ANNUAL REPORT
eQ in 2023 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 33
Consolidated Key Ratios 41
Contents
Financial Statements 2023 44
Auditor’s Report 75
Corporate Governance 78
Corporate Governance Statement 79
Remuneration Report 84
Board of Directors 87
Management Team 89
Performace Fees of Private Equity Funds 90
Information about Capital Adequancy 92
Information to the Shareholders 95
2eQ in 2023 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
Key Figures
NET REVENUE
.
MEUR
: . MEUR
EARNINGS PER SHARE
.
EUR
. EUR
COST/INCOME RATIO
.%
.%
DIVIDEND PER SHARE
.
. EUR
MARKET CAP
.
MEUR
,. MEUR
NUMBER OF SHAREHOLDERS
,
,
NUMBER OF PERSONNEL
ASSETS UNDER MANAGEMENT
WITHOUT REPORTING SERVICES
.
EUR BILLION
. EUR BN
OPERATING PROFIT
.
MEUR
. MEUR
AND IN TOTAL
.
EUR BILLION
. EUR BN
4
eQ in 2023 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.
80
70
60
50
40
30
20
10
0
2023202220212020201920182017201620152014
NET REVENUE DEVELOPMENT,
MEUR
Asset Management Corporate Finance
Investments Group Administration Group
24.4
30.5
35.4
40.7
45.4
50.6
56.7
78.9
77.8
70.9
60
50
40
30
20
10
0
2023202220212020201920182017201620152014
OPERATING PROFIT DEVELOPMENT,
MEUR
Asset Management Corporate Finance
Investments Group Administration Group
9.0
13.2
16.2
20.1
22.4
26.3
30.8
47.7
45.7
39.7
5eQ in 2023 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 period fell in the partially challenging operating
environment. The net revenue of the Group during the financial period
was EUR 70.9 million and the operating profit EUR 39.7 million. Operating
profit fell by 13 per cent from the previous year. The profit for the year was
EUR 31.5 million and the earnings per share were 78 cents. The Group’s cost/
income ratio was at an excellent level of 43.8 per cent.
Last year, eQ Asset Management’s net revenue decreased by 7 per cent and
operating profit by 10 per cent to EUR 41.4 million. eQ Asset Management’s
management fees grew but performance fees fell by 50 per cent. The cost/
income ratio of the Asset Management segment continued stood at
37.9 per cent. The net revenue of Advium fell by 27 per cent from the year
before to EUR 3.9 million. Operating profit was EUR 0.7 million, compared with
the previous year’s EUR 1.7 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
from the year 2021. The operating profit of the segment was EUR -0.6 million,
compared with previous year’s EUR 0.7 million.
eQ Asset Management is the leading institutional asset manager
in Finland
According to a survey conducted by SFR last year, eQ is the second most used
institutional asset manager in Finland. 64 per cent of the respondents say
they use eQ’s services. Best of all, investors assessed the quality of eQ Asset
Management to be the best in the market for already the fifth time in a row.
The overall assessment of quality consists of several different criteria, and
clients interviewed find the return of investments to be the most important
among these. In the 2023 study, eQ Asset Management was ranked number
one in no fewer than 7 categories of 9. SFR interviews the approximately 100
largest Finnish institutional investors annually.
As for traditional interest and equity investments, the returns of client
portfolios in 2023 were excellent. Of the funds that eQ manages itself, 69 per
cent gave a better return that its benchmark index, and during a three-year
period the corresponding figure was also 69. The returns of Private Equity funds
were slightly positive as well. The returns of the real estate funds were negative
eQ Group’s result fell in
the partially challenging
operating environment
Investors assessed the quality
of eQ Asset Management to be
the best in the market for
already the fifth time in a row.
6eQ in 2023 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
for the first time, on the other hand, due to an increase of the yields resulting
from the strong rise in interest rates.
Interest in alternative investment products has grown for several years both
in Finland and globally. Investors aim to raise anticipated returns and diversify
their investment portfolios. eQ Asset Management is a clear market leader as
a provider of alternative investment products in Finland.
In eQ’s Private Equity asset management, we raised a total of more than
300 million dollars in private equity and VC funds in 2023. We raise assets
in funds investing in Europe and the United States in alternating years, and
2023 was a year for the US. The first closing of the new eQ PE XV US private
equity fund was held at the end of January 2023 at USD 177 million. The final
closing of the fund was made in December at USD 283 million. The eQ PE XV
US Fund makes investments in private equity funds that invest in unlisted
small and mid-sized companies in Northern America. The eQ PE XV US Fund
is already the fifth fund that makes investments in private equity funds in
Northern America, and altogether we have raised investment commitments
of about one billion dollars to the US funds. In October we also made the first
closing in the eQ VC II Fund, which makes Venture Capital investments and is
the second fund in size at USD 20 million. At the turn of the year, the assets
managed by Private Equity funds and asset management programmes totalled
EUR 4.0 billion.
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 founded in 2014. In 2020 we
expanded real estate investing to housing by establishing the eQ Residential
Fund, and in 2022 we founded the second residential fund – eQ Residential II.
At the turn of the year, eQ’s real estate funds managed EUR 2.3 billion in assets
and the combined real estate assets of the funds totalled EUR 3.4 billion.
We invest 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 seventh 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. Every portfolio manager and
analyst must know how to analyse and take responsibility and sustainability
into account in their investment decisions. eQ’s Director for Responsible
Investment is responsible for the co-ordination and development.
We draw up an ESG report on all equity, fixed-income and real estate
investments twice a year and on Private Equity investments once a year.
We regularly report to PRI (UN’s Principles for Responsible Investment) on
sustainability in our investment processes, our concrete engagement activities
in the investees and our development initiatives regarding the responsible
investment approach. The ratings we have received are excellent.
Sustainability has for years been
one of the cornerstones of our
operations and part of all our
business operations.
Mikko Koskimies
CEO
7eQ in 2023 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
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
In 2023, the value of corporate acquisitions fell world-wide from the previous
year, but a small pickup could be observed at the end of the quarter. This
was affected by the rise in share prices late in the year and expectations of
a lowering of the interest rate level in 2024. Activity in Finnish real estate
transactions slowed down considerably in 2023, leading to a decline of more
than 60 per cent in overall transaction volume compared with the previous
year. The most significant factor contributing to a slowdown in activity is
the rapid rise in interest rate levels and weaker availability of financing.
In 2023, Advium acted as advisor in four M&A acquisitions completed:
a Fairness Opinion to Musti Group, advising Aspo Plc regarding a minority
investment by OP Suomi Infra, sale of shares in Caverion, and advising Otava
on a mandatory public offer. In real estate transactions, Advium also acted as
advisor for the global fund manager Schroders which sold an office building
in central Turku.
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 78 cents per share in 2023. Due to the strong
balance sheet and capital adequacy, the Board of Directors have decided to
propose to the Annual General Meeting that EUR 0.80 per share be paid as
a dividend. It is proposed that the dividend be paid in two instalments.
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.
High-quality customer service requires extremely professional, committed and
motivated personnel. The results of the biannual survey on well-being at work
were excellent in 2023 as well. The survey deals with employees’ commitment,
well-being at work, satisfaction with the work community and the work of
the supervisor. On a scale from 1 to 5, employees assessed job satisfaction and
well-being at work at 4.4, which is an excellent level. According to the survey,
employees are happy to recommend eQ Group as an employer. The eNPS value
that describes this was very high at 44 (on a scale from -100 to +100, where
0 to +20 is good, over 20 excellent and over 40 a top result). I want to thank
the entire personnel for their excellent achievements in 2023.
In addition to the clients and personnel, my warm thanks go to all our partners
for good co-operation.
Outlook for 2024
The asset management market in Finland has grown strongly, and eQ’s growth
has outpaced the market. We estimate that the long-term outlook for growth
in the asset management market and for eQ in Finland is still good.
For eQ’s real estate funds, 2023 was a difficult year due to an increase of
the yields resulting from a strong rise in the interest rate level. As yields rose,
values of properties clearly declined. Also, net subscriptions in funds were
negative. The limited availability of real estate financing also contributed
to a significant decrease in real estate transactions. With regard to the real
estate funds, we expect 2024 to be a challenging year, although the long-
term outlook for growth is good. Sales of eQ’s Private Equity products has
continued to be strong, and the desire of Finnish asset management clients to
increase Private Equity allocations in their portfolios will continue to support
the growth of eQ’s Private Equity products. We also anticipate a growth in
performance fees from 2025 onwards, due to the transfer of several Private
Equity products to a performance fee stage. eQ’s competitive position in
traditional asset management products and discretionary asset management
is good thanks to excellent returns on investments. We believe that traditional
asset management has great potential for growth in future years, considering
however its characteristic short-term variation according to market conditions.
Mikko Koskimies
CEO
8
eQ in 2023 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 2023, the assets managed by the Group, excluding assets covered by
private equity reporting services, were EUR 10,000 million and altogether
EUR 12,917 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 2023, investors regarded
eQ as the best asset manager in the market in their quality assessments already
the fifth 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.
10eQ in 2023 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 10.0 bn
and in total EUR 12.9 bn
Private equity
40%
Real estate
23%
Traditional
38%
31 DEC. 2023
EUR 10.0 BN
1.0
2.0
1.8
1.9
3.0
0.4
Key figures
Asset Management 1–12/2023 1–12/2022 Change
Net revenue, MEUR 66.9 71.8 -7%
Operating profit, MEUR 41.4 45.9 -10%
Cost/income ratio, % 37.9 36.0 5%
Personnel as full-time resources 80 76 5%
Fee and commission income,
Asset Management, MEUR 1–12/2023 1–12/2022 Change
Management fees
Traditional asset management 8.8 9.4 -6%
Real estate asset management 35.6 35.1 1%
Private equity asset management 17.6 16.9 4%
Management fees, total 62.0 61.5 1%
Performance fees
Traditional asset management 0.0 0.0 281%
Real estate asset management -0.7 4.3 -117%
Private equity asset management 6.1 6.5 -5%
Performance fees, total 5.4 10.8 -50%
Other fee and commission income 0.1 0.1 -18%
Fee and commission income, total 67.5 72.4 -7%
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 2023, eQ Asset Management’s net revenue decreased by 7 per cent and
operating profit by 10 per cent to EUR 41.4 million. Performance fees fell
by 50 per cent to EUR 5.4 million from previous year’s EUR 10.8 million.
Performance fees typically fluctuate strongly per quarter and financial period.
Management fees grew by 1 percent. As for sales, the year 2023 was good
especially in private equity asset management. In 2023, private equity assets
were raised to the eQ PE XV US Fund, which makes investments in Northern
America. Its size in final closing grew to USD 283 million. In October we also
made the first closing in the eQ VC II Fund, which makes Venture Capital
investments and is the second fund in size at USD 20 million.
11eQ in 2023 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
eQ’s real estate funds had a challenging year in 2023
eQ’s real estate funds had a difficult year in 2023, and the returns of
the real estate funds at an annual level were negative for the first time, due
to an increase of the yields resulting from the strong rise in the interest rate
level. The value of the eQ Commercial Properties Fund decreased by 12.7%
and the value of the eQ Community Properties Fund by 13.8% (with full
fees). The funds’ returns over the long term remain at a good level. The return
of the eQ Commercial Properties Fund since establishment is 5.7 per cent,
the corresponding figure for the eQ Community Properties Fund being
6.7 per cent p.a.
Real estate yields increased and as a result values of properties fell. Thus
the decline in values is not caused by properties in eQ’s real estate funds or
leasing nor were there any changes in these. The properties are located in
the Helsinki metropolitan region and other growth centres, and their occupancy
rates are high. Rents rose by around 5 per cent at almost all of our properties
in January 2024. The current initial rental yield level in the eQ Commercial
Properties Fund is 6.3 per cent and in the eQ Community Properties Fund
5.9 per cent.
The value of the real estate assets in eQ’s real estate funds is EUR 3.4 billion,
and the rental area is more than one million square meters.
eQ Asset Management again the most high-quality
asset manager in Finland
In the annual SFR survey, institutional investors assessed eQ Asset
Management to be the most high-quality asset manager in Finland, already
the fifth time in a row. The survey covers the approximately 100 largest
institutional investors in Finland and was conducted in the autumn of 2023.
eQ Asset Management was ranked number one in no fewer than 7 categories of
9.
1. Investment performance 3 years
2. Customer service
3. Clarity of investment process
4. Resources
5. Ability to take a market view
6. Performance 12 months
7. Reporting services
In the same survey eQ Asset Management was the second most used
institutional asset manager in Finland. 64 per cent of the interviewees say they
use eQ’s services.
0 10 20 30 40 50 60 70 80
SFR RESEARCH: MOST USED
INSTITUTIONAL ASSET MANAGERS
Source: SFR research 2023
72%
64%
62%
57%
40%
54%
36%
45%
28%
27%
24%
17%
16%
15%
15%
1
eQ
3
4
5
6
7
8
9
10
11
12
13
14
15
eQ
2
3
4
5
6
7
8
SFR RESEARCH: ASSET MANAGEMENT
QUALITY REVIEW (1–5)
Source: SFR research 2023
4.11
4.01
3.98
3.87
3.75
3.86
3.66
3.83
3.2 3.3 3.4 3.5 3.6 3.7 3.8 3.9 4.0 4.1 4.2
eQ has raised more than one billion dollars
in the North America PE funds
eQ PE XV US, which is eQ Asset Management’s fifth Private Equity fund
investing in North America, raised 283 million dollars in 2023. In total, more
than one billion dollars have been raised in eQ’s US PE funds since 2015.
Special Investment Fund eQ PE XV US makes investments in private equity
funds whose strategy is to make equity investments in unlisted, small and
medium-sized companies in the United States and Canada. The management
company of all five eQ PE US funds is eQ and the advisor is RCP Advisors.
