finances
40
finnish cultural foundation
annual report 2012–2013
I
n the United States, the upturn in hous-
ing prices and the recovery of the con-
struction sector in particular strength-
ened confidence that the employment situation and domestic consumption are also
gradually improving.
Japan, which has been suffering from
an economic downturn for nearly 20 years,
made a U-turn in its economic and monetary policy. The government’s announce-
ment of a 2% inflation target and fiscal
stimulus led to a sharp weakening of the
yen. As a result, there was a rise in the Jap-
anese share prices. The country’s export
industry will benefit from a weak currency.
Share prices remained high during the
first months of 2013, especially in the Unit-
ed States. However, the situation started to
change during the spring. Economic per-
formance in the euro area and in emerg-
ing markets, especially in China, was be-
low expectations. The recovery in the euro
area has been hampered by the strength-
ening of the euro. There was yet another
mini-crisis in Europe in March. The euro
area countries had to support Cyprus as
the country’s banking sector had run into
serious trouble.
In early summer, the US Federal Reserve
announced that it is considering a gradual
tightening of the economic stimulus. This
scared investors and long-term interest
rates rose sharply in both the United
States and Europe. Share prices declined
and on the Helsinki Stock Exchange the
drop was more than 5%. After a sluggish
summer, share prices increased again
in early September as the US Federal
Reserve announced that it is postponing
the measures.
At the end of the year, shares were
generating good returns, despite sub-
The return on the Foundation’s invest-
ment portfolio was good, at 14.2%. The re-
turn on the benchmark index was 11.8%
in the corresponding period. The return
on the equity portfolio was excellent, at
22.2%. With the return on the benchmark
index at 20.6%, the difference in return
was 1.6 percentage points to the benefit
of the Foundation’s equity portfolio. The
difference was a result of the high propor-
tion of Finnish shares in the equity port-
folio. During the period under review, do-
mestic shares generated a return of 29%.
The price of Huhtamäki Group shares, the
Foundation’s biggest investment, contin-
ued to rise sharply. In 2012, the increase
was 31.7%. During the period under re-
view, the euro-denominated return on the
Foundation’s international equity funds
was 6.3% (the figure for the benchmark
index was 5.6%). The return on the fixed-
income portfolio was onlymodest, at 2.2%.
The return on the benchmark index was
3%. The negative return on emergingmar-
ket loans and the fact that the duration
of the fixed-income portfolio was shorter
than that of the benchmark index negatively affected the returns on the Foun-
dation’s fixed-income portfolio.
In addition to the legislation in effect,
the Foundation observes responsible and
sustainable principles in its investment
activities. The Finnish Cultural Founda-
stantial fluctuations in share prices. The
MSCI World Index, which reflects trends
in the world’s share prices, rose by 14%.
In North America, the rise was 12%, while
in Europe and Japan share prices increased
by 18% and 25%, respectively. In emerg-
ing markets, the year was difficult and
share prices dropped by 4%. In Finland,
share prices rose by an impressive 31.5%
(as measured using the OMX Helsinki CAP
index). This was mainly the result of an
increase in the prices of Nokia’s shares.
Interest returns were also good, con-
sidering the circumstances, except for
loans in emerging markets. The return
on European government bonds was 4.1%,
while the figure for corporate bonds with
a high credit rating was 4.3%. The return
on high-yield corporate bonds was excel-
lent, at 12.7%. The return on emerging
market loans, denominated in local cur-
rencies, was negative (-5.7%), the result
of a sharp weakening of the currencies.
Foundation’s finances
The fair value of the Foundation’s assets
stood at EUR 1,137 million at the end of
the year, or EUR 118 million more than a
year before. The book value of the assets
was EUR 782 million. The book value of
the investment assets at the end of the
year totalled EUR 718 million and its fair
value was EUR 1,066 million.
Economic uncertainty requires
good crisis resistance
The positive trend in stock exchanges, which started in the summer of 2012, continued
throughout the autumn. There were increasing signs towards the end of the year that
the world economy is recovering, as growth in the USA and China is picking up.
As in previous years, the biggest uncertainties
from the Foundation’s perspective concern
the trends in the global economy, capital markets
and current returns.
