ownership - e

Transcription

ownership - e

FOR FINNISH
OWNERSHIP
ANNUAL REPORT
Contents
Solidium
Corporategovernance
2
3
4
6
Solidium in brief
Chairman of the Board’s review
Managing Director’s review
Solidium’s mission and operation
34
36
38
42
Board of Directors
Personnel
Corporate governance
Corporate responsibility
Holdings
Financialreporting
8
10
12
14
16
18
20
22
24
26
28
30
32
Solidium’s investments
Impact on society
Elisa
Kemira
Metso
Outokumpu
Rautaruukki
Sampo
Sponda
Stora Enso
TeliaSonera
Tieto
Tikkurila
45
48
55
56
Report of the Board of Directors
Financial statements
Audit report
Sources and comments
NET ASSET VALUE
7 715
458
35
Eur
Million
RECEIVED PROFIT DISTRIBUTION
Eur
Million
PORTFOLIO YIELD
%
| ANNUAL REPORT 2010
Solidium in brief
Solidium is a holding company that is
wholly-owned by the State of Finland.
Its mission is to strengthen and stabilise
Finnish ownership in nationally important
companies and to increase the financial
value of its holdings in the long term.
Solidium bases its investments on
financial analysis. The effective management of the company’s current investments and increasing their value form
the core target of Solidium’s investment
strategy. At the end of the report
period, Solidium’s equity portfolio
comprised eleven listed companies
(Elisa Corporation, Kemira Oyj,
Metso Corporation, Outokumpu Oyj,
Rautaruukki Corporation, Sampo plc,
Stora Enso Oyj, Sponda Plc, TeliaSonera
AB, Tieto Corporation and Tikkurila Oyj),
in all of which Solidium has a minority
holding.
Solidium is the largest or one of
the largest owners in its portfolio companies. As a long-term owner Solidium,
in collaboration with the other owners,
aims at enhancing value creation in the
companies by being an active owner.
Solidium exercises its influence as an
active owner in participating in the
selection of board members and in the
preparation of share issues and other
significant mergers and acquisitions,
which require shareholder support.
Key issues in Solidium’s financial year
2009–2010 were:
•
•
•
•
•
•
•
•
Solidium’s mission is
to strengthen and stabilise
Finnish ownership in nationally
important companies and to increase
the value of its holdings in the long term
MISSION
Solidium’s vision is to be an owner, whose professionalism,
governance practice and value creation skills are widely recognised
1. Professionalism
2. Integrity and transparency
Portfolio yield was 34.6 per cent
Market value of equity investments
at the end of the report period was
EUR 7,914 million
Cash dividends and capital repayments received by Solidium totalled
EUR 356 million
Solidium’s Board of Directors
proposes EUR 356 million dividend
distribution
Solidium’s Board of Directors
confirmed Solidium’s values and
strategy
Solidium agreed financing
arrangements involving a total
of EUR 600 million
New portfolio companies: Tieto
Corporation and Tikkurila Oyj
Solidium has representation on
the nomination committees of
seven portfolio companies
VISION
3. Accountability
4. Proactivity
VALUES
1. Increase cost-effectively the value of the holdings in the long term
2. In cooperation with other key shareholders develop the portfolio companies
with a view to increase their value
3. Actively promote good governance and contribute to the development of
the capital markets in Finland
1. Be a significant owner with sufficient influence to develop and
execute owner value creation plans
2. Focus on a limited number of portfolio companies
3. Portfolio allocations will be developed in accordance with Solidium’s
mission, taking market conditions into consideration
SOLIDIUM
INANUTSHELL
GOALS
INVESTMENT STRATEGY
1. Nationally significant listed companies and companies
in important industries preparing for a listing
2. Minority ownership that is significant enough to secure
sufficient influence
3. Value creation potential through active ownership
4 Long investment horizon
The received dividend income after deduction of operating
expenses is, as a general rule, distributed to the owner.
2
INVESTMENT CRITERIA
DIVIDEND POLICY
CHAIRMAN OF THE BOARD'S REVIEW
Operating capacity established
The past financial year was Solidium’s first full year of operation.
The year was busy and included everything that was expected, consisting, however, also of some unexpected challenges. As a result of the
global economic recession, our operating environment was changed
dramatically from that prevailing at the time of the decision to establish Solidium. Companies were abruptly forced to swap their growth
strategies for short-term survival measures. In the new scenario
Solidium adopted a clear-cut operating policy. Our role as a blue-andwhite holding company meant that we would provide support for our
portfolio companies through the hard times.
The cornerstones of any newly launched
company are a clear mission statement
and the establishment of the core
organisation. In the course of the first
financial year, Solidium’s organisation
reached a high level of operating capacity. From day one, the company has
had the benefit of a Board of Directors
with a diverse range of competence and
experience. The discussions have been
open and challenging in style, promoting constructive outcomes. I have also
been pleased to note that Solidium’s
Board of Directors is united in a strong
sense of commitment to our cause.
The year saw the creation of effective
control and supervision systems. The
objective with regard to the operational
organisation was the creation of a topquality, yet compact team of experts,
which is capable of sufficiently in-depth
analysis in diverse sectors. Accountable
decisions require thorough, objective
and dispassionate analysis. In its annual
evaluation, Solidium’s Board of Directors has given this work high marks.
During the year, our agenda has
included several projects, some of them
very significant in terms of size. The
young organisation has taken charge of
these projects and managed them well.
Only a few of the projects have been in
the public eye. However, in the decisionmaking process the “no” decisions
require just as thorough a preparation
and consideration as a positive
response.
On the whole, Solidium’s activities
have elicited positive external feedback.
Critical comments have related alternately to our active or allegedly inactive
”We want to observe
good governance
practice in our
operations, while
maintaining a good
level of cooperation.”
approach to issues as well as to our
compensation systems. The nature of
our mission must be emphasised when
considering our operations. Our role of
blue-and-white anchor owner carries
with it a long-term responsibility. We
are not a short-term player, although
we can be nimble when required. Our
strategy lays down the direction of any
change in our current holdings. Just as
in the past financial period, we see
future changes in holdings in the form
of additional investment and sell
downs, as well as entirely new names
in our portfolio. We base our decisions
on thorough analyses, with primary
focus on financial considerations, as
dictated by our mission, but always
within sight of the national interest.
Consequently, new invesments have
a long time span. When exiting
from a holding, we naturally
require a financially feasible
solution, i.e. a “good price”.
Part of the disposal
process is to facilitate
for that the shares
that we may sell, end up in a “good
home”.
Our compensation systems naturally
complies with the guidelines issued by
Government. Accordingly, when establishing an organisation the objective is
a high-quality expert organisation which
is paid an appropriate and competitive
overall compensation, and this is what
we have done.
The role of anchor owner confers
special responsibilities on Solidium. We
want to be an accountable, demanding
and cooperative owner. A demanding
owner wants to keep the company’s
earning capacity at as good a level as
possible today and into the future. This
is also evidence of real accountability.
Solidium is a significant owner, but only
one of many. We want to observe good
governance practice in our operation,
while maintaining a good level of
cooperation with the other owners.
The cooperation between us and our
portfolio companies and the other
shareholders has got off to a good start.
As our operating capacity has now
been solidly established , I view the
future with confidence. Economic volatility will continue. The current environment requires us to be wise, patient and
nimble. I believe that Solidium will
manage its mission in line with the high
expectations.
Keijo Suila
Chairman of the Board
3
First full operating year
Solidium was established with the aim
of creating a coherent, transparent blueand-white operator with long-term
goals, whose decision-making process
is based on a professional approach.
Solidium has an independent and autonomous Board of Directors, which acts
within the framework of Government
guidelines. From its first year of operation, Solidium has acted consistently
in line with the aforementioned model.
It has participated actively in the share
issues of its portfolio companies and
also made a new investment in Tieto
Corporation. The decision-making
process, which was defined at Solidium’s
inception, has been transparent and
effective.
Solidium’s limited liability company
status and own balance sheet have
given credibility and flexibility. A large
balance sheet is an asset in itself, since
it enables access to sufficient additional
funding should it be required; this in
turn, paves the way for considerable
4
development of the portfolio companies
as well as new investments. It is our
intention to maintain Solidium’s finance
reserves at a level to allow this. In
autumn 2009, Solidium concluded an
agreement on availabe senior financing
totalling EUR 600 million, allowing
the company to make rapid investment
decisions, where required.
In the first full operating year,
Solidium has focused on defining in
more detail its national mission.
Solidium’s blue-and-white mission and
the values, goals and strategies dictated
by it are laid out on page 2 of the annual
report. We believe that Solidium’s
accountable and professional operation
will in the long term lead to a good
result and, through dividends, be
beneficial to the owner, the State of
Finland.
In the financial period just ended,
Solidium’s holdings generated a yield
of 34.6 per cent and the value of our
equity investments grew from EUR 6.0
billion to EUR 7.9 billion. This represents
a good result for our owner, but one
year is too short a time span on which
to base an evaluation of our operation.
”After a full year of
operation, Solidium
has proved to be
robust in structure”
The correct time span for evaluating
Solidium’s financial result is over the
cycle.
The past year has seen both
projects involving current holdings and
the analysis of potential new investment targets. Only a fraction of the
work done at Solidium is visible to
the public. Despite this, the work to
consider projects always consists of
far-reaching preparatory work as well
as the acceptance that in certain
circumstances projects will have to
be rejected.
