ANNUAL REPORT
eQ in 2022 3
Key Figures 4
eQ in Brief 5
CEO’s Review 6
Business Areas 9
Asset Management 10
Corporate Finance 13
Investments 14
Sustainability 15
Report by the Board of Directors 34
Consolidated Key Ratios 42
Contents
Financial Statements 2022 45
Auditor’s Report 76
Corporate Governance 79
Corporate Governance Statement 80
Remuneration Report 85
Board of Directors 88
Management Team 90
Performace Fees of Private Equity Funds 91
Information about Capital Adequancy 93
Information to the Shareholders 96
2eQ in 2022 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
Key Figures
NET REVENUE
.
EUR MILLION
: . MEUR
EARNINGS PER SHARE
.
EUR
. EUR
COST/INCOME RATIO
.%
.%
DIVIDEND AND REPAYMENT
OF EQUITY PER SHARE
.
. EUR
MARKET CAP
,.
EUR MILLION
,. MEUR
NUMBER OF SHAREHOLDERS
,
,
NUMBER OF PERSONNEL
ASSETS UNDER MANAGEMENT
WITHOUT REPORTING SERVICES
.
EUR BILLION
. BN EUR
OPERATING PROFIT
.
EUR MILLION
. MEUR
AND IN TOTAL
.
EUR BILLION
. BN EUR
4eQ in 2022 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
eQ in Brief
eQ is a Finnish group of companies that
concentrates on asset management and corporate
finance operations. The share of the parent
company eQ Plc is listed on Nasdaq Helsinki.
The Group offers its clients services related to
mutual-, real estate- and private equity funds,
discretionary asset management, investment
insurance policies, and a large range of mutual
funds offered by international partners. The asset
management clients are institutional investors and
private individuals. In addition, Advium Corporate
Finance Ltd, which is part of the Group, offers
services related to mergers and acquisitions, real
estate transactions and equity capital markets.
NET REVENUE DEVELOPMENT,
MEUR
80
70
60
50
40
30
20
10
0
20222021202020192018
Asset Management Corporate Finance
Investments Group Administration Group
77.8
78.9
56.7
45.4
50.6
OPERATING PROFIT DEVELOPMENT,
MEUR
60
50
40
30
20
10
0
20222021202020192018
45.7
47.7
30.8
22.4
26.3
Asset Management Corporate Finance
Investments Group Administration Group
5eQ in 2022 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
CEO’S REVIEW
eQ’s result for the financial year was good despite the challenging operating
environment. The net revenue of the Group during the period under review was
EUR 77.8 million and the operating profit EUR 45.7 million. Operating profit
fell by 4 per cent from the previous year. The profit for the year was EUR 36.3
million and the earnings per share were 91 cents. The Group’s cost/income ratio
was at an excellent level of 41.1 per cent.
eQ Asset Management’s growth continued. Last year, eQ Asset Management’s
net revenue grew by 11 per cent and operating profit by 14 per cent to
EUR 45.9 million. The cost/income ratio of the Asset Management segment
continued to improve and was 36.0 per cent. The net revenue of Advium
fell by 22 per cent from the year before to EUR 5.4 million. Operating profit
was EUR 1.7 million, compared with the previous year’s EUR 2.7 million.
The business operations of the Investments segment consist of private equity
and real estate fund investments made from eQ Group’s own balance sheet.
The result of the Investments segment fell considerably from the exceptionally
strong year 2021. The operating profit of the segment was EUR 0.7 million,
compared with previous year’s EUR 7.1 million.
eQ Asset Management is the leading
institutional asset manager in Finland
According to a study made by SFR last year, eQ is the second most used
institutional asset manager in Finland. 66 per cent of the respondents tell that
they use eQ’s services. What is best, investors regarded eQ as the quality-wise
best asset manager already the fourth time in a row. The overall assessment
of quality consists of several different criteria, the return on the investments
being the most important of them according to the interviewees. In the
2022 study, eQ Asset Management was ranked number one in 7 categories
of 11. SFR interviews the approximately 100 largest Finnish institutional
investors annually. In addition, the clients assessed the overall quality of
eQ Asset Management as the best in Finland in 2022 in Kantar Prospera’s
”External Asset Management Finland” study.
As for traditional investments, the returns of client portfolios were negative
in 2022 in line with the market. Of the funds that eQ manages itself,
23 per cent surpassed their benchmark indices, and during a three-year period
Institutional investors
regarded eQ as the best
company in their quality
assessments the forth
year in a row.
eQ Group’s result
was good in 2022
6eQ in 2022 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
the corresponding figure was 77 per cent. The eQ Europe Dividend Fund won
the Lipper Nordics 2021 best “Equity Europe Income Fund” award for the
second time in a row. The award is based on the fund’s 3 and 5-year risk-
adjusted returns. The real estate and private equity returns were excellent in
2022, supporting very well the annual overall returns of most of our clients.
Since 2012, the return of the eQ Community Properties Fund has been 8.9
per cent annually. Last year, the return of the fund was 8.2 per cent. The eQ
Commercial Properties Fund has given an annual return of 8.4 per cent since
establishment and 7.6 per cent last year. The returns of the private equity funds
and asset management programmes were also excellent in 2022.
The interest in alternative investment products has grown for several years
now, both in Finland and internationally. The aim is to increase the portfolio’s
return expectation and diversify the investment portfolio. eQ Asset
Management is the clear market leader in Finland among the providers of
alternative investment products.
The eQ Care Fund was the first Finnish open real estate fund. It was established
in 2012, and in 2021 its name was changed to eQ Community Properties
Fund. The eQ Commercial Properties Fund was established in 2014. In 2020,
we expanded our real estate investments to housing by establishing the eQ
Residential Fund and last year we already established our second residential
fund, eQ Residential II. Investment commitments totalling EUR 53 million was
raised in it last year. Net subscriptions in eQ’s open real estate funds totalled
EUR 165 million. At the end of the year, the assets under management were
EUR 2.7 billion and the real estate assets of the funds totalled EUR 3.6 billion.
The strong growth of eQ’s private equity asset management continued last year
and we raised a record amount of about EUR 500 million to our private equity
and VC funds. We raise capital yearly to funds investing in Europe and the US,
alternately, and in 2022 it was Europe’s turn. The first closing of the new eQ PE
XIV North private equity fund was held at the end of January 2022 at EUR 196
million. In the final closing of the fund at the end of 2022, the size of the fund
grew to EUR 288 million. The eQ PE XIV North Fund makes investments in
private equity funds that invest in unlisted, small and mid-sized companies in
Northern Europe. At the same time, eQ established its fourth secondary market
fund eQ PE SF IV, the size of which grew to EUR 151 million in the final closing.
In addition, the size of the eQ VC Fund, established at the end of October 2021,
grew to USD 77 million in the final closing. The eQ VC Fund invests in the best
venture capital funds in the US. The assets managed under the private equity
funds and asset management programmes totalled EUR 3.7 billion at the close
of the year.
We increase our efforts in sustainability
Sustainability has for years been one of the cornerstones of our operations
and part of all our business operations. We act in a responsible and sustainable
manner as eQ Group and integrate sustainability systematically and in practice
to eQ Asset Management’s investment operations and Advium’s corporate
finance operations.
Even though eQ Group, based on its size and operations, is not obliged to draw
up a sustainability report required by the Finnish Accounting Act, we have
decided to voluntarily report on sustainability to investors and other major
stakeholders, now already for the sixth time. The sustainability report is part of
our Annual Report.
Responsible investment is not a separate consideration for eQ, as ESG is
part of all investment operations. In practice this means that sustainability
is continuously and systematically integrated in the selection, monitoring
and reporting of investees in all investment areas of eQ. eQ’s Director for
Responsible Investment is responsible the co-ordination and development.
We draw up an ESG report on all equity and fixed-income investments twice
a year and on real estate and private equity funds once a year.
The returns of real estate
and private equity funds
were excellent in 2022,
supporting very well the
overall returns of most of
our clients for the year.
Mikko Koskimies
CEO
7eQ in 2022 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
We regularly report to PRI (UN’s Principles for Responsible Investment) on
sustainability in our investment process, our concrete engagement activities
in the investees and our development initiatives regarding the responsible
investment approach. The ratings we have received are excellent.
We are committed to continuously developing sustainability in co-operation
with our clients. We wish to offer our clients concrete solutions that support
their needs even with regard to sustainability, now and in future.
Advium’s operating environment slowed
down towards the end of the year
In 2022, the value of corporate acquisitions fell world-wide from the record
year 2021. Above all the last quarter showed clear signs of slowing down.
The number of corporate acquisitions decreased in Finland as well. There was
also a slowdown in the real estate transaction market due to increasing interest
rates and uncertain economic growth, for instance.
In 2022, Advium acted as advisor in five M&A transactions: advisor to
a consortium led by Bain in the public cash tender offer for Caverion,
the divestment of Bluebird to The North Aliance, the acquisition of Raksystems
to Trillimpact, the divestment of Akkurate to Sandvik, and the acquisition of
Finnamyl by Chemigate (Berner). Advium’s market position and market share
remained good.
In 2022, Advium’s real estate transaction activity increased. Advium acted as
advisor in five published transactions. The most important of them were the
establishment of a joint venture for the development of a real estate portfolio
by Ilmarinen, YIT and HGR Property Partners, the divestment of Espoo Hospital
and the fire station portfolio owned by the city of Espoo, and the divestment
of Cromwell European REIT’s office property in Helsinki to Julius Tallberg Real
Estate Corporation.
Group balance sheet and dividend proposal
The Group has no interest-bearing loans, and its balance sheet is very strong.
The profit of the Group was 91 cents per share in 2022. Due to the strong
balance sheet and capital adequacy, the Board of Directors have decided
to propose to the Annual General Meeting that a dividend of EUR 1.00, i.e.
the entire profit for the year, and an equity repayment of EUR 0.09 per share
be paid out to the shareholders.
Thanks to our clients, personnel and partners
I wish to thank all our clients for excellent co-operation and the trust you have
shown in our services. After the easing of COVID-19 restrictions, it was great
to also be able to meet you face to face more often than in recent years.
The personnel was able to adapt excellently to returning to the office.
The results of the study on well-being at work, which is conducted twice
a year, were excellent in 2022 as well. The study covers the personnel’s
commitment, well-being at work, satisfaction with the work community and
the work of the superior, for instance. On a scale from 1 to 5, the employees
gave job satisfaction and well-being at work the grade 4.3, which is
an excellent level. According to the study, the employees also recommend eQ
Group as a working place. The eNPS value that describes this was very high at
48 (on a scale from -100 to +100, where 0 to +20 is good, over 20 excellent
and over 40 a top result).
Top performance requires very professional, engaged and motivated people.
I want to thank the entire personnel for their excellent achievements in 2022.
In addition to the clients and personnel, my warm thanks go to all our partners
for good co-operation.
Outlook for 2023
As for sales, the year 2022 was very good for eQ Asset Management. In January
2023, the eQ PE XV US private equity fund raised a record amount of assets in
the first closing of the fund, i.e. almost USD 180 million, which is 35 per cent
more than our previous fund investing in the US. This strengthens our view
that the demand for alternative investment products continues to be strong
among investors and the increase in fixed management fees will continue. The
returns of real estate funds are linked to the development of the yields and
their possible performance fees for 2023 involve uncertainty. The performance
fees of private equity funds will, on the other hand, be at the same level due to
the catch up accrual.
Consequently, we expect the net revenue and operating profit of the Asset
Management segment to be at the same level as last year or to grow in 2023.
In accordance with our disclosure policy, we do not issue profit guidance
for the Corporate Finance and Investments segments. The results of these
segments are highly dependent on factors that are not dependent on
the company. Therefore, their operating profits may vary considerably and are
difficult to foresee.
Mikko Koskimies
CEO
8
eQ in 2022 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
The aim of eQ Asset Management is to offer its clients good investment
returns, innovative asset management services and excellent customer service.
Through its own organisation and international partners, eQ can offer its clients
an extensive and international range of investment solutions.
eQ has a wide range of actively managed and successful funds, which offer
diversified investment alternatives with different strategies. The investment
range covers 23 traditional mutual funds registered in Finland, private equity
and real estate funds as well as funds of our international partners, covering
all major investment categories and markets. At the end of the financial
period 2022, the assets managed by the Group, excluding assets covered
by private equity reporting services, were EUR 9,678 million and altogether
EUR 12,564 million.
eQ Asset Management is the leading institutional asset manager in Finland.
SFR interviews the approximately 100 largest Finnish institutional investors
annually. According to the study conducted by SFR in 2022, investors regarded
eQ as the best asset manager in the market in their quality assessments already
the fourth year in a row. According to the study, eQ is the second most used
institutional asset manager in Finland.
Asset Management
The Asset Management segment consists of eQ Plc’s subsidiary, the investment firm
eQ Asset Management Ltd, and other Group companies engaged in asset management
operations, the most important of which is eQ Fund Management Company Ltd.
Key figures
Asset Management 1–12/2022 1–12/2021 Change
Net revenue, MEUR 71.8 64.9 11%
Operating profit, MEUR 45.9 40.3 14%
Cost/income ratio, % 36.0 37.7 -5%
Personnel as full-time resources 76 76 0%
Fee and commission income,
Asset Management, MEUR 1–12/2022 1–12/2021 Change
Management fees
Traditional asset management
9.4 10.6 -11%
Real estate asset management 35.1 29.1 21%
Private equity asset management 16.9 13.9 22%
Management fees, total 61.5 53.6 15%
Performance fees
Traditional asset management
0.0 2.9 -100%
Real estate asset management 4.3 5.4 -19%
Private equity asset management 6.5 3.1 108%
Performance fees, total 10.8 11.4 -5%
Other fee and commission income 0.1 0.5 -68%
Fee and commission income, total 72.4 65.4 11%
The principles of responsible Investments cover all of eQ’s investment areas.
There is more information on eQ Group’s sustainable business and responsible
investment operations in a separate section of the Annual Report.
In 2022, eQ Asset Management’s net revenue increased by 11 per cent
to EUR 71.8 million. Profitability continued to improve, and the operating
profit grew by 14 per cent to EUR 45.9 million. The demand for alternative
investment products among investors continued to be strong. eQ raised
altogether almost EUR 440 million to the eQ PE XIV North and eQ PE SF IV
private equity funds. In addition, the size of the eQ VC Fund grew to EUR
77 million in the final closing. The net subscriptions in the eQ Community
Properties and Commercial Properties funds were EUR 165 million, and
the size of the eQ Residential II Fund grew to EUR 53 million.
10eQ in 2022 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
Traditional asset management mutual funds
Funds of the partners and other asset management
Open real estate funds
Closed real estate funds
Private equity funds
Private equity asset management programmes
e
Q’S ASSETS UNDER MANAGEMENT
Without private equity reporting services EUR 9.7 bn
and in total EUR 12.6 bn.
Private equity
39%
Real estate
28%
Traditional
34%
1.0
1.7
1.6
2.4
2.7
0.3
31 DEC. 2022
EUR 9.7 BN
eQ Asset Management is the quality-wise best
institutional asset manager in Finland
In the annual SFR study, institutional investors regarded eQ as the quality-
wise best asset manager in Finland, already the fourth time in a row. The study
covers the approximately 100 largest institutional investors in Finland and it
was conducted in the autumn of 2022.
eQ Asset Management was ranked number one in 7 categories of 11.
1. Investment performance 3 years
2. Ability to take a market view
3. Resources
4. Clarity of investment process
5. Client servicing
6. Reporting services
7. Investment performance 12-months
In the same study, eQ Asset Management was the second most used institutional
asset manager in Finland. No less than 66 per cent of the interviewees told that
they used eQ’s services.
SFR RESEARCH: MOST USED
INSTITUTIONAL ASSET MANAGERS
Source: SFR research 2022
0 10 20 30 40 50 60 70 80
67%
66%
63%
53%
45%
52%
35%
50%
30%
29%
23%
16%
15%
13%
13%
1
eQ
3
4
5
6
7
8
9
10
11
12
13
14
15
SFR RESEARCH: ASSET MANAGEMENT
QUALITY REVIEW (1–5)
Source: SFR research 2022
eQ
2
3
4
5
6
7
8
3.2 3.3 3.4 3.5 3.6 3.7 3.8 3.9 4.0 4.1 4.2
4.09
3.93
3.90
3.86
3.77
3.83
3.64
3.77
The outlook of eQ’s real estate funds remains good
The returns of eQ’s real estate funds were good in 2022. The return of the eQ
Community Properties Fund was 8.2 per cent and that of the eQ Commercial
Properties Fund 7.6 per cent in 2022. The outlook of the funds continues to be
good: the initial rental yield is at a good level (eQ Community Properties 5.5 per
cent and eQ Commercial Properties 6.0 per cent) and the demand for the rental
premises is good. Rents have gone up in most of the premises in line with
the cost-of-living index at the turn of 2022 and 2023. In addition, eQ’s real
estate team has in both funds development projects the purpose of which is to
increase the value of the properties and create a new, strong rental cash flow.
The fact that high-quality resources are now better available than previously
in the construction industry facilitates the development work. The price of
financing increases alongside with rising interest rates, but this will translate to
eQ’s funds rather slowly. The financing of the funds consists of several facilities
and maturities, and a considerable part of it is interest rate hedged.
The value of the real estate assets in eQ’s real estate funds exceeds
EUR 3.5 billion, and the rental area is more than one million square meters.
Most of the properties are located in the Helsinki metropolitan area.
11eQ in 2022 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
• Thanks to BSAG’s Ship Waste Action initiative,
the way in which marine traffic operates has
changed, both on land and at sea. The actors
within shipping and waste management
participating in the initiative steer the waste
from the vessels to circular economy instead
of the Baltic Sea. After Ship Waste Action
was launched, it has become markedly more
common to discharge wastewater in harbours
along Finland’s coasts. For example in
the HaminaKotka harbour, the number of cargo
ships that discharged wastewater in the harbour
increased from three to 49 in 2022.
• BSAG promotes regenerative farming,
which improves soil health, mitigates
climate change, and supports biodiversity.
In 2022, 1,000 new farmers registered with
the E-college for Regenerative Farming.
Altogether 2,210 persons have joined this
extensive web course. In addition, more
than 3,800 farmers participated in field
days and webinars for regenerative farming.
More than 100 new members joined
the Carbon Action Club, an open network of
farmers, in 2022.
• In 2022, 4,800 hectares of valuable marine
nature was protected in Gullkrona. BSAG
took the initiative for establishing a marine
conservation area and brought the landowners
together. The work for establishing the largest
private conservation area in the Archipelago Sea
will facilitate the protection of other privately
owned valuable areas of marine nature in future.
eQ has supported the Baltic Sea Action Group (BSAG) since 2019.
The support is channelled through the BSAG share of the eQ Blue
Planet Fund, and in 2022 it amounted to more than EUR 170,000.
BALTIC SEA ACTION GROUP’S EFFECTIVENESS FIGURES
eQ raised a total of about EUR 500 million
to private equity and VC funds
Despite the difficult operating environment, eQ had a record year of raising
funds within private equity asset management. eQ raised altogether about
EUR 500 million to private equity and VC funds. The returns of the eQ PE funds
remained excellent. Our investment focus lies in the SME segment, in which
value creation and valuations are based on companies’ operative development
and profit growth. The correlation to the listed market is low.
The final closing of the eQ PE XIV North Fund, which makes investments in
Northern Europe, took place at the end of 2022 at EUR 288 million. The fund
was more than 40 per cent larger than its predecessor. The final closings of
the secondary market fund eQ PE SF IV at EUR 151 million and the eQ VC Fund
at USD 77 million were held at the same time.
eQ VC is eQ’s first venture capital fund, and it mainly makes investments
in early and late stage venture capital funds in the US. In VC investments,
eQ’s partner is TrueBridge from the US. TrueBridge is one of the world’s best
and most experienced VC investors with a long and excellent track record.
eQ VC represents a new strategy and shows that eQ is able to introduce new
investment products that complement the clients’ investment portfolios.
eQ builds up the VC product area on a longer term and will establish its next
VC fund in Q3/2023.
In 2023, funds will also be raised to the eQ PE XV US Fund, which is a private
equity fund investing in North America. The first closing of the fund was held
in January at USD 177 million. The fund is our fifth US fund together with
the long-term partner RCP, and it is only intended for professional investors.
The four previous US funds have raised more than USD 700 million of
client assets.
12eQ in 2022 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
Corporate Finance
eQ’s corporate finance services are offered by eQ Plc’s subsidiary Advium Corporate Finance Ltd. The services
cover mergers and acquisitions, large real estate transactions, equity capital markets, and advisory services in
general. The clients are mainly Finnish companies that make corporate or real estate transactions in Finland
and abroad, but also international companies engaged in corporate and real estate transactions in Finland.
Advium is one of the most experienced and highly esteemed advisors in
Finland. Since its establishment in 2000, the company has carried out
approximately 240 corporate and real estate transactions, and in many of them,
at least one of the parties has been an international actor. The total value of
the transactions has exceeded EUR 20 billion.
In 2022, Advium acted as advisor in five M&A transactions and five published
real estate transactions. In M&A transactions, Advium acted as advisor to
a consortium led by Bain in the public cash tender offer for Caverion and
in the acquisition of Raksystems to Trillimpact, for instance. In real estate
Key figures
Corporate Finance –/ –/ Change
Net revenue, MEUR 5.4 6.9 -22%
Operating profit, MEUR 1.7 2.7 -37%
Cost/income ratio, % 67.7 60.0 13%
Personnel as full-time resources 13 15 -13%
transactions, Advium acted as advisor in the divestment of Espoo Hospital
and the fire station portfolio owned by the city of Espoo, for instance.
In 2022, Advium’s net revenue was EUR 5.4 million and operating profit
EUR 1.7 million. It is typical of the corporate finance business that clients
pay a success fee when the transaction has been carried out. Consequently,
the transaction dates of the transactions have a major impact on invoicing,
and the net revenue may vary considerably.
13eQ in 2022 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
Investments
The business operations of the Investments segment consist of private equity
and real estate fund investments made from eQ Group’s own balance sheet.
During the financial period 2022, the operating profit of the Investments
segment was EUR 0.7 million. At the end of the year, the fair value of
the investments was EUR 16.8 million and the amount of the remaining
investment commitments was EUR 7.5 million. During the financial period,
eQ Plc made a EUR 1.0 million investment commitment in the eQ PE XIV North
private equity fund and a EUR 1.0 million commitment in the eQ Residential
II Fund.
During the period, the investment objects returned capital for EUR 2.9
million and distributed a profit of EUR 2.0 million. Capital calls totalled
EUR 2.1 million. The net cash flow from the investments during the period was
EUR 2.8 million. The value changes of investments recognised through profit or
loss were EUR -1.2 million during the period. The value changes in the Amanda
III and Amanda V private equity funds, which invest in Eastern Europe, had
a negative impact on the value changes of investments during the period under
review due to the war in Ukraine.
As for the income from own investment operations, eQ’s net revenue is
recognised for eQ due to factors independent of the company. As a result,
the segment’s result may vary considerably.
THE VALUE OF PRIVATE EQUITY AND
REAL ESTATE FUND INVESTMENTS
. MEUR
Key figures
Investments 1–12/2022 1–12/2021 Change
Operating profit, MEUR 0.7 7.1 91%
Fair value of investments, MEUR 16.8 18.8 -11%
Investment commitments, MEUR 7.5 7.2 3%
Net cash flow of investments, MEUR 2.8 4.1 -32%
14eQ in 2022 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
Continuous
dialogue improves
eQ’s sustainability
We now publish our Sustainability Report for the sixth time as part of
the Annual Report. For us as a Group, it is very important to report on
the realisation of sustainability in our business operation transparently.
We have also actively and for a long time encouraged our investees to
report on corporate responsibility and to develop the contents and quality
of their reports.
Our values “honest, open, competent and efficient” guide the work of every
eQ employee and constitute the foundation for daily co-operation with clients,
partners and other key stakeholders. Although the year 2022 was exceptional
in many ways, satisfaction among our clients and employees has remained at
an extremely high level.
From the perspective of business operation, we also find it very important that
every eQ employee has good competence in sustainability matters and up-to-
date information on them. Subjects on the training agenda in 2022 included
an updating review of the EU Sustainable Finance Disclosure Regulation
(SFDR) and the Taxonomy Regulation, the PRI results achieved by eQ Asset
Management (the UN Principles for Responsible Investment), the success of
eQ’s real estate funds in the GRESB assessment, and reformed ESG reports on
equity and fixed income investments.
Sustainability at eQ Group is at an excellent level. As a result of the successful
sustainability performance at Group level, eQ Plc has been awarded
the international ISS ESG Prime responsibility rating. eQ Plc is also included in
the Nasdaq OMX Sustainability Finland index.
In the autumn of 2022 eQ Asset Management once again achieved excellent
results in PRI’s 2021 assessment. We succeeded much better than the median
in all areas the company reported. The grade of eQ’s private equity investments
has been among the best (five stars) for several years now. Real estate
investments climbed to the best category for the first time. As a new area in
the PRI assessment we included corporate bonds that also scored good results.
The reform of eQ Asset Management’s sustainability reporting on equity and
fixed income investments was the most significant development project
in 2022. We also started reporting PAI indicators on equity and fixed income
investments back in the summer of 2022, as one of the first asset managers.
The results of real estate investments were excellent in GRESB sustainability
reporting, and in addition, the number of Breeam In Use certifications (Very
Good level) at our individual properties continued to grow. In the future, eQ’s
real estate funds classified according to Article 9 must also report the share
of properties which meet the taxonomy criteria in the funds. Taxonomy
compliance assessment was one of the key development projects in real estate
investments last year, and this work still continues. The target funds at eQ’s
private equity funds are in full flow with consideration and development of
sustainability. We describe this in detail in the paragraph on private equity
funds in this Report.
We look at the year 2023 with great interest. Our own work on sustainability
continues by, e.g., bringing changes arising from the EU’s Sustainable Finance
Disclosure Regulation and the Taxonomy Regulation to a concrete level in
all our asset classes. In the spring of 2023, we will officially report adverse
sustainability impacts (“PAI indicators”) on all of our investments. For the first
time, we will now collect emission data on target funds at eQ’s private
equity funds.
