervisory Board), OneMed Group (Chairman), The New Black Oy, Å&R Carton AB.
CapMan Plc shares and options:
1,220,200 A shares 7,418,720 B shares
Teuvo Salminen (b. 1954)
M.Sc. (Econ.) Authorised Public Accountant Vice Chairman of the Board since 31 March 2005. Member of the Board since 2001, Deputy CEO of Pöyry Plc.
Key positions of trust: YIT Corporation, Holiday Club Resorts Oy (Chairman).
CapMan Plc shares and options: 20,000 B shares
Sari Baldauf (b. 1955)
M.Sc. (Bus. Adm.), D.Sc. (Tech.) h.c., D.Sc. (Econ. and Bus. Adm.) h.c. Member of the Board since 2007.
F-Secure Corporation, Hewlett-Packard Company, Sanoma Plc (Vice Chairman), International Youth Foundation, Savonlinna Opera Festival Ltd (Chairman), The Finnish Cultural Foundation (member of the Board of Trustees), Daimler AG (member of the Supervisory Board), Finnish Business and Policy Forum EVA, Connected Day Ltd (Chairman).
CapMan Plc shares and options: 60,000 B shares
Tapio Hintikka (b. 1942)
M.Sc. (Eng.) Member of the Board since 2004.
Key positions of trust: Aina Group Oyj (Chairman), Evli Bank Plc, Teleste Corporation (Chairman).
CapMan Plc shares and options:
–
Lennart Jacobsson (b. 1955)
BBA Member of the Board since 2002. CapMan Senior Partner. Joined CapMan in 1995.
Key positions of trust: Gammadata Holding AB, Xlent AB, Ascade AB, Locus AS.
CapMan Plc shares and options: 1,129,217 B shares
Conny Karlsson (b. 1955)
MBA Member of the Board since 2008.
Key positions of trust: Swedish Match AB (Chairman), SEB Investment Management AB (Chairman), Zodiak Television AB (Chairman), TeliaSonera AB, Carl Lamm AB.
CapMan Plc shares and options:
–
* The share and stock option ownership figures are as at 31 December 2008. CapMan Partners B.V., which is owned by the Senior Partners of CapMan, owned 3,000,000 A shares and 2,000,000 B shares. The Senior Partners of CapMan own the majority of their shares through corporations under control.
Heikki Westerlund (b. 1966)
M.Sc. (Econ.) CEO of CapMan Plc, Senior Partner. Joined CapMan in 1994.
Key positions of trust: Lumene Oy, The Finnish Venture Capital Association (FVCA) (Chairman).
CapMan Plc shares and options: 258,020 A shares 2,718,260 B shares
Kaisa Arovaara (b. 1970)
M.Sc. (Econ.) CFO of CapMan Plc, Head of Group Finances and Accounting, IT. Joined CapMan in 2006.
Key positions of trust:
–
CapMan Plc shares and options: 5,000 B shares 63,956 2003B options
Jerome Bouix (b. 1971)
M.Sc. (Econ.) Head of Investor Services, Senior Partner. Joined CapMan in 2000.
Key positions of trust: European Private Equity and Venture Capital Association (EVCA).
CapMan Plc shares and options: 50,000 2003B options
Markku Hietala (b. 1957)
LL.M., Deputy Judge Head of CapMan Real Estate, Managing Director of Realprojekti Oy, Senior Partner. Joined CapMan in 2005.
Key positions of trust: –
CapMan Plc shares and options: 181,818 B shares
Kai Jordahl (b. 1960)
M.Sc. (Econ.) Deputy Head of CapMan Buyout, Senior Partner. Joined CapMan in 2004.
Key positions of trust: Cardinal Foods AS (Chairman), Curato AS (Chairman), Barnebygg Gruppen (Chairman), OneMed Group Oy.
CapMan Plc shares and options: 50,000 2003B options
Hilkka-Maija Katajisto (b. 1967)
M.Sc. (Econ.) HR Director Joined CapMan in 2007.
Key positions of trust:
– CapMan Plc shares and options:
CapMan Plc shares and options: 796,564 A shares 1,982,520 B shares
Olli Liitola (b. 1957)
M.Sc. (Eng.) Deputy CEO of CapMan Plc, Senior Partner. Joined CapMan in 1991.
Key positions of trust: Pretax Oy, The New Black Oy.
CAPMAN AS A COMPANY CAPMAN FUNDS INVESTMENT AREAS INFORMATION CORPORATE SOCIAL RESPONSIBILITY AND PERSONNEL
CORPORATE GOVERNANCE AND FINANCIAL STATEMENTS
SHAREHOLDER
CapMan Plc Annual Report 2008
47
* The share and stock option ownership figures are as at 31 December 2008. CapMan Partners B.V., which is owned by the Senior Partners of CapMan, owned 3,000,000 A shares and 2,000,000 B shares. The Senior Partners of CapMan own the majority of their shares through corporations under control.
CapMan is an alternative asset manager, with operations in two business areas: CapMan Private Equity (manages funds that invest in portfolio companies) and CapMan Real Estate (manages funds that invest in real estate and also provides real estate consulting). The guiding principle for funds' investment activities is to directly and actively work towards increasing the value of investments. Information about each business area is reported in a separate segment in the Company's interim reports.
CapMan Plc's income is derived from management fees paid by funds, from carried interest received from funds, from returns on fund investments made from CapMan Plc's own balance sheet, and from income generated by real estate consulting. There can be considerable quarterly fl uctuations in carried interest as well as in the fair value of fund investments. For this reason CapMan's fi nancial performance should be analysed over a longer time span than the quarterly cycle.
CapMan's turnover in 2008 amounted to €37.1 million (€51.6 million in 2007). The main factors affecting turnover and result are described in more detail in their own sections.
The Group's operating profi t/loss totalled €–6.3 million (29.8). Management company business generated a profi t (operating profi t excluding the profi t impact of fund investments) of €7.1 million (23.6). Profi t/loss before taxes was €–10.7 million (32.7) and profi t/loss after taxes was €–8.1 million (24.2).
Parent company equity holders' share of profi t/loss was €–8.2 million (18.6), and the earnings per share based on it were €–10.2 cents (23.8 cents).
The quarterly breakdown of turnover and profi t, as well as turnover and profi t by segment, for 2008 are presented in the table in Section 2. Segment information of the Notes to the Financial Statements.
The amount of management fees grew compared to 2007 and amounted to €29.6 million (25.0). Establishment of the new €844.9 million CapMan Hotels RE real estate fund in January 2008 contributed to the increase in management fees throughout the year. The CapMan Public Market and CapMan Russia funds also started to pay management fees in 2008. In addition, a management fee of €1.8 million was received regressively from the CapMan Russia fund during the last quarter of the year.
Income from real estate consulting totalled €2.4 million (2.1). The aggregate total of management fees and income from real estate consulting was €32.0 million (27.1), and it covered the operating expenses of €29.8 million (27.7).
CapMan receives carried interest income from funds that have transferred to carry – i.e. repaid paid-in capital to their investors and paid an annual preferential return on the capital. In 2008 there was one exit from funds in carry. As a result of the exit from Staffpoint in May, carried interest income totalled €4.1 million. Carried interest in 2007 amounted to €23.6 million, which accrued primarily through the sale of CapMan Real Estate I fund's real estate portfolio.
The profi t impact of fund investments made from CapMan's own balance sheet was €–13.4 million (6.2). Of this, the realised returns from fund investments were €0.3 million (0.5) and fair value changes related to fund investments were €–13.7 million (5.7). The main factor affecting fair value changes was the general market development, but the weakening of the Swedish krona, and the new funds' expenses had also an impact. The valuation change of CapMan Equity VII's portfolio company Moventas contributed most to the fair value change in the comparison year. The negative development in the fourth quarter of 2008, altogether €–11.0 million, was mainly attributable to the general market situation and its impact on the multiples of portfolio companies' listed peers used in company valuations. The change in the fair value of CapMan's fund investments was –17.1% in the last quarter, and –20.6% from the beginning of 2008. The aggregate fair value of fund investments on 31 December 2008 amounted to €53.1 million (€44.2 million on 31 December 2007).
CapMan made new investments in its funds during 2008 amounting to €26.3 million (15.4). Most of these investments were made in the CapMan Buyout VIII and CapMan Hotels RE funds. CapMan's objective is to invest in its future funds 2–10% of their original capital depending on the funds' demand and CapMan's own investment capacity. In 2008 CapMan made a €5 million investment commitment to the CapMan Hotels RE fund, a €13.5 million investment commitment to the CapMan Russia fund, a €15 million investment commitment to the CapMan Public Market fund, and a €13 million investment commitment to the CapMan Buyout IX fund. The amount of remaining investment commitments at the end of 2008 was €77.2 million (56.0). The aggregate fair value of existing investments and remaining investment commitments on 31 December 2008 was €130.4 million (€100.2 million on 31 December 2007).
Investments in portfolio companies are valued at fair value in accordance with the International Private Equity and Venture Capital Valuation Guidelines (IPEVG), and real estate assets are valued in accordance with the value appraisements of external experts.
On 18 December 2008 CapMan Plc issued a €20.0 million hybrid bond to Finnish institutional investors. The issue will strengthen the Group's capital structure and, in line with Group strategy, fi nance commitments that CapMan Plc has made to the funds managed by the Group. The coupon rate for the bond is 11.25% p.a. and it is payable semi-annually.
The bond has no maturity date but the Company may call the bond after fi ve years. The size of the issue may be increased to at most €30 million.
CapMan's balance sheet total increased during 2008 to €138.0 million (€117.4 million on 31 December 2007). Non-current assets increased during 2008 to €99.8 million (74.9), mainly due to investments made in funds, to growth in receivables, and to an increase in goodwill of €6.5 million recognised for the Norum acquisition. Long-term receivables amounted to €24.5 million (16.2), of which €21.1 million (11.6) comprised loan receivables from the Maneq funds. In addition to CapMan Plc, CapMan personnel are investors in the Maneq funds, the expected returns from which are broadly in line with the return expectations for CapMan's own fund investments. Maneq funds pay market rate interest on loans they receive from CapMan Plc.
Current assets amounted to €38.2 million (42.4). Liquid assets (cash in hand and at banks, plus other fi nancial assets at fair value through profi t and loss) amounted to €25.3 million (34.6). Liquid assets include the hybrid bond issued on 18 December 2008. In the comparison period liquid assets were exceptionally high due to the carried interest income received from CapMan Real Estate I fund's sale of its real estate portfolio.
Equity in the balance sheet includes the hybrid bond issued on 18 December 2008, which has been entered in 'Other reserves'. At 31 December 2008 CapMan Plc had a bank fi nancing package of €60 million (16.0) available, of which €46 million (16.0) was in use. Interest-bearing liabilities increased as CapMan pursued its strategy of using debt fi nancing to fi nance some of its investments in funds. The amount of trade and other payables was €15.8 million (21.4). The Group's interestbearing net debts amounted to €20.7 million (–18.6).
CapMan Plc's receivables from the Maneq funds are specifi ed in more detail in the Notes to the Financial Statements in Section 32. Related party disclosures.
CapMan's equity ratio on 31 December 2008 was 50.3% (57.6% on 31 December 2007). Return on equity was 11.8% (38.9%) and return on investment was –6.3%
49
(44.2%). The target level for the equity ratio is at least 50% and for return on equity at least 25%.
| 31.12.2008 | 31.12.2007 | |
|---|---|---|
| Earnings per share, cents | –10.2 | 23.8 |
| Diluted, cents | –10.2 | 23.7 |
| Shareholders' equity per share, | ||
| cents* | 86.1 | 86.4 |
| Share issue adjusted number | ||
| of shares | 80 432 600 | 78 142 867 |
| Number of shares at end of period | 81 458 424 | 79 968 819 |
| Number of shares outstanding | 81 322 921 | 79 968 819 |
| Own shares held by the Company | ||
| at end of period | 135 503 | 0 |
| Return on equity, % | –11.8 | 38.9 |
| Return on investment, % | –6.3 | 44.2 |
| Equity ratio, % | 50.3 | 57.6 |
| Net gearing, % | 30.0 | –27.5 |
* In line with IFRS standards, the €20 million hybrid bond issued on 18 December 2008 is included in equity and also in calculating equity per share.
CapMan Plc's target is to distribute at least 50% of net profi t as dividends. Owing to the loss made in 2008 and the uncertainty attached to the current market situation, CapMan Plc's Board of Directors will propose to the Annual General Meeting to be held on 7 April 2009 in Helsinki that no dividend be paid to shareholders for 2008. The company's distributable funds amounted to €11.0 million on 31 December 2008 (€19.0 million on 31 December 2007).
On 26 May 2008 CapMan Plc signed an agreement to buy private equity house Norum from the company's senior management, DnB NOR Bank ASA and Sitra Management Ltd. The transaction was closed on 27 August 2008, on terms whereby 51% of the CapMan Russia fund's management company's and 100% of the advisory company's share capital and voting rights were transferred to CapMan Plc's ownership. The CapMan Russia fund, which is currently in the fundraising phase, was also transferred under CapMan's management. The fund makes investments in mid-size companies operating in Russia, and its size is currently €118.1 million. CapMan Plc's own commitment to the fund is €13.5 million.
The purchase price of the shares was approx. €3.4 million. Some €1 million of the purchase price was paid in cash and the remaining €2.4 million through a direct share issue to the sellers. The value of each B share in the transaction was €2.43 corresponding to the volume weighted average trading price of CapMan B shares between 22 April 2008 and 21 May 2008. CapMan Plc issued a total of 982,539 new CapMan Plc B shares, the three-phase lock-up for which will end on 25 May 2011. The purchase price of the shares will be adjusted on the basis of the fi nal size of CapMan Russia fund.
CapMan Plc has the right to buy the remaining 49% of Norum shares by July 2012 at the latest. The sellers have the right to sell their remaining Norum shares to CapMan at any time. The payable transaction price per share will be the same as the fundraising adjusted transaction price in the fi rst phase of the transaction.
Expanding operations into Russia is an important strategic step for CapMan, as the Russian market has considerable potential for long-term growth. Following the transaction 12 persons transferred to CapMan Group. The CapMan Russia team is headed by CapMan's Senior Partner Mr Petri Saavalainen, while Mr Hans Christian Dall Nygård, the former Managing Director of Norum and now a Partner in CapMan, is responsible for all the investment activities of CapMan Russia. CapMan Russia is included in the CapMan Private Equity business area in CapMan Plc's fi nancial reporting. As a subsidiary, Norum is fully consolidated in CapMan Group's fi gures, including the goodwill arising from the transaction. The Norum acquisition will have no signifi cant impact on CapMan Plc's result over the next few years.
On 11 July 2008 CapMan Plc established a new equity fund, CapMan Public Market. The size of the fund is at present €106 million, including CapMan Plc's commitment of €15 million. The CapMan Public Market fund invests in Nordic listed companies that have a market capitalisation of €100–1,000 million, and it utilises private equity style value creation methods in its operations. The fund's fundraising continues.
The establishment of the fund was the start of CapMan's sixth investment area, CapMan Public Market, which is headed by CapMan's Senior Partner Mr Jukka Ruuska. CapMan Public Market is included in the CapMan Private Equity business area in CapMan Plc's fi nancial reporting. CapMan Public Market's operations have considerable potential for long-term growth, but establishment of the investment area will have no signifi cant impact on CapMan Plc's result over the next few years.
On 18 January 2008 CapMan Plc established a new private equity fund focusing on hotel real estate, CapMan Hotels RE Ky. The size of the hotel fund at the end of 2008 was €844.9 million, and the fund's fundraising is ongoing. The fund acquired a €805 million hotel portfolio of 39 properties from Northern European Properties Ltd in conjunction with its establishment. Seven professionals in the hotel business transferred to CapMan Group through the transaction. The management company of CapMan Hotels RE Ky is CapMan Hotels RE Oy, of which CapMan Plc owns 80%. Establishment of the fund has had a slightly positive effect on CapMan Plc's result in 2008 through the management fees paid by the fund.
On 22 December 2008 CapMan Plc established its
| Fund | Established | Capital | Capital | CapMan Group's | CapMan Group's |
|---|---|---|---|---|---|
| 31 Dec 07 | 31 Dec 08 | commitment | carried interest | ||
| MEUR | MEUR | MEUR | (net*) | ||
| CapMan Technology 2007 | 9.2.2007 | 140.3 | 142.3 | 15.0 | 10% |
| CapMan Hotels RE Ky | 18.1.2008 | 0.0 | 844.9 | 5.0 | 12% |
| CapMan Public Market Fund | 11.7.2008 | 0.0 | 106.0 | 15.0 | 10% |
| CapMan Russia Fund** | 27.8.2008 | 56.0 | 118.1 | 13.5 | n/a |
| CapMan Buyout IX | 22.12.2008 | 0.0 | 203.0 | 13.0 | 10% |
* CapMan Group's carried interest taking into account the carried interest due to management companies' other owners and investment teams after the fund has transferred into carry. Carried interest = share of the fund's cash flows after it has transferred into carry.
** The CapMan Russia fund was transferred to CapMan's management on 27 August 2008 on finalisation of the Norum acquisition. CapMan Plc's share of carried interest will depend on the final size of the fund and will be announced in conjunction with notification of the final fund size.
ninth buyout fund, CapMan Buyout IX. The size of the fund after the fi rst closing was €203 million, including CapMan Plc's own investment commitment of €13 million. The fund will make investments in mid-sized Nordic buyouts, and its fundraising is ongoing. The fund will start paying a management fee to CapMan as from its fi rst investment.