The cooperation with our strategic partner RCP has continued for a long time
and is working excellent. An experienced local partner is an absolute necessity
for finding the most interesting funds and obtain an allocation from them. eQ’s
previous PE US funds have already made extremely strong value creation for
our clients.
eQ establishes Europe and USA Private Equity funds in alternating years.
eQ’s Private Equity funds are intended for professional investors only.
12eQ in 2023 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 more than 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 2023, Advium acted as advisor in four M&A acquisitions completed:
a Fairness Opinion to Musti Group relating to a public cash tender offer by
a consortium led by Sonae, advising Aspo Plc regarding a minority investment
by OP Suomi Infra, sale of shares in Caverion to a subsidiary of the Triton
investment firm, and advising Otava on a mandatory public offer concerning
Key figures
Corporate Finance 1–12/2023 1–12/2022 Change
Net revenue, MEUR 3.9 5.4 -27%
Operating profit, MEUR 0.7 1.7 -62%
Cost/income ratio, % 83.0 67.7 23%
Personnel as full-time resources 16 13 23%
shares in Alma Media Corporation. In real estate transactions, Advium acted
as advisor in one published transaction in 2023 when a fund managed by
Schroders Capital sold an office building in central Turku to Niam.
In 2023, Advium’s net revenue was EUR 3.9 million and operating profit
EUR 0.7 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 2023 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 2023, the operating profit of the Investments
segment was EUR -0.6 million. At the end of the period, the fair value of
the investments was EUR 16.6 million and the amount of the remaining
investment commitments was EUR 7.2 million. During the period under review,
eQ Plc made a USD 1.0 million investment commitment in the eQ PE XV US
private equity fund and a USD 1.0 million commitment in the eQ VC II venture
capital fund.
During the period, the investment objects returned capital for EUR 1.4 million
and distributed a profit of EUR 0.8 million. Capital calls totalled EUR 2.3
million. The net cash flow from investments during the period was EUR -0.1
million. The value changes of investments recognised through profit or loss
were EUR -1.2 million during the period.
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 1–12/2023 1–12/2022 Change
Operating profit, MEUR -0.6 0.7 187%
Fair value of investments, MEUR 16.6 16.8 -2%
Investment commitments, MEUR 7.2 7.5 -4%
Net cash flow of investments, MEUR -0.1 2.8 -105%
14eQ in 2023 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
Sustainability
develops in all
actions taken by eQ
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 2023 included an update of the EU Sustainable Finance
Disclosure Regulation and the Taxonomy Regulation, the success of eQ’s real
estate funds in the GRESB assessment, collection of PAI indicator data on eQ’s
areas of investment and study of data contents, and review of the concept of
greenwashing and its manifestation.
Sustainability within 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 late 2023 eQ Asset Management once again achieved excellent results in
PRI’s 2022 assessment. We succeeded much better than the median in all six
sections the company reported. The grade of eQ’s listed shares and real estate
investments has been among the best (five stars) for a long time. Corporate
loans climbed to the best category (five stars) for the first time. Private equity
investments achieved a grade of four stars. A new area in the assessment was
confidential building measures where the results were also good.
In this eQ Group’s Sustainability Report, we also briefly present the most
important events concerning ESG matters in 2023 in the various asset classes.
Detailed ESG information is available in our fund-specific ESG reports, and we
provide our portfolio clients with reports on the ESG situation of the entire
portfolio as a summary.
Emission reduction targets were the theme of engagement in eQ’s fixed
income and equity investments in 2023. eQ implemented a climate survey to
investments of funds which have not yet used MSCI’s data to set an emission
reduction target for their own business operations. The answers provided
important further information about the companies’ situation and future
plans regarding emission reduction targets. This survey and discussions with
businesses again demonstrated the importance of a portfolio manager’s own
ESG activity and engagement in investees.
Sustainability reporting of eQ’s real estate investments was reformed in 2023.
During the reporting reform, we carefully assessed ESG information collected
on properties and improved the data collection processes. The new ESG reports
of real estate funds are published in early 2024 and ESG reports of residential
funds later in the spring. Another important development project was related to
the taxonomy compliance assessment of properties, and we describe its results
in this report in greater detail.
The year 2023 was also very active from ESG activity in eQ’s private equity
investments, and a great deal of concrete development work was completed. In
spring 2023 eQ collected PAI indicators on eQ’s European private equity target
funds and reported them to investors for the first time. In November eQ PE won
international recognition at the Private Equity Exchange & Awards in Paris.
We are already looking ahead to 2024 with great interest. Our own systematic
and concrete work on sustainability will continue in all of our areas of investing.
We also closely monitor the launch of the Corporate Sustainability Reporting
Directive (CSRD), which takes effect at the beginning of 2024, at large listed
corporations. eQ will be covered by sustainability reporting in 2025 and publish
its first report in 2026.
Now is the time to thank our clients and partners. 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 2023 Sustainability Report.
Sanna Pietiläinen
Director, Responsible Investment
We now publish the Sustainability Report for the seventh time as part of
our Annual Report. For us, it is very important to report on the realisation of
sustainability in our business operation transparently. We have 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. Customer satisfaction at our largest
clients (SFR) and satisfaction of personnel (our own biannual survey) remained
at excellent levels in 2023 also.
16eQ in 2023 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 2023 Sustainability Report has
been approved by the eQ Plc’s Board of Directors, and it is published as part of
the 2023 Annual Report.
Sustainability Report 2023
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.
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.
eQ Group’s values
17eQ in 2023 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/fi/about-eq-group/sijoittajat/vastuullisuus).
Sustainability themes
eQ has identified 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, internal
instructions, policies (such as
the policy on conflicts of interest)
and Code of Conduct
• Transparent reporting on
costs also
• 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
• Green electricity in our
own premises
• Environmentally friendly
guidelines for employees
• Location of the premises, travel
ticket as employee benefit, and
bicycle storage
• Support for the Baltic Sea Action
Group (BSAG) since 2019, EUR
120,000 in 2023
PERSONNEL
• Wellbeing at work and monitoring
of job satisfaction
• Equality and diversity
• Early support programme,
programme on substance abuse
and gaming addiction
• Training on sustainability matters
for our employees
Training related to sustainability
We provide our employees with continuous training in sustainability matters.
Items on the training agenda in 2023 included a review of the EU Sustainable
Finance Disclosure Regulation and the Taxonomy Regulation from eQ’s
perspective, the success of the real estate funds in the GRESB assessment,
the concept of greenwashing and its manifestation, and a discussion of the eQ
Group’s substance abuse programme.
In its induction programme, eQ commits new employees to comply with and
implement eQ’s principles and procedures on responsible investing. In 2023
the company organised three 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 five 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 2023 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 processes, 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 chair of
the ESG working group) and Invest Europe and, correspondingly for real
estate investments, at Finnish Property Owners Rakli, at Green Building
Council Finland (FIGBC), and in the GRESB (Global Real Estate Sustainability
Benchmark) assessment. In fixed income and equity 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. The principles cover all asset classes, and their application
depends on the asset class and investment method. 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 corporate governance
principles of eQ Asset Management Ltd are available on eQ’s website.
Responsible and sustainable investment at eQ Asset Management
Sustainability risks and opportunities (ESG, sustainability factors associated
with the environment, society and governance) are part of the selection,
monitoring and reporting of investments in all 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 three 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.
The Director for Responsible Investment is responsible for coordination of
the implementation and development of responsible investing at eQ Asset
Management for all of eQ’s funds and their investment activities. Supervisors of
investment teams (fixed income, equities, real estate investments and private
equity investments) are responsible for the implementation and monitoring
of ESG in their own investment teams. Every portfolio manager and analyst
working on investment decisions at eQ systematically takes into account
sustainability factors pertaining to investments in their own work. In addition,
risk management & compliance and the CFO of eQ’s Group Administration
take part in the SFDR and ESG reporting of investment products, monitoring of
regulation amendments, and sustainability reporting at Group level.
ESG training of eQ’s investment teams in 2023
Implementation of the Sustainable Finance Disclosure Regulation, GRESB
results concerning real estate funds, and collection of PAI indicator data and
a review of data contents were on the agenda for training of eQ’s investment
teams in 2023. Also, eQ’s fixed income and equity investment team focused
on the quality and sources of MSCI’s ESG data, and planned and sent
an emissions survey to investments of actively managed funds. The private
equity investment team reformed the process on ESG DD and monitoring,
prepared a methodology for investment processes of Article 8 products, and
collected PAI indicators on Northern European target funds for the first time.
During the autumn the real estate investment team implemented a taxonomy
compliance assessment on properties and started developing a new ESG report.
Carbon accounting on properties was also specified during the development of
the ESG report.
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 2023 ESG was involved in almost all meetings with clients, and meetings
exclusively focused on ESG were also held with many clients.
In 2023 eQ organised for its clients an ESG webinar whose key topics were ESG
data obtained from eQ’s investment areas, changes in the data and concrete
measures taken at investments on the basis of the data.
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.
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. Furthermore, eQ Fund Management Company’s
Board regularly discusses reports according to the Disclosure Regulation
19eQ in 2023 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
concerning investment areas. 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 2023 PRI
(the UN Principles for Responsible Investment) assessment. The information
that was evaluated pertains to the year 2022.
eQ succeeded much better than the median in all the six sections the company
reported. The highest star classification (five stars) was achieved for real estate
investments, listed equities and corporate bonds. A new area in the assessment
was discussion of information reported to PRI where the results were also good.
The following chapters briefly present the most important events concerning
ESG matters in 2023 in the various asset classes. The ESG reports per asset
class contain detailed information about our responsible investment operations
and the ESG matters that we monitor in our investees.
Fixed income and equity investments
Emissions and emission reduction targets as themes of engagement in 2023
eQ’s portfolio managers monitor target companies for, e.g., the companies’
emissions, the scope of emissions (Scope 1, Scope 2 and Scope 3), their trends
and reporting, and the companies’ commitment to the emission reduction
target. The Science Based Target (SBT) or the Net Zero target encourages
businesses to take concrete action to reduce emissions.
Active engagement – emissions survey of eQ’s actively managed funds
In the spring of 2023 eQ implemented a climate survey to investments
of fixed income and equity funds, which have not yet used MSCI’s data
to set an emission reduction target for their own business operations
(the Science Based Target SBT or the Net Zero target). The survey was sent
to 215 companies of which 80 submitted a response. The answers provided
important further information about the companies’ situation and future
plans regarding emissions.
eQ’s sustainable investment work can be seen as an excellent result in PRI reporting
Reported areas 2023 Score (max. 100%) Star grade* Median score % Median grade
Policy Governance and Strategy 80% 59%
Direct – Listed equity – Active fundamental 95% 71%
Direct – Fixed income – Corporate 96% 68%
Direct – Real estate
94% 62%
Indirect – Private equity 88% 60%
Confidential building measures** 100% 80%
*PRI’s grading system is based on a classification of stars (1 star means “poor” -> 5 stars means “best”). The 2023 star classification range:
% (1 star), > 25 ≤ 40% (2 stars), > 40 ≤ 65% (3 stars), > 65 ≤ 90% (4 stars) and > 90 ≤ 100% (5 stars).
**A new section (‘Confidence building measures’). Includes a discussion of information reported to PRI (such as processes and data) at the company.
100
90
80
70
60
50
40
30
20
10
0
5%
3%
9%
17%
18%
28%
11%
55%
46%
53%
2%
29%
8%
14%
40%
7%
15%
17%
11%
26%
10%
20%
2%
6%
68%
33%
1%
5%
61%
53%
26%
17%
40%
24%
61%
55%
20%
50% 50%
71%
7% 3%
52%
2% 4% 4%
35%
10% 8%
SBTi target Net Zero target Responses to the survey No response to the survey
eQ Euro
Floating
Rate Fund
eQ Short-Term
Euro Fund
eQ Euro
Investment
Grade Fund
eQ High
Yield Fund
eQ EM
Corporate
Bond Fund
eQ Finland
Fund
eQ Blue
Planet Fund
eQ Nordic
Small Cap
Fund
eQ Europe
Dividend
Fund
eQ Emerging
Markets
Small Cap
Fund
eQ Europe
Small Cap
Fund
eQ Emerging
Dividend
Fund
eQ Frontier
Markets
Fund
Total investments of the fund pcs
Investments in funds with either a SBTi or Net Zero target
21%
2%
69%
20eQ in 2023 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
Key observations of the emissions survey:
• More than half of the companies in eQ’s fixed income and equity funds in
emerging markets and in corporate bond funds in emerging markets already
have a Science Based Target (SBT) or a Net Zero target.
• Large corporations have an SBT target and smaller enterprises a Net
Zero target.
• Some companies stated that they need time to find out the various emission
reduction target options. Few companies said that emissions are not
an essential part of their business that requires reporting.
• The answers indicate that many companies are gradually expanding
emissions reporting to the Scope 3 level, which will clarify the image
investors obtain of the total emissions of a company’s business operation.
• The survey also provided information about the companies’ other emission
targets that were not revealed by the SBT and Net Zero screening.
• It was noteworthy that in the eQ Emerging Markets Small Cap Fund,
the majority of respondents declared that the company has a specified
emission reduction target, and some respondents are even considering
an SBT emission reduction target. This suggests that smaller companies are
excluded from MSCI’s analysis, especially in the emerging markets.
