CapMan alternative asset manager in the Nordic region and Russia Annual General Meeting 2010 Heikki Westerlund, CEO, CapMan Plc 30 March 2010
CapMan update Market environment Contents Financials 2009 2 30 March 2010 Annual General Meeting 2010 - CEO's review
CapMan a Leading alternative asset manager in the Nordic countries and Russia Specialised listed alternative asset manager Capital under management 3.6 billion In addition assets and mandates managed/advised by Access Capital Partners approx. 2.6 billion* Active owner in the portfolio companies and real estate One stop shop for investors investing in Nordic countries and Russia * CapMan owns 35% of Access Capital Partners. 3 30 March 2010 Annual General Meeting 2010 - CEO's review
CapMan s growth strategy 2008 2010 Organic growth Full benefit out of investments Profitability and performance Expansion to Russia Establishment of a fund investing in public markets 2005 Expansion to real estate investments 2001 2004 established in 1999* 1993 MBO Mezzanine 2001 Listing in Helsinki Stock Exchange Offices in Denmark, Sweden and Norway Life Science Real Estate Public Market Russia Technology Buyout CapMan established in 1989 as a buyout house. Technology Expansion to mezzanine and technology investments in 1995. Nordic growth strategy 2001 2004. 2004. Expansion to life science investments in 2002. Utilising growth potential in alternative asset class and geographical expansion 2005 c * CapMan owns 35% of Access Capital Partners. 4 30 March 2010 Annual General Meeting 2010 - CEO's review
Six investment areas over 1bn investment capacity CapMan Buyout CapMan Private Equity 1.8 billion CapMan Technology CapMan Life Science CapMan Russia CapMan Public Market CapMan Real Estate 1.7 billion 27 investment 10 investment 4 investment 9 investment 6 investment professionals professionals professionals professionals professionals 42 real estate professionals Manufacturing, retail and services Middle market equity investments typically 20 70 million / company Both equity and mezzanine investments Expansion and later stage technology companies Equity investments 3 15 million / company Medical technology and healthcare services Equity investments 2 7 million / company Industrial and service companies Equity investments 5 15 million / company Nordic public companies Equity investments 20 70 million / company Commercial properties, property development targets t and hotel properties mainly in Finland Investments typically 5 50 million / real estate test nds: Lat fun CapMan Buyout IX 285 million (2009) CapMan Mezzanine IV 240 million (2004) CapMan Technology 2007 142 million (2007) CapMan Life Science IV 54 million (2006) CapMan Russia Fund 118 million (2008) CapMan Public Market Fund 138 million (2009) CapMan Hotels RE 873 million (2008) Open funds: CapMan Buyout IX CapMan Mezzanine V Residential housing 5 30 March 2010 Annual General Meeting 2010 - CEO's review
Key strategic assets CapMan long term value Investment culture active ownership Fundraising and fund management Fund investment capacity CapMan Brand Service infrastructure 6 30 March 2010 Annual General Meeting 2010 - CEO's review
CapMan main events in 2009 Investments Exits CapMan Plc 8 portfolio company investments 4 real estate investments 1 opening of shopping center 4 final and 1 partial exit from portfolio companies 1 exit from real estate investment 4 new funds 29 million hybrid bond issued Sale of fund investments and commitments worth 25 million & (partial) * Tuusula * Helsinki Hyvinkää Helsinki Helsinki * The transaction announced in December 2009, closed in 2010. 7 30 March 2010 Annual General Meeting 2010 - CEO's review
CapMan main events in 2010 Investments Exits CapMan Plc 2 portfolio company investments 1 real estate investments 3 final and 1 partial exit from portfolio companies 1 exit from real estate investment 3 fundraising projects * Sale of ON2 shares (Hantro products exit in 2007) * Fundraising for CapMan Buyout IX continues Preparations for CapMan Mezzanine V started Evaluation ongoing for the potential of a fund investing in Finnish housing markets Proposal for new Board members New CEO to be recruited Helsinki Helsinki * The transaction announced in December 2009. 8 30 March 2010 Annual General Meeting 2010 - CEO's review
Lennart Simonsen appointed new CEO of CapMan as of 1 June 2010 joins CapMan from Roschier, Attorneys Ltd LL.M. b. 1960 Partner at Roschier since 1999 Managing Partner at Roschier between 2001 and 2009 Expansion to Baltic countries and Sweden has represented numerous Finnish and international private equity investors in the M&A field since 1993 prior to Roschier, Simonsen was Managing Partner at Castrén & Snellman. extensive experience from leading an expert organisation oga o 9 30 March 2010 Annual General Meeting 2010 - CEO's review