It is time to thank our clients. You challenge us to ponder topical new themes
and trends in responsibility and sustainability, and to develop our approach on
this basis. We will be happy to meet this challenge going forward.
We hope that you enjoy reading our 2022 Sustainability Report.
Sanna Pietiläinen
Director, Responsible Investment
Our values guide the work of
every eQ employee and constitute
the foundation for daily
co-operation with key stakeholders.
16eQ in 2022 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
Sustainability and its
reporting in eQ Group
eQ Group is a Finnish group of companies that concentrates on asset
management and corporate finance business. The parent company eQ Plc’s
shares are listed on the main board of Nasdaq Helsinki.
Sustainability reporting describes eQ Group’s role as a responsible actor
in relation to its stakeholders and society at large. eQ wishes to ensure
the transparency and openness of its operations by reporting on its
sustainability work and its development regularly and extensively. Even though
eQ Group, based on its size and operations, is not obliged to draw up a non-
financial report required by the Finnish Accounting Act, since 2017 the Board
of Directors of eQ Plc has decided to voluntarily report on its sustainability
to shareholders, clients and other major stakeholders. eQ Group’s 2022
Sustainability Report has been approved by the eQ Plc’s Board of Directors, and
it is published as part of the 2022 Annual Report.
This report follows Nasdaq’s ESG global
reporting guide for public and private
companies published in May 2019 (ESG
Reporting Guide 2.0 – A Support Resource for
Companies) for the parts that are relevant to
eQ’s operations.
Sustainability Report 2022
eQ Group’s responsible operations
Responsible operations are a key part of eQ’s entire business. We act in
a responsible and sustainable manner as eQ Group and integrate this work
systematically and in practice to eQ Asset Management’s investment
operations and Advium’s corporate finance operations. eQ’s values (below)
are at the core of the Group’s work culture. They guide the work of each
eQ employee and constitute the foundation for daily co-operation with clients,
partners and other key stakeholders.
eQ Group’s values
HONEST
We are honest and reliable, true
to our word. We act correctly
and responsibly. We comply with
the regulation of the financial
industry and eQ’s joint rules.
OPEN
We are easily approachable and
discuss all matters openly. We do
not cover up mistakes or problems,
we learn from them. We rejoice
successes together. We also
respect dissimilarity.
COMPETENT
We want to understand our clients’
needs. We constantly develop our
professional skills and procedures.
We dare to question matters.
We share information, provide
assistance and give feedback.
EFFICIENT
We do what we promise briskly
and carefully. We do the work,
we do not simply talk and plan.
We work diligently and with an
uncompromising attitude together
with our clients, colleagues
and partners.
17eQ in 2022 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
eQ encourages the companies in which it invests to provide transparent
stakeholder information and develop their sustainability reporting, regardless of
the size of the company or the regulatory requirements. More information about
sustainability, the related principles and other relevant documents can be found
on eQ’s website (https://www.eq.fi/en/about-eq-group/sijoittajat/vastuullisuus).
Sustainability themes
eQ has in its own business four essential areas that create the framework for
sustainability. The sustainability themes have been approved by eQ Plc’s Board
of Directors. The section below describes in detail what these four themes
mean in practice.
At Group level, the Management Team is responsible for sustainability, and
the work is conducted in close co-operation with eQ’s Director for Responsible
Investment. eQ Plc’s Board of Directors receives annual reports on how
sustainability has been carried out within the company as well as on future
development plans.
GOOD GOVERNANCE
• Adherence to the law and
the company’s internal
instructions, commitments,
policies (such as the policy on
conflicts of interest) and Code of
Conduct in all operations
• eQ’s open and transparent
reporting – the pricing of asset
management products, for
example, is presented openly and
clearly, both ex-ante and ex-post
• Proactive activities against
corruption, bribery and
money laundering, as well as
promoting these activities in
the entire sector
• eQ Plc publishes a
Sustainability Report
CLIENTS
• An honest, open, competent and
efficient partner to eQ’s clients
• In-depth understanding of
customer needs and meeting
these needs
• Monitoring customer satisfaction
THE ENVIRONMENT
• We use green electricity in our
own property (hydropower)
• We have minimised the use of
plastic materials, we recycle in
our premises and prefer public
transports and alternative
ways of travelling (Guidelines
for environmentally friendly
operation to eQ’s employees
since 2019, updated in
the autumn of 2022)
• Training on environmental
matters for our employees
• Support for the Baltic Sea
Action Group (BSAG) since
2019. The support is channelled
through the BSAG share of
the eQ Blue Planet Fund, and in
2022 it amounted to more than
EUR 170,000
PERSONNEL
• Equal and diverse work
community
• Wellbeing at work and work
ability – workplace ergonomics,
fitness tests, monitoring
the quality of indoor air
• Early support programme
• eQ – enabler of professional
development
• Monitoring job satisfaction
Training related to sustainability
eQ provides its employees with continuous training in sustainability matters.
Subjects on the training agenda in 2022 included a review of the EU
Sustainable Finance Disclosure Regulation (SFDR) and the Taxonomy Regulation
from eQ’s perspective, the PRI results achieved by eQ Asset Management
(the UN Principles for Responsible Investment), the success of the real
estate finds in the GRESB assessment, and eQ Group’s updated guidelines for
environmentally friendly operation.
In its induction programme, eQ commits new employees to comply with and
implement eQ’s principles and procedures on responsible investing. In 2022
the company organised two induction trainings for new employees related to
sustainability. New employees complete e-learning on the Code of Conduct as
part of their induction.
Sustainability within the Group is at an excellent level
As a result of the successful sustainability performance at Group level, eQ
Plc has been given the international ISS ESG Prime responsibility rating. ISS
assesses how responsibility matters are carried out by a company with regard
to environmental, social and governance aspects. The ISS ESG Prime rating
is awarded to companies that reach or exceed the criteria for the best ESG
practices defined by ISS ESG. eQ Plc was among the best tenth in its sector
regarding responsible operations.
eQ Plc is included in the Nasdaq OMX Sustainability Finland index. The index
consists of 40 companies ranked best on Nasdaq Helsinki in terms of
sustainability criteria. In order to promote openness and transparency eQ
has already for four years reported key ESG ratios describing operations
based on sustainability reporting to the ESG database maintained by Nasdaq.
In recognition of this, Nasdaq has awarded eQ Plc with the “Nasdaq ESG
Transparency Partner” certificate.
18eQ in 2022 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
eQ Asset Management has for several years acted as an active forerunner for
responsible investment. eQ signed the United Nations’ Principles for Responsible
Investment (PRI) in 2010 and has accordingly undertaken to incorporate ESG
factors (the environment, social responsibility and governance) as part of
the investment process, to be an active owner and to promote the development
of responsible investing practices in the industry. eQ is also an active member of
Finsif (Finland’s Sustainable Investment Forum), and Finance Finland.
Furthermore, eQ promotes the implementation of sustainability in private equity
funds at the Finnish Venture Capital Association (as the chairman of the ESG
Committee) and Invest Europe and, correspondingly for real estate investments,
at Finnish Property Owners Rakli and in the GRESB (Global Real Estate
Sustainability Benchmark) assessment. In equity and fixed income investments
eQ has signed CDP’s Climate Change programme and encourages businesses to
specify emission reduction targets for their own operation, based on science,
through the Science Based Target Initiative (SBTi) organised by the CDP.
Responsibility and sustainability are a key part of eQ Asset Management’s
investment activities and processes. eQ Asset Management’s principles for
responsible investment form a framework for all of eQ’s investment operations
and their processes. These principles have been approved by eQ Asset
Management’s Board, and they are based on policies on responsible investing
specified by the Board. The ownership policy of eQ Asset Management Ltd are
available on eQ’s website.
Sustainability risks and opportunities (ESG, sustainability factors associated
with the environment, society and governance) are integrated systematically
and practically in the selection, monitoring and reporting of investments in all
Responsible and sustainable investment at eQ Asset Management
of eQ’s investment areas. eQ’s goal in responsible and sustainable investing
is to identify investments that benefit from sustainable operation and their
potential for return, and to reduce the risk in investments. For the past two
years, the development of the ESG approach has been for its part steered by
the EU Sustainable Finance Disclosure Regulation (SFDR) that took effect in
March 2021 and its implementation in investment activities.
All those working on investment activity at eQ systematically take into
account sustainability factors pertaining to investments in their own work.
In addition to the sustainability analysis, monitoring investments regularly
and ownership practices applied by companies as necessary are also an
important part of a portfolio manager’s job. Influence is exerted via direct
engagement dialogue with businesses, by attending corporate meetings when
needed and by impacting companies through engagement initiatives, either
alone or jointly with other investors. The coordination of work on responsible
investing, its development and training are the responsible of eQ’s Director for
Responsible Investment.
ESG training of eQ’s investment teams in 2022
Implementation of the Sustainable Finance Disclosure Regulation, review of
PRI results, and planning of the upcoming PAI indicator reporting were on
the agenda for training of eQ’s investment teams in 2022. eQ’s equity and fixed
income investment team also selected a new ESG data supplier and reformed
the ESG report. The private equity investment team prepared the eQ PE ESG
handbook that serves as a concrete tool for team members. During the autumn,
the real estate investment team acquired more information and competence for
evaluating the taxonomy compliance of buildings, carefully discussed the 2022
GRESB results concerning real estate funds, and heard how real estate
financiers take account of sustainability in their funding decisions. The sales
team was trained on the amendment to the MiFID II Directive that entered
into force in August 2022 and which adds integration of clients’ sustainability
preferences into investment advice.
Clients
Conversations with clients and training them when necessary are a material
part of eQ’s customer work. We listen to our clients and learn from them.
In 2022 eQ organised two ESG webinars for its clients, the first one on an
update to the situation with the EU’s regulation on sustainable financing, with
general talk on whether asset managers have relevant responsibility data at
their disposal. The second ESG webinar was a discussion of what ESG looks like
from a Finnish institutional investor’s perspective.
In accordance with the MiFID II amendment that took effect in August
2022, sustainability preferences have been enquired from clients (except for
online customers) as part of their suitability assessment. Investment service
providers must determine their clients’ own sustainability preferences, which
are used to specify the most suitable investments for the organisation from
the sustainability perspective also.
During the past year eQ’s ESG experts were also active in several Finnish and
international forums and ESG surveys, promoting the distribution of information
based on best practices.
19eQ in 2022 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
Reporting on responsible investing
eQ Plc’s Board of Directors is reported once a year on implementation of
responsibility and responsible investment and on future development activities
in all of eQ’s areas of investing. eQ Fund Management Company’s Board
regularly discusses engagement activities with investees. eQ also annually
reports to PRI on the company’s practices in responsible investing and on
concrete engagement activities in the investees.
eQ Asset Management once again achieved excellent results in the 2021 PRI
(the UN Principles for Responsible Investment) assessment. The information
that was evaluated pertains to the year 2020. PRI did not publish the results
until September 2022, due to reforms in their reporting.
eQ succeeded much better than the median in all six areas the company
reported. The grade of eQ’s private equity investments has been among the best
(five stars) for several years now. Real estate investments climbed to the best
category for the first time. As a new area in the PRI assessment eQ included
corporate loans that also scored good results.
In the following chapters, eQ briefly presents the most important events
concerning ESG matters in 2022 in the various asset classes. There is more
detailed information about our responsible investment operations and the ESG
matters that we monitor in our investees in the ESG reports per asset class.
Equity and fixed income investments
Significant reforms to sustainability reporting of
equity and fixed income investments
The reform of eQ Asset Management’s sustainability reporting on equity and
fixed income investments was a key development project in 2022. Besides
reforming the report, eQ also carefully evaluated what kind of ESG information
the company needs in support of investment decisions, influencing and
reporting now and in the future.
eQ Asset Management has cooperated with ISS ESG and CDP for a long time.
ISS ESG monitors eQ’s equity and fixed income funds for any violations of
the UN’s Global Compact principles on a quarterly basis. In addition to eQ’s
engagement concerning its own investees, ISS ESG also conducts frequent
engagement conversations with the businesses it analyses. eQ also influences
enterprises directly and by participating in engagement initiatives with other
investors. eQ encourages businesses to specify emission reduction targets
for their own operation, based on science, through the Science Based Target
Initiative (SBTi) organised by the CDP. In summer 2022 eQ selected as its
third partner MSCI, which assesses the sustainability of portfolio companies
regarding environmental and social responsibility and provides ESG data on
investees. Regulation associated with sustainability factors and the rapid
development of disclosure requirements create pressure for the demand
for diversified ESG data. In 2022, thirty per cent of the research budget of
eQ’s equity and fixed income funds was spent on ESG research. One should,
however, understand that it is still difficult to obtain ESG information or that
the data received is incomplete regarding small businesses and emerging
markets, in particular.
PRI signatory since
eQ PRI results (data per )
• eQ performs better than the median in all reported areas
• The ESG rating of private equity has remained among the best for several years
• Real estate has risen to the highest star grade
• eQ has included corporate bonds as a new area in the PRI assessment – good results too
eQ’s sustainable investment work can be seen as an excellent result in PRI reporting
Reported areas 2021 Score (max. 100%) Star grade* Median score % Median grade
Investment & Stewardship Policy 85% 60%
Private Equity (fund of funds) 90% 63%
Real Estate 93% 69%
Listed Equity – ESG Incorporation
99% 71%
Listed Equity – Voting 57% 54%
Fixed Income – Corporate 78% 62%
* PRI’s new rating scale is based on a star grade (1 star ”poor” -> 5 stars ”best”).
What the new report says of the level of sustainability in investments
MSCI specifies for all of eQ’s equity and fixed income funds an ESG Quality
Score that is published on each fund’s ESG report. The ESG quality score takes
note of the weighted average of ESG scores of the companies in the fund, their
industry and the trend in the scores. The MSCI ESG score a fund receives is a
“second opinion” for the portfolio manager’s own ESG assessment of investees.
The current sustainability score of eQ’s actively managed equity and fixed
income funds is very good, “AA”.
Portfolio managers of eQ funds monitor the realisation of environmental and
social characteristics by means of, e.g., the volume of emissions by target
companies, the trend in carbon intensity, commitment to emission reduction
targets (the Science Based Target Initiative, SBTi), assessment of adverse
sustainability impacts (PAI indicators), and businesses’ capabilities for managing
risks and opportunities in the transition to low carbon. Portfolio managers also
study the number of violations of norms at target companies and continue to
20eQ in 2022 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
monitor the implementation of corporate responsibility reporting at businesses.
Sources of ESG information include MSCI, ISS ESG and sustainability data
published by investees.
A company’s commitment to the Science Based Target Initiative (SBTi)
contributes to how its climate measures support the goal of the Paris
Agreement on climate change to keep the rise in mean global temperature
to well below 2 °C by 2050. For a fund’s portfolio manager, this is a concrete
indicator for understanding and measuring the development of a company’s
climate action in its business operation. Of the investees in eQ’s equity funds,
on average 20% already have a science-based emission reduction target and
around 4% of the businesses are committed to the initiative (there is no target
yet). In fixed income funds the figures are slightly lower (an average of 9%).
The figures are high in the Article 9 classified eQ Blue Planet Fund: An SBTi
emission reduction target has already been specified by 57% of the investees,
and 12% are committed to the SBTi initiative. In summary, we can state that
CARBON INTENSITY: LEVEL 1+2,
(
tCO
2
e/COMPANY’S TURNOVER MEUR)
250
200
150
100
50
0
202120202018 201920172016
Examples of monitored ESG indicators in eQ’s equity and fixed income funds per 31 December 2022
Equities Fixed income
MSCI ESG Quality Score (avg.)* AA AA
The share of EU taxonomy eligibility activities 60% 64%
The share of EU taxonomy alignment activities 8% 7%
Science-based emission reduction target (SBTi) set 19% 9%
SBTi commitment 4% 9%
No science-based emission reduction target (SBTi) 76% 82%
Readiness to manage the risks and opportunities associated with the transition to low-carbon: Neutral 46% 49%
Readiness to manage the risks and opportunities associated with the transition to low-carbon: Solutions 9% 4%
Readiness to manage the risks and opportunities associated with the transition to low-carbon: Operational Transition 4% 6%
Readiness to manage the risks and opportunities associated with the transition to low-carbon: Product Transition 5% 6%
Readiness to manage the risks and opportunities associated with the transition to low-carbon: Asset Stranding 0% 0%
Readiness to manage the risks and opportunities associated with the transition to low-carbon: No information 36% 35%
Total number of norm based violations in funds pcs (exc. Index funds) 0 0
Implied Temperature Rice (°C) 1.96 2.60
* MSCI ESG Rating Scale: ”AAA” (Excellent), ”AA” (Very Good), ”A” (Good), ”BBB” (Average), ”BB” (Satisfactory). Source: MSCI.
Source: MSCI, ISS ESG and eQ per 31.12.2022.
The fund’s carbon intensity is the weighted average of the carbon intensity
of its current target companies. The carbon intensity takes into account
the companies Scope 1 and Scope 2 emissions (tCO
2
e) in proportion to
the company’s turnover (MEUR) (source: MSCI).
large corporations have set more SBTi emission reduction targets than small
companies. These figures are higher in the developed markets than in emerging
markets. European businesses are forerunners in setting these targets compared
with the United States.
eQ has monitored the trends in setting SBTi emission reduction targets for a
few years now, and also through the joint engagement initiative organised by
the CDP. It is estimated that at the end of 2022, more than 4,000 enterprises
had either undertaken to set a target or had already accepted a target. These
companies account for more than a third of the value of the global equity
markets. When eQ joined the campaign in 2019, the number of businesses was
495. Since then that figure has grown by more than 100% per year. According
to CDP’s 2021 report, more than 80% of the corporate targets are below
the warming curve of 1.5 °C. Today almost all business have also set their
target for the Scope 3 emission level. The Scope 3 category includes emissions
generated by purchased goods and services, i.e., all indirect emissions.
The figure on the left shows the carbon intensity trend of the eQ Global
Fund, which is the weighted average of carbon intensity at its current target
companies. Carbon intensity takes account of the companies’ Scope 1 and
Scope 2 emissions (tCO
2
e) proportioned to the company’s net turnover (MEUR).
Carbon intensity at the fund’s current investments has decreased in the long
term. (Source: MSCI).
eQ’s fixed income funds also actively invest in ESG loans (incl. green loans
and loans linked to sustainability). Thus eQ aims to promote the financing
of sustainable development and the green transition in fixed income funds.
The share of ESG loans in funds has increased in the past three years. In the eQ
Euro Investment Grade and eQ Emerging Markets Corporate Bond funds,
the share of ESG loans at the end of 2022 was approximately 30% and in
the eQ High Yield Fund over 15%.
21
eQ in 2022 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
In summary, we can state that investments provide quantitative date in
support of investment decisions, engagement and reporting. The availability and
quality of ESG data remain inadequate but improvements occur all the time.
eQ was one of the first asset managers to start reporting PAI indicators
on equity and fixed income investments in the summer of 2022. Reported
PAI indicators are available in fund-specific ESG reports on eQ’s website
(https://www.eq.fi/en/funds/fund-values).
Real estate investments
eQ’s real estate funds according to Article 9 have a broader impact
on the development of ESG within the whole industry
All of eQ’s real estate funds are sustainable financial products according to Article
9. eQ is a responsible property owner who wants sustainability measures to lead
to concrete and positive development in the energy efficiency of the properties
owned and in questions of environmental and social responsibility. eQ has set
a tough but realistic carbon neutrality target for in-use energy consumption
by 2030.
Consideration of ESG is also evaluated by means of outside ESG assessments.
Real estate investments climbed to the best category (five stars) in the PRI 2021
assessment for the first time.
GRESB is a global sustainability comparison used for measuring and
comparing the sustainability of real estate investment companies and funds
in the management of their real estate portfolios. The annual assessment
provides diversified coverage of sustainability in real estate management in
terms of environmental matters, sustainable management and practices. Results
obtained from the sustainability assessment are used as a tool for monitoring
and developing sustainability in eQ’s real estate investments. This year 1,820
businesses and funds from 74 countries took part in the assessment.
eQ’s real estate funds participated in the Global Real Estate Sustainability
Benchmark (GRESB) assessment in the real estate sector for the fourth
consecutive year. In the 2022 assessment, where the data came from the year
2021, both eQ Community Properties and eQ Commercial Properties achieved
For eQ’s equity and fixed income funds: SFDR classifications, reporting of PAI indicators, and the MSCI ESG rating 31 Dec. 2022
Funds Article 6 Article 8 Article 9 Reporting of PAI indicators MSCI ESG rating*
FIXED INCOME FUNDS
Money Markets
eQ Euro Short Term
x x AA
Government Bonds
eQ Government Bond
x x BBB
Investment Grade Credit
eQ Euro Floating Rate
x x AA
eQ Euro Investment Grade x x AAA
eQ Euro Investment Grade Bond Index (Vanguard) x x AA
High Yield Credit
eQ High Yield
x x A
Emerging Markets Credit
eQ Emerging Markets Corporate Bond HC
x x A
eQ Emerging Markets Corporate Bond Local
Currency x x A
EQUITY FUNDS
Finland
eQ Finland
x x AAA
Europe
eQ Euroope Dividend
x x AA
eQ Nordic Small Cap x x A
eQ Europe Active (Fidelity) x x AAA
eQ Europe Stock Index (Vanguard) x x AAA
North America
eQ US Stock Index (Vanguard)
x x AA
Emerging Markets
eQ Emerging Dividend
x x BB
eQ Emerging Markets Small Cap x x BBB
eQ Frontier Markets x x A
eQ Euro Investment Grade Bond Index Fund x x x BBB
Japan
eQ Japani Stock Index (Vanguard)
x x AAA
Global
eQ Blue Planet
x x AAA
* MSCI ESG Rating Scale: ”AAA” (Excellent), ”AA” (Very Good), ”A” (Good), ”BBB” (Average), ”BB” (Satisfactory). Source: MSCI.
22
eQ in 2022 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
three stars out of five and a Green Star recognition for their sustainable work.
Although the GRESB assessment was made more strict, both funds’ results were
better than the whole group of respondents and eQ’s comparison group. eQ’s real
estate funds scored full points for setting of carbon neutrality and certification
targets, cooperation with tenants and for management of sustainability (incl.
policies, practical measures and reporting on sustainability). According to
the assessment, eQ’s real estate funds still have room for improvement in
the coverage of consumption data on properties, for example.
The Building Research Establishment’s Environmental Assessment Method
(BREEAM) In Use certification is used to assess the operability of an individual
property and related maintenance functions, identify any shortcomings and
select areas of development. eQ’s real estate funds intend to obtain a Breeam
In Use certificate for all sites, with the Very Good level as their goal.
In the future, eQ’s real estate funds classified according to Article 9 must also
report the share of properties which meet the taxonomy criteria in the funds.
Taxonomy compliance assessment was one of the key development projects
last year, and this work still continues. Specific taxonomy criteria have been
defined for properties built before 31 December 2020 and after that date.
Last year eQ focused on reviewing properties built prior to 2020. By a rough
estimate, the eQ Community Properties fund has 19 taxonomy compliant
properties that meet the basic criteria (high energy category A or even B,
depending on the type of property) and the eQ Commercial Properties fund
has five of them. These properties need to undergo a review of climate risks
which means evaluating, for instance, what kinds of physical climate risks
the properties may face in the future relating to temperature (temperature
variation), wind (changes in wind conditions), water (changes to rain
conditions, such as precipitation and snow, rising sea levels, floods, etc.) or
soil (deterioration of the soil, landslide, rising sea levels, etc.). The guidelines
such properties have for managing potential risks are also assessed. In the next
stage eQ will go through properties built since 31 December 2020. One should
note that the taxonomy criteria leave plenty of room for interpretation, and
the interpretations made now can still change and become more precise, so eQ
wants to carry out a taxonomy compliance assessment on properties carefully
and by taking its time. * % of the value of fund’s assets at the end of year. The target is to have assets certified with a level of “Very Good”.
eQ Commercial Properties BREEAM -sertificate target*
eQ Community Properties BREEAM -sertificate target*
GRESB respondents
avg. 74, Comparison
group 73
GRESB respondents
avg. 74, Comparison
group 77
eQ Commercial Properties
GRESB -assessment
eQ Community Properties
GRESB -assessment
eQ has set carbon neutrality
target for in-use energy
consumption by 2030.
Responsibility and sustainable energy solutions are systematically implemented
in the eQ Residential and eQ Residential II funds as well. All investees are
certified with “Very Good” as the targeted level for BREEAM In Use. The first
certifications will be made in early 2023. A GRESB assessment is conducted
for the first time after the sites in the fund have been completed. All sites have
solar power plants. The eQ Residential fund has one site using geothermal
energy already finished and two under construction. One site is also being built
with heating that utilises an air/water heat pump. All other sites use green
district heating. Green electricity is used at all sites in addition to solar power.
The buildings are new and have a good energy classification (energy category B
at least). All sites in the eQ Residential II fund boast the best energy category A.
In terms of real estate investing, eQ deems it important that the real estate
team has an excellent level of ESG expertise and practical competence. This
is supported by sustainability trainings started in 2022 concerning the real
estate team and its partners. The themes of the training were focused on
comprehending the taxonomy and how financiers of properties consider
sustainability in their funding decisions.
In the latter part of the year eQ’s real estate funds were accepted as
a member of the Green Building Council Finland (FIGBC). Membership enables
eQ’s real estate funds to contribute to the development of the real estate
and construction sector and to network among the actors in the industry.
The biggest value of the membership for eQ is that the company can engage
in regular discussions with other operators in the sector, seek best practices
and develop ESG-related matters. Constantly learning new lessons and sharing
information does not benefit eQ alone, instead the company can genuinely have
a broader impact on the development of the entire real estate sector.
23
eQ in 2022 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
Private equity, private credit and venture capital investments
Private equity funds are in full flow with consideration
and development of sustainability
eQ has monitored the development of sustainability at private equity funds since
2017 by means of an annual ESG survey sent to target funds, for instance.