The most important channels for
Solidium to incfluence as a shareholder
are contacts with the boards of the
portfolio companies and participation
in the work of their nomination
committees alongside other shareholders. In our view, there remains room
for improvement in the composition,
working procedures and supervision of
company boards, and Solidium intends
to be an active participant in this
development. One of our targets in this
respect is to increase the diversity and
sector-specific competence of board
MANAGING DIRECTOR'S REVIEW
members. Although market forces
require that companies are effective
in their operation, at the board level
systematic development is lacking. One
of the most important future issues for
consideration is the way in which shareholders could act as catalysts in the
development of company boards to
keep pace with the progress of the
shareholders’ own processes.
At the same time as the composition and operation of the boards of
directors are improved, various means
must be deployed to ensure that remuneration is appropriately measured.
Solidium had a key role in ensuring that
in the spring an increasing number of
companies decided to pay a part of the
board members’ remuneration in shares.
It is important that both the management and the board members hold
shares in the company. Long-term remuneration schemes, in particular, should
adopt this model in the future.
As a key owner of some of the
largest listed companies in Finland,
Solidium is in a unique position to view
the operation of the boards of these
companies. In the last financial period,
Solidium took part in reforming the
Corporate Governance Code of the
Securities Market Association by commenting on proposals and bringing forth
its own views. The new code allows
different methods to be adopted to
prepare proposals to the shareholders’
general meeting concerning boards of
directors and their composition. This is
justified in the case of companies with a
different ownership structure or history.
The Corporate Governance Code should
have a steering function, rather than a
restrictive one. For Solidium the most
significant change in the code was the
introduction into the general Finnish
system of a model of nomination
committee, whereby the committee
members comprise shareholders of
the company. The model is effective in
companies where some of the shareholders are anchor owners and committed to the success of the company. The
model increases transparency and on
the other hand encourages the owner
to adopt a long-term and professional
approach to the operation. Solidium
complies with the new Corporate
Governance Code in all activities that
are linked to holdings and it supports
the efforts to include all listed companies
within the sphere of the code.
Hundreds of thousands of workers
and shareholders have an interest in
Solidium’s holdings. The impact our
holdings remained extensive, although
WHYINVESTINTIETOCOrpOrATION?
the companies were forced to carry out
drastic efficiency measures in the economic recession. The speedy adjustment
measures proved that Darwinism in
economics works, because the companies will recover from the recession in
different ways to meet the next twists
and turns in the economy. In the current
financial period, a core task on the
agenda will be to identify the postrecession winners and to support their
growth strategies.
I would like to thank the owner for
its positive support of our activities and
the personnel for the good operating
year. I am sure that in the next few
years we and the other shareholders,
in cooperation, will face new challenges
and encounter new opportunities in our
work in the vanguard of Finnish ownership. We have full confidence in Solidium’s
ability to meet these challenges.
Kari A.J. Järvinen
Managing Director
• Solidium believes that Tieto is a good investment in the long term
• Tieto plays a central role in information technology services in
the Nordic countries
• Tieto is a clear market leader in the Finnish information technology
market with its market share of around 25 per cent
• Tieto, with its workforce numbering around 5,800 employees,
is the biggest employer by far in the Finnish information technology
sector and it represents the biggest IT skills cluster in Finland
• Finnish anchor ownership is well justified in Tieto
• The company is well-positioned for profitable
growth in its strategic growth areas
5
Solidium’s mission
and operation
GENErAL
Solidium is a limited liability company
that is wholly-owned by the State of
Finland. Its mission is to strengthen and
stabilise Finnish ownership in nationally
important companies and to increase
the value of its holdings in the long
term. Solidium’s articles of association
state that the company’s field of operations comprises ownership and management of shares in companies operating
in Finland and the exercise of shareholders’ rights in them. In its activities,
Solidium complies with the general
principles of ownership steering, as
confirmed by Government.
The company invests in companies
that are considered to be of national
importance. Solidium may invest in
Finnish listed companies, foreign listed
companies with extensive operations in
Finland and also in companies that are
preparing for a listing. The Cabinet
Committee on Economic Policy has
determined the authority of the Board
of Directors of Solidium, and the board
operates independently within the
defined framework.
SOLIDIUM’SINVESTMENTS
Solidium’s investment activities are
based on financial analysis and their
objective is to increase shareholder
value in the long term. Solidium is a
long-term investor in its portfolio companies. Solidium applies measures that
are available to an active owner, in order
to promote the further development
and growth of the companies in which
it has a holding, and to enhance value
creation.
The basis and core objective of
Solidium’s investment strategy is the good
management of the current investment
6
portfolio and the growth of its value.
Solidium’s investment yield target is to
increase cost-effectively the value of its
equity investments in the long term,
using as benchmarks the OMX Hki Cap
index and the risk-adjusted return of
long-term government bonds.
Solidium analyses potential new
portfolio companies in accordance with
several different investment criteria, the
key criteria being:
• the investment yield target set for
the portfolio company
• the investment is justified on
national interests
• possibities to exercise shareholder
influence are available
• the size of the investment is
meaningful incramental to
Solidium’s portfolio.
Solidium’s investments do not incorporate industrial policy factors or an aid
dimension or factors that might distort
competition. Solidium does not invest in
companies whose activities could be
construed to be unethical or whose
financial status or ownership structure
does not support investment. Solidium’s
corporate responsibility is described in
more detail on pages 42–43.
Solidium may exit from its holding
or reduce its holding in any portfolio
company, if there are good economic
reasons for the exit or reduction and
the market circumstances are favourable. Solidium may similarly exit from,
or reduce its holding in, a protfolio
company, if Solidium’s mission as a
Finnish anchor-owner in the company
has been fulfilled or if it can be fulfilled
with a smaller holding.
ACTIVEOWNErSHIp
Solidium is the largest or one of the
largest owners in the portfolio companies, remaining, however, a minority
shareholder in all of the companies.
Solidium’s role in its portfolio companies is that of an active owner, and it
aims to exercise its influence in any
matters available to it as an owner.
As part of active ownership,
Solidium cerates an owner’s strategy
for each of the portfolio companies.
This requires in-depth understanding
of the companies’ business, operating
environment, competitive circumstances
and financial standing as well as active
interaction between Solidium’s portfolio
companies and the other shareholders.
The creation of an owner’s strategy
provides Solidium with a view of the
portfolio companies’ capital requirements and important strategic and
structural issues. Furthermore, the
owner’s strategy forms the basis for
disposal or purchase of shares in the
portfolio companies or subscription for
new shares in any share issues. It also
contributes to Solidium’s views on
reorganisation measures in the companies, when shareholders’ views are
sought.
An important means of influence
in active ownership is participating in
the selection of board members. In
most of Solidium’s portfolio companies,
Solidium’s representatives participate in
evaluating the work of board members
and in preparing proposals to the shareholders’ general meeting concerning
board members and their remuneration.
Solidium’s representatives are heard
either in connection with nomination
committees, consisting of shareholders,
or in other connections.
SOLIDIUM'S MISSION AND OPERATION
SOLDIUM’SpArTICIpATION
INTHEWOrKOFTHENOMINATION
COMMITTEES,2009–2010
Kemira
Kari Järvinen, member
Metso
Kari Järvinen, chairman
Outokumpu
Rautaruukki
Sponda
Stora Enso
Keijo Suila, chairman
TeliaSonera
Kari Järvinen, member
Elisa and Sampo have a nomination committee
consisting of board members. Solidium became
a shareholder in Tieto and Tikkurila in spring
2010.
Key considerations when selecting
board members include the company’s
development needs and the aim to
create an effective Board of Directors,
whose members have complementary,
diverse skills and experience.
Board members’ selection criteria
include professional competence and
skill as well as experience, commitment,
impartiality and the opportunity to
devote sufficient time to the board
work.
GOVErNANCEINSOLIDIUM’S
pOrTFOLIOCOMpANIES
Solidium aims to promote good governance practice in its portfolio companies.
The companies are governed in line with
the provisions of the Companies Act,
the Securities Markets Act, other legislation, the Finnish Corporate Governance Code applying to Finnish listed
companies as well as best practices
applying to the securities markets.
On 15 June 2010 the Finnish Securities
Market Association published a new
governance code for listed companies.
Solidium was involved in the code
reform process by supplying oral and
written comments on the proposals.
The new Corporate Governance Code
takes into account the remuneration
recommendation issued by the European Commission on 30 April 2009.
Another change to the code states
that establishing a nomination board,
consisting of shareholders or their
representatives, for the purpose of
preparing for the selection of board
members does not constitute a departure
from the code. The Swedish corporate
governance code applying to listed
companies was also updated on
1 February 2010. The new code takes
into account the remuneration recommendation issued by the European
Commission on 30 April 2009 as well
as certain amendments to the Swedish
legislation governing limited liability
companies.
The new corporate governance codes
promote transparency and harmony in
the disclosure of remuneration in listed
companies. Furthermore, the new Finnish
governance code increases flexibility
in the preparation of the appointment
of listed companies’ board members.
Following the reform, all Solidium’s
portfolio companies comply with the
applicable corporate governance code.