The emissions survey taken in the spring demonstrates the importance of
a portfolio manager’s own ESC activity and engagement in investees. Besides
such engagement, eQ has monitored the trends in setting SBT emission
reduction targets for a few years now, and also through the joint engagement
initiative organised by the CDP. At the end of 2023, a total of 4 408 enterprises
(ca. 4 000 in 2022) had either undertaken to set a target or already had an
accepted target. These companies account for more than a third of the value
of the global equity markets. The number of accepted targets doubled in 2023
(from 2 709 to 4 204), which is a significant leap in growth. When eQ joined
the campaign in 2019, the number of businesses was 495. However, much work
remains to be done. Although the majority of targets by companies have been
set below the warming limit of 1,5 degrees, CDP’s report published in 2022
says that only 24% of the reporting companies (around 5% of total emissions)
are about to achieve the target set. Today almost all businesses have also set
their target for the Scope 3 emission level. The Scope 3 category also includes
emissions generated by end use of products as well as purchased goods and
services, i.e., all indirect emissions.
Other ESG activities
eQ started reporting PAI indicators on fixed income and equity investments
back in the summer of 2022, as one of the first asset managers. Reported
PAI indicators are available in fund-specific ESG reports on eQ’s website
(https://www.eq.fi/fi/funds/fund-values).
The year 2023 was an interesting and educational time to read up on
indicators reported on new investments. However, one must point out that
the information available and its quality still involve constraints. Details
relating to sustainability have not been standardized yet, and target companies
do not report on information extensively, so some of the PAI indicator data
available for use may be based on estimates. eQ finds that interpretation of
a value of an individual PAI indicator is not yet sensible. As the data improves,
PAI indicators will deepen the information about corporate sustainability.
The planned theme for new engagement in spring 2024 is eQ’s survey designed
to determine how many investees have adopted processes to monitor
the implementation of human rights. In addition, portfolio managers will
monitor the launch of sustainability reporting (CSDR) at larger investees.
Real estate investments
Reformed ESG reports offer more information than before
about the sustainability of real estate investments
eQ’s real estate and residential 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.
The reform of eQ’s sustainability reporting on real estate investments was a key
development project in 2023. Property-specific ESG data (energy efficiency
MWh, carbon footprint tCO
2
, water m
3
and waste t) has been systematically
collected since 2018, and the first ESG report on real estate investments was
published in 2019. During the recent reporting reform, eQ carefully assessed the
ESG data required in analysis and property development, its quality and scope,
the data collection process and needs for development in general with regard
to data acquisition and reporting. The reporting reform also included a shift to
fund-specific ESG reports.
In the future, each fund’s ESG report will comprise the fund’s basic information
as well as ESG ratios and their trends. The report also shows the trend in
the fund’s ESG scores and carbon footprint, key property development projects
and the results of a tenant satisfaction survey. Waste recycling rate was
introduced as a new ratio in reporting. Since the summer of 2023, real estate
funds have monitored the waste recycling rate and at the same time taken
concrete measures (such as facility arrangements to facilitate sorting, site-
specific recycling and sorting guides for tenants) to improve the recycling rate.
The recycling rates at the end of 2023 were: eQ Commercial Properties 57% and
eQ Community Properties 37%. In Finland the recycling rate is approximately
40%.
The significance of ESG data has increased through regulation also. The EU’s
SFDR regulation and the Energy Efficiency Directive that took effect in
October 2023 for their part increase the need for data collection and reporting
requirements, and eQ wants to respond to these with the reformed ESG reports.
ESG reports of real estate funds are published in early 2024 and ESG reports of
residential funds later in the spring.
Another important development project in 2023 was related to the taxonomy
compliance assessment of properties. eQ’s Article 9 classified real estate
and residential funds monitor and report the share of properties meeting
the taxonomy compliance criteria in the funds.
21
eQ in 2023 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
The taxonomy compliance assessment first determines whether a property is
nationally in the top 15 per cent in energy efficiency (E rating). The assessment
specifies for a property an imputed energy efficiency comparison rating (kWh/
m
2
/year), i.e. an E rating. The lower the E rating, the more energy-efficient the
building. After this, at least a climate risk review is carried out on properties
which takes into account the environmental objective for climate change
adaptation specified in the EU’s Taxonomy Regulation and its environmental
criteria. The climate risk review evaluates which physical environmental
risks (chronic and acute ones) can affect properties during their anticipated
useful life. These include variation in temperatures, changes in wind and
rain conditions, rise of the sea level, and floods. It also assessed adaptation
solutions for reducing identified physical climate risks that are materially
associated with properties. After the assessment, maintenance-related
measures are incorporated into the servicing manual and those of a renovation
nature into the long-term maintenance plan. Based on the age of the site, it
is also necessary to assess other criteria in accordance with the taxonomy
guidelines. In late 2023 the eQ Community Properties Fund included 12 per
cent taxonomy-compliant properties and the eQ Commercial Properties Fund
7 per cent taxonomy-compliant properties. Taxonomy compliance assessments
will be made on sites in the residential funds also.
One individual new theme worth mentioning is electrical energy storage
systems. As renewable energy increases, the need to store energy and balance
the electrical network will grow. In recent years Finland has deployed the first
electrical energy storage systems (EESS) and building-specific batteries. Energy
is stored into a set of batteries when its availability is good. The capacity of
an EESS must be at least 1 MW for the investment to be reasonable in an
overall economic terms. The best profitability comes from contributing to
the balancing of Fingrid’s reserve market, or the electrical network. When
the frequency of the main grid deteriorates, power is fed to it from the
building’s EESS. Buildings can also store electricity for their own use. The first
project related to an EESS has been started on one site of the eQ Commercial
Properties Fund.
Excellent ratings in ESG assessments
For the second time, eQ’s real estate investments achieved the highest rating
(five stars) in the 2023 PRI assessment (a score of 94% / 100%).
eQ’s real estate funds have participated in the Global Real Estate Sustainability
Benchmark (GRESB) assessment in the real estate sector for five years in a row.
In the 2023 assessment the eQ Commercial Properties Fund gained four stars
out of five for the first time. The rating of the eQ Community Properties was
slightly below this, at three stars. The results of both funds were better than
the group of respondents as a whole and the averages in eQ’s comparison
group. The score grew the most in risk management, the environmental system,
and coverage of data on energy, water and waste. eQ utilizes the results of
the assessment in identifying new development measures.
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 target.
Responsibility and sustainable energy solutions are systematically implemented
in eQ’s residential funds as well. All investees are certified with “Very Good” as
the targeted level for BREEAM In Use. Certifications are in progress, and two
sites have already received a certificate. Two sites that use geothermal energy
are finished and two are under construction. One site is also being built with
heating that utilises an air/water heat pump. All other sites use green district
heating. All sites have solar power plants. The sites use green electricity in
addition to solar power. All the buildings are new. Those in the eQ Residential
Fund have an energy category A or B, and all sites in the eQ Residential II Fund
boast the best energy category A as a rule.
The further improvement of results of sustainability assessments demonstrates
that eQ is on the right path in developing sustainability. eQ’s constant target
is to improve energy efficiency and reduce environmental impacts in properties
owned by eQ’s funds, naturally in cooperation with the tenants.
GRESB respondents
avg. 75, Comparison
group 77
GRESB respondents
avg. 75, Comparison
group 81
eQ Commercial Properties
GRESB -assessment
eQ Community Properties
GRESB -assessment
eQ Commercial Properties
BREEAM-certificate status
eQ Community Properties
BREEAM-certificate status
% %
22
eQ in 2023 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
eQ won the Silver Award in the ’Best ESG Private Equity Initiative (LP)’ category on
9 November 2023
Private equity, private credit and venture capital investments
Recognition for concrete ESG work from both fund managers and the industry
In November 2023 eQ was honoured to receive recognition for its ESG work
– the Silver Award for ’Best ESG Private Equity Initiative (LP) at the Private
Equity Exchange & Awards in Paris. Annual competitors include a large number
of renowned European actors in the private equity sector, and the winners are
selected by a jury consisting of experienced private equity investors.
eQ has done systematic ESG work for a long time, but plenty of active and
concrete development work has been carried out in the past few years in
particular. eQ has developed its ESG process in-house and cooperates with
its fund managers. There are no ready-made databases on unlisted companies.
eQ also distributes information to its own field of managers and contributes to
the development of ESG in the private equity sector.
eQ has monitored the development of sustainability at private equity funds it
invests in since 2017 by means of an annual ESG survey sent to target funds,
for instance. Results analysed in spring 2023 indicated that the sustainability
ratings of all of eQ’s Europe and US funds had improved. SFDR regulation
has accelerated the development of ESG practices in Europe, which is shown
especially in the results on the year 2022. The results also demonstrate that
ESG has changed in a direction that is more measurable than before. In the
EU region managers measure sustainability with key ratios and report an
increasing amount of PAI indicators. ESG Data Convergence, an alternative
set of indicators, has rapidly gained popularity in the private equity sector
and has been deployed by managers in North America, as well. Today, half
of all managers calculate greenhouse gas emissions on every investment.
Emissions measurement has become more prevalent at both management
company and portfolio levels in Europe, regardless of the size of the manager.
Once the measurement process has been created and the first results have
come in, emission reduction targets have become the next goal. Managers
in North America continue to focus on the Diversity, Equity and Inclusion
(DE&I) approach, but in other respects ESG development there lags behind
European peers. At present, the United States has fairly little ESG-related
regulation, and the Securities and Exchange Commission (SEC) is working on
rules expected to tighten requirements on marketing and disclosure associated
with ESG. For now, it is easy for a company to stand out in the United States
through excellent development work on ESG because there are still so few
standards. In 2021 eQ launched the Special Investment Fund eQ VC and in
2023 the Special Investment Fund eQ VC II. Development of ESG practices
has been started at these funds also.
In spring 2023 eQ collected PAI indicators on eQ’s European private equity
target funds and reported them to investors for the first time. Most of
the target funds’ managers collected and calculated PAI indicators for the first
time. The formulae still manifested different practices and interpretations.
Coverage remained low but was still better than anticipated.
In June 2023 eQ organised for the second time the eQ GP event on ESG
that was attended by 40 European small and medium-size private equity
fund managers. This year’s topics included calculating emission and carbon
footprints, measuring these at a software company, and integrating sustainable
development in the business models of target companies. Training and
engagement with our USA PE partner RCP continued in 2023.
In the latter half of the year we worked on methodology for investment
processes at Article 8 funds and trained the private equity investment team on
this, and incorporated sustainability perspectives in eQ’s PE DDQ document.
According to the SFDR classification, the eQ PE XVI North and eQ PE SF V
funds of 2024 are classified as Article 8 funds.
All in all, 2023 was an active year from the perspective of ESG activities and
a great deal of concrete development work was completed. The international
recognition and positive feedback from fund managers received in November
encourages us to continue our active ESG work in the private equity
investment field.
23
eQ in 2023 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
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
24
eQ in 2023 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
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 are leased. Heat and water
consumption as well as air conditioning (district cooling) is included in the rent,
and consumption data regarding them is not available from the lessor.
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
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.
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
Location of the premises,
employee travel ticket
and bicycle storage
FOOD/CATERING
Salads, organic packaging
as well as favouring other
local food products
ENERGY AND WATER
Reducing electricity consumption
and using renewable energy
sources (hydropower)
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
25
eQ in 2023 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
Own energy consumption of the organisation
2023 2022 2021 2020 2019
Electricity consumption, kWh* 131,630 103,960 106,369 89,893 100,396
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 61 55 64 54 60
Electricity consumption per person, kWh 1,303 1,106 1,108 956 1,128
Other environmental responsibilities**
2023 2022 2021 2020 2019
Other indirect greenhouse gas emissions
Travelling by air, CO
2
emissions, kg 43,235 51,879 4,669 3,961 42,455
Travelling by air, CO
2
emissions, kg per person 428 552 49 42 477
Use of material
Paper consumption, total, kg 1,124 631 715 1,710 1,985
Paper consumption, kg per person 11 7 7 18 22
*In 2023 electricity consumption increased due to an extension of eQ’s premises.
**The table shows an estimate of carbon dioxide emissions of air travel and paper consumption. Paper consumption is reported based on paper purchased.
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 2023 eQ also continued the implementation of measures
on the sorting and recycling of office waste introduced in 2019. These
measures included:
• training on eQ Group’s environmentally friendly operating guidelines,
• employees have no individual waste bins for mixed waste and
• eQ employees do not consume mineral water in plastic bottles.
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. The company switched to double-
sided printing three years ago. eQ has not been engaged in legal proceedings
or claims concerning environmental accidents.
26
eQ in 2023 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.
Employees’ job satisfaction and commitment and the need to develop the
workplace are monitored regularly with a semi-annual survey. The results of the
2023 study on well-being at work were excellent again. The results have been
excellent when reviewed by the five-year trend also.
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
4,4 (2022: 4,3). According to the survey, employees are happy to recommend
eQ Group as an employer. The eNPS value that describes this was very high at
41 (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 2023 survey of well-being
at work was also high, averaging at 95% (2022: 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. In autumn 2023, consideration of compliance and
sustainability matters in employees’ job descriptions was incorporated on eQ’s
development discussion form as new sections. The intention is that employees
and their supervisors together evaluate how the employee has succeeded at
taking account of compliance and sustainability matters in their work and how
they could improve at these.
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 101 employees at the end of
2023 (2022: 94). When calculating full-time resources, part-time employees
and those on parental and study leave have been included. Altogether 107
persons had an employment relationship with eQ (2022: 98), and 6 of them
worked part-time (2022: 4). Part-time employees are used in seasonal tasks
or projects.
27
eQ in 2023 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
Personel
2023 2022 2021 2020 2019
Personnel as full-time resources 101 94 96 94 89
Permanent employment relationship 101 94 91 94 88
Temporary employment relationship 6 4 11 9 4
Employment relationship, total 107 98 102 103 92
Share of temporary employees, % 5,6 4,1 10,8 8,7% 4,3%
Full-time, total 101 94 93 95 89
Part-time, total 6 4 9 8 3
Age and gender distribution, no.