Capital under management refers to funds' remaining investment capacity and capital already invested at acquisition cost. CapMan's target is to increase the capital under management by an average 15% per year. As a result of the establishment of the CapMan Hotels RE, CapMan Public Market and CapMan Buyout IX funds, and of the CapMan Russia fund being transferred to CapMan's management, the capital under management grew in 2008 by some 56% from €2,190.0 million to €3,407.5 million. At the end of 2008, €1,767.0 million (1,394.3) was in funds making investments in portfolio companies and €1,640.5 million (795.7) in real estate funds. Capital was raised during 2008 as follows.
Capital under management was reduced by exits made during 2008, amounting to €39.4 million at acquisition cost. The Nordic Private Equity Partners II fund was terminated owing to its exit during the year from its last remaining investment.
Funds raised during the review period
The companies included in the CapMan Plc Group are presented in the Notes to the Financial Statements in Section 32. Related party disclosures.
CapMan Plc's Board of Directors at the end of 2008 comprised: Ari Tolppanen (Chairman), Teuvo Salminen (Vice Chairman), Sari Baldauf, Tapio Hintikka, Lennart Jacobsson and Conny Karlsson. Heikki Westerlund was CapMan Plc's CEO in 2008 and Olli Liitola was his deputy.
More details about the election, tasks and remuneration of CapMan Plc's Board of Directors, CEO and Deputy CEO and Management Group are given in the Corporate Governance section on pages 42–44 of the Company's 2008 Annual Report. Background information about the Board of Directors and the Management Group, as well as their holdings of shares and stock options, is given on pages 45–47 of the 2008 Annual Report.
On 31 December 2008 CapMan employed altogether 141 people (110 people on 31 December 2007), of whom 102 (86) worked in Finland and the remainder worked in other Nordic countries or Russia. In particular, the establishment of the new hotel fund and the Norum acquisition both contributed to growth in the number of personnel. A breakdown of personnel by country and by team is presented in the Notes to the Financial Statements in Section 5. Employee benefi t expenses.
There were no changes in CapMan Plc's share capital during 2008. Share capital on 31 December 2008 was €771,586.98 (€771,586.98 on 30 December 2007). The number of CapMan Plc's listed B shares increased during the year by altogether 1,489,605 shares, after a total of 507,066 B shares were subscribed for with 2003A options and 982,539 new B shares were issued in connection with the Norum acquisition. The number of B shares on 31 December 2008 was 75,458,424, and the number of unlisted A shares 6,000,000. A shares (10 votes) carry entitlement to 44.3% and B shares (1 vote) 55.7% of the voting rights in the Company. A shares are owned by CapMan Plc's current Senior Partners. A and B shares carry the same dividend entitlement. CapMan Plc's shares are included in the book-entries securities system.
CapMan Plc had 4,514 shareholders on 31 December 2008 (4,489 on 31 December 2007). The biggest change in the Company's ownership during 2008 was that following the Norum transaction Norum's management became shareholders of CapMan Plc with a combined holding of 1.21% in the Company. No fl agging notices were issued during 2008.
As at 31 December 2008, the members of the Board of Directors, the CEO and the Deputy CEO owned directly and through corporations under control a total of 15,603,501 A and B shares, representing 19.2% of the total shares and 26.6% of the total votes. In addition, two members of the Board of Directors, the CEO and the Deputy CEO are shareholders in CapMan Partners B.V., which owns 3,000,000 CapMan Plc A shares and 2,000,000 B shares.
The ownership of CapMan Plc by sector classifi cation and by size of shareholding, the Company's largest shareholders, nominee registered shares, and the redemption clauses applicable to the Company's shares are described in the Notes to the Financial Statements in Section 23. Share capital and shares. The impact on the number of shares and votes of stock options issued by the Company is specifi ed in Section 31. Share-based payments.
CapMan Plc's Board of Directors decided on 8 August 2008 to start purchases of CapMan Plc B shares based on the authorization granted by the Annual General Meeting on 27 March 2008. During the period 18 August –15 October 2008 a total of 135,503 was repurchased. The authorization to repurchase CapMan Plc B shares applies to a maximum 8,000,000 shares and is valid until 30 June 2009. The authorized maximum of 8,000,000 shares would carry entitlement to 5.9% of the Company's total voting rights.
At the end of 2008 CapMan Plc had two stock option programs as part of the incentive and commitment program for the key personnel: Option program 2003 and Option program 2008. The 2003B options are traded on the options list of the OMX Nordic Exchange in Helsinki. A total of 625,000 B shares can still be subscribed for with 2003B options, for which the subscription period ends on 31 October 2009. No shares were subscribed for with 2003B options in 2008. At the end of October 2008, a total of 507,066 B shares were subscribed for with 2003A options, which expired at the end of October 2008. Receivables from shares subscribed for with options are entered in the Company's invested unrestricted shareholders' equity.
CapMan Plc's Annual General Meeting held on 27 March 2008 approved the issue of stock options to key personnel under the Option program 2008. The maximum total number of stock options issued within the Option program 2008 will be 4,270,000, which will carry entitlement to subscribe for a maximum total of 4,270,000 new B shares. The subscription period for 2008A options starts on 1 May 2011 and for 2008B options on 1 May 2012.
Stock option programs are described in more detail in the Notes to the Financial Statements in Section 31. Share-based payments.
The exceptional market climate and the steep decline in global stock markets in 2008 were also refl ected in the trading volumes and prices of CapMan Plc shares. On 31 December 2008 the closing price of CapMan Plc B shares was €0.95 (€3.25 on 31 December 2007). The average price during the year was €2.09 (3.49). The highest price was €3.40 (4.07) and the lowest €0.79 (2.86). The trading of the Company's shares declined appreciably with respect to 2007, in terms of both volume and value. Altogether 14.8 (30.9) million CapMan Plc B shares were traded in 2008 for a total of €29.6 million (107.0). The number of shares traded accounted for 20.6% of all B shares. The average daily volume of trading was approx. 58,470 shares, with a value of approx. €117,040.
The market capitalisation of CapMan Plc B shares on 31 December 2008 was €71.7 million (240.4). The market capitalisation of all shares, in which the A shares are valued at the closing price of B shares for the review period, was €77.4 million (259.9). At the end of 2008, CapMan Plc was listed in the OMX Helsinki Mid Cap index.
By decision of the Annual General Meeting, CapMan Plc's Board of Directors is authorised to decide on a share issue as well as to issue stock options and other entitlements to shares, and is also authorised to purchase the Company's own shares and to accept them as a pledge. The authorisations are valid until 30 June 2009, and the terms and conditions attached to them were specifi ed in more detail in the Stock Exchange release issued on 27 March 2008.
On 9 October 2008 CapMan Plc announced that the sale of Access Capital Partners (Access), fi rst announced on 25 July 2008, was cancelled after the purchaser announced that its lender bank had decided to withdraw the pre-agreed fi nancing from the transaction, invoking force majeure caused by the general fi nancial crisis. CapMan Plc continues as a 35% minority shareholder in Access after the cancellation of the deal. More information on Access can be found on page 22.
CapMan Plc's management company business is profi table, but the prevailing market climate has increased the uncertainty attached to forecasting the Company's fi nancial performance. The combination of an almost total standstill in the buyout market, a credit squeeze and a sharp decline in fair values of investment targets have appreciably weakened exit opportunities. This can result in postponement of exits, and consequently therefore of carried interest income. In the
51
real estate market, the economic climate can impact tenants' operations, and thereby the vacancy rate and rental income of investment properties. CapMan believes that fundraising also will continue to be challenging, which might affect the end result of ongoing fundraising activities and, through that, management fees over the next few years. CapMan Plc's fi nancial position was strengthened by issuing a €20 million hybrid bond in December.
The risks attached to CapMan Plc's operations and the company's risk management are described in more detail in pages 42–44 of the 2008 Annual Report. Risk management is also described in the Notes to the Financial Statements in Section 33. Financial risk management.
The prospects for growth in the demand for alternative assets have remained good over the long term. The fi nancial crisis and the steep decline in market valuations of other asset classes, however, are clearly slowing the growth in the alternative asset class. Private equity has consolidated its position in fi nancing M&A and growth, and continues to focus typically on consolidation in various sectors, family successions, privatisation of public services and functions, and the commercialisation of R&D in the technology and life science sectors. Increased entrepreneurial activity has also boosted growth. Real estate funds, for their part, have gained an established share of institutional investors' investment allocations.
The CapMan funds investing in portfolio companies will continue to implement their investment strategies. The deep crisis in the debt market has been refl ected, however, in CapMan's operating area also. At present the M&A market is still waiting for the positive impact of banking sector bail-out plans to materialise. The banks have focused their lending on large corporations in particular which has delayed the positive impact on other companies. We believe that bank fi nancing for buyouts, mergers & acquisitions and real estate investments will gradually recover during 2009. The market looks promising for new investment targets both in the Nordic countries and Russia. The number of new potential portfolio companies has remained at a good level especially for the Public Market and Russia funds. The exit market has at present come to a standstill and the impact of the crisis is visible in lower prices.
The slowdown in growth of the real economy has been seen in our portfolio companies, especially in those sectors that are linked, for instance, to consumer demand or the automobile industry. Generally our portfolio companies' development has been favourable, but forecasting for 2009 is diffi cult. A steep decline in listed market valuations was refl ected in the fair value of our investments. We plan to keep enough reserves in our funds to support our companies' growth and fi nancing in this market situation. Long-term cooperation with Nordic banks is particularly important to us.
In the real estate sector, instability in debt markets has appreciably depressed the volume of real estate transactions. Tighter bank credit will continue to affect both competition and the valuation levels in the real estate sector, and we expect to see increased use of equity for the fi nancing of real estate transactions. Demand for prime real estate is still at a good level and the changed market situation could well open up good investment opportunities. The challenging market has boosted demand for real estate consulting. On the leasing market, the occupancy rate and demand for offi ce and retail premises remain at a good level. Vacancy rates for offi ce premises, however, are expected to rise in the Helsinki metropolitan area.
All CapMan's investment teams are in a good position and have adequate resources to implement their investment strategies in the Nordic countries and Russia. The funds investing in portfolio companies have some €875 million for making new and follow-on investments, while the real estate funds have approx. a €320 million investment capacity for identifying new investment targets and developing the existing portfolio.
CapMan's strategy is to exploit growth opportunities within the alternative asset class. The projects for expanding geographically into Russia and for establishing a fund utilising private equity style value creation methods in public markets have now been implemented, and these funds are now in the fundraising phase. A new buyout fund was established in December and its fundraising is also ongoing. We will focus on fully exploiting our existing business portfolio, and we have no plans to expand it in the near future. CapMan will invest in its future funds 2–10% of their original capital depending on the fund's demand and CapMan's own investment capacity. As one element in preparing for the continuation of the weak exit market CapMan is exploring possibilities for incorporating its own fund investments. This would clarify the difference between CapMan's management company business and its own investment operations and enable having third party investors in the possible new vehicle to be formed. CapMan strengthened its fi nancial position in December by issuing a €20 million hybrid bond. The size of the bond can be increased to €30 million.
Management fees and income from real estate consulting will cover CapMan's fi xed expenses in 2009. Income from carried interest will depend on developments in the exit market. Despite the slowdown in the exit market, the funds still have portfolio companies ready to enter the exit process. We expect the CapMan Equity VII A, B and Sweden funds as well as the Finnmezzanine III A and B funds to transfer to carry during 2009–2010. The unstable market climate and the sharp decline in listed peers' valuations may, however, be refl ected as a decline in the fair value of CapMan Plc's fund investments in 2009. The Group's overall result for 2009 will mainly depend on whether new exits are made by funds already generating carried interest, and on how the value of investments develops in those funds in which CapMan is a substantial investor.
| Consolidated Income Statement (IFRS) | Consolidated Balance Sheet (IFRS) | ||||||
|---|---|---|---|---|---|---|---|
| € ('000) | Note | 1.1.–31.12.2008 | 1.1.–31.12.2007 | € ('000) | Note | 31.12.2008 | 31.12.2007 |
| Turnover | 2 | 37,126 | 51,572 | ASSETS | |||
| Other operating income | 4 | 108 | 236 | Non-current assets | |||
| Employee benefit expenses | 5 | –16,867 | –15,381 | Tangible assets | 13 | 1,064 | 819 |
| Depreciation | 6 | –635 | –581 | Goodwill | 14 | 11,762 | 4,845 |
| Other operating expenses | 7 | –12,321 | –11,783 | Other intangible assets | 15 | 3,229 | 1,001 |
| Fair value gains/losses of investments | 8 | –13,709 | 5,696 | Investments in associated companies | 16 | 1,575 | 3,407 |
| Investments at fair value through profit and loss | 17 | ||||||
| Operating profit/loss | –6,298 | 29,759 | Investments in funds | 53,147 | 44,230 | ||
| Other financial assets | 828 | 878 | |||||
| Finance income | 9 | 2,451 | 2,014 | Receivables | 18 | 24,451 | 16,191 |
| Finance costs | 9 | –4,445 | –944 | Deferred tax assets | 19 | 3,707 | 3,547 |
| Share of associated companies' result | 10 | –2,378 | 1,915 | 99,763 | 74,918 | ||
| Current assets | |||||||
| Profit/loss before taxes | –10,670 | 32,744 | Trade and other receivables | 20 | 12,965 | 7,837 | |
| Income taxes | 11 | 2,612 | –8,509 | Other financial assets at fair value | 21 | 942 | 14,857 |
| Cash and bank | 22 | 24,330 | 19,741 | ||||
| Profit/loss for the financial year | –8,058 | 24,235 | 38,237 | 42,435 | |||
| Attributable to: | Total assets | 138,000 | 117,353 | ||||
| Equity holders of the Company | –8,209 | 18,620 | EQUITY AND LIABILITIES | ||||
| Minority interest | 151 | 5,615 | |||||
| Capital attributable to the Company's equity holders | 23 | ||||||
| Earnings per share for profit/loss attributable to the equity holders of the Company: | Share capital | 772 | 772 | ||||
| Earnings per share (basic), cents | 12 | –10.2 | 23.8 | Share premium account | 38,968 | 38,968 | |
| Earnings per share (diluted), cents | 12 | –10.2 | 23.7 | Other reserves | 25,829 | 2,961 | |
| Translation difference | –226 | 133 | |||||
| The Notes are an integral part of the Consolidated Financial Statements. | Retained earnings | 3,585 | 24,676 | ||||
| 68,928 | 67,510 | ||||||
| Minority interest | 221 | 34 | |||||
| Total equity | 69,149 | 67,544 | |||||
| Non-current liabilities | |||||||
| Deferred tax liabilities | 19 | 284 | 3,734 | ||||
| Interest-bearing loans and borrowings | 24 | 43,125 | 16,000 | ||||
| Other liabilities | 25, 26 | 6,600 | 701 | ||||
| 50,009 | 20,435 | ||||||
| Current liabilities | |||||||
| Trade and other payables | 27 | 15,751 | 21,356 | ||||
| Interest-bearing loans and borrowings | 28 | 2,875 | 0 |
The Notes are an integral part of the Consolidated Financial Statements.
Current income tax liabilities 216 8,018
Total liabilities 68,851 49,809 Total equity and liabilities 138,000 117,353
18,842 29,374
53
| Attributable to the equity holders of the Company | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| € ('000) | capital Share |
premium account Share |
shareholders' unrestricted Invested equity |
reserves Other |
Translation difference |
Retained earnings |
Total | Minority interest |
equity Total |
| Equity on 31 December 2006 | 772 | 38,968 | 0 | 1,218 | 316 | 15,074 | 56,348 | 599 | 56,947 |
| Share subscriptions with options Translation difference |
1,726 | –183 | |||||||
| Options Profit/loss for the financial year Dividends paid Other changes |
17 | 223 18,620 –9,259 18 |
5,615 –6,222 42 |
||||||
| Equity on 31 December 2007 | 772 | 38,968 | 1,726 | 1,235 | 133 | 24,676 | 67,510 | 34 | 67,544 |
| € ('000) | capital Share |
premium account Share |
shareholders' unrestricted Invested equity |
reserves Other |
Translation difference |
Retained earnings |
Total | Minority interest |
equity Total |
| Equity on 31 December 2007 | 772 | 38,968 | 1,726 | 1,235 | 133 | 24,676 | 67,510 | 34 | 67,544 |
| Share subscriptions with options Translation difference Options |
639 | 112 | –359 | –87 | |||||
| Share issues Own shares purchased Profit/loss for the financial year Dividends paid |
2,392 –275 |
–8,209 –12,795 |
151 | ||||||
| Hybrid bond Other changes |
20,000 | 36 | |||||||
| Equity on 31 December 2008 | 772 | 38,968 | 24,482 | 1,347 | –226 | 3,585 | 68,928 | 221 | 69,149 |
The Notes are an integral part of the Consolidated Financial Statements.
| € ('000) | 1.1.–31.12.2008 | 1.1.–31.12.2007 |
|---|---|---|
| Cash flow from operations | ||
| Profit/loss for the financial year | –8,058 | 24,235 |
| Adjustments | 16,526 | 239 |
| Change in working capital: | ||
| Change in current non-interest-bearing receivables | –5,260 | –1,923 |
| Change in current trade payables and other non-interest-bearing liabilities | 696 | 7,585 |
| Interest paid | –2,473 | –704 |
| Interest received | 1,167 | 918 |
| Dividends received | 446 | 812 |
| Taxes paid | –9,228 | –2,137 |
| Cash flow from operations | –6,184 | 29,025 |
| Cash flow from investments | ||
| Investments in tangible and intangible assets | –1,565 | –1,018 |
| Investments in funds and other placements | –22,603 | –5,896 |
| Proceeds from sale of tangible assets | 0 | 91 |
| Cash flow from investments | –24,168 | –6,823 |
| Cash flow from financing activities | ||
| Share issue | 639 | 1,726 |
| Own shares purchased | –275 | 0 |
| Long-term loan receivables granted | –14,489 | –9,111 |
| Receivables from long-term receivables | 3,740 | 6,552 |
| Issued hybrid bond | 20,000 | 0 |
| Proceeds from borrowings | 61,000 | 16,000 |
| Repayment of long-term loan | –31,000 | –10,000 |
| Dividends paid | –18,589 | –9,687 |
| Other financial assets at fair value | 13,915 | –12,078 |
| Cash flow from financing activities | 34,941 | –16,598 |
| Change in cash and cash equivalents | 4,589 | 5,604 |
| Cash and cash equivalents at start of year | 19,741 | 14,137 |
| Cash and cash equivalents at end of year | 24,330 | 19,741 |
The Notes are an integral part of the Consolidated Financial Statements.
