FIM Group Corporation STOCK EXCHANGE RELEASE 15.2.2007 klo 08:00
FIM Group Corporation financial statement bulletin 2006
FIMS OPERATING PROFIT ON A PAR WITH LAST YEAR; NON-RECURRING ITEMS OF ABOUT
EUR 2 MILLION
Key figures in 2006 (2005)
Net sales: EUR 82.0 million (63.2)
Growth in net sales: 30% (48%)
Operating profit: EUR 19.1 million (19.1)
Operating profit margin: 23% (30%)
Net profit: EUR 13.3 million (13.7)
Earnings per share: EUR 0.32 (0.36)
Proposed dividend: EUR 0.14 per share (0.18)
OPERATING ENVIRONMENT IN 2006
The strong growth in the global equity markets in the first part of the year
tailed off in the second quarter, when concern about inflation and the trend in
the world economy sent share prices downward. During the summer, fading
inflation fears and buoyant corporate earnings sparked a rebound in share
prices. The global equity index rose 8 percent in euro terms in 2006. The
equities index for the worlds emerging markets has risen by 26 percent from
the beginning of the year and the OMX Helsinki Cap Index by 30 percent.
From the standpoint of the fixed-income investor, 2006 was clearly a dual mode
year. Inflation fears and the strong growth in the global economy led to a rise
in long interest rates in the first half of 2006. After the summer, the fixed-
income market turned favorable to investors, because long interest rates
declined during the fall, on the tails of fairly weak financial news from the
USA. In December, interest rates headed upward again.
In trade volumes, 2006 was a record year on the OMX Helsinki Stock Exchange.
Trade volume grew by 29 percent compared with 2005 and was EUR 288 billion
(223). Average intra-day volume grew to about EUR 1.1 billion. The third
quarter was an exception to the pattern of growth, because the sharp correction
in the spring was reflected in the trade volume, and the growth in volume was
markedly lower than in other quarters.
M&A activity in Finland and the countrys nearby areas was brisk. The market in
Finland for capital-protected structured products grew to a record figure of
more than 2 billion euros in 2006 (growth of 40 percent on 2005).
INCOME AND FINANCIAL PERFORMANCE IN 2006
In 2006, FIMs total income from investment services amounted to EUR 82.0
million. Total income increased 30 percent compared with income in 2005 (63.2).
Growth was driven by the strong trend in the capital markets as well as FIMs
active investments to boost growth, along with expanded product offerings and
successful portfolio management.
The second quarter of 2006 saw a plunge in the stock markets in the emerging
markets - an important area for FIM - and in the Nordic countries. The ensuing
slowdown in trade volume as well as the District Court of Helsinkis ruling on
FIMs major owner which was followed by the Finnish FSAs decision to nullify
his voting rights were reflected clearly in third-quarter total income, which
only reached the level of the same period in 2005. The total income in the
other quarters of 2006 grew substantially compared with 2005.
The Groups expenses in 2006, excluding fee and interest expenses, came to EUR
52.5 million (37.9). Expenses grew 39 percent compared to 2005. The inputs made
over the past years to spur growth have particularly increased the Groups
personnel expenses. The average number of employees grew by 37 percent on 2005.
Owing to non-recurring items and factors that negatively affected third quarter
operations, the operating profit in 2006 matched only the level of 2005 and was
EUR 19.1 million (19.1). Operating profit was 23 percent of total income (30).
Non-recurring items amounted to about EUR 2 million and include, among other
things, court costs, damages paid and the cost of reorganizing the investment
banking business.
The Groups taxes were EUR 5.8 million in 2006 and EUR 5.4 million in 2005. The
effective tax rate grew due to non tax-deductible losses in operations abroad.
Net profit for the 2006 fiscal year was EUR 13.3 million (13.7).
Earnings per share for 2006 were EUR 0.32 (0.36).
BALANCE SHEET
The Groups total assets strengthened in fiscal 2006 in step with the share
issue that was carried out in April. Total assets as of December 31, 2006,
stood at EUR 142.4 million (71.4).
The Groups shareholders equity at the end of the fiscal year was EUR 100.1
million (32.4), or EUR 2.34 per share (0.88). The acquisition of minority
interests that was carried out through exchanges of shares during 2006 was made
at fair values, and thereby brought a significant increase in the share premium
reserve. For this reason, goodwill of EUR 41.2 million was recorded in the
consolidated balance sheet. The annualized return on equity was 20.2% (50.8).
The Groups equity ratio was 70.3 percent (45.4) and the Tier 1 ratio was 115.7
percent (59.6).
FIMs derivatives exposure at the end of the reporting period consisted mainly
of equity derivatives held for trading. The value of the underlying assets of
equity derivatives was EUR 44.9 million, and they had a fair value of EUR -5.3
million. In addition, receivables denominated in foreign currency were hedged
with forward contracts, the underlying assets of which had a value of EUR 16.8
million, their fair value being EUR 0.5 million.
INVESTMENTS
In 2006, the Groups investments in tangible and intangible assets were EUR 3.9
million (3.5).
Over the past years, FIM has made a number of investments in its trading and
back office systems. In 2006, the most important investments were carried out
within brokerage. Toward the end of the year, a new customer information system
became operational, along with the last parts of the new back office system,
bringing stepped-up reporting, improved risk management and automated trading
processes.
PERSONNEL
The number of employees has grown greatly in the recent years. In 2006, the
Group had an average headcount of 262 employees (191). The number of employees
at the end of December was 284 (215). During 2006, 24 people left the company
(14).
