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CapMan Plc Group’s (CapMan) turnover for the review period was EUR 13.2 million. (EUR 10.1 million 1 January – 30 September 2001). Profit after financial items was EUR 4.1 million (EUR 29.6 million). The fall in profit is mainly accounted for by the sale of CapMan’s Sampo plc shares in the comparative period of 2001, from which CapMan recorded a one-off profit of EUR 18 million in addition to the paid dividend (including imputation credit) of EUR 6.6 million. Operating profit for the period was EUR 3.5 million, which is the same level as the comparative period (EUR 3.6 million) excluding the one-off sale of Sampo plc shares. The Group’s profit after taxes and minority interests was EUR 3.1 million (EUR 20.8 million). Earnings per share on 30 September 2002 was EUR 0.04 (EUR 0.33).
The funds managed/advised by CapMan invested in January-September EUR 94.1 million in portfolio companies, which is more than in the whole year 2001 in total. The funds have significant capital left for new and follow-on investments, which enables CapMan to continue its active role in the private equity field also in 2003.
CapMan’s core business is private equity fund management and advisory services. The Group’s income derives from management fees from the funds, carried interest from funds generating carried interest, and a share of the result of affiliated companies. Returns on other financial assets also contribute substantially to the Group’s result.
CapMan’s Swedish subsidiary CapMan AB (formerly Swedestart Management AB), which became a wholly owned subsidiary of CapMan Plc on 18 April 2002, is included in the interim report as of 1 May 2002.
The interim report is divided into two sections: the funds managed/advised (later managed) by CapMan and CapMan Group’s financial performance for the period under review.
Investments are divided into direct investments in portfolio companies and European fund investments. Direct investments include mid-sized buy-outs, technology investments and investments in the life science sector in Finland, Sweden and Denmark. Buy-outs are made in manufacturing, service and retail industries while technology investments focus on strong growth companies in the IT and telecommunications sectors. The Swedish subsidiary CapMan AB introduced life science investments, with a focus on companies specialising in medical technology, to CapMan’s portfolio.
Fund investments are carried out by the affiliated company Access Capital Partners, of which CapMan owns 47.5 per cent. Access Capital Partners manages/advises two funds that invest in mid-sized buy-out, technology and life science funds throughout Europe.
Substantial remaining commitments
At the end of the third quarter CapMan managed / advised EUR 1,649 million (EUR 1,168 million) in capital calculated as total commitments in the funds, of which EUR 1,121.9 million was in funds that invest directly in portfolio companies. As at 30 September 2002, investments in portfolio companies at acquisition cost totalled EUR 484.3 million. Of this, 73 per cent was invested in traditional companies and 27 per cent was invested in technology and life science companies. About EUR 500 million remains to be invested in portfolio companies.
CapMan’s affiliated company Access Capital Partners managed/advised EUR 527 million in capital (EUR 465 million) at the close of the period. Of this, investments / commitments totalled EUR 304.6 million and remaining investment capacity totalled EUR 222.6 million.
Investments by the funds increased
The funds that invest directly in portfolio companies made ten new investments and six substantial follow-on investments from January to September. All in all, EUR 94.1 million (EUR 73.3 million) was invested by CapMan funds during the period.
Three new investments were made during the third quarter, one each in the buy-out, technology and life science sectors. In July, the Swedestart Life Science KB fund managed by CapMan AB made an investment in Eutech Medical AB, which is focused on the treatment of incontinence. In the technology sector Swedestart Tech KB fund, Finnventure Fund V and CapMan Equity VII made the first mutual co-investment in the Swedish company Avitec AB in July. Avitec is a world-leading supplier of repeaters and repeater systems, used to improve the radio coverage in mobile telephony and trunked radio networks. In August, Finnventure Fund V and CapMan Equity VII made a EUR 34 million investment in the Danish waste management company RGS90 A/S and gained a 40 per cent stake in the company. RGS90 provides versatile waste management services especially to industrial customers. The company is market leader in recycling of construction materials in Denmark and holds a strong position also in the treatment and recycling of contaminated soil and industrial waste water. The transaction was CapMan’s first in the environmental technology and recycling sector.