The response rate to the 2021 ESG survey was 100% (comprising 111
managers/funds with more than 1,000 target companies in their portfolios).
Results analysed in spring 2022 show that ESG practices among European
managers are beginning to be at a good level. North American managers still lag
behind their European counterparts in attitudes toward ESG (no sustainability-
related regulation as in Europe), and there is considerable polarization between
managers. A major improvement regarding ESG practices was witnessed
regarding some North American managers in 2021, while many others were
only taking their first steps in terms of ESG perspectives. In spring 2022 eQ
initiated a comprehensive ESG cooperation project with its partner RCP. In
the course of the year, RCP among other things organised seminars on ESG
topics for eQ’s fund managers and proactively contacted them on the coaching
perspective relating to ESG. We can already see that this work has contributed
to how managers are starting to look more positively at ESG. eQ believes that in
the next few years North American managers will take significant leaps forward
as far as ESG is concerned.
eQ is committed to considering adverse sustainability impacts (“PAI indicators”)
in its own investment activities and to report on them starting in 2022. These
mandatory PAI indicators are reported annually to the extent appropriate
information is available. In early autumn 2022 eQ proactively enquired its
managers’ capability to report sustainability indicator data to eQ as early as
spring 2023. It was delightful to notice that pacesetting managers already
work in Europe who develop investees’ capacity for reporting by including these
indicators in corporate business operations. eQ acknowledges that the coverage
of PAI indicators regarding private equity investments will probably be low
in the first few years, as small and medium-sized businesses tend to have
inadequate reporting resources and some managers (such as in North America
and the UK) are outside of regulation.
The EU Sustainable Finance Disclosure Regulation, which entered into force
in March 2021, has certainly served as a key driver in sharpening the ESG
approach among European private equity funds, in particular. In 2022 many
private equity funds that accumulated assets were Article 8 funds, and among
them were funds that had invested in very small enterprises (a company
with 10 employees that was only beginning to develop its financial reporting
capability). Managers who decided to classify their fund according to Article
6 in 2022 often justified their decision with the desire to ascertain that they
would be able to fulfil the reporting obligation required by regulation and avoid
“greenwashing”.
In principle, every one of these managers believes that the next fund will be
compliant with Article 8 (promoting environmental or social characteristics).
In June 2022 the company organised the eQ GP Day on ESG that was attended
by 30 European private equity fund managers. At the event, the representative
of Invest Europe reported the latest news on regulation of sustainable
financing, and eQ presented the key observations on its annual ESG survey.
Case presentations by two managers were also found to be very interesting
and concrete. Feedback received from the event inspired eQ to continue this
systematic work every year. eQ’s role at the core of the manager field enables
wide sharing of best practices.
In late 2022 the company prepared the eQ PE ESG handbook that serves as
a concrete tool for whole private equity team. This ensures that eQ’s private
equity team is a forerunner that wants to further improve its operation.
All in all, 2022 was an active year from the perspective of ESG activities and a
great deal of concrete development work was completed. Still, it is clear that
the standards are rising constantly and that the bar for eQ’s own work has
already been raised to the next height.
24
eQ in 2022 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
ESG due diligence and
manager communication
Enhanced dialogue and cooperation
with managers & eQ GP Event
Annual ESG Survey Continuous development
/ ESG INTEGRATED INTO INVESTMENT PROCESS AND MONITORING / TARGETING BROAD APPLICATION OF ART. IN EUROPEAN
LOWER MIDDLE AND MIDDLE MARKET
• ESG report once a year
• ESG development of tar
• Trends from several years
• Current themes
• “…improvement challenge accepted
• “ the feedback is encouraging
• “.. refreshing and a helpful guidance
• “ we highly appreciate the ESG rating by eQ
• ESG action plan for North American managers
with RCP
• ESG coaching with European ”support students”
• Coaching and supporting PAI reporting readiness
• Chairman of FVCA’s ESG Committee and
other networking
2
Luottamuksellinen
Sustainable investing in Private Equity
3
2
1
Monitoring
Sourcing,
screening and
due diligence
Investor
reporting
§ As part of the investment process, assessment of
sustainability risks and opportunities and manager’s ESG
commitment (ESG due diligence)
§ ESG score for each potential investee funds
§ ESG objectives included in the legal documentation of the
target fund
§ Monitoring and promoting the development of ESG
performance
§ Annual ESG survey since 2017
§ Fund reporting, and advisory board & investor meetings
§ Ad-hoc discussions
§ Annual ESG report
§ ESG performance of investee funds and ESG events
§ Trends for multiple years
§ Recent trends
The investment advisors (RCP, MV Credit, TrueBridge) are required to meet the sustainability criteria and to include ESG assessment as part
of the investment analysis and recommendation. eQ performs ESG monitoring regarding the US funds by itself.
Tehdään tästä ensimmäinen
kuva edellä olevaaan slideen!! Ja
tekstit “häivytetään”
3
Luottamuksellinen
6.2
4.6
4.7
3.9
4.2
2.2
1.9
2.1
1.3
0
1
2
3
4
5
6
7
Amanda IV
We st
eQ PE VI
North
eQ PE VIII
North
eQ PE X
North
eQ PE XII
North
eQ PE VII
US
eQ PE IX
US
eQ PE XI
US
eQ PE XIII
US
2017 2018 2019 2020 2021
2007 2013 2016
2018 2020 2015 2017 2019 2021
eQ Private Equity -rahastojen vastuullisuusarvio
Vastuullisuusarvio rahastoittain, 0-7 pistettä (keskiarvo kohderahastojen yleisarvosanasta
1
)
1
Käytetty aritmeettista keskiarvoa vertailtavuuden vuoksi edeltäviin vuosiin. Jäljempänä rahastokohtaisilla sivuilla käytetään painotettua (markkina-arvo + kutsumaton) keskiarvoa.
§ Kyselyn arviointikriteerejä tiukennettiin vuodelle
2021, mikä näkyy joidenkin eurooppalaisten
rahastojen vastuullisuusarviossa
§ Pohjois-Amerikassa positiivinen ESG-kehitys, mutta
polarisaatio merkittävä kohderahastojen välillä, eivät
osa EU-tason sääntelyä ja tuotekategorisointia
5.0
4.4
4.3
3.7
3.5
0
1
2
3
4
5
6
7
eQ PE SF eQ PE SF II eQ PE SF III Amanda III
Eastern
Amanda V
East
2017 2018 2019 2020 2021
2017 2018 2020 2006 2011
Indicators applicable to investments in investee companies
Adverse sustainability indicator Metric Impact [year n] Impact [year n-1] Explanation Actions
taken, and
actions
planned and
targets set
for the next
reference
period
CLIMATE AND OTHER ENVIRONMENT-RELATED INDICATORS
Greenhouse
gas emissions
1. GHG emissions
Scope 1 GHG emissions
Scope 2 GHG emissions
Scope 3 GHG emissions
Total GHG emissions
2. Carbon footprint
Carbon footprint
3. GHG intensity of
investee
companies
GHG intensity of investee
companies
4. Exposure to
companies active
in the fossil fuel
sector
Share of investments in companies
active in the fossil fuel sector
5. Share of non-
renewable energy
consumption and
production
Share of non-renewable energy
consumption and non-renewable
energy production of investee
companies from non-renewable
energy sources compared to
renewable energy sources,
expressed as a percentage of total
energy sources
SME sector has inherently less resources available, but there is an even greater opportunity to influence and every step counts.
Sustainability in eQ’s private equity investment activity
25
eQ in 2022 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
RECYCLING, SORTING AND CLEANING
Improving recycling and guidance
as well as using environmentally
friendly cleaning products
MANAGEMENT
Improving continuously
environmental matters.
Internal working group
COMMUNICATION AND ENGAGEMENT
Communicating sustainable practices in the work
community and training in key environmental matters as
well as monitoring and reporting the development of these
themes with the eQ Group’s sustainability report
MOVEMENT
Public transport ticket supported
by the employer and using a
remote connection (TEAMS etc.)
when reducing unnecessary travel
ENERGY AND WATER
Reducing electricity
consumption and using
renewable energy
sources (hydropower)
FOOD/CATERING
Salads, organic packaging
as well as favouring other
local food products
PROCUREMENT
Giving up plastic bottled
mineral water, favouring
environmentally friendly and
durable products (including
Fair Trade products, bubble
water tap) and reducing
paper consumption
Realisation of environmental
responsibility at eQ Group
Mitigation of climate change is an important theme both at eQ Group and in
eQ Asset Management’s investment operation. eQ Group’s own business places
a relatively minor direct burden on the environment. Energy use is primarily
related to the consumption of energy on the premises. On the other hand, eQ
has an opportunity to promote sustainable development through eQ Asset
Management’s investment activities.
Although eQ does not operate in an “emitting industry”, the company pays
more and more attention to the environmental impacts of its own operation
and develops its procedures in an increasingly sustainable direction. In
2021, on the basis of earlier operating principles, eQ outlined and prepared
an environmental policy concerning eQ Group that consists of five themes:
1. recycling, sorting and cleaning, 2. movement, 3. food/refreshments, 4.
procurement, and 5. energy and water. In 2022 the company discussed
indicators of themes on environmental responsibility and the need to update eQ
Group’s guidelines for environmentally friendly operation.
Companies in eQ Group have used fully renewable energy in their own
electricity consumption since 2018. The premises have been rented.
Consequently, the heat and water consumption as well as the air conditioning
(district cooling) is included in the rent, and consumption data regarding them
are not available from the lessor. The quality of indoor air is also an important
consideration with regard to the health and wellbeing of our employees. For this
end, eQ purchased in the spring of 2019 a system that monitors the quality of
indoor air (temperature, humidity, CO
2
, fine particles) to the offices.
eQ encourages its employees to use public transport and other alternative
ways of travelling. Employees are offered a travel ticket as employee benefit
and part of the overall salary, and they also have access to eQ’s joint public
26
eQ in 2022 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
Own energy consumption of the organisation
2022 2021 2020 2019 2018
Electricity consumption, kWh 103,960 106,369 89,893 100,396 107,235
Origin of electricity:
Share of renewable energy, % 100% 100% 100% 100% 100%
Share of nuclear power, % 0% 0% 0% 0% 0%
Share of fossil fuels, % 0% 0% 0% 0% 0%
Specific carbon dioxide emissions of electricity, g/kWh 0 0 0 0 0
Nuclear fuel used in electricity, mg/kWh 0.0 0.0 0.0 0.0 0.0
Carbon dioxide emissions of electricity, total, kg 0 0 0 0 0
Carbon dioxide emissions of electricity per net revenue, g/EUR 0.00 0.00 0.00 0.00 0.00
Electricity consumption per rented office square metre, kWh 55 64 54 60 64
Electricity consumption per person, kWh 1,106 1,108 956 1,128 1,254
Other environmental responsibilities*
2022 2021 2020 2019 2018
Other indirect greenhouse gas emissions
Travelling by air, CO
2
emissions, kg 51,879 4,669 3,961 42,455 70,396
Travelling by air, CO
2
emissions, kg per person 552 49 42 477 823
Use of material
Paper consumption, total, kg 631 715 1,710 1,985 1,950
Paper consumption, kg per person 7 7 18 22 23
* The table shows an estimate of carbon dioxide emissions of air travel and paper consumption. Paper consumption is reported based on paper purchased.
transport travel cards when travelling in the near-by area during the working
day. The company prefers direct flights, and when possible, negotiations are
conducted with remote negotiation technologies. eQ also reports the total
CO
2
emissions for work-connected flights of our employees and, as a new key
ratio, the amount of emissions per person. As the COVID-19 pandemic began to
dissipate in early 2022, CO
2
emissions from the Group’s air travel have returned
to the 2019 levels. The reason for rising air travel emissions is the normalization
of business operations regarding face-to-face meetings and events with
potential and current investees and partners.
eQ takes care of the sorting and recycling of the office waste produced on
its premises. The lessor of the premises used by eQ is responsible for waste
management. In 2022, special attention was paid to reducing the amount
of waste and increasing recycling, as in previous years. During the previous
year the company updated eQ Group’s guidelines for environmentally friendly
operation and communicated them to all eQ employees. eQ also continued
the implementation of measures on the sorting and recycling of office waste
introduced in 2019. These measures included:
• drawing up guidelines for environmentally friendly operation to eQ’s
employees and arranging training on them,
• removing individual waste bins for mixed waste and the reassessment
of the present sorting containers,
• giving up plastic bottles, and
• the use of recyclable and permanent tableware.
eQ Group’s guidelines for environmentally friendly operation are always presented
when new employees are being trained. eQ also reports on the consumption of
paper at its premises. Switching to double-sided printing a couple of years ago
is manifested as a positive trend in the consumption data. The general reduction
in the use of paper printouts is another positive trend in the figures. Paper
consumption by eQ continued to decrease in 2022. eQ has not been engaged in
legal proceedings or claims concerning environmental accidents.
27
eQ in 2022 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
Realisation of social
responsibility at eQ Group
eQ as employer
The aim of eQ Group is to act as a responsible employer. The personnel is eQ’s
most important resource.
The year 2022 that just ended was exceptional in many ways. As
the coronavirus pandemic was letting up early in the year, the general market
situation started to look quite positive. The Russian invasion of Ukraine in
February 2022 and rising energy prices, accelerating inflation and rate increases
by central banks, among other factors, have influenced market sentiment.
The continuing uncertainty has definitely caused challenges for every
employee’s coping at work. Despite the current challenges and atmosphere in
the operating environment, the commitment and job satisfaction of the Group’s
employees have remained at an extremely high level. The results are excellent
when reviewed by the five-year trend also.
The results of the biannual survey on well-being at work were excellent in
2022 as well. The survey deals with the personnel’s commitment, well-being
at work, satisfaction with the work community and the work of the superior.
On a scale from 1 to 5, job satisfaction and well-being at work received
the score 4.3 (2021: 4.3). In the summer of 2022 eQ extended its premises
and added conference rooms and silent workspaces, which garnered praise
in the survey. Employees also regarded the tools, a clear division of work and
a caring atmosphere at work as positive aspects. According to the survey,
employees are happy to recommend eQ Group as an employer. The eNPS value
that describes this was very high at 48 (on a scale from -100 to +100, where 0
to +20 is good, over 20 excellent and over 40 a top result). The response rate to
the 2022 survey of well-being at work was also high, averaging at 89.3% (2021:
89.3%). The personnel survey is one of eQ’s most important tools for developing
internal working methods and the quality of managerial work. At team-specific
meetings, the results are discussed in detail, and potential development
measures and goals are agreed for monitoring them.
eQ invests in the well-being of its personnel by offering extensive occupational
health care, exercise benefit vouchers and other welfare services, for instance.
Development discussions are conducted with the entire personnel in all Group
companies. The discussions are conducted at least once a year and they assess
the performance of the previous period and set targets for the following one
as well as assess, e.g. the need to develop the employee, managerial work and
the work community.
eQ’s employees may participate in training offered by the employer and
partners, in other external training, or study independently. The Group is
favourably disposed to studies at the employees’ own initiative.
Calculated as full-time resources, eQ Group had 94 employees at the end of
2022 (2021: 96). When calculating full-time resources, part-time employees and
28
eQ in 2022 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
Personel
2022 2021 2020 2019 2018
Personnel as full-time resources 94 96 94 89 86
Permanent employment relationship 94 91 94 88 85
Temporary employment relationship 4 11 9 4 6
Employment relationship, total 98 102 103 92 91
Share of temporary employees, % 4,1% 10,8% 8,7% 4,3% 6,6%
Full-time, total 94 93 95 89 86
Part-time, total 4 9 8 3 5
Age and gender distribution, no.
18–30 years total, (F/M) 22 (8/14) 25 (10/15) 23 (9/14) 15 (4/11) 17 (6/11)
31–40 years total, (F/M) 22 (8/14) 28 (13/15) 31 (13/18) 34 (14/20) 31 (10/21)
41–50 years total, (F/M) 26 (10/16) 22 (8/14) 20 (7/13) 17 (7/10) 19 (8/11)
51–60 years total, (F/M) 26 (9/17) 26 (8/18) 27 (11/16) 25 (14/11) 22 (11/11)
61– years total, (F/M) 2 (2/0) 1 (1/0) 2 (1/1) 1 (-/1) 2 (-/2)
Total 98 (37/61) 102 (40/62) 103 (41/62) 92 (39/53) 91 (35/56)
Average age of employees, years 42.4 41.2 41.3 41.3 40.9
Employment relationships
based on gender, no. and %
Female 37 (38%) 40 (39%) 41 (40%) 39 (36%) 35 (38%)
Male 61 (62%) 62 (61%) 62 (60%) 53 (64%) 56 (62%)
Employee turnover (%) 11.7% 8.7% 4.2% 9.3% 8.8%
Sick leaves during the year, day per person 4.6 1.7 2.7 2.8 1.9
Work accidents* 4 0 0 1 2
Work well-being
Job satisfaction and well-being at work**
4.3 4.3 4.3 4.4 4.3
eNPS value*** 48 44 49 59 -
* An occupational accident is an accident that occurs at the workplace, on the way from home to work or vice versa, or during a business or other trip ordered by the employer.
** Rating scale: “poor” (1–2.4), “adequate” (2.5–2.9), “satisfactory” (3–3.4), “good” (3.5–3.9) and “excellent” (4–5).
*** Scale from -100 to +100: “Good” (0 - +20), “Excellent” (over 20) and “Top score” (over 40). eQ has monitored and reported the eNPS score since 2019.
SATISFACTION
AND WELLBEING
AT WORK
.
SCALE
NUMBER OF
PERSONNEL
those on parental and study leave have been included. Altogether 98 persons had
an employment relationship with eQ (2021: 102), and 4 of them worked part-
time (2021: 11). Part-time employees are used in seasonal tasks or projects.
Of the personnel, 38% were women (2021: 39%) and 62% men (2021:
61%). The average age of the personnel was 42.4 years (2021: 41.2), and
the employee turnover in 2022 was 11.7% (2021: 8.7%). In 2022, the average
sick leave of the personnel was 4.6 days per person (2021: 1.7) and there were
5 occupational accidents in 2022 (2021: 0).
Equal pay between genders
eQ Group pays the same salary to employees for the same or similar
work regardless of gender. Similar in this respect means that the central
requirements, expertise, responsibility, workload and working conditions are on
the same level. The job title is not decisive. Instead, the remuneration system is
based on how demanding the work is.
Equality
Equality, justice, and non-discrimination are important principles for eQ Group.
eQ has drawn up an equality plan, which comprises the measures for promoting
equality and the agreed follow-up measures. The plan is assessed and updated
on a regular basis and covers all Group companies. The plan is available to all
employees of eQ Group on the Group’s internal website.
Health and Safety Policy
eQ Group has drawn up a policy for promoting health and safety at work and
for maintaining the working capacity of the employees. It covers the needs to
develop working conditions as well as the impacts and development needs of
factors related to the work environment. The policy is available to all employees
of eQ Group on the Group’s internal website. eQ Group also uses the early
support method.
29eQ in 2022 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
Principles related to human rights violations and child labour
eQ Group has not drawn up separate principles related to human rights
violations or child labour. All operations of the Group are located in Finland, at
one single office. Therefore the Group can monitor operating practices related
to the employees in a reliable manner.
Board diversity
eQ Plc’s Board of Directors aims to promote the diversity of the Board’s
composition for its part. When assessing diversity, the Board takes into
consideration, for instance, the age and gender of the directors, their education
and professional experience, individual characteristics and experience that
is essential with regard to the task and the company operations. eQ Plc has
defined as goal regarding the equal representation of genders on the Board that
there should always be representatives of both genders on eQ Plc’s Board of
Directors. The Board aims at reaching this goal and maintaining it primarily by
informing eQ Plc’s owners actively about it.
During the 2022 financial period, eQ Plc’s Board met the preconditions set for
the company diversity, including the goal of having representatives of both
genders on the Board. The following persons were on eQ Plc’s Board of Directors
during the 2022 financial period from the Annual General Meeting: Janne Larma
(Chair) Georg Ehrnrooth (Vice Chair), Nicholas Berner, Timo Kokkila, Lotta Kopra
and Tomas von Rettig. The directors have versatile experience from sectors
that are of importance to the company, such as the investment and finance
sector and the real estate sector. In addition, the diverse work experience and
education of the directors as well as their international experience complement
each other. eQ Plc’s Annual General Meeting elects the directors.
The company’s Board of Directors monitored diversity issues during the 2022
financial period.
Diversity of the Board of Directors on 31 December 2022
Directors, total 6 100%
Female 1 17%
Male 5 83%
Board members who are independent of the company 4 67%
Board members who are independent of
the major shareholders 3 50%
30eQ in 2022 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
Good governance at eQ Group
Board – separation of powers and transparent practices
In addition to acts and regulations applicable to listed companies, eQ
Plc complies with the Finnish Corporate Governance Code published by
the Securities Market Association on 1 January 2020. The entire Code is
publicly available on the website of the Securities Market Association at
(www.cgfinland.fi/en). eQ Plc draws up annually a Corporate Governance
Statement required by the Corporate Governance Code separately
from the report by the Board of Directors. The Corporate Governance
Statement, the Remuneration Report for Governing Bodies, and other
information that shall be disclosed in accordance with the Corporate
Governance Code as well as the company’s financial statements, report by
the Board of Directors and auditors’ report are available on eQ Plc’s website
(https://www.eq.fi/en/about-eq-group).
eQ’s largest shareholders, who as a rule represent at least one-half of
the number of shares in the company and the votes these represent, submit
a proposal to the Annual General Meeting (AGM) on the number of Board
members, the members of the Board of Directors and their remuneration.
eQ Plc’s Annual General Meeting is ultimately responsible for the election of
Board members and preparations for the election. The company’s Articles of
Association do not include a provision on appointment of Board members in any
specific order.
Each person elected as a member of the Board must have the competence
required by the task and enough time to handle it. The company contributes to
the work of the Board by providing Board members with sufficient information
about the company’s operation. Five to seven members can be elected to eQ
Plc’s Board of Directors, and the members of the Board select a chair from
among their number. Board members are elected for one year at a time. eQ
Plc’s Board has a full-time Chair whose duties, besides serving as Chair, include
developing eQ’s strategy together with the CEO. In the Corporate Governance
Report, the company states the number of Board meetings held during
the financial period and the members’ average attendance at Board meetings.
The company discloses the following personal and ownership information on
Board members: name, gender, year of birth, education, main occupation, key
work experience, international experience, start date of Board membership,
key positions of trust, and shareholdings in the company. The statement
also includes any dependency of the company or the company’s significant
shareholders, and any grounds why the Board member is not deemed to be
independent. Members of eQ Plc’s Board of Directors must provide the Board
and the company with adequate information so their competence and
independence can be evaluated, and report any changes in this information.
The Board’s charter, the minutes of meetings and other documents on Board
operations are not publicly available. The main tasks included in the charter
are listed in the Corporate Governance Statement. The company discloses
information about events that concern the Group in accordance with valid
31eQ in 2022 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
legislation and the company’s disclosure policy. The company’s disclosure policy
is available on eQ’s website (https://www.eq.fi/en/about-eq-group).
Remuneration
eQ’s remuneration system is based on the strategy and long-term goals defined
by the Board, and it is one of the major tools used for reaching the Group’s
long-term and short-term strategic goals. The remuneration system contributes
to good, efficient and comprehensive risk management within eQ Group
and prevents above all detrimental risk-taking. The remuneration systems
must also take into account sustainability risks related to eQ Group and its
business operations. The aim of comprehensive risk management is to take
into consideration the goals, values and interests of the Group companies,
funds under management and the investors, for instance. The remuneration of
the company management is not separately dependent on meeting certain ESG
criteria.
In addition to eQ Group’s Remuneration Principles, eQ Plc has a Remuneration
Policy for Governing Bodies required by the Corporate Governance
Code, which accounts for the remuneration of the Board and the CEO.
The Remuneration Policy for Governing Bodies is presented to the Annual
General Meeting for consideration at least every four years and always when
major changes have been made in it. eQ Group’s Remuneration Principles and
the Remuneration Policy for Governing Bodies can be found on eQ’s website
(https://www.eq.fi/en/about-eq-group/hallinnointi/palkitseminen).
eQ Plc publishes an annual Remuneration Report for Governing Bodies at
the same time as the Annual Report. The 2022 Remuneration Report for
Governing Bodies was drawn up in accordance with the 2020 Corporate
Governance Code for listed companies, and eQ Plc’s Board of Directors
reviewed it on 6 February 2023.
The Remuneration Report for Governing Bodies accounts for the remuneration
paid to the Board of Directors and CEO during the previous financial period,
how the Remuneration Policy for Governing Bodies has been applied during
to the small number of direct subcontractors and their minor significance for
the business operation.
eQ Group’s Code of Conduct was updated in the autumn of 2021. Contents of
the old Code of Conduct were used in updating the new version, and new and
topical themes where a need for development had been detected on the basis
of the personnel survey, for example. The themes of eQ Group’s Code of
Conduct are:
• Complying with regulation and acting correctly
• Clients’ interests, eQ’s interests, and management of conflicts of interest
• Information security and data protection
• Intervention in abuses and problems
• Trust and confidentiality
• Responsibility and responsible investment activities
• Equality, diversity and respect
• Cooperation with stakeholders
• Reputation management
• Cooperation and development of competence
• Occupational safety and wellbeing at work
• Prevention of financial crimes
• Offering and accepting gifts and hospitality
• Sponsorship, donations and partnerships
The Code of Conduct is available on eQ’s website
(https://www.eq.fi/en/about-eq-group/hallinnointi/code-of-conduct).
the previous financial period and how remuneration promotes the company’s
financial success on a longer term. The Remuneration Report also compares
the development of the Board’s and CEO’s remuneration with the development
of the average remuneration of company employees and the company’s
financial development during the five previous financial periods. eQ Plc’s
Remuneration Report for Governing Bodies is available on eQ’s website
(https://www.eq.fi/en/about-eq-group/hallinnointi/palkitseminen).