18–30 years total, (F/M) 23 (6/17) 22 (8/14) 25 (10/15) 23 (9/14) 15 (4/11)
31–40 years total, (F/M) 24 (10/14) 22 (8/14) 28 (13/15) 31 (13/18) 34 (14/20)
41–50 years total, (F/M) 28 (12/16) 26 (10/16) 22 (8/14) 20 (7/13) 17 (7/10)
51–60 years total, (F/M) 30 (12/18) 26 (9/17) 26 (8/18) 27 (11/16) 25 (14/11)
61– years total, (F/M) 2 (2/0) 2 (2/0) 1 (1/0) 2 (1/1) 1 (-/1)
Total 107 (42/65) 98 (37/61) 102 (40/62) 103 (41/62) 92 (39/53)
Average age of employees, years 42,5 42,4 41,2 41,3 41,3
Employment relationships
based on gender, no. and %
Female 42 (39%) 37 (38%) 40 (39%) 41 (40%) 39 (36%)
Male 65 (61%) 61 (62%) 62 (61%) 62 (60%) 53 (64%)
Employee turnover (%) 3,0% 11,7% 8,7% 4,2% 9,3%
Sick leaves during the year, day per person 4,7 4,6 1,7 2,7 2,8
Work accidents* 0 4 0 0 1
Work well-being
Job satisfaction and well-being at work** 4,4 4,3 4,3 4,3 4,4
eNPS value*** 41 48 44 49 59
*A work 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
Of the personnel, 39% were women (2020: 38%) and 61% men (2022: 62%). The
average age of the personnel was 42.5 years (2022: 42,4), and the employee
turnover in 2023 was 3,0% (2022: 11,7%). In 2023, the average sick leave of
the personnel was 4,7 days per person (2022: 4,6) and there were no work
accidents in 2023 (2022: 4).
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 and workload are on the same level.
The job title is not decisive.
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 and eQ Group’s substance abuse programme that was prepared
in 2023. All eQ employees were provided internal training on the substance
abuse programme.
28eQ in 2023 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 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.
During the 2023 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 2023 financial period from the Annual General Meeting: Janne
Larma (Chair) Georg Ehrnrooth (Deputy Chair), Päivi Arminen, Nicolas Berner,
Timo Kokkila 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 2023
financial period.
Diversity of the Board of Directors on 31 December 2023:
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%
29eQ in 2023 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). 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/fi/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
legislation and the company’s disclosure policy. The company’s disclosure policy
is available on eQ’s website (https://www.eq.fi/fi/about-eq-group).
30eQ in 2023 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
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.
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.
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/fi/about-eq-group/hallinnointi/palkitseminen).
eQ Plc publishes an annual Remuneration Report for Governing Bodies at
the same time as the Annual Report. The 2023 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 5 February 2024.
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
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/fi/about-eq-group/hallinnointi/palkitseminen).
• 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/fi/about-eq-group/hallinnointi/code-of-conduct).
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/fi/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
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. The themes
of eQ Group’s Code of Conduct are:
31eQ in 2023 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
Taxes, 1,000 EUR 2023 2022 2021 2020 2019
Taxes paid
Income tax, Finland 8,308 9,437 9,560 6,209 5,306
Effective tax rate 20.9% 20.6% 20.1% 20.2% 20.2%
Charges of tax-like nature payable by the employer (employee pension, social security and
unemployment charges) 4,435 4,420 3,317 2,978 2,960
Taxes remitted
Withdrawal from salaries, Finland 8,770 9,018 7,102 6,483 5,901
Charges of tax-like nature payable by the employee
(employee pension, unemployment charges) 2,032 2,163 1,529 1,405 1,308
Value-added tax paid, Finland 453 536 658 393 1,503
Tax withdrawn from dividend and equity repayment, Finland 2,588 1,762 1,246 1,217 1,061
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
2023 totalled EUR 4,4 million (2022: EUR 4,4 million).The withholdings that eQ
made from the salaries amounted to EUR 8,8 million (2022: EUR 9,0 million)
and the other tax-like charges totalled EUR 2,0 million (2022: EUR 2,2 million).
The value-added tax remitted by eQ Group in 2023 totalled EUR 0,5 million
(2022: EUR 0,5 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 2023 totalled EUR 2,6 million (2022: EUR 1,8 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 2023, the income tax for eQ’s taxable profit
paid in Finland totalled EUR 8,3 million (2022: EUR 9,4 million). The Group’s
effective tax rate was 20,9% (2022: 20,6%).
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 2023.
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.
32
eQ in 2023 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
Operating environment
Inflation was the key theme in the investment markets in 2023. At the same time,
talk continued on how much central banks should further raise interest rates to curb
inflation. Both the Federal Reserve (Fed) in the US and the European Central Bank
(ECB) continued to raise their key interest rates during the year. In 2023 the Fed raised
its key interest rate from 4.5% to 5.5% and the ECB from 2.5% to 4.0%.
Economic growth in Europe and especially in the US withstood the continued rise
in interest rates surprisingly well. In early 2023 we also saw a small-scale banking
crisis that started in the US but was resolved quickly. In China inflation has not been
a problem but there concerns have mostly involved economic growth, as both private
consumption and exports have been weaker than expected.
Towards the end of the year countries in the West began to see a slowdown in
both inflation and growth, which gave the markets faith that interest rates would
be lowered during 2024. In the final quarter of 2023 market expectations for both
the speed and volume of interest rate reductions were intensified, well indicated as
positive returns in both the fixed income and equity markets. Still, there were large
differences in returns between different countries and sectors.
Throughout 2023, the best equity market was the US where the return of the S&P
500 Index, measured in dollars, was as high as 25.7%. Returns in the US were raised
particularly by the seven large technology companies which have been dubbed
the Magnificent Seven. The US gave a 21.4% return in euros, due to the weaker dollar.
Report by the Board of Directors
1 January to 31 December 2023
Measured by the MSCI Index, Japanese shares returned 16.2%, European stocks 15.8%
and shares in emerging countries 6.1%. Behind all of these came the Finnish equity
market where the index return was 0.6% in the negative. After large negative returns
in 2022, interest rates provided good returns in 2023. The European High Yield Index
returned 12.1%, IG corporate loans 8.0%, euro zone government bonds 6.7%, and
euro-denominated corporate loans in emerging countries 5.4%.
Major events during the financial period
eQ Plc’s Annual General Meeting was held on 27 March 2023. Nicolas Berner,
Georg Ehrnrooth, Timo Kokkila, Janne Larma and Tomas von Rettig were re-elected
to the Board. Päivi Arminen was elected as new member. 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 195,000
shares on 16 May 2023, by 111,000 shares on 29 August 2023 and by 10,000 shares
on 14 November 2023. After the changes, the number of eQ shares is 40,745,698.
Group net revenue and result development
During the financial period, the Group’s net revenue totalled EUR 70.9 million
(EUR 77.8 million from 1 Jan. to 31 Dec. 2022). The Group’s net fee and commission
income was EUR 70.8 million (EUR 77.1 million). The Group’s net investment income
from own investment operations was EUR -01. million (EUR 0.7 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 31.1 million (EUR 32.0 million).
Personnel expenses were EUR 25.4 million (EUR 26.7 million), other administrative
expenses EUR 2.5 million (EUR 2.5 million) and the other operating expenses were
EUR 1.9 million (EUR 1.7 million). Depreciation was EUR 1.3 million (EUR 1.2 million).
The salary expenses fell from the year before due to result-related remuneration.
The Group’s operating profit was EUR 39.7 million (EUR 45.7 million) and the profit for
the period was EUR 31.5 million (EUR 36.3 million).
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.
Responsibility and sustainability are a key part of eQ Asset Management’s investment
activities and processes. eQ Asset Management once again achieved excellent
results in the 2023 PRI (the UN Principles for Responsible Investment) assessment.
eQ succeeded much better than the median in all six sections the company reported
34eQ in 2023 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
and obtained the highest star rating, five stars, for real estate investments, listed
shares and corporate loans. eQ provides its clients with comprehensive reports on
the implementation of sustainability.
Finnish institutional clients stated for the fifth year in a row in the 2023 SFR survey
that eQ Asset Management is the most high-quality asset manager in Finland. Clients
hold eQ in high esteem particularly with regard to investment returns, customer
service, resources and reporting. eQ received the best assessment in no fewer than
seven of the nine criteria in total. We were the second most-used asset manager in
Finland. The survey is conducted every year and its participants are the 100 largest
institutional investors.
Mutual funds and asset management
At the end of the period, eQ had 23 traditional mutual funds registered in Finland.
eQ’s fixed income funds posted good returns in 2023. Credit risk margins contracted
and interest rates fell toward the end of the year, especially after the intensive rise
in interest rate levels in 2022. The best returns came from the eQ High Yield and
eQ Emerging Markets Corporate Bond Local Currency funds. As compared with the
benchmark indices, the best returns were yielded by the eQ Floating Rate and eQ
Investment Grade funds. The returns of our equity funds in 2023 were also excellent.
The best returns came from the eQ Europe Dividend, Emerging Market Small Cap and
eQ Europe Small Cap funds. The best returns as compared with benchmark indices
came from the eQ Emerging Dividend, eQ Europe Small Cap and eQ Finland funds.
Of the funds that eQ manages itself, 69 per cent gave a better return than its
benchmark index, and the figure for the last three years was also 69. The average
Morningstar rating of funds managed by eQ was 3.3 stars at the end of 2023.
The returns of the discretionary asset management portfolios that eQ manages
varied between approximately +8.9 and +16.5 per cent during the period, based
on the allocation of the investment portfolio. The return of portfolios that only
invest in Finnish shares was +2.5%. The ESG ratings of the eQ funds are better than
the average, and eQ’s listed shares and corporate loans obtained the highest rating
in the latest PRI assessment.
Private equity
The first closing of the new eQ PE XV US private equity fund was held at the end of
January 2023 at USD 177 million. The final closing of the fund was made in December
at USD 283 million. The eQ PE XV US Fund makes investments in private equity funds
that invest in unlisted small and mid-sized companies in Northern America. The eQ PE
XV US Fund is already the fifth fund that makes investments in private equity funds in
Northern America, and altogether we have raised investment commitments of about
one billion dollars to these funds. In October we also made the first closing in the eQ
VC II Fund, which makes Venture Capital investments and is the second fund in size at
USD 20 million.
eQ’s scored excellent PRI results for the private equity section. In November eQ was
honoured to receive recognition for its ESG work – the Silver Award for ’Best ESG
Private Equity Initiative (LP)’ at the Private Equity Exchange & Awards in Paris.
At the end of the period, the assets in private equity funds managed by eQ totalled
EUR 2,973 million (EUR 2,726 million) and the assets managed under private equity
asset management programmes were EUR 1,009 million (EUR 1,009 million).
At the beginning of 2022, eQ began to accrue the catch up share of private equity
funds’ performance fee in the income statement. The catch up share accrued
cumulatively by 31 December 2023 was EUR 11.8 million, and the accrual of
the 2023 financial period was EUR 6.0 million. The estimated total amount of future
performance fees grew to EUR 142 million at the end of 2023 (EUR 130 million on
31 Dec. 2022). More information about the estimated returns and performance fees
is available in the annual report.
Real estate investments
The net subscriptions in the eQ Commercial Properties Fund were EUR -7 million
during the period under review. In accordance with the fund rules, the eQ Commercial
Properties Fund postponed the payment date of 31 December 2023 redemptions
for approximately EUR 50 million. At the end of the period, the size of the fund was
EUR 651 million, and its real estate property around EUR 1.2 billion. The return of
the fund in 2023 was -12.7 per cent and since establishment 5.7 per cent p.a. The fund
has approximately 2,150 unit holders.
The net subscriptions in the eQ Community Properties Fund in 2023 were EUR -119
million. At the end of the period, the size of the fund was EUR 1,198 million and its
real estate property was approximately EUR 1.8 billion. The return of the fund in 2023
period was -13.8 per cent and since establishment 6.7 per cent p.a. The fund has
approximately 4,500 unit holders.
The returns of the real estate funds were negative for the first time, due to an increase
of the yields resulting from the strong rise in the interest rate level.
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 fund invests more than
EUR 300 million in residential properties. 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, which will be completed by the end of 2024. At the beginning of 2022, we
established a new similar eQ Residential II Fund. Upon final closing its size was
EUR 53 million. 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.
In 2023, eQ’s real estate funds participated in the GRESB sustainability assessment
already for the fifth time. The results improved further in 2023 and exceed both
the average results of companies participating in the GRESB assessment and the
results of the funds’ peers. The real estate funds also obtained the highest rating in
the 2023 PRI assessment.
Overall, eQ’s real estate funds had real estate property worth approximately
EUR 3.4 billion at the end of the period under review, and eQ has become a major
Finnish real estate investor.
Assets under management and clients
The assets managed by eQ Asset Management totalled EUR 12,917 million at the end
of the period. Growth during the period was EUR 353 million (EUR 12,564 million on 31
Dec. 2022). At the end of the period, the assets managed by mutual funds registered
in Finland totalled EUR 3,843 million (EUR 4,101 million), and the assets decreased by
EUR 258 million during the period under review. The assets managed by the real estate
35eQ in 2023 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
funds totalled EUR 2,251 million (EUR 2,697 million). The assets managed by the
private equity funds and asset management programmes totalled EUR 3,982 million
(EUR 3,734 million).
Assets under management, MEUR 12/2023 12/2022 Change
eQ mutual funds 3,843 4,101 -6%
of which eQ equity, fixed income and
balanced funds 1,993 1,687 18%
of which eQ real estate funds 1,850 2,415 -23%
Closed-end real estate funds 401 282 42%
Funds of partners and other asset management 1,773 1,561 14%
eQ private equity funds 2,973 2,726 9%
Private equity asset management programmes 1,009 1,009 0%
Total excl. reporting services 10,000 9,678 3%
Private equity reporting services 2,917 2,885 1%
Total 12,917 12,564 3%
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.
