LEVERATOR PLC HALF-YEAR FINANCIAL REPORT 1 JANUARY – 30

Leverator Plc     Half-year Financial Report 11 August 2016 at 10.30 a.m. EEST

LEVERATOR PLC HALF-YEAR FINANCIAL REPORT 1 JANUARY – 30 JUNE 2016

Business

Leverator Plc’s (“Leverator” or the “Issuer”) business consists of the issue of bonds and the grant of loans to CapMan Mezzanine IV L.P. mezzanine fund (“CMM IV” or the “Fund”). Leverator’s result is formed by the difference between interest received from CMM IV’s loans and interest paid to bondholders. The issued bonds are listed on the Helsinki Exchanges (Nasdaq Helsinki).

Bonds

Leverator has issued a serial loan with a fixed coupon interest of 8.162% (the “Bonds”). The Bonds were issued in five tranches in accordance with the loan capital needed by CMM IV, and investors subscribed all five tranches according to their commitments. The final size of the Bonds totalled MEUR 192 on 18 June 2009. The maturity of the Bonds was extended by two years and they mature on 21 June 2018. Leverator has a call option to repay the Bonds or part thereof not earlier than 22 June 2009.

The Bonds’ outstanding principal totalled EUR 33,291,264 on 30 June 2016. Leverator repaid EUR 37,022,592 of the principal during the review period.

Issued tranches and Leverator’s financial performance

Leverator’s turnover for the review period was EUR 0, because the Issuer’s interest earnings and interest expenses are presented as financial items in the income statement. Leverator’s operating loss was EUR 122,187 (EUR 31,210 for 1 Jan – 30 June 2015) and financial income and expenses totalled EUR 74,784 (EUR 87,892). The result for the review period was EUR -47,403 (EUR 45,346).

Leverator’s solvency and risks

The security for the Bonds is Leverator’s receivable from CMM IV. The security for this receivable to Leverator is CMM IV’s mezzanine loan receivables from portfolio companies as well as associated options and portfolio company shares that are possibly subscribed on the basis of those options.

Leverator’s solvency to pay the Bonds’ interest and principal is based on CMM IV’s solvency to pay the loan receivable and interest to Leverator. CMM IV’s solvency is dependent on its mezzanine loan receivables from portfolio companies and on the value of associated options or shares as well as on CMM IV’s right to call the commitments and clawback of the Fund’s Limited Partners. The most significant risks or uncertainty factors in Leverator’s operations are that the portfolio companies would not be able to pay their debt to the Fund, that the Fund’s Limited Partners would not fulfil their obligations in accordance with Fund agreement or that the Fund’s solvency would be put at risk due to some other cause.

An examination of CMM IV’s solvency to manage the loan receivable to Leverator is first carried out in order to determine Leverator’s solvency.

CMM IV’s solvency 30 June 2016

* Figures by CMM IV's management company, as reported or with a discount.

CMM IV's financial assets were MEUR 17.4 below the total loan receivables of Leverator on 30 June 2016 and therefore the latter's receivable due from CMM IV presented below cannot be booked in full. CMM IV’s financial assets were MEUR 21.5 below the total loan receivables of Leverator on 31 March 2016 and MEUR 10.7 below on 30 June 2015.

Due to the requirement from the senior lenders, CMM IV has been required to partly convert its loans to portfolio companies into preferred shares and extend the loan terms of the remaining loans to portfolio companies beyond the original loan terms. Developments in the general market environment in the next few years may continue to cause difficulties for Fund portfolio companies to pay interest on their mezzanine loans and repay principal to the Fund in accordance with the revised loan terms. Restrictions in the portfolio companies’ senior loan agreements may in certain cases prevent the companies from meeting their interest payments during 2016 despite revisions of the original loan terms. The aforementioned issues might, in turn, weaken the Fund’s ability to meet its debt to Leverator Plc in full, which would affect Leverator’s solvency. It is possible that CMM IV’s solvency weakens further during 2016.

According to the management company the targeted exit valuations of CMM IV’s mezzanine loans and associated options and shares are higher than their current valuation, and therefore the Fund may potentially be able to pay back the loan to Leverator. Given the two-year extension to the Bond’s maturity and the maturity of Leverator’s loans to CMM IV, it is possible that the value of the Fund’s portfolio by the time of the Bond’s maturity in June 2018, in addition to commitments at call from Limited Partners, would be sufficient for the Fund to meet its obligations to Leverator in full. This outlook is highly uncertain.

