29.5.20002nd nordic ir-seminar/e. grannenfelt1 cross-border investment - wishful thinking? eeva...

29.5.2000 2nd Nordic IR-Seminar/E. Grannenfelt 1

Cross-border investment

- wishful thinking?

Eeva GrannenfeltVice President, Capital MarketsPension Fennia


Cross-border investment - wishful thinking?

AGENDA

Pension Fennia

Investment strategy

* Allowed asset classes

* Efficient frontier

* Equity strategy

* Fixed income strategy

Expectations on IR-personal

Corporate Governance


PENSION FENNIA

* In Finland the employer is obliged to arrange pension benefits for his employees by taking out insurance in a private pension insurance company or by establishing 1 a pension fund.

* 6 pension insurance companies in Finland.

* The market share of Pension Fennia is approximately 10 %.

* The Finnish statutory earnings-related pension scheme is a partially fundedscheme.

* Roughly 3/4 of the premiums are used immediately to pay pensions while the rest is funded for the future.

* Pension Fennia is a part of The Fennia Group. Joint field organisation provides clients with all non-life, pension and life insurance services.



INVESTMENT ASSETS, EUR 3.6 million (market value)April 30, 2000

Bonds42 %

Equities30 %

Money Market10 %

Customer Loans3 %

Real Estate11 %

Premium Loans4 %



Allowed asset classes

* Equities (Pan-Europe, USA, Asia including Japan)

* Fixed Income (USA, EURO-land, Sweden, U.K.)

* Real estate

* Customer loans



INVESTMENT STRATEGY

* Increase the share of equities

* Increase the share of credit risk

* Increase private equity and other alternative assets classes



Efficient frontier

* Maximise return with accepted risk level

* Try to achieve optimal long term allocation of assets



6.20%

6.30%

6.40%

6.50%

6.60%

6.70%

6.80%

6.90%

7.00%

7.10%

4.00% 4.50% 5.00% 5.50% 6.00%

Volatility, %

Exp

ect

ed

re

turn

, %

12/98

5/99

6/98

7/99 10/99

21 % 19 %

EFFICIENT PORTFOLIO AND CHANGES OF PROTFOLIO



Finland 55 %

Pan-Europe25 %

USA12 %

Asia8 %

Small Caps

Global Pharma

Global Techno

Global Active

Emerging markets

Nokia +Sonera33 %

GlobalTelecom

(4 %)

(5 %)

(21 %)

(70 %)

EQUITY STRATEGY: CORE AND SATELITIES



15

20

25

30

35

Volatility %

0 10 20 30 40 50 60 70 80 90 100

International %

SHARE OF INTERNATIONAL DIVERSIFICATION AND EXPECTED RISK



0

2

4

6

8

10

12

14

16

Aut

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Ban

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Bas

ic R

ecou

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Che

mic

al

Con

stru

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Cyc

lical

Goo

ds &

Ser

vice

Non

-cyc

lical

Goo

ds &

Ser

vice

Ene

rgy

Fin

anci

al S

ervi

ces

Foo

d &

Bev

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re

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ds &

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vice

Insu

ranc

e

Med

ia

Ret

ail

Tec

hnol

ogy

Tel

ecom

Pow

er S

uppl

iers

SECTORS

DJ STOXX

DJ EURO STOXX

%



0

5

10

15

20

25

Aut

o

Ban

k

Bas

ic R

ecou

rces

Che

mic

al

Con

stru

ctio

n

Cyc

lical

Goo

ds &

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vice

Non

- cyc

lical

Goo

ds &

Ser

vice

Ene

rgy

Fin

anci

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ervi

ces

Foo

d &

Bev

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Hea

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ds &

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Insu

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Ret

ail

Tec

hnol

ogy

Tel

ecom

Pow

er S

uppl

iers

SECTORS

% DJ STOXX-50

DJ EURO STOXX-50



0

10

20

30

40

50

SECTORS

DJ STOXX

DJ EURO STOXX

DJ STOXX NORDIC%



Fixed income strategy

* Corporate credit new, but growing asset class

* Only large and rated companies

* USA trend



12/1999

Long term

80 % AAA-AAeuro/government

20 % AAA-BBB(ex. government)

minimum 30 % AAA-AAeuro/government max. 70 % AAA-BBB

(ex. government)max .10%

max .10 %

High Yield

International BenchmarkEFFAS, all euro governmet bonds

FIXED INCOME MORE CREDIT



0,6

0,7

0,8

0,9

1,0

1,1

1,2

1,3

1,4

0,0 1,0 2,0 3,0 4,0 5,0 6,0

Volatility

To

tal m

on

thly

ret

urn

High

Yield

Investment Grade Government bond

Emerging

Markets

CREDIT RISK AND EFFICIENT FRONTIER



EXPECTATIONS ON IR-PERSONAL

1) As means of competition consistent shareholder value an important factor

2) Sufficient and essential information- company- division- sector

3) Annual and quarterly reports- history- expectations

4) Personal contacts




EXPECTATIONS ON IR-PERSONAL

5) Compensation systems- option schemes- other benefits

6) Public relations is part of our corporate government system



CORPORATE GOVERNANCE

* The mission of Pension Fennia

* Ethical principles

* Return and risk expectations (diversification and used indices)

* Co-operation with company management

* Voting in annual meetings

* Board of directors

* Dividend policy

* Compensation systems

* Co-operation with other shareholders



Monitoring systems

* Legislation and other authorities

* Other interest groups

* Company auditors

* Internal auditors and monitoring systems

* Company meetings (road shows)

* Analysts comments

* Using our voting right

* Going exit (sell your stocks)



How to monitor companies outside Finland

* Exit (sell your stocks)

* Proxy voting

* Voting through internet

* Using of corporate monitoring companies

* Co-operation with other owners



As a Nordic institutional investor we have to keep in mindafter 1.1.1999

* The group of potential investors has increased significantly

* Indexation; only big well known names

=> more demands are made on investment and management policies

29.5.20002nd nordic ir-seminar/e. grannenfelt1 cross-border investment - wishful thinking? eeva...

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