Result of the Asset Management segment
During the period under review, the net revenue of the Asset Management segment
decreased by 7% and the operating profit by 10% to EUR 41.4 million (EUR 45.9 million
from 1 Jan. to 31 Dec. 2022). Performance fees fell by 50 per cent to EUR 5.4 million
from previous year’s EUR 10.8 million. Performance fees typically fluctuate strongly
per quarter and financial period. Performance fees include EUR 6.0 million of the
accrued catch up share of private equity funds’ performance fee. For the review
period, performance fees in real estate asset management include a EUR -0.7 million
adjustment from a value calculation error, relating to the real estate fund’s 2022
performance fee.
The cost/income ratio was 37.9% (36.0 %). Calculated as full-time resources,
the Asset Management segment had 80 employees at the end of the period
under review.
Asset Management 1–12/2023 1–12/2022 Changes
Net revenue, MEUR 66.9 71.8 -7%
Operating profit, MEUR 41.4 45.9 -10%
Cost/income ratio, % 37.9 36.0 5%
Number of personnel as full-time
resources, average 80 76 5%
Fee and commission income,
Asset Management, MEUR 1–12/2023 1–12/2022 Change
Management fees
Traditional asset management 8.8 9.4 -6%
Real estate asset management 35.6 35.1 1%
Private equity asset management 17.6 16.9 4%
Management fees, total 62.0 61.5 1%
Performance fees
Traditional asset management 0.0 0.0 281%
Real estate asset management -0.7 4.3 -117%
Private equity asset management 6.1 6.5 -5%
Performance fees, total 5.4 10.8 -50%
Other fee and commission income 0.1 0.1 -18%
Fee and commission income, total 67.5 72.4 -7%
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 2023, the value of corporate acquisitions fell world-wide from the previous year, but
a small pickup could be observed at the end of the quarter. This was affected by the
rise in share prices late in the year and expectations of a lowering of the interest rate
level in 2024.
In 2023, Advium acted as advisor in four M&A acquisitions completed: a Fairness
Opinion to Musti Group relating to a public cash tender offer by a consortium led by
Sonae, advising Aspo Plc regarding a minority investment by OP Suomi Infra, sale of
shares in Caverion to a subsidiary of the Triton investment firm, and advising Otava on
a mandatory public offer concerning shares in Alma Media Corporation.
Activity in Finnish real estate transactions slowed down considerably in 2023, leading
to a decline of more than 60 per cent in overall transaction volume compared with
the previous year. The most significant factor contributing to a slowdown in activity is
the rapid rise in interest rate levels and weaker availability of financing. Advium acted
as advisor in one published transaction when a fund managed by Schroders Capital
sold an office building in central Turku to Niam.
Result of the Corporate Finance segment
During the financial period, Advium’s net revenue totalled EUR 3.9 million
(EUR 5.4 million from 1 Jan. to 31 Dec. 2022). Operating profit was EUR 0.7 million
(EUR 1.7 million). The segment had 16 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 1–12/2023 1–12/2022 Change
Net revenue, MEUR 3.9 5.4 -27%
Operating profit, MEUR 0.7 1.7 -62%
Cost/income ratio, % 83.0 67.7 23%
Personnel as full-time resources 16 13 23%
36eQ in 2023 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 -0.6 million (EUR 0.7 million from 1 Jan. to 31 Dec. 2022). At the end of
the period, the fair value of the investments was EUR 16.6 million (EUR 16.8 million
on 31 Dec. 2022) and the amount of the remaining investment commitments was EUR
7.2 million (EUR 7.5 million). During the period under review, eQ Plc made a USD 1.0
million investment commitment in the eQ PE XV US private equity fund and a USD 1.0
million commitment in the eQ VC II venture capital fund.
During the period, the investment objects returned capital for EUR 1.4 million (EUR 2.9
million from 1 Jan. to 31 Dec. 2022) and distributed a profit of EUR 0.8 million (EUR
2.0 million). Capital calls totalled EUR 2.3 million (EUR 2.1 million). The net cash flow
from investments during the period was EUR -0.1 million (EUR 2.8 million). The value
changes of investments recognised through profit or loss were EUR -1.2 million during
the period (EUR -1.2 million).
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 1–12/2023 1–12/2022 Change
Operating profit, MEUR -0.6 0.7 187%
Fair value of investments, MEUR 16.6 16.8 -2%
Investment commitments, MEUR 7.2 7.5 -4%
Net cash flow of investments, MEUR -0.1 2.8 -105%
Balance sheet, financial position and capital adequacy
At the end of the period, the consolidated balance sheet total was EUR 100.3 million
(EUR 110.9 million on 31 Dec. 2022) and the shareholders’ equity was EUR 75.4 million
(EUR 81.8 million). During the period, the shareholders’ equity was influenced by the
profit for the period of EUR 31.5 million, the dividend distribution of EUR -36.8 million,
the repayment of equity of EUR -3.6 million from the reserve for invested unrestricted
equity, the subscription for new shares with option rights of EUR 1.3 million and
the accrued expense of EUR 1.3 million related to an option scheme and entered in
shareholders’ equity.
At the end of the period, liquid assets totalled EUR 22.9 million (EUR 23.7 million)
and liquid investments in mutual funds EUR 10.5 million (EUR 20.1 million).
The lease liability related to premises and entered in the balance sheet was
EUR 5.0 million (EUR 5.6 million) at the end of the period, the share of short-term
liabilities being EUR 1.2 million (EUR 0.8 million).
Short-term interest-free debt was EUR 19.9 million (EUR 23.5 million). The Group had
no interest-bearing loans at the end of the period (EUR - million). eQ’s equity to assets
ratio was 75.2 % (73.8 %).
The ratio between total capital and the capital requirement according to eQ Group’s
capital adequacy calculations was 252.8 per cent (242.3 per cent on 31 Dec. 2022). 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 5.4 million. At the end of the period, the Group’s
total capital based on capital adequacy calculations totalled EUR 13.6 million (EUR
11.9 million). Detailed information on capital adequacy is available in the annual
report.
Capital adequacy
EUR 1,000
IFR
31 Dec. 2023
eQ Group
IFR
31 Dec. 2022
eQ Group
Equity 75,436 81,779
Common equity tier 1 (CET 1) before deductions 75,436 81,779
Deductions from CET 1
Intangible assets -29,251 -29,400
Unconfirmed profit for the period -31,524 -36,322
Dividend proposal by the Board* -1,073 -4,107
Common equity tier 1 (CET 1) 13,588 11,949
Additional tier 1 (AT1) 0 0
Tier 1 (T1 = CET1 + AT1) 13,588 11,949
Tier 2 (T2) 0 0
Total capital (TC = T1 + T2) 13,588 11,949
Own funds requirement according
to the most restrictive requirement (IFR) 5,375 4,932
Fixed overhead requirement 5,375 4,932
K-factor requirement 371 393
Absolute minimum requirement 150 150
Risk-weighted items total – Total risk exposure 67,188 61,651
Common equity tier (CET1) / own funds requirement, % 252.8% 242.3%
Tier 1 (T1) / own funds requirement, % 252.8% 242.3%
Total capital (TC) / own funds requirement, % 252.8% 242.3%
Common equity tier 1 (CET1) / risk weights, % 20.2% 19.4%
Tier 1 (T1) / risk weights, % 20.2% 19.4%
Total capital (TC) / risk weights, % 20.2% 19.4%
Excess of total capital compared with the minimum level 8, 213 7,017
Total capital compared with the target level
(incl. a 25% risk buffer for the requirement) 6,869 5,784
*The dividend and equity repayment proposed by the Board exceeding the profit for the period.
37eQ in 2023 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 Group’s major single risk is the dependence of the result 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’ 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 and value changes of the funds. The income
from investment operations and changes in value may vary considerably by quarter
and financial period.
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 27 March 2023. Nicolas Berner,
Georg Ehrnrooth, Timo Kokkila, Janne Larma and Tomas von Rettig were re-elected to
the Board. Päivi Arminen was elected as new member. 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 2023, average attendance being 98%.
On 31 December 2023, 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
The Group had 101 employees at the end of the period (94 employees on 31 Dec.
2022), calculated as full-time resources. Calculated as full-time resources, the Asset
Management segment had 80 (76) employees and the Corporate Finance segment
16 (13) employees. Group administration had 5 (5) employees.
The overall salaries paid to the employees of eQ Group during the period totalled
EUR 25.4 million (EUR 26.7 million from 1 Jan. to 31 Dec. 2022). The salary expenses
fell from the year before due to result-related remuneration.
During the financial period, Tero Estovirta was appointed deputy managing director of
eQ Asset Management Ltd.
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 8.66% 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 2023, the number of eQ Plc’s shares was
40,745,698 and the share capital was EUR 11,383,873.00.
During the financial period, the number of eQ Plc’s shares increased by new shares
subscribed for with option rights 2018. The number of shares increased by 195,000
38eQ in 2023 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
shares on 16 May 2023, by 111,000 shares on 29 August 2023 and by 10,000
shares on 14 November 2023. The subscription price of the new shares totalled
EUR 1,270,320.00. The entire subscription was entered in the reserve for invested
unrestricted equity.
The closing price of eQ Plc’s share on 31 December 2023 was EUR 15.58 (EUR 25.45 on
31 Dec. 2022). The market capitalisation of the company was thus EUR 634.8 million
(EUR 1,028.9 million) at the end of the period. During the period, 1,113,557 shares
were traded on Nasdaq Helsinki (1,947,634 shares from 1 Jan. to 31 Dec.2022). In
euros, the turnover was EUR 21.2 million (EUR 45.9 million).
Option schemes
At the end of the period, eQ Plc had two valid 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 1,113,500 had been exercised by the end of
the period. The number of outstanding options was 661,500 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:
At the end of the period, altogether 910,000 options had been allocated from option
scheme 2022. 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 2023, eQ Plc held no own shares.
Shareholders
Major shareholders Number of shares
% of votes
and shares
Fennogens Investments S.A. 7,962,605 19.54%
Rettig Group Oy Ab 6,206,706 15.23%
Chilla Capital S.A. 6,165,904 15.13%
Teamet Oy 4,250,000 10.43%
Oy Cevante Ab 1,419,063 3.48%
Fazer Jan 1,314,185 3.23%
Procurator Oy 793,892 1.95%
Lavventura Oy 700,000 1.72%
Ilmarinen Mutual Pension Insurance Company 697,500 1.71%
Linnalex Ab 631,652 1.55%
Pinomonte Ab 529,981 1.30%
Umo Invest Oy 414,240 1.02%
Pohjolan Kiinteistökehitys Oy 387,000 0.95%
Leppä Jukka-Pekka 325,000 0.80%
Sever Match Oy 290,000 0.71%
Elo Mutual Pension Insurance Company 280,000 0.69%
Danske Invest Finnish Equity Fund 266,149 0.65%
Mononen Matti 180,000 0.44%
Leenos Oy 158,772 0.39%
Nacawi Ab 150,000 0.37%
Others 7,623,049 18.71%
Total 40,745,698 100.00%
The information is based on the situation in the share register maintained by Euroclear
Finland Ltd on 31 December 2023.
Ownership structure by sector on 31 December 2023:
Number
of shares
% of votes
and shares
Corporations 16,969,026 41.65%
Financial and insurance institutions 923,973 2.27%
Public sector entities 1,041,892 2.56%
Households 7,252,230 17.80%
Foreign 14,226,664 34.92%
Other
1)
331,913 0.81%
Total 40,745,698 100.00%
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 4,139 49.41%
101–500 2,626 31.35%
501–1,000 728 8.69%
1,001–5,000 679 8.11%
5,001–10,000 90 1.07%
10,001–50,000 70 0.84%
50,001–100,000 14 0.17%
100,001–500,000 19 0.23%
500,001– 11 0.13%
Total 8,376 100.00%
39eQ in 2023 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
1–100 171,395 0.42%
101–500 664,976 1.63%
501–1,000 560,620 1.38%
1,001–5,000 1,473,257 3.62%
5,001–10,000 672,352 1.65%
10,001–50,000 1,605,822 3.94%
50,001–100,000 1,055,080 2.59%
100,001–500,000 3,870,708 9.50%
500,001– 30,671,488 75.28%
Total 40,745,698 100.00%
Nominee registered shares:
Of the company shares, 367,303 were nominee-registered, representing 0.90% 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 2023 totalled
EUR 59,732,405.70. The sum consisted of retained earnings of EUR 36,894,065.96
and the means in the reserve of invested unrestricted equity of EUR 22,838,339.74.
The Board of Directors proposes to the Annual General Meeting that a dividend of
EUR 0.80 per share be paid out. The proposal corresponds to a dividend totalling
EUR 32,596,558.40 calculated with the number of shares at the close of the financial
period. The dividend is paid in two instalments.
The first instalment, EUR 0.40 per share, is paid to those who are registered as
shareholders in the company’s shareholder register maintained by Euroclear Finland
Ltd on the record date 25 March 2024. The Board proposes that the first instalment
of the dividend be paid out on 3 April 2024.
The second instalment, EUR 0.40 per share, is paid in October 2024. The second
instalment is paid to those who are registered as shareholders in the company’s
shareholder register maintained by Euroclear Finland Ltd on the record date. The Board
of Directors will decide the record date and payment date of the second instalment of
the dividend payment at its meeting in September 2024. The planned record date is 25
September 2024 and the dividend payment date 2 October 2024.
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 does not endanger the liquidity of the company.
Events after the end of the financial year
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 21 March
2024 regarding the number of directors, their remuneration and the principles for
compensation 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, Janne Larma and Tomas von Rettig
are re-elected to the Board.