CapMan update Market environment Contents Financials 2009 10 30 March 2010 Annual General Meeting 2010 - CEO's review
Global crisis dramatically reflected in latest activity figures for European private equity Market environment However 46% of European PE firms raised capital between 2007 2009 Less concentration ti of capital in 2009 since only 4bn raised to 1bn+ funds bn 120 112 100 80 72 71 73 X 83 82-84% 60 40 20 48 40 35 25 25 24 37 28 28 27 29 27 47 X 54-61% 21 13 0 1999 2000 2001 2002 2003 2004 2005 2006 20007 2008 2009P Funds raised Investments Source: EVCA 11 30 March 2010 Annual General Meeting 2010 - CEO's review
Drastic change in amount of capital raised from North American investors Market environment In 2008 North American LPs provided 38% of all capital raised to European funds but in 2009 this figure dropped to 12%! Location of LPs behind 2009 fundraising in Europe Change in amount raised to European PE funds in 2009 by LP domicile 3% 12% 0% -10% 8% -20% -30% -40% -50% -95% -81% -74% -95% -60% -70% 78% -80% -90% North America Nordic ROE ROW -100% North America Nordic ROE ROW Source: EVCA 12 30 March 2010 Annual General Meeting 2010 - CEO's review
Clients Average private equity allocations by LP geographyg European average? Still below 3% Best in class Nordic and Dutch institutions 5 to 7% Catching up fast German and UK institutions 2 to 3% going up to 5% Increasing slowly French institutions 1 to 2% going up to Nowhere to be seen Italian and Spanish institutions Below 1% Role models US institutions 10% (alternatives) not uncommon Source: Access Capital Partners 13 30 March 2010 Annual General Meeting 2010 - CEO's review
Clients All investor types increasing allocation to private equity 3,500+ actively investing LPs at the end of 2009 Family offices and foundations, and private sector pension funds are the most numerous types of LP 14% 12% 10% 8% 6% 10,9% 12,3% 10,4% 12,8% 8,3% 77% 7,7% 6,8% 6,6% 6,2% 5,8% 5,4% 5,2% 4% 3,9% 29% 2,9% 2% 0% Endowment Family offices & Asset managers SWFs Public pension Private sector Insurance plans foundations plans pension funds companies 14 30 March 2010 Average current allocation Average long-term target allocation Source: 2010 Preqin Global Private Equity Report Annual General Meeting 2010 - CEO's review
Nordic pension funds expect to increase private equity allocation over the next six months Clients Public and private equity, commodities and forestry key areas in which Nordic pension funds wish to increase interest while nearly half plan to reduce exposure to fixed assets 50% 40% 30% 20% 10% 0% -10% -20% -30% -40% -50% 15 % of respondents planning to increase allocation % of respondents planning to decrease allocation Source: NRPN survey (covers 22 Nordic pension funds) Annual General Meeting 2010 - CEO's review
Recent surveys show encouraging news that fundraising would pick-up p in 2010 Clients 67% of LPs are planning to make PE commitments in 2010 and 51% of LPs are planning to commit more capital than in 2009 Time frame for next intended PE Amount of capital LPs plan to commit commitment in PE funds in 2010 25% 41% 4% 4% 51% 51% 16% 8% H1/2010 H2/2010 2011 2012- Unsure More than in 2009 Less than in 2009 Equal to 2009 Source: 2010 Preqin Global Private Equity Report 16 Annual General Meeting 2010 - CEO's review
Small/mid-market buyout continue to attract most investor interest Clients Mega BO 9% Small/mid-market BO 53% Venture 20% Distressed PE 30% Secondaries funds 17% Cleantech 5% Mezzanine 11% Fund of funds 16% Other 3% None 14% 0% 10% 20% 30% 40% 50% 60% Seek to invest over 2010/2011 Viewed as presenting best opportunities 17 30 March 2010 Annual General Meeting 2010 - CEO's review Source: 2010 Preqin Global Private Equity Report
Market environment Signs of recovery in senior LBO loans? Situation improved already for mid-sized deals Debt availability in 2014 2015? About $400bn of PE debt expiring globally Annual European senior loan volume Monthly European senior loan volume 2009 160bn 300 1,2bn 140bn 250 1,0bn 120bn 100bn 200 0,8bn 80bn 150 0,6bn 60bn 100 0,4bn 40bn 20bn 50 0,2bn 0bn 2002 2003 2004 2005 2006 2007 2008 2009 0 0,0bn Jan-09Feb-09Mar-09Apr-09May-09Jun-09Jul-09Aug-09Sep-09loka-09 marras-09 joulu-09 1Q 2Q 3Q 4Q Deal count Source: S&P LCD 18 Annual General Meeting 2010 - CEO's review
CapMan update Market environment Contents Financials 2009 19 30 March 2010 Annual General Meeting 2010 - CEO's review