In addition to the Remuneration Policy and Report for Governing Bodies,
eQ presents in the remuneration section of its website information
about the remuneration principles for the Board, CEO and the rest of
the Management Team. Information about the remuneration of the Board,
CEO and the rest of the Management Team is available on eQ’s website
(https://www.eq.fi/en/about-eq-group/hallinnointi/palkitseminen).
Application of collective labour market agreements
No collective agreements are applicable to eQ Group’s employees, nor are they
covered by the universally applicable collective agreement in Finland.
Code of Conduct
eQ Group’s Code of Conduct describes joint rules based on eQ’s values and
the general principles guiding behaviour, decision-making and business
operation that every eQ employee must follow. The Code of Conduct also
serves as a top-level instruction for eQ’s other internal guidelines that contain
detailed operational instructions from various sectors. Still, the Code of
Conduct cannot cover all situations we encounter, so advice must always be
asked in new and unclear situations. By honest, open, competent and efficient
action, eQ wants to earn the trust and respect of clients, other stakeholders,
the surrounding society and the financial markets.
eQ requires its partners to act in a responsible manner. All agreements in real
estate investments (such as on building contracts and with service providers)
include eQ’s Code of Conduct for suppliers as an enclosure. eQ Group has found
other, separate Codes of Conduct concerning subcontractors unnecessary due
32eQ in 2022 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
Taxes, , EUR
Taxes paid
Income tax, Finland 9,437 9,560 6,209 5,306 4,679
Effective tax rate 20.6% 20.1% 20.2% 20.2% 20.8%
Charges of tax-like nature payable by the employer (employee pension, social security and
unemployment charges)
4,420 3,317 2,978 2,960 2,770
Taxes remitted
Withdrawal from salaries, Finland
9,018 7,102 6,483 5,901 5,267
Charges of tax-like nature payable by the employee
(employee pension, unemployment charges)
2,163 1,529 1,405 1,308 1,106
Value-added tax paid, Finland
536 658 393 1,503 768
Tax withdrawn from dividend and equity repayment, Finland
1,762 1,246 1,217 1,061 976
As employer, eQ pays charges related to pension, unemployment and social
security and remits the withholding from the salaries to tax authorities.
The charges of tax-like nature related to the personnel that eQ Group paid in
2022 totalled EUR 4.4 million (2021: EUR 3.3 million).The withholdings that eQ
made from the salaries amounted to EUR 9.0 million (2021: EUR 7.1 million)
and the other tax-like charges totalled EUR 2.2 million (2021: EUR 1.5 million).
The value-added tax remitted by eQ Group in 2022 totalled EUR 0.5 million
(2021: EUR 0.7 million). In addition, part of the value-added tax included in
purchases is paid by eQ, as the operations are partly exempted from VAT.
The taxes withdrawn from the dividend and equity repayment that eQ Plc paid
in 2022 totalled EUR 1.8 million (2021: EUR 1.2 million).
eQ has not received any public subsidies for its operations.
Tax transparency
As part of this Sustainability Report, eQ reports its financial impact on society
in form of taxes and charges of tax-like nature. Transparent reporting is part of
responsible operations and governance. eQ Group does not have a separate tax
strategy approved by the Board. The Group pays its taxes to Finland.
eQ Group is a major taxpayer. In 2022, the income tax for eQ’s taxable profit
paid in Finland totalled EUR 9.4 million (2021: EUR 9.6 million). The Group’s
effective tax rate was 20.6% (2021: 20.1 %).
External validation of the report
This report has not been validated by an external party.
The Firm of Authorised Public Accountants KPMG Oy Ab has audited eQ Plc’s
financial statements for the financial period 1 January to 31 December 2022.
eQ Plc’s Board and CEO are responsible for the other information in the Annual
Report. This report is included in eQ’s Annual Report and treated as ”other
information”, as defined in the Auditors’ Report. Even though the auditors
do not audit other information, they have in their report assessed whether
the other information essentially conflicts with the financial statement and
information obtained by the auditors or if it otherwise seems to be incorrect
for essential parts.
33
eQ in 2022 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
Operating environment
The year 2022 started off with strong economic growth and accelerating inflation.
The central banks in the US and the eurozone are increasingly concerned about the
pace of inflation and anticipated interest rate increases from the zero level, which
has prevailed for a long time. Russia’s war of aggression against Ukraine, which began
in February, created a new supply chock after COVID-19 and increased the prices
of above all energy and food. The labour market remained strong in both the US and
Europe, and the rise of service prices accelerated as well. The US Consumer Price
Index increased by 8.0 per cent in 2022 and the Eurozone Consumer Price Index by
8.4 per cent. In 2022, the Fed raised its key interest rate no less than seven times,
from 0.25 to 4.5 per cent, and the European Central Bank four times from 0 to 2.5
per cent.
Gross Domestic Product grew by a little over 3 per cent in the eurozone and by
approximately 2 per cent in the US during the year. The growth in Europe was largely
driven by the revival of tourism and other service sectors after the pandemic. China
kept its strict COVID-19 restrictions in force the whole year, which hampered the
country’s growth. China’s estimated GDP growth in 2022 is about 3 per cent. Unlike in
the West, inflation remained moderate, and there was no need to raise interest rates.
Towards the end of the year, China decided to start easing COVID-19 restrictions.
The rapid and drastic increase in central bank rates from around zero also lead to a
steep rise of long-term interest rates. This meant exceptionally negative returns for
those who had invested in fixed income funds. The return of euro government bonds
Report by the Board of Directors
1 January to 31 December 2022
for the entire year was -18.2 per cent, i.e. record weak. The return of the Investment
Grade Index was -14.0 per cent and that of the High Yield Index -11.7 per cent.
The fall in emerging market corporate loans as -16.5 per cent as euro hedged.
Like the fixed-income market, the equity market reacted strongly to the war and,
above all, the increase in interest rates. Both markets experienced major fluctuations
during the year, when fears for inflation, increasing interest rates and slowing
economic growth alternately increased and receded. As for the whole year, the US
Stock Exchange return in dollars was -18.5 per cent and in euros -13.2 per cent.
The dollar grew clearly stronger during the year but deteriorated clearly in the last
quarter of 2022. The return of the MSCI Europe equity index was -9.5 per cent, the
return of the Finnish stock exchange was -12.7 per cent and that of the emerging
markets equity index -14.9 per cent.
Major events during the financial period
On 3 February 2022, eQ Plc’s Board decided on a new option scheme to the key
personnel of eQ Group. The number of option rights in the 2022 option scheme is
990,000. Based on the option scheme 2022, the Board of Directors of eQ Plc decided
to issue 940,000 option rights to key persons employed by the eQ Group nominated
by the Board during the period under review. The option scheme 2022 covers more
than one fourth of eQ Group’s personnel.
eQ Plc’s Annual General Meeting was held on 23 March 2022. Nicolas Berner, Georg
Ehrnrooth, Timo Kokkila, Lotta Kopra, Janne Larma and Tomas von Rettig were
re-elected to the Board. The Chair of the Board is Janne Larma and Deputy Chair
Georg Ehrnrooth.
During the period under review, the number of eQ Plc’s shares increased with new
shares subscribed for with option rights. The number of shares increased by 180,000
shares on 17 May 2022 and by 617,500 shares on 16 June 2022. After the changes,
the number of eQ shares is 40,429,698.
Group net revenue and result development
During the financial period, the Group’s net revenue totalled EUR 77.8 million
(EUR 78.9 million from 1 Jan. to 31 Dec. 2021). The Group’s net fee and commission
income was EUR 77.1 million (EUR 71.6 million). The Group’s net investment income
from own investment operations was EUR 0.7 million (EUR 7.3 million), including
the return from private equity and real estate fund investments and liquid fixed
income funds.
The Group’s expenses and depreciation totalled EUR 32.0 million (EUR 31.2 million).
Personnel expenses were EUR 26.7 million (EUR 26.7 million), other administrative
expenses EUR 2.5 million (EUR 2.1 million) and the other operating expenses were EUR
1.7 million (EUR 1.3 million). Depreciation was EUR 1.2 million (EUR 1.0 million).
The Group’s operating profit was EUR 45.7 million (EUR 47.7 million) and the profit for
the period was EUR 36.3 million (EUR 38.1 million).
35eQ in 2022 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
Business Areas
Asset Management
eQ Asset Management offers versatile and innovative asset management services to
both institutions and individuals. The Asset Management segment consists of the
investment firm eQ Asset Management Ltd and other Group companies engaged in
asset management operations, the most important of which is eQ Fund Management
Company Ltd.
Mutual funds and asset management
At the end of the period, eQ had 23 traditional mutual funds registered in Finland.
As a result of the increase in interest rates and widening of credit risk margins,
the returns of eQ’s fixed income funds were negative in 2022. The best returns came
from the eQ Short-Term Euro and eQ Euro Floating Rate funds. The best returns as
compared with benchmark indices came from the eQ Emerging Markets Corporate
Bond and eQ Euro Government Bond funds. The returns of our equity funds were
also negative. The best returns came from the eQ Frontier Markets and eQ Europe
Dividend funds. As compared with the benchmark index, eQ Frontier Markets gave
the best return.
Of the funds managed by eQ, 23 per cent surpassed their benchmark indices during
the year, and in the past three years, 77 per cent of the funds managed by eQ
have surpassed their benchmark indices. The average Morningstar rating of funds
managed by eQ was 3.2 stars at the end of the period under review. The returns of
the discretionary asset management portfolios that eQ manages varied between
approximately -9.1 and -16.6 per cent during the period, based on the allocation
of the investment portfolio. The return of portfolios that are only invest in Finnish
shares was -14,4 per cent. eQ Europe Dividend Fund was awarded as the Best
Nordic European Dividend Fund by Lipper Fund Awards for the second time in a row.
The award is based on the fund’s 3 and 5-year risk-adjusted return. In addition, the
clients assessed the overall quality of eQ Asset Management as the best in Finland in
2022 in Kantar Prospera’s ”External Asset Management Finland” study. According to
the annual highly esteemed study of SFR, which is conducted among Finnish corporate
customers, eQ Asset Management was the second largest institutional asset manager.
It was ranked as number one in quality and received the Platinum Award. The ESG
ratings of the eQ funds are better than the average, and eQ obtained excellent ESG
ratings in the latest PRI assessment.
Private Equity
The first closing of the new eQ PE XIV North private equity fund was held at the end
of January 2022 at EUR 196 million. In the final closing of the fund towards the end
of 2022, the size of the fund grew to EUR 288 million. The eQ PE XIV North Fund
makes investments in private equity funds that invest in unlisted, small and mid-sized
growth companies in Northern Europe. eQ also established its fourth secondary market
fund eQ PE SF IV, and its first closing was held at EUR 85 million. In the final closing,
the size of the fund grew to EUR 151 million. The secondary market investments
of the eQ PE XIV North Fund are carried out through the eQ PE SF IV Fund.
The investment focus of the eQ PE SF IV Fund is, both geographically and as for the
size of companies, the same as that of the eQ PE XIV North Fund. Towards the end of
the year, we also held the final closing of the eQ VC Fund, the size of the fund grew to
USD 77 million. The eQ VC Fund invests in the best venture capital funds in the US.
eQ’s private equity ESG integration and reporting are at an excellent level and the
company continues with the development work. At the end of the financial period,
the assets in private equity funds managed by eQ totalled EUR 2,726 million
(EUR 2,203 million) and the assets managed under private equity asset management
programmes were EUR 1,009 million (EUR 1,001 million).
At the beginning of 2022, eQ began to accrue the catch up share of private equity
funds’ performance fee in the income statement. Catch up share accrued cumulatively
by 31 December 2022 was EUR 5.8 million. Estimated future total amount of the
private equity funds’ performance fees is about EUR 130 million at 31 December 2022
(EUR 109 million 31 Dec. 2021). More information about the estimated returns and
performance fees is available in the annual report.
Real estate investments
The net subscriptions in the eQ Finnish Commercial Properties Fund were
EUR 34 million in 2022. At the end of the period, the size of the fund was EUR 799
million, and its real estate property exceeded EUR 1.3 billion. The return of the fund
in 2022 was 7.6 per cent and since establishment 8.4 per cent p.a. The fund has
approximately 2,200 unit holders.
In 2022, new net subscriptions for EUR 131 million were made in the eQ Community
Properties Fund. At the end of the period under review, the size of the fund was
EUR 1,616 million and its real estate property exceeded EUR 2.2 billion. The return of
the fund in 2022 was 8.2 per cent and since establishment 8.9 per cent p.a. The fund
has approximately 4,800 unit holders.
In May 2020, eQ established a new real estate fund eQ Residential. The fund was
finally closed in May 2021 at EUR 100 million. The investment operations have
proceeded excellently, and the fund invests more than EUR 300 million in residential
real estate. eQ Residential makes investments in the Helsinki metropolitan area,
Tampere and Turku. The fund targets complete residential buildings and aims to
manage approximately 1,500 rental units in total. In practice, the entire investment
capacity of the fund was used by the end of 2021, and therefore we decided to
establish a new eQ Residential II Fund. The first closing of the new fund was held at
EUR 27 million in January, and the size of the fund has grown to EUR 53 million during
the year 2022. Unlike eQ Community Properties and eQ Commercial Properties funds,
the eQ Residential funds are intended for professional investors only, and they have a
closed-end fund structure.
Overall, eQ’s real estate funds had real estate property worth more than EUR 3.6
billion at the end of the year, and eQ has become a major Finnish real estate investor.
In 2022, eQ’s real estate funds participated in the GRESB sustainability assessment
already for the fourth time. The results have remained good in 2022 and clearly exceed
both the average results of companies participating in the GRESB assessment and the
results of the funds’ peers.
Assets under management and clients
The assets managed by eQ Asset Management totalled EUR 12,564 million at the end
of the period. Growth during the period was EUR 980 million (EUR 11,584 million
on 31 Dec. 2021). At the end of the period, the assets managed by mutual funds
registered in Finland totalled EUR 4,101 million (EUR 4,264 million), and the assets
decreased by EUR 163 million during the period under review. The assets managed
by the real estate funds totalled EUR 2,697 million (EUR 2,283 million). The assets
managed by the private equity funds and asset management programmes totalled
EUR 3,734 million (EUR 3,203 million).
36eQ in 2022 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
Assets under management, MEUR 12/2022 12/2021 Change
eQ mutual funds 4,101 4,264 -4%
of which eQ equity, fixed income
and balanced funds 1,687 2,082 -19%
of which eQ real estate funds 2,415 2,182 11%
Closed-end real estate funds* 282 100 181%
Funds of partners and other asset management 1,561 1,619 -4%
eQ private equity funds 2,726 2,203 24%
Private equity asset management programmes 1,009 1,001 1%
Total excl. reporting services 9,678 9,187 5%
Private equity reporting services 2,885 2,397 20%
Total 12,564 11,584 8%
*As for eQ Residential funds, which are included in closed-end funds, the total amount of uncalled
commitments and gross asset value (GAV) is reported as assets under management from 12/2022.
Result of the Asset Management segment
During the financial period, the net revenue of the Asset Management segment
increased by 11 per cent and the operating profit by 14 per cent to EUR 45.9 million
(EUR 40.3 million from 1 Jan. to 31 Dec. 2021). Performance fees fell slightly to EUR
10.8 million. Performance fees typically fluctuate strongly per quarter and financial
period. Performance fees include EUR 5.8 million of the accrued catch up share of
private equity funds’ performance fee.
The cost/income ratio was 36.0 per cent (37.7 per cent). Calculated as full-time
resources, the Asset Management segment had 76 employees at the end of the
financial period.
Asset Management 1–12/2022 1–12/2021 Changes
Net revenue, MEUR 71.8 64.9 11%
Operating profit, MEUR 45.9 40.3 14%
Cost/income ratio, % 36.0 37.7 -5%
Personnel as full-time resources 76 76 0%
Fee and commission income,
Asset Manage-ment, MEUR 1–12/2022 1–12/2021 Change
Management fees
Traditional asset management
9.4 10.6 -11%
Real estate asset management 35.1 29.1 21%
Private equity asset management 16.9 13.9 22%
Management fees, total 61.5 53.6 15%
Performance fees, total
Traditional asset management
0.0 2.9 -100%
Real estate asset management 4.3 5.4 -19%
Private equity asset management 6.5 3.1 108%
Performance fees, total 10.8 11.4 -5%
Other fee and commission income 0.1 0.5 -68%
Fee and commission income, total
72.4 65.4 11%
Corporate Finance
In the Corporate Finance segment, Advium Corporate Finance acts as advisor in
mergers and acquisitions, larger real estate transactions and equity capital markets.
In 2022, the value of corporate acquisitions fell world-wide from the record year
2021. Above all the last quarter showed signs of clear slowing-down. Increasing
interest rates, structural and high inflation, strong movements by central banks, the
long-lasting stock market correction and geopolitical uncertainties all contributed to
the fall in the total value of transactions. The volume of corporate acquisitions well
slightly in Finland as well.
In 2022, Advium acted as advisor in five M&A transactions: advisor to a consortium
led by Bain in the public cash tender offer for Caverion, the divestment of Bluebird
to The North Aliance, the acquisition of Raksystems by Trillimpact, the divestment
of Akkurate to Sandvik, and the acquisition of Finnamyl by Chemigaten (Berner).
Advium’s market position and market share remained strong.
In 2022, the real estate transaction volume of Advium increased on the previous year,
even though the Finnish real estate investment market developed negatively on the
whole due to increasing interest rates and uncertain economic growth, for instance.
In 2022, Advium acted as advisor in five published transactions. The most important
of them were the establishment of a joint venture for the development of a real
estate portfolio by Ilmarinen, YIT and HGR Property Partners, the divestment of Espoo
Hospital and the fire station portfolio owned by the city of Espoo, and the divestment
of Cromwell European REIT’s office property in Helsinki to Julius Tallberg Real Estate
Corporation.
Result of the Corporate Finance segment
During the financial period, Advium’s net revenue totalled EUR 5.4 million
(EUR 6.9 million from 1 Jan. to 31 Dec. 2021). Operating profit was EUR 1.7 million
(EUR 2.7 million). The segment had 13 employees at the end of the period.
It is typical of corporate finance business that success fees have a considerable
impact on invoicing, due to which the result pf the segment varies considerably from
quarter to quarter.
Corporate Finance 1–12/2022 1–12/2021 Change
Net revenue, MEUR 5.4 6.9 -22%
Operating profit, MEUR 1.7 2.7 -37%
Cost/income ratio, % 67.7 60.0 13%
Personnel as full-time resources 13 15 -13%
37eQ in 2022 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
Investments
The business operations of the Investments segment consist of private equity and real
estate fund investments made from eQ Group’s own balance sheet.
During the period, the operating profit of the Investments segment was
EUR 0.7 million (EUR 7.1 million from 1 Jan to 31 Dec. 2021). At the end of the
period, the fair value of the investments was EUR 16.8 million (EUR 18.8 million on 31
Dec. 2021) and the amount of the remaining investment commitments was EUR 7.5
million (EUR 7.2 million). During the period under review, eQ Plc made a EUR 1.0
million investment commitment in the eQ PE XIV North private equity fund and a
EUR 1.0 million commitment in the eQ Residential II Fund.
During the period, the investment objects returned capital for EUR 2.9 million
(EUR 3.5 million from 1 Jan. to 31 Dec. 2021) and distributed a profit of EUR
2.0 million (EUR 3.2 million). Capital calls totalled EUR 2.1 million (EUR 2.6 million).
The net cash flow from investments during the period was EUR 2.8 million
(EUR 4.1 million). The value changes of investments recognised through profit or loss
were EUR -1.2 million during the period (EUR 4.1 million). The value changes in the
Amanda III and Amanda V private equity funds, which invest in Eastern Europe, had
a negative impact on the value changes of investments during the period under review
due to the war in Ukraine.
The income of eQ’s Investments segment is recognised due to factors independent of
the company. Due to this, the segment’s result may vary considerably.
Investments 1–12/2022 1–12/2021 Change
Operating profit, MEUR 0.7 7.1 91%
Fair value of investments, MEUR 16.8 18.8 -11%
Investment commitments, MEUR 7.5 7.2 3%
Net cash flow of investments, MEUR 2.8 4.1 -32%
Balance sheet, financial position and capital adequacy
At the end of the period, the consolidated balance sheet total was EUR 110.9
million (EUR 110.8 million on 31 Dec. 2021) and the shareholders’ equity was
EUR 81.8 million (EUR 80.0 million). During the period, the shareholders’ equity was
influenced by the profit for the period of EUR 36.3 million, the dividend distribution
of EUR -38.4 million, the repayment of equity of EUR -1.2 million from the reserve
for invested unrestricted equity, the subscription for new shares with option rights
of EUR 4,0 million and the accrued expense of EUR 1.1 million related to the option
scheme and enter in shareholders’ equity.
At the end of the period, liquid assets totalled EUR 23.7 (EUR 35.1 million) and liquid
investments in mutual funds EUR 20.1 million (EUR 20.9 million).
The lease liability related to premises and entered in the balance sheet was
EUR 5.6 million (EUR 1.2 million) at the end of the period, the share of short-term
liabilities being EUR 0.8 million (EUR 0.9 million). The amount of lease liabilities
increased resulting from a follow-up and expansion agreement on the leased premises.
Short-term interest-free debt was EUR 23.5 million (EUR 29.7 million). The Group had
no interest-bearing loans at the end of the period (EUR - million). eQ’s equity to assets
ratio was 73.8 per cent (72.1 per cent).
The ratio between total capital and the capital requirement according to eQ Group’s
capital adequacy calculations was 242.3 per cent (229.4 per cent on 31 Dec.
2021). eQ Asset Management Ltd as investment firm and eQ Plc as the holding
company apply the IFD/IFR regime. The most restrictive capital requirement for
eQ is defined on the basis of fixed overheads at the end of the period. The minimum
capital requirement based on fixed overheads was EUR 4.9 million. At the end of
the period, the Group’s total capital based on capital adequacy calculations totalled
EUR 11.9 million (EUR 10.8 million).
Capital adequacy, 1,000 EUR
IFR
31 Dec. 2022
eQ Group
IFR
31 Dec. 2021
eQ Group
Equity 81,779 79,955
Common equity tier 1 (CET 1) before deductions 81,779 79,955
Deductions from CET 1
Intangible assets
-29,400 -29,552
Unconfirmed profit for the period -36,322 -38,078
Dividend proposal by the Board* -4,107 -1,554
Common equity tier 1 (CET1) 11,949 10,771
Additional tier 1 (AT1) 0 0
Tier 1 (T1 = CET1 + AT1) 11,949 10,771
Tier 2 (T2) 0 0
Total capital (TC = T1 + T2) 11,949 10,771
Own funds requirement according to
the most restrictive requirement (IFR) 4,932 4,696
Fixed overhead requirement 4,932 4,696
K-factor requirement 393 331
Absolute minimum requirement 150 150
Risk-weighted items total – Total risk exposure 61,651 58,697
Common equity tier (CET1) / own funds requirement, % 242.3% 229.4%
Tier 1 (T1) / own funds requirement, % 242.3% 229.4%
Total capital (TC) / own funds requirement, % 242.3% 229.4%
Common equity tier 1 (CET1) / risk weights, % 19.4% 18.3%
Tier 1 (T1) / risk weights, % 19.4% 18.3%
Total capital (TC) / risk weights, % 19.4% 18.3%
Excess of total capital compared with the minimum level 7,017 6,075
Total capital compared with the target level
(incl. a 25% risk buffer for the requirement) 5,784 4,901
* The dividend and equity repayment proposed by the Board exceeding the profit for the period.
38eQ in 2022 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
Major risks and uncertainties related to the operations
The major single risk of the Group is the dependence of the operating income on
changes in the external operating environment. The result of the Asset Management
segment depends on the development of the assets under management, which is
dependent of the development of the capital market, for instance. On the other
hand, the management fees of private equity funds and closed real estate funds are
based on long-term agreements that produce a stable cash flow. The realisation of
the performance fee income that is dependent on the success of the investment
operations also influences result development. The performance fees of the asset
management operations may consist of performance fees paid by mutual funds and
real estate funds, profit shares that private equity funds pay to the management
company, and performance fees from asset management portfolios. Performance fees
may vary considerably by quarter and financial period.
Success fees, which depend on the number of mergers and acquisitions and real
estate transactions, have a considerable impact on the result of the Corporate
Finance segment. These vary considerably within one year and are dependent on
economic trends.
The risks associated with eQ Group’s own investment operations are the market risk
and currency risk, for instance. Of said risks, the market risk has the greater impact on
investments. The company’s own investments are well diversified, which means that
the impact of one investment made by one individual fund in one single investment
object on the return of investments is often small. The income from eQ Group’s own
investment operations is recognised in different quarters due to factors independent
of the company, depending on the exits from private equity funds. The income from
investment operations may vary considerably from quarter to quarter.
The Group’s liquidity is monitored continuously, and good liquidity is maintained by
only investing the surplus liquidity in objects with a low risk, which can be turned into
cash rapidly and at a clear market price. The liquidity is influenced by the capital calls
and returns of the own private equity and real estate fund investments.
Board of Directors, Management Team, CEO and auditor
eQ Plc’s Annual General Meeting was held on 23 March 2022. Nicolas Berner,
Georg Ehrnrooth, Timo Kokkila, Lotta Kopra, Janne Larma and Tomas von Rettig were
re-elected to the Board. The Board elected Janne Larma Chair of the Board and George
Ehrnrooth Deputy Chair of the Board. eQ Plc’s Board had eight meetings during the
financial period 2022, average attendance being 100%.
On 31 December 2022, eQ Group’s Management Team has consisted of the following
persons:
• Mikko Koskimies, eQ Plc and eQ Asset Management Ltd, CEO
• Staffan Jåfs, eQ Asset Management Ltd, Director, Head of Private Equity
• Antti Lyytikäinen, eQ Plc, CFO
• Juha Surve, eQ Asset Management Ltd, Director, Group General Counsel
The CEO of the Group was Mikko Koskimies. The company auditor was KPMG Oy Ab,
a firm of authorized public accountants, with Tuomas Ilveskoski, APA, as auditor with
main responsibility.