Solidium applies the following principles in the corporate governance of its
portfolio companies:
• Solidium applies corporate governance principles based on the
mutual equality of the owners
• Solidium acts in cooperation with
other significant owners as well as
the boards and operational management of its portfolio companies
• Solidium has an active influence on
the board selections of its portfolio
companies and on other matters
pertaining to owners and it monitors
actively the operational development
of its portfolio companies
• Solidium does not, in its role as
owner, violate good governance
practice by intervening in the decision-making process of the boards
or the operational management of
the portfolio companies
• Solidium discusses with other significant owners key issues relating
to business strategy and structural
arrangements.
meeting approves the principles of good
governance practice to be applied by
Solidium in its role as a shareholder of
listed companies.
FINANCIALYEAr2009–2010
Solidium’s representatives took part in
the preparation of proposals concerning
the board members and their remunerations in the nomination committees of
seven of its portfolio companies. In
spring 2010, a total of 13 new members
were elected to the boards of Solidium’s
portfolio companies (excluding Tieto
and Tikkurila, in which Solidium
acquired shareholdings following the
appointments of the boards). Of the
13 new members, five (approximately
38 per cent) were women.
In all of Solidium’s portfolio companies, excluding Tieto, the board members’
remuneration in 2010 is paid as a combination of the companies’ own shares
and cash. It is Solidium’s view that
increased and long-term shareholding
by board members serves to align the
interests of the shareholders and board
members and consequently serves the
interests of all the shareholders.
Solidium used its full subscription
entitlement in Kemira’s rights issue,
subscribing for the new Kemira shares
with approximately EUR 35 million. In
connection with the issue, Solidium also
gave an underwriting commitment and
guarantee. As shareholder Solidium had
an active role in supporting the spin-off
of Tikkurila from Kemira.
Solidium purchased in a “on-market”
operation 10.3 per cent of Tieto’s share
capital, paying approximately EUR 116
million and becoming Tieto’s largest
shareholder. Tieto is a major Nordic
service provider, and the holding is very
well in-line with Solidium’s owner interests. In Solidium’s view the company is
in a good position to achieve profitable
growth in its strategic growth areas.
Solidium believes that Tieto is a financially good investment target in the
long term.
Solidium’s articles of association
determine that the annual general
7
Solidium’s investments
INVESTMENTYIELD
The yield of Solidium’s equity investments was 35.1 per cent in the financial
year and 3.6 per cent in the first half of
2010. Kemira and Metso brought in the
best return on equities in the 12 month
financial period. The value of the equity
investments grew by EUR 1,919 million,
from EUR 5,995 million to EUR 7,914
million.
Solidium’s total portfolio (equity
and money market investments) generated a return of 34.6 per cent in the
financial year and 3,8 per cent in the
first half of 2010. Solidium’s net asset
value increased by 28 per cent, from
EUR 6,042 million to EUR 7,715 million.
CApITALMArKETS
The stock markets started to recover
in the first months of 2009 and the
upturn continued until early spring
2010. On average, growth in the equity
market in Finland outstripped that of
the rest of Europe. Although the global
economy is showing signs of recovery,
several uncertainties continue to influence economic development and this
reflects on prices on stock exchanges.
In spring 2010, national debt problems
increased volatility on the markets,
causing heavy swings in prices, but
share index values ended the financial
year at near the same levels as at the
start of the year.
HELSINKISTOCKEXCHANGE
On 30 June 2010, the Helsinki Stock
Exchange had a market value of EUR
136 billion. Twelve months earlier, the
market value had been EUR 121 billion,
translating to a rise in the financial year
of 12.4 per cent. The weight-capped
OMX Helsinki Cap yield index rose in
the financial year by 31.8 per cent.
As the market value of the Helsinki
Stock Exchange was EUR 141 billion at
the beginning of 2010, market values
have decreased by 3.5 per cent in the
first half of the year. In the same period,
the OMX Helsinki Cap yield index rose
by 5.0 per cent.
SOLIDIUM’SHOLDINGS
At the end of the financial year,
Solidium’s equity portfolio contained
shares of eleven listed companies.
The equity investments’ market value
amounted to EUR 7,914 million on
30 June 2010, the biggest holdings by
market value being TeliaSonera, Sampo
and Outokumpu.
The profit distributions (dividends
and capital repayments) received by
Solidium from the companies in the
financial year amounted to EUR 458
million in aggregate, of which EUR 299
million was in cash dividends, EUR 57
million in capital repayments and EUR
102 million in dividends in the form of
Tikkurila shares. This means that the
cash distribution totalled EUR 356
million.
The largest profit distributions were
received from TeliaSonera (EUR 142
million), Kemira (EUR 109 million, incl.
Tikkurila shares) and Sampo (EUR 79
million).
Solidium was established by
demerger on 1 May 2009. The shares
which were transferred to Solidium in
the demerger received a profit distribution of EUR 285 million in the first half
of 2009.
INCOME FROM PROFIT DISTRIBUTIONS
IN THE PERIOD 1.7.2009–30.6.2010
EUR million
141.9
TeliaSonera
79.3
Sampo
38.8
Stora Enso
25.0
Rautaruukki
22.0
Elisa
19.8
Outokumpu
Sponda
11.4
Metso
11.0
7.0
Kemira
0
30
60
90
120
150
Tieto and Tikkurila were not included in Solidium's
portfolio at the time of the profit distribution.
The graph does not include the Tikkurila shares
received as profit distribution.
CHANGESINEQUITYpOrTFOLIO
Acquisitions
Kemira's rights issue, December 2009
Distribution of Tikkurila shares as dividend to Kemira shareholders, March 2010
Acquisition of shares in Tieto, spring 2010
Number of shares
Acquisition
price/share, EUR
Cost of acquisition,
EUR
5 239 587
6 474 021
7 415 418
6.60
15.80
15.58
34 581 274
102 289 532
115 560 419
Acquisitions, total
Disposals
Sale of Rautaruukki shares, June 2010
CAPITAL DEVELOPMENT 1.7.2009–30.6.2010
EUR million
9 000
8 000
7 000
6 000
5 000
4 000
3 000
2 000
1 000
0
10
10
10
10
10
10
09 09 09 09 09 09 09
20 20 20 .20 .20 1.20 2.20 .1.20 .2.20 .3.20 .4.20 .5.20 6.20
.
6. 1.7. 1.8.
9 .10
1
1
.
.
1
1
.
1
.
3
3
3
3
28
3
30
30
31
30
30 31
30
8
252 431 225
Number of shares Sale price/share, EUR
100
12.98
Sale price, EUR
1 298
YIELD DEVELOPMENT 1.7.2009–30.6.2010
150
140
130
120
110
100
90
80
10
10
10
10
10
10
09
09
09
09
09
09
09
20 7.20 .20 .20 .20 1.20 2.20 .1.20 .2.20 .3.20 .4.20 .5.20 6.20
.
6.
9
8
.
1
0
1
.
.
.
1
1
.
1
1
1
.
3
.
3
3
3
28
31
30
30
31
30
30 31
30
SOLIDIUM'S INVESTMENTS
KEYINVESTMENTrATIOSASAT30.6.2010
Yield of total investments (incl. money market investments)
Yield of equity investments, %
Yield of benchmark index OMX CAP HKI, %
Volatility, %
Sharpe
Beta
Alfa, %
Tracking Error, %
Information ratio
* Annual figures given for key ratios of over 12 months
1 month
6 months
12 months
2 years*
2.1
2.2
-1.2
3.8
3.6
5.0
24.7
0.3
34.6
35.1
31.8
24.6
1.4
1.0
1.8
7.2
0.4
-1.9
-1.5
-2.9
35.6
-0.1
1.0
1.1
9.3
0.1
EQUITYHOLDINGSASAT30.6.2010
Company
Elisa
Kemira
Metso
Outokumpu
Rautaruukki
Sampo A
Sponda
Stora Enso
Stora Enso A*
Stora Enso R*
TeliaSonera
Tieto
Tikkurila
Number of
shares held by
Solidium
Proportion of company’s
total share capital
Proportion
of company’s
votes
16 631 000
25 896 087
15 695 287
56 440 597
55 656 599
79 280 080
95 163 745
97 079 438
55 595 937
41 483 501
616 128 221
7 415 418
6 474 021
10,0%
16,7%
10,4%
30,9%
39,7%
14,1%
34,3%
12,3%
31,4%
6,8%
13,7%
10,3%
14,7%
10,0%
16,7%
10,4%
30,9%
39,7%
14,0%
34,3%
25,1%
31,4%
6,8%
13,7%
10,3%
14,7%
* A proportion of total number of shares in series
pOrTFOLIObrEAKDOWN
Market value
30.6.2010, EUR million
TeliaSonera
Sampo A
Outokumpu
Rautaruukki
Stora Enso
Stora Enso A
Stora Enso R
Metso
Elisa
Sponda
Kemira
Tieto
Tikkurila
Total
3 259.3
1 377.1
701.6
669.0
589.8
341.9
247.9
416.2
236.5
236.0
228.4
100.8
99.7
7 914.4
Weight in portfolio, %
41.2%
17.4%
8.9%
8.5%
7.5%
5.3%
3.0%
3.0%
2.9%
1.3%
1.3%
100.0%
Market value
Weight in portfolio, %
2 285.8
1 066.3
693.7
793.1
418.9
263.0
156.0
208.7
195.1
193.2
140.5
38.1%
17.8%
11.6%
13.2%
7.0%
5 995.3
100.0%
3.5%
3.3%
3.2%
2.3%
NETASSETVALUECALCULATION
EUR million
Tangible and intangible assets
Equity investments
Current receivables
Money market investments
Assets,total
Current liabilities
Deferred tax liability
Liabilities,total
Net asset value
Change in financial year, EUR
Change in financial year, %
30.6.2010
30.6.2009
0.3
7 914.4
0.6
357.7
8273.1
0.0
5 995.3
0.3
152.8
6148.4
-3.8
-554.5
-558.3
-0.6
-106.2
-106.8
7 714.8
1 673.2
28%
6 041.6
Publicly quoted securities and investment funds are valued at the price applicable to the most recent market transaction. All other balance sheet items are
valued at their book-value. The deferred tax liability is 26% of the difference between the market value and book-value.