CapMan's core business is private equity fund management and advisory services. The funds under management invest mainly in unquoted Nordic companies or real estate assets.
The parent company of the Group is CapMan Plc. The parent company's domicile is Helsinki and its registered offi ce address is Korkeavuorenkatu 32, 00130 Helsinki, Finland.
The Consolidated Financial Statements may be viewed online at www.capman.com, or a hard copy is available from the offi ce of the parent company.
The Consolidated Financial Statements for 2008 have been approved for issue by the Board of Directors of CapMan Plc on 28 January 2009. Pursuant to the Finnish Companies Act, shareholders may adopt or reject the Company's fi nancial statements, and make decisions on amendments to the fi nancial statements, at the Annual General Meeting.
The Group's fi nancial statements for 2008 have been prepared in accordance with International Financial Reporting Standards (IFRS) in conformity with the IAS and IFRS standards and SIC and IFRIC interpretations in force at 31 December 2008. The appendices to the Consolidated Financial Statements have been prepared in accordance with Finnish accounting standards and IFRS, as adopted by the European Union (EU). The information in the Consolidated Financial Statements is presented in thousands of euros.
The preparation of fi nancial statements in conformity with IFRS requires the management of the Group, in applying the accounting principles, to make estimates and assumptions and these are presented in more detail
The Consolidated Financial Statements include the accounts of all Group companies and associated companies, excluding inoperative subsidiaries. Subsidiaries are enterprises in which the Group has the control (the Group acquires or has the power over more than one half of the voting rights or it has the power to govern the operating and fi nancial policies of the other enterprise as a result of a statute). Subsidiaries are consolidated from the date on which control of the net assets and operations of the enterprise is effectively transferred to CapMan for acquired subsidiaries, and to the date when CapMan's control has expired for divested subsidiaries. Subsidiaries have been consolidated to the Group fi nancial statements in accordance with the purchase method of accounting. For subsidiaries acquired on or subsequent to 1 January 2004, the excess acquisition cost over the Group's interest in the fair value of the net assets acquired at the acquisition date is recognised as goodwill. All intercompany transactions, intercompany receivables and liabilities as well as intra-Group dividends have been eliminated.
Minority interests are presented separately in the income statement and within equity in the consolidated balance sheet. A share of accumulated loss is separated only to the extent the defi cit is covered by minority shareholdings.
The associated companies have been consolidated in accordance with the equity method. An associated company is an entity in which the Group has signifi cant infl uence (more than 20% of the voting rights), but does not have the control. Under the equity method, the investment in the associate 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 in value. The Group's share (based on its holding) of the associated companies' net profi t for the fi nancial period has been reported as a separate item in the income statement after operating profi t/loss.
The result and fi nancial 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 at the date of the transactions; in practice a reasonable 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 profi t and for fi nancial items are recorded in fi nance income and costs. The Group's foreign currency items have not been hedged.
The fi nancial statements of foreign subsidiaries have been translated into euros at the average year-end exchange rate. The same exchange rate has been used in translating the income statement and the balance sheet, as the change caused by exchange rate fl uctuations has been assumed to be minimal. Translation differences caused by changes in exchange rates for the cumulative shareholders' equity of foreign subsidiaries have been recognised in shareholders' equity.
When a subsidiary is wholly or partially divested, the cumulative amount of the translation differences is recognised in the income statement under profi t or loss.
As of 1 January 2004, the goodwill arising on the acquisition of a foreign operation and any fair value adjustments to the carrying amounts of assets and liabilities arising on the acquisition of that foreign operation have been treated as part of the assets and liabilities of the foreign operation and translated into euros at the year-end exchange rate. For acquisitions before 1 January 2004 the goodwill and fair value adjustments have been recorded in euros.
Tangible non-current assets have been reported in the balance sheet at their acquisition value less depreciation according to plan. Assets are amortised on a straight-line basis over their estimated useful lives. The estimated useful lives are:
| Machinery and equipment | 4–5 years |
|---|---|
| Other long-term expenditure | 5 years |
The residual values and useful lives of assets are reviewed at each balance sheet date and adjusted to refl ect changes in the expected economic benefi ts as necessary.
Goodwill acquired in a business combination is initially measured at cost being the excess of the cost of the acquired enterprise (subsidiary or associated company) over the Group's interest in the net fair value of the identifi able assets, liabilities and contingent liabilities at the date of acquisition. Goodwill arising from acquisitions prior to 1 January 2004 is recognised as the carrying value at cost in accordance with accounting principles applicable at the date of acquisition. Goodwill is measured as the original acquisition cost less accumulated impairment. Impairment of goodwill is tested annually and write-offs are not made under goodwill. For this reason goodwill is directed to cash-generating units or, in the case of an associated company, goodwill is included in the company's acquisition cost.
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 it is probable that the future economic benefi ts that are attributable to the asset will fl ow to the Group. Intangible assets acquired in business combinations that are classifi ed as acquisitions are recognised in the balance sheet separate to goodwill, provided that they meet the defi nition of intangible assets and the cost of the assets can be measured reliably. Intangible assets are expensed in the income statement by the straight-line method over their useful lives (maximum ten years). The carrying amount is assessed for impairment whenever there is an indication that the intangible asset may be impaired.
The Group reviews all assets for indications that the value of an asset may be impaired at each balance sheet date. If such indications 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 identifi able group of assets that is largely independent of other units and cash infl ows from other assets. The recoverable amount is the fair value of an asset less costs to sell or value in use. The value in use refers to the expected future net cash fl ow projections, 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 refl ects current market assessments of the time value of money and the risks specifi c to the asset. Impairment is recorded in the income statement as an expense. The recoverable amount for fi nancial assets is either the fair value or the present value of expected future cash fl ows discounted by the initial effective interest rate.
An impairment loss is recognised whenever the recoverable amount of the asset is below the carrying amount, and it is recognised in the income statement immediately. An impairment loss of a cash-generating unit is fi rst allocated to reduce the carrying amount of any goodwill allocated to the cash-generating 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 is not more than 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 frequently if there is an indication that goodwill may be impaired, due to events and circumstances that may increase the probability of impairment.
The Group's fi nancial instruments have been classifi ed according to IAS 39 Financial Instruments: Recognition and Measurement into the following categories:
Classifi cation of fi nancial assets is made on the basis of the purpose of the acquisition of fi nancial instruments at the time of initial recognition. Transaction costs have been reported in the initial cost of fi nancial assets, excluding items valued at fair value through profi t and loss. All purchases and sales of fi nancial instruments are recognised on the trade date. An asset is eligible for derecognition and removed from the balance sheet when the Group has transferred the contractual rights to receive the cash fl ows or when it has substantially transferred all of the risks and rewards of ownership of the asset outside of the Group.
The fi nancial assets at fair value through profi t and loss group has been divided into two subcategories:
Financial assets are classifi ed as held for trading if they are acquired principally for the purpose of generating a profi t from short-term fl uctuations in price. Financial assets held for trading and fi nancial assets with a maturity less than 12 months are included in current assets. The fair value of investments that are actively traded in organised fi nancial markets is determined by reference to quoted market bid prices at the close of business on the balance sheet date. Both unrealised and realised gains and losses caused by changes in fair value are reported in the income statement for the fi nancial period in which they arise.
In accordance with IAS 39 the receivables carried at amortised cost accrue interest income at the discount rate used to measure impairment after impairment has been recognised. An impairment loss of an equity investment that has been classifi ed as an available-forsale fi nancial asset is not reversed through profi t and loss.
Available-for-sale fi nancial assets are measured at fair value using market values at the balance sheet date. In case there is no market price available at the balance sheet date, the fair value is determined using recent arm's length transactions, reference to the current market value of another instrument that is substantially the same, or discounted cash fl ow analysis. Most of the available-for-sale fi nancial assets are fund investments, for which fair value is calculated by using the guidelines of the International Private Equity and Venture Capital Valuation Guidelines (IPEVG) and, taking into account the valuation principles in IAS 39 for the fair value of investments that are not quoted in an active market, using multiples based on the current performance level of the portfolio companies. Investments for which fair value cannot be reliably estimated are valued at cost less any permanent impairment losses. IPEVG are generally used for fair value valuation in the private equity industry, and the guidelines have been prepared in consideration of IFRS requirements.
Loans and other receivables include the Group's fi nancial assets arising from the transfer of cash or services to a debtor. Loans and receivables are non-derivative fi nancial assets with fi xed or determinable payments that are not quoted in an active market. Loans and receivables are reported either in current fi nancial assets or, if the maturity exceeds 12 months, in non-current fi nancial assets. These investments are measured at amortised cost using the effective interest method in case of signifi cant deviation from the nominal rate. Impairment is recognised if there is objective evidence that the value of the item in question has been impaired at the balance sheet date. Impairment testing of loan receivables from the funds takes into consideration the fund's fair value, life cycle phase and expected returns when all investments are realised.
Trade receivables are carried at original invoice amount less an allowance for any uncollectible amounts. Provision is made when there is objective evidence that the Group will not be able to collect the debts under the original terms and conditions. The Placement Agent Fee relating to fundraising has been amortised over fi ve years.
Cash and short-term deposits in the balance sheet comprise cash in banks and in hand as well as liquid short-term deposits. Cash assets have a maximum maturity of three months. Short-term investments to third party funds have been categorised as fi nancial assets at fair value through profi t and loss, and are presented in that category.
Financial liabilities are initially recognised at fair value. Transaction costs are reported in the initial book value of the fi nancial liability. After initial recognition all fi nancial liabilities are subsequently measured at amortised cost using the effective interest method. Financial liabilities are reported in non-current and current liabilities.
Hybrid bonds are reported in shareholders' equity due to the judicial structure of the bonds. Hybrid bonds are classifi ed as shareholders' equity, as the bonds have a lower priority ranking than all other debts and no specifi ed maturity date. Hybrid issuance costs are entered directly as an expense. Hybrid bonds are valued at nominal value, as there is no maturity date.
All of the Group's leasing arrangements are classifi ed as operating leases, as the risks and benefi ts of ownership remain with the lessor. Operating lease payments are recognised as an expense in the income statement on a straight-line basis. CapMan Group does not act as a lessor.
Provisions are recognised in case the Group has a present obligation (legal or constructive) as a result of a past event, and it is probable that an outfl ow will be required to settle the obligation and a reliable estimate of the outfl ow can be made.
The Group has defi ned contribution pension plans in accordance with the local regulations and practices of its business domiciles. Payments to defi ned contribution pension plans are charged to the income statement in the fi nancial period to which they relate. The pensions have been arranged through insurance policies of external pension institutions.
56
The fair value of stock options is assessed at the grant date and expensed in even instalments in the income statement over the vesting period of the rights. The fair value is determined using the Black-Scholes pricing model.
The Group offers a sabbatical program for key personnel based on the number of years of full-time work for the Company. The liability of the sabbatical has been estimated and recorded on the basis of probability.
Revenue is recognised to the extent that it is probable that the economic benefi ts will fl ow to the Group and the amount of revenue can be reliably measured. The following specifi c recognition criteria must also be met before revenue is recognised:
has been returned is recognised in the income statement under returns on fund investments.
Tax expenses in the consolidated income statement comprise taxes on taxable income and changes in deferred taxes for the fi nancial period. Taxes on taxable income for the fi nancial 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 fi nancial periods, if applicable. The Group's taxes have been recognised during the fi nancial year using the average expected tax rate.
Deferred taxes are calculated on all 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 profi t 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 amortisation of goodwill. Deferred taxes have been measured at the statutory tax rates that have been enacted by the balance sheet date.
– Amended IAS 39 and IFRS 7 Reclassifi cation of Financial Assets. The amendment permits an entity to reclassify non-derivative fi nancial assets out of the held for trading category and from the available-forsale category in particular circumstances and with certain criteria. In case of reclassifi cation additional disclosures are required. The amendment is effective from 1 July 2008. The Group has not applied the treatment allowed by the amendment during the fi nancial year.
The IASB has published the following standards and
interpretations whose application will be mandatory in 2009 or later. The Group has not early adopted these standards, but will adopt them in later periods.
The following standards and interpretations will be adopted by the Group in 2009:
also specifi es that all cancellations, whether by the entity or by other parties, should receive the same accounting treatment. The amendment is not expected to have an impact on the Group's fi nancial statements.
CAPMAN AS A COMPANY CAPMAN FUNDS INVESTMENT AREAS INFORMATION CORPORATE SOCIAL RESPONSIBILITY AND PERSONNEL
CapMan Plc Group Financial Statements 2008
57
contributions. IFRIC 14 will not have an effect on the Group's fi nancial statements.
The IASB published changes to 34 standards in May 2008 as part of the IFRS Annual Improvements Project. The following presentation includes those changes that the Group will adopt in 2009 and where the management assesses that the change may have an impact on the Group's fi nancial statements:
the asset to inventories when the asset becomes held for sale. A consequential amendment to IAS 7 states that cash fl ows arising from purchase, rental and sale of those assets are classifi ed as cash fl ows from operating activities. Management is assessing the impact of this amendment on the fi nancial statements of the Group.*
– Amended IAS 28 Investments in Associates (and consequential amendments to IAS 32 Financial Instruments: Presentation and IFRS 7 Financial Instruments: Disclosures). Where an investment in an associate is accounted for in accordance with IAS 39, only certain rather than all disclosure requirements in IAS 28 need to be made in addition to disclosures required by IAS 32 and IFRS 7. The Group will not reduce the amount of information presented in the Notes to the Financial Statements in the way allowed by the amendment, but will continue the current presentation.*
Amended IAS 36 Impairment of Assets. Where fair value less costs to sell is calculated on the basis of discounted cash fl ows, disclosures equivalent to those for value-in-use calculation should be made. The change to the standard will increase the amount of information presented on impairment testing in the Group's Notes to the Financial Statements.
Amended IAS 38 Intangible Assets. A prepayment may only be recognised in the event that payment has been made in advance of obtaining right of access to goods or receipt of services. Management assesses that the amendment will not have a material impact on the fi nancial statements of the Group.*
account biological transformation when calculating fair value. Management assesses that the amendment will not have a material impact on the fi nancial statements of the Group.*
The following new standards and interpretations effective in 2009 are not relevant to the fi nancial statements of the Group:
– Amended IFRS 1 First-time Adoption of IFRS and IAS 27 Consolidated and Separate Financial Statements. The amended standard allows fi rst-time adopters to use a deemed cost of either fair value or the carrying amount under previous accounting practice to measure the initial cost of investments in subsidiaries, jointly controlled entities and associates in the separate fi nancial statements. The amendment also removes the defi nition of the cost method from IAS 27 and replaces it with a requirement to present dividends as income in the separate fi nancial statements of the investor. The amendment does not have an impact on the Group's fi nancial statements, and the Group companies are not applying IFRS in their stand-alone fi nancial statements.*
The following standards and interpretations published by the IASB will be adopted by the Group in 2010:
change in control. They will no longer result in goodwill or gains and losses. The standard also specifi es the accounting when control is lost. Any remaining interest in the entity is remeasured to fair value and a gain or loss is recognised in profi t or loss. Management is assessing the impact of this revision on the fi nancial statements of the Group.*
The following new standards and interpretations effective in 2010 are not relevant to the fi nancial statements of the Group:
– IFRIC 12 Service Concession Arrangements. The interpretation applies to contractual arrangements whereby a private sector operator participates in the development, fi nancing, operation and maintenance of infrastructure for public sector services.*
* The standard/interpretation is still subject to endorsement by the European Union.
The preparation of the fi nancial statements in conformity with IFRS standards requires the management of the Group to make estimates and assumptions in applying the accounting 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 fi nancial statements and on the reported amounts of income and expenses during the reporting period. Estimates have substantial impact on the Group's operating result. Estimates and assumptions have been used in impairment of goodwill, fair value of fund investments, intangible and tangible assets, in determining the useful economic lives and in reporting of deferred taxes, among others.