Personnel
At the end of the period, the number of Group personnel calculated as full-time
resources was 94 (96 persons on 31 December 2021). Calculated as full-time
resources, the Asset Management segment had 76 (76) employees and the Corporate
Finance segment 13 (15) employees. Group administration had 5 (5) employees.
The overall salaries paid to the employees of eQ Group during the period totalled
EUR 26.7 million (EUR 26.7 million from 1 Jan. to 31 Dec. 2021).
Loans to related parties
eQ Plc’s receivables from related parties have been described in further detail in Note
32 to the Financial Statements.
eQ Plc’s share
Authorisations
The AGM authorised the Board of Directors to decide on a share issue and/or
the issuance of special rights entitling to shares referred to in Chapter 10 Section 1
of the Limited Liability Companies Act, in one or several transactions, comprising
a maximum total of 3,500,000 new shares. The amount of the authorisation
corresponded to approximately 8.83% of all shares in the company on the date of
the notice of the AGM.
The authorisation can be used in order to finance or carry out potential acquisitions
or other business transactions, to strengthen the balance sheet and the financial
position of the company, to carry out the company’s incentive schemes or for any
other purposes decided by the Board. Based on the authorisation, the Board shall
decide on all matters related to the issuance of shares and special rights entitling to
shares referred to in Chapter 10 Section 1 of the Limited Liability Companies Act,
including the recipients of the shares or the special rights entitling to shares and
the amount of the consideration to be paid. Therefore, based on the authorisation,
shares or special rights entitling to shares may also be issued to certain persons, i.e.
in deviation of the shareholders’ pre-emptive rights as described in said Act. A share
issue may also be executed without payment in accordance with the preconditions
set out in the Limited Liability Companies Act. The authorisation cancels all previous
corresponding authorisations and is effective until the next AGM, no longer than 18
months, however.
Shares and share capital
At the end of the period on 31 December 2022, the number of eQ Plc’s shares was
40,429,698 and the share capital was EUR 11,383,873.00.
During the financial period on 17 May 2022, the number of eQ Plc’s shares increased
by 180,000 new shares subscribed for with option rights 2018. The subscription price
of the new shares totalled EUR 903,600.00. During the financial period on 16 June
2022, the number of eQ Plc’s shares increased by 617,500 new shares subscribed
for with option rights 2018. The subscription price of the new shares totalled
EUR 3,099,850.00. The entire subscriptions were entered in the reserve for invested
unrestricted equity.
39eQ in 2022 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
The closing price of eQ Plc’s share on 31 December 2022 was EUR 25.45 (EUR 25.75
on 31 Dec. 2021). The market capitalisation of the company was thus EUR 1,028.9
million (EUR 1,020.5 million) at the end of the period under review. During the period,
1,947,634 shares were traded on Nasdaq Helsinki (2,089,680 shares from 1 Jan. to 31
Dec. 2021). In euros, the turnover was EUR 45.9 million (EUR 48.9 million).
Option schemes
At the end of the financial period, eQ Plc had two option schemes. The option
schemes are intended as part of the commitment system of the Group’s key personnel.
Option scheme 2018:
At the end of the period, altogether 1,775,000 options had been allocated from option
scheme with a purchase price 2018. The subscription period of shares with option
rights 2018 began on 1 April 2022 and will end on 1 April 2024.
Of the options granted, altogether 797,500 had been exercised by the end of the
period. The number of outstanding options was 977,500 at the end of the period.
No options of the option scheme 2018 can any longer be allocated.
The terms and conditions of the option scheme have been published in a stock
exchange release of 26 October 2018, and they can be found in their entirety on the
company website at www.eQ.fi/en. The options have been listed on Nasdaq Helsinki.
Option scheme 2022:
On 3 February 2022, the Board of Directors of eQ Plc decide on a new option scheme
to key personnel of eQ Group based on the authorisation by the Annual General
Meeting on 24 March 2021. The option scheme 2022 consists of 990,000 option
rights and each option right entitles to the subscription of one new share in eQ Plc.
On 3 February 2022, the Board of Directors of eQ Plc decided to issue 880,000 option
rights, based on the option scheme 2022, to key persons employed by eQ Group and
nominated by the Board. On 24 October 2022, the Board also decided to issue 60,000
option rights on the basis of the option scheme 2022. The option scheme 2022 covers
more than one fourth of eQ Group’s personnel.
Due to termination of employment, 30,000 options were returned to eQ Plc during
the financial period. The number of outstanding options was 910,000 at the end of
the period.
The subscription period of shares with option rights 2022 will begin on 1 April 2025
April and end on 30 April 2027. The terms and conditions of the option scheme have
been published in a stock exchange release of 4 February 2022, and they can be found
in their entirety on the company website at www.eQ.fi/en.
Own shares
At the end of the financial period, on 31 December 2022, eQ Plc held no own shares.
Shareholders
On 16 June 2022, eQ Plc published a flagging announcement in which Fennogens
Investments S.A. announced that its holding in the company had fallen below
the 20 per cent flagging threshold. The change in holding was due to the increase in
the number of eQ Plc’s shares.
Shareholders
Major shareholders Number of shares
% of votes
and shares
Fennogens Investments S.A. 7,962,605 19.69%
Anchor Oy Ab 6,206,706 15.35%
Chilla Capital S.A. 6,165,904 15.25%
Teamet Oy 4,225,000 10.45%
Oy Cevante Ab 1,419,063 3.51%
Fazer Jan Peter 1,314,185 3.25%
Procurator-Holding Oy 793,892 1.96%
Lavventura Oy 700,000 1.73%
Ilmarinen Mutual Pension Insurance Company 697,500 1.73%
Linnalex Ab 631,652 1.56%
Pinomonte Ab 529,981 1.31%
Umo Invest Oy 414,240 1.02%
Pohjolan Kiinteistökehitys Oy 387,000 0.96%
Leppä Jukka-Pekka 325,000 0.80%
Sever Match Oy 290,000 0.72%
Mononen Matti 180,000 0.45%
Balance Finance-Team Oy 160,000 0.40%
Leenos Oy 158,772 0.39%
Nacawi Ab 150,000 0.37%
Viskari Jyri 150,000 0.37%
Others 7,568,198 18.72%
Total 40,429,698 100.00%
The information is based on the situation in the share register maintained by Euroclear
Finland Ltd on 31 December 2022.
Ownership structure by sector on 31 December 2022
Number
of shares
% of
votes and shares
Corporations 16,927,139 41.87%
Financial and insurance institutions 945,877 2.34%
Public sector entities 721,892 1.79%
Households 7,303,941 18.07%
Foreign 14,195,411 35.11%
Other
1)
335,438 0.83%
Total 40,429,698 100.00%
1
The item Others comprises non-profit organisations.
Ownership structure according to number of shares held
Number of shares per shareholder
Number of
shareholders
% of
shareholders
1–100 4,135 49.96%
101–500 2,540 30.69%
501–1,000 698 8.43%
1,001–5,000 702 8.48%
5,001–10,000 91 1.10%
10,001–50,000 67 0.81%
50,001–100,000 16 0.19%
100,001–500,000 17 0.21%
500,001– 11 0.13%
Total 8,277 100.00%
40eQ in 2022 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
Number of shares per shareholder Number of shares % of shares
1–100 171,045 0.42%
101–500 649,935 1.61%
501–1,000 541,261 1.34%
1,001–5,000 1,541,419 3.81%
5,001–10,000 665,553 1.65%
10,001–50,000 1,463,922 3.62%
50,001–100,000 1,226,625 3.03%
100,001–500,000 3,523,450 8.72%
500,001– 30,646,488 75.80%
Total 40,429,698 100.00%
Nominee registered shares
Of the company shares, 462,391 were nominee-registered, representing 1.14% of
the votes and shares.
Other information on the share
The following information on the company share is found in the Notes to the Financial
Statements: holdings of the company management and directors and the number of
company shares and share types.
Corporate governance
In addition to acts and regulations applicable to listed companies, eQ Plc complies
with the Finnish Corporate Governance Code published by the Securities Market
Association on 1 January 2020. The entire Code is available on the website of the
Securities Market Association at www.cgfinland.fi/en.
Proposal for the distribution of profit
The distributable means of the parent company on 31 December 2022 totalled
EUR 65,947,885.52. The sum consisted of retained earnings of EUR 40,741,192.96
and the means in the reserve of invested unrestricted equity of EUR 25,206,692.56.
The Board of Directors proposes to the Annual General Meeting that a dividend of
EUR 0.91 per share be paid out. The proposal corresponds to a dividend totalling
EUR 36,791,025.18 calculated with the number of shares at the close of the financial
year. Additionally, the Board proposes to the AGM that an equity repayment of
EUR 0.09 per share be paid out from the reserve of invested unrestricted equity.
The proposal corresponds to an equity repayment of EUR 3,638,672,82 calculated
with the number of shares at the close of the financial year. The dividend and equity
repayment shall be paid to those who are registered as shareholders in eQ Plc’s
shareholder register maintained by Euroclear Finland Ltd on the record date 29 March
2023. The Board proposes 5 April 2023 as the payment date of the dividend and
equity repayment.
After the end of the financial period, no essential changes have taken place in
the financial position of the company. The Board of Directors feel that the proposed
distribution of dividend and equity repayment do not endanger the liquidity of
the company.
Events after the financial period
eQ Plc’s shareholders with more than 60 per cent of the company shares and
votes have made a proposal to the Annual General Meeting to be held on 27 March
2023 regarding the number of directors, their remuneration and the principles for
compensating expenses as well as the election of the directors. The shareholders
propose that no changes will be made in the Board composition and, consequently,
Nicolas Berner, Georg Ehrnrooth, Timo Kokkila, Lotta Kopra, Janne Larma, and Tomas
von Rettig are re-elected to the Board.
The first closing of the eQ PE XV US private equity fund was held towards the end
of January 2023 at USD 177 million. eQ Plc made an investment commitment of
EUR 1.0 million in the fund.
Outlook
As for sales, the year 2022 was very good for eQ Asset Management. In January 2023,
the eQ PE XV US private equity fund raised a record amount of assets in the first
closing of the fund, i.e. almost USD 180 million, which is 35 per cent more than
our previous fund investing in the US in its first closing. This strengthens our view
that the demand for alternative investment products continues to be strong among
investors and the increase in fixed management fees will continue. The returns of real
estate funds are linked to the development of return requirements and their possible
performance fees for 2023 involve uncertainty. The performance fees of private equity
funds will, on the other hand, be at the same level due to the catch up accrual.
Consequently, we expect the net revenue and operating profit of the Asset
Management segment to be at the same level as last year or to grow in 2023.
In accordance with our disclosure policy, we do not issue profit guidance for the
Corporate Finance and Investments segments. The results of these segments are
highly dependent on factors that are not dependent on the company. Therefore, their
operating profits may vary considerably and are difficult to foresee.
Helsinki, 6 February 2023
eQ Plc
Board of Directors
41
eQ in 2022 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
Consolidated key ratios
EUR 1,000 2022 2021 2020 2019 2018
INCOME STATEMENT
Fee and commission income, net
77,129 71,578 56,734 49,505 43,571
Net income from financial assets 709 7,314 32 1,132 1,794
Net revenue 77,781 78,880 56,744 50,614 45,367
Operating profit (loss) 45,735 47,660 30,757 26,292 22,450
% of net revenue 58.8 60.4 54.2 51.9 49.5
Profit (loss) for the period 36,322 38,078 24,610 21,035 17,799
BALANCE SHEET
Claims on credit institutions and liquid assets
23,688 35,141 21,453 22,375 15,848
Financial assets 36,956 39,760 30,576 26,112 26,777
Intangible and tangible assets 35,186 30,819 31,812 32,159 29,748
Other assets and receivables 15,027 5,123 7,636 4,772 5,837
Total assets 110,858 110,842 91,476 85,418 78,211
Total equity 81,779 79,955 67,545 65,117 62,249
Liabilities 29,079 30,887 23,931 20,301 15,962
Total liabilities and equity 110,858 110,842 91,476 85,418 78,211
EUR 1,000 2022 2021 2020 2019 2018
PROFITABILITY AND OTHER KEY RATIOS
Return on investment, ROI % p.a.
43.2 50.6 35.9 32.4 28.5
Return on equity, ROE % p.a. 44.9 51.6 37.1 33.0 28.5
Equity to assets ratio, % 73.8 72.1 73.8 76.2 79.6
Gearing, % -46.7 -68.7 -50.8 -45.7 -41.3
Cost/income ratio, %
Group 41.1 39.5 45.6 48.1 50.5
Asset Management 36.0 37.7 39.0 42.7 46.9
Corporate Finance 67.7 60.0 72.3 64.1 54.7
Number of personnel as full-time resources
at the end of the period 94 96 94 89 86
Number of personnel as full-time resources, average 96 95 92 88 85
42eQ in 2022 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
EUR 1,000 2022 2021 2020 2019 2018
SHARE-RELATED KEY RATIOS
Earnings per average share, EUR
0.91 0.97 0.64 0.55 0.47
Diluted earnings per average share, EUR 0.87 0.93 0.60 0.51 0.45
Equity per share, EUR 2.02 2.02 1.74 1.70 1.65
Equity per share, EUR
1
2.04 2.03 1.76 1.71 1.66
Dividend, EUR 1,000
2
36,791 38,443 24,878 21,069 17,722
Dividend per share
2
0.91 0.97 0.64 0.55 0.47
Dividend per earnings, %
2
100.0 100.0 100.0 100.0 100.0
Repayment of equity, EUR 1,000
3
3,639 1,189 2,332 2,682 2,640
Repayment of equity per share
3
0.09 0.03 0.06 0.07 0.07
Dividend and repayment of equity, total, EUR 1,000 40,430 39,632 27,211 23,750 20,362
Dividend and repayment of equity, total per share 1.00 1.00 0.70 0.62 0.54
Effective dividend and equity repayment yield, % 3.9 3.9 4.2 5.0 7.1
Price/earnings ratio, P/E 28.0 26.5 26.2 22.6 16.2
Adjusted share price development, EUR
Average price
23.54 23.26 13.43 9.61 8.59
Highest price 27.95 30.65 17.05 13.15 9.36
Lowest price 20.10 16.50 9.54 7.72 7.60
Closing price 25.45 25.75 16.75 12.45 7.60
Market capitalisation, EUR 1,000 1,028,936 1,020,529 651,109 476,925 286,575
Market capitalisation, EUR 1,000 1,948 2,090 2,722 1,616 5,444
% of total number of shares 4.9 5.3 7.1 4.2 14.5
Share turnover, EUR 1,000 45,853 48,909 35,793 15,926 45,378
Adjusted number of shares, 1,000 shares
Average during the year
40,082 39,353 38,448 38,044 37,607
At the end of the year 40,430 39,632 38,872 38,307 37,707
1) Weighted average number of shares outstanding during the
period
2) The
Board’s dividend proposal
3) The
Board’s proposal for repayment of equity from the
reserve for invested unrestricted equity
43eQ in 2022 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
RETURN ON INVESTMENT, ROI (%)
profit or loss + interest expenses
x 100
equity + interest-bearing financial liabilities (average)
RETURN ON EQUITY, ROE (%)
profit or loss
x 100
equity (average)
EQUITY TO ASSETS RATIO (%)
equity
x 100
balance sheet total - advances received
GEARING (%)
interest-bearing liabilities - financial assets - cash in hand and at bank
x 100
equity
COST/INCOME RATIO (%)
administrative expenses + other operating expenses + depreciation (excl.
agreement depreciation)
x 100
net revenue
EARNINGS PER SHARE, EPS
profit or loss for the period attributable to equity holders of the parent
company
adjusted average number of shares during the period
EQUITY PER SHARE
equity
adjusted number of shares at the balance sheet date
DIVIDEND PER SHARE
dividend
adjusted number of shares at the balance sheet date
DIVIDEND PER EARNINGS (%)
dividend per share
x 100
earnings per share
REPAYMENT OF EQUITY PER SHARE
repayment of equity from the reserve for invested unrestricted equity
adjusted number of shares at the balance sheet date
EFFECTIVE DIVIDEND AND EQUITY REPAYMENT YIELD (%)
dividend and equity repayment per share
x 100
adjusted share price at the balance sheet date
PRICE/EARNINGS RATIO, P/E
adjusted share price at the balance sheet date
earnings per share
MARKET CAPITALISATION
number of shares on 31. Dec. x closing price on 31. Dec
SHARE TURNOVER (%)
number of shares traded during the period
x 100
average number of shares during the period
Calculation of Key Ratios
44eQ in 2022 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
Financial Statements 2022
Consolidated Income Statement 46
Consolidated Balance Sheet 47
Consolidated Cash Flow Statement 48
Change in Consolidated Shareholders’ Equity 48
Principles for preparing
the Consolidated Financial Statements 49
Notes to the Consolidated Financial Statements 58
Parent Company Financial Statements 67
Income Statement 67
Balance Sheet 67
Cash Flow Statement 68
Notes to the Financial Statements 69
Proposal for the Distribution of Profits 74
Signatures and Auditors’ Note 75
In line with the ESEF requirements, the consolidated financial statements have been
labelled with XBRL tags in the XHTML-file. These XBRL tags have not been subject to audit.
Non-official version, translation.
45eQ in 2022 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
Consolidated Income Statement
1,000 EUR Note no. 2022 2021
Fee and commission income 5 77,665 72,152
Interest income 6 8 7
Net income from financial assets 7 709 7,314
Operating income, total 78,383 79,473
Fee and commission expenses 8 -536 -574
Interest expenses 9 -65 -19
NET REVENUE 77,781 78,880
Administrative expenses 10
Personnel expenses -26,724 -26,683
Other administrative expenses -2,490 -2,141
Depreciation on tangible and intangible assets 11 -1,178 -1,050
Other operating expenses 12 -1,655 -1,346
OPERATING PROFIT (LOSS) 45,735 47,660
PROFIT (LOSS) BEFORE TAXES 45,735 47,660
Income tax 13 -9,412 -9,582
PROFIT (LOSS) FOR THE PERIOD 36,322 38,078
Consolidated statement of comprehensive income
1,000 EUR Note no. 2022 2021
Other comprehensive income: - -
Other comprehensive income after taxes - -
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD 36,322 38,078
Profit for the period attributable to:
Equity holders of the parent company
Non-controlling interest - -
Comprehensive income for the period attributable to:
Equity holders of the parent company
Non-controlling interest - -
Earnings per share calculated from the profit
of equity holders of the parent company: 14
Earnings per average share, EUR
Diluted earnings per average share, EUR 0.87 0.93
46eQ in 2022 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
Consolidated Balance Sheet
EUR 1,000 Note no. 31 Dec. 2022 31 Dec. 2021
ASSETS
Liquid assets
Claims on credit institutions 15 23,667 35,069
Financial assets 16, 26–29
Financial securities 20,119 20,943
Private equity and real estate fund investments 16,837 18,817
Intangible assets 17
Goodwill and brands 29,212 29,212
Client agreements 108 208
Other intangible assets 79 131
Tangible assets 18
Right-of-use assets
Other tangible assets 514 301
Other assets 19 14,393 4,525
Accruals and prepaid expenditure 20 426 502
Income tax receivables 138 52
Deferred tax assets 21 70 44
TOTAL ASSETS 110,858 110,842
EUR 1,000 Note no. 31 Dec. 2022 31 Dec. 2021
LIABILITIES AND EQUITY
LIABILITIES
Other liabilities 22
Accruals and deferred income 23 16,607 19,103
Lease liabilities 24 5,621 1,187
Income tax liabilities 22 4,249
TOTAL LIABILITIES 29,079 30,887
EQUITY 30
Attributable to equity holders of the parent company:
Share capital
Reserve for invested unrestricted equity 27,061 24,247
Retained earnings 7,011 6,247
Profit (loss) for the period 36,322 38,078
TOTAL EQUITY 81,779 79,955
TOTAL LIABILITIES AND EQUITY 110,858 110,842
47eQ in 2022 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
Consolidated Cash Flow Statement
EUR 1,000 2022 2021
Cash flow from operations
Operating profit 45,735 47,660
Depreciation and impairment 1,178 1,050
Interest income and expenses 57 13
Transactions with no related payment transactions 2,451 -3,894
Financial assets - private equity funds 755 910
Change in working capital
Business receivables, increase (-) / decrease (+) -9,741 2,500
Interest-free debt, increase (+) / decrease (-) -6,264 3,555
Change in working capital, total -16,005 6,055
Cash flow from operations before financial items and taxes 34,172 51,794
Interests received 8 7
Interests paid -65 -19
Income taxes -9,553 -5,321
Cash flow from operations 24,561 46,460
Cash flow from investments
Investments in tangible and intangible assets -369 -70
Investments in other investments - liquid mutual funds 727 -6,018
Cash flow from investments 359 -6,088
Cash flow from financing
Dividends/equity repayments
-39,632 -27,242
Subscription of new shares 4,003 1,392
Deduction of lease liability capital -744 -834
Cash flow from financing -36,372 -26,685
Increase/decrease in liquid assets -11,452 13,688
Liquid assets on 1 Jan. 35,141 21,453
Liquid assets on 31 Dec. 23,688 35,141
Change in Consolidated Shareholders’ Equity
EUR 1,000 Equity attributable to equity holders of the parent company
Share
capital
Reserve
for invested
unrestricted
equity
Retained
earnings Total
Total
equity
Shareholders’ equity on 1 Jan. 2022 11,384 24,247 44,325 79,955 79,955
Comprehensive income
Profit (loss) for the period
Other comprehensive income - - -
Total comprehensive income 36,322 36,322 36,322
Dividends/equity repayments -1,189 -38,443 -39,632 -39,632
Subscription of new shares 4,003 4,003 4,003
Options granted 1,130 1,130 1,130
Shareholders' equity on 31 Dec. 2022 11,384 27,061 43,334 81,779 81,779
Shareholders' equity on 1 Jan. 2021 11,384 25,190 30,972 67,545 67,545
Comprehensive income
Profit (loss) for the period
Other comprehensive income - - -
Total comprehensive income 38,078 38,078 38,078
Dividends/equity repayments -2,335 -24,907 -27,242 -27,242
Subscription of new shares 1,392 1,392 1,392
Options granted 182 182 182
Shareholders' equity on 31 Dec. 2021 11,384 24,247 44,325 79,955 79,955
48eQ in 2022 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
1 Principles for preparing the Consolidated Financial Statements
Notes to the Consolidated Financial Statements
49eQ in 2022 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
50eQ in 2022 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
51eQ in 2022 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
52eQ in 2022 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
53eQ in 2022 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
54eQ in 2022 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
55eQ in 2022 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
56eQ in 2022 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
57eQ in 2022 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
Notes to the Income Statement
58eQ in 2022 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
Notes to the Consolidated
Balance Sheet
59eQ in 2022 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
60
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61
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62eQ in 2022 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
63eQ in 2022 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
64eQ in 2022 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
65eQ in 2022 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
66eQ in 2022 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
Parent Company Income Statement (FAS)
EUR Note no. 2022 2021
Fee and commission income 2 76,800.00 76,800.00
Net gains on trading in securities and foreign currencies 3
Net gains on trading in securities -1,330,349.01 4,093,990.85
Income from equity investments 4
From Group undertakings - 2,000,000.00
From other companies 2,039,708.00 3,220,152.02
Interest income 5 6,115.35 4,477.99
INVESTMENT FIRM INCOME 792,274.34 9,395,420.86
Fee and commission expenses 6 -150,000.00 -153,999.96
Interest expenses 7 -24,301.73 -17,116.97
Administrative expenses
Personnel expenses 8
Salaries and remuneration
-1,404,637.49 -1,635,082.20
Indirect employee costs
Pension costs -215,473.24 -224,171.96
Other indirect employee costs -27,891.46 -32,535.89
Other administrative expenses
9 -357,731.42 -319,235.71
Depreciation and impairment on tangible and
intangible assets 10 -9,166.13 -21,360.60
Other operating expenses 11 -402,473.04 -379,215.90
OPERATING PROFIT (LOSS) -1,799,400.17 6,612,701.67
Appropriations 12 48,669,659.51 43,019,671.11
Income tax 13 -9,384,586.14 -9,521,767.70
PROFIT (LOSS) FOR THE FINANCIAL PERIOD 37,485,673.20 40,110,605.08
Parent Company Balance Sheet (FAS)
EUR Note no. 31 Dec. 2022 31 Dec. 2021
ASSETS
Liquid assets
3,810.00 6,780.00
Claims on credit institutions
Repayable on demand 14 2,189,031.13 7,542,201.95
Shares and participations 15, 23 36,943,665.96 39,747,537.37
Shares and participations in Group undertakings 15 29,154,321.94 29,149,321.94
Intangible assets 16
Other intangible assets
1,849.79 4,847.32
Tangible assets 16
Other tangible assets 17,433.83 23,602.43
Other assets 17 10,670,000.00 5,173,493.33
Accruals and prepaid expenditure 18 194,462.33 55,929.89
TOTAL ASSETS 79,174,574.98 81,703,714.23
LIABILITIES AND EQUITY
LIABILITIES
Liabilities to the public and public sector entities
Other
1,000,000.00 1,000,000.00
Other liabilities 19
Other liabilities
157,739.91 4,348,516.30
Accruals and deferred income 20 685,076.55 880,375.95
TOTAL LIABILITIES 1,842,816.46 6,228,892.25
EQUITY 24
Share capital
11,383,873.00 11,383,873.00
Unrestricted equity
Reserve for invested unrestricted equity
25,206,692.56 22,392,208.50
Retained earnings 3,255,519.76 1,588,135.40
Profit (loss) for the period 37,485,673.20 40,110,605.08
TOTAL EQUITY 77,331,758.52 75,474,821.98
TOTAL LIABILITIES AND EQUITY 79,174,574.98 81,703,714.23
67eQ in 2022 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
Parent Company Cash Flow Statement (FAS)
EUR 1,000 2022 2021
Cash flow from operations
Operating profit 46,870 49,632
Adjustments:
Depreciation and impairment 9 21
Interests received -6 -4
Interests paid 24 17
Dividends received - -2,000
Transactions with no related payment transactions 1,321 -4,076
Financial assets – private equity and real estate funds 755 908
Change in working capital
Business receivables, increase (-) decrease (+) -5,497 -2,206
Interest-free liabilities, increase (+) decrease (-) -4,386 -1,506
Total change in working capital -9,883 -3,711
Cash flow from operations before financial items and taxes 39,091 40,787
Interests received 6 4
Interests paid -24 -17
Dividends received - 2,000
Taxes -9,523 -5,281
Cash flow from operations 29,550 37,493
EUR 1,000 2022 2021
Cash flow of investments
Investing activities in tangible and intangible assets - -1
Investing activities in investments -5 2
Investing activities in other investments - liquid mutual funds 727 -6,018
Cash flow from investments 722 -6,016
Cash flow from financing
Dividends paid -39,632 -27,242
Subscription of new shares 4,003 1,392
Cash flow from financing -35,629 -25,850
Increase/decrease in liquid assets -5,356 5,627
Liquid assets on 1 Jan. 7,549 1,922
Liquid assets on 31 Dec. 2,193 7,549
68eQ in 2022 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
1 Principles for preparing the Financial Statements
General
When preparing the financial statements, the company has followed the Ministry
of Finance Decree on financial statements and consolidated financial statements
of credit institutions and investment firms (76/2018) and the Financial Supervision
Authority’s regulations and guidelines on accounting, financial statements, and report
by the Board of Directors for the financial sector (2/2016).