9
Impact on society
Solidium’s portfolio companies are
influential within their own sectors in
the Nordic region and several of them
have a global impact. The companies
employ over 140,000 people in total
and in 2009 they generated more than
EUR 39 billion of turnover. They paid
a total of EUR 790 million in taxes in
2009 and their profit distributions
amounted to a total of EUR 2.2 billion
in spring 2010.
The majority of the business operations undertaken by Solidium’s portfolio
companies take place abroad. Over 90%
of the turnover of Metso, Outokumpu
and Stora Enso is generated outside
Finland. Over two-thirds of personnel
10
work abroad; only Elisa, Rautaruukki and
Sponda have most of their workforce in
Finland.
The companies have a widely scattered ownership base. A significant
proportion of the share capital, 61 per
cent on average, is held by foreign
institutions (e.g. pension funds, equity
funds). On the other hand, Finnish
households feature prominently in the
ownership structure. Each of Solidium’s
investment targets has thousands, some
even tens of thousands of Finnish
households as shareholders.
Measured in proportions of ownership, Stora Enso and TeliaSonera have
the most international ownership bases.
A total of 68 per cent of Stora Enso’s
owners are foreign, while 81 per cent of
those investing in TeliaSonera are nonFinnish (Swedish investors account for
65 per centages of this figure).
80% of the
companies’ turnover
is generated abroad;
over 2/3 of the
employees are
abroad
Whilst the increased internationalisation of these companies means higher
foreign sales and more foreign personnel, Finns retain a strong interest in the
financial success of the companies, both
through direct share ownership and
through institutions that invest Finnish
pension and insurance premiums.
Because different groups of investors are able to adopt different investment strategies in changing markets and
thus stabilise the markets and add
liquidity, it is important in terms of
the smooth operation of the Finnish
capital markets that the companies have
foreign shareholders as well as a Finnish
institutional ownership base and an
extensive base of small investors in
Finland.
IMPACT ON SOCIETY
DATAONIMpACT
Turnover 2009,
EUR million
Turnover generated
outside Finland, %
1 430
1 970
5 016
2 611
1 950
4 568
243
8 945
10 280
1 706
530
39 249
9%
86%
93%
95%
70%
65%
9%
93%
84%
52%
80%
80%
Number of employees,
2009
Number of employees
outside Finland
Proportion of foreign
employees, %
3 331
4 955
27 166
7 606
11 648
7 087
134
28 696
29 734
16 663
3 538
140 558
300
3 890
18 473
4 903
5 743
4 922
14
20 450
24 893
10 905
2 774
97 267
9%
79%
68%
64%
49%
69%
10%
71%
84%
65%
78%
69%
Company
Elisa
Kemira
Metso
Outokumpu
Rautaruukki
Sampo
Sponda
Stora Enso
TeliaSonera
Tieto
Tikkurila
Total
Note: Kemira’s turnover is pro forma (excluding Tikkurila)
Company
Elisa
Kemira
Metso
Outokumpu
Rautaruukki
Sampo
Sponda
Stora Enso
TeliaSonera
Tieto
Tikkurila
Total
Note: i) Kemira’s employee figure is pro forma (excluding Tikkurila), ii) Elisa’s employee figure is an estimate by Solidium based on breakdown of turnover figures
Number of shareholders, Proportion of foreign holders,
30.6.2010
% of shares
Company
Elisa
Kemira
Metso
Outokumpu
Rautaruukki
Sampo
Sponda
Stora Enso
TeliaSonera
Tieto
Tikkurila
Total market value held by foreign shareholders
230 153
32 078
45 068
38 807
45 106
83 142
9 659
75 100
622 194
25 152
28 530
25%
11%
52%
22%
21%
49%
44%
68%
81%
50%
5%
31 560
Profit distribution,
1.1.–30.6.2010, EUR million
Taxes paid in 2009,
EUR million
Market value,
143
41
105
64
62
561
33
158
1 035
36
0
2 238
57
23
138
-36
21
275
3
3
288
14
3
790
2 215
1 338
3 968
2 261
1 669
9 749
688
4 740
23 755
971
679
52 035
Note: i) Shareholder numbers are not in aggregate because of possible overlap,
ii) Number of Stora Enso and Tieto shareholders are from the 2009 annual report.
Company
Elisa
Kemira
Metso
Outokumpu
Rautaruukki
Sampo
Sponda
Stora Enso
TeliaSonera
Tieto
Tikkurila
Total
Note: Kemira’s profit distribution excludes the Tikkurila shares that were distributed. Kemira’s taxes are pro forma (excluding Tikkurila)
11
Elisa Corporation
10.0
3.0
236
22.0
Solidium's holding (%)
Weight in Solidium's
equity portfolio (%)
Market value of
holding as at 30.6.2010
(EUR million)
Profit distribution
to Solidium,
1.7.2009–30.6.2010
(EUR million)
bUSINESSOpErATIONSAND
STrATEGY
Elisa is a Finnish mobile and fixed-line
service provider that operates in the
Nordic and Baltic countries as well as
Russia. The company serves some two
12
million consumer customers regionally
and around 150,000 corporate customers internationally. The company offers
services under the Elisa and Saunalahti
brands. Elisa’s goal is to improve the
productivity of organisations in the
network and to develop ICT and online
services for consumers and corporate
customers.
The company’s turnover in 2009
was EUR 1.4 billion and operating profit
EUR 267 million. Over 90 per cent of
the turnover and operating profit was
generated in Finland and the rest in
Estonia. The corporation employs
around 3,500 people. Elisa operates
globally in cooperation with Vodafone
and Telenor.
Elisa provides fixed-line and wireless
telecommunication services to consumers and corporate customers. Elisa’s
service provision covers mobile and
fixed-line subscriber connections, broadband connections as well as ICT and
other services. In the first half of 2010,
consumer customers accounted for
60 per cent of the turnover and 63 per
cent of the operating profit. Thanks to
Elisa’s corporate history, its fixed-line
network is particularly solid in Uusimaa
and in the Tampere, Jyväskylä and Joensuu regions. The wireless 3G network is
the most comprehensive in Finland,
covering over 90 per cent of the
country’s population.
As a result of its historical basis as
a telephone cooperative, Elisa continues
Chairmanofthe
boardofDirectors:
Risto Siilasmaa
president&CEO:
Veli-Matti Mattila
PORTFOLIO
to operate with a considerable Finlandbased ownership structure. With its
over 230,000 shareholders, it has the
most extensive ownership base of all
the companies listed on the Helsinki
Stock Exchange. Elisa underwent a widereaching integration phase in the first
years of the new millennium, resulting
in the merger of the previously separate
telephone cooperatives and telephone
companies to form the single Elisa.
In the next phase of the strategy Elisa
reinforced its market standing in its
key areas, making it the largest mobile
telephone operator in Finland,
measured in subscription volumes.
In line with its strategy, Elisa will
now focus on developing new products
and services for both consumer and
corporate customers. Elisa will exploit
its extensive customer base and its
effective electronic distribution channel
in the implementation and distribution
of the new services.
competed to increase their market
shares. Elisa’s churn in mobile subscriptions grew in the first half of the year to
over 15.5 per cent of the customer base,
reflecting the competition in the Finnish
markets.
Elisa’s turnover in the first half of
2010 grew by 1.6 per cent year-on-year.
Operating profit was at the same level
as in the previous year. In consumer
business the growth was generated
through an increase in the demand for
services and increased mobile business.
The downward turn experienced in
2009 in corporate business became
a slight upturn in the second quarter.
Recently, Elisa has launched numerous new services targeting consumers,
such as IPTV entertainment service Elisa
Viihde, the security service Elisa Vahti
and the audiobook service Elisa Kirja.
In addition to current operator
services, Elisa’s future services for corporate customers will include solutions
that integrate with ICT services. In
spring 2010, Elisa acquired majority
shareholding in Videra Oy, which specialises in video conferencing solutions,
with a view to boosting Elisa’s market
position and competence in video
conferencing services.
rECENTDEVELOpMENTS
After the first quarter, the number of
Elisa’s mobile phone subscriptions broke
the three million mark. The first half of
the year were characterised by strong
pricing competition in telecommunications, as the operators in the sector
SHARE PRICE DEVELOPMENT
EUR million
20
15
10
5
05
.20
1.1
06
.20
1.1
07
.20
1.1
08
.20
1.1
09
.20
1.1
10
.20
1.1
Dow Jones STOXX 600 Telecommunications Index
Elisa
The development of the sector index has been normalised with reference
to the company share
BREAKDOWN OF TURNOVER
Finland, 91%
Other countries, 9%
SOLIDIUM’SVIEW
Elisa’s publicly stated medium to longterm objective is to grow at a faster rate
than the market average, with emphasis
on new products and services. Elisa’s
extensive shareholder and customer
base in Finland is a considerable competitive asset in this aspiration.