The determination of fair value of fund investments using the International Private Equity and Venture Capital Valuation Guidelines takes into account a range of factors, including the price at which the investment was acquired, the nature of the investment, local market conditions, trading values on public exchanges for comparable securities, current and projected operating performance and fi nancing transactions subsequent to the acquisition of the investment. These valuation methodologies involve a signifi cant degree of management judgment. Because there is signifi cant uncertainty in the valuation of, or in the stability of, the value of illiquid investments, the fair values of such investments as refl ected in a fund's net asset value do not necessarily refl ect the prices that would actually be obtained when such investments are realised. This is especially relevant for the second half of 2008, as the private equity market has been inactive. Due to the prevailing economic uncertainty in the market, the assumptions used in the valuation are based on best efforts only and are inherently risky.
Impairment testing for goodwill is performed annually. The most signifi cant management assumptions in accrual valuations are related to the timing and size of new funds to be established and the accrual of potential carried interest income. The management fees received from the funds are based on agreements and, for a fund's operational period of approximately ten years, the fee can be predicted quite reliably. The estimates and assumptions include new funds to be established for the continuity of operations. A new fund is established at the end of the investment period for an existing fund or some four years after the fund's inception. Carried interest income is taken into account in estimates and assumptions when the realisation of carry seems likely.
CapMan provides management and advisory services in two main business areas: funds making investments in portfolio companies (CapMan Private Equity) and private equity real estate funds making investments in real estate assets (CapMan Real Estate). Information on each business area is reported in its own segment below. CapMan has no secondary reporting segments.
| € ('000) | |||
|---|---|---|---|
| 2008 | CapMan Private Equity | CapMan Real Estate | Group total |
| Turnover | 29,609 | 7,517 | 37,126 |
| Operating profit/loss | –5,565 | –733 | –6,298 |
| Share of associated companies' result | –2,378 | 0 | –2,378 |
| Profit/loss for the financial year | –7,103 | –955 | –8,058 |
| Assets | 127,954 | 10,046 | 138,000 |
| Investments in associated companies | 1,575 | 0 | 1,575 |
| Liabilities | 60,513 | 8,338 | 68,851 |
| Investments | 31,475 | 5,578 | 37,053 |
| Depreciation | 527 | 108 | 635 |
| 2007 | |||
| Turnover | 25,840 | 25,732 | 51,572 |
| Operating profit/loss | 9,484 | 20,275 | 29,759 |
| Share of associated companies' result | 1,915 | 0 | 1,915 |
| Profit/loss for the financial year | 9,385 | 14,850 | 24,235 |
| Assets | 94,938 | 22,415 | 117,353 |
| Investments in associated companies | 3,407 | 0 | 3,407 |
| Liabilities | 27,989 | 21,820 | 49,809 |
| Investments | 7,434 | 393 | 7,827 |
| Depreciation | 560 | 21 | 581 |
CapMan Group acquired private equity house Norum on 27 August 2008. In the fi rst stage of the transaction, 51% of Norum Russia III fund's management company's and 100% of the fund's advisory company's share capital and voting rights were transferred to the ownership of CapMan Plc. The purchase price of the shares was approx. €3.4 million, of which €1 million was paid in cash and approx. €2.4 million through a direct share issue of 982,539 CapMan B shares to the sellers. The value of each B share in the transaction was €2.43, corresponding to the volume weighted average trading price of CapMan Plc B shares for the period 22 April 2008 to 21 May 2008.
The payable transaction price is based on management fees to be received from CapMan Russia fund in the next few years and on potential carried interest income to be received from the fund in the future. The fi nal purchase price will rise in a linear fashion as fundraising for CapMan Russia fund progresses. As the fund size reaches the €150 million target the transaction price will rise to approx. €4.1 million, and if the fund size reaches €200 million the transaction price will be approx. €4.6 million. The possible additional transaction price will be paid to the sellers as an additional share issue and cash in accordance with the decision of the Board of Directors of CapMan Plc at the fi nal closing of the fund.
CapMan Plc has the right to buy the remaining 49% of Norum's shares at the end of CapMan Russia fund's period of investment in July 2012 at the latest. The sellers have the right to sell their remaining shares to CapMan at any time. The payable transaction price will be approx. €3.3 million to €4.4 million depending on the fi nal size of CapMan Russia fund. The payable transaction price per share will, however, be the same as the fundraising adjusted original transaction price.
The transaction has been entered in the consolidated balance sheet at acquisition date corresponding to 100% ownership, as CapMan has an obligation to redeem the remainder in 2012 at the latest. For this reason, the acquisition gives rise to €6.5 million goodwill and an estimated €4.4 million liability, which is related to acquisition of the remaining 49% ownership share. €1.5 million of the transaction price has been allocated to the management fee agreement, which shall be amortised during the lifetime of the fund. A minor amount of net assets were transferred in the transaction.
Norum's four-month result has been consolidated to the Group's 2008 income statement and minority interest has not been attributed.
| € ('000) | 2008 | 2007 |
|---|---|---|
| Gains from sales of tangible assets | 0 | 55 |
| Gain from sale of Baltcap Management Oy's shares | 0 | 114 |
| Other items | 108 | 67 |
| Total | 108 | 236 |
| 2008 | 2007 |
|---|---|
| 13,484 | 11,827 |
| 2,430 | 2,276 |
| 25 | 238 |
| 928 | 1,040 |
| 16,867 | 15,381 |
Remuneration of the management is presented in Table 32. Related party disclosures.
| By country | 2008 102 3 |
2007 |
|---|---|---|
| 86 | ||
| Finland | ||
| Denmark | 4 | |
| Sweden | 19 | 15 |
| Norway | 6 | 5 |
| Russia | 11 | 0 |
| In total | 141 | 110 |
| By team | ||
| CapMan Private Equity | 54 | 37 |
| CapMan Real Estate | 43 | 30 |
| Investor Services | 24 | 25 |
| Internal Services | 20 | 18 |
| In total | 141 | 110 |
60
The terms of the 2003 and 2008 stock option programs are presented in Table 31. Share-based payments.
| € ('000) | 2008 | 2007 |
|---|---|---|
| Depreciation by asset type | ||
| Intangible assets | ||
| Other intangible assets | 356 | 303 |
| Total | 356 | 303 |
| Tangible assets | ||
| Machinery and equipment | 279 | 278 |
| Total | 279 | 278 |
| Total depreciation | 635 | 581 |
| 2007 | |
|---|---|
| –2,378 | 1,915 |
| –2,378 | 1,915 |
| 2008 |
| € ('000) | 2008 | 2007 |
|---|---|---|
| Current income tax | –964 | –10,023 |
| Taxes for previous years | 55 | –204 |
| Deferred taxes | 3521 | 1,718 |
| Total | 2,612 | –8,509 |
| € ('000) | 2008 | 2007 |
|---|---|---|
| Included in other operating expenses: | ||
| Other personnel expenses | 1,729 | 1,238 |
| Office expenses | 2,283 | 2,293 |
| Travelling and entertainment | 1,184 | 1,031 |
| External services | 3,455 | 2,709 |
| Other operating expenses | 3,670 | 4,512 |
| Total | 12,321 | 11,783 |
| Audit fees | 133 | 128 |
| € ('000) | 2008 | 2007 |
|---|---|---|
| Investments at fair value through profit and loss | ||
| Fair value gains/losses of investments | –13,709 | 5,696 |
| Total | –13,709 | 5,696 |
| € ('000) | 2008 | 2007 |
|---|---|---|
| Finance income | ||
| Interest income, loan receivables | 1,312 | 785 |
| Interest income, deposits | 612 | 760 |
| Interest and finance income, other | 345 | 455 |
| Exchange gains | 182 | 14 |
| Total | 2,451 | 2,014 |
| Finance costs | ||
| Interest expenses/loans | –1,863 | –560 |
| Other interest and finance expenses | –2,580 | –363 |
| Exchange losses | –2 | –21 |
| Total | –4,445 | –944 |
The difference between income taxes at the statutory tax rate in Finland (26%) and income taxes recognised in the Consolidated Income Statement is reconciled as follows:
| € ('000) | 2008 | 2007 |
|---|---|---|
| Profit/loss before taxes | –10,670 | 32,744 |
| Income taxes at Finnish tax rate on consolidated profit before tax | –2,774 | 8,513 |
| Taxes for previous years | 199 | 104 |
| Effect of different tax rates outside Finland | –165 | –248 |
| Tax exempt income | 32 | 31 |
| Non-deductible expenses | 41 | –95 |
| Effect of consolidation | 55 | 204 |
| Income taxes in the Consolidated Income Statement | –2,612 | 8,509 |
Earnings per share is calculated by dividing the distributable retained profi t for the fi nancial 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.
| € ('000) | 2008 | 2007 |
|---|---|---|
| Attributable to the equity holders of the Company, € ('000) | –8,209 | 18,620 |
| Weighted average number of shares ('000) | 80,433 | 78,143 |
| Effect of options ('000) | 2,698 | 776 |
| Weighted average number of shares adjusted for the effect of dilution ('000) | 83,131 | 78,919 |
| Own shares ('000) | 136 | 0 |
| Earnings per share (basic), cents | –10.2 | 23.8 |
| Earnings per share (diluted), cents | –10.2 | 23.7 |
A dividend of €0.16 per share, or a total of €12.8 million, was paid for the year 2007. The Board of Directors will propose to the Annual General Meeting to be held on 7 April 2009 that no dividend be paid for 2008.
| € ('000) | 2008 | 2007 |
|---|---|---|
| Machinery and equipment | ||
| Acquisition cost at 1 January | 2,364 | 2,127 |
| Additions | 1,081 | 464 |
| Disposals | –1,665 | –227 |
| Translation difference | –43 | 0 |
| Acquisition cost at 31 December | 1,737 | 2,364 |
| Accumulated depreciation at 1 January | –1,665 | –1,572 |
| Accumulated depreciation in changes | 1,111 | 185 |
| Depreciation for the financial year | –279 | –278 |
| Translation difference | 40 | 0 |
| Accumulated depreciation at 31 December | –793 | –1,665 |
| Book value on 31 December | 944 | 699 |
| Other tangible assets | ||
| Acquisition cost at 1 January | 120 | 117 |
| Additions | 0 | 3 |
| Book value on 31 December | 120 | 120 |
| Tangible assets total | 1,064 | 819 |
| € ('000) | 2008 | 2007 |
|---|---|---|
| Acquisition cost at 1 January | 7,271 | 7,271 |
| Additions | 6,917 | 0 |
| Acquisition cost at 31 December | 14,188 | 7,271 |
| Accumulated impairment at 1 January | –2,426 | –2,426 |
| Accumulated impairment at 31 December | –2,426 | –2,426 |
| Book value on 31 December | 11,762 | 4,845 |
The majority of goodwill is targeted to CapMan's acquisition on 27 August 2008 of private equity house Norum, whose goodwill was €6.5 million as at 31 December 2008, and CapMan's 2002 acquisition of Swedestart Management AB, whose remaining goodwill was €4.5 million as at 31 December 2008.
In the 2002 acquisition of Swedestart Management AB, CapMan acquired operations related to the management of certain funds as well as a skilled technology and life science investment team. The management of these Swedish funds and the advisory service provided by the technology and life science teams to the rest of the management companies forms a cash-generating unit. Potential impairment has been tested by using estimated future discounted cash fl ows. Cash fl ow projections have been prepared for fi ve years, and periods beyond management's review period have been extrapolated taking into consideration the average business cycle. The management fees of the current funds are based on long-term agreements and the income is discounted using an 8.42% (2007: 9.20%) discount rate. Potential carried interest income has not been taken into account. Based on the impairment test there was no need to write down the goodwill.
The fi nal acquisition price of Norum will be determined at the time of fi nal closing of CapMan Russia fund. The goodwill at 31 December 2008 is based on the estimated fi nal size of the fund, whereby the fi nal purchase price allocation will be done after this event has taken place.
The carrying amount of goodwill is generally sensitive to the success of fundraising. The goodwill may be impaired in future in the event that the funds' size is less than estimated or in case of delays in the fundraising process.
| € ('000) | 2008 | 2007 |
|---|---|---|
| Acquisition cost at 1 January | 2,503 | 1,909 |
| Additions | 3,045 | 594 |
| Disposals | –1,313 | 0 |
| Acquisition cost at 31 December | 4,235 | 2,503 |
| Accumulated depreciation at 1 January | –1,502 | –1,199 |
| Accumulated depreciation in changes | 833 | 0 |
| Depreciation for the financial year | –356 | –303 |
| Translation difference | 19 | 0 |
| Accumulated depreciation at 31 December | –1,006 | –1,502 |
| Book value on 31 December | 3,229 | 1,001 |
Other intangible assets include software €1.3 million and the management fee agreement of €1.5 million regarding the purchase of Norum.
62
| € ('000) | 2008 | 2007 |
|---|---|---|
| Acquisition cost at 1 January | 3,407 | 2,860 |
| Additions/disposals | 1,318 | 41 |
| Fair value gains/losses on investments | –3,150 | 506 |
| Acquisition cost at 31 December | 1,575 | 3,407 |
| 2008 | |||||
|---|---|---|---|---|---|
| Associated companies: | Assets | Liabilities | Turnover | Profit/loss | Ownership, % |
| Access Capital Partners Group S.A., Belgium | 10,270 | 4,814 | 18,198 | 3,335 | 35.00% |
| BIF Management Ltd, Jersey | 70 | 4 | 380 | 4 | 33.33% |
| Baltic SME Management B.V., The Netherlands | 34 | 4 | 135 | 1 | 33.33% |
| Maneq 2002 AB, Sweden | 386 | 310 | 114 | 62 | 35.00% |
| Maneq 2004 AB, Sweden | 1,226 | 1 | 0 | –55 | 41.90% |
| Maneq 2005 AB, Sweden | 4,560 | 4,078 | 0 | –149 | 35.00% |
| Maneq 2006 AB, Sweden | 8,205 | 7,070 | 41 | –10 | 40.00% |
| Maneq 2007 AB, Sweden | 9,244 | 8,147 | 0 | –170 | 40.00% |
| Maneq 2008 AB, Sweden | 11,741 | 7,194 | 0 | –177 | 40.00% |
| Yewtree Holding AB, Sweden | 865 | 1,313 | 0 | –563 | 35.00% |
| 2007 | |||||
| Access Capital Partners Group S.A., Belgium | n/a | n/a | n/a | 1,600 | 35.00% |
| BIF Management Ltd, Jersey | 68 | 4 | 449 | 0 | 33.33% |
| Baltic SME Management B.V., The Netherlands | 34 | 7 | 158 | –1 | 33.33% |
| Maneq 2002 AB, Sweden | 543 | 528 | 812 | –30 | 35.00% |
| Maneq 2004 AB, Sweden | 1,272 | 1 | 1,033 | 1,006 | 41.90% |
| Maneq 2005 AB, Sweden | 4,699 | 4,068 | 51 | –20 | 35.00% |
| Maneq 2006 AB, Sweden | 6,782 | 5,803 | 0 | –52 | 40.00% |
| Maneq 2007 AB, Sweden | 6,978 | 6,067 | 0 | –28 | 40.00% |
| Yewtree Holding AB, Sweden | 1,375 | 1,294 | 0 | –223 | 35.00% |
Team members of CapMan investment teams and certain key employees have the option to invest in portfolio companies alongside CapMan via Maneq funds. CapMan participates in these funds as one of the investors and as fi nance provider with market based conditions.
Access Capital Partners manages funds of funds and private equity investment mandates. The funds invest mainly in European based funds.
| 17. Investments at fair value through profi t and loss | ||
|---|---|---|
| € ('000) | 2008 | 2007 |
| Investments in funds | ||
| Investments in funds at 1 January | 44,230 | 33,122 |
| Additions | 26,326 | 15,384 |
| Disposals | –3,700 | –9,972 |
| Fair value gains/losses of investments | –13,709 | 5,696 |
| Investments in funds at 31 December | 53,147 | 44,230 |
The cumulative fair value losses of investments in funds is €4.8 million (2007: profi t €9.0 million).
| € ('000) | 2008 | 2007 |
|---|---|---|
| Other financial assets | ||
| Other investments at 1 January | 878 | 848 |
| Additions/disposals | –50 | 30 |
| Other investments at 31 December | 828 | 878 |
Investments at fair value through profi t and loss include mainly CapMan's own investments in the funds. The valuation principles are presented in Note 1. Accounting principles.
| € ('000) | 2008 | 2007 |
|---|---|---|
| Loan receivables from associated companies 1) | 21,257 | 12,497 |
| Other loan receivables 2) | 1,909 | 1,500 |
| Other receivables 3) | 1,285 | 2,194 |
| Total | 24,451 | 16,191 |
Receivables include mainly fi xed-interest loan receivables from the funds. Loan receivables from associated companies are presented in Table 32. Related party disclosures. Other loan receivables include receivables from Maneq 2002 Ky €0.8 million and Leverator Plc €0.6 million. Non-current receivables have a fair value equal to their book value.
| € ('000) | 2008 | 2007 |
|---|---|---|
| 1) Loan receivables from associated companies | ||
| Senior loans | 9,287 | 5,006 |
| Mezzanine loans | 10,945 | 6,060 |
| Other loans receivables | 1,025 | 1,431 |
| 21,257 | 12,497 | |
| 2) Other loan receivables | ||
| Mezzanine loans | 800 | 800 |
| Subordinated loan | 600 | 600 |
| Other loans receivables | 509 | 100 |
| 1,909 | 1,500 |
Senior loans, mezzanine loans and other loan receivables are interest-bearing.