New investments in the first half of 2002 included Finland’s leading IT-training provider Knowledgepool Tieturi Oy, Swedish provider of communications, interactive media and CRM consultation services Digiscope AB, and provider of mobile multimedia solutions Hantro Products Oy. New investments in the life science sector were Inion Oy, specialist in biomaterials and their surgical applications, and Otre AB, developer of a new technology for the sterilisation of surgical instruments. In the buy-out sector the new investments were in Finland’s leading staffing company Extra Personnel Services and the multi-sector family business Savcor Group.
The most significant follow-on investments during the period included folding cartons manufacturer Å&R Carton AB, leisure travel company Holiday Club Finland Oy, health care group Mehiläinen Oyj, developer of XML technologies Republica Oy, multimedia company Aktivist Network Oy (now Medianorth Group Oy) and accounting company chain Pretax Oy.
Exits by the funds
The funds managed by CapMan exited from a total of four portfolio companies during the period under review. The exits took place in the first half of the year. The acquisition price of all realisations during the period (including partial realisations and mezzanine loan payments) totalled EUR 11.7 million (12.6 million).
The most significant realisation during the period was the sale of shares in the restaurant chain Royal-Rest Oy to MK-Rest Oy in May. Finnventure Fund IV and Finnmezzanine Fund II invested in Royal-Rest in 1999 and held a 43.7 per cent stake of the company.
Finnventure Funds II and III exited Euran Kuluttajatuotteet Oy in June. The funds made their initial investment in the company in 1997 and their combined shareholding was 30.5 per cent.
Finnventure Fund III sold its 1.5 per cent share in Arcorus Oyj to Swedish Ratos AB in April. The fund invested in Arcorus in 1997 and made a partial realisation of the investment in spring 2000.
Finnventure Funds II and III made a partial exit from the manufacturer of wood-fired heating products and fireplaces UPL Holding Oy in January.
Finnventure Fund II’s portfolio company Mytek Oy, which specialised in shiitake mushroom growing and sales, filed for bankruptcy in March.
For information on the funds managed by CapMan and their portfolio companies, please visit CapMan’s website
European fund investments
CapMan Plc’s affiliated company Access Capital Partners is one of Europe’s leading funds of funds managers, with EUR 527 million (EUR 465 million) of capital managed/advised in two funds. Access Capital Fund (ACF) has EUR 250 million in capital and it has made investments in 22 European funds. Access Capital Fund II (ACF II) was closed at the end of July with a final size of EUR 277 million. The fund had made seven investments as of the end of the third quarter.
Further information about Access Capital Partners can be found at

Other events during the period
One of the portfolio companies in Finnmezzanine Fund II, the Swedish provider of telecommunications infrastructure and services Utfors AB, filed for financial restructuring on 16 September 2002. The possible loss of the investment was already taken into account in the valuation of Finnmezzanine Fund II’s portfolio in CapMan’s interim report for January-June 2002.
CapMan Group
Financial performance
CapMan’s turnover from January to September was EUR 13.2 million (EUR 10.1 million 1 January – 30 September 2001). Management fees from the funds increased and were EUR 11.1 million (EUR 6.3 million). Carried interest received by CapMan from the funds decreased to EUR 1.4 million (EUR 3.4 million). Finnventure Fund IV is not generating carried interest at present, but the realisation of its investment in Royal-Rest Oy moves the fund considerably closer to the point when it will begin to generate carried interest.
Carried interest for the period was received from the four funds that have begun to generate carried interest. These four funds have capital of EUR 84.1 million, which represents about 8.0 per cent of the total capital in CapMan funds (EUR 1,052.1 million) as listed in appendix 3. As can be seen in the appendix, the portfolios of funds that have not begun to generate carried interest are mainly in good condition.
It may prove difficult for Finnmezzanine Fund II to begin to generate carried interest if the fund loses its whole investment of EUR 13.4 million in Utfors AB, which filed for financial restructuring in September. The fund has EUR 88.3 million of capital under management in total. Because CapMan’s investment as the fund’s management company is small, the potential loss of the investment will not have an immediate effect on CapMan’s result for 2002.