The majority of Elisa’s business
operation is focused in Finland, where
the market is fairly mature with a high
density of subscriptions and high fixedline coverage. Prices are also under
pressure due to strong competition in
the current product and service areas.
Elisa is in a robust financial position
and has the potential to generate good
results. The company’s gearing is nearing the lower limit of the long-term
target level, putting the company in
a good position to pay dividends.
KEY INDICATORS
EUR
25
0
Teleoperators have always invested
heavily in fixed-line and wireless networks. Elisa forecasts that in the next
few years its investments will be around
10–12 per cent of turnover. It is
expected that a significant proportion
of this amount will be allocated for the
development of new products and
services.
Turnover
Operating profit
Operating profit, %
Net profit
Return on equity
Return on investment
Equity ratio
Gearing
Earnings per share (EUR)
Market value
Balance sheet total
Number of employees
Profit distribution
Profit distribution to Solidium
1–6/2010
2009
2008
717
126
17.6
48
1 430
267
18.7
177
20%
17%
46%
80%
1.13
2 484
1 965
3 331
143
15
1 485
264
17.8
177
19%
16%
43%
93%
1.12
1 914
2030
3 017
156
7
13%
42%
93%
0.31
2 215
1 935
3 538
Dividends are indicated under the financial period whose financial
statements have been used as the basis for dividend payments.
MAJOR SHAREHOLDERS, 30 JUNE 2010
Solidium Oy
Elisa Corporation
Varma
Ilmarinen
State Pension Fund
Number of
shares
Proportion of shares
and votes, (%)
16 631 000
10 534 506
10 151 976
5 041 334
2 000 000
10.0
6.3
6.1
3.0
1.2
13
Kemira Oyj
16.7
2.9
228
7.0
Market value of
(EUR million)
Profit distribution
to Solidium,
1.7.2009–30.6.2010
(EUR million)
STrATEGY
Kemira focuses on water management
chemicals, offering a wide range of
products related to fibre chemistry,
chemical water treatment and water
separation technology. Kemira provides
solutions for the management of both
water quality and quantity, which boost
customers’ energy, water and raw
14
material efficiency. Kemira’s customers
comprise companies operating in waterintensive industries as well as public
sector operators involved in water
treatment.
In 2009 Kemira’s continuing operations (excluding Tikkurila, which was
spun off in March 2010) generated
turnover of around EUR 2 billion, and its
operating profit, excluding non-recurring
items, was EUR 110 million. In mid-2010
the Group employed around 5,200
people in 40 countries. The company’s
financial targets are operating profit of
over 10 per cent and organic growth of
5 per cent per annum. The target for
gearing is 40–80 per cent.
Kemira has the following segments
focusing on water and fibre treatment
chemistry: Paper, Municipal & Industrial
and Oil & Mining.
Nearly one-half of the turnover
originates in the Paper segment, i.e.
in chemicals for the pulp and paper
industry. Globally Kemira is one of the
three major operators in this segment.
Kemira’s products are used to reduce
the amount of water in production
processes and to maintain the purity
of the process. Chemicals are used, for
instance, to eliminate microbes from the
water circulation, in order to improve
paper quality and boost process runnability. Kemira’s strategy for the Paper
segment is to reposition it and focus on
growing markets and selected products
and customers.
Municipal & Industrial segment
generates almost one-third of Kemira’s
turnover. Kemira is the world’s largest
provider of coagulants used by local
authorities and industry in water treatment. It is also a significant producer of
polymers. The segment’s products are
used for the treatment of drinking and
industrial water and sludge. Market
growth is based on rapidly increasing
demand for clean water and water
treatment, in particular in the major
cities of the developing world. Kemira’s
strategy is to grow the segment both in
existing and new market areas.
The Oil & Mining segment accounts
for around 15 per cent of Kemira’s
turnover. Its products are used e.g. in
oil drilling to prevent coagulation and
to fill and pressurise oil deposits. They
are also used in various mining industry
applications. Kemira is one of the most
important operators in the sector.
Typically, customers are major companies, but the business is fairly local.
Chairmanofthe
boardofDirectors:
Pekka Paasikivi
president&CEO:
Harri Kerminen
PORTFOLIO
The company’s strategy focuses on
global growth, fuelled by a recovery in
the production volumes of the mining
and oil industries.
The remaining 10 per cent of
Kemira’s turnover is generated by a wide
range of chemicals produced for, among
others, the food, animal feed, drugs and
textile industries. Most of the production
takes place in the ChemSolutions unit.
Kemira also has a 39 per cent stake in
Sachtleben, a producer of titanium
oxide used as a pigment.
measures following the phase of corporate acquisitions in the new millennium.
The spin-off of Tikkurila served to promote Kemira to a company focusing on
water chemicals. Eighty-six per cent of
Tikkurila, previously wholly-owned by
Kemira, was distributed on 26 March
2010 to its current owners in the form
of share dividends. At the same time
Tikkurila was listed on the Helsinki
Stock Exchange.
Kemira has announced the initiation
of the Centre of Water Efficiency Excellence (SWEET) project in collaboration
with VTT Technical Research Centre of
Finland. Participants will invest a total
of EUR 120 million in it over the next
four years. It will employ 200 people
annually. Other operators in the cluster
will also become involved in the project.
rECENTDEVELOpMENTS
In the first six months of 2010, Kemira
was able to maintain the positive trend
initiated in 2009, with turnover increasing by 7.5 per cent. Sales volumes rose
out of the slump, with the Paper and
Oil & Mining segments leading the way,
but they remain at historically low
levels. The profit margin rose by around
two percentage points to 7.8 per cent
year-on-year. This was due to Kemira’s
efficiency measures in 2009 as well as
market recovery. Cash flow remained at
a good level and gearing was reduced to
48 per cent.
The Kemira of today, specialising in
water treatment solutions, is the outcome of integration and centralisation
SOLIDIUM’SVIEW
Kemira’s vision is to be a leading water
chemistry company. The company
focuses on serving companies in waterintensive industries, where it is important to optimise water quality and consumption. Kemira’s objective is to
achieve organic growth in its selected
segments; the long-term outlook for
market growth promises well. Thanks
to the share issue organised in autumn
KEY INDICATORS
1
EUR
14
12
10
8
6
4
2
0
5
00
.1.2
06
.20
1.1
07
.20
1.1
2009 and the strong cash flow position,
the company is in a good position to
invest for growth.
Paper and pulp chemicals continue
to account for a significant proportion
of Kemira’s sales. Because of challenges
faced in these customer segments,
demand for the products in the mature
markets will be weak. On the other hand,
emerging markets will increase their
share, as the pulp industry is focusing
investment in South America and the
paper manufacturing industry in Asia.
The Municipal & Industrial segment has
good opportunities for growth in the
public sector in major, fast developing
cities, but on the other hand, the slow
development of local infrastructures
may, in certain cases, place obstacles in
the way of growth. At the global level,
Oil & Mining is a growth segment, but
at present it represents still a small
portion of Kemira’s overall business
operation.
In Solidium’s view, Kemira has all the
prerequisites to carve itself a globally
recognised niche in the water treatment
business sector. Furthermore, converting
seawater to fresh water and the exploitation of biomasses represent potential
for interesting new growth areas in the
long term.
EUR million
08
.20
1.1
09
.20
1.1
10
.20
1.1
FTSE EUROFIRST 300 Chemicals
Kemira
The development of the sector index has been normalised with reference to
the company share
Turnover
Operating profit
Operating profit, %
Net profit
Return on equity
Equity ratio
Gearing
Market value
Balance sheet total
Number of employees
Profit distribution
1–6/2010
2009
2008
1 060
83
7.8
55
2 500
175
7.0
96
9%
8%
45%
53%
0.72
1 574
2 817
8 493
41
7
2 833
133
4.7
35
3%
7%
34%
108%
0.26
720
2 860
9 405
30
5
9%
50%
48%
0.35
1 338
2 518
5 177
Finland, 15%
statements have been used as the basis for dividend payments. The figures
include Tikkurila’s figures for previous financial years and for early 2010,
up to the date of Tikkurila’s spin-off. The distribution of Tikkurila shares as
dividend is not taken into account in the profit distribution data.
Rest of Europe, Near East and
Africa, 50%
North America, 23%
South America, 6%
Asia and Pacific region, 6%
Oras Invest Oy
Solidium Oy
Varma
Ilmarinen
Kemira Oyj
Number of
shares
and votes, (%)
25 933 622
25 896 087
15 185 836
8 153 495
3 600 225
16.7
16.7
9.8
5.2
2.3
15
Metso Corporation
10.4
5.3
416
11.0
Market value of
(EUR million)
Profit distribution to
Solidium, 1.7.2009–
30.6.2010 (EUR
million)
STrATEGY
Metso supplies sustainable technologies
and services to the mining, construction,
power generation, metal recycling
and pulp and paper industries. Metso
operates in more than 50 countries and
employs around 27,000 people worldwide. Metso Corporation has three
reporting segments: Mining and
Construction Technology, Energy
and Environmental Technology and
Paper and Fibre Technology. Metso’s
16
operations comprise product and
project business activities and service
business.
Metso has created a global sales
and service network, in order to maintain a presence in the target markets
and to secure the optimal service standards for its customers. The company’s
main competitors in the supply of new
equipment business and entire production plants are companies with global
operations whose product and service
business partly overlaps with Metso’s
offering. However, the number of competitors with capabilities to provide
total solutions is relatively small.