3) Other long-term receivables are non-interest-bearing.
63
| 19. Deferred tax assets and liabilities | ||
|---|---|---|
| € ('000) | 2008 | 2007 |
| Deferred tax assets | ||
| Accrued differences | 3,707 | 3,547 |
| Total | 3,707 | 3,547 |
| Deferred tax liabilities | ||
| Accrued differences | 1,897 | 1,689 |
| Fair value gains/losses of investments | –1,375 | 2,188 |
| Employee benefits | –238 | –143 |
| Total | 284 | 3,734 |
| € ('000) | 2008 | 2007 |
|---|---|---|
| Trade receivables | 1,891 | 701 |
| Receivables from associated companies | 2,196 | 878 |
| Loan receivables | 133 | 126 |
| Accrued income | 5,249 | 3,960 |
| Other receivables | 3,496 | 2,172 |
| Total | 12,965 | 7,837 |
The Group has had no bad debts. Accrued income includes mainly credit items and tax receivables. Other receivables include mainly the receivables from the funds.
| Trade and other receivables | Amount in foreign currency | Amount in euros | Proportion |
|---|---|---|---|
| EUR | 11,466 | 88% | |
| NOK | 68 | 7 | 0% |
| SEK | 14,957 | 1,376 | 11% |
| DKK | 864 | 116 | 1% |
| € ('000) | 2008 | 2007 |
|---|---|---|
| Other financial assets at fair value | 942 | 14,857 |
| Total | 942 | 14,857 |
Other fi nancial assets at fair value includes deposits and shares in external investment fund companies.
| € ('000) | 2008 | 2007 |
|---|---|---|
| Bank accounts | 24,330 | 19,741 |
| Total | 24,330 | 19,741 |
Cash and bank includes bank accounts.
| 23. Share capital and shares | ||||
|---|---|---|---|---|
| Number of | Number of | Total | ||
| A shares ('000) | B shares ('000) | ('000) | ||
| Movements in the number of shares: | ||||
| Share capital at 31 December 2006 | 8,000 | 69,159 | 77,159 | |
| Shares subscribed with options | 2,810 | |||
| Own shares purchased | –2,000 | 2,000 | ||
| Share capital at 31 December 2007 | 6,000 | 73,969 | 79,969 | |
| Share issue | 983 | |||
| Shares subscribed with options | 507 | |||
| Other change | –136 | |||
| Share capital at 31 December 2008 | 6,000 | 75,323 | 81,323 | |
| Share | ||||
| Share | premium | Invested unrestricted | ||
| capital | account | shareholders' equity | Total | |
| Effect of the movements in the number of shares: | € ('000) | € ('000) | € ('000) | € ('000) |
| Share capital at 31 December 2006 | 772 | 38,968 | 0 | 39,740 |
| Shares subscribed with options | 1,726 | 1,726 | ||
| Share capital at 31 December 2007 | 772 | 38,968 | 1,726 | 41,466 |
| Share issue | 2,392 | 2,392 | ||
| Shares subscribed with options | 639 | 639 | ||
| Own shares purchased | –275 | –275 | ||
| Share capital at 31 December 2008 | 772 | 38,968 | 4,482 | 44,222 |
CapMan Plc has two series of shares, A (10 votes) and B (1 vote). The shares have no nominal value.
The invested unrestricted shareholders' equity reserve includes other equity investments and share subscription prices, not pertaining to decisions to record the share subscription price in shareholders' equity. The share subscription prices received on the basis of stock option programs that expire after the new Finnish Companies Act entered into force are recorded in their entirety in invested unrestricted shareholders' equity. The invested unrestricted shareholders' equity reserve includes a hybrid bond.
The foreign currency translation reserve includes translation differences arising from currency conversion in the closing of the books for foreign units.
Other reserves include granted stock option subscription rights. The stock option programs are presented in Table 31. Share-based payments. Includes also the hybrid bond.
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.
In addition there is a redemption clause pertaining to the transfer of CapMan Plc A shares. If an A share is transferred to a new shareholder who does not already own A shares in the Company, the other shareholders of A shares have the right to redeem the shares under transfer in accordance with the conditions outlined in the Company's Articles of Association.
As at 31 December 2008 CapMan Plc had no knowledge of agreements or arrangements, related to the Company's ownership and voting rights, that were apt to have a material impact on the share value of CapMan Plc.
| Number of | Number of | Number of | ||||
|---|---|---|---|---|---|---|
| Shareholding | holdings | % | shares | % | votes | % |
| 1 – 100 | 952 | 21.09% | 42,375 | 42,375 | 0.03% | |
| 101 – 1,000 | 2,181 | 48.32% | 1,141,454 | 1,141,454 | 0.84% | |
| 1,001 – 10,000 | 1,195 | 26.47% | 3,730,039 | 3,730,039 | 2.75% | |
| 10,001 – 10,000 | 134 | 2.97% | 3,284,242 | 3,284,242 | 2.42% | |
| 100,001 – | 52 | 1.15% | 73,241,547 | 127,241,547 | 93.95% | |
| Total | 4,514 | 100.00% | 81,439,657 | 135,439,657 | 99.99% | |
| Nominee registered | 9 | 24,016,655 | 29.48% | 24,016,655 | 17.73% | |
| On the book-entry register joint account | 18,767 | 0.02% | 18,767 | 0.01% | ||
| Total shares outstanding | 81,458,424 | 100.00% | 135,458,424 | 100.00% |
| Number of | Number of | Number of | ||||
|---|---|---|---|---|---|---|
| Sector | holdings | % | shares | % | votes | % |
| Corporations | 247 | 5.47% | 25,659,029 | 31.50% | 52,659,029 | 38.88% |
| Financial and insurance | ||||||
| corporations | 14 | 0.31 % | 1,765,493 | 2.17% | 25,758,289 | 20.56% |
| Public sector institutions | 5 | 0.11 % | 5,026,522 | 6.17% | 5,026,522 | 3.71% |
| Households | 4,191 | 92.84 % | 11,525,009 | 14.15% | 11,525,009 | 8.51% |
| Non-profit organisations | 30 | 0.67 % | 3,967,374 | 4.87% | 3,967,374 | 2.93% |
| Foreign shareholders | 27 | 0.60 % | 9,479,575 | 11.64% | 36,503,434 | 26.95% |
| Total | 4,514 | 100.00 % | 57,423,002 | 99.98% | 133,949,953 | 99.99% |
| Nominee registered | 24,016,655 | 29.48% | 24,016,655 | 17.73% | ||
| On the book-entry register joint account | 18,767 | 0.02% | 18,767 | 0.01% | ||
| Total shares outstanding | 81,458,424 | 100.00% | 135,458,424 | 100.00% |
Source: Finnish Central Securities Depository Ltd, as at 31 December 2008. Figures are based on the total number of shares 81,458,424 and total number of shareholders 4,514. There are 6,000,000 A shares, which are owned by companies under control or authority of CapMan Plc's Senior Partners. CapMan Plc had 135,503 B shares as at 31 December 2008.
| Number of | Number of | Total number | Proportion | Number | Proportion | |
|---|---|---|---|---|---|---|
| A shares | B shares | of shares | of shares, % | of votes | of votes, % | |
| 1 Aristo Invest Oy + Ari Tolppanen* | 1,220,200 | 7,418,720 | 8,638,920 | 10.61% 19,620,720 | 14.48% | |
| Aristo Invest Oy | 1,220,200 | 6,918,192 | 8,138,392 | 9.99% | 19,120,192 | 14.12% |
| Ari Tolppanen | 500,528 | 500,528 | 0.61% | 500,528 | 0.37% | |
| 2 CapMan Partners B.V.** | 3,000,000 | 2,000,000 | 5,000,000 | 6.14% 32,000,000 | 23.62% | |
| 3 Winsome Oy + Tuomo Raasio* | 680,663 | 3,080,873 | 3,761,536 | 4.62% | 9,887,503 | 7.30% |
| Winsome Oy | 680,663 | 2,867,129 | 3,547,792 | 4.36% | 9,673,759 | 7.14% |
| Tuomo Raasio | 213,744 | 213,744 | 0.26% | 213,744 | 0.16% | |
| 4 Vesasco Oy | 3,375,158 | 3,375,158 | 4.14% | 3,375,158 | 2.49% | |
| 5 Heiwes Oy + Heikki Westerlund* | 258,020 | 2,718,260 | 2,976,280 | 3.65% | 5,298,460 | 3.91% |
| Heiwes Oy | 258,020 | 2,440,584 | 2,698,604 | 3.31% | 5,020,784 | 3.71% |
| Heikki Westerlund | 277,676 | 277,676 | 0.34% | 277,676 | 0.20% | |
| 6 Geldegal Oy + Olli Liitola* | 796,564 | 1,982,520 | 2,779,084 | 3.41% | 9,948,160 | 7.34% |
| Geldegal Oy | 796,564 | 1,768,776 | 2,565,340 | 3.15% | 9,734,416 | 7.19% |
| Olli Liitola | 213,744 | 213,744 | 0.26% | 213,744 | 0.16% | |
| 7 The State Pension Fund | 2,500,000 | 2,500,000 | 3.07% | 2,500,000 | 1.85% | |
| 8 Åbo Akademi University Foundation | 2,000,000 | 2,000,000 | 2.46% | 2,000,000 | 1.48% | |
| 9 Varma Mutual Pension Insurance | ||||||
| Company | 1,712,924 | 1,712,924 | 2.10% | 1,712,924 | 1.26% | |
| 10 Novestra Ab + Peter Buch Lund | 1,371,656 | 1,371,656 | 1.68% | 1,371,656 | 1.01% | |
| Novestra Ab | 1,171,656 | 1,171,656 | 1.44% | 1,171,656 | 0.86% | |
| Peter Buch Lund | 200,000 | 200,000 | 0.25% | 200,000 | 0.15% | |
| 11 Degato International SARL | ||||||
| (Lennart Jacobsson***) | 1,129,217 | 1,129,217 | 1.39% | 1,129,217 | 0.83% | |
| 12 Svenska litteratursällskapet i Finland | ||||||
| r.f. | 1,012,000 | 1,012,000 | 1.24% | 1,012,000 | 0.75% | |
| 13 Norum Russia Carry Limited | ||||||
| (Hans Christian Dall Nygård***, | ||||||
| Knut J Borch, Alberto Morandi) | 982,539 | 982,539 | 1.21% | 982,539 | 0.73% | |
| 14 OP-Finland Small Firms Fund | 941,800 | 941,800 | 1.16% | 941,800 | 0.70% | |
| 15 Guarneri Oy + Petri Saavalainen* | 44,553 | 882,663 | 927,216 | 1.14% | 1,328,193 | 0.98% |
| Guarneri Oy | 44,553 | 567,775 | 612,328 | 0.75% | 1,013,305 | 0.75% |
| Petri Saavalainen | 314,888 | 314,888 | 0.69% | 314,888 | 0.23% | |
| 16 Icecapital Pankkiiriliike Oy | 903,124 | 903,124 | 1.11% | 903,124 | 0.67% | |
| 17 Mateus International SARL | ||||||
| (Jan Lundahl***) | 839,217 | 839,217 | 1.03% | 839,217 | 0.62% | |
| 18 Torpet International SARL | ||||||
| (Lars Hagdahl***) | 753,936 | 753,936 | 0.93% | 753,936 | 0.56% | |
| 19 Jensen Leif | 699,469 | 699,469 | 0.86% | 699,469 | 0.52% | |
| 20 Joensuun Kauppa ja Kone Oy | 590,000 | 590,000 | 0.72% | 590,000 | 0.44% | |
| Total | 6,000,000 | 36,894,076 | 42,894,076 | 52.67% | 96,894,076 | 71.54% |
| Nominee registered | 24,016,655 | 24,016,655 | 29.48% | 24,016,655 | 17.73% | |
| Shareholdings of management and employees**** |
6,000,000 | 23,596,108 | 29,596,108 | 36.33% | 89,596,108 | 63.34% |
| * Employed by CapMan. |
*** CapMan employee who exercises controlling power in the | |||||
| ** The shareholding of CapMan Partners B.V. is equally |
aforementioned company but who does not own CapMan | |||||
| divided among corporations under control by Senior | shares directly. | |||||
| Partners of CapMan. | **** Shareholders among the 100 largest shareholders of the |
**** Shareholders among the 100 largest shareholders of the Company.
| € ('000) | 2008 | 2007 |
|---|---|---|
| Bank loans | 43,125 | 16,000 |
| Total | 43,125 | 16,000 |
| The loan maturity is fi ve years. The interest is paid monthly. €4 million of the €50 million loan was still undrawn at |
year-end.
| € ('000) | 2008 | 2007 |
|---|---|---|
| Other liabilities | 6,600 | 701 |
| Total | 6,600 | 701 |
Other liabilities include the liability of the sabbatical €0.9 million, the liability of €4.4 million regarding the right to buy the remaining 49% of Norum shares and the derivative instrument at fair value €1.3 million.
| 2008 | 2008 | 2008 | |
|---|---|---|---|
| Fair values | Positive fair value (balance sheet value) | Negative fair value (balance sheet value) | Net value |
| Unhedged items | 12 | –1,251 | –1,239 |
| 2007 | 2007 | 2007 | |
| Fair values | Positive fair value (balance sheet value) | Negative fair value (balance sheet value) | Net value |
| Unhedged items | 261 | –151 | 110 |
The interest rate level of the Group's interest-bearing debts is hedged by interest rate options. They are recognised in the balance sheet at fair value on the closing date. The Group does not use derivative instruments for hedging purposes. Currency receivables and payables, their net position or subsidiaries' equity are not hedged.
| € ('000) | 2008 | 2007 |
|---|---|---|
| Trade payables | 798 | 975 |
| Advance payments received | 616 | 63 |
| Accrued expenses | 11,402 | 12,077 |
| Other liabilities | 2,935 | 8,241 |
| Total | 15,751 | 21,356 |
The maturity of trade payables is normal terms of trade. Trade payables do not include debts due. Accrued expenses include the clawback reserve for the carried interest and accrued salaries and social benefi t expenses.
| Trade and other liabilities | Amount in foreign currency | Amount in euros | Proportion |
|---|---|---|---|
| EUR | 15,282 | 97% | |
| NOK | 390 | 40 | 0% |
| SEK | 2,391 | 220 | 2% |
| DKK | 1,557 | 209 | 1% |
| 28. Interest-bearing loans and borrowings – Current | |||||
|---|---|---|---|---|---|
| € ('000) | 2008 | 2007 | |||
| Bank loans | |||||
| Current portion of long term loans | 2,875 | 0 | |||
| Total | 2,875 | 0 |
As at 31 December 2008 the Group had a €10 million committed revolving credit facility available. The facility was not utilised as at the year-end.