The share from the result of CapMan’s affiliated companies increased slightly from the previous year and was EUR 0.5 million (EUR 0.3 million). Profit after taxes and minority interests was EUR 3.1 million (EUR 20.8 million). The fall in profit resulted mainly from the sale of CapMan’s Sampo plc shares in the comparative period of 2001, for which CapMan received a pre-tax profit EUR 18 million. The share sale and a EUR 6.6 million Sampo dividend had a combined effect of approximately EUR 17.5 million on CapMan’s profit after taxes in 2001. Operating profit for the period was EUR 3.5 million, which is the same level as the comparative period of 2001 (EUR 3.6 million) excluding the one-off sale of Sampo plc shares. Shareholder’s equity per share on 30 September 2002 was EUR 0.70 (EUR 0.90). CapMan’s cash assets at the end of the review period totalled EUR 28.8 million (EUR 58.9 million). The company has no interest-bearing debt. Return on equity was 5.34 per cent (48.49%).
EUR 221 million committed to the new fund
CapMan began to raise a new Nordic equity fund CapMan Equity VII in autumn 2001. The fund is CapMan’s seventh equity fund and it had raised commitments totalling EUR 166 million at the first closing on 31 January 2002. By the end of September, nineteen investors had committed EUR 221 million in capital to the fund. About half of the commitments are from Finnish institutional investors and the remainder from international institutional investors. 43 per cent of the commitments originate from new investors. Additional commitments to the fund are still expected and the fund will remain open to new investors until the final closing by the end of 2002.
The investment strategy of CapMan Equity VII is to invest about two-thirds of the capital in mid-sized buy-outs and about one-third in technology companies in the IT and telecommunications sectors, with main focus on investments in Nordic companies. CapMan has committed EUR 16 million to the fund.
New Nordic organisation
CapMan Plc strengthened its position as one of the leading private equity investors in the Nordic countries via the acquisitions of the Swedish venture capital company Swedestart Management AB (now CapMan AB) in spring 2002 and the Danish Nordic Private Equity Group (now CapMan Invest A/S) in 2001. Subsequent to the acquisitions, CapMan announced a reorganisation of the Group in August. The reorganisation combines the separate domestic organisations into pan-Nordic business and support units with the aim to achieve synergies at the Nordic level. The new organisation came into effect on 2 September 2002 and consists of three Nordic Business Units (Buy-out, Technology and Life Science) as well as two Nordic Support Units (Group Finances and Administration and Group Development).
Those appointed as heads of the new units were Mr Heikki Westerlund, Senior Partner (Head of Buy-out Business Unit), Mr Lennart Jacobsson, Senior Partner (Head of Technology Business Unit), Mr Jan Lundahl, Senior Partner (Head of Life Science Business Unit), Mr Olli Liitola, Senior Partner (Head of Group Finances and Administration) and Mr Vesa Vanha-Honko, Senior Partner (Head of Group Development).
At the end of the review period, CapMan had 67 (49) employees. There were 49 (45) employees in Helsinki, 12 in Stockholm and 6 (4) in Copenhagen. In addition there were seven Senior Advisors acting as consultants for CapMan, four in Finland and three in Sweden.
Trading and shares
Consistent with the decisions adopted by the Annual General Meeting held on 3 April 2002, CapMan Plc distributed a dividend per share of EUR 0.26 for the 2001 financial year.
A total of 12,540,977 CapMan Plc B shares with a value of EUR 32.5 million were traded on the Helsinki Stock Exchange during the period under review. The share’s highest trading price was EUR 2.90 and the lowest trading price was EUR 1.50. The closing price on the first trading day 2 January 2002 was EUR 2.30 and on the last trading day 30 September 2002 it was EUR 1.51. The average price of trades was EUR 2.59. At the end of the third quarter CapMan Plc had 5,991 shareholders. The market value of CapMan Plc’s B shares was EUR 102.2 million and the company’s total market capitalisation, including CapMan A shares, was EUR 122.9 million.
On 16 August 2002 the Board of Directors of CapMan Plc resolved to acquire a maximum of 3,500,000 of the company’s own B shares, in accordance with the authorisation granted by the Annual General Meeting held on 3 April 2002. The shares will be acquired through public trading on the Helsinki Stock Exchange at the publicly quoted market price at the time of purchase, as provided by the regulations on public trading of shares. The acquisition of shares began on 27 August 2002 and will end no later than 2 April 2003. The B shares will be acquired for use by the company as consideration in prospective business acquisitions, to develop the capital structure of the company, or to be assigned or invalidated in some other way.