Outlook
The asset management market in Finland has grown strongly, and eQ’s growth has
outpaced the market. We estimate that the long-term outlook for growth in the asset
management market and for eQ in Finland is still good.
For eQ’s real estate funds, 2023 was a difficult year due to an increase of the yields
resulting from a strong rise in the interest rate level. As yields rose, values of
properties clearly declined. Also, net subscriptions in funds were negative. The limited
availability of real estate financing also contributed to a significant decrease in real
estate transactions. With regard to the real estate funds, we expect 2024 to be
a challenging year, although the long-term outlook for growth is good. Sales of eQ’s
Private Equity products has continued to be strong, and the desire of Finnish asset
management clients to increase Private Equity allocations in their portfolios will
continue to support the growth of eQ’s Private Equity products. We also anticipate
a growth in performance fees from 2025 onwards, due to the predicted transfer of
several Private Equity products to a performance fee stage. eQ’s competitive position
in traditional asset management products and discretionary asset management is
good thanks to excellent returns on investments. We believe that traditional asset
management has great potential for growth in future years, considering however its
characteristic short-term variation according to market conditions.
eQ has updated its disclosure policy and, as a rule, will not issue a result forecast
for the Asset Management segment in the future but instead describe its outlook in
a general manner. Results in the Corporate Finance and Investments segments are
largely dependent on factors beyond the company’s control, which is why no result
forecast has been issued for these segments before.
Helsinki, 5 February 2024
eQ Plc
Board of Directors
40
eQ in 2023 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
Consolidated key ratios
EUR 1,000 2023 2022 2021 2020 2019
INCOME STATEMENT
Fee and commission income, net 70,815 77,129 71,578 56,734 49,505
Net income from financial assets -52 709 7,314 32 1,132
Net revenue 70,853 77,781 78,880 56,744 50,614
Operating profit (loss) 39,749 45,735 47,660 30,757 26,292
% of net revenue 56.1 58.8 60.4 54.2 51.9
Profit (loss) for the period 31,524 36,322 38,078 24,610 21,035
BALANCE SHEET
Claims on credit institutions and liquid assets 22,911 23,688 35,141 21,453 22,375
Financial assets 27,111 36,956 39,760 30,576 26,112
Intangible and tangible assets 33,891 35,186 30,819 31,812 32,159
Other assets and receivables 16,357 15,027 5,123 7,636 4,772
Total assets 100,270 110,858 110,842 91,476 85,418
Total equity 75,436 81,779 79,955 67,545 65,117
Liabilities 24,834 29,079 30,887 23,931 20,301
Total liabilities and equity 100,270 110,858 110,842 91,476 85,418
EUR 1,000 2023 2022 2021 2020 2019
PROFITABILITY AND OTHER KEY RATIOS
Return on investment, ROI % p.a. 37.8 43.2 50.6 35.9 32.4
Return on equity, ROE % p.a. 40.1 44.9 51.6 37.1 33.0
Equity to assets ratio, % 75.2 73.8 72.1 73.8 76.2
Gearing, % -37.8 -46.7 -68.7 -50.8 -45.7
Cost/income ratio, %
Group 43.8 41.1 39.5 45.6 48.1
Asset Management 37.9 36.0 37.7 39.0 42.7
Corporate Finance 83.0 67.7 60.0 72.3 64.1
Number of personnel as full-time resources
at the end of the period 101 94 96 94 89
Number of personnel as full-time resources, average 101 96 95 92 88
41eQ in 2023 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
EUR 1,000 2023 2022 2021 2020 2019
SHARE-RELATED KEY RATIOS
Earnings per average share, EUR 0.78 0.91 0.97 0.64 0.55
Diluted earnings per average share, EUR 0.75 0.87 0.93 0.60 0.51
Equity per share, EUR 1.85 2.02 2.02 1.74 1.70
Equity per share, EUR
1)
1.86 2.04 2.03 1.76 1.71
Dividend, EUR 1,000
2)
32,597 36,791 38,443 24,878 21,069
Dividend per share
2)
0.80 0.91 0.97 0.64 0.55
Dividend per earnings, %
2)
102.6 100.0 100.0 100.0 100.0
Repayment of equity, EUR 1,000
3)
0 3,639 1,189 2,332 2,682
Repayment of equity per share
3)
0.00 0.09 0.03 0.06 0.07
Dividend and repayment of equity, total, EUR 1,000 32,597 40,430 39,632 27,211 23,750
Dividend and repayment of equity, total per share 0.80 1.00 1.00 0.70 0.62
Effective dividend and equity repayment yield, % 5.1 3.9 3.9 4.2 5.0
Price/earnings ratio, P/E 20.0 28.0 26.5 26.2 22.6
Adjusted share price development, EUR
Average price 19.02 23.54 23.26 13.43 9.61
Highest price 25.70 27.95 30.65 17.05 13.15
Lowest price 13.90 20.10 16.50 9.54 7.72
Closing price 15.58 25.45 25.75 16.75 12.45
Market capitalisation, EUR 1,000 634,818 1,028,936 1,020,529 651,109 476,925
Share turnover, 1,000 shares 1,114 1,948 2,090 2,722 1,616
% of total number of shares 2.7 4.9 5.3 7.1 4.2
Share turnover, EUR 1,000 21,184 45,853 48,909 35,793 15,926
Adjusted number of shares, 1,000 shares
Average during the year 40,592 40,082 39,353 38,448 38,044
At the end of the year 40,746 40,430 39,632 38,872 38,307
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
42eQ in 2023 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
43eQ in 2023 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
Financial
Statements 2023
Consolidated Income Statement 45
Consolidated Balance Sheet 46
Consolidated Cash Flow Statement 47
Change in Consolidated Shareholders’ Equity 47
Principles for preparing
the Consolidated Financial Statements 48
Notes to the Consolidated Financial Statements 57
Parent Company Financial Statements 66
Income Statement 66
Balance Sheet 66
Cash Flow Statement 67
Notes to the Financial Statements 68
Proposal for the Distribution of Profits 73
Signatures and Auditors’ Note 74
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.
44eQ in 2023 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
Consolidated Income Statement
EUR 1,000 Note no. 2023 2022
Fee and commission income 5 71,361 77,665
Interest income 6 275 8
Net income from financial assets 7 -52 709
Operating income, total 71,584 78,383
Fee and commission expenses 8 -546 -536
Interest expenses 9 -185 -65
NET REVENUE 70,853 77,781
Administrative expenses 10
Personnel expenses -25,415 -26,724
Other administrative expenses -2,532 -2,490
Depreciation on tangible and intangible assets 11 -1,272 -1,178
Other operating expenses 12 -1,885 -1,655
OPERATING PROFIT (LOSS) 39,749 45,735
PROFIT (LOSS) BEFORE TAXES 39,749 45,735
Income tax 13 -8,225 -9,412
PROFIT (LOSS) FOR THE PERIOD 31,524 36,322
Consolidated statement of comprehensive income
EUR 1,000 Note no. 2023 2022
Other comprehensive income: - -
Other comprehensive income after taxes - -
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD 31,524 36,322
Profit for the period attributable to:
Equity holders of the parent company 31,524 36,322
Non-controlling interest - -
Comprehensive income for the period attributable to:
Equity holders of the parent company 31,524 36,322
Non-controlling interest - -
Earnings per share calculated from the profit
of equity holders of the parent company: 14
Earnings per average share, EUR 0.78 0.91
Diluted earnings per average share, EUR 0.75 0.87
45eQ in 2023 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. 2023 31 Dec. 2022
ASSETS
Liquid assets 70 21
Claims on credit institutions 15 22,841 23,667
Financial assets 16, 26–29
Financial securities 10,555 20,119
Private equity and real estate fund investments 16,556 16,837
Intangible assets 17
Goodwill and brands 29,212 29,212
Client agreements 8 108
Other intangible assets 30 79
Tangible assets 18
Right-of-use assets 4,215 5,273
Other tangible assets 425 514
Other assets 19 15,657 14,393
Accruals and prepaid expenditure 20 414 426
Income tax receivables 133 138
Deferred tax assets 21 153 70
TOTAL ASSETS 100,270 110,858
EUR 1,000 Note no. 31 Dec. 2023 31 Dec. 2022
LIABILITIES AND EQUITY
LIABILITIES
Other liabilities 22 6,933 6,829
Accruals and deferred income 23 12,871 16,607
Lease liabilities 24 4,980 5,621
Income tax liabilities 49 22
TOTAL LIABILITIES 24,834 29,079
EQUITY 30
Attributable to equity holders of the parent company:
Share capital 11,384 11,384
Reserve for invested unrestricted equity 24,693 27,061
Retained earnings 7,836 7,011
Profit (loss) for the period 31,524 36,322
TOTAL EQUITY 75,436 81,779
TOTAL LIABILITIES AND EQUITY 100,270 110,858
46eQ in 2023 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
Consolidated Cash Flow Statement
EUR 1,000 2023 2022
Cash flow from operations
Operating profit 39,749 45,735
Depreciation and impairment 1,272 1,178
Interest income and expenses -90 57
Transactions with no related payment transactions 2,312 2,451
Financial assets – private equity funds -940 755
Change in working capital
Business receivables, increase (-) / decrease (+) -1,113 -9,741
Interest-free debt, increase (+) / decrease (-) -3,654 -6,264
Change in working capital, total -4,767 -16,005
Cash flow from operations before financial items and taxes 37,536 34,172
Interests received 275 8
Interests paid -185 -65
Income taxes -8,392 -9,553
Cash flow from operations 29,234 24,561
Cash flow from investments
Investments in tangible and intangible assets -52 -369
Investments in other investments – liquid mutual funds 9,766 727
Cash flow from investments 9,713 359
Cash flow from financing
Dividends/equity repayments -40,430 -39,632
Subscription of new shares 1,270 4,003
Deduction of lease liability capital -565 -744
Cash flow from financing -39,725 -36,372
Increase/decrease in liquid assets -777 -11,452
Liquid assets on 1 Jan. 23,688 35,141
Liquid assets on 31 Dec. 22,911 23,688
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. 2023 11,384 27,061 43,334 81,779 81,779
Comprehensive income
Profit (loss) for the period 31,524 31,524 31,524
Other comprehensive income - - -
Total comprehensive income 31,524 31,524 31,524
Dividend/equity repayments -3,639 -36,791 -40,430 -40,430
Subscription of new shares 1,270 1,270 1,270
Options granted 1,293 1,293 1,293
Shareholders’ equity on 31 Dec. 2023 11,384 24,693 39,359 75,436 75,436
Shareholders’ equity on 1 Jan. 2022 11,384 24,247 44,325 79,955 79,955
Comprehensive income
Profit (loss) for the period 36,322 36,322 36,322
Other comprehensive income - - -
Total comprehensive income 36,322 36,322 36,322
Dividend/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
47eQ in 2023 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
48eQ in 2023 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
49eQ in 2023 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
50eQ in 2023 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
51eQ in 2023 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
52eQ in 2023 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
53eQ in 2023 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
54eQ in 2023 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
55eQ in 2023 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
56eQ in 2023 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
57eQ in 2023 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
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59
eQ in 2023 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
60
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63eQ in 2023 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
64eQ in 2023 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
65eQ in 2023 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
Parent Company Income Statement (FAS)
EUR Note no. 2023 2022
Fee and commission income 2 76,800.00 76,800.00
Net gains from financial instruments entered
at fair value through profit or loss 3 -841,847.85 -1,330,349.01
Net gains on trading in securities
Income from equity investments 4
From other companies 790,155.87 2,039,708.00
Interest income 5 273,876.20 6,115.35
INVESTMENT FIRM INCOME 298,984.22 792,274.34
Fee and commission expenses 6 -150,000.00 -150,000.00
Interest expenses 7 -307,116.42 -24,301.73
Personnel and administrative expenses
Personnel expenses 8
Salaries and remuneration -1,365,900.31 -1,404,637.49
Indirect employee costs
Pension costs -204,551.60 -215,473.24
Other indirect employee costs -30,068.35 -27,891.46
Other administrative expenses 9 -340,231.88 -357,731.42
Depreciation and impairment on tangible and
intangible assets as well as shares and participations 10 -4,699.67 -9,166.13
Other operating expenses 11 -376,173.20 -402,473.04
OPERATING PROFIT (LOSS) -2,479,757.21 -1,799,400.17
Appropriations 12 43,644,829.49 48,669,659.51
Income tax 13 -8,221,174.10 -9,384,586.14
PROFIT (LOSS) FOR THE FINANCIAL PERIOD 32,943,898.18 37,485,673.20
Parent Company Balance Sheet (FAS)
EUR Note no. 31 Dec. 2023 31 Dec. 2022
ASSETS
Liquid assets - 3,810.00
Claims on credit institutions
Repayable on demand 14 7,884,736.81 2,189,031.13
Shares and participations 15, 23 27,108,424.53 36,943,665.96
Shares and participations in Group undertakings 15 29,154,321.94 29,154,321.94
Intangible assets 16
Other intangible assets 585.23 1,849.79
Tangible assets 16
Other tangible assets 18,714.71 17,433.83
Other assets 17 8,665,222.97 10,670,000.00
Accruals and prepaid expenditure 18 191,751.15 194,462.33
TOTAL ASSETS 73,023,757.34 79,174,574.98
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 419,431.58 157,739.91
Accruals and deferred income 20 488,047.06 685,076.55
TOTAL LIABILITIES 1,907,478.64 1,842,816.46
EQUITY 24
Share capital 11,383,873.00 11,383,873.00
Unrestricted equity
Reserve for invested unrestricted equity 22,838,339.74 25,206,692.56
Retained earnings (loss) 3,950,167.78 3,255,519.76
Profit (loss) for the period 32,943,898.18 37,485,673.20
TOTAL EQUITY 71,116,278.70 77,331,758.52
TOTAL LIABILITIES AND EQUITY 73,023,757.34 79,174,574.98
66eQ in 2023 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 2023 2022
Cash flow from operations
Operating profit 41,165 46,870
Adjustments:
Depreciation and impairment 5 9
Interests received -274 -6
Interests paid 307 24
Transactions with no related payment transactions 1,019 1,321
Financial assets – private equity and real estate funds -940 755
Change in working capital
Business receivables, increase (-) / decrease (+) 2,141 -5,497
Interest-free liabilities, increase (+) / decrease (-) 65 -4,386
Total change in working capital 2,205 -9,883
Cash flow from operations before financial items and taxes 43,488 39,091
Interests received 274 6
Interests paid -307 -24
Taxes -8,354 -9,523
Cash flow from operations 35,100 29,550
EUR 1,000 2023 2022
Cash flow from investments
Investing activities in tangible and intangible assets -5 -
Investing activities in investments -10 -5
Investing activities in other investments – liquid mutual funds 9,766 727
Cash flow from investments 9,751 722
Cash flow from financing
Dividends paid -40,430 -39,632
Subscription of new shares 1,270 4,003
Cash flow from financing -39,159 -35,629
Increase/decrease in liquid assets 5,692 -5,356
Liquid assets on 1 Jan. 2,193 7,549
Liquid assets on 31 Dec. 7,885 2,193
67eQ in 2023 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 and the unpaid interests as interest expenses
and liabilities.