At the end of 2006, the personnel were divided by business area as follows: FIM
Asset Management: 129 employees; FIM Brokerage: 87 employees; and FIM
Investment Banking: 11 employees. The number of employees working in Finland
was 246, with 35 employees in Russia and 3 in Sweden. Personnel figures are
stated converted to full-time staff.
The share of part-time employees of the total personnel has been under 10
percent during 2006 and 2005. The average age of the personnel is 35 years and
the share of women 41 percent (37).
In 2006, the total amount of salaries and bonuses paid by the group was EUR
23,1 million (16,8).
FIM has put in place a compensation scheme for employees, in which part of the
bonus is based on personal performance. A performance appraisal discussion is
held with every employee twice a year with the aim of agreeing on each persons
development areas, ensuring their level of motivation, going through their
personal profit-related bonus and, furthermore, in order to set targets for the
next half-year period.
As part of the incentive and commitment-building system for the personnel, an
extraordinary general meeting of FIM Group Corporations shareholders passed a
resolution on December 5, 2006, to grant stock options to employees and to CEO
of the FIM Group.
In June 2006, the Group appointed a Human Resources Director, who is also a
member of the Group Management Board. Human resources processes will be refined
and harmonized for a unified approach in different countries.
In the competition organized by the Great Place to Work Institute Finland, FIM
placed second in the general category, from a group of about 80 Finnish
companies. The results were published in January 2007. The companys ranking
improved by one from the third place in 2006.
CHANGES IN THE COMPANYS MANAGEMENT
Risto Perttunen was appointed CEO of FIM Group Corporation, effective July 1,
2006. Niklas Geust was appointed Group CFO, effective July 1, 2006, in addition
to his duties within mutual fund operations. Within business areas there were
following appointments: Jan Forsbom was appointed Managing Director of FIM
Asset Management as from July 1, 2006 and Kurt Lundmark Managing Director of
FIM Investment Banking as from September 1, 2006.
CHANGES IN THE GROUP STRUCTURE
FIM Omaisuudenhoito Oys business was transferred to FIM Asset Management Ltd
as of March 1, 2006. A license for merging FIM Omaisuudenhoito Oy into FIM
Group Corporation was obtained from the Trade Register on July 17, 2006, and
the merger was registered on August 15, 2006.
Following the merger, FIM Group Corporation owns 100% of the shares in all of
its subsidiaries: FIM Securities Ltd, FIM Asset Management Ltd (formerly FIM
Fund Management Ltd), FIM Corporate Finance Ltd, and ZAO FIM Financial Services
and OOO FIM Asset Management, the last two of which are located in Moscow,
Russia.
SHARES AND SHARE CAPITAL
FIM Group Corporation was listed on the OMX Helsinki Stock Exchange, and the
trading in the companys share commenced on the Exchanges Pre List on April
13, 2006. The companys share moved to the Main List on April 21, 2006. The
listing was carried out through a share issue and sale of shares, in which a
total of 9.7 million FIM Group Corporation shares were offered. The share issue
accounted for 3.6 million of this total number of shares.
The FIM Group Corporations share capital on December 31, 2006, was EUR
2,813,505 million. The companys issued shares consist of one share class that
is divided into a total of 42,683,690 shares. According to a decision issued by
the Finnish Financial Supervisory Authority on September 19, 2006, the voting
rights of the shares owned by Mr. Seppo Sairanen were nullified for one year.
Seppo Sairanens shareholding as of December 31, 2006, was a total of
13,476,451 FIM Group Corporation shares, corresponding to 31.6% of the share
capital. Accordingly, the number of votes conferred by all the companys shares
is 29,207,239.
Summary of the changes in FIMs share capital:
Counterbook Increase/ Increase/ Share capital Number of
value of a decrease decrease (EUR) shares
share (EUR) in share in the
capital number of
(EUR) shares
31.12.2005 30 342 000
Share issue 0.07 119 830.53 1 817 949 2 119 830.53 32 159 949
13.4.2006
Share issue 0.07 30 699.69 465 745 2 150 530.22 32 625 694
13.4.2006
Share issue 0.07 237 294.84 3 600 000 2 387 825.06 36 225 694
13.4.2006
Share issue 0.07 425 680.31 6 457 996 2 813 505.37 42 683 690
15.8.2006
After the listing, the trade volume of the FIM Group Corporation share on the
OMX Helsinki Stock Exchange during the period April 13 - December 31, 2006, was
EUR 112.6 million and 19.3 million shares. The trade volume includes the 6.1
million shares sold in the initial public offering. The share price registered
a high of EUR 8.25 in April and a low of EUR 4.76 in June. The volume-weighted
average share price was EUR 5.88. At the end of the reporting period on
December 31, 2006, the share price was EUR 6.10 and the company had a market
capitalization of EUR 260.4 million. The company had in its possession a total
of 36,000 treasury shares as of December 31, 2006, and they had a market value
of EUR 0.2 million.
RESOLUTIONS OF EXTRAORDINARY GENERAL MEETINGS
The Annual General Meeting of FIM Group Corporation was held on February 27,
2006, before the company was listed on the Helsinki Stock Exchange. In
addition, on March 28, 2006, an Extraordinary General Meeting was held, at
which, among other issues, a resolution was passed on the share issue in
connection with the listing.
At a second Extraordinary General Meeting that was held on December 5, 2006, a
resolution was passed on amending the Articles of Association. The amendments
were mostly of technical nature in accordance with the new Companies Act.
Articles regarding Share Capital and Number of Shares were removed from the
Articles of Association and the term of the auditors was defined to end at the
close of the first Annual General Meeting following their election. All the
wordings regarding the Agenda of the Annual General Meeting were amended in
accordance with the new Companies Act. The Extraordinary General Meeting
furthermore resolved to issue stock options to FIM Group personnel and key
employees as well as to FIM Group Corporations wholly-owned subsidiary FIM
Securities Ltd.