| Loans and other | Fair value | Financial | |||
|---|---|---|---|---|---|
| € ('000) | recivables | through P/L | liabilities | ||
| Amortised | Fair | Amortised | Balance | ||
| Valuation principles | cost | value | cost | sheet value | Fair value |
| Non-current assets | |||||
| Other investments | |||||
| Investments available-for-sale | 53,975 | 53,975 | 53,975 | ||
| Receivables | |||||
| Interest-bearing loan receivables from | |||||
| associated companies | 21,257 | 21,257 | 21,257 | ||
| Interest-bearing other loan receivables | 1,909 | 1,909 | 1,909 | ||
| Trade and other receivables | 1,285 | 1,285 | 1,285 | ||
| Current assets | |||||
| Trade and other receivables | 12,965 | 12,965 | 12,965 | ||
| Cash and bank | 24,330 | 942 | 25,272 | 25,272 | |
| Total | 61,746 | 54,917 | 0 | 116,663 | 116,663 |
| Non-current interest-bearing loans | |||||
| Interest-bearing loans | 43,125 | 43,125 | 43,125 | ||
| Other liabilities | 6,600 | 6,600 | 6,600 | ||
| Current liabilities | |||||
| Trade and other liabilities | 15,751 | 15,751 | 15,751 | ||
| Interest-bearing loans and borrowings | 2,875 | 2,875 | 2,875 | ||
| Total | 0 | 0 | 68,351 | 68,351 | 68,351 |
66
| Loans and other | Fair value | Financial | |||
|---|---|---|---|---|---|
| € ('000) | receivables | through P/L | liabilities | ||
| Amortised | Fair | Amortised | Balance | ||
| Valuation principles | cost | value | cost | sheet value | Fair value |
| Non-current assets | |||||
| Other investments | |||||
| Investments available-for-sale | 45,108 | 45,108 | 45,108 | ||
| Receivables | |||||
| Interest-bearing loan receivables from | |||||
| associated companies | 12,497 | 12,497 | 12,497 | ||
| Interest-bearing other loan receivables | 1,500 | 1,500 | 1,500 | ||
| Trade and other receivables | 2,194 | 2,194 | 2,194 | ||
| Current assets | |||||
| Trade and other receivables | 7,837 | 7,837 | 7,837 | ||
| Cash and bank | 19,741 | 14,857 | 34,598 | 34,598 | |
| Total | 43,769 | 59,965 | 0 | 103,734 | 103,734 |
| Non-current interest-bearing loans Interest-bearing loans Other liabilities Current liabilities |
16,000 701 |
16,000 701 |
16,000 701 |
||
| Trade and other liabilities | 21,356 | 21,356 | 21,356 | ||
| Total | 0 | 0 | 38,057 | 38,057 | 38,057 |
| 30. Commitments and contingent liabilities € ('000) |
2008 | 2007 | |||
| Leasing agreements – CapMan Group as lessee | |||||
| Operating lease commitments | |||||
| Within one year | 238 | 249 | |||
| After one but not more than five years | 300 | 191 | |||
| Total | 538 | 440 | |||
| Other hire purchase commitments | |||||
| Within one year | 1,483 | 1,244 |
| € ('000) | 2008 | 2007 |
|---|---|---|
| Securities and other contingent liabilities | ||
| Contingencies for own commitment | ||
| Mortgage bonds | 60,000 | 20,000 |
| Pledged deposit for own commitment | 12 | 9 |
| Loan commitments to Maneq funds | 8,292 | 5,284 |
| Other contingent liabilities | 1,300 | 2,075 |
| Remaining commitments to funds | ||
| Equity funds | ||
| CapMan Equity VII | 1,780 | 2,927 |
| CapMan Buyout VIII | 11,965 | 23,152 |
| CapMan Life Science IV | 5,655 | 6,892 |
| CapMan Technology Fund 2007 | 10,760 | 12,444 |
| CapMan Public Market Fund | 15,000 | 0 |
| CapMan Russia Fund | 11,090 | 0 |
| CapMan Buyout IX | 13,000 | 0 |
| Other | 1,195 | 1,637 |
| 70,445 | 47,052 | |
| Mezzanine funds | ||
| CapMan Mezzanine IV L.P. | 972 | 2,719 |
| CapMan Mezzanine IV Classic Ky | 1,477 | 1,744 |
| Other | 55 2,504 |
62 4,525 |
| Fund of funds | ||
| Access Capital LP II | 1,925 | 2,216 |
| Other | 481 | 27 |
| 2,406 | 2,243 | |
| Real estate funds | ||
| CapMan Real Estate I Ky | 350 | 502 |
| CapMan RE II Ky | 1,092 | 1,672 |
| CapMan RE Hotels Ky | 437 | 0 |
| 1,879 | 2,174 | |
| Remaining commitments to funds | 77,234 | 55,994 |
Total 8,549 9,273 The Group has leased the offi ces. The rental agreements are for 1 to 15 years. Index, renewal and other terms of the agreements differ from each other.
After one but not more than five years 3,854 3,854 Beyond five years 3,212 4,175
CapMan, like other investors in the funds, gives commitments to the funds when they are established. The main part of the commitments become due during the fi rst fi ve years of each fund's life time.
32. Related party disclosures
SHAREHOLDER
CapMan Plc Group Financial Statements 2008
67
The stock option programs 2003 and 2008 cover all employees and members of the Board. Stock options granted after 7 November 2002 and not vesting before 1 January 2005 are entered in the fi nancial statements in accordance with IFRS 2 Share-based Payment. The fair value of stock options has been assessed at the grant date and expensed straight-line in the income statement over the vesting period. Fair value of options at the grant date is determined in accordance with the Black-Scholes model. Key information on the stock option programs is presented in the table below.
| Stock option program 2003 | Stock option program 2008 | ||||
|---|---|---|---|---|---|
| Stock option 2003A | Stock option 2003B | Stock option 2008A | Stock option 2008B | ||
| Stock options, number | 625,000 | 625,000 | 2,135,000 | 2,135,000 | |
| Entitlement to subscribe for B shares | 625,000 | 625,000 | 2,135,000 | 2,135,000 | |
| Share subscription period begins | 1.10.2006 | 1.10.2007 | 1.5.2011 | 1.5.2012 | |
| Share subscription period ended/ends | 31.10.2008 | 31.10.2009 | 31.12.2012 | 31.12.2013 | |
| Share subscription price | Trade volume | Trade volume | Trade volume | Trade volume | |
| weighted average | weighted average | weighted average | weighted average | ||
| price of the B share | price of the B share | price of the B share | price of the B share | ||
| on the Helsinki | on the Helsinki | on the OMX Nordic | on the OMX Nordic | ||
| Exchanges | Exchanges | Exchange Helsinki | Exchange Helsinki | ||
| 1.12.–31.12.2003 | 1.6–30.6.2004 | 1.5.–30.6.2008 | 1.5.–30.6.2009 | ||
| €1.72 less dividends | €1.60 less dividends | with an addition of | with an addition of | ||
| from 2004 onwards | from 2005 onwards | ten (10) per cent | ten (10) per cent | ||
| Number of shares subscribed with stock options as |
|||||
| at 31 December 2008 | 556,494 | ||||
| Information applied | Stock option program 2003 | Stock option program 2008 | |||
| in the Black-Scholes model | Stock option 2003A | Stock option 2003B | Stock option 2008A | Stock option 2008B | |
| Expected volatility | 20.00% | 20.00% | 20.00% | 20.00% |
Stock option program 2003A ended on 31 October 2008. The program originally included 625,000 stock options with entitlement to subscribe an equivalent number of CapMan Plc B shares. A total of 556,494 B shares were subscribed for with year 2003 stock options in 2008. According to the AGM, subscription prices were recorded in the Company's invested unrestricted shareholders' equity.
Risk-free interest 2.75% 2.75% 2.75% 2.75%
The lowest trading price of 2003B stock options was €0.12 and the highest was €2.00, with an average price of trades of €1.11. The closing price on 31 December 2008 was €0.15.
| Shares 31.12.2008 | Stock options 31.12.2008 | |||||||
|---|---|---|---|---|---|---|---|---|
| Distributed | of shares % | of votes % | of shares % of votes % | |||||
| stock options | if all distributed stock | if all stock options of option | ||||||
| Number | 31.12.2008 | of shares % | of votes % | options will be exercised | programs will be exercised | |||
| A shares | 6,000,000 | 7.4% | 44.3% | |||||
| B shares | 75,458,424 | 92.6% | 55.7% | |||||
| 2003B options | 625,000 | 625,000 | 0.8% | 0.5% | 0.8% | 0.5% | ||
| 2008A options | 2,135,000 | 250,000 | 0.3% | 0.2% | 2.6% | 1.6% | ||
| 2008B options | 2,135,000 | 250,000 | 0.3% | 0.2% | 2.6% | 1.6% |
| Group ownership | Parent company ownership | Share | |||
|---|---|---|---|---|---|
| Subsidiaries | of shares, % | of shares, % | capital, € | ||
| CapMan Capital Management Oy, Finland | 100% | 100% | |||
| Finnmezzanine Oy, Finland | 100% | ||||
| EastMan Advisors Oy, Finland | 100% | ||||
| ScanEast Managing Partner Ltd., Guernsey | 70% | ||||
| CapMan Invest A/S, Denmark | 100% | 100% | |||
| NPE General Partner II Limited, Jersey | 100% | 100% | |||
| CapMan Sweden AB, Sweden | 100% | 100% | |||
| CapMan Holding AB, Sweden | 100% | 100% | |||
| CapMan AB, Sweden | 100% | ||||
| CapMan Norway AS, Norway | 100% | 100% | |||
| CapMan (Guernsey) Limited, Guernsey | 100% | 100% | |||
| CapMan Mezzanine (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 | 80% | 80% | |||
| Dividum Oy, Finland | 80% | 80% | |||
| Realprojekti Oy, Finland | 80% | 80% | |||
| CapMan RE II GP Oy, Finland | 80% | 80% | |||
| 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 Hotels RE GP Oy, Finland | 80% | 80% | |||
| Public Market Manager S.A., Luxembourg | 100% | 100% | |||
| Norum Private Equity Advisors Ltd, Cyprus | 100% | 100% | |||
| CapMan (Guernsey) Russia GP Ltd, Guernsey | 51% | 51% | |||
| CapMan (Guernsey) Investment Limited, Guernsey | 1) | 100% | 100% | 100 | |
| CapMan Germany GmbH, Germany | 1) | 100% | 100% | 25,000 | |
| CapMan (Guernsey) Buyout IX GP Limited, Guernsey | 1) | 100% | 100% | 20,000 |
1) Not consolidated, included in the total of other investments.
| Group ownership | Parent company ownership | ||
|---|---|---|---|
| Associated companies | of shares, % | of shares, % | |
| Access Capital Partners Group S.A., Belgium | 35.00% | 35.00% | |
| BIF Management Ltd, Jersey | 33.33% | 33.33% | |
| Baltic SME Management B.V., The Netherlands | 33.33% | 33.33% | |
| Maneq 2002 AB, Sweden | 35.00% | 35.00% | |
| Maneq 2004 AB, Sweden | 41.90% | 41.90% | |
| Maneq 2005 AB, Sweden | 35.00% | 35.00% | |
| Maneq 2006 AB, Sweden | 40.00% | 40.00% | |
| Maneq 2007 AB, Sweden | 40.00% | 40.00% | |
| Maneq 2008 AB, Sweden | 40.00% | 40.00% | |
| Yewtree Holding AB, Sweden | 35.00% | 35.00% |
The Group received a return of €0.7 million from the sale of services to Access Capital Partners Group S.A.
| Non-current loan receivable 2008 0.0 |
Non-current loan receivable 2007 0.4 |
|---|---|
| 0.3 | 0.5 |
| 2.2 | 2.2 |
| 5.0 | 3.9 |
| 5.2 | 4.2 |
| 7.6 | 0.0 |
| 1.0 | 1.3 |
The retirement age and retirement benefi ts for the CEO and Deputy CEO are specifi ed according to the statute on employee pensions. The term of notice for the CEO, Deputy CEO and the Company is 12 months, during which time the normal monthly salary is paid.
As at 31 December 2008 the members of the Board of Directors held no stock options (no stock options at 31 December 2007). The stock options granted to the members of the Board are subject to the same terms as for stock options granted to employees.
CapMan Group has centralised fi nancial risk management and control. The purpose of fi nancial risk management is to ensure that the Group has adequate and effectively utilised fi nancing 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-effi ciency. The Group's CFO is responsible for fi nancial risk management and control.
The policy of the management is to constantly monitor cash fl ow 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 covenant assessments.
The Group has a Performance Monitoring team, which monitors the performance of the investment portfolio (fi nancial assets entered at fair value through profi t and loss) independently and objectively of the investment teams. The Performance Monitoring team is responsible for reviewing the monthly reporting and forecasts for portfolio companies. Valuation proposals made by the case investment professionals are examined by the Performance Monitoring team and subsequently approved by the Valuation Committee, which comprises the Group CEO, CFO, Deputy CEO and Heads of investments teams.
The Group's cash fl ow is a mix of predictable cash fl ow from management fees received and highly volatile carried interest income. The third main component in liquidity management is the timing of the capital calls to the funds and the proceeds received from fund investments.
Management fees received from the funds are based on long-term agreements and are targeted to cover the operational expenses of the Group. Management fees are relatively predictable for the coming 12 months or even for a couple of years.
The timing and receipt of carried interest generated by the funds is uncertain and will contribute to the volatility of the results. Changes in investment and exit activity levels may have a signifi cant impact on cash fl ows of the Group. A single investment or exit may change the cash fl ow situation completely and the exact timing of the cash fl ow is diffi cult to predict.
CapMan has made commitments to the funds it manages. Most of the existing commitments are typically called in to the funds within the next four years. Management aims to have at least 50% fi nancing capacity available for the commitments. As at 31 December 2008 the undrawn commitments to the funds amount to €77.2 million and the fi nancing capacity available (cash and third party fi nancing facilities) amount to €38.3 million (49.6%).
€10 million short-term loan facility, phased drawdowns to October 2009 (full drawdown 31 December 2008). €50 million senior loan, maturity in 2013 (€4 million undrawn at 31 December 2008). Hybrid bond, no maturity date, call option in 2013 (€20 million drawn at 31 December 2008).
A maturity analysis of the Group's contractual assets and liabilities is presented in the following table.
| Maturity analysis | |||||
|---|---|---|---|---|---|
| Due within | Due between | Due between | Due between | Due beyond | |
| 31 December 2008, € ('000) | 3 months | 3 and 12 months | 1 and 3 years | 3 and 5 years | 5 years |
| Non-current financial assets | |||||
| Loan receivables | 967 | 1,071 | 22,090 | ||
| Current financial assets | |||||
| Account receivables | 1,891 | ||||
| Loan receivables | 133 | ||||
| Other financial assets at fair value | 942 | ||||
| Cash and bank | 24,329 | ||||
| Non-current financial liabilities | |||||
| Interest-bearing loans and | |||||
| borrowings | 11,500 | 31,625 | |||
| Other financial liabilities | 4,439 | ||||
| Current financial liabilities | |||||
| Accounts payable | 798 | ||||
| Interest-bearing loans and | |||||
| borrowings | 2,875 |
| 31 December 2007, € ('000) | Due within 3 months |
Due between 3 and 12 months |
Due between 1 and 3 years |
Due between 3 and 5 years |
Due beyond 5 years |
|---|---|---|---|---|---|
| Non-current financial assets | |||||
| Loan receivables | 100 | 600 | 13,297 | ||
| Current financial assets | |||||
| Account receivables | 700 | ||||
| Loan receivables | 126 | ||||
| Other financial assets at fair value | 14,857 | ||||
| Cash and bank | 19,741 | ||||
| Non-current financial liabilities | |||||
| Interest-bearing loans and | |||||
| borrowings | 16,000 | ||||
| Current financial liabilities | |||||
| Accounts payable | 975 |
The Group's exposure to interest rate risk arises primarily from long-term liabilities. The Group manages cash fl owrelated interest rate risk by using partly fl oating interest and fl oating to fi xed interest rate swaps. The objective is that approximately half of the interest rate risk is converted back to fi xed with regard to the loan maturity date.
The interest rate for the hybrid bond is fi xed to 11.25%. Long-term loan receivables from Maneq funds are fi xed to fi ve-year interest rate periods.
The Group's exposure to credit risk is limited mainly to loan receivables from Maneq funds. Maneq funds make investments in portfolio companies alongside CapMan funds. CapMan typically has a 35–40% ownership in these companies and it fi nances them with senior and mezzanine loans.
The analysis of possible credit provisions and impairment of loan receivables takes into account that fund solvency observes the J-curve pattern, which is common for private equity funds. The fair value of funds typically falls below acquisition cost in the early investment phase until the fi rst realisations are made. For this reason a more reliable assessment of credit risk may be performed approximately four years after the initial investment date, as repayment solvency is endangered only if the average exit multiple within the investment portfolio is less than one. CapMan has a historical exit multiple of approximately 3x. In addition the assessment of credit risk incorporates the portfolio companies' expected realisation returns, which are often greater than fair value at that time.
| € ('000) | CapMan's receivables total |
Receivables total (incl. write-downs) |
Capital account at fair value (excl. external debts) |
|---|---|---|---|
| Funds where fair value < receivables | 15,682 | 14,470 | 12,214 |
| Funds where fair value > receivables | 7,729 | 7,729 | 11,882 |
| 23,411 | 22,199 | 24,096 | |
| Other loan receivables | 2,252 | 2,252 | n/a |
| Total | 25,663 | 24,451 |
CapMan has subsidiaries outside of the Eurozone whose equity is exposed to movements in foreign currency exchange rates (Sweden, Denmark and Norway). However, the Group does not hedge currency as the impact of exposure to currency movements on equity is relatively small.
The Group's turnover is almost wholly denominated in euros and consequently turnover does not include any signifi cant foreign currency risk. In 2008 €0.5 million of the Group's turnover was denominated in Swedish crowns, and approx. €6 million of the Group's expenses were denominated in Swedish crowns, Danish crowns, Norwegian crowns and Russian roubles (approx. 17% of operating expenses). Of the foreign currencies there was a weakening, in particular, of Swedish crowns and Norwegian crowns against the euro during the fi nal quarter of 2008. Compared to 2007 exchange rate levels, foreign currency conversion into euros is estimated to have a positive impact of €0.2 million on the Group's result.