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 fund investments recorded through
profit or loss are entered among the net gains from financial instruments entered at
fair value through profit or loss. 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 from financial instruments entered at fair value through profit or loss.
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 2023 2022
From other operations 77 77
3 Net gains from financial instruments entered
at fair value through profit or loss
EUR 1,000 2023 2022
From shares and participations
Changes in fair value -1,019 -1,321
Sales profits/losses 178 -9
Total -842 -1,330
4 Income from equity investments
EUR 1,000 2023 2022
Dividend income from financial assets
valued at fair value 790 2,040
Total 790 2,040
Notes to the Parent Company Financial Statements
68eQ in 2023 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
5 Interest income
EUR 1,000 2023 2022
From Group companies 8 0
From credit institutions 265 4
Other interest income 1 2
Total 274 6
6 Fee and commission expenses
EUR 1,000 2023 2022
Other fees – management of investments
eQ Asset Management -150 -150
Total -150 -150
7 Interest expenses
EUR 1,000 2023 2022
To Group undertakings -307 -19
Other interest expenses 0 -5
Total -307 -24
8 Personnel expenses
EUR 1,000 2023 2022
Salaries and remuneration -1,366 -1,405
Pension costs -205 -215
Other indirect employee costs -30 -28
Total -1,601 -1,648
Average number of personnel during
the period – permanent 5 5
Change during the financial period - -
9 Other administrative expenses
EUR 1,000 2023 2022
Other personnel expenses -29 -26
IT and connection costs -99 -115
Other administrative expenses -212 -216
Total -340 -358
10 Depreciation and impairment on tangible and
intangible assets as well as shares and participations
EUR 1,000 2023 2022
Depreciation on intangible and tangible assets -5 -9
A depreciation specification per balance sheet item is presented under intangible and
tangible assets.
11 Other operating expenses
EUR 1,000 2023 2022
Expert fees -4 -8
Fees to the auditor
Audit fees -22 -26
Other services -4 -3
Total -27 -29
Leases on premises and other rental expenses -74 -97
Other expenses -272 -269
Total -376 -402
12 Appropriations
EUR 1,000 2023 2022
Group subsidies received 43,645 48,670
Group subsidies issued 0 0
Total 43,645 48,670
13 Income tax
EUR 1,000 2023 2022
Income tax for the period
Income taxes for operations -8,354 -9,523
Deferred taxes 133 138
Total -8,221 -9,385
14 Claims on credit institutions
EUR 1,000 2023 2022
Repayable on demand
From domestic credit institutions 7,885 2,189
15 Shares and participations
EUR 1,000 2023 2022
Shares and participations
Financial assets: Private equity and
real estate fund investments 16,556 16,837
Financial assets: Units in investment funds 10,532 20,076
Other participations 20 30
Shares and participations in Group undertakings 29,154 29,154
Total 56,263 66,098
– of which at acquisition cost 29,174 29,184
69eQ in 2023 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
16 Intangible and tangible assets
EUR 1,000 2023 2022
Other intangible assets
Acquisition cost on 1 Jan. 237 237
Increases - -
Acquisition cost on 31 Dec. 237 237
Accumulated depreciation on 1 Jan. -235 -232
Depreciation for the period -1 -3
Accumulated depreciation on 31 Dec. -236 -235
Book value on 31 Dec. 1 2
Other tangible assets
Acquisition cost on 1 Jan. 242 242
Increases 5 -
Acquisition cost on 31 Dec. 246 242
Accumulated depreciation on 1 Jan. -224 -218
Depreciation for the period -3 -6
Accumulated depreciation on 31 Dec. -228 -224
Book value on 31 Dec. 19 17
17 Other assets
EUR 1,000 2023 2022
Receivables from Group undertakings 8,645 10,670
Other receivables 20 -
Total 8,665 10,670
18 Accruals and prepaid expenditure
EUR 1,000 2023 2022
Other accruals 192 194
Total 192 194
19 Other liabilities
EUR 1,000 2023 2022
Accounts payable 62 36
Liabilities to Group undertakings 38 47
Other liabilities 319 74
Total 419 158
20 Accruals
EUR 1,000 2023 2022
Other accruals 488 685
21 Items denominated in domestic and
foreign currencies and Group items
31 Dec. 2023
EUR 1,000 EUR
Other
than EUR Total
From Group
undertakings
Balance sheet items
Claims on credit institutions 7,885 - 7,885 -
Other assets 58,235 6,904 65,139 8,645
Total 66,120 6,904 73,024 8,645
Liabilities to the public and
public sector entities 1,000 - 1,000 1,000
Other liabilities 907 - 907 38
Total 1,907 - 1,907 1,038
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
70eQ in 2023 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
22 Fair values of financial assets and liabilities
2023 2022
EUR 1,000
Fair
value
Book
value
Fair
value
Book
value
Financial assets
Claims on credit institutions 7,885 7,885 2,189 2,189
Shares and participations 27,108 27,108 36,944 36,944
Shares and participations in
Group undertakings 29,154 29,154 29,154 29,154
Total 64,147 64,147 68,287 68,287
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 private equity funds are based on the value of the fund
according to the management company of the private equity fund and their use
in widely used valuation models. Private equity fund 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 fund investments are
based on 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. 2023
EUR 1,000 Level 1 Level 3
Financial assets at fair value through profit or loss
Private equity and real estate fund investments - 16,556
Financial securities 10,552 -
Total 10,552 16,556
Level 3 reconciliation – Financial assets at fair value through profit or loss
Private equity and
real estate funds
Opening balance 16,837
Calls and returns 940
Impairment loss -1,221
Closing balance 16,556
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 funds
Opening balance 18,817
Calls and returns -755
Impairment loss -1,224
Closing balance 16,837
71eQ in 2023 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
24 Equity
EUR 1,000 2023 2022
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. 25,207 22,392
Increases/decreases -2,368 2,814
Reserve for invested unrestricted equity on 31 Dec. 22,838 25,207
Retained earnings
Retained earnings on 1 Jan. 40,741 41,699
Dividend -36,791 -38,443
Other changes - 0
Retained earnings on 31 Dec. 3,950 3,256
Profit (loss) for the period 32,944 37,486
Non-restricted equity, total 59,732 65,948
Equity on 31 Dec. 71,116 77,332
Calculation of distributable assets on 31 Dec.
Retained earnings 3,950 3,256
Profit for the period 32,944 37,486
Reserve for invested unrestricted equity 22,838 25,207
Distributable assets 59,732 65,948
The share capital of the company consists of 40,745,698 shares.
All shares carry one vote.
Other notes
25 Pledges, mortgages and obligations
EUR 1,000 2023 2022
eQ Plc’s investment commitments in private equity
funds, remaining commitment 7,153 7,477
Leasing agreements and leases less than one year 1,250 735
Leasing agreements and leases exceeding one year
but less than five years 4,373 5,197
Total 12,776 13,409
72eQ in 2023 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 2023
totalled EUR 59,732,405.70. The sum consisted of retained earnings of
EUR 36,894,065.96 and the means in the reserve of invested unrestricted equity
of EUR 22,838,339.74.
The Board of Directors proposes to the Annual General Meeting that a dividend
of EUR 0.80 per share be paid out. The proposal corresponds to a dividend
totalling EUR 32,596,558.40 calculated with the number of shares at the close
of the financial period. The dividend is paid in two instalments.
The first instalment, EUR 0.40 per share, is paid to those who are registered
as shareholders in the company’s shareholder register maintained by Euroclear
Finland Ltd on the record date 25 March 2024. The Board proposes that
the first instalment of the dividend be paid out on 3 April 2024.
The second instalment, EUR 0.40 per share, is paid in October 2024.
The second instalment is paid to those who are registered as shareholders
in the company’s shareholder register maintained by Euroclear Finland Ltd
on the record date. The Board of Directors will decide the record date and
payment date of the second instalment of the dividend payment at its meeting
in September 2024. The planned record date is 25 September 2024 and
the dividend payment date 2 October 2024.
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 does not endanger the liquidity of
the company.
73eQ in 2023 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, 5 February 2024
Auditor’s note
The auditors’ report over the audit has been issued today.
Helsinki, 5 February 2024
KPMG Oy Ab
Firm of Authorised Public Accountants
Tuomas Ilveskoski
APA
Janne Larma
Chair of the Board
Nicolas Berner Timo Kokkila Tomas von Rettig
Georg Ehrnrooth
Deputy Chair of the Board
Mikko Koskimies
CEO
Päivi Arminen
74eQ in 2023 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, 2023.
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 material accounting policy information, 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 IFRS Accounting Standards 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.
75eQ in 2023 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 IFRS Accounting Standards 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.
76eQ in 2023 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 10 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
or 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, 5 February, 2024
KPMG OY AB
Tuomas Ilveskoski
Authorised Public Accountant, KHT
77eQ in 2023 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
Corporate Governance Statement 2023
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 5 February 2024 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 2023 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 2023, 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 27 March 2023.
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 Annual General Meeting held on 27 March 2023 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; Advium Corporate Finance
Oy, Managing Director, 2000–; eQ Pankki Oy, member of Management Team,
2004–2009; Enskilda Securities, management position in investment banking,
1998–2000; Alfred Berg, investment banking, 1993–1998; Kansallis-Osake-Pankki,
investment banking, 1988–1992.
79eQ in 2023 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
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: Byggmästare Anders J Ahlström Holding AB (publ), member
of the Board, 2023–; 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., Chair 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.
Päivi Arminen, born 1978, female, member of the Board since 2023, M. Sc. (Econ)
Key positions of trust: Interogo Holding AG, Infrastructure investments, Investment
Committee Member, 2023–.
Primary work experience: EQT Partners AB, Infrastructure investment, Managing
Director, Director, Associate 2008–2021; Danske Bank A/S / Sampo Bank Plc, Debt
Capital Markets, Vice President, Assistant Vice President 2005–2008; Evli Plc,
Equity Analyst, 2004–2005.
Independent of the company and significant shareholders.
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.
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, a parent company of
Rettig Group Oy Ab, which is a significant shareholder of eQ Plc.
Independence of Board Members
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. The majority of the members of the Board
must be independent from the company, and at least two Board members who
are independent from the company must also be independent from the company’s
significant shareholders. The Board of Directors assesses the independence of
the directors. 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.
eQ Plc’s Board member Nicolas Berner has been a member of the Board continuously
for over ten years. Based on the Board’s overall assessment, the Board member’s
independence is not considered to have been compromised due to his long board
membership, and no other circumstances have been found that would weaken
the Board member’s independence.
Of the company’s six Board members, four (Päivi Arminen, Nicolas Berner, Timo
Kokkila and Tomas von Rettig) are independent from the company and three Board
members (Päivi Arminen, Nicolas Berner and Timo Kokkila) who are independent
from the company are also independent from the company’s significant shareholders.
An assessment of the independence of each Board member and the reasons why
the Board member is not considered independent can be found in the information on
each Board member above and from the company’s website.
Board Members’ holdings in the company
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 2023:
Member of the Board Security Holding
Päivi Arminen Share 3,550
Nicolas Berner Share 90,000
Georg Ehrnrooth Share 75,000
Timo Kokkila Share 4,142
Janne Larma 2022 Option righ
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
80eQ in 2023 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
• 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
• 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 2023, the Board of Directors of eQ Plc convened eight (8)
times, average attendance being 98%. Attendance at the Board meetings 2023:
Member of the Board
Päivi Arminen 6/6
Nicolas Berner 8/8
Georg Ehrnrooth 8/8
Timo Kokkila 7/8
Lotta Kopra 2/2
Janne Larma 8/8
Tomas von Rettig 8/8
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
2023, 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 2023.
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 2023:
Name Task in the organisation Security Holding
Mikko
Koskimies
CEO 2018 Option right
2022 Option right
Share
eQ new (Opt 2018)
25,000
50,000
4,250 000
50,000
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 2023:
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
81eQ in 2023 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
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
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 2023:
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
29,000
30,000
41,000
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, clients and other
stakeholders 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
Internal audit is a support function of the Board and management that is independent
of eQ Group’s business operations. The internal auditor inspects on a risk-based
assessment the operations, internal control, risk management and management and
administration processes of especially such group companies that hold authorisations
by focusing on yearly set targets; in addition, the internal auditor inspects how the
companies comply with internal guidelines and the requirements and obligations
that arise from regulation concerning the companies. The internal auditor reports
to the management and the Board and the audit reports are discussed in the
82eQ in 2023 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
Board, who decide on the corrective measures to be taken based on the audit report’s
recommendations and monitor their implementation. The internal audit function has been
outsourced to an external service provider, Oy Tuokko Ltd.