STOCK OPTION PLAN
In accordance with the resolution of the General Meeting, a total of 371,250
stock options 2006H were granted to the personnel of FIM and a total of 870,000
stock options 2006A were granted to key employees. All the remaining stock
options, 2,608,750 in number, were granted to FIM Securities Ltd. The
subscription price of the companys share through the exercise of stock option
warrants 2006A and 2006H is the trade volume-weighted average price of the FIM
Group Corporation share on the Helsinki Stock Exchange from October 1 to
December 31, 2006.
RISK MANAGEMENT
Risk management is an essential part of the internal control and its aim is to
reduce the probability of unforeseeable losses or a threat to the reputation of
FIM. Risk management covers all material risks connected with FIMs operations,
such as operational risks, market risks, liquidity and financing risks, credit
risks and strategic risks.
The parent companys Board of Directors defines the principles of the Groups
risk-taking, grants decision-making authorizations to management and oversees
risk management. The task of the Groups independent risk management team is to
study and assess, efficiently and broadly, the comprehensiveness, adequacy and
effectiveness of the FIM Groups risk management. The unit is responsible for
maintaining, developing and preparing risk management guidelines that are
confirmed by the parent companys Board of Directors. The risk management
assessment function must also ensure that for all major risks assumed in
business operations, the joint effect on the earnings and own funds of both an
individual Group company and the FIM Group are reported to the respective Board
of Directors and the Management Boards.
Operational risks encompass the danger of loss or damage arising as a result of
unclear or deficient guidelines, actions in violation of instructions,
unreliable information, deficient systems or external factors. The management
of operational risks is part of the FIM Groups overall risk management, and it
generally involves minimizing risks. In addition to preventive work that is
carried out to prevent operational risks from materializing, the FIM Group
seeks to maintain sufficient insurance coverage for the purpose of
compensating, for example, loss or damage resulting from malfeasance, intrusion
into information systems, or other criminal actions. Continuity plans have
been put in place to cope with major disturbances to operations.
Market risk means the effect on earnings of fluctuations in interest rates or
asset prices. FIMs Board of Directors determines the risk-taking limits and
principles governing market risks. Limits and other operational instructions
have been set for the taking of market risks, bearing in mind the sufficiency
of equity and capital adequacy planning within the FIM Group.
By means of managing liquidity and refinancing risks, it is insured that the
Group is able to meet its financing obligations. To support liquidity
management, FIM Securities Ltd has the possibility, in the form of credit
extended by customers (so-called cash account customers), to improve its
liquidity, and, additionally, the company has credit facilities that have been
agreed with banks and can be drawn as the need arises. In practice, despite the
increase in trading activity, it has been possible to attend to liquidity
management mainly without having recourse to bank credit facilities.
Across FIM units, the contractual counterparties in accordance with the adopted
definition of credit risk are customers and other trading counterparties as
well as other cooperation partners. In line with the lending policy approved by
the Board of Directors, FIM engages only in lending activities in which risk-
taking is limited and the risk is manageable. Lending is targeted primarily to
private individuals.
Reformed capital adequacy regulations
As of January 1, 2007, FIMs operations have been in compliance with the Basel
II capital adequacy reform. FIMs Board of Directors has prepared a capital
plan in accordance with the reformed capital adequacy regulations. The plan
sets out FIMs risk-based capital requirement, the sufficiency of capital items
and capital adequacy. The capital plan furthermore sets the objectives for the
shareholders equity to cover FIMs capital requirements and for the capital
adequacy ratio.
FIM operates nearly entirely on a fee and commission basis and does not seek,
to any significant extent, to generate income through active risk-taking.
Accordingly, the Groups risk-based capital requirement is relatively small in
proportion to the extent of operations.
The main component that ties up capital across FIM units is the liquidity
required in brokerage activities, particularly in Russia. In planning the
amount of the Groups equity, the central factor is, however, the assessment of
the riskiness of operations. In addition to the minimum requirements set in the
regulatory regime, a number of international counterparties and cooperating
partners require a given capital adequacy level, and thus capital adequacy is
also a factor influencing the competitive position.
FIM complies with all the relevant capital adequacy regulations. Furthermore,
at FIMs business units and at the Group level, a regular assessment is made of
the riskiness of operations, and the susceptibility to risk is taken into
account in managing capital and solvency as well as in operational planning.
The capital requirement for covering business risks is assessed systematically,
using means such as scenario analysis and stress testing. The Groups balance
sheet and capital adequacy position are currently strong.
The regulatory capital adequacy requirement for FIMs Pillar 1 risks (credit,
market and operational risks) on December 31, 2006, was a total of EUR 11.8
million. The adequacy of capital is examined especially with respect to the
regulatory calculations for Tier 1 capital. Tier 1 capital corresponds roughly
to shareholders equity in the balance sheet less the amount of intangible
assets and the fair value reserve derived from the measurement differences for
available-for-sale securities. The Tier 1 capital as of December 31, 2006 was
about EUR 49.7 million (22.6). The Groups capital adequacy is thus nearly four-
fold compared to the required in order to meet the minimum level specified in
the regulatory requirements. Accordingly, the Group has a strong capital and
solvency position at the present time.
In order to maintain sufficient operational leeway and a risk buffer, the
target level for FIMs own funds is either a minimum of 150 percent of the risk-
based capital requirement, or 150 percent of the minimum capital adequacy
required by the regulatory authorities, whichever is greater. Calculated in
this way, FIMs capital adequacy target at present would be about EUR 20
million, which is very substantially below the present level of the companys
own funds (Tier 1). Bearing in mind the Groups growth at the present time, it
is desirable to maintain a sufficient capital adequacy level in order to be
able to prepare for the capital requirements for the growth in operations and
the planned start-up of retail banking.