Valuation principles and methods as well as periodization principles and methods
Fee and commission income is recorded when the income can be defined in a reliable
manner and it is likely that the company benefits from the financial advantage
related to the transaction. Dividend income is recorded when the right to the dividend
has arisen.
Interest income and expenses are recorded based on time by using the effective
interest method and taking into account all contractual terms of the financial
instrument. Interests that have not been received on the closing date are recorded as
interest income and receivable among accruals and the unpaid interests as interest
expenses and liabilities among accrued expenses.
The profit shares from the private equity and real estate fund investments made from
eQ Plc’s own balance sheet are entered as income from equity investments. The value
changes of private equity fund and real estate investments recorded through profit
or loss are entered among the net gains on trading in securities. The value changes
through profit or loss as well as sales profits and losses of investments in mutual
funds are also entered among the net gains on trading in securities.
Financial assets are classified into the following groups in accordance with the IFRS 9
standard Financial Instruments:
a) valued at amortised acquisition cost,
b) entered at fair value through profit or loss
c) valued at fair value with other items of comprehensive income.
eQ Plc’s private equity and real estate fund investments and investments in mutual
funds are classified among financial assets at fair value through profit or loss.
Financial liabilities as classified as follows:
a) valued at amortised acquisition cost
b) valued at fair value through profit or loss
eQ Plc had no financial liabilities valued at fair value through profit or loss at
the reporting moment.
Depreciation principles
Tangible and intangible assets are entered in the balance sheet at acquisition cost
less depreciation according to plan and impairment. The depreciation according to
plan is calculated as straight-line depreciation based on the useful life of tangible and
intangible assets. Depreciation has been calculated from the month the assets were
taken into use. The depreciation period of intangible assets is 3 to 5 years and that of
machinery and equipment 3 to 10 years.
Foreign currency items
The receivables and debts in foreign currencies have been translated to euros
according to the rate prevailing on the balance sheet day.
2 Fee and commission income
EUR 1,000 2022 2021
From other operations 77 77
3 Net gains on trading in securities and foreign currencies
EUR 1,000 2022 2021
Net gains on trading in securities
From financial assets/liabilities entered at fair value
through profit or loss
Changes in fair value -1,321 4,076
Sales profits/ losses -9 18
Total -1,330 4,094
4 Income from equity investments
EUR 1,000 2022 2021
Dividend income from Group undertakings - 2,000
Profit shares from financial assets valued at fair value 2,040 3,220
Total 2,040 5,220
Notes to the Parent Company Financial Statements
69eQ in 2022 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
5 Interest income
EUR 1,000 2022 2021
Other interest income 6 4
Total 6 4
6 Fee and commission expenses
EUR 1,000 2022 2021
Other fees - management of investments
eQ Asset Management -150 -150
Limit fees - -4
Total -150 -154
7 Interest expenses
EUR 1,000 2022 2021
To Group undertakings -19 -15
Other interest expenses -5 -3
Total -24 -17
8 Personnel expenses
EUR 1,000 2022 2021
Salaries and remuneration -1,405 -1,635
Pension costs -215 -224
Other indirect employee costs -28 -33
Total -1,648 -1,892
Average number of personnel during the period -
permanent 5 5
Change during the financial period - -
9 Other administrative expenses
EUR 1,000 2022 2021
Other personnel expenses -26 -67
IT and connection costs -115 -77
Other administrative expenses -216 -176
Total -358 -319
10 Depreciation and impairment
EUR 1,000 2022 2021
Depreciation on intangible and tangible assets -9 -21
A depreciation specification per balance sheet item is presented under intangible and
tangible assets.
11 Other operating expenses
EUR 1,000 2022 2021
Expert fees -8 -7
Fees to the auditor
Audit fees -26 -12
Other services -3 -
Total -29 -12
Leases on premises and other rental expenses -97 -121
Other expenses -269 -240
Total -402 -379
12 Appropriations
EUR 1,000 2022 2021
Group subsidies received 48,670 43,020
Group subsidies issued 0 0
Total 48,670 43,020
13 Income tax
EUR 1,000 2022 2021
Income tax for the period
Income tax for operations
-9,523 -5,281
Deferred taxes 138 -4,241
Total -9,385 -9,522
14 Claims on credit institutions
EUR 1,000 2022 2021
Repayable on demand
From domestic credit institutions
2,189 7,542
15 Shares and participations
EUR 1,000 2022 2021
Shares and participations
Financial assets: Private equity and real estate fund
investments 16,837 18,817
Financial assets: Units in mutual funds 20,076 20,901
Other participations 30 30
Shares and participations in Group undertakings 29,154 29,149
Total 66,098 68,897
- of which at acquisition cost 29,184 29,179
70eQ in 2022 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
16 Intangible and tangible assets
EUR 1,000 2022 2021
Other intangible assets
Acquisition cost on 1 Jan. 237 236
Increases - 1
Acquisition cost on 31 Dec. 237 237
Accumulated depreciation on 1 Jan. -232 -215
Depreciation for the period -3 -16
Accumulated depreciation on 31 Dec. -235 -232
Book value on 31 Dec. 2 5
Other intangible assets
Acquisition cost on 1 Jan. 242 242
Increases - -
Acquisition cost on 31 Dec. 242 242
Accumulated depreciation on 1 Jan. -218 -213
Depreciation for the period -6 -5
Accumulated depreciation on 31 Dec. -224 -218
Book value on 31 Dec. 17 24
17 Other assets
EUR 1,000 2022 2021
Receivables from Group undertakings 10,670 5,120
Other receivables - 53
Total 10,670 5,173
18 Accruals and prepaid expenditure
EUR 1,000 2022 2021
Other accruals 194 56
Total 194 56
19 Other liabilities
EUR 1,000 2022 2021
Accounts payable 36 60
Liabilities to Group undertakings 47 0
Income tax liabilities - 4,241
Other liabilities 74 47
Total 158 4,349
20 Accruals
EUR 1,000 2022 2021
Other accruals 685 880
21 Items denominated in domestic and
foreign currencies and Group items
31 Dec. 2022
EUR 1,000 EUR
Other
than EUR Total
From Group
undertakings
Balance sheet items
Claims on credit institutions
2,189 - 2,189 -
Other assets 70,085 6,900 76,986 10,670
Total 72,274 6,900 79,175 10,670
Liabilities to the public and
public sector entities 1,000 - 1,000 1,000
Other liabilities 843 - 843 47
Total 1,843 - 1,843 1,047
31 Dec. 2021
EUR 1,000 EUR
Other
than EUR Total
From Group
undertakings
Balance sheet items
Claims on credit institutions
7,542 - 7,542 -
Other assets 69,178 4,984 74,162 34,269
Total 76,720 4,984 81,704 34,269
Liabilities to the public and
public sector entities 1,000 - 1,000 1,000
Other liabilities 5,229 - 5,229 38
Total 6,229 - 6,229 1,038
71eQ in 2022 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
22 Fair values of financial assets and liabilities
2022 2021
EUR 1,000
Fair
value
Book
value
Fair
value
Book
value
Financial assets
Claims on credit institutions
2,189 2,189 7,542 7,542
Shares and participations 36,944 36,944 39,748 39,748
Shares and participations in
Group undertakings 29,154 29,154 29,149 29,149
Total 68,287 68,287 76,439 76,439
Financial liabilities
Liabilities to the public and
public sector entities
1,000 1,000 1,000 1,000
Total 1,000 1,000 1,000 1,000
The table shows the fair values and book values of financial assets and liabilities per
balance sheet item. The assessment principles of fair values are presented in principles
for preparing the financial statements.
Level 1 comprises liquid assets the value of which is based on quotes in the liquid
market. A market where the price is easily available on a regular basis is regarded as
a liquid market.
The fair values of level 3 instruments are based on the value of the fund according to
the management company of the fund and their use in widely used valuation models.
Private equity investments are valued in accordance with a practice widely used in
the sector, International Private Equity and Venture Capital Guidelines. The fair values
of level 3 real estate investments are based on n the value of the fund according to
the management company. The valuation of real estate owned by a fund is based on a
value defined by an external valuer.
23 Value of financial assets across the three
levels of the fair value hierarchy
31 Dec. 2022
EUR 1,000 Level 1 Level 3
Financial assets at fair value through profit or loss
Private equity and real estate fund investments - 16,837
Financial securities 20,106 -
Total 20,106 16,837
Level 3 reconciliation - Financial assets at fair value through profit or loss
Private equity and real estate
Opening balance 18,817
Calls and returns -755
Impairment loss -1,224
Closing balance 16,837
31 Dec. 2021
EUR 1,000 Level 1 Level 3
Financial assets at fair value through profit or loss
Private equity and real estate fund investments - 18,817
Financial securities 20,931 -
Total 20,931 18,817
Level 3 reconciliation - Financial assets at fair value through profit or loss
Private equity and real estate
Opening balance 15,656
Calls and returns -908
Impairment loss 4,068
Closing balance 18,817
72eQ in 2022 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
24 Equity
EUR 1,000 2022 2021
Share capital on 1 Jan. 11,384 11,384
Share capital on 31 Dec. 11,384 11,384
Restricted equity, total 11,384 11,384
Reserve for invested unrestricted equity on 1 Jan. 22,392 23,335
Increases/decreases 2,814 -943
Reserve for invested unrestricted equity on 31 Dec. 25,207 22,392
Retained earnings
Retained earnings on 1 Jan. 41,699 26,495
Dividend -38,443 -24,907
Other changes 0 0
Retained earnings on 31 Dec. 3,256 1,588
Profit (loss) for the period 37,486 40,111
Non-restricted equity, total 65,948 64,091
Equity on 31 Dec. 77,332 75,475
Calculation of distributable assets on 31 Dec.
Retained earnings 3,256 1,588
Profit for the period 37,486 40,111
Reserve for invested unrestricted equity 25,207 22,392
Distributable assets 65,948 64,091
The share capital of the company consists of 40,429,698 shares. All shares carry
one vote.
Other notes
25 Pledges, mortgages and obligations
EUR 1,000 2022 2021
eQ Plc’s investment commitments in private equity
funds, remaining commitment 7,477 7,235
Leasing agreements and leases less than one year 735 878
Leasing agreements and leases exceeding one year but
less than five years 5,197 295
Total 13,409 8,409
73eQ in 2022 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
Proposal for the distribution of profits
The distributable means of the parent company on 31 December 2022 totalled EUR
65,947,885.52. The sum consisted of retained earnings of EUR 40,741,192.96 and
the means in the reserve of invested unrestricted equity of EUR 25,206,692.56.
The Board of Directors proposes to the Annual General Meeting that a dividend of
EUR 0.91 per share be paid out. The proposal corresponds to a dividend totalling
EUR 36,791,025.18 calculated with the number of shares at the end of the financial
year. Additionally, the Board proposes to the AGM that a repayment of equity of
EUR 0.09 per share be paid out from the reserve of invested unrestricted equity.
The proposal corresponds to a repayment of equity totalling EUR 3,638,672.82
calculated with the number of shares at the end of the financial year. The dividend
and repayment of equity shall be paid to those who are registered as shareholders
in eQ Plc’s shareholder register maintained by Euroclear Finland Ltd on the record
date 29 March 2023. The Board proposes 5 April 2023 as the payment date of
the dividend and repayment of equity.
After the end of the financial period, no essential changes have taken place in
the financial position of the company. The Board of Directors feel that the proposed
distribution of dividend and equity repayment do not endanger the liquidity of
the company.
74eQ in 2022 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
Signatures to the Report by the Board of
Directors and Financial Statements
Helsinki, 6 February 2023
Auditor’s note
The auditors’ report over the audit has been issued today.
Helsinki, 6 February 2023
KPMG Oy Ab
Firm of Authorised Public Accountants
Tuomas Ilveskoski
APA
Janne Larma
Chair of the Board
Timo Kokkila Lotta Kopra Tomas von Rettig
Georg Ehrnrooth
Chair of the Board
Mikko Koskimies
CEO
Nicolas Berner
75eQ in 2022 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
Auditor’s Report
To the Annual General Meeting of eQ Plc
Report on the Audit of the Financial Statements
Opinion
We have audited the financial statements of eQ Plc (business identity code 1625441-9) for the year ended 31 December, 2022.
The financial statements comprise the consolidated balance sheet, income statement, statement of comprehensive income,
statement of changes in equity, statement of cash flows and notes, including a summary of significant accounting policies, as well as
the parent company’s balance sheet, income statement, statement of cash flows and notes.
In our opinion
— the consolidated financial statements give a true and fair view of the group’s financial position, financial performance and cash
flows in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU
— the financial statements give a true and fair view of the parent company’s financial performance and financial position in
accordance with the laws and regulations governing the preparation of financial statements in Finland and comply with
statutory requirements.
Our opinion is consistent with the additional report submitted to the Board of Directors.
Basis for Opinion
We conducted our audit in accordance with good auditing practice in Finland. Our responsibilities under good auditing practice are
further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report.
We are independent of the parent company and of the group companies in accordance with the ethical requirements that are
applicable in Finland and are relevant to our audit, and we have fulfilled our other ethical responsibilities in accordance with
these requirements.
In our best knowledge and understanding, the non-audit services that we have provided to the parent company and group companies
are in compliance with laws and regulations applicable in Finland regarding these services, and we have not provided any prohibited
non-audit services referred to in Article 5(1) of regulation (EU) 537/2014. The non-audit services that we have provided have been
disclosed in note 12 to the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Materiality
The scope of our audit was influenced by our application of materiality. The materiality is determined based on our professional
judgement and is used to determine the nature, timing and extent of our audit procedures and to evaluate the effect of identified
misstatements on the financial statements as a whole. The level of materiality we set is based on our assessment of the magnitude
of misstatements that, individually or in aggregate, could reasonably be expected to have influence on the economic decisions of
the users of the financial statements. We have also taken into account misstatements and/or possible misstatements that in our
opinion are material for qualitative reasons for the users of the financial statements.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial
statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole,
and in forming our opinion thereon, and we do not provide a separate opinion on these matters. The significant risks of material
misstatement referred to in the EU Regulation No 537/2014 point (c) of Article 10(2) are included in the description of key audit
matters below.
We have also addressed the risk of management override of internal controls. This includes consideration of whether there was
evidence of management bias that represented a risk of material misstatement due to fraud.
This document is an English translation of the Finnish auditor’s report. Only the Finnish version of the report is legally binding.
76eQ in 2022 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
THE KEY AUDIT MATTER HOW THE MATTER WAS ADDRESSED IN THE AUDIT
Recognition of fee and commission income (Principles for preparing the
consolidated financial statements and Note 5)
— The assets managed by eQ Group entitle to management fees
on the grounds of agreements with customers. Management
fees make up a significant item in the Group’s income statement.
— Performance fees and fees from the corporate finance segment
also make up a substantial part in the formation of the Group’s
result and may vary considerably from year to year.
— Calculation of fee and commission income is system-
based relying on fee agreements and other source data.
The functionality of the control environment of IT systems
has a substantial importance in respect to the accuracy of
the calculations.
— Appropriate timing of the recognition of fee and commission
income at correct amount is relevant in respect to the accuracy
of the financial statements.
— We evaluated the business processes and IT systems related
to fee and commission income and assessed the associated
key controls. Our audit procedures also included comparing
the accounting data kept in subledgers to that in the general
ledger, and substantive procedures performed in respect of
fee income. In addition, we have evaluated the accuracy of
the timing and the amount of revenue recognition.
— Regarding corporate finance fees, we assessed the monitoring
procedures used as the well as timing and the amount of
revenue recognition under projects by reference to the terms of
customer contracts.
— We inspected the calculation model of performance fees and
compared the parameters used to individual fund agreements
and the rules of investment funds.
— We inspected the accounting treatment of fees and
commissions and the appropriateness of the notes in relation to
the requirements of the IFRS 15 standard.
Valuation of private equity fund investments (Principles for preparing the consolidated financial statements and Notes 16, 26–29)
— The determination of fair values for investments is based
on the valuation principles as described in the principles for
preparing the consolidated financial statements of eQ Group.
With respect to illiquid assets in eQ’s investment portfolio,
fair values are provided by fund managers. In accordance with
the IFRS 9 standard, changes in the value of equity investments
are recognized in profit or loss.
— Private equity fund investments is a significant item in eQ
Group’s financial statements, and therefore the valuation of said
assets is considered a key audit matter.
— We assessed eQ Group’s valuation process as well
as the compliance with the principles for preparing
the consolidated financial statements. In addition, we inspected
the consistency of the accounting treatment in relation to
the requirements of the IFRS 9 standard.
— As part of our year-end audit procedures, we compared the fair
values used in the financial statements with the valuations
provided by fund managers. In addition, we reconciled
the balance sheet values of private equity funds with separate
monitoring of the funds.
— We also assessed the appropriateness of the disclosures made in
relation to investment assets.
Responsibilities of the Board of Directors and the Managing Director for the Financial Statements
The Board of Directors and the Managing Director are responsible for the preparation of consolidated financial statements that give
a true and fair view in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU, and of financial
statements that give a true and fair view in accordance with the laws and regulations governing the preparation of financial
statements in Finland and comply with statutory requirements. The Board of Directors and the Managing Director are also responsible
for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the Board of Directors and the Managing Director are responsible for assessing the parent
company’s and the group’s ability to continue as a going concern, disclosing, as applicable, matters relating to going concern and using
the going concern basis of accounting. The financial statements are prepared using the going concern basis of accounting unless there
is an intention to liquidate the parent company or the group or cease operations, or there is no realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is
a high level of assurance, but is not a guarantee that an audit conducted in accordance with good auditing practice will always
detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis
of the financial statements.
As part of an audit in accordance with good auditing practice, we exercise professional judgment and maintain professional skepticism
throughout the audit. We also:
— Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and
perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis
for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error,
as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
— Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the parent company’s or the group’s
internal control.
— Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures
made by management.
77eQ in 2022 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
— Conclude on the appropriateness of the Board of Directors’ and the Managing Director’s use of the going concern basis of
accounting and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that
may cast significant doubt on the parent company’s or the group’s ability to continue as a going concern. If we conclude that
a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial
statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained
up to the date of our auditor’s report. However, future events or conditions may cause the parent company or the group to cease
to continue as a going concern.
— Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether
the financial statements represent the underlying transactions and events so that the financial statements give a true and
fair view.
— Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within
the group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and
performance of the group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and
significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding
independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our
independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance
in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in
our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances,
we determine that a matter should not be communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.
Other Reporting Requirements
Information on our audit engagement
We were first appointed as auditors by the Annual General Meeting on 1.1.2014, and our appointment represents a total period of
uninterrupted engagement of 9 years.
Other Information
The Board of Directors and the Managing Director are responsible for the other information. The other information comprises
the report of the Board of Directors and the information included in the Annual Report, but does not include the financial statements
and our auditor’s report thereon. We have obtained the report of the Board of Directors prior to the date of this auditor’s report, and
the Annual Report is expected to be made available to us after that date. Our opinion on the financial statements does not cover
the other information.
In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in
doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained
in the audit, or otherwise appears to be materially misstated. With respect to the report of the Board of Directors, our responsibility
also includes considering whether the report of the Board of Directors has been prepared in accordance with the applicable laws
and regulations.
In our opinion, the information in the report of the Board of Directors is consistent with the information in the financial statements
and the report of the Board of Directors has been prepared in accordance with the applicable laws and regulations.
If, based on the work we have performed on the other information that we obtained prior to the date of this auditor’s report, we
conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to
report in this regard.
Other opinions
We support that the financial statements should be adopted. The proposal by the Board of Directors regarding the use of the result and
other free equity shown in the balance sheet is in compliance with the Limited Liability Companies Act. We support that the Members
of the Board of Directors of the parent company and the Managing Director should be discharged from liability for the financial period
audited by us.
Helsinki, 6 February, 2023
KPMG OY AB
Tuomas Ilveskoski
Authorised Public Accountant, KHT
78eQ in 2022 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
Corporate Governance Statement 2022
Introduction
eQ Plc (the company) is a Finnish public limited liability company the shares of which
are listed on Nasdaq Helsinki Ltd (Helsinki Stock Exchange).
This Corporate Governance Statement has been drawn up separately from the report
by the Board of Directors. eQ Plc’s Board of Directors has reviewed this Corporate
Governance Statement on 6 February 2023 This statement and other information
that shall be provided in accordance with the Corporate Governance Code as well as
the company’s financial statements, report by the Board of Directors and auditors’
report are available on eQ Plc’s website (www.eQ.fi/en). The statement is not part of
the official financial statements.
In addition to acts and regulations applicable to listed companies, eQ Plc has
during 2022 complied with the Finnish Corporate Governance Code 2020 published
by the Securities Market Association that entered into force on 1 January 2020.
The entire Code is available on the website of the Securities Market Association at
www.cgfinland.fi/en.
In 2022, eQ Plc complied with the Finnish Corporate Governance Code 2020 without
any departures.
Descriptions Concerning Corporate Governance
General Meeting of Shareholders
The General Meeting is eQ Plc’s highest decision-making body, at which
the shareholders participate in the supervision and control of the company.
eQ Plc convenes one Annual General Meeting (AGM) during each financial period.
Extraordinary General Meetings may be convened when necessary. Shareholders
exercise their right to vote and voice their views at the General Meeting.
eQ Plc provides shareholders with sufficient information about the agenda of
the General Meeting in advance. The advance information is provided in the notice
of the General Meeting, other releases and on the company website. The General
Meeting is organised in such a way that shareholders can effectively exercise their
ownership rights. The goal is that the CEO, Chair of the Board, and a sufficient number
of directors attend the General Meeting. A person proposed as director for the first
time shall participate in the General Meeting that decides on his or her election,
unless there are well-founded reasons for the absence.
The Annual General Meeting of eQ Plc was held on 23 March 2022.
Board of Directors
Composition of the Board
The General Meeting elects the directors. The director candidates put forward to
the Board shall be mentioned in the notice of the General Meeting if the candidate
is supported by shareholders holding at least 10 per cent of the total votes carried
by all the shares of the company, provided that the candidate has given his or her
consent to the election. The candidates proposed after the delivery of the notice of
the meeting will be disclosed separately. In its Corporate Governance Statement,
the company states the number of Board meetings held during the financial period as
well as the average attendance of the directors. The directors are elected for one year
at a time.
The company’s Articles of Association do not contain any provisions on the manner of
proposing prospective directors. eQ Plc’s major shareholders, who as a rule represent
at least one half of the number of shares and votes in the company, make a proposal
on the number of directors, the directors and their remuneration to the AGM.
A person elected director must have the qualifications required by the work of
a director and sufficient time for taking care of the duties. The company facilitates
the work of the Board by providing the directors with sufficient information on
the company’s operations. eQ Plc’s Board of Directors consists of 5 to 7 members.
The Board of Directors elects the Chair from among its members. eQ Plc’s Board
of Directors has a full-time Chair of the Board. The full-time Chair of the Board’s
duties include, in addition to being the Chair of the Board, for example, developing
eQ’s strategy together with the CEO. It is eQ Plc’s AGM solely that ultimately elects
the directors and makes preparations for their election.
The company reports the following biographical details and holdings of the directors:
name, gender, year of birth, education, main occupation, primary work experience,
international experience, date of inception of Board membership, key positions
of trust, and shareholdings in the company. In addition, eQ reports the directors’
independence of the company or its major shareholders together with the reasoning
for determining that a board member is not independent.
The members of eQ’s Board of Directors shall provide the Board and the company with
sufficient information for the evaluation of their qualifications and independence and
notify of any changes in such information.
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The Annual General Meeting held on 23 March 2022 elected the following persons
to the Board:
Janne Larma, born 1965, male, member of the Board since 2021, Chair of the Board
since 24 March 2021, M. Sc. (Econ)
Key positions of trust: Notalar Oy, Chair of the Board of Directors, 1995-; Inkoo
Shipping Oy, Member of the Board, 2014-; Rettig Group Oy Ab, Member of the Board,
2020-; Svenska handelshögskolan, Member of the Board, 2019-; Meripuolustussäätiö
SR, Member of the Board, 2017–.
Primary work experience: eQ Plc, CEO, 2011–2021; eQ Pankki Oy, Member of
Management Team, 2004-2009; Advium Corporate Finance Oy, Managing Director,
2000-; Enskilda Securities, management position in investment banking, 1998-2000;
Alfred Berg, investment banking, 1993-1998; Kansallis-Osake-Pankki, investment
banking, 1988–1992.
Janne Larma is not independent of the company, as he is the full-time Chair of
the Board, has been the company’s CEO since 2011 until 2021, and is also involved in
the same stock option program as the company’s current management. Janne Larma
is not independent of the company’s major shareholder Chilla Capital S.A., where he is
a significant shareholder.