Because the service business is more
local in nature, the competitors tend to
be small, local companies.
Metso invests heavily in the development of environmental business.
About 60 per cent of the company’s
business operations can be classified as
environmental business under the
OECD guidelines. Environmentally
effective solutions give customers
added value at every phase of the
lifecycle of the production process; they
strengthen the customer’s competitive
edge and minimise the harmful impact
on the environment. Metso’s environmental business involves renewable
energy sources, the energy efficiency
of customers’ production processes,
recycling, effective exploitation of raw
materials and water, minimising dust,
noise, waste, carbon dioxide and particle
emissions as well as optimising the
customer’s processes. Increases in
energy consumption, globalisation and
population growth as well as environmental and energy issues all represent
opportunities for Metso in the long term.
As the demand for metals and other
raw materials continues to grow and
raw material reserves to dwindle, the
mining sector represents promising
growth opportunities for Metso. In
Paper and Fibre Technology segment
Metso is a world leader and is able to
exploit its cutting-edge technology and
its competence in process technology.
The energy and environmental technology business focuses on developing
products and solutions for cleaner
energy as well as automation products
for a wide range of customer sectors.
rECENTDEVELOpMENTS
The last months of 2009 saw Metso
continuing to focus on adjusting its
organisation and cost structure to
Chairmanofthe
boardofDirectors:
Jukka Viinanen
president&CEO:
Jorma Eloranta
PORTFOLIO
the decreased level of demand and
boosting its cash flow. The cost-cutting
measures have served to give Metso a
solid competitive foundation as growth
gets underway once more in Metso’s
customer sectors.
In November 2009, Metso acquired
Tamfelt Oyj, a manufacturer of paper
machine clothing and filter fabrics. The
acquisition strengthens Metso’s position
to provide services, a business that is
important to the company and one that
balances its overall operation.
In the first half of the year, there
was an increase in demand in Metso’s
service business. Turnover grew by
seven per cent compared to previous
year, amounting to EUR 1,123 million.
This is 45 per cent of Metso’s total
turnover. The service business stabilises
Metso’s overall operations and it plays
an increasingly important role in
Metso’s strategy.
In the first few months of the year,
demand took a positive turn and subsequently recovery is on a broader basis.
The last 12 months have seen stronger
than expected demand for Metso’s
Paper and Fibre Technology business,
due in particular to investments in pulp
technology in South America and China.
Metso has received several significant
orders during the year. Encouraged by
the recovery in demand for metals and
minerals, customers in the Mining and
construction segment have once more
started to make new investments.
As utilisation rates grow, replacement
investment is picking up. The Energy
and Environmental business segment
has profited considerably from new
power plant projects, for which Metso
supplies boilers and automation systems.
Towards the end of last year the
mining sector, in particular, showed
signs of increasing pressure on prices
as demand slowed down. In the first
months of the current year, however,
price pressures have eased. Stable price
levels contribute significantly to Metso’s
profitability. A further factor in the
profitability trend is the stability of
pricing power.
SOLIDIUM’SVIEW
As a result of updated operating models
and the capacity adjustments, Metso is
well-placed to profit from the increased
investment activity becoming apparent
in its main markets, as the demand for
goods picks up.
KEY INDICATORS
EUR million
EUR
60
50
40
30
20
10
0
05
.20
1.1
06
.20
1.1
07
.20
1.1
Metso has three strong business
segments which complement each
other. As the economic cycles in the
customer sectors of these business
segments vary from each other, this
tends to balance Metso’s performance
trends.
In the future Metso will focus its
sales of new equipment on the emerging
markets, while the service business will
concentrate on the maintenance and
service of existing equipment in the
developed world. Factors that will have
a positive impact on Metso’s business in
the long term are the need for new
infrastructure and the replacement of
old infrastructure, the development of
new forms of energy, the increasing role
played by the service business and the
economic growth in emerging markets.
Metso is a global operator in its
main sectors. The company has been
able to develop a high standard of
business and technological competence,
which can now be exploited widely in
the newer customer sectors, notably in
the environmental sector. The energy
and environmental technology segment
has the potential for significant new
business lines.
08
.20
1.1
09
.20
1.1
10
.20
1.1
Bloomberg Europe Machinery-Diversified Index
Metso
the company share
Turnover
Operating profit
Operating profit, %
Net profit
Return on equity
Equity ratio
Gearing
Market value
Balance sheet total
Number of employees
Profit distribution
1–6/2010
2009
2008
2 540
210
8.2
115
14%
13%
36%
29%
0.76
3 968
6 059
27 665
5 016
271
5.4
135
8%
9%
35%
47%
0.90
3 693
5 715
27 166
105
11
6 400
631
9.8
385
25%
23%
29%
77%
2.72
1 207
5 511
29 322
99
11
Number of
shares
and votes, (%)
15 695 287
10.4
7 258 794
4 162 637
4 113 552
1 910 000
5.1
2.8
2.7
1.3
Finland, 7%
Other Nordic countries, 8%
Rest of Europe, 29%
North and South America, 28%
Asia and Pacific region, 22%
Other countries, 8%
Solidium Oy
Marathon Asset Management
LLP *
Ilmarinen
Varma
State Pension Fund
* Based on flagging notice, 19.11.2008.
17
Outokumpu Oyj
30.9
8.9
702
19.8
Market value of
(EUR million)
Profit distribution
to Solidium,
1.7.2009–30.6.2010
(EUR million)
STrATEGY
Outokumpu is one of Europe’s biggest
stainless steel producers. The company
produces hot and cold rolled, precision
strip, tubular and long products for the
18
construction, process and chemicals
industries as well as for transport and
catering applications. Outokumpu has
its main production sites in Finland,
Sweden, Great Britain and the United
Sates. There are service centres in
12 countries and operations in a total
of 30 countries.
Stainless steel accounts for a small
proportion of steel used worldwide, but
demand is growing. Stainless is used in
products with an increasing number of
applications; demand is increasing with
the growth of urbanisation and higher
standards of living. Alongside the basic
products in the markets, Outokumpu
has developed its very own steel grades
(“duplex” grades). Their use is forecast
to grow, with Outokumpu the global
market leader.
Stainless steel is manufactured
using ferrochrome. Outokumpu has its
own ferrochrome mine in Kemi. The
chromite from the mine is taken to
Outokumpu’s own facility in Tornio,
where it is enriched to produce ferrochrome. The proximity of its own ferrochrome mine has served to make the
Tornio plant one of the most efficient in
the world in the production of stainless
steel. Currently around two-thirds of
Outokumpu’s ferrochrome requirement
is met by production of chrome from
its own mine. The investment in the
expansion of ferrochrome production
Chairmanofthe
boardofDirectors:
Ole Johansson
president&CEO:
Juha Rantanen
PORTFOLIO
capacity, which was announced in
June 2010, will make Outokumpu selfsufficient in ferrochrome.
Fluctuations in the prices of nickel
and molybdenum, used as alloying
elements in stainless steel, influence
the price and demand of stainless steel.
Outokumpu is susceptible to the price
fluctuation of these raw materials in the
course of its production process.
Changes in inventory values are
reflected in the company’s financial
result as part of normal business operations. It is part of Outokumpu’s strategy
to increase sales of low nickel containing
grades and also increase sales directly
to end-users. These measures are
expected to counter the significant
fluctuations in demand and profitability
that have been experienced previously.
Outokumpu’s goal is to be the
leading producer of stainless steel in
the world. Currently, its production
capacity is the sixth largest worldwide,
and 74 per cent of the production is
sold in Europe. Part of the strategy is
to increase sales outside Europe.
positive trend, Outokumpu’s capacity
utilisation rate at the start of the year
was around 75 per cent, and in June the
capability was raised to full capacity in
Tornio. Group result turned positive in
the second quarter of the year.
At the end of March 2010, Outokumpu made the decision to update
the feasibility study on an investment
project involving doubling its ferrochrome production capacity to 530,000
tonnes at the Tornio plant. A decision
was made in June 2010 to implement
the EUR 440 million investment project.
The original investment decision had
been made in June 2008 but, due to the
economic crisis and uncertain markets,
the investment was postponed in
December 2008. The project will be
launched without delay and, once
completed, it will create around 120
permanent new jobs at the Tornio ferrochrome plant and in the mine in Kemi.
It is estimated that the new extended
capacity will be in use by the first half
of 2013 and at full capacity in 2015.
In June 2010 it was also decided to
invest EUR 104 million to increase the
production capability and capacity of
quarto plate in Degerfors, Sweden.
According to plans, most of the capacity
will be operational in 2014.
rECENTDEVELOpMENTS
Demand for the standard grades of
stainless recovered somewhat in the
first months of 2010. Despite the
EUR million
40
30
20
10
05
.20
1.1
06
.20
1.1
07
.20
1.1
08
.20
1.1
09
.20
1.1
10
.20
1.1
Bloomberg Europe Steel Index
Outokumpu
the company share
Europe, 74%
SOLIDIUM’SVIEW
Stainless steel producers are beginning
to recover from the low utilisation rates
imposed by the economic crisis and
the slump in demand. The outlook for
companies operating in the sector is
cautiously optimistic. Europe, however,
continues to suffer from structural
overcapacity and ineffective production,
and this is reflected in utilisation rates
and the price of steel in coming years.
In Solidium’s view the ferrochrome
investment will reinforce Outokumpu’s
position among the industry’s most
efficient producers. Structural reorganisation may become a necessity, in order
to restore profitability in the sector to
a healthier basis and to boost the
competitiveness of European producers.