LITIGATION
In a court case concerning the concealment of the assets of a bankrupt private
person, which occurred in 1998, the companys former CEO, Seppo Sairanen, and
one broker were sentenced in September 2006 to a period of imprisonment. In the
same connection, a corporate fine of EUR 100,000 was imposed on FIM
Omaisuudenhoito Oy. The company and the persons in question have appealed the
District Courts judgment.
On August 24, 2006, an arbitration tribunal handed down its decision in the
arbitration proceedings between the former managing director of FIM Corporate
Finance Ltd and FIM Group Corporation. The arbitration tribunal obligated FIM
Group Corporation to pay to said person, against the shareholding in FIM
Corporate Finance Ltd, damages plus interest and expenses. The cost effect of
the damages paid and expenses, about EUR 0.8 million, was booked to the third
quarter of 2006.
BUSINESS DEVELOPMENT
Three priority areas have been chosen as the cornerstones of the Groups growth-
oriented business strategy. The aim is to expand service offerings to domestic
clients by adding innovative investment service products, by devoting further
efforts to sales of structured products and by developing the Corporate Finance
function in Finland. As part of the enhancement of its service concept, FIM has
in January 2007 applied for a license to operate as a bank.
The second priority area is the expansion of operations in Russia. The
subsidiary that was established in Russia to carry on asset management and
mutual fund operations received an operating license during the third quarter
and the startup of actual operations is progressing as planned. The third
growth area that has been defined is the sale of selected investment service
products to an international clientele. The objective is to increase sales of
FIMs spearhead products to international institutional investors, and as part
of this development effort, the mutual fund business is presently preparing the
registration of mutual funds elsewhere in Europe.
Operations in selected growth areas are expected to increase the Groups total
income substantially over a period of 1-2 years.
GLITNIRS ANNOUNCEMENT ON INTENTION TO MAKE A PUBLIC TENDER OFFER
Icelandic Glitnir banki h.f. announced on February 5, 2007 that it intends to
acquire the outstanding shares and options in FIM, through a public tender
offer. It has also obtained an irrevocable undertaking from the shareholders of
FIM, who represent approximately 68 percent of the shares, to sell their shares
to Glitnir.
All the other shareholders of FIM have two alternatives to accept the public
tender offer:
a) Combined cash and Glitnir share offer containing Eur 4.00 cash and 14.75
Glitnir shares per each FIM Share.
b) Cash offer for Eur 8.00 per FIM Share.
The combined cash and share consideration corresponds to a total consideration
of Eur 8.00 per FIM share based on Glitnirs closing share price of ISK 24.80
on January 15, 2007 and an ISK/EUR exchange rate of 91.44, the mid-rate
published by the Icelandic Central Bank on January 16, 2007.
If the General Meeting of Shareholders of FIM resolves on a dividend
distribution in excess of Eur 0.14 before the settlement date of the public
tender offer, the offer price shall be reduced by the amount of the dividend in
excess of Eur 0.14 per share in any such dividend distribution.
FIM stock option holders will receive Eur 8.00 per option less the trade
weighted average price of the FIM share in regular trading on the Helsinki
stock exchange between October 1 and December 31, 2006 (Eur 5.19). The trade
weighted average referred to above (the option exercise price) shall be
adjusted by any dividend paid by FIM.
FIM Group Corporations Board of Directors recommends the shareholders and
option holders to accept the tender offer. Further, the Board of Directors of
FIM has signed a combination agreement with Glitnir to such effect.
The Board of Directors notes that at the time of decision making each FIM
shareholder and option holder must independently choose whether to accept the
combined cash and share offer, the cash offer or not to accept the tender
offer. The Board of Directors recommends each shareholder and option holder to
independently evaluate the impact of possible exchange rate fluctuation risk,
the risk associated with the general development in the Icelandic economy, tax
position, trading and other costs and volatility risk with respect to the share
component of the combined cash and share offer. The principle terms of the
public tender offer, including the conditions for completing the public tender
offer, were published in a stock exchange release on February 5, 2007 which is
also available on FIMs website at www.fim.com.
The offer period is expected to commence on March 12, 2007 or as soon as
practicable thereafter and a public offer document will be published prior to
the start of the offer period and it will also be available on FIMs website at
www.fim.com.
OTHER EVENTS AFTER THE REPORT PERIOD
At its meeting in January 2007, the Board of Directors of FIM Group Corporation
announced its decision to begin preparing for the start-up of retail banking
operations as part of the Groups expansion of its service offerings. In this
connection, Mr. Timo T. Laitinen, M.Sc. (Eng.), was appointed CFO of the FIM
Group as of February 15, 2007, and, apart from his role as CFO, he will also be
in charge of FIMs retail banking project. The present CFO, Mr. Niklas Geust,
will leave for a sabbatical beginning on March 1, 2007.
According to the plan ,FIM Corporate Finance Ltd will merge into FIM Asset
Management Ltd during 2007.
NEAR-TERM OUTLOOK
FIM Asset Managements assets under management on January 31, 2007, totalled
about EUR 3,020 million, an increase of 6 percent since January 31, 2006. FIM
Brokerages market share of euro-denominated trade volume on the OMX Helsinki
Stock Exchange was 3.1 percent in January (2.6 percent, January 2006). Based on
the number of trades, the market share was 3.6 percent (3.1).
The trend in operations in January offers a good starting point for the current
year. The growth in full-year net sales is expected to reach the long-term
growth target of 20 percent. Full-year operating profit is estimated to exceed
that reported for 2006.