Georg Ehrnrooth, born 1966, male, member of the Board since 2011, Vice Chair of
the Board, studies in agriculture and forestry
Key positions of trust: Sampo Plc, member of the Board, 2020-; Louise and Göran
Ehrnrooth Foundation, Chair of the Board, 2013-; Fennogens Investments S. A, Chair
of the Board, 2009-; Anders Wall Foundation, member of the Board, 2008-; Paavo
Nurmi Foundation, member of the Board, 2005-; Topsin Investments S.A., member of
the Board, 1998–.
Primary work experience: Management positions in family owned companies
with responsibility for finance and investments, 2008-; eQ Plc and eQ Bank Ltd,
CEO, 2005.
Georg Ehrnrooth is not independent of the company on the basis that he has served
for more than ten consecutive years on the Board of the company, including six
years as Chair and two years as the Vice Chair. In addition, Georg Ehrnrooth is not
independent of the company’s major shareholder Fennogens Investments S.A, where
he is a significant shareholder.
Nicolas Berner, born 1972, male, member of the Board since 2013, Master of Laws
Key positions of trust: Berner Ltd, member of the Board, 2006-.
Primary work experience: Berner Ltd, CFO, 2011-; Hannes Snellman Attorneys Ltd,
partner, 1998–2011. Independent of the company and significant shareholders.
Timo Kokkila, born 1979, male, member of the Board since 2016, M.Sc. (Eng.)
Key positions of trust: Ilmarinen Mutual Pension Insurance Company, member of
the Board, 2017-; Valmet Automotive Ltd, member of the Board, 2016-; SRV Group
Plc, Vice Chair of the Board, 2021-, and member of the Board, 2010-; Pontos Ltd,
member of the Board, 2007-.
Primary work experience: Pontos Group, CEO, 2016-; Pontos Group, Investment
Director, 2011–2015; SRV Group Plc, Manager, Project Development, 2008–2011;
SRV Group Plc, Project Development Engineer, 2006–2008; Kampin Keskus Oy,
Development Engineer, 2004–2006.
Independent of the company and significant shareholders.
Lotta Kopra, born 1980, female, member of the Board since 2019, M. Sc. (Econ)
Key positions of trust: Nightingale Health Plc, member of the Board, 2021-.
Primary work experience: Spinnova Plc, Chief Commercial Officer, 2019-2022;
BearingPoint, Executive level, 2015–2018; Magenta Advisory, Founder, Chair of
the Board, 2010–2015; Finland and Nordics, Management consultant, 2004–2010.
Independent of the company and significant shareholders.
Tomas von Rettig, born 1980, male, member of the Board since 2019, BBA,
CEFA certificate
Key positions of trust: Purmo Group Plc, Chair of the Board, 2016-; Rettig Capital Oy
Ab, member of the Board, 2014-.
Primary work experience: Rettig Group Oy Ab, CEO, 2016–2019; Rettig Group
Oy Ab, vice president business development, vice president corporate finance and
development, 2011–2015; Rettig Asset Management Oy Ab, portfolio manager,
senior portfolio manager, 2008–2011; Skandinaviska Enskilda Banken,
Middle Office, 2006–2008.
Independent of the company, but not independent of its significant shareholders.
Tomas von Rettig is a shareholder and member of the Board of Rettig Capital Oy Ab,
an indirect parent company of Anchor Oy, which is a significant shareholder of eQ Plc.
Shares and share-related rights of the Board members and entities that they control in
the company at the end of the financial period on 31 December 2022:
Member of the Board Security Holding
Nicolas Berner Share 85,000
Georg Ehrnrooth Share 8,037,605
Timo Kokkila Share 4,142
Lotta Kopra Share 18,942
Janne Larma
2022 Option right
Share
50,000
6,165,904
Tomas von Rettig Share 5,000
Operations of the Board of Directors
eQ Plc’s Board of Directors has drawn up a written charter covering its operations.
Below is a list of the most important principles and duties presented in the charter. In
order to carry out its duties, the Board of Directors:
• confirms the company values and manners of operating and monitors their
implementation
• confirms the company’s basic strategy and continuously monitors that it is
up-to-date
• based on the strategy, approves the annual plan of operation and budget and
supervises their outcome
• reviews and approves the interim reports, report by the Board of Directors and
financial statements
• defines the company’s dividend policy and makes a proposal on dividend
distribution to the AGM
• convenes General Meetings
• makes proposals to the General Meeting, when necessary
• decides on major investments, corporate acquisitions and divestments and on
investments that exceed two million euros
• confirms the organisation structure
• appoints and dismisses the CEO
• sets personal targets for the CEO annually and assesses their outcome
• appoints and dismisses the members of the Management Team, defines their areas
of responsibility and decides on the terms of their employment
81eQ in 2022 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
• decides on so called unconventional related party transactions that are not
conducted in the ordinary course of eQ’s operation and which are not made on
ordinary commercial terms
• monitors and assesses related party transactions at least once a year
• reviews the Remuneration Policy for Governing Bodies of eQ at least once a year
and presents the policy to the General Meeting of the company for consideration
at least every four years
• reviews eQ Group’s remuneration principles at least once a year
• decides on the incentive schemes and annual bonuses of the CEO and the personnel
• goes through the major risks related to the company’s operations and their
management at least once a year and gives instructions on them to the CEO,
when necessary
• meets the auditors at least once a year
• convenes at least once a year without the executive management
• assesses its own operations at least once a year
• assesses the independence of its members
• confirms its own charter, which is reviewed annually
• handles other matters that the Chair of the Board or the CEO has proposed to
the agenda of a Board meeting; the directors also have the right to put matters on
the Board agenda by informing the Chair of this.
During the financial period 2022, the Board of Directors of eQ Plc convened eight (8)
times, average attendance being 100%. Attendance at the Board meetings 2022:
Member of the Board
Nicolas Berner 8/8
Georg Ehrnrooth 8/8
Timo Kokkila 8/8
Lotta Kopra 8/8
Janne Larma 8/8
Tomas von Rettig 8/8
The majority of the members of eQ Plc’s Board of Directors are independent of
the company and half of the members of the Board are independent of the company’s
significant shareholders. The Board of Directors assesses the independence of
the directors and states on the company website which of the directors have been
deemed independent. When evaluating independence, the circumstances of private
individuals or legal entities regarded as related parties will be taken into consideration
in all situations. Companies belonging to the same group as a company are comparable
with that company.
Principles on the diversity of the Board of Directors
The Board’s aim is to promote, for its part, the diversity of the Board’s composition.
When assessing diversity, the Board takes into consideration, for instance, the age
and gender of the directors, their education and professional experience, personal
qualities and experience that is essential with regard to the task and the company
operations. Regarding the equal representation of genders on the Board, eQ Plc has
defined as its goal that there should always be representatives of both genders on
eQ Plc’s Board of Directors. The Board aims at reaching this goal and maintaining it
primarily by informing eQ Plc’s owners actively about it. During the financial period
2022, eQ Plc’s Board met the preconditions of diversity set by the company, including
the goal of having representatives of both genders on the Board. The directors have
versatile experience in sectors that are of importance to the company operations, such
as the investment and financial sector and real estate sector. In addition, the work
experience and education of the directors as well as their international experience
complement each other. The directors are elected by eQ Plc’s AGM.
The Board of Directors of the company has monitored the development of
the company’s diversity during the financial period 2022.
CEO and his duties
The CEO is in charge of the day-to-day administration of the company in accordance
with the rules and regulations of the Finnish Limited Liability Companies Act and
instructions and orders issued by the Board of Directors. The CEO may take measures
that, considering the scope and nature of the operations of the company, are unusual
or extensive with the authorisation of the Board. The CEO ensures that the accounting
practices of the company comply with the law and that finances are organised in a
reliable manner. eQ Plc’s Board of Directors appoints the CEO. The company discloses
the same biographical details and information on the holdings of the CEO as of
the directors. eQ Plc does not have substitute for the CEO.
Mikko Koskimies, M.Sc. (Econ) (born 1967) was appointed the CEO of eQ Plc on 1 April
2021 and he has been the CEO of eQ Asset Management Ltd since 2012.
Key positions of trust: St1 Nordic Corporation, member of the Board, 2007-; Urlus-
Säätiö Sr, Chair of the Board, 2012-.
Primary work experience: eQ Asset Management Ltd, CEO, 2012-; Pohjola Bank,
member of the Executive Committee and Executive Director responsible for asset
management business unit and Pohjola Asset Management Ltd, Managing Director,
2005-2012; Alfred Berg Asset Management Ltd, Managing Director, 1998-2005;
Nordea Group, several positions in senior management, 1989–1997, of which Merita
Bank Luxembourg S.A., 1993–1997.
Shares and share-related rights of the CEO and entities that he controls in eQ Plc at
the end of the financial period on 31 December 2022:
Name Task in the organisation Security Holding
Mikko
Koskimies
CEO 2018 Option right
2022 Option right
Share
75,000
50,000
4,225,000
Other Management Team members
eQ Group has a Management Team that convenes regularly. The status of
the Management Team is not based on company law, but in practice it has a
significant role in the organisation of the company management. The Management
Team consists of the persons heading the company’s operative business, the CFO and
Group General Counsel. The main duty of the Management Team is to assist the CEO.
eQ Group’s Management Team on 31 December 2022:
Mikko Koskimies, born 1967, M.Sc. (Econ), Chair, eQ Plc, CEO and eQ Asset
Management Ltd, CEO
Staffan Jåfs, born 1974, M.Sc. (Econ), eQ Asset Management Ltd,
Head of Private Equity
Antti Lyytikäinen, born 1981, (M.Sc. (Econ), eQ Plc, CFO
Juha Surve, born 1980, Master of Laws, M.Sc. (Econ), eQ Asset Management Ltd,
Group General Counsel
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Shares and share-related rights of the other Management Team members and entities
that they control in eQ Plc at the end of the financial period on 31 December 2022:
Name Task in the organisation Security Holding
Staffan Jåfs Director, Private Equity,
eQ Asset Management Ltd
2018 Option right
2022 Option right
Share
100,000
50,000
66,778
Antti
Lyytikäinen
CFO, eQ Plc 2018 Option right
2022 Option right
Share
50,000
30,000
35,000
Juha Surve Group General Counsel,
eQ Asset Management Ltd
2018 Option right
2022 Option right
Share
50,000
30,000
41,500
Descriptions of Internal Control Procedures and
the Main Features of Risk Management Systems
Control and risk management related to the financial reporting process
The objective of the financial reporting process is to produce timely financial
information and to ensure that decision-making is based on reliable information.
The aim is to ensure that the financial statements and interim reports are prepared
according to applicable laws, generally accepted accounting principles and other
requirements on listed companies.
The financial reporting process produces eQ Group’s monthly and quarterly reports.
The Management Team of the Group reviews eQ Group’s result and financial
performance monthly. The Group management presents the result and financial
position of the Group quarterly to the Board of Directors. The Board of Directors of
eQ Plc supervises that the financial reporting process produces high-quality financial
information. The CEO is responsible for eQ Group’s internal risk management.
The Group’s subsidiaries report their results monthly to the parent company.
The financial administration of the Group takes care of the bookkeeping of
the subsidiaries. At Group level, this will make it easier to ensure that the financial
reporting of the subsidiaries is reliable. The Group’s interim reports and financial
statements are prepared in accordance with the IFRS reporting standards.
The financial administration of the Group monitors the changes that take place in IFRS
standards.
Based on risk assessments, the company has developed measures for controlling
the risks pertaining to financial reporting, which make sure that financial reporting is
reliable. The companies use various reconciliations, checks and analytical measures,
for instance. The financial administration of the Group prepares monthly analyses of
income statement and balance sheet items, both at company and segment level. In
addition, tasks related to risk-exposed work combinations are separated, and there
are appropriate approval procedures and internal guidelines. The reliability of financial
reporting is also supported by various system controls in the reporting systems. Other
basic principles of control are a clear division of responsibility and clear roles as well as
regular reporting routines.
Risk management overview
The purpose of the Group’s risk management is to make sure that the risks associated
with the company’s operations are identified, assessed and that measures are taken
regarding them. eQ Plc’s Board supervises that the CEO takes care of eQ Plc’s day-
to-day administration according to the instructions and orders issued by the Board.
The Board also supervises that risk management and control are organised in a proper
manner. The executive management is responsible for the practical implementation of
the risk management process and control.
eQ Group comprises a fully owned subsidiary of eQ Plc, eQ Asset Management Ltd,
which is an investment firm. A permanent risk management function is responsible
for risk management at eQ Asset Management Ltd. The risk management function,
which is independent of the other operations, consists of risk experts and is led by
the Chief Risk Officer. eQ Asset Management has a risk management committee,
which the Chief Risk Officer convenes regularly. The risk management committee
reviews the follow-up reports of risk management-related operations and decides on
corrective measures, for instance. It also approves new products, changes made in
products and counterparties.
General description of internal control
eQ Plc’s Board of Directors is responsible for arranging sufficient and well-functioning
internal control. Internal control covers all functions within eQ Group, which means
that eQ Plc steers and controls the operations of the subsidiaries in order to make
sure that the result of its operations is reliable. The business operations are steered
by the Group’s operating principles, decision-making powers and company values that
cover the entire Group. eQ Plc takes into account the Group structure and the nature
and extent of the operations when arranging internal control.
eQ Group’s internal control system covers financial and other control. Internal control
is carried out by the Board, CEO and other superior management as well as the entire
personnel. The aim of internal control is to make sure that the operations of the entire
Group are efficient and contribute to the achievement of the goals and targets,
reporting is reliable and that the Group follows laws and other regulations. In addition,
the aim of internal control is to ensure that information, eQ Plc’s assets and client
assets are secured in a sufficient manner and that internal procedures and information
systems are arranged properly and in order to support operations.
eQ Group has a notification channel through which an employee can report
misdemeanors or other misconduct within the eQ Group anonymously and confidentially
(eQ Whistleblower). Authorized persons process notifications and only they have access
to the information in the notifications. The notification channel is entirely on a server
outside the company and allows for discussions with an anonymous notifier.
Internal control is above all based on financial reports, management reports, risk
reports and reports of internal control. The company’s central operations are steered
according to internal operating policies and practices.
Other Information to be Provided in the CG Statement
Internal audit
The Group does not have a separate internal audit organisation. The CEO together
with the heads of the business units, is responsible for the day-to-day supervision of
the company’s operational business in the first line, and the Risk Management and
Compliance unit, which is independent of the business, oversees the operations in
the second line and reports directly to the Board, if necessary. The CEO may assign
external evaluators to carry out audits on areas that the CEO deems necessary.
The CEO reports the observations to the Board of Directors.
83eQ in 2022 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
Principles concerning related party transactions
eQ’s Group Administration is responsible for managing related party matters at Group
level and for maintaining the related party register, in accordance with principles on
the management of related party matters approved by eQ Plc’s Board of Directors.
The management of each company that is a member of the Group is responsible for
ensuring that any related party transactions at the Group are made in accordance
with the approved principles. At eQ Group, all business transactions within the Group
and related party transactions are always made on arm’s-length terms and as part of
the company’s normal business operations. Group companies can offer their services
to related party individuals or organisations under their control or influence on market
terms, and ordinary assignments are implemented in the ordinary course of business
of the company. Related party transactions are allowed, provided that they promote
the purpose and interest of the company and are commercially justified.
The Board of Directors regularly monitors and evaluates transactions between
eQ Plc and the company’s related parties, and assesses how contracts and other
legal transactions made between the company and its related parties meet
the requirements on the ordinary course of business and arm’s-length terms. Primarily,
all related parties are personally responsible for ensuring that eQ is informed of any
related party transactions they make. eQ also monitors related party transactions on
a business segment basis, and eQ Plc’s CFO is responsible for reporting related party
transactions to the Board of Directors annually. Related party transactions that are
not conducted in the ordinary course of eQ’s operation and which are not made on
ordinary commercial terms are “unconventional business transactions”. Only eQ Plc’s
Board of Directors can make decisions on implementation of unconventional business
transactions. The Board of eQ Group’s parent company always decides on all related
party loans to related parties or entities outside the eQ Group.
eQ complies with the obligations of the Finnish Corporate Governance Code 2020
for listed companies and the IFRS standards (IAS 24) on related party disclosures.
As required by the standard, eQ discloses, in the consolidated financial statements
or separate financial statements, the related party relationships and transactions
and outstanding balances of the parent company or an investor with joint control
or significant control over the investment target with related parties, which are
presented in accordance with the IFRS. eQ also discloses in the company’s annual
report information to be presented on the basis of the Finnish Limited Liability
Companies Act, concerning loans, liabilities and commitments to related parties and
the main terms thereof, if the business transactions are material and implemented on
unconventional terms.
eQ Plc publishes, by a stock release, related party transactions that are significant for
the company’s shareholders.
Central procedures of insider administration
In its insider administration, eQ Plc complies with the applicable Finnish and EU legislation
(including the Market Abuse Regulation 596/2014), rules and regulations issued by
the Finnish Financial Supervisory Authority as well as the Guidelines for Insiders issued
by the Helsinki Stock Exchange (insider regulations). eQ Plc has drawn up guidelines on
insider issues and trading. The company has informed the company management, insiders
and persons covered by the trading restriction of the insider guidelines.
Managers and persons closely associated with them are obliged to inform
the company and the Financial Supervisory Authority of their trading in company
shares or other financial instruments. The company discloses the information
that it has received without delay with a stock exchange release. At eQ, such
managers (covered by the disclosure obligation) are the CEO and directors as well at
the members of the Management Team appointed by the Board. eQ maintains a list of
managers and persons closely associated with them. This list is not an insider list.
The company maintains insider lists required by insider regulations of persons who
have access to inside information. These lists are not public. The information on eQ
Plc’s managers required by regulations and the insider lists are maintained by Euroclear
Finland Ltd. The information in the insider lists is available to the Financial Supervisory
Authority for the supervision of the securities market.
eQ Plc’s permanent insiders are only persons who, due to their tasks or position,
have permanent access to all inside information in the listed company and who
have the right to make decisions on the company’s future development and
the arrangement of business. eQ’s permanent insiders comprise the directors, CEO and
the members of the Group’s Management Team appointed by the Board of Directors.
In addition to insider lists, eQ maintains a list of persons covered by the so-called
extended trading restriction.
eQ Plc’s closed period commences 30 days prior to the disclosure of an interim report
(first and third quarter), half-yearly report or financial statements report and ends at
the end of the day of the disclosure.
The company has informed the company management, insiders and persons covered
by the extended trading restriction of the insider guidelines. The company has a
designated person in charge of insider issues (Compliance Officer), who carries out tasks
related to the management of insider issues, training in insider matters, maintenance of
the insider lists and the supervision of trading. The knowledge of other employees about
insider matters is maintained and their need of training assessed continuously.
Audit
Election of the Auditors
The proposal for the election of an auditor prepared by the Board of Directors of
the company is disclosed in the notice of the General Meeting. If the Board has
not arrived at a decision on the prospective auditor by the time the notice is sent,
the candidacy will be disclosed separately.
In 2022, the company auditor was KPMG Oy Ab, a firm of authorized public
accountants, with Tuomas Ilveskoski, APA, as auditor with main responsibility.
KPMG Oy Ab has acted as eQ Plc’s auditor since 2014 and Tuomas Ilveskoski, APA,
has acted as auditor with main responsibility since the Annual General Meeting 2021.
The decision on continuing with the period of the auditor with main responsibility
and the auditing firm is made annually at the AGM, and the auditor with main
responsibility and the auditing firm are changed at least in accordance with the valid
regulations. The Board of eQ Plc organized a statutory audit firm appointment
procedure in accordance with the EU Audit Regulation (537/2014) for the audit of
the financial year 2021 and the company’s Annual General Meeting elected KPMG Oy
Ab as auditor in accordance with the Board’s recommendation.
Auditors’ fees
The independent auditors have been paid the following fees in 2022: for the audit
and closely related services a total of EUR 94,400 (2021: EUR 47,600) and for other
services than audit a total of EUR 10,800 (2021: 8,200).
84eQ in 2022 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
Introduction
This remuneration report for governing bodies has been drafted in accordance with
the instructions concerning remuneration in the Finnish Corporate Governance
Code 2020 for Finnish listed companies. In 2022, the remuneration for the Board of
Directors and the CEO of eQ Plc was in compliance with the company’s remuneration
policy for governing bodies.
The remuneration systems used in eQ Group are based on the strategy and long-term
goals defined by the Board, and they are important tools used for reaching the group’s
long-term and short-term strategic goals. The remuneration systems contribute to
efficient risk management within eQ Group and, above all, preventing detrimental
risk-taking. In addition, the remuneration systems take into account the sustainability
risks associated with eQ Group and its business. Comprehensive risk management
aims at acknowledging i.e. the goals and interests of the group companies,
the managed funds and investors.
eQ Group’s strong financial performance during the last five years is reflected in
the remuneration of the CEO, particularly in the increase of the variable remuneration
components. The following table presents the remuneration development for
the Board of Directors and CEO in comparison to the average remuneration
development for the Group’s employees and the Group’s economic development for
the previous five financial years.
Remuneration Report for Governing Bodies 2022
Salary and remuneration
– EUR 2022 2021 2020 2019 2018
CEO* 1,944,133 1,034,689 851,669 784,613 622,314
change, % 88% 21% 9% 26% 38%
Chair of the Board** 702,106 549,489 51,000 46,200 44,800
change, % 28% 977% 10% 3% -1%
Other Board
members*** 212,000 199,500 131,500 112,400 108,800
change, % 6% 52% 17% 3% 1%
Board, in total 914,106 748,989 182,500 158,600 153,600
change, % 22% 310% 15% 3% 0%
Employee, in
average**** 207,953 218,726 185,653 176,637 166,434
change, % -5% 18% 5% 6% 10%
Operating profit
– MEUR 45.7 47.7 30.8 26.3 22.4
change, % -4% 55% 17% 17% 12%
* Due to changes in the remuneration regulations, the variable remunerations in the 2022 bonus payment will
no longer be deferred. All reported figures include paid salary, fringe benefits and annual bonus. The year 2021
includes CEO Janne Larma from 1 January to 31 March 2021 and CEO Mikko Koskimies from 1 April to 31
December 2021.
** The remuneration of the Chair of the Board includes the salary and fringe benefits of the full-time Chair of
the Board, Janne Larma, based on the service contract from 1 April 2021.
*** The number of Board members increased by one in 2021.
**** The total amount of paid salaries, other remuneration, fringe benefits and annual bonuses for
the financial year (without option costs and side costs and excluding the CEO) divided by the average number
of personnel.
Remuneration of the Board of Directors
Compensation and remuneration of the Board
The Annual General Meeting decides upon the remuneration of the Board of Directors.
In 2022, the Annual General Meeting decided that the members of the Board of
Directors shall receive remuneration according to following: Chair of the Board
5,000 euros per month, Vice Chair of the Board of Directors receives 4,000 euros per
month and the directors 3,000 euros per month. The Annual General Meeting also
decided that the directors shall be paid EUR 500 for each Board meeting that they
attend. The travel and lodging costs of the Board members shall be compensated in
accordance with the company’s expense policy. The remuneration is paid in cash.
The full-time Chair of the Board has entered into a service contract with the company
and is paid a fixed salary in cash (monthly salary and fringe benefits) in addition to
the remuneration paid on the basis of the Board’s membership. The full-time Chair of
the Board is not covered by the eQ Group’s performance-based annual bonus scheme.
85eQ in 2022 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
In 2022, the members of the Board of Directors have been paid remuneration
as follows:
Remuneration –
EUR
Annual
remuneration
Meeting fees
in total
Other
compensation Total
Nicolas Berner 36,000 4,000 - 40,000
Georg Ehrnrooth 48,000 4,000 - 52,000
Timo Kokkila 36,000 4,000 - 40,000
Lotta Kopra 36,000 4,000 - 40,000
Janne Larma* 60,000 4,000 638,106 702,106
Tomas von Rettig 36,000 4,000 - 40,000
Total 252,000 24,000 638,106 914,106
* Other compensation contains the salary and fringe benefits paid to the full-time Chair of the Board Janne
Larma based on his service contract with the company.
The full-time Chair of the Board’s participation in the option programs
Based on the service contract, the full-time Chair of the Board may be granted shares,
options or other share-based rights as part of the long-term commitment scheme.
The other members of eQ Plc’s Board of Directors have no share-related rights, nor are
they covered by any other remuneration system.
eQ Group has two different option programs: option program 2018 and option
program 2022. Based on these programs, eQ Group has issued option rights and
option subscription rights to key persons, which aim for long-term commitment
to the company. The Chair of eQ Plc’s Board of Directors is covered by both option
programs. In accordance with the terms and conditions of the option programs for
2018 and 2022, the options have an approximately three-year retention period after
which they are available for subscription. The terms and conditions contain no other
special terms related to ownership.
Option program 2018
As part of the engagement system, the Chair of the Board is covered by the option
program 2018 and has initially received 100 000 option rights based on option
program 2018. Janne Larma has used all of the option rights granted on the basis of
the option program 2018 by 31 December 2022.
The share subscription period for the option program 2018 begun on 1 April 2022 and
ends on 1 April 2024.
Option program 2022
As part of the engagement system, the Chair of the Board has initially received 50
000 option rights based on option program 2022. The share subscription price with
the option rights 2022 was EUR 23.25 per share at 31 December 2022.
The share subscription period for the option program 2022 begins on 1 April 2025 and
ends on 30 April 2027.
Remuneration of the CEO
The salary of the CEO and other benefits
The Board of Directors appoints the CEO and decides on the CEO’s salary, benefits
and other terms related to the CEO’s service. It is important for the company that
the salary of the CEO is competitive, as the commitment of the CEO and sufficient
incentives are vital with regard to the company’s success.
The remuneration of the CEO consists of a fixed salary in cash (monthly salary and
fringe benefits) and an annual performance bonus. The amount of the annual bonus
is determined based on achievement of personal goals and the result of eQ Group. eQ
Plc’s Board decides on the amount and distribution of the annual bonuses taking into
consideration, e.g. the above presented main principles of remuneration.