The values given above are reported by CMM IV’s management company. The management company’s assessment of the value appreciation of mezzanine loans and associated options and shares is based on reporting principles common to the private equity industry. These principles aim at take into account risk factors caused by the general economic environment. The amount of commitments and clawback that the fund has a right to call from the Fund’s Limited Partners is based on CMM IV’s fund agreement.

Leverator’s solvency 30 June 2016

At current value Leverator’s solvency is below the balance of the Bonds.

Leverator’s more detailed financial position is presented in the income statement, balance sheet, statement of changes in equity and cash flow statement in Appendix 1. There are no exceptional liabilities of Leverator or CMM IV in the knowledge of Leverator’s Board of Directors that should be considered in the above calculations.

Leverator’s ownership

The owners of Leverator Plc are CapMan Plc, Etera Mutual Pension Insurance Company, Foundation for Economic Education, Ilmarinen Mutual Pension Insurance Company, OP Life Assurance Company Ltd, Pharmacy Pension Fund, Mandatum Life Insurance Company Limited, Varma Mutual Pension Insurance Company and Yleisradio Pension Fund with equal holdings.

Leverator’s Board of Directors

On 4 May 2016 the shareholders of Leverator Plc elected the following members to the Company’s Board of Directors: Mr Tatu Hemmo, Ms Nina Olander, Mr Staffan Jåfs, Mr Harri Lemmetti, Mr Olli Liitola, Mr Tommi Mäkelä, Mr Antti Palkén, Ms Katja Salovaara, and Mr Kyösti Ylikortes. The members elected Mr Tatu Hemmo as Chairman of the Board.

Other significant events during the review period

Leverator’s bondholders approved on 20 January 2016 the proposal by the Board of Directors to extend the maturity of the Bonds by two years. The consent relating to this extension became effective on the conditions that Leverator (i) makes an additional redemption (outside Condition 6 (b) of the terms and conditions of the Bonds) in a total amount of MEUR 12.6 on 15 February 2016 to the relevant bondholders holding Bonds on such date, and (ii) deposits a consent fee of 2% of the outstanding principal amount after all redemptions made as at 21 June 2016 to an escrow account. Leverator has made the additional redemption of MEUR 12.6 and paid the consent fee of EUR 665,825 as per the agreement. The conditions for the extension of the Bonds’ maturity have been fulfilled and the maturity of the Bond is 21 June 2018. The coupon of the Bonds and other terms remain the same.

Events after the end of the review period

There were no significant events after the end of the review period.

Future outlook

Due to the requirement from the senior lenders, CMM IV has been required to partly convert its loans to portfolio companies into preferred shares and extend the loan terms of the remaining loans to portfolio companies beyond the original loan terms. Developments in the general market environment in the next few years may continue to cause difficulties for Fund portfolio companies to pay interest on their mezzanine loans and repay principal to the Fund in accordance with the revised loan terms. Restrictions in the portfolio companies’ senior loan agreements may in certain cases prevent the companies from meeting their interest payments during 2016 despite revisions of the original loan terms. The aforementioned issues might, in turn, weaken the Fund’s ability to meet its debt to Leverator Plc in full, which would affect Leverator’s solvency. It is possible that CMM IV’s solvency weakens further during 2016.

According to the management company the targeted exit valuations of CMM IV’s mezzanine loans and associated options and shares are higher than their current valuation, and therefore the Fund may potentially be able to pay back the loan to Leverator. Given the two-year extension to the Bond’s maturity and the maturity of Leverator’s loans to CMM IV, it is possible that the value of the Fund’s portfolio by the time of the Bond’s maturity in June 2018, in addition to commitments at call from Limited Partners, would be sufficient for the Fund to meet its obligations to Leverator in full. This outlook is highly uncertain.

It is probable that Leverator’s interest earnings will cover its interest payable and other operating expenses in 2016.

Leverator Plc will publish its Interim Report 1 January–30 September 2016 on 3 November 2016.

Helsinki 11 August 2016

LEVERATOR PLC

Board of Directors

For further information, please contact:

Olli Liitola, CEO, tel. +358 400 605 040

DISTRIBUTION

NASDAQ Helsinki

Principal media

www.leverator.fi

APPENDIX 1.                     Income statement, balance sheet, statement of changes in equity and cash flow statement

The Half-year Financial Report 1 January–30 June 2016 has been prepared in compliance with International Financial Reporting Standards (IFRS) and the accounting principles applied are the same as in the financial statements for 2015. The information presented is unaudited.

         Olli Liitola, CEO, tel. +358 400 605 040