The investments in funds are valued using the International Private Equity and Venture Capital Valuation 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 observed for comparable publicly traded companies or transactions. Changes in valuation multiples can lead to signifi cant changes in fair values depending on the leverage ratio of the investee company.
| Impact on result, M€ | |||||
|---|---|---|---|---|---|
| Change –10% | Change +10% | ||||
| Average profitability of portfolio companies in the 2009 financial year | –2.24 | 2.21 | |||
| Average peer group multiples | –4.51 | 4.56 | |||
| EUR/SEK FX rate | 0.47 | –0.38 | |||
| EUR/NOK FX rate | 0.32 | –0.26 | |||
| EUR/DKK FX rate | 0.15 | –0.12 |
There were no signifi cant events after the close of the review period.
| Parent Company Income Statement (FAS) | Parent Company Balance Sheet (FAS) | ||||||
|---|---|---|---|---|---|---|---|
| € | Note | 1.1.–31.12.2008 | 1.1.–31.12.2007 | € | Note | 31.12.2008 | 31.12.2007 |
| Turnover | 1 | 1,595,637.71 | 686,256.45 | ASSETS | |||
| Other operating income | 2 | 4,000.00 | 164,108.96 | Non-current assets | |||
| Employee benefit expenses | 3 | –4,777,851.30 | –4,032,219.09 | ||||
| Depreciation | 4 | –456,484.75 | –88,557.01 | Intangible assets | 9 | 1,652,650.30 | 392,462.73 |
| Other operating expenses | 5 | –3,855,657.03 | –3,558,734.80 | Tangible assets Investments |
10 11 |
946,432.94 | 44,311.64 |
| Operating loss | –7,490,355.37 | –6,829,145.49 | Shares in subsidiaries Investments in associated companies |
14,886,038.41 336,775.68 |
11,102,456.36 340,760.49 |
||
| Finance income and costs | 6 | 1,865,231.08 | 15,490,592.99 | Other investments Investments total |
49,519,088.49 64,741,902.58 |
33,159,989.05 44,603,205.90 |
|
| Profit/loss before extraordinary items | –5,625,124.29 | 8,661,447.50 | |||||
| Extraordinary items | 7 | 8,500,000.00 | 6,100,000.00 | 67,340,985.82 | 45,039,980.27 | ||
| Current assets | |||||||
| Profit before taxes | 2,874,875.71 | 14,761,447.50 | |||||
| Long-term receivables | 12 | 27,390,088.46 | 18,906,692.67 | ||||
| Income taxes | 8 | –285,178.65 | –375,697.69 | Deferred tax receivables | 13 | 1,963,729.67 | 1,573,673.07 |
| Short-term receivables | 14 | 24,616,826.46 | 21,909,782.76 | ||||
| Profit for the financial year | 2,589,697.06 | 14,385,749.81 | Marketable securities | 39,679.36 | 3,081,972.98 | ||
| Cash and bank | 19,526,915.19 | 2,802,751.10 | |||||
| 73,537,239.14 | 48,274,872.58 | ||||||
| Total assets | 140,878,224.96 | 93,314,852.85 | |||||
| SHAREHOLDERS' EQUITY AND LIABILITIES | |||||||
| Shareholders' equity | 15 | ||||||
| Share capital | 771,586.98 | 771,586.98 | |||||
| Share premium account | 38,968,186.24 | 38,968,186.24 | |||||
| Invested unrestricted shareholders' equity | 4,482,255.00 | 1,726,604.17 | |||||
| Retained earnings | 4,512,711.92 | 2,921,972.11 | |||||
| Profit/loss for the financial year | 2,589,697.06 | 14,385,749.81 | |||||
| 51,324,437.20 | 58,774,099.31 | ||||||
| Liabilities | |||||||
| Non-current liabilities | 16 | 64,507,803.66 | 16,382,547.66 | ||||
| Current liabilities | 17 | 25,045,984.10 | 18,158,205.88 | ||||
| 89,553,787.76 | 34,540,753.54 | ||||||
| Total shareholders' equity and liabilities | 140,878,224.96 | 93,314,852.85 |
71
| € | 1.1.–31.12.2008 | 1.1.–31.12.2007 |
|---|---|---|
| Cash flow from operations | ||
| Profit/loss before extraordinary items | –5,625,124 | 8,661,448 |
| Finance income and costs | –1,865,231 | –15,490,593 |
| Adjustments to operating profit/loss | 456,485 | –25,547 |
| Change in net working capital | 4,905,195 | –1,315,170 |
| Interest paid | –2,396,309 | –729,532 |
| Interest received | 626,480 | 518,121 |
| Dividends received | 2,049,338 | 15,341,380 |
| Taxes paid | –1,771,284 | –1,372,378 |
| Cash flow from operations | –3,620,450 | 5,587,729 |
| Cash flow from investments | ||
| Investments in tangible and intangible assets | –2,618,794 | –308,447 |
| Investments in other placements | –17,173,789 | –4,551,664 |
| Cash flow from investments | –19,792,583 | –4,860,111 |
| Cash flow from financing activities | ||
| Share issue | 638,903 | 1,726,604 |
| Own shares purchased | –274,748 | 0 |
| Short-term loan receivables granted | 0 | –150,000 |
| Long-term loan receivables granted | –14,870,466 | –12,327,518 |
| Repayment of long-term loans | 5,896,224 | 6,552,672 |
| Issued hybrid bond | 20,000,000 | 0 |
| Proceeds from borrowings | 61,000,000 | 16,000,000 |
| Repayment of loans from financial institutions | –31,000,000 | –13,478,256 |
| Dividends paid | –12,795,010 | –9,259,044 |
| Other financial assets at fair value | 3,042,294 | –3,081,973 |
| Group contributions received | 8,500,000 | 6,100,000 |
| Cash flow from financing activities | 40,137,197 | –7,917,515 |
| Change in cash and cash equivalents | 16,724,164 | –7,189,897 |
| Cash and cash equivalents at start of year | 2,802,751 | 9,992,648 |
| Cash and cash equivalents at end of year | 19,526,915 | 2,802,751 |
| Change in working capital: | ||
| Change in current non-interest-bearing receivables | –9,577,822 | –7,055,140 |
| Change in current trade payables and other non-interest-bearing liabilities | 14,483,017 | 5,739,970 |
| 4,905,195 | –1,315,170 |
| 1. Turnover by area | 2008 | 2007 |
|---|---|---|
| € | ||
| Finland | 809,222 | 302,777 |
| Foreign | 786,416 | 383,479 |
| Total | 1,595,638 | 686,256 |
| 2. Other operating income | 2008 | 2007 |
| Capital gain | 0 | 12,000 |
| Gains from sale of shares in associated companies | 0 | 114,104 |
| Other | 4,000 | 38,005 |
| Total | 4,000 | 164,109 |
| 3. Personnel | 2008 | 2007 |
| Salaries and wages | 3,946,055 | 3,249,710 |
| Pension expenses | 712,643 | 449,563 |
| Other personnel expenses | 119,153 | 332,946 |
| Total | 4,777,851 | 4,032,219 |
| Salaries and other remuneration of the CEO and Deputy CEO | 706,271 | 533,617 |
| Board members | 168,000 | 136,500 |
| Average number of employees | 41 | 29 |
| 4. Depreciation | 2008 | 2007 |
| Depreciation by asset type: | ||
| Intangible rights | 65,638 | 6,706 |
| Other long-term expenditure | 158,248 | 63,636 |
| Machinery and equipment | 232,599 | 18,215 |
| Total | 456,485 | 88,557 |
| 5. Other operating expenses | 2008 | 2007 |
| Other personnel expenses | 219,641 | 435,494 |
| Office expenses | 793,874 | 1,111,958 |
| Travelling and entertainment | 360,192 | 297,268 |
| External services | 1,293,434 | 1,340,030 |
| Other operating expenses | 1,188,516 | 373,985 |
| Total | 3,855,657 | 3,558,735 |
| Audit fees | 51,565 | 35,150 |
72
| 6. Finance income and costs | 2008 | 2007 | 9. Intangible assets | 2008 | 2007 |
|---|---|---|---|---|---|
| € | Intangible rights | ||||
| Dividend income | |||||
| Group companies | 3,333,515 | 14,528,880 | Acquisition cost at 1 January | 296,123 | 42,623 |
| Others | 445,822 | 812,500 | Additions | 211,701 | 253,500 |
| Total | 3,779,337 | 15,341,380 | Acquisition cost at 31 December | 507,824 | 296,123 |
| Other interest and finance income | Accumulated depreciation at 1 January | –19,896 | –13,190 | ||
| Group companies | 289,554 | 201,731 | Depreciation for the financial year | –65,638 | –6,706 |
| Others | 1,819,998 | 1,271,730 | Accumulated depreciation at 31 December | –85,534 | –19,896 |
| Total | 2,109,552 | 1,473,461 | Book value on 31 December | 422,290 | 276,227 |
| Interest and other finance costs | Other long-term expenditure | ||||
| Group companies | –141,786 | –465,425 | |||
| Others | –3,881,872 | –858,823 | Acquisition cost at 1 January | 428,465 | 374,968 |
| Total | –4,023,658 | –1,324,248 | Additions | 1,272,372 | 53,497 |
| Acquisition cost at 31 December | 1,700,837 | 428,465 | |||
| Finance income and costs total | 1,865,231 | 15,490,593 | |||
| Accumulated depreciation at 1 January | –312,229 | –248,593 | |||
| Depreciation for the financial year | –158,248 | –63,636 | |||
| 7. Extraordinary items | 2008 | 2007 | Accumulated depreciation at 31 December | –470,477 | –312,229 |
| Extraordinary income | Book value on 31 December | 1,230,360 | 116,236 | ||
| Group contributions received | 8,500,000 | 6,100,000 | |||
| Intangible rights total | 1,652,650 | 392,463 | |||
| 10. Tangible assets | 2008 | 2007 | |||
| 8. Income taxes | 2008 | 2007 | Machinery and equipment | ||
| Income taxes | –675,235 | –1,754,073 | |||
| Deferred taxes | 390,057 | 1,378,376 | Acquisition cost at 1 January | 102,996 | 129,828 |
| Total | –285,178 | –375,697 | Additions | 1,019,968 | 1,450 |
| Disposals | 0 | –28,282 | |||
| Acquisition cost at 31 December | 1,122,964 | 102,996 | |||
| Accumulated depreciation at 1 January | –63,609 | –73,676 | |||
| Accumulated depreciation in changes | 0 | 28,282 | |||
| Depreciation for the financial year | –232,599 | –18,215 | |||
| Accumulated depreciation at 31 December | –296,208 | –63,609 | |||
| Book value on 31 December | 826,756 | 39,387 | |||
| Other tangible assets |
| Book value on 31 December | 826,756 | 39,387 |
|---|---|---|
| Other tangible assets | ||
| Acquisition cost at 1 January Additions Book value on 31 December |
4,925 114,752 119,677 |
4,925 0 4,925 |
| Tangible assets total | 946,433 | 44,312 |
Total 11,584,664 19,034,326
SHAREHOLDER
73
| 11. Investments | 2008 | 2007 | 14. Short-term receivables | 2008 | 2007 |
|---|---|---|---|---|---|
| € | Accounts receivable | 765,373 | 89,633 | ||
| Shares in subsidiaries | |||||
| Receivables from Group companies | |||||
| Acquisition cost at 1 January | 11,102,456 | 11,069,496 | Accounts receivable | 257,306 | 122,961 |
| Additions | 3,809,282 | 33,600 | Loan receivables | 891,507 | 516,507 |
| Disposals | –25,700 | –640 | Other receivables | 17,306,882 | 18,816,458 |
| Acquisition cost at 31 December | 14,886,038 | 11,102,456 | Total | 18,455,695 | 19,455,926 |
| Shares in associated companies | Receivables from associated companies | ||||
| Accounts receivable | 116,715 | 193,681 | |||
| Acquisition cost at 1 January | 340,760 | 864,094 | Loan receivables | 465,732 | 0 |
| Additions | 99,162 | 52,738 | Accrued income | 1,613,196 | 684,819 |
| Disposals | –103,147 | –576,072 | Total | 2,195,643 | 878,500 |
| Acquisition cost at 31 December | 336,775 | 340,760 | |||
| Loan receivables | 133,390 | 125,939 | |||
| Shares, other | Other receivables | 1,145,669 | 931,407 | ||
| Accrued income | 1,921,056 | 428,377 | |||
| Acquisition cost at 1 January | 33,159,989 | 28,117,952 | |||
| Additions | 18,768,011 | 13,838,972 | Short-term receivables total | 24,616,826 | 21,909,782 |
| Disposals | –2,408,910 | –8,796,935 | |||
| Acquisition cost at 31 December | 49,519,090 | 33,159,989 | |||
| 15. Shareholders' equity | 2008 | 2007 | |||
| Investments total | 64,741,903 | 44,603,205 | Share capital at 1 January | 771,587 | 771,587 |
| Share capital at 31 December | 771,587 | 771,587 | |||
| The subsidiaries and the associated companies are presented in the Notes to the Consolidated Financial Statements, | |||||
| Table 32. Related party disclosures. | Share premium account at 1 January | 38,968,186 | 38,968,186 | ||
| Share premium account at 31 December | 38,968,186 | 38,968,186 | |||
| 12. Long-term receivables | 2008 | 2007 | Invested unrestricted shareholders' equity at 1 January | 1,726,604 | 0 |
| Receivables from Group companies | Share issue | 2,391,500 | 0 | ||
| Loan receivables | 3,250,000 | 4,648,105 | Share subscriptions with options | 638,903 | 1,726,604 |
| Own shares purchased | –274,748 | 0 | |||
| Receivables from associated companies | Other | –4 | 0 | ||
| Loan receivables | 22,219,052 | 12,497,396 | Invested unrestricted shareholders' equity at 31 December | 4,482,255 | 1,726,604 |
| Other loan receivables | 1,909,107 | 1,500,000 | Retained earnings at 1 January | 17,307,722 | 12,163,542 |
| Dividend payment | –12,795,010 | –9,259,044 | |||
| Other receivables | 11,930 | 261,192 | Other change | 0 | 17,474 |
| Retained earnings at 31 December | 4,512,712 | 2,921,972 | |||
| Long-term receivables total | 27,390,089 | 18,906,693 | |||
| Profit for the financial year | 2,589,697 | 14,385,750 | |||
| 13. Deferred tax assets | 2008 | 2007 | Shareholders' equity, total | 51,324,437 | 58,774,099 |
| Accrued differences | 1,963,730 | 1,573,673 | |||
| Deferred tax assets total | 1,963,730 | 1,573,673 | Calculation of distributable assets | ||
| Retained earnings | 4,512,712 | 2,921,972 | |||
| Profit for the financial year | 2,589,697 | 14,385,750 | |||
| Invested unrestricted shareholders' equity | 4,482,255 | 1,726,604 |
74
| CapMan Plc's share capital is divided as follows: | 2008 | 2007 | 18. Contingent liabilities | 2008 | 2007 |
|---|---|---|---|---|---|
| Number of shares | |||||
| Series A share (10 votes/share) | 6,000,000 | 6,000,000 | Leasing agreements – CapMan Group as lessee | ||
| Series B share (1 vote/share) | 75,458,424 | 73,968,819 | |||
| Operating lease commitments | |||||
| 16. Non-current liabilities | 2008 | 2007 | Within one year | 229,594 | 0 |
| € | After one but not more than five years | 299,644 | 0 | ||
| Liabilities to Group companies | Total | 529,238 | 0 | ||
| Other liabilities | 131,656 | 231,656 | |||
| Other hire purchase commitments | |||||
| Hybrid bond | 20,000,000 | 0 | Within one year | 963,516 | 0 |
| After one but not more than five years | 3,854,064 | 0 | |||
| Bank loans | 43,125,000 | 16,000,000 | Beyond five years | 3,211,720 | 0 |
| Total | 8,029,300 | 0 | |||
| Other liabilities | 1,251,148 | 150,892 | |||
| Securities and other contingent liabilities | |||||
| Non-current liabilities total | 64,507,804 | 16,382,548 | |||
| Contingencies for own commitment | |||||
| 17. Current liabilities | 2008 | 2007 | Mortgage bonds | 60,000,000 | 20,000,000 |
| € | |||||
| Accounts payable | 330,057 | 359,042 | Loan commitments to Maneq funds | 8,291,935 | 5,284,278 |
| Other contingent liabilities | 1,300,000 | 2,075,000 | |||
| Liabilities to Group companies | |||||
| Accounts payable | 4,498,544 | 4,630,498 | Remaining commitments to funds | ||
| Other liabilities | 12,924,293 | 10,421,345 | |||
| Accrued expenses | 359,331 | 851,157 | Equity funds | ||
| Total | 17,782,168 | 15,903,000 | CapMan Equity VII | 1,961,520 | 2,927,030 |
| CapMan Buyout VIII | 10,565,347 | 23,151,574 | |||
| Bank loans | 2,875,000 | 0 | CapMan Life Science IV | 5,654,565 | 6,892,000 |
| Other liabilities | 2,406,055 | 101,476 | CapMan Technology Fund 2007 | 10,759,991 | 12,444,491 |
| Accrued expenses | 1,652,704 | 1,794,688 | Swedestart Tech KB | 658,899 | 967,294 |
| CapMan Public Market Fund | 15,000,000 | 0 | |||
| Current liabilities total | 25,045,984 | 18,158,206 | CapMan Russia Fund | 11,090,709 | 0 |
| CapMan Buyout IX | 13,000,000 | 0 | |||
| Other | 159,321 | 589,622 | |||
| 68,850,352 | 46,972,011 | ||||
| Mezzanine funds | |||||
| CapMan Mezzanine IV L.P. | 971,500 | 2,718,750 | |||
| CapMan Mezzanine IV Classic Ky | 1,476,875 | 1,743,750 |
Fund of funds
CapMan, like other investors in the funds, gives commitments to the funds when they are established. The main part of the commitments become due during the fi rst fi ve years of each fund's life time.