Cyclical sensitivity is typical of investment service operations and FIMs
operations are also characterized by a marked dependence on the trend in the
global securities markets. In the short term, performance fees in discretionary
asset management are the type of income that is the most sensitive of all to
both positive and negative moves in the market.
BOARD OF DIRECTORS PROPOSAL FOR THE DISPOSAL OF PROFITS
Parent companys distributable funds are EUR 22,929,115.77 million. The Board
of Directors has decided to propose to the Annual General Meeting that a
dividend of EUR 0.14 per share be paid for the 2006 fiscal year (EUR 0.18), or
a total dividend payout of EUR 5,975,716.60.
REVIEW OF THE BUSINESS UNITS
FIM Asset Management
Key figures (million euros except for personnel and client figures)
10-12/06 10-12/05 Change 1-12/06 1-12/05 Change
Total income 14.9 14.4 4 % 50.5 39.3 28 %
Operating profit 4.9 6.9 -29 % 15.6 14.7 7 %
Operating margin, % 33 % 48 % 31 % 37 %
Personnel, average 129 88 47 % 115 85 35 %
Assets under 2 966 2 552 16 %
management (end of
period)
Assets under 1 865 1 622 15 %
management, mutual
funds (end of
period)
Assets under 1 297 1 215 7 %
management, equity
funds (end of
period)
Market share, 3.1 % 3.6 %
mutual funds (end
of period)
Market share, 5.9 % 7.4 %
equity funds (end
of period)
Net subscription, -8 21 -70 303
mutual funds
Net subscription, 15 40 -185 279
equity funds
Number of unit 55 113 48 471 14 %
holders, mutual
funds (end of
period)
Number of clients 2 444 2 260 8 %
in discretionary
asset management
and discretionary
fund management
(end of period)
Oct.-Dec. 2006 compared with Oct.-Dec. 2005
FIM Asset Managements total income in the fourth quarter was EUR 14.9 million
(14.4). Total income increased by 64 percent compared with the modest third
quarter. The growth in total income compared to the last quarter of 2005 was 4
percent. The amount of assets under management increased by EUR 274 million
from the end of the third quarter and was about EUR 3.0 billion at the end of
the year (2.6). Net subscriptions to mutual funds decreased by EUR 8 million in
the past quarter (21).
Operating profit in October-December was EUR 4.9 million (6.9). The drop in
operating profit was attributable to factors such as the strong outlays made to
insure future growth. FIM Asset Managements average payroll grew by 47 percent
on the same period of last year.
Jan.-Dec. 2006 compared with Jan.-Dec. 2005
FIM Asset Managements total income in 2006 amounted to EUR 50.5 million
(39.3). The strong growth in total income was largely a result of the increase
in assets under management. In 2006, the amount of assets under management was
in average 38 percent greater than a year earlier. Full-year operating profit
was EUR 15.6 million (14.7).
Of FIMs mutual funds, 50 percent outperformed their benchmark indeces in the
reporting period. Of FIMs 12 Morning Star-rated balanced and equity funds, 7
funds had five stars at the end of the year. Within discretionary asset
management and fund management, successful allocation decisions generally led
to a return that exceeded the global equity markets.
The subsidiary that was established in Russia to carry on FIMs asset
management and investment banking operations received an operating license in
August 2006. Preparations for actual operations are progressing according to
plans, and in January the FSFR, Russias financial markets regulatory
authority, approved the statutes of FIMs first local funds. It is estimated
that the funds will begin operating during the current quarter.
The expansion of operations in Sweden has been continued. In the fall of 2006,
the Stockholm branch office concluded a major distribution agreement with
Länsförsäkringar, one of Swedens largest insurance companies.
FIM Brokerage
Key figures (million euros except for personnel and client figures)
10-12/06 10-12/05 Change 1-12/06 1-12/05 Change
Total income 7.3 7.1 4 % 25.4 20.8 22 %
Operating profit 0.8 1.3 -35 % 3.7 4.4 -18 %
Operating margin, % 11 % 18 % 14 % 21 %
Personnel, average 83 70 19 % 80 58 38 %
Market share, 3.1 % 3.5 % -0.4 % 3.0 % 2.9 % 0.7 %
turnover in euros
(OMX Helsinki)
Market share, number 3.4 % 4.2 % -0.8 % 3.4 % 3.3 % 0.1 %
of transactions (OMX
Helsinki)
Oct.-Dec. 2006 compared with Oct.-Dec. 2005
FIM Brokerages total income in the last quarter of the year was EUR 7.3
million (7.1). Trading picked up markedly in the latter part of the year, and
FIM Brokerages total income rose 42 percent compared with a modest third
quarter. FIMs market share on the OMX Helsinki Stock Exchange grew compared
with the third quarter and was 3.1 percent as measured by the value of
transactions and 3.4 percent by transaction volume. Total income was up 4
percent on the same quarter of 2005.
Fourth-quarter operating profit was EUR 0.8 million (1.3). The decrease in
operating profit was affected significantly by the strong inputs into expanding
operations in Russia.
Jan.-Dec./2006 compared with Jan.-Dec./2005
FIM Brokerages total income in 2006 increased by 22 percent and was EUR 25.4
million (20.8). Factors that contributed to the strong growth in total income
were the clear increase in trade volumes on the OMX Helsinki Stock Exchange as
well as a growing clientele for FIM Brokerage's operations in Russia. FIMs
international customers increased their trade volumes markedly over the year.
Within the FIM Direct online trading service, there was an increase in both the
number of customers and the number of trades executed. In 2006, operating
profit was EUR 3.7 million (4.4). Operating profit was burdened by the outlays
on expanding operations in Russia.