Operating segments and main components of income Management Company business Fund Investment Business Management fees Carried interest Real estate consulting Returns on direct fund investments from own balance sheet Based on original fund size (total commitments) or fund s remaining portfolio at cost Typically 0.5 2.5% p.a. of the capital in the funds (total commitments / portfolio at cost) depending on whether the fund is real estate, mezzanine or equity fund CapMan begins to receive carried interest after the investors have regained their investment and a preferred annual return, usually 7 to 8% When a fund is in carry, CapMan s share of the fund s cash flow is typically 20 25% in the case of CapMan funds that were established before 2004, and 10 15% for newer funds CapMan Plc s subsidiary Realprojekti Oy acts as advisor for the private equity real estate funds managed by CapMan and practices real estate consulting CapMan invests in its future funds 1 5% of their original capital depending on the fund s demand and CapMan s own investment capacity. Income is derived from realised returns on fund investments and from changes in the fair value of investments Value development of investment objects is reflected on fair value changes on a quarterly basis Capital under management 3.5 billion at 31 Dec 2009 Management fees 33.3 million in 2009 No carried interest income in 2009 The announced carried interest income in 2010 2.1 million to Income from real estate consulting 2.4 million in 2009 Fair value of CapMan s fund investments 59.4 million at 31 Dec 2009 Commitments totalled 42.6 date million 31 Dec 2009 Impact on profit -3,4 million in 2009 20 30 March 2010 Annual General Meeting 2010 - CEO's review
Profitability development Q1/2008 Q4/2009 million 6 4 2 0 0,4 0,5 3,3 2,2 2,0 2,0 0,5 2,3 3,1-2 -0,4-0,8-1,3-4 -6-4,7-3,7 37-8 -10-12 -9,6-10,0 Q1/2008 Q2/2008 Q3/2008 Q4/2008 Q1/2009 Q2/2009 Q3/2009 Q4/2009 Operating profit / loss Profit / loss after taxes 21 30 March 2010 Annual General Meeting 2010 - CEO's review
Profit / loss before taxes Profit / loss before taxes Profit / loss after taxes million million 10 10 5 0 0,7 3,7 2,7 1,2 5 0 0,5 2,7 1,9 0,1-5 -10-4,6-5,6-3,4-5 -10-3,7-5,0-3,0-8,1-10,7-15 1-3 1-6 1-9 1-12 2008 2009-15 1-3 1-6 1-9 1-12 2008 2009 22 30 March 2010 Annual General Meeting 2010 - CEO's review
Result of Management Company business Management Company business Satisfactory result taking into account: goodwill write-down of 0.7 million management fees received from CapMan Buyout IX fund only since the end of Q2 Special attention is paid to managing expenses Operating profit / loss of management million company business 10 8 7,3 6 5,9 4,9 4 3,7 2,2 2 0,6 0,6 0-0,2-2 1-3 1-6 1-9 1-1212 2008 2009 million 2009 2008 Turnover 36.3 36.8 Management fees 33.3 29.6 Real estate consulting 2.4 2.4 Carried interest 00 0.0 41 4.1 Operating profit / loss 3.7 7.3 Profit / loss 3.7 6.5 23 30 March 2010 Annual General Meeting 2010 - CEO's review
Management fees Management Company business million 35 30 25 20 15 10 5 6,4 7,4 15,6 13,6 20,9 24,6 29,6 33,3 12.5% growth compared to comparable period The increase was largely attributable to the fees paid by CapMan Buyout IX The fee base also rose as a result of new capital raised to CapMan Hotels RE, CapMan Russia and CapMan Public Market funds 0 1-3 1-6 1-9 1-12 2008 2009 24 30 March 2010 Annual General Meeting 2010 - CEO's review
Carried interest Management Company business million 8 No substantial exits made from 7 funds in carry during review period no carried interest income 6 In comparable period, carried 5 4,1 4,1 4,1 interest income was 4.1 million, 4 (generated as result of StaffPoint 3 exit) 2 Pretax exit announced, estimated impact on Q1 2010 0 EUR 1.5 1 million 0 0 0 0,0 0 0 1-3 1-6 1-9 1-12 2008 2009 25 30 March 2010 Annual General Meeting 2010 - CEO's review
Large medium-term carried interest potential Management Company business CapMan Equity VII A, B and Sweden as well as Finnmezzanine III A and B funds are expected to start generating carried interest during 2010-2011 We consider it unlikely that CapMan Real Estate I would generate new carried interest income in future Over one third of the funds under management remains to be invested Portfolios at fair value, 2,617 million, and remaining investment capacity 1,140 million 31.12.2009 1 % 9 % 34 % Funds generating carried interest Funds that are expected to start generating carried interest in 2010-2011 Other funds not yet in carry* Funds with no carried interest t potential ti to CapMan Remaining investment capicity in CapMan funds 1 % 55 % 26 30 March 2010 Annual General Meeting 2010 - CEO's review * Current portfolios at fair value include 845.3 million debt financing in three real estate funds.