Remaining commitments to funds 73,704,904 53,677,317
Access Capital LP II 1,925,000 2,216,316 Other 481,177 26,490
2,448,375 4,462,500
2,406,177 2,242,806
75
| Calculation of key ratios | ||
|---|---|---|
| Return on equity (ROE), % = | Profi t before taxes – taxes Shareholders' equity + minority interest (average) |
x 100 |
| Return on investment (ROI), % = Profi t before taxes + interest expenses and other fi nancial expenses Balance sheet total – non-interest bearing debts (average) |
x 100 | |
| Equity ratio, % = | Shareholders' equity + minority interest Balance sheet total – advances received |
x 100 |
| Net gearing, % = | Net interest-bearing liabilities Shareholders' equity |
x 100 |
| Earnings per share (EPS) = | Profi t/loss for the fi nancial year Share issue adjusted number of shares (average) |
|
| Shareholders' equity per share = Shareholders' equity | Share issue adjusted number of shares at the end of the fi nancial year | |
| Dividend per share = | Dividend paid in the fi nancial year Share issue adjusted number of shares at the end of the fi nancial year |
|
| Dividend per earnings, % = | Dividend/share Earnings/share |
x 100 |
| Helsinki, 28 January 2009 | |
|---|---|
| Ari Tolppanen Chairman |
Sari Baldauf |
| Tapio Hintikka | Lennart Jacobsson |
| Conny Karlsson | Teuvo Salminen |
| Heikki Westerlund CEO |
We have audited the accounting records, the fi nancial statements, the report of the Board of Directors and the administration of CapMan Plc. for the fi nancial period 1 January – 31 December 2008. The fi nancial statements comprise the consolidated balance sheet, income statement, cash fl ow statement, statement of changes in equity and notes to the consolidated fi nancial statements, as well as the parent company's balance sheet, income statement, cash fl ow statement and notes to the fi nancial statements.
The Board of Directors and the CEO are responsible for the preparation of the fi nancial statements and the report of the Board of Directors and for the fair presentation of the consolidated fi nancial statements in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU, as well as for the fair presentation of the parent company's fi nancial statements and the report of the Board of Directors in accordance with laws and regulations governing the preparation of the fi nancial statements and the report of the Board of Directors in Finland. The Board of Directors is responsible for the appropriate arrangement of the control of the Company's accounts and fi nances, and the CEO shall see to it that the accounts of the Company are in compliance with the law and that its fi nancial affairs have been arranged in a reliable manner.
Our responsibility is to perform an audit in accordance with good auditing practice in Finland, and to express an opinion on the parent company's fi nancial statements, on the consolidated fi nancial statements and on the report of the Board of Directors based on our audit. Good auditing practice requires that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the fi nancial statements and the report of the Board of Directors are free from material misstatement and whether the members of the Board of Directors of the parent company and the CEO have complied with the Limited Liability Companies Act. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fi nancial statements and the report of the Board of Directors. The procedures selected depend on the auditor's judgement, including the assessment of the risks of material misstatement of the fi nancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the fi nancial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the fi nancial statements and the report of the Board of Directors.
The audit was performed in accordance with good auditing practice in Finland. We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.
In our opinion, the consolidated fi nancial statements give a true and fair view of the fi nancial position, fi nancial performance, and cash fl ows of the Group in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU.
In our opinion, the fi nancial statements and the report of the Board of Directors give a true and fair view of both the consolidated and the parent company's fi nancial performance and fi nancial position in accordance with the laws and regulations governing the preparation of the fi nancial statements and the report of the Board of Directors in Finland. The information in the report of the Board of Directors is consistent with the information in the fi nancial statements.
Helsinki, 6 March 2009
PricewaterhouseCoopers Oy Authorised Public Accountants
Jan Holmberg
Authorised Public Accountant
1 Jul 2008 CapMan exits Reima
CapMan Plc Annual Report 2008
77
| SUMMARY OF RELEASES IN 2008 | March | 3 Jul 2008 | Curato acquires Norwegian Sentrum | November | |||
|---|---|---|---|---|---|---|---|
| January | 10 Mar 2008 CapMan's Annual Report 2007 published |
Røntgeninstitutt 11 Jul 2008 CapMan establishes a Public Market fund that will utilise private |
6 Nov 2008 | CapMan Russia Fund reaches EUR 118 million at second closing |
|||
| 11 Jan 2008 CapMan invests in Norwegian Barnebygg |
11 Mar 2008 LUMENE Group to focus on beauty and hair care – Farmos Oy to |
equity style value creation methods in public markets |
25 Nov 2008 B-shares subscribed with stock options 2003A in CapMan Plc |
||||
| 16 Jan 2008 CapMan Plc's EPS for 2007 approximately EUR 0.23 according |
become independent 17 Mar 2008 Medtronic's Per Sköld joins CapMan |
25 Jul 2008 CapMan Plc sells its stake in Access Capital Partners, impact on 2008 |
26 Nov 2008 CapMan invests in LTE Innovations | ||||
| to preliminary fi gures 18 Jan 2008 CapMan establishes EUR 835 |
Life Science 26 Mar 2008 CapMan acquires land in Kivistö, |
result EUR 18.0 million | December | ||||
| million hotel real estate fund and buys 39-hotel portfolio |
Vantaa 27 Mar 2008 Decisions adopted by CapMan Plc's |
August | 3 Dec 2008 5 Dec 2008 |
CapMan acquires Danfysik ACP A/S CapMan Plc issues EUR 20.0 |
|||
| 18 Jan 2008 CapMan Real Estate and Holiday | Annual General Meeting | 4 Aug 2008 | Invitation to CapMan Plc' Press | million hybrid bond | |||
| Club Resorts Oy sign a letter of intent for four spa hotel projects |
31 Mar 2008 Jukka Ruuska to join CapMan | 8 Aug 2008 | Conference CapMan Plc Group's Interim Report |
8 Dec 2008 | Correction to CapMan Plc Stock Exchange Release on 5 December |
||
| 18 Jan 2008 Invitation to CapMan Plc's Press Conference at 12.00 p.m: CapMan establishes EUR 835 million hotel |
April | 29 Apr 2008 Invitation to CapMan Plc' Press | 8 Aug 2008 | January–June 2008 CapMan Plc starts share repurchases |
2008 18 Dec 2008 CapMan estimates approx. 15% decline in the fair value of its fund |
||
| real estate investment fund 22 Jan 2008 CapMan and operative |
Conference | 11 Aug 2008 Jukka Ruuska appointed member of CapMan Plc Management Group, |
investments in the last quarter of 2008 |
||||
| management acquires Talentum's TV business |
May | Joakim Rubin joins CapMan Public Market team from Handelsbanken |
23 Dec 2008 CapMan Buyout IX fund established at EUR 203 million |
||||
| 23 Jan 2008 CapMan Technology 2007 fund closes at EUR 142.3 million – the |
7 May 2008 CapMan Plc Group's Interim Report January–March 2008 |
Capital Markets 27 Aug 2008 CapMan Plc's Norum acquisition |
|||||
| fund is one of the Nordic countries' largest technology funds |
19 May 2008 B-shares subscribed with stock options 2003A in CapMan Plc |
completed, two new investments from CapMan Russia Fund |
Press release Stock exchange release |
||||
| 25 Jan 2008 Invitation to CapMan Plc' Press Conference |
19 May 2008 CapMan acquires Cederroth 22 May 2008 CapMan exits StaffPoint, impact on |
||||||
| 31 Jan 2008 CapMan Plc Group Financial | CapMan Plc's result approx. EUR 4 | September | In addition CapMan published releases on acquisition of own shares on trading days 18 August – 15 October |
||||
| Statements Bulletin 1 January – 31 December 2007 |
million 26 May 2008 CapMan expands its operations to |
4 Sep 2008 | CapMan Real Estate to develop a new head offi ce for OneMed |
2008. Releases regarding acquisition of own shares are available on CapMan's Internet pages at www.capman. |
|||
| 31 Jan 2008 CapMan Plc Board of Directors convenes Annual General Meeting |
Russia and acquires private equity house Norum |
5 Sep 2008 | New CapMan Plc B shares entered in the Trade Register |
com. | |||
| 2008 31 Jan 2008 Summary of CapMan Plc's releases |
29 May 2008 CapMan builds Nordic television production company |
22 Sep 2008 Nominations at CapMan Group | |||||
| in 2007 | October | ||||||
| February | June | 6 Oct 2008 | B-shares subscribed with stock | ||||
| 5 Feb 2008 | CapMan builds Nordic logistics | 18 Jun 2008 CapMan and InnovationsKapital invest in Crayon |
9 Oct 2008 | options 2003A in CapMan Plc CapMan Plc's Access sale called off |
|||
| group, Cargo Partner | 23 Oct 2008 Invitation to CapMan Plc Group's | ||||||
| 29 Feb 2008 CapMan Hotels RE Ky's acquisition of 39 hotel properties fi nalised |
July | Press Conference 30 Oct 2008 CapMan Plc Group's Interim Report |
|||||
| 1 Jul 2008 | CapMan exits Spintop Netsolution | January–September 2008 |
30 Oct 2008 CapMan Plc's fi nancial reporting in
2009
➥ The releases in their entirety are available on CapMan's Internet pages at www.capman.com.
The CapMan Plc B share has been listed on the Helsinki Exchange since 2001. At the end of 2008, CapMan had 4,514 shareholders. Altogether 36% of the total shares were owned by personnel.
CapMan Plc's shares are included in the book-entry securities register. The shares have no nominal value. A and B shares carry equal dividend entitlement.
CPMBV
Finance
Mid Cap
* Proposal of the Board of Directors to the Annual General Meeting for year 2009.
| Number of shares | Votes | Proportion of shares, % | Proportion of votes, % | |
|---|---|---|---|---|
| A (10 votes/share) | 6,000,000 | 60,000,000 | 7.4% | 44.3% |
| B (1 vote/share) | 75,458,424 | 75,458,424 | 92.6% | 55.7% |
| Total | 81,458,424 | 135,458,424 | 100.0% | 100.0% |
| 2004 | 2005 | 2006 | 2007 | 2008 | |
|---|---|---|---|---|---|
| Earnings/share, € | 0.06 | 0.09 | 0.15 | 0.24 | –0.10 |
| Diluted, € | 0.06 | 0.09 | 0.15 | 0.24 | –0.10 |
| Shareholders' equity/share, € | 0.60 | 0.64 | 0.74 | 0.86 | 0.86 |
| Dividend/share, €* | 0.06 | 0.07 | 0.12 | 0.16 | 0.00 |
| Dividend/earnings, % | 100.0 | 78.0 | 80.0 | 66.7 | – |
| Average share issue adjusted number of shares | 74,709,330 | 75,041,938 | 76,212,849 | 78,142,867 | 80,432,600 |
| Share issue adjusted number of shares at year-end | 74,709,330 | 75,923,348 | 77,158,698 | 79,968,819 | 81,458,424 |
| Number of shares outstanding | 74,709,330 | 75,923,348 | 77,158,698 | 79,968,819 | 81,322,921 |
| Own shares held by Company at year-end | – | – | – | – | 135,503 |
| Return on equity (ROE), % | 11.1 | 14.8 | 23.4 | 38.9 | –11.8 |
* Proposal of the Board of Directors to the Annual General Meeting for year 2008.
79
| Trading price, € | Trading turnover | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Highest | Lowest | Volume-weighted average | Closing price 31.12. | Trading, million shares | Trading, M€ | ||||||||
| 2008 | 2007 | 2008 | 2007 | 2008 | 2007 | 2008 | 2007 | 2008 | 2007 | 2008 | 2007 | ||
| B shares | 3.40 | 4.07 | 0.79 | 2.86 | 2.09 | 3.49 | 0.95 | 3.25 | 14.8 | 30.9 | 29.6 | 107 | |
| 2003B options* | 2.00 | 2.25 | 0.12 | 2.09 | 1.11 | 2.15 | 0.15 | 2.1 | 0.2 | 0.1 | 0.2 | 0.3 |
* Listing of 2003B stock options was commenced on 1 October 2007 and ends on 31 October 2009.
CapMan B share trading and average price 1.1.2004–31.12.2008
* The share sale by Senior Partners and other employees of CapMan accounted for €17.5 million of trading.
Relative development of CapMan B share and OMX indices 1.1.2004–31.12.2008
Management and employees of CapMan* 36% Other shareholders 34% Nominee registered shareholders 30% Holdings by shareholder class
* Shareholders among the 100 largest shareholders of the Company (directly or via corporations under control or authority).
The proportion of holdings by nominee registered owners in CapMan Plc at the year-end was 29.5% (31.6%). According to information received by CapMan Plc directly from shareholders, nominee registered owners at the end of 2008 included funds managed by the following international investors: Dunedin Enterprise Investment Trust Plc, INVESCO PowerShares Capital Management LLC, Red Rocks Capital and Royce & Associates LLC and AP3. In addition to the aforementioned, Barwon Investment Partners and Hermes Investment Management managed CapMan shares on behalf of discretionary clients at year-end. The aggregate holding of these entities was approx. 59% of the total holdings by nominee registered owners in CapMan Plc according to information received by the Company.
CapMan Plc's Annual General Meeting for 2009 will be held on Tuesday, 7 April 2009 at 10 am in the Diana Auditorium, Erottajankatu 5, 00130 Helsinki, Finland. Shareholders who, by 27 March 2009, have been entered in the Company's Shareholder Register held by the Finnish Central Securities Depository Ltd may attend the Annual General Meeting.
A shareholder who wishes to attend the Annual General Meeting must inform CapMan at the latest by 4 pm on 30 March 2009. Shareholders can register either by written notice (CapMan Plc, Korkeavuorenkatu 32, 00130 Helsinki, Finland), on the Internet at www.capman.com/En/ InvestorRelations/AnnualGeneralMeetings, by phone to Anu Mikkola on +358 207 207 586 or to Anna Ojansivu on +358 207 207 357, by e-mail to [email protected], or by fax to +358 207 207 550. Registrations must be received at CapMan before expiry of the registration period. Any proxy for exercising voting rights must be delivered to CapMan at the aforementioned postal address before expiry of the registration period.
Owing to the loss made in 2008 and the uncertainty attached to the current market situation, CapMan Plc's Board of Directors will propose to the Annual General Meeting that no dividend be paid for 2008.
In 2009, CapMan Plc will publish its interim reports on the following dates:
1 January – 31 March 2009: Tuesday, 12 May 2009 1 January – 30 June 2009: Friday, 7 August 2009 1 January – 30 September 2009: Friday, 30 October 2009
CapMan's fi nancial reports are published in Finnish and English. CapMan's Annual Report, interim reports, stock exchange releases and press releases can be viewed on CapMan's Internet pages at www.capman.com. CapMan's website also contains other information for investors. In addition, those interested can subscribe to the Company's press releases electronically and be added to the mailing list for CapMan's Annual Report online.
Euroclear Finland Ltd maintains registers of CapMan Plc's shares, shareholders and stock options. Shareholders and holders of options are requested to notify changes in their personal particulars and address directly to Euroclear Finland or to their own account manager. Further information is available from the free customer helpline of Euroclear Finland, tel. +358 20 770 6000. CapMan is not able to update address information.
The Group's CEO, Head of Investor Services team, CFO and Fundraising and IR Analyst are responsible for CapMan's investor relations. The company observes a two-week silent period before publication of its interim reports and fi nancial statements, during which it does not comment on the Company's results or future prospects and does not meet investors, analysts or representatives of the media.
Heikki Westerlund CEO, CapMan Plc, Senior Partner Tel. +358 207 207 504
Jerome Bouix Head of Investor Services, Senior Partner Tel. +358 207 207 558
Kaisa Arovaara CFO tel. +358 207 207 583
Fundraising and IR Analyst Tel. +358 207 207 523
Christopher Brown, tel. +44 20 7155 8145 [email protected]
Martti Larjo, tel. +358 9 3694 9429 [email protected]
Mikael Nummela, tel. +358 10 252 4414 [email protected]
CapMan Plc CapMan Capital Management Ltd. Realprojekti Oy Korkeavuorenkatu 32 00130 Helsinki, Finland Tel +358 207 207 500 Fax +358 207 207 510
Esplanaden 7 1263 Copenhagen K, Denmark Tel +45 35 26 02 12 Fax +45 35 26 02 14
Grev Turegatan 30 P.O. Box 5745 114 87 Stockholm, Sweden Tel +46 8 545 854 70 Fax +46 8 545 854 89
Dronning Mauds gate 3 P.O. Box 1235 Vika 0110 Oslo, Norway Tel +47 23 23 75 75 Fax +47 23 23 75 79
CapMan Russia Norum Private Equity Advisors Limited 23, Osennij Blvd, 121609 Moscow, Russia Tel + 7 495 781 37 30 Fax + 7 495 781 37 29
CapMan (Guernsey) Ltd CapMan Mezzanine (Guernsey) Ltd CapMan (Guernsey) Buyout VIII GP Ltd CapMan (Guernsey) Buyout IX GP Ltd CapMan (Guernsey) Technology 2007 GP Ltd CapMan (Guernsey) Life Science IV GP Ltd CapMan (Guernsey) Russia GP Ltd
Hambro Hs, St. Julian's Avenue P.O. Box 86, St. Peter Port Guernsey, GY1 3AE, Channel Islands Tel +44 1481 726 521 Fax +44 1481 710 376
Carré Bonn, 20, rue de la Poste P.O. Box 230 L-2012 Luxembourg Tel +352 230 236 812 Fax +352 260 236 470
www. capman.com E-mail addresses at CapMan fi [email protected]
Helsinki l Copenhagen l Stockholm l Oslo l Moscow
www.capman.com
Building tools?
Free accounts include 100 API calls/year for testing.
Have a question? We'll get back to you promptly.