The infrastructure for FIM Brokerages securities brokerage operations located
in Moscow was put in place for the most part during 2006. The inputs into
developing and expanding operations in Russia increased FIM Brokerages
expenses. During the year, the earnings of the unit in Russia developed in a
positive direction, but the full-year result was still in the red.
In the summer of 2006, FIM Securities Ltd and the Finnish Savings Banks
Association entered into a Cooperation Agreement according to which FIM will
act as the online intermediary in securities transactions of the Finnish
Savings Banks Associations member savings banks in all trades executed on the
Nordic Exchange. The savings banks will go over to using FIM Securities as
their intermediary in securities transactions in the fall of 2007.
Investment Banking
Key figures (million euros except for personnel and client figures)
10-12/06 10-12/05 Change 1-12/06 1-12/05 Change
Total income 2.7 1.5 82 % 7.4 4.4 68 %
Operating profit 1.0 0.5 119 % 1.9 1.4 38 %
Operating margin, % 38 % 32 % 26 % 31 %
Personnel, average 13 13 - 16 12 33 %
Sales of structured 77 44 75 % 229 129 79 %
notes
Oct.-Dec./2006 compared with Oct.-Dec./2005
FIM Investment Bankings total income in the last quarter of the year was EUR
2.7 million (1.5). The operating result was EUR 1.0 million (0.5). The growth
in total income and operating profit was attributable in particular to the good
trend in sales of structured products. After a seasonally slow third quarter,
sales of structured products hit EUR 77 million in the fourth quarter.
Jan.-Dec. 2006 compared with Jan.-Dec. 2005
In 2006, FIM Investment Banking generated total income of EUR 7.4 million
(4.4). In 2006, the business area comprised two separate units: structured
products and corporate finance advisory services. During the summer and fall of
2006, the company made a decision to reorganize the investment banking
business, and the business areas activities focused mainly on selling
structured products. In 2006, operating profit was EUR 1.9 million (1,4).
The market for capital-protected structured products in Finland grew to a
record figure of over 2 billion euros in 2006 (growth of 40 percent on 2005).
Last year, FIMs sales of structured products totaled EUR 229 million,
representing growth of 79 percent on 2005. With a view to streamlining the
structure of the investment banking operations, sales of structured products
were organized within FIM Asset Management in the latter part of the year.
The FIM Investment Banking division will from now on focus on advisory services
in capital market transactions and in mergers and acquisitions.
This report has been prepared in accordance with IFRS recognition and
measurement principles and the same accounting policies as were applied in the
financial statements for 2005, with the exception of performance fees, which
are not periodized in the Groups first and third quarters. In accordance with
the Groups accounting policies, performance fees are recognized as income semi-
annually on the last day of June and December at the end of the report and
charging period under each agreement, at which time the amount of income can be
determined reliably.
This report has not been prepared in compliance with all the requirements of
IAS 34 Interim Financial Reporting.
The Group has adopted the following standards as of the beginning of 2006:
IAS 19 (Amendment) Employee Benefits, IAS 21 (Amendment) The Effect of Changes
in Foreign Exchange Rates - Net Investment in a Foreign Operation, IAS 39
(Amendment) Financial Instruments: Recognition and Measurement (Cash Flow Hedge
Accounting of Forecast Intragroup Transactions), Amendment to IAS 39: The Fair
Value Option, IAS 39 (Amendment) Financial Instruments: Recognition and
Measurement and IFRS 4 (Amendment) Insurance Contracts - Financial Guarantee
Contracts, as well as IFRIC 4, Determining whether an Arrangement contains a
Lease. The adoption of these standards has not had a material impact on the
consolidated financial statements.
This Financial Statement Bulletin is unaudited.
Helsinki, February 15, 2007
FIM Group Corporation
Board of Directors
TABLES
FIM GROUP INCOME STATEMENT
(IFRS)
1.10.- 1.10.- 1.1.- 1.1.-
31.12.06 31.12.05 31.12.06 31.12.05
Thousand euros
Fee and commission income 23 039 20 831 77 322 59 082
Net gains (losses) from 585 406 1 216 39
securities trading
Dividend income 47 185 883 2 407
Interest income 797 669 2 264 1 313
Gains less losses from 0 93 147 144
available-for-sale financial
assets
Other operating income 19 131 214 167
TOTAL INCOME FROM INVESTMENT 24 486 22 314 82 046 63 152
SERVICES
Fee and commission expenses -3 289 -2 035 -9 514 -5 851
Interest expenses -231 -116 -910 -343
General administrative
expenses
Employee benefits expenses
Wages and salaries -6 804 -5 097 -22 970 -16 136
Social security costs
Pension costs -864 -572 -3 413 -2 497
Other personnel costs -433 -229 -1 555 -898
Share-based payments 0 -196 -52 -325
Other administrative -4 530 -3 846 -15 775 -11 960
expenses
Depreciation, amortization -701 -529 -2 508 -1 863
and impairment charges
Rent expenses -452 -343 -1 707 -1 403
Other operating expenses -901 -1 120 -4 527 -2 768