According to the regulations in force at the time of payment of the variable
remuneration accrued before 2020 and paid before 2021, if the variable remuneration
component of the CEO exceeded EUR 50 000 annually, 50 per cent of the variable
remuneration had to be deferred to be paid during the following three years (even
payments each year). 50 per cent of the deferred remuneration had to be linked to
the development of eQ Plc’s share price during the deferral period. eQ Plc’s Board
decides annually on the interest possibly payable to the remaining part of the deferred
remuneration. Due to changes in the remuneration regulations, the part of the variable
remuneration in excess of EUR 50 000 for the variable remuneration accrued after
2021 will no longer be deferred to be paid during the following three years.
In 2022, the CEO was paid the following salary and other remuneration:
Renumeration paid during 2022 – EUR
Fixed remuneration Variable remuneration
Annual salary
(incl. fringe benefits)
Part of the
overall
remuneration Annual bonus* Part of the
overall remuneration Total
638,106 32.8% 1,306,027 67.2% 1,944,133
* Represents the aggregate amount of annual bonuses paid in 2022. The earnings periods for the bonuses paid in 2022 are defined in the table below.
The annual bonus paid to the CEO is always based on the preceding year’s performance.
86eQ in 2022 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
The table below presents the earnings periods for the variable remuneration
paid to the CEO Mikko Koskimies in 2022 (deferred remuneration falling due for
the previous years):
Specification of variable remuneration paid during 2022 – EUR
For year
2021*
For year
2020*
For year
2019*
For year
2018* Total
789,758 150,652 156,543 209,074 1,306,027
* The annual bonus of the CEO is always based on the preceding year’s performance. Some of the reported
remuneration was earned before Mikko Koskimies became CEO.
The following table presents the remuneration to the CEO falling due (including
deferred variable remuneration), which has not yet been paid on 31 December 2022.
The unpaid deferred variable remuneration for each earnings period:
Deferred variable remuneration* – EUR
For year 2020 For year 2019 Total
306,744 159,561 466,305
* Including changes in stock prices and dividend consideration. Some of the reported remuneration was earned
before Mikko Koskimies became CEO.
The variable remuneration of the CEO Mikko Koskimies that has been earned
during 2022 and that has not yet been paid out by the date of this report was
EUR 833,056 in aggregate.
The terms of the CEO’s service are specified in the CEO’s service contract. Both
parties may give notice on the CEO’s service contract with a period of notice of six
months. When notice is given by the company for whatever reason or if the contract
is terminated through mutual agreement by the company and the CEO, the CEO is
entitled to a severance pay corresponding to his or her overall remuneration for six
months preceding the termination of the contract, which is paid on the day when
the contract is terminated.
The retirement age and pension of the CEO are determined in accordance with
the Finnish Employees Pensions Act. The CEO does not have a supplementary
pension scheme.
The CEO’s participation in the option programs
eQ Group has two different option programs: option program 2018 and option
program 2022. Based on these programs, eQ Group has issued option rights and
option subscription rights to key persons, which aim for long-term commitment to
the company. The CEO of eQ Plc is covered by both option programs. In accordance
with the terms and conditions of the option programs for 2018 and 2022, the options
have an approximately three-year retention period after which they are available
for subscription. The terms and conditions contain no other special terms related
to ownership.
Option program 2018
As part of the engagement system, the CEO is covered by the option program 2018
and has initially received 100 000 option rights based on option program 2018. Mikko
Koskimies has used 25 000 of the option rights granted on the basis of the option
program 2018 by 31 December 2022. The share subscription price with the option
rights 2018 was EUR 5.02 per share at 31 December 2022.
The share subscription period for the option program 2018 begun on 1 April 2022 and
ends on 1 April 2024.
Option program 2022
As part of the engagement system, the CEO has initially received 50 000 option rights
based on option program 2022. The share subscription price with the option rights
was EUR 23.25 per share at 31 December 2022.
The share subscription period for the option program 2022 begins on 1 April 2025 and
ends on 30 April 2027.
87
eQ in 2022 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
Janne Larma
Chair of the Board
Member of the Board since 2021
Born: 1965
Education:
M.Sc. (Econ.), Hanken Svenska handelshögskolan
Primary working experience:
2011–2021 eQ Plc, CEO
2004–2009 eQ Bank, Member of Management Team
2000– Advium Corporate Finance Ltd, Managing Director
1998–2000 Enskilda Securities, management position in
investment banking
1993–1998 Alfred Berg, investment banking
1988–1992 Kansallis-Osake-Pankki, investment banking
Primary positions of trust:
Notalar Oy, Chair of the Board of Directors; Inkoo Shipping
Oy, Member of the Board; Rettig Group Oy Ab, Member of
the Board; Svenska handelshögskolan, Member of the Board;
Meripuolustussäätiö SR, Member of the Board
Not independent of the company and not independent of its
significant shareholders.
Board of Directors
eQ Plc Board of Directors 31 December 2022:
Georg Ehrnrooth
Vice Chair of the Board
Member of the Board since 2011
Born: 1966
Education:
Studies in agriculture and forestry,
Högre Svenska Läroverket, Åbo
Primary working experience:
2008– Management positions in family-owned companies
responsible for finance and investments
2005 eQ Corporation and eQ Bank Ltd, Chief Executive Officer
Primary positions of trust:
Sampo Plc, Member of the Board; Paavo Nurmi Foundation,
Member of the Board; Anders Wall Foundation, Member of
the Board; Louise and Göran Ehrnrooth Foundation, Chair
of the Board; Topsin Investments S.A., Chair of the Board;
Fennogens Investments S.A., Chair of the Board
Not independent of the company and not independent of its
significant shareholders.
88eQ in 2022 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
Nicolas Berner
Member of the Board since 2013
Born: 1972
Education:
LL.B, University of Helsinki
Primary working experience:
2011– Berner Ltd, Chief Financial Officer,
1998–2011 Hannes Snellman Attorneys Ltd, Partner
Primary positions of trust:
Berner Ltd, Member of the Board
Independent of the company and significant shareholders.
Timo Kokkila
Member of the Board since 2016
Born: 1979
Education:
M.Sc. (Eng.), University of Technology Espoo
Primary working experience:
2016– Pontos Group, CEO
2011–2015 Pontos Group, Investment Director
2008–2011 SRV Group Plc, Manager, Project Development
2006–2008 SRV Group Plc, Project Development Engineer
2004–2006 Kampin Keskus Oy, Development Engineer
Primary positions of trust:
Ilmarinen Mutual Pension Insurance Company, Member of
the Board; Valmet Automotive Ltd, Member of the Board; SRV
Group Plc, Vice Chair of the Board; Pontos Ltd, Member of
the Board
Independent of the company and significant shareholders.
Lotta Kopra
Member of the Board since 2019
Born: 1980
Education:
M.Sc. (Econ.), HSE
Primary working experience:
2019–2022 Spinnova Plc, Chief Commercial Officer
2015–2018 BearingPoint, Executive level
2010–2015 Magenta Advisory, Founder, Chair of the board
2004–2010 Finland and Nordics, Management consultant
Primary positions of trust:
Nightingale Health Plc, Member of the Board
Independent of the company and significant shareholders.
Tomas von Rettig
Member of the Board since 2019
Born: 1980
Education:
BBA (Bachelor of Business Administration),
Arcada University of Applied Sciences
CEFA -degree, Hanken Svenska handelshögskolan
Primary working experience:
2016–2019 Rettig Group Oy Ab, CEO
2011–2015 Rettig Group Oy Ab, vice president business
development, vice president corporate finance and development
2008–2011 Rettig Asset Management Oy Ab,
portfolio manager, senior portfolio manager
2006–2008 Skandinaviska Enskilda Banken,
Middle Office function
Primary positions of trust:
Purmo Group Oyj, Chair of the Board; Rettig Capital Oy Ab, Member
of the Board
Independent of the company, but not independent of its significant
shareholders.
89
eQ in 2022 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
Management Team
eQ Group’s Management Team 31 December 2022:
Mikko Koskimies, Chair
Mikko Koskimies, M.Sc. (Econ), (born 1967) is CEO of eQ Plc and
eQ Asset Management Ltd and has worked with eQ since 2012.
He previously worked as a Managing Director of Pohjola Asset
Management Ltd and was a member of the Executive Committee of
Pohjola Bank. Mikko Koskimies also worked from 1998 to 2005 as
a Managing Director of Alfred Berg Asset Management Ltd. During
the years from 1989 to 1997 he worked within the current Nordea
Group. From 1993 to 1997 Mikko worked in Private Banking for
Merita Bank Luxembourg S.A. in Luxembourg.
Staffan Jåfs
Staffan Jåfs, M.Sc. (Econ), (born 1974) is responsible for
the private equity asset management and group’s own private
equity investment operations. Staffan has worked in the private
equity business since 2000 and with eQ since 2007. Previously in
2000–2007 he worked at Proventure Ltd as CFO, responsible for
the group’s financial administration.
Antti Lyytikäinen
Antti Lyytikäinen, M.Sc. (Econ.), (born 1981) is CFO of eQ Group.
Antti has worked among financial sector since 2004 and with eQ
since 2011. From 2008 to 2011 he worked at Aberdeen Asset
Management and was responsible for the financial management of
group’s property funds. Prior to that he worked as an Auditor e.g. in
the Financial Services -division of KPMG.
Juha Surve
Juha Surve, LL.M and M.Sc. (Econ.), (born 1980) is Group General
Counsel of eQ Plc, and he also acts as a secretary of the Board of
eQ Plc. Juha has worked among financial sector and capital markets
since 2003 and with eQ since the beginning of year 2012. From
2008 to 2012 he worked at Castrén & Snellman Attorneys Ltd
expertising in M&A transactions, capital markets and corporate
law. Prior to that he gained over five years’ experience in various
asset management related duties e.g. in OP-Pohjola Group and
Nordea Bank.
90eQ in 2022 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
Performance based fees of private equity
funds managed by eQ
It is possible for eQ Group to obtain a performance based fee (carried interest) based
on the return of the private equity fund or asset management programme that eQ
manages. The performance based fee, which is based of fund agreements and belongs
to the management company, is not paid until the return rate defined by the hurdle
rate (IRR) has been achieved at cash flow level. Typically, the performance fee will
become payable first towards the end of a fund’s life cycle. If the return from the fund
remains below the hurdle rate, the management company receives no performance
fee. When the hurdle rate has been reached, the management company will receive
the coming cash flow until the entire performance fee accumulated this far has been
obtained (catch up stage, catch up share 100%). After the catch up stage, the cash
flows distributed by the fund will be divided between the management company and
investors according to the fund agreement (e.g. 7.5% / 92.5%).
eQ Group accrues the catch up share of private equity funds’ performance fee
in the income statement. eQ Group will begin to accrue the catch up share of
performance fees when the Group has assessed that it will not be necessary to later
make any considerable cancellations in the accrued and recognised income. Accruals
will be recognised for the funds that fulfil the requirements and that are assessed,
based on cash flows, to pay carried interest in the following five years, the investment
period of which has ended, and regarding which eQ has received return assessments
of the final returns from the targets funds’ management companies. After the catch
up stage, the performance fees will be booked in the income statement according to
the cash flow distributed by the fund and divided between the management company
and investors (e.g. 7.5% / 92.5%).
The estimated returns and performance fees for each separate fund have been
presented on the following page. The catch up share to be recognised in the 2023
income statement is estimated to be round EUR 6.0 million.
91eQ in 2022 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
Funds – 31 December 2022
Fund Fund size Vintage year Hurdle rate Performance fee
eQ’s share of
the performance fee Present TVPI Estimated TVPI
Estimate on
reaching the hurdle
rate (cash flow)
Estimated catch up
share, total MEUR
Estimated future
performance fees,
total MEUR
Performance fees
accrued presently
in the fund’s value,
MEUR
1)
Amanda III MEUR 110 2006 6.0% 10.0% 100% 1.1x 1.1x Will not reach n/a n/a n/a
Amanda IV MEUR 90 2007 8.0% 7.5% 100% 1.5x 1.5x Has reached n/a 0.2 0.2
Amanda V MEUR 50 2011 6.0% 10.0% 100% 1.3x 1.4x Will not reach n/a n/a n/a
eQ PE VI MEUR 100 2013 7.0% 7.5% 100% 1.5x 1.8x 2024 2.2 6.9 3.7
eQ PE VII MUSD 80 2015 7.0% 7.5% 45% 1.6x 2.1x 2025 0.9 3.2 1.8
eQ PE VIII MEUR 160 2016 7.0% 7.5% 100% 1.5x 1.9x 2024 2.9 13.4 6.0
eQ PE IX MUSD 105 2017 7.0% 7.5% 45% 1.4x 2.2x 2025 0.8 4.7 1.6
eQ PE X MEUR 175 2018 7.0% 7.5% 100% 1.1x 1.7x After 2027 n/a 11.4 1.5
eQ PE XI MUSD 217 2019 7.0% 7.5% 45% 1.2x 1.8x After 2027 n/a 6.3 1.0
eQ PE XII MEUR 205 2020 7.0% 7.5% 100% 1.1x 1.8x After 2027 n/a 13.4 0.9
eQ PE XIII MUSD 318 2021 7.0% 7.5% 45% n/a 1.8x After 2027 n/a 9.5 n/a
eQ PE XIV MEUR 288 2022 7.0% 7.5% 100% n/a 1.8x After 2027 n/a 18.7 n/a
eQ PE SF II MEUR 135
2)
2018 10.0% 10.0% 100% 1.2x 1.4x 2025 2.8 3.4 n/a
eQ PE SF III MEUR 170
3)
2020 10.0% 10.0% 100% 1.3x 1.7x 2025 1.8 7.8 2.1
eQ PE SF IV MEUR 151
4)
2022 10.0% 10.0% 100% n/a 1.4x After 2027 n/a 3.2 n/a
PE programmes MEUR 198 2013–16 8%/12% 7,5%/12% 100% n/a n/a 2024–2027 7.6 24.3 10.0
eQ VC MUSD 77 2021 7.0% 7.5% 45% n/a 2.3x After 2027 n/a 3.6 n/a
Total 18.9 130.1 28.8
of which covered by the catch up accrual 18.9 63.7 25.2
catch up share accrued cumulatively by 31 December 2022 5.8
estimated accrual for 2023 6.0
The return estimates that eQ has presented are based on assessments obtained from the target funds’ management companies regarding the funds that are fully invested and where that investment periods of the target funds have ended. Otherwise, the estimates are based on eQ´s own assessment model.
1)
The amount of the performance fee that eQ would receive, if the investments of the funds were sold at present market value.
2)
Capital covered by the performance fee MEUR 75.
3)
Capital covered by the performance fee MEUR 104.
4)
Capital covered by the performance fee MEUR 71.
92eQ in 2022 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
Information about capital adequacy
Capital adequacy management
eQ Group comprises a fully owned subsidiary of eQ Plc, eQ Asset Management Ltd,
which is an investment firm. eQ Asset Management Ltd, as investment firm, and
eQ Plc as the holding company, apply the IFD/IFR regime for investments firms.
This section presents information about the capital adequacy management and
calculations of eQ Group (Pillar III).
Capital adequacy management is a central part of pillar 2 of the capital adequacy
regulations. According to them, investment firms are obliged to consider their
capital adequacy in relation to risks in a more extensive manner than just fulfilling
the calculated capital adequacy requirements set out in the first pillar. In the capital
adequacy management process, the company builds a motivated view of essential
risks and the risk-based capital need required by them, which is not the same as
the capital adequacy requirement of pillar 1 and may deviate from it. The capital
adequacy management process deals with risks that are not taken into consideration
in pillar 1 capital adequacy requirements, including qualitative risks. The capital
adequacy management process also takes a stand on the sufficient level of risk
management and internal control regarding each separate risk. The capital adequacy
management process is carried out at least once a year and a capital plan describing
the capital need, the sufficiency of capital and capital adequacy is drawn up based on
the process.
The goals and practises of risk management at eQ Group have been presented in
the Notes to the Financial Statements. Information about the corporate governance
and remuneration in eQ Group can be found as part of the Annual Report and
on eQ’s website.
Capital adequacy
According to the IFR-regulations, the most restrictive capital requirement for eQ at
the end of the financial period is defined on the basis of fixed overheads. The minimum
capital requirement based on fixed overheads was EUR 4.9 million. At the end of
the period, the Group’s own funds based on capital adequacy calculations totalled
EUR 11.9 million. Detailed information on the Group’s capital adequacy can be found
in the following section.
Capital adequacy, EUR 1,000
IFR
31 Dec. 2022
eQ Group
IFR
31 Dec. 2021
eQ Group
Equity
81,779 79,955
Common equity tier 1 (CET 1) before deductions
81,779 79,955
Deductions from CET 1
Intangible assets
-29,400 -29,552
Unconfirmed profit for the period
-36,322 -38,078
Dividend proposal by the Board*
-4,107 -1,554
Common equity tier 1 (CET1)
11,949 10,771
Additional tier 1 (AT1)
0 0
Tier 1 (T1 = CET1 + AT1)
11,949 10,771
Tier 2 (T2)
0 0
Total capital (TC = T1 + T2)
11,949 10,771
Own funds requirement according to the most
restrictive requirement (IFR) 4,932 4,696
Fixed overhead requirement
4,932 4,696
K-factor requirement
393 331
Absolute minimum requirement
150 150
IFR
31 Dec. 2022
eQ Group
IFR
31 Dec. 2021
eQ Group
Risk-weighted items total – Total risk exposure
61,651 58,697
Common equity tier (CET1) / own funds
requirement, % 242.3% 229.4%
Tier 1 (T1) / own funds requirement, %
242.3% 229.4%
Total capital (TC) / own funds requirement, %
242.3% 229.4%
Common equity tier 1 (CET1) / risk weights, %
19.4% 18.3%
Tier 1 (T1) / risk weights, %
19.4% 18.3%
Total capital (TC) / risk weights, %
19.4% 18.3%
Excess of total capital compared with
the minimum level 7,017 6,075
Total capital compared with the target level
(incl. a 25% risk buffer for the requirement) 5,784 4,901
* The dividend and equity repayment proposed by the Board exceeding the profit for the period.
93eQ in 2022 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
Composition of regulatory own funds (EU IF CC1), 1,000 EUR
(a) (b)
Amounts
Source based on
reference numbers/
letters of the balance
sheet in the audited
financial statements
Common Equity Tier (CET) capital: instruments and reserves
1
Own funds
11,949
2
Tier 1 capital
11,949
3
Common equity tier 1 capital
45,456
4
Paid up capital instruments
11,384 Row 23, CC2
6
Retained earnings
7,011 Row 25, CC2
8
Other reserves
27,061 Row 24, CC2
11
(-) Total deductions from common equity tier 1
-33,507
17
(-) Goodwill
-25,212 Row 7, CC2
18
(-) Other intangible assets
-4,187 Rows 7, 8 and 9, CC2
25
(-) Other deductions
-4,107
Own funds: reconciliation of regulatory own funds to balance sheet in the audited financial statements (EU IF CC2)
(a) (b) (c)
Balance sheet as in audited financial statements Under regulatory scope of consolidation Cross reference to EU IFCC 1
As at period end, 1,000 EUR As at period end, 1,000 EUR
Assets - Breakdown by asset classes according to the balance sheet in the audited financial statements
1
Liquid assets
21
2
Claims on credit institutions
23,667
3
Financial assets
4
Financial securities
20,119
5
Private equity and real estate fund investments
16,837
6
Intangible assets
7
Fair value and brands
29,212 Row 17, CC1
8
Client agreements
108 Row 17 and 18, CC1
9
Other intangible assets
79 Row 17 and 18, CC1
10
Tangible assets
11
Right-of-use assets
5,273
12
Tangible assets
514
13
Other assets
14,393
14
Accruals and prepaid expenditure
426
15
Income tax receivables
138
16
Deferred tax assets
70
17
Total Assets
110,858
Liabilities - Breakdown by liability classes according to the balance sheet in the audited financial statements
18
Other liabilities
6,829
19
Accruals and deferred income
16,607
20
Lease liabilities
5,621
21
Income tax liabilities
22
22
Total Liabilities
29,079
Shareholders’ Equity
23
Share capital
11,384 Row 4, CC1
24
Reserve for invested unrestricted equity
27,061 Row 8, CC1
25
Retained earnings
7,011 Row 6, CC1
26
Profit (loss) for the period
36,322
27
Total Shareholders' equity
81,779
Audited consolidated balance sheet and regulatory own funds under regulatory scope of consolidation are equal.
94
eQ in 2022 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
Own funds: main features of own instruments (EU IF CCA)
1 Issuer eQ Oyj
2 Unique identifier ISIN: FI0009009617
3 Public or private placement Public
4 Governing law(s) of the instrument Finnish law, EU’s IFR regulation 2019/2033,
EU’s CRR regulation 575/2013
5 Instrument type CET1
6 Amount recognised in regulatory capital (MEUR) 11.4
7 Nominal amount of instrument n/a
8 Issue price n/a
9 Redemption price n/a
10 Accounting classification Shareholders' equity
11 Original date of issuance 1 Nov 2000
12 Perpetual or dated Perpetual
13 Original maturity date No maturity
14 Issuer call subject to prior supervisory approval n/a
15 Optional call date, contingent call dates and redemption
amount
n/a
16 Subsequent call dates, if applicable n/a
Coupons / dividends
17 Fixed or floating dividend/coupon Floating
18 Coupon rate and any related index n/a
19 Existence of a dividend stopper No
20 Fully discretionary, partially discretionary or mandatory (in
terms of timing)
Fully discretionary
21 Fully discretionary, partially discretionary or mandatory (in
terms of amount)
Fully discretionary
22 Existence of step up or other incentive to redeem No
23 Noncumulative or cumulative Non-cumulative
24 Convertible or non-convertible Non-convertible
25 If convertible, conversion trigger(s) n/a
26 If convertible, fully or partially n/a
27 If convertible, conversion rate n/a
28 If convertible, mandatory or optional conversion n/a
29 If convertible, specify instrument type convertible into n/a
30 If convertible, specify issuer of instrument it converts into n/a
31 Write-down features n/a
32 If write-down, write-down trigger(s) n/a
33 If write-down, full or partial n/a
34 If write-down, permanent or temporary n/a
35 If temporary write-down, description of write-up mechanism n/a
36 Non-compliant transitioned features No
37 If yes, specify non-compliant features n/a
38 Link to the full term and conditions of the instrument
(signposting)
See equity note of the consolidated financial statement
95eQ in 2022 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
Information to the shareholders
eQ Plc’s share
eQ Plc’s share is traded on Nasdaq Helsinki. At the end of 2022, the company had had
8,277 shareholders (7,883 shareholders on 31 Dec. 2021). The largest shareholders
have been presented in the Report by the Board of Directors.
• Symbol: EQV1V
• Sector: Financial Services
• Market capitalisation classification: Mid Cap companies
Why to invest in eQ’s share
eQ Group’s profit growth has been strong and profitability at a good level during
the recent years. eQ aims also in the future in a strong growth, constant cost-
efficiency and to pay competitive dividend.
eQ aims at creating value for its shareholders through profitable and growing business
areas. eQ Asset Management has a strong position as a service provider for the most
professional investors in Finland. About 66 per cent of 100 largest institutional
investors in Finland use eQ Asset Management’s services and eQ has been ranked as
No.1 in overall quality, already the fourth time in a row. (SFR-survey 2022). eQ Asset
Management has an excellent product offering. Demand for alternative investment
products such as real estate and private equity funds has increased in recent years. In
the Corporate Finance -segment advisory services are offered by Advium Corporate
Finance, which is one of the most experienced and highly esteemed advisors in Finland.
eQ also has committed personnel. Personnel owns over 30 per cent of eQ Plc and
personnel’s satisfaction is at an excellent level according to the personnel surveys.
Professional and committed employees are the key to good customer services,
investment operations and advisory.
NUMBER OF SHAREHOLDERS
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
20222021202020192018
8,277
7,883
7,261
5,945
5,451
SHARE PRICE DEVELOPMENT 2018 TO 2022,
EUR
35
30
25
20
15
10
5
0
20222021202020192018
eQ Plc OMXH
97eQ in 2022 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
ANNUAL REPORT:
WEEK
ANNUAL
GENERAL MEETING:
MARCH
RECORD DATE
OF THE DIVIDEND
AND EQUITY REPAYMENT:
MARCH
PAYMENT DATE OF
THE DIVIDEND AND
EQUITY REPAYMENT:
APRIL
Q INTERIM REPORT:
APRIL
HALF YEAR
FINANCIAL REPORT:
AUGUST
Q INTERIM REPORT:
OCTOBER
Calendar in 2023
In connection with the publication of
the financial reports, eQ will arrange
a result presentation for investors,
analysts and representatives of
the media. The interim and half
year reports will be available on
eQ’s website at www.eQ.fi/en.
Annual General Meeting
eQ Plc’s Annual General Meeting (AGM) will be held on Wednesday 27 March 2023.
Detailed information and instructions for participation can be found on the company
website at www.eQ.fi/en.
Dividend distribution
The Board of Directors proposes to the 2023 Annual General Meeting that a dividend
of EUR 0.91 per share be paid out. Additionally, the Board proposes to the AGM that
an equity repayment of EUR 0.09 per share be paid out from the reserve of invested
unrestricted equity. Record date of the dividend and equity repayment is 29 March
2023 and payment date 5 April 2023.
Analysts following eQ Plc
The analysts mentioned below follow eQ Plc. eQ is not responsible for their comments
or assessments.
• Inderes Oy, Sauli Vilén, +358 44 025 8908, sauli.vilen@inderes.fi
• Inderes Oy, Kasper Mellas, +358 45 671 7150, kasper.mellas@inderes.fi
• OP Corporate Bank Plc, Antti Saari, +358 10 252 4359, antti.saari@op.fi
Investor relations, contact information
CFO
Antti Lyytikäinen
+358 40 709 2847
antti.lyytikainen@eQ.fi
98
eQ in 2022 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