Result of Fund Investment business Fund Investment business Fair value changes -5.4% during 2009 and +1.5% in Q4 Reduction mainly due to the weakening in results of portfolio companies in 2009 Fair value changes have no impact on Group s cash flows million 5 Operating profit / loss of fund investment business million 2009 2008 0-5 -0,2-1,2-2,7-4,4-4,8-4,4-3,6 Fair value changes of investments -3.4-13.4 Operating profit / loss -3.6-13.6 Profit / loss for the period -3.6-14.5-10 -15-13,6 1-3 1-6 1-9 1-12 2008 2009 27 30 March 2010 Annual General Meeting 2010 - CEO's review
Fund investments and commitments Fund Investment business 31 December 2009 CapMan invests in future funds 1 5% of original capital depending on fund s demand and CapMan s own investment capacity Sale of fund investments and commitments (done H2 2009) worth 25 million lowers capital calls in next few years 140 120 100 80 42,6 60 40 20 0 2003 2004 2005 2006 2007 2008 2009 59,4 Investments at fair value Remaining commitments 28 30 March 2010 Annual General Meeting 2010 - CEO's review
Share of associated companies result: Access Capital Partners 31 December 2009 Leading manager and advisor of European private equity funds of funds Capital under management 2.6 billion Team of 31 professionals in Paris, Brussels, Munich and London CapMan s ownership 35% Provides further diversification and earning potential in form of consolidated profit and carried interest CapMan s share of carried interest between 25% and 47.5% Access shares valued in CapMan Plc balance sheet at acquisition cost million 3 000 2 500 2 000 1 500 1 000 500 0 Assets under management 2004 2005 2006 2007 2008 2009 Funds of funds Private equity mandates 29 30 March 2010 Annual General Meeting 2010 - CEO's review
Income Statement million 2009 IFRS 2008 IFRS Turnover 36.3 36.8 Management fees 33.3 29.6 Carried interest 0.0 4.1 Real estate consulting 2.4 2.4 Other income 0.6 0.7 Other operating income 0.1 0.1 Operating expenses -33.0-29.8 Fair value gains / losses of investments -3.3-13.4 Operating profit / loss 0.1-6.3 Financial income and expenses -0.2-2.0 Share of associated companies result 1.3-2.4 Profit / loss before taxes 1.2-10.7 Profit / loss for the period 0.1-8.1 30 30 March 2010 Annual General Meeting 2010 - CEO's review
Actions taken to improve the financial position 60 million senior loan facility agreed with two Nordic banks 29 million hybrid bond issued from institutional investors Sale of fund investments and commitments t worth of 25 million* Target to be able to fund all commitments even in potentially prolonging difficult environment (worst case scenario) Incorporation of own fund investments Cost control program 31 30 March 2010 Annual General Meeting 2010 - CEO's review * Investments sold at fair value, no discount. Direct impact on cash flow approx. 3.4 million, no impact on profit.