Operating profit 6 281 8 232 19 114 19 108
PROFIT BEFORE TAX 6 281 8 232 19 114 19 108
Income taxes -1 898 -2 189 -5 766 -5 371
PROFIT FOR THE PERIOD 4 383 6 043 13 348 13 737
Equity holders of the 4 383 4 456 11 607 10 490
Company
Minority interest* 0 1 587 1 741 3 248
Earnings per share
attributable to equity
holders of the company
Basic and diluted earnings 0,10 0,15 0,32 0,36
per share, EUR
Weighted average number of 42 648 29 122 36 763 29 482
shares during the period,
thousands
* after August 15, 2006 no
minority interests
FIM Group Corporation Consolidated 31.12.06 31.12.05
Balance Sheet (IFRS)
Thousand euros
ASSETS
Cash and cash equivalents 24 089 18 080
Due from customers
Repayable on demand 5 254 4 730
Shares and participations
Securities trading 40 258 15 804
Available-for-sale investments 1 084 1 601
Derivative financial instruments 1 473 3 097
Investments in associates 0 0
Intangible assets
Goodwill 41 163 31
Other intangible assets 3 186 2 751
Tangible assets
Shares in property investment 0 17
companies
Other tangible assets 3 914 2 908
Other assets 9 151 11 637
Accrued income and prepayments 12 622 10 725
Deferred tax receivables 189
TOTAL ASSETS 142 384 71 381
EQUITY AND LIABILITIES
EQUITY
Equity attributable to equity holders
of the Company
Share capital 2 814 2 000
Share premium 65 493 645
Treasury shares -35 -811
Translation difference 3 28
Fair value reserve 8 67
Other reserves 0 2 482
Retained earnings 20 177 11 859
Profit for the period 11 607 10 490
100 066 26 760
Minority interest 0 5 628
Total equity 100 066 32 388
LIABILITIES
Due to banks and financial 0 476
institutions
Due to customers
Repayable on demand 2 593 914
Derivative financial instruments and 11 414 5 422
other trading liabilities
Other liabilities 17 264 20 175
Accrued expenses and deferred income 11 048 11 952
Deferred tax liabilities 0 55
Total liabilities 42 319 38 993
TOTAL EQUITY AND LIABILITIES 142 384 71 381
CONSOLIDATED STATEMENT OF CHANGES IN
EQUITY
Share Share Other Treasury Translation
capital premium reserves shares difference
1000 eur
Equity at December 984 1 661 4 915 -2 976 -29
31, 2004
Net gains (losses)
from available-for-
sale investments
Currency 58
translation
adjustments
Listing expenses,
net
Profit for the
period
Minoritys share of
the profit for the
period
Total recognized 58
income for the
period
Dividend for year
Change in minority
interest
Increase in share
capital
Transfers in equity 1 016 -1 016 -2623 2 623
Purchase/sales of 190 -458
own shares
Taxes on equity
Equity at December 2 000 645 2 482 -811 28
31, 2005
Fair value Retained Total Minority Total
reserve earnings equity interest equity
attrib-
utable
to
equity
holders
of the
Company
Equity at December 240 13 735 18 530 3 122 21 651
31, 2004
Net gains (losses) -173 -173 9 -164
from available-for-
sale investments
Currency -33 24 24
translation
adjustments
Listing expenses, 55 55 55
net
Profit for the 10 490 10 490 10 490
period
Minoritys share of 3 247 3 247
the profit for the
period
Total recognized -173 10 512 10 396 3 256 13 652
income for the
period
Dividend for year -2 000 -2 000 -750 -2 750
Change in minority
interest
Increase in share
capital
Transfers in equity
Purchase/sales of 102 -166 -166
own shares
Taxes on equity
Equity at December 67 22 349 26 760 5 628 32 388
31, 2005
Share Share Other Treasury Translation
capital premium reserves shares difference
1000 eur
Equity at December 2 000 645 2 482 -811 28
31, 2005
Net gains (losses)
from available-for-
sale investments
Currency -26
translation
adjustments
Listing expenses, -2268
net
Profit for the
period
Minoritys share of
the profit for the
period
Total recognized -2268 -26
income for the
period
Dividend for year
Change in minority
interest
Increase in share 814 67 116 776
capital
Transfers in equity -2482
Taxes on equity
Equity at December 2 814 65 493 -35 3
31, 2006
Equity at December Fair value Retained Total Minority Total
31, 2005 reserve earnings equity interest equity
attrib-
utable
to
equity
holders
of the
Company
67 22 349 26 760 5 628 32 388
Net gains (losses) -59 -3 -62 -62
from available-for-
sale investments
Currency -14 -40 -40
translation
adjustments
Listing expenses, -2 268 -2 268
net
Profit for the 9 865 9 865 1 741 11 607
period
Minoritys share of 1 741 1 741 -1 741
the profit for the
period
Total recognized -59 11 589 9 237 9 237
income for the
period
Dividend for year -5 228 -5 228 -1 505 -6 733
Change in minority -3 059 -3 059
interest
Increase in share 565 69 270 -1 064 68 206
capital
Transfers in equity 2 482
Taxes on equity 28 28 28
Equity at December 8 31 784 100 066 0 100 066
31, 2005
FIM GROUP CORPORATION CONSOLIDATED 1.1. - 30.9.06 2005
CASH FLOW STATEMENT
Thousand euros
Net cash from operations 17 873 17 458
Changes in financial items -19 428 1 549
Net cash generated from operating -1 555 19 007
activities
Net cash used in investing activities -3 038 -2 488
Change in equity 293
Share issue, net 17 635
Dividends paid -7 032 -2 750
Net cash used in financing activities 10 603 -2 457
Change in liquid assets 6 010 14 062
Cash and cash equivalents at the 18 080 4 018
beginning of the period
Cash and cash equivalents at the end 24 089 18 080
of the period