A total of 109,000 own shares had been acquired as of the end of the period under review. The repurchasing of CapMan B shares has reduced the company’s distributable equity by approximately EUR 0.2 million.

Funds managed by CapMan
The funds have made no new investments or substantial follow-on investments since the end of the third quarter.
CapMan Group
After the close of the period, by 22 October 2002, a total of 539,500 own CapMan B shares have been acquired. As a result of the share repurchases, the company’s distributable equity has been reduced by EUR 0.8 million to EUR 14.4 million.


Funds managed by CapMan
CapMan’s acquisitions in Denmark and Sweden have increased the company’s recognition and strengthened its position as one of the leading private equity investors in the Nordic countries. In turn, companies seeking private equity investors are more attracted to CapMan and the number of suitable potential investments for CapMan’s investment strategy grows.CapMan will continue to focus its investment strategy on a Nordic level in mid-sized buy-outs, technology investments in IT and telecommunications and life science investments in medical technology.
The foundations for value creation of CapMan’s portfolio companies are organic growth or mergers and acquisitions, improved profitability and cash flows and sophisticated financing structures. CapMan strives to secure its portfolio companies with a strategic market position that will arouse the interest of industrial buyers and stock markets alike. CapMan actively evaluates the optimal time and method of exit, depending on the development stage of the portfolio company and the prevailing market conditions. Profitable realisations from portfolio companies are not solely dependent on the stock market. Trade sales to industrial buyers or other private equity investors have become a typical exit method in the private equity investment business.
CapMan Group
It is very likely that in 2002 CapMan will achieve the 2001 operating profit of EUR 4.0 million, excluding the one-off sale of Sampo plc shares. CapMan’s final 2002 result will depend largely on whether any significant exits are made during the last quarter from those portfolio companies owned by funds that are already generating carried interest. Exit possibilities are being evaluated and negotiations are underway in several investee companies.
We believe that private equity investment will continue to show growth also in the future. According to the European Venture Capital Association EVCA, private equity investments in Europe represent 0.38 per cent of gross domestic product, while the comparative figure for the United States is 1.03 per cent of GDP. Consolidation will continue in both traditional and technology sectors and the privatisation of state-owned companies will increase. An increasing number of family businesses are turning to private equity investors to finance their management successions. In addition, growth in CapMan’s Nordic home market will be supported by substantial investments in research and development activities within the technology sector and increasing entrepreneurial activity.
Private equity funds have long life spans, usually 10 years. Private equity fund management companies begin to receive carried interest after the investors have regained their investment in addition to a preferred annual return, usually 6 to 8 per cent. Carried interest is typically 20 to 25 per cent of the fund’s cash flow through exits from its portfolio companies. Four of the funds managed by CapMan (appendix 3) are already generating carried interest. These funds have EUR 84.1 million in capital, which represents 8.0 per cent of the total capital in CapMan funds (EUR 1,052.1 million).
The portfolios of the funds that invest directly in portfolio companies, totalling EUR 484.3 million at acquisition cost, include both traditional manufacturing and service companies and technology companies. To date, 73 per cent of the capital invested by funds in portfolio companies is invested in traditional companies and 27 per cent in technology and life science companies. Based on the valuation guidelines provided by the EVCA, the fair market value of the portfolios of these funds is EUR 501.5 million. Several of the portfolio companies offer substantial upside potential. The portfolios also include companies in both traditional industries and the technology sector with clearly higher risk levels than at the time of investment.
CapMan is well positioned to continue as an active player in the private equity market in 2003, as its funds have approximately EUR 500 million in capital for new investments. The affiliated company Access Capital is in a similar position. Its funds have abundant capital available for new fund investments.
CapMan Plc will publish its financial statements bulletin for the period 1 January – 31 December 2002 on 14 February 2003.

Helsinki 5 November 2002

Board of Directors

The full report including tables can be downloaded from the following link.