KEY INDICATORS
EUR
50
0
In summer 2010, the Finnish
parliament approved Fennovoima Oy’s
application to build a nuclear power
plant. Outokumpu has a 10 per cent
stake in Fennovoima and it is entitled
to buy electricity at cost, quantities
defined in proportion to its ownership.
Fennovoima plans to have the nuclear
reactor operational by 2020.
The company strengthened its
foothold in Asia by opening a service
centre in Kunshan, China in June 2010.
Turnover
Operating profit
Operating profit, %
Net profit
Return on equity
Equity ratio
Gearing
Market value
Balance sheet total
Number of employees
Profit distribution
Australia and Oceania, 2%
2009
2008
2 026
49
2.4
22
2%
3%
44%
68%
0.12
2 261
5 718
8 617
2 611
-418
-16.0
-321
-12%
-9%
51%
64%
-1.78
2 400
4 850
7 606
64
20
5 474
20.0
0.4
-46
-2%
-1%
52%
51%
-0.26
1 492
5 341
8 471
90
28
Asia, 14%
North and South America, 10%
1–6/2010
Solidium Oy
Social Insurance Institution
Ilmarinen
Varma
State Pension Fund
Number of
shares
and votes, (%)
56 440 597
14 652 666
8 871 927
3 300 317
2 731 600
30.9
8.0
4.9
1.8
1.5
19
Rautaruukki
Corporation
39.7
8.5
669
25.0
Market value of
(EUR million)
Profit distribution
to Solidium,
1.7.2009–30.6.2010
(EUR million)
bUSINESSOEprATIONSAND
STrATEGY
Rautaruukki supplies metal-based
components, systems and integrated
systems to the construction and
mechanical engineering industries.
20
The company offers a wide selection of
metal products and related services and
operates in 27 countries. The company’s
main customer sectors are infrastructure and industrial and commercial
construction and the heavy and light
engineering industries.
Ruukki operates under three business areas: Construction, Engineering
and Metals. Ruukki’s market area
comprises Europe and its position in
the Nordic countries is strong. The
company’s focus for long-term growth
is on Central and Eastern Europe,
Russia and Ukraine.
Rautaruukki’s strategic intent is to
be a key operator in steel production
and the supplier of solutions to the
engineering and construction industries
in selected market areas. In geographic
terms, Rautaruukki focuses on the Nordic region in the sale of steel as well as
on the growth markets of Central and
Eastern Europe, with special emphasis
on industrial and commercial construction as well as residential construction.
By developing all three business
areas, Rautaruukki aims to minimise the
impact of sharp cyclical fluctuations in
demand for steel products.
In the Metals business area, Rautaruukki’s goal is to continue to develop
high-strength and wear-resistant steel
grades, which sell for prices that are
higher than those of standard steel
products. Special steel grades offer
customers added value thanks to their
durability and light weight, thereby
extending the product’s life and giving
the customer savings in costs for
example. Special steel grades have
good growth prospects.
In the Construction business area
Rautaruukki’s strategic priority is the
growth markets of Eastern Europe.
The construction neglect opens good
prospects for Rautaruukki’s concept of
erecting industrial buildings time- and
cost-efficiently.
For end users of engineering
products, Rautaruukki develops and
manufactures both individual components and integrated systems. It is
Rauta-ruukki’s intent to get a more
in-depth insight into the customer’s
design process, in order to be able
Chairmanofthe
boardofDirectors:
Reino Hanhinen
president&CEO:
Sakari Tamminen
PORTFOLIO
to fully exploit Rautaruukki’s expertise
in special grade steels.
The price hike in carbon steel raw
materials may put pressure on profitability, unless the raw material cost
rises can be transferred to customer
selling prices. Raw material prices have
been subject to considerable fluctuation
in recent years. The annual benchmark
prices applied in the global market
pricing of iron ore were scrapped in
spring 2010. Instead, a quarterly quotation market is being formed. The expansion of major steel producers into raw
material production, gives them an edge
as the raw material pricing practice
changes, because they are better able
to cover the price risk in iron ore, being
both producers and buyers of the raw
material.
Rautaruukki is investing around
EUR 270 million to modernise its Raahe
production plant. The investments,
taking place in 2009–2011, target the
blast furnaces, the pellet store and
environmental technology.
In carbon steel production the
capacity utilisation rate of the production plant largely determines the profitability of the operation. Due to the
modernisation work, Raahe’s blast
furnace 2 was shut down for around
two months in spring 2010, and this had
an impact on the utilisation rate. Prior
rECENTDEVELOpMENTS
For Rautaruukki, the year 2009 proved
to be a difficult one due to the slump in
demand. Demand bottomed out in the
second half of last year. In the current
year, demand for carbon steel has
revived in several industries, both in
developing markets and in Europe,
improving the outlook for Rautaruukki.
Although demand in Europe remains
fairly subdued, steel deliveries to the
engineering industry, for example, and
to automotive subcontractors increased
or remained on a high level. Another
positive sign is the strong growth in
demand for special steels in Rautaruukki’s
new market areas outside Europe.
The construction and engineering
sectors are also showing signs of reviving
demand. During spring, the order flow
from the construction sector in Central
and Eastern Europe and Russia started
to pick up. Demand from the infrastructure building sector remained at a good
level. In the engineering sector, the
product order flow took an upward
direction in the spring, and turnover
was at the same level as at the end of
last year.
EUR million
EUR
60
50
40
30
20
10
05
.20
1.1
06
.20
1.1
07
.20
1.1
08
.20
1.1
09
.20
1.1
10
.20
1.1
Bloomberg Europe Steel Index
Rautaruukki
the company share
Finland, 30%
SOLIDIUM’SVIEW
Rautaruukki is dependent, on the one
hand, on the market price of carbon
steel as well as the demand for it, and
on the other hand, on the demand for
its customers’ products and on the
solvency of its customer base. In order
to safeguard the financial feasibility of
its operation, a company operating in
the heavy steel industry must have near
full capacity utilisation rates.
Global iron ore prices are adopting
shorter cycles. This is likely to exacerbate the raw material price fluctuations
suffered by smaller producers, such as
Rautaruukki.
Rautaruukki’s selected markets and
operating areas will offer several opportunities for growth. However, there are
no clear indications of long-term growth
in the demand for standard carbon steel
in the developed markets.
KEY INDICATORS
0
to the shutdown, the company had
accumulated steel slab inventory, which
allowed uninterrupted supplies to
customers. As customer demand grew
in spring 2010, the company has now
reached 80–90 per cent capacity
utilisation rates (excluding the effects
of the blast furnace shutdown).
Turnover
Operating profit
Operating profit, %
Net profit
Return on equity
Equity ratio
Gearing
Market value
Balance sheet total
Number of employees
Profit distribution
Rest of Europe, 14%
Other countries, 6%
2009
2008
1 160
-2
-0.2
-13
-7%
-4%
55%
36%
-0.09
1 669
2 654
12 214
1 950
-323
-16.6
-275
-16%
-11%
60%
22%
-1.98
2 241
2 532
11 648
62
25
3 851
573
14.9
410
21%
25%
65%
8%
2.98
1 688
2 983
14 286
187
75
Other Nordic countries, 31%
Central and Eastern Europe,
Russia and Ukraine, 19%
1–6/2010
Solidium Oy
Capital Research and
Management Company *
Varma
Ilmarinen
OP Funds
Number of
shares
and votes, (%)
55 656 599
39.7
7 297 852
3 514 322
2 517 417
2 077 604
5.2
2.5
1.8
1.5
21
Sampo plc
14.1
17.4
1 377
79.3
Market value of
(EUR million)
Profit distribution
to Solidium,
1.7.2009–30.6.2010
(EUR million)
STrATEGY
Sampo Group’s operations are divided
into two business areas: property and
casualty insurance and life insurance.
The parent company, Sampo plc, has an
associated company, Nordea Bank AB,
with Nordic banking operations, of
which Sampo’s share was 20.5% on
30 June 2010.
If P&C Insurance Company is the
leading property and casualty insurance
22
company in the Nordic countries. It also
operates in the Baltic States and Russia.
If’s strategic long-term goals are better
profitability and a higher degree of
customer satisfaction than its competitors as well as a high level of creditworthiness. The financial targets include
achieving a combined ratio of less than
95 per cent and a return on equity of
at least 17.5 per cent.
Mandatum Life is responsible for
life insurance operations and asset
management under an insurance
wrapper. Its primary operating area is
Finland, and it also has a subsidiary in
the Baltic States. The majority of the
company’s total technical provisions
comprise with-profit insurance portfolio,
but new business focuses on unit-linked
insurance, risk products and voluntary
corporate pension schemes. Mandatum
Life’s financial target is to produce a
return on equity of at least 17.5 per
cent.
Nordea is the biggest financial
services group in the Nordic and Baltic
regions. Measured in market value, the
company figures among the largest in
the Nordic region. In addition to the
Nordic countries, Nordea operates in
Russia, Poland and the Baltic States.
Nordea has approximately 10 million
customers and around 1,400 branches.
Nordea’s long-term goal is to double
the risk-adjusted result (around EUR 2
billion) achieved in 2006 by the year
2013.
rECENTDEVVELOpMENTS
P&C insurance is a sector that has
suffered less than most in the economic
recession. Year-on-year, If has produced
a low volatility and solid cash flow.