Change in liquid assets 6 010 14 062
FIM GROUP QUARTERLY 10- 7-9/06 4-6/06 1-3/06 10-
INCOME STATEMENT 12/06 12/05
Thousand euros
Fee and commission 23 039 13 607 20 942 19 734 20 831
income
Net gains/losses 585 249 -303 685 406
from securities
trading
Dividend income 47 9 530 297 185
Interest income 797 523 490 454 669
Gains less losses 0 -2 113 36 93
from available-for-
sale investments
Other operating 19 99 65 31 131
income
TOTAL INCOME FROM 24 486 14 485 21 838 21 237 22 314
INVESTMENT SERVICES
Fee and commission -3 289 -1 760 -2 312 -2 153 -2 035
expenses
Interest expenses -231 -188 -138 -353 -116
General
administrative
expenses
Employee benefits
expenses
Wages and salaries -6 804 -4 331 -6 293 -5 542 -5 096
Social security
costs
Pension costs -864 -785 -857 -906 -572
Other personnel -433 -385 -413 -325 -229
costs
Share-based 0 0 0 -52 -196
payments
Other -4 530 -3 477 -4 131 -3 637 -3 846
administrative
expenses
Depreciation, -701 -650 -608 -549 -529
amortization and
impairment charges
Rent expenses -452 -436 -399 -420 -343
Other operating -901 -1 480 -1 078 -1 069 -1 121
expenses
Operating profit 6 281 994 5 610 6 230 8 232
PROFIT BEFORE TAX 6 281 994 5 610 6 230 8 232
Income taxes -1 898 -286 -1 631 -1 951 -2 189
PROFIT FOR THE 4 383 708 3 979 4 279 6 043
PERIOD
Equity holders of 4 383 376 3 624 3 223 4 456
the Company
Minority interest* 0 332 354 1 055 1 587
Earnings per share
attributable to
equity holders of
the company
Basic and diluted 0,10 0,01 0,10 0,11 0,15
earnings per share,
EUR
Weighted average 42 648 39 489 35 299 29 439 29 122
number of shares
during the period,
thousands
* after August 15,
2006 no minority
interests
SEGMENT INFORMATION 10- 7-9/06 4-6/06 1-3/06 10-
12/06 12/05
Thousand euros
Asset Management
Total income 14 867 9 087 13 223 13 314 14 363
Operating profit 4 916 2 008 3 862 4 856 6 940
Brokerage
Total income 7 287 5 145 6 070 6 835 7 057
Operating profit 839 188 777 1 817 1 298
Investment Banking
Total income 2 701 449 2 818 1 469 1 486
Operating profit 1 038 -252 1 218 -97 473
Group and eliminations
Total Income -369 -197 -272 -381 -591
Operating profit -513 -951 -247 -347 -479
Total
Total Income 24 486 14 485 21 838 21 237 22 314
Operating profit 6 280 994 5 610 6 230 8 232
FEE AND COMMISSION
INCOME
Fee and commission 4 739 3 568 4 433 4 318 3 813
income from brokerage
Transaction-based fees 1 706 695 3 183 3 017 2 120
from asset management
Fixed management fees 7 652 7 578 8 020 8 840 7 015
from mutual funds
Performance based fees 118 41 93 75 0
from mutual funds
Fixed management fees 765 487 652 569 534
from discretionary
asset management
Performance based fees 3 753 -11 588 199 4 324
from discretionary
asset management
Arrangement fees from 2 786 315 2 510 1 166 1 287
structured products
Advisory fees 58 26 52 295 143
Custody fees 605 578 545 667 497
Other fee and 371 170 588 185 426
commission income
Fees from foreign 483 160 280 401 672
exchange transaction
executed on behalf of
clients
Total 23 039 13 608 20 942 19 733 20 831
KEY FIGURES DESCRIBING FINANCIAL 1-12/2006 1-12/2005
DEVELOPMENT
Return on equity, annualised % 20.2 % 50.8 %
Cost/income ratio 0.77 0.70
Basic and diluted earnings per share, EUR 0.32 0.36
Book value per share, EUR (end of period) 2.34 0.88
Equity ratio, % (end of period) 70.3 % 45.4 %
Tier 1 ratio, % (end of period) 115.7 % 59.6 %
Return on equity, annualised %
operating profit/loss - taxes x 100
---------------------------
Total shareholders' equity (including minority interest)
(average from start and end of period)
Cost/income ratio
Interest expenses + Fee and commission expenses + administrative expenses +
depreciation + rents + other operating expenses
---------------------------
Total income from investment services
Basic and diluted earnings per share, EUR
Profit for the period attributable to equity holders of the Company
---------------------------
Weighted average number of shares
Book value per share, EUR
Total shareholders'equity (excluding minority interest)
---------------------------
Number of shares at period-end
Equity ratio, %
Total shareholders' equity (including minority interest) x 100
---------------------------
Balance sheet total
Tier 1 ratio, % =
Core capital (including minority interest) x 100
---------------------------
Total risk weighted assets
FIM Group Corporation
Risto Perttunen
CEO
For additional information,
please contact:
Risto Perttunen,
toimitusjohtaja, puh. 09 6134
6303
Timo T. Laitinen, CFO (as from
15.2.2007), puh. 09 6134 6525
Niklas Geust, CFO, puh. 09 6134
6210
Distribution:
Helsinki Stock Exchange
The main media
www.fim.com
Established in 1987, FIM is a
Finnish investment services
group that offers asset
management, brokerage and
investment banking services for
private persons and
organizations. In addition to
the head office in Helsinki,
FIM has regional offices in
Espoo, Jyväskylä, Kuopio,
Lahti, Oulu, Riihimäki,
Tampere, Turku, and Vaasa. FIM
also operates in Stockholm and
Moscow. The company's net sales
in 2006 were 82.0 million euros
and operating profit 19.1
million euros. FIM employed 284
persons in the end 2006.
www.fim.com.
FIM Group Oyj
FIM Group Corporation financial statement bulletin 2006
| Source: FIM Group