Balance sheet Assets, IFRS 1,000 31.12.2009 31.12.2008 Non-current assets Tangible assets 838 1,064 Goodwill 10,245 11,762 Other intangible assets 2,972 3,229 Investments in associated companies 6,547 1,575 Investments t at fair value through h profit and loss Investments in funds 59,421 53,147 Other financial assets 585 828 Receivables 25,304 24,451 Deferred income tax assets 6,177 3,707 112,089 99,763 Current assets Trade and other receivables 10,291 12,965 Other financial assets at fair value through profit and loss 1,673 942 Cash and bank 17,978 24,330 29,942 38,237 TOTAL ASSETS 142,031 138,000 32 30 March 2010 Annual General Meeting 2010 - CEO's review
Balance sheet Total equity and liabilities, IFRS 1,000 31.12.2009 31.12.2008 Capital attributable the Company's equity holders Share capital 772 772 Share premium account 38,968 38,968 Other reserves 37,347 25,829 Translation difference -392-226 Retained earnings 1,097 3,585 77,792792 68,928 Minority interest 413 221 Total equity 78,205 69,149 Non-current liabilities Deferred income tax liabilities 1,824 284 Interest-bearing loans and borrowings 40,625 43,125 Other liabilities 2,291 6,600 44,740 50,009 Current liabilities Trade and other payables 12,227 15,751 Interest-bearing loans and borrowings 6,250 2,875 Current income tax liabilities 609 216 19,086 18,842 Total liabilities 63,826 68,851851 TOTAL EQUITY AND LIABILITIES 142,031 138,000 33 30 March 2010 Annual General Meeting 2010 - CEO's review
Key figures 2005 IFRS 2006 IFRS 2007 IFRS 2008 IFRS 2009 IFRS Earnings per share, 0.09 0.15 0.24-0.10-0.03 Diluted, 0.09 0.15 0.24-0.10-0.03 Shareholders equity / share, * 0.64 0.74 0.86 0.86 0.94 Dividend / share, ** 0.07 0.12 0.16 0.00 0.04 Dividend / earnings, %** 78.0 80.0 67.0 0.00 n/a Return on equity, % 14.8 23.4 38.9-11.8 0.2 Return on investment, % 20.2 29.9 44.2-6.3 2.8 Equity ratio, % 85.8 71.6 57.6 50.3 55.1 Personnel (at year / review period end) 87 98 110 141 150 34 30 March 2010 Annual General Meeting 2010 - CEO's review * In line with IFRS standards, hybrid bond included in equity also when calculating equity per share. ** For 2009, Board of Directors proposal to the AGM.
Financial objectives Objective 2009 Growth Average growth of capital under management at least 15% p.a. 2.8% growth in 2009. Average growth 30.4% in 2004-2009. Profitability Capital structure Return on equity over 25% Equity fund performance above 15% net IRR to fund investors p.a. Finance 50% of CapMan Plc s future fund investments with debt financing Return on equity 0.2 in 2009. Net return to investors historically 16.5% in equity funds. Net gearing 34.8% in 2009. Equity ratio at least 50% Equity ratio 55% in 2009. Dividend policy Pay-out ratio at least 50% of the net profit The Board s dividend proposal to the AGM 0.04. 35 30 March 2010 Annual General Meeting 2010 - CEO's review
Future outlook Management Company business Fund Investment Business Management fees + real estate consulting Carried interest Returns on direct fund investments from own balance sheet Management fees and Impact of announced exits 2.1 million on The fair value change of income from real estate CapMan s result (to date). CapMan s fund investments consulting will cover Funds have a number of portfolio companies is expected to be, at CapMan s fixed costs and ready to enter the exit process. aminimun, neutral in early interests expenses in 2010. CapMan Equity VII A, B and Sweden funds, 2010. as well as the Finnmezzaninei III A and B funds are expected to start generating carried interest during 2010-2011. Unlikely that the CapMan Real Estate I fund will generate new carried interest in the future. The development of the fair value of investments during the rest of the year will depend on developments in portfolio companies and the general market situation. The Group s overall result for 2010 will mainly depend on whether new exits are made by funds already generating carried interest, whether further funds will transfer to carry, and on how the value of investments will develop in those funds in which CapMan is a substantial investor. 36 30 March 2010 Annual General Meeting 2010 - CEO's review
Mission and vision Mission Our mission is to create financial returns through active ownership. We act as a high quality service provider by investing capital in companies, properties or other targets within private equity and other alternative asset class. The lasting value of these investments is created by growth, change and professional governance. Vision Our vision is to be the preferred private equity and other alternative assets partner for investors globally and entrepreneurs locally. 37 30 March 2010 Annual General Meeting 2010 - CEO's review
CapMan values High Ethics our heart 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. Dedication our soul We are committed to reach our objectives. We are innovative and aim to be the trendsetter for the industry. Employees are our most important t resource. Active Ownership our drive We are an active industrial player with strong financial know-how. We create lasting value through growth, change and professional governance. 38 30 March 2010 Annual General Meeting 2010 - CEO's review