REVIEW OF INDUSTRIAL INVESTMENTS 2010

Norvestia Industries Ltd has continued its industrial investment activities that first began in 2007. The aim of these activities is to increase the return on investment by developing the target companies. Our investment horizon is long-term and there are no strict time limits set for the withdrawal of these investments. We seek returns through both dividend yields and increases in value. Our aim is to work actively with other main owners to increase the value of the target company. This is mainly achieved through definition of strategy in the initial stage of the investment and through supporting board work.

AREAS OF EMPHASIS

The emphasis of our industrial investment activities is on companies ready to step up to the next strategic level of international business, which will be achieved by conceptualizing services. Our investment decisions are influenced by both long-term macroeconomic trends and anticipated changes in customer and consumer behaviour. We are particularly keen to invest in companies and industries that have strong competitive opportunities in domestic markets, and the potential to capitalize on their service development innovations internationally. The target companies may also be engaged in tangible goods or in design products if they have the potential to develop current earning models into service concepts. Interesting areas for industrial investments are, for example, health care, outsourcing of service processes, conceptualised expert services, environmental technology and education services. All of these areas offer favourable long-term development opportunities, and changes in consumer behaviour.

Last year we expanded the area of emphasis of industrial investments from unlisted companies to listed Nordic companies. When seeking target companies and developing business activities the same basic principles are primarily followed as with unlisted target companies.

PORTFOLIO COMPANIES

Coronaria Hoitoketju

In 2008 Norvestia Industries invested in Coronaria Hoitoketju which is one of the leading providers of primary and special health care services to the public and private sectors in Finland. The turnover of the Coronaria Hoitoketju Group in 2010 was approximately EUR 20 million and operations were profitable. The growth from last year was 27%. Norvestia Industries owns 20% of Coronaria Hoitoketju.

At present the activities of the Group cover, apart from medical, dental and nursing services, eye care and day care services. Coronaria Hoitoketju Oy owns 70% of Coronaria Silmäklinikka Oy and 72% of Coronaria Päivähoito Oy. Coronaria Silmäklinikka accounts for a significant part of the approximately 11,000 yearly outpatient visits for eye diseases in the hospital district of Helsinki and Uusimaa, as well as the follow-up of glaucoma patients in the municipalities surrounding Tampere. Coronaria Päivähoito Oy has children’s day care activities in Oulu and Ylöjärvi and in 2011 operations will start also in Espoo.

GSP Group Oy

GSP Group is an expert organization specializing in construction services and real estate development. Norvestia Industries owns 25% of GSP Group. The adjustment to GSP’s strategy made in 2008, which shifted the company’s emphasis from construction to construction management and real estate development, has proceeded according to plan, despite challenging market conditions. The activities have been developed particularly in the direction of scalable service concepts. The company’s most significant projects last year were construction operations in the residential area of Sipoonranta and in Konecranes Plc’s headquarters, as well as the development plan of the Mukkula area, among others.

Because of a decrease in turnover due to the change in strategy we adjusted the GSP Group’s carrying amount to correspond with the current recoverable amount of the investment. On the basis of a cash flow-based valuation we reduced the balance value by EUR 0.2 million.

MARKET SITUATION

The decline in the number of corporate acquisitions in Finland ceased in 2010. According to statistics collected by BvD, the number of executed corporate acquisitions remained unchanged from the previous year, that is, nearly 700. However, the combined value of the acquisitions decreased further by over 20%. As an exception to this, corporate acquisitions executed by private equity investors increased from 40 transactions to 52. The combined value of these acquisitions was approximately EUR 880 million which is 50% more than in 2009.

In Western Europe the volume of corporate acquisitions declined further both in number and in value. Services, logistics and some other retail trade industries grew compared to the previous year however. The activity of private equity investors also grew at the European level. The value of executed corporate acquisitions increased by 57% while the amount of transactions grew by 13%.

In 2010 Norvestia continued to actively analyse possible industrial investments. During the whole year we assessed the industrial investment potential of 32 companies. We continued negotiations for an equity-based investment with seven companies. The negotiations have not yet led to final investment decisions. We continue to evaluate on a case by case basis whether to invest our assets in our actively managed portfolio or for the long-term, in service companies with strong development potential.