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 2023, 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 2023: for the audit and
closely related services a total of EUR 93 258 (2022: EUR 94 400) and for other services
than audit a total of EUR 14 348 (2022: 10 800).
83eQ in 2023 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 2023, 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 2023
Salary and remuneration
– EUR 2023 2022 2021 2020 2019
CEO
1)
1,755,389 1,944,133 1,034,689 851,669 784,613
change, % -10% 88% 21% 9% 26%
Chair of the Board
2
) 679,421 702,106 549,489 51,000 46,200
change, % -3% 28% 977% 10% 3%
Other Board members
3)
218,750 212,000 199,500 131,500 112,400
change, % 3% 6% 52% 17% 3%
Board, in total 898,171 914,106 748,989 182,500 158,600
change, % -2% 22% 310% 15% 3%
Employee, in average
4)
185,836 207,953 218,726 185,653 176,637
change, % -11% -5% 18% 5% 6%
Operating profit – MEUR 39.7 45.7 47.7 30.8 26.3
change, % -13% -4% 55% 17% 17%
1)
Paid salaries and remuneration. 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.
2)
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.
3)
The number of Board members increased by one in 2021.
4)
The total amount of 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 2023, 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 750 for each Board meeting that they attend. The
travel and lodging costs of the Board members are 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.
84eQ in 2023 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
In 2023, the members of the Board of Directors have been paid remuneration
as follows:
Remuneration –
EUR
Annual
remuneration
Meeting fees
in total
Other
compensation Total
Päivi Arminen 27,000 4,500 - 31,500
Nicolas Berner 36,000 5,500 - 41,500
Georg Ehrnrooth 48,000 5,500 - 53,500
Timo Kokkila 36,000 4,750 - 40,750
Lotta Kopra 9,000 1,000 - 10,000
Janne Larma* 60,000 5,500 613,921 679,421
Tomas von Rettig 36,000 5,500 - 41,500
Total 252,000 32,250 613,921 898,171
*
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 2023.
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 22.25 per share at 31 December 2023.
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 the Asset
Management segment. Remuneration is not based directly on the realisation of certain
metrics, but on the Board’s overall assessment. 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.
In 2023, the CEO was paid the following salary and other remuneration:
Renumeration paid during 2023 – EUR
Fixed remuneration Variable remuneration
Annual salary (incl. fringe benefits) Part of the overall remuneration Annual bonus* Part of the overall remuneration Total
609,400 34.7% 1,145,989 65.3% 1,755,389
*
Represents the aggregate amount of annual bonuses paid in 2023. The earnings periods for the bonuses paid in 2023 are defined in the table below. The annual bonus paid to the CEO is always based on the preceding year’s performance.
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.
85eQ in 2023 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 2023 (deferred remuneration falling due for
the previous years):
Specification of variable remuneration paid during 2023 – EUR
For year 2022* For year 2021* For year 2020* For year 2019* Total
833,056 153,372 159,561 1,145,989, 833,056
*
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 2023.
The unpaid deferred variable remuneration for each earnings period:
Deferred variable remuneration* – EUR
For year 2020
120,854
*
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
2023 and that has not yet been paid out by the date of this report was EUR 631,739 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 75 000 of the option rights granted on the basis of
the option program 2018 by 31 December 2023.
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 22.25 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.
86
eQ in 2023 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; 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 2023:
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; Byggmästare
Anders J Ahlström Holding AB, Member of the Board
Not independent of the company and not independent of its
significant shareholders.
87eQ in 2023 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
Päivi Arminen
Member of the Board since 2023
Born: 1978
Education:
M.Sc. (Econ.), HSE
Primary working experience:
2008–2021 EQT Partners AB, Infrastructure investment,
Managing Director, Director, Associate
2005–2008 Danske Bank A/S / Sampo Bank Plc, Debt Capital
Markets, Vice President, Assistant Vice President
2004–2005 Evli Plc, Equity Analyst
Primary positions of trust:
2023– Interogo Holding AG, Infrastructure investments,
Investment Committee Member
Independent of the company and significant 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.
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.
88
eQ in 2023 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 2023:
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.
89eQ in 2023 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 late 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. The catch up share to be recognised in the 2024 income
statement is estimated to be around EUR 5.4 million.
90eQ in 2023 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
Funds – 31 December 2023
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 0.0 0.0
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 % 1.4x 1.7x 2025 2.2 6.4 3.7
eQ PE VII MUSD 80 2015 7.0 % 7.5 % 45 % 1.7x 2.0x 2025 0.9 3.0 1.9
eQ PE VIII MEUR 160 2016 7.0 % 7.5 % 100 % 1.6x 1.9x 2025 3.0 12.8 7.1
eQ PE IX MUSD 105 2017 7.0 % 7.5 % 45 % 1.6x 2.1x 2026 0.9 4.2 2.1
eQ PE X MEUR 175 2018 7.0 % 7.5 % 100 % 1.3x 1.9x 2027 3.7 13.7 3.3
eQ PE XI MUSD 217 2019 7.0 % 7.5 % 45 % 1.2x 2.1x 2027 1.7 8.4 1.4
eQ PE XII MEUR 205 2020 7.0 % 7.5 % 100 % 1.2x 1.8x After 2028 n/a 14.1 2.0
eQ PE XIII MUSD 318 2021 7.0 % 7.5 % 45 % 1.0x 1.8x After 2028 n/a 9.1 n/a
eQ PE XIV MEUR 288 2022 7.0 % 7.5 % 100 % n/a 1.8x After 2028 n/a 18.7 0.1
eQ PE XV MUSD 283 2023 7.0 % 7.5 % 45 % n/a 1.8x After 2028 n/a 7.7 n/a
eQ PE SF II MEUR 135 2) 2018 10.0 % 10.0 % 100 % 1.3x 1.4x 2026 1.8 1.8 n/a
eQ PE SF III MEUR 170 3) 2020 10.0 % 10.0 % 100 % 1.4x 1.8x 2026 2.4 9.2 3.6
eQ PE SF IV MEUR 151 4) 2022 10.0 % 10.0 % 100 % n/a 1.4x After 2028 n/a 3.2 0.8
PE programmes MEUR 198 2013-16 8%/12% 7.5%/12% 100 % n/a n/a 2025-2027 9.2 25.7 12.4
eQ VC MUSD 77 2021 7.0 % 7.5 % 45 % n/a 2.3x After 2028 n/a 3.5 n/a
Total 26.0
141.5
(130.1 prev. year) 38.4
of which covered by the catch up accrual 26.0 85.3 35.5
catch up share accrued cumulatively by 31 December 2023 11.8
estimated accrual for 2024 5.4
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 the 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.
91eQ in 2023 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 2023 is defined on the basis of fixed overheads.
The minimum capital requirement based on fixed overheads was EUR 5.4 million.
At the end of the period, the Group’s own funds based on capital adequacy
calculations totalled EUR 13.6 million. Detailed information on the Group’s capital
adequacy can be found in the following section.
Capital adequacy
EUR 1,000
IFR
31 Dec. 2023
eQ Group
IFR
31 Dec. 2022
eQ Group
Equity
75,436 81,779
Common equity tier 1 (CET 1) before deductions
75,436 81,779
Deductions from CET 1
Intangible assets
-29,251 -29,400
Unconfirmed profit for the period
-31,524 -36,322
Dividend proposal by the Board*
-1,073 -4,107
Common equity tier 1 (CET1)
13,588 11,949
Additional tier 1 (AT1)
0 0
Tier 1 (T1 = CET1 + AT1)
13,588 11,949
Tier 2 (T2)
0 0
Total capital (TC = T1 + T2)
13,588 11,949
Own funds requirement according to the most
restrictive requirement (IFR) 5,375 4,932
Fixed overhead requirement
5,375 4,932
K-factor requirement
371 393
Absolute minimum requirement
150 150
EUR 1,000
IFR
31 Dec. 2023
eQ Group
IFR
31 Dec. 2022
eQ Group
Risk-weighted items total – Total risk exposure
67,188 61,651
Common equity tier (CET1) / own funds
requirement, % 252.8% 242.3%
Tier 1 (T1) / own funds requirement, %
252.8% 242.3%
Total capital (TC) / own funds requirement, %
252.8% 242.3%
Common equity tier 1 (CET1) / risk weights, %
20.2% 19.4%
Tier 1 (T1) / risk weights, %
20.2% 19.4%
Total capital (TC) / risk weights, %
20.2% 19.4%
Excess of total capital compared with
the minimum level 8,213 7,017
Total capital compared with the target level
(incl. a 25% risk buffer for the requirement) 6,869 5,784
*The dividend and equity repayment proposed by the Board exceeding the profit for the period.
92eQ in 2023 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
Composition of regulatory own funds (EU IF CC1)
EUR 1,000
(a) (b)
Amounts
Source based on
reference num-bers/
letters of the balance
sheet in the audited
financial statements
Common Equity Tier 1 (CET1) capital: instruments and reserves
1
Own funds 13,588
2
Tier 1 capital 13,588
3
Common equity tier 1 capital 43,912
4
Paid up capital instruments 11,384 Row 23, CC2
5
Share premium 24,693 Row 24, CC2
6
Retained earnings 7,836 Row 25, CC2
11
(-) Total deductions from common equity tier 1 -30,324
17
(-) Goodwill -25,212 Row 7, CC2
18
(-) Other intangible assets -4,039 Rows 7, 8 and 9, CC2
25
(-) Other deductions -1,073
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 refer-ence to EU IFCC 1
As at period end, EUR 1,000 As at period end, EUR 1,000
Assets – Breakdown by asset classes according to the balance sheet in the audited financial statements
1
Liquid assets 70
2
Claims on credit institutions 22,841
3
Financial assets
4
Financial securities 10,555
5
Private equity and real estate fund investments 16,556
6
Intangible assets
7
Fair value and brands 29,212 Row 17, CC1
8
Client agreements 8 Row 17 and 18, CC1
9
Other intangible assets 30 Row 17 and 18, CC1
10
Tangible assets
11
Right-of-use assets 4,215
12
Tangible assets 425
13
Other assets 15,657
14
Accruals and prepaid expenditure 414
15
Income tax receivables 133
16
Deferred tax assets 153
17
Total Assets 100,270
Liabilities – Breakdown by liability classes according to the balance sheet in the audited financial statements
18
Other liabilities 6,933
19
Accruals and deferred income 12,871
20
Lease liabilities 4,980
21
Income tax liabilities 49
22
Total Liabilities 24,834
Shareholders’ Equity
23
Share capital 11,384 Row 4, CC1
24
Reserve for invested unrestricted equity 24,693 Row 5, CC1
25
Retained earnings 7,836 Row 6, CC1
26
Profit (loss) for the period 31,524
27
Total Shareholders' equity 75,436
Audited consolidated balance sheet and regulatory own funds under regulatory scope of consolidation are equal.
93
eQ in 2023 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 Plc
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
94eQ in 2023 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 2023, the company had had
8 376 shareholders (8 277 shareholders on 31 Dec. 2022). 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 Plc aims in a strong growth, constant cost-efficiency and to pay competitive
dividend. eQ Plc 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 64 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 fifth time in a row. (SFR-survey
2023). The asset management market in Finland has grown strongly, and eQ’s growth
has outpaced the market. We estimate that the long-term outlook for growth in
the asset management market and for eQ in Finland is still good.
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.
20232022202120202019
NUMBER OF SHAREHOLDERS
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
8,376
8,277
7,883
7,261
5,945
35
30
25
20
15
10
5
0
20232022202120202019
SHARE PRICE DEVELOPMENT 2019 TO 2023,
EUR
eQ Plc OMXH
96eQ in 2023 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
Calendar in 2024
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 Thursday 21 March 2024.
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 Annual General Meeting that a dividend of
EUR 0.80 per share be paid out. The dividend is paid in two instalments. The first
instalment, EUR 0.40 per share, is paid to those who are registered as shareholders in
the company’s shareholder register maintained by Euroclear Finland Ltd on the record
date 25 March 2024. The Board proposes that the first instalment of the dividend be
paid out on 3 April 2024.
The second instalment, EUR 0.40 per share, is paid in October 2024. The second
instalment is paid to those who are registered as shareholders in the company’s
shareholder register maintained by Euroclear Finland Ltd on the record date. The Board
of Directors will decide the record date and payment date of the second instalment of
the dividend payment at its meeting in September 2024. The planned record date is 25
September 2024 and the dividend payment date 2 October 2024.
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
ANNUAL REPORT:
WEEK
ANNUAL GENERAL
MEETING:
MARCH
RECORD DATE OF THE FIRST
INSTALMENT OF THE DIVIDEND:
MARCH
RECORD DATE OF
THE SECOND INSTALMENT
OF THE DIVIDEND
PRELIMINARY:
SEPTEMBER
PAYMENT DATE OF
THE FIRST INSTALMENT
OF THE DIVIDEND:
APRIL
PAYMENT DATE OF
THE SECOND INSTALMENT
OF THE DIVIDEND
PRELIMINARY: OCTOBER
Q INTERIM REPORT:
APRIL
HALF YEAR
FINANCIAL REPORT:
AUGUST
Q INTERIM REPORT:
OCTOBER
97
eQ in 2023 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
eQ Plc | Aleksanterinkatu 19, 5th fl | 00100 Helsinki, Finland | Tel. +358 9 6817 8777 | asiakaspalvelu@eQ.fi | www.eQ.fi/en