finances
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finnish cultural foundation
annual report 2013–2014
T
he surplus for the financial year was
EUR 27.9 million. Capital gains on
assets were recognised at EUR 33.2
million. A total of EUR 3million of this sum
was used for supporting the provision of
grants by Regional Funds.
The Finnish Cultural Foundation
received a total of EUR 7.5 million in
legacies and donations during the year.
Of these, capital donations totalled EUR 7.2
million and operating donations allocated
to grants amounted to EUR 0.3 million. On
30 September 2014, the Foundation had
a total of 806 donor funds.
Market situation
During the year under review, the world
economy has continued its slow recovery,
even though geopolitical tensions have
increased and slowed down economic
growth.
In the United States, unemployment
is down and investments and private
consumption are up. Monetary policy
has been gradually tightened. Among the
emerging countries, both China and India
have experienced faster-than-expected
growth. There had already been a substan-
tial slowdown in the Russian economy
before the crisis in Ukraine.
The economic prospects for the euro
area are dim and the economic sanctions
imposed on Russia will not improve the
situation. Extremely low inflation has
emerged as a new threat. The euro has
finally weakened substantially against the
US dollar and this devaluation will provide
a boost for companies in the euro area.
The Finnish economy is contracting
for the third year running and the growth
prospects are among the weakest in the
euro area. Finland is suffering from three
problems occurring simultaneously: weak
export demand, the effects of the economic
sanctions resulting from the crisis in
underperformance was due to the fact that
the Foundation has not invested in govern-
ment bonds in the euro area, even though
they are included in the portfolio bench-
mark index.
Other investments
The return on the Foundation’s other
investments (mainly private equity funds)
stood at 7.2 per cent. Real estate invest-
ments also yielded a high return (8.7 per
cent) This is due to a rise in the value of
real estate funds (housing funds).
Responsible investments
In addition to the legislation in effect, the
Foundation observes responsible and
sustainable principles in its investment
activities. The Finnish Cultural Founda-
tion used an external expert to assess
the responsibility of its domestic equity
investments during the year. The expert
reviewed the Foundation’s domestic equity
portfolio at regular intervals. In foreign
fund investments, the Foundation only
cooperates with asset managers who act
in a responsible and transparent manner
and who have signed the UN Principles of
Responsible Investment (PRI) or a compa-
rable document.
Outlook
As in previous years, the biggest uncer-
tainties from the Foundation’s perspective
concern the trends in the global economy,
capital markets and the returns on its
investment portfolio. The Finnish Cultural
Foundation has divided its assets into
different asset categories in accordance
with the investment policy approved by its
Board of Trustees. Volatility in the capital
markets occasionally results in substantial
fluctuations in values. However, the Foun-
dation is a long-term investor and highly
resistant to crises.
Ukraine and, in the domestic market,
a weakening of household purchasing
power.
Equities
Price fluctuations in the equity markets
have been substantial and there have been
considerable differences between returns
generated at the world’s stock exchanges.
North America has been doing well for
quite a while and after rising 26.5 per cent
during the year, equity prices there have
reached record levels. In the emerging
markets, equity prices increased by 11.8
per cent, despite the difficult first months
of the year. In Europe, equity prices rose
by 13.4 per cent and in Finland 15.9 per
cent. The return on the Finnish Cultural
Foundation’s equity investments was 23.8
per cent, while the return on the portfo-
lio’s benchmark index was 16.1 per cent.
The portfolio yielded higher returns than
the index because the price of Huhtamäki
Group shares, the Foundation’s biggest
investment, rose sharply during the year.
The price of Huhtamäki shares increased
by 37.2 per cent (dividend adjusted
increase was 41.3 per cent).
Interest income
Contrary to all expectations, bondmarkets
generated good returns in 2014. At the
end of the financial year, the return on
European government bonds stood at a
hefty 11.4 per cent. The sharpening geopo-
litical situation has increased demand
for government bonds at the expense of
riskier products. For example, the German
ten-year interest rate halved during the
year under review.
The return on the Finnish Cultural
Foundation’s fixed income investments
was 5.1 per cent, while the return on the
benchmark index was 8.8 per cent. The
Further growth in the assets of
the Finnish Cultural Foundation
The return on the Foundation’s investments in the 2013–2014 financial year was
excell nt, at 17 per cent. The fair value of the Foundation’s assets stood at EUR 1,292
million at the year’s end. It increased by EUR 155 million from the previous year.