However, measured in market value If
can produce significantly fluctuating
financial results from one year to the
next, depending on equity market trends.
The year 2009 was the company’s best
ever, in terms of mark-to-market profit
before taxes, which was EUR 1,353 million (EUR -19 million in 2008). Due to
the harsh winter experienced in the
Chairmanofthe
boardofDirectors:
Björn Wahlroos
GroupCEO:
Kari Stadigh
PORTFOLIO
Nordic countries, 2010 began on a challenging note for property and casualty
insurers. In the first quarter, If incurred
exceptional insurance indemnities, due
to the winter weather, amounting to
around EUR 70 million. If’s combined
ratio in the first half of 2010 was 94.1
per cent, when it was 92.5 per cent in
the equivalent period in 2009. Increased
competition in the sector has pared
down off If’s market share in Finland
and Norway.
Due to the positive correction in the
equities markets in 2009, Mandatum
Life’s mark-to-market result also broke
all records at EUR 658 million in 2009.
The 2009 book profit before taxes was
EUR 121 million. In unit-linked products,
in particular, Mandatum Life’s premiums
written has increased considerably. In
the first half of 2010, premiums written
grew by 82 per cent year-on-year and
profit before taxes by 31 per cent.
In 2007, Sampo sold Sampo Bank
to Danske Bank for a good four billion
euros. Following the sale, Sampo has
invested around EUR 5.3 billion euros
in Nordea shares, becoming Nordea’s
largest shareholder with its 20.5 per
cent stake in the company. As at 30
June 2010 the value of the shareholding
stood at EUR 5.7 billion. Furthermore,
Sampo has received dividends from
Nordea amounting to around EUR 450
million in 2007–2010. Nordea has
weathered well the financial crisis, and
its credit loss has remained at a reasonable level. In the first six months of
2010, net loan loss provisions dropped
to 0.36 per cent per annum, whereas in
2009 they were 0.54 per cent, or
almost EUR 1.5 billion.
In 2006 and 2007, Sampo reduced
its equity weights considerably and
achieved significant gains in the recession by buying and retaining in its
portfolio corporate bonds, whose risk
premiums were high. In 2009 the equity
weight was increased, and the company
now reaped the benefits of the strong
positive corrections in the equities
markets. In the first months of 2010,
Sampo has underweighted government
bonds and further increased the equity
weight.
SOLIDIUM’SVIEW
In the insurance business a significant
share of the profit is generated by
investment activities, and in recent
years Sampo has displayed exemplary
competence in this field.
Currently there are major plans
afoot to amend the regulation targeting
KEY INDICATORS
EUR million
EUR
25
20
15
10
5
0
05
.20
1.1
06
.20
1.1
07
.20
1.1
both insurance and banking business
operations. The final format of the new
regulations remains open in summer
2010, and due to the serious problems
in the eurozone economies it is possible
that the new regulations will not be
implemented in the near future or in
the format envisaged. In Solidium’s view
potentially tighter regulations do not
pose a problem for If because, in order
to achieve the credit rating that is a
condition for the conduct of business
even at present, the company must
meets the capital adequacy requirement.
Solidium believes that the solvency
capital of Mandatum Life is on a stable
basis at the moment.
Economics of scale are significant in
property and casualty insurance. In the
current markets organic growth will
remain modest, with the result that
cost-efficiency and success in underwriting will gain in importance.
In Solidium’s opinion Nordea has
adopted a disciplined approach in its
credit risk control. Consequently, loan
losses caused by the financial crisis
and the recession will be smaller than
anticipated in Nordea, and decreasing
loan losses, a trend begun in early 2010,
will continue.
08
.20
1.1
09
.20
1.1
10
.20
1.1
OMX Nordic Financials
Sampo
the company share
Premiums written
Profit before taxes
Net profit
Net asset value per share (EUR)
Return on assets
Return on equity
Market value
Balance sheet total
Number of employees
Profit distribution
1–6/2010
2009
2008
2 961
621
518
0.92
14.50
10%
20%
9 749
28 295
6 899
4 479
825
641
1.14
14.63
17%
54%
9 553
26 635
7 087
561
79
4 350
870
675
1.18
8.28
-7%
-32%
7 433
21 149
7 458
449
63
BREAKDOWN OF PREMIUMS
WRITTEN
Finland, 35%
Norway, 29%
Sweden, 25%
Denmark, 7%
Baltic States, 4%
Number of
shares
Solidium Oy
Varma
Capital Research and
Management Company *
Ilmarinen
Björn Wahlroos
Proportion
of shares Proportion
(%) of votes(%)
79 280 080
47 709 421
28 485 301
14.1
8.5
5.1
14.0
8.4
5.0
15 007 445
11 756 737
2.7
2.1
2.7
2.1
* Based on flagging notice, 18.12.2009
23
Sponda Plc
34.3
3.0
236
11.4
Market value of
(EUR million)
Profit distribution
to Solidium,
1.7.2009–30.6.2010
(EUR million)
STrATEGY
Sponda is a real estate investment
company that specialises in commercial
properties. The company operates in
the Helsinki metropolitan area and
other large Finnish cities as well as
St. Petersburg and Moscow, Russia. The
leasable area of Sponda’s investment
properties is around 1.5 million square
24
metres, consisting of office and retail
premises and logistics properties. The
fair value of the investment properties
is EUR 2.8 billion.
Office and retail premises accounted
for 52 per cent, shopping centres for
19 per cent, logistics premises for 15 per
cent, real estate funds for 4 per cent
and the Russia Business Unit for 10 per
cent of the company’s net income in the
first six months of 2010. The company
has four business units: Investment
Properties, Property Development,
Real Estate Funds and Russia.
Sponda’s objective is the ongoing
development of the property portfolio
by selling, constructing and acquiring
real estate investment properties.
In 2009, Sponda chose comprehensive environmental competence as the
priority theme of its corporate responsibility strategy. Energy efficiency is a key
point in the programme, but environmental considerations and sustainable
development are taken into account in
every process, from the design of new
premises to the strategy applied in
ownership.
Sponda has real estate properties
in Russia, in desirable market areas in
the heart of Moscow and St. Petersburg.
Currently, investments by the Russia
Business Unit account for around 7 per
cent of the company’s real estate investment portfolio, but Sponda is looking
to increase that figure.
rECENTDEVELOpMENTS
For the first six months of 2010, the
business environment in Sponda’s market
areas in Finland and Russia remained
challenging. As a result of a slowdown
in the demand for commercial premises,
Chairmanofthe
boardofDirectors:
Lauri Ratia
president&CEO:
Kari Inkinen
PORTFOLIO
market rents continued their downward
trend, but now the price reduction
appears to have bottomed out. Vacancy
rates have been on the rise, and several
market analyses predict that in the
office premises market vacancy rates
may continue to rise. Real estate transactions were sluggish in the first
months of 2010.
The vacancy rate in Sponda’s real
estate portfolio was 12.7 per cent at the
end of the first half of 2010, a year-onyear reduction of around 0.7 percentage
points. The high vacancy rate can be
attributed in part to the low demand
for the rental premises completed in
Vuosaari Harbour, as industrial export
companies show little interest in rental
premises.
As the real estate market levelled
out in the early months of 2010, there
were no significant value changes in
Sponda’s real estate portfolio. In the
second quarter, the company’s net
assets per share took a slight upward
turn, reaching by the end of June
EUR 3.55. Sponda’s equity ratio stood
at 37 per cent. The company’s long-term
target is to raise the equity ratio to
40 per cent.
Sponda expects the economic
occupancy rate to continue to rise
towards the end of the year, provided
that there are not any unexpected
changes in the current economic
development trend. Demand for business premises is closely tied to the
trend in GDP as well as industrial
activity in general. A rise in industrial
activity quickly translates into increased
demand for logistics premises.
Sponda is developing 22,000 floor
square metres of production and office
space for Metso Automation Oy in
Hakkila in the city of Vantaa. The total
investment is worth around EUR 40
million. Sponda’s major development
project, City-Center, in the heart of
the Helsinki will be ongoing until 2012.
The company reports that this
year’s refinancing need has been met,
part of it due to the issue in May 2010
of a EUR 100 million bond. In the
current environment Sponda will
finance its development projects
primarily by property sales.
On 6 July 2010, Sponda announced
that the Supreme Administrative Court
had decided in favour of Sponda in the
case involving the right to deduct
Sponda Kiinteistöt Oy’s confirmed
losses of EUR 558 million. The decision
does not have any effect on Sponda’s
2010 result.
EUR
9
8
7
6
5
4
3
2
1
0
05
.20
1.1
06
.20
1.1
07
.20
1.1
KEY INDICATORS
EUR million
08
.20
1.1
09
.20
1.1
10
.20
1.1
EPRA real estate investment index
Sponda
the company share.
Finland, 91%
SOLIDIUM’SVIEW
Real estate investment operates in a
post-cyclic business sector, and the
economic situation affects the value
development of property portfolio.
The continuing poor predictability of
economic development is dampening
the interest of companies in changing
premises or renting new facilities for
the time being. The rising yield demands
have, however, been halted as has the
slide in market rents in good market
areas. In Solidium’s view, Sponda is in
a good position to increase its net asset
value per share in the next few years.
Thanks mainly to the historically
low interest rates, the banks providing
financing for the real estate sector have
not so far incurred any significant credit
losses in the Finnish property markets.
Property investors remain uninterested
in poorly maintained properties in the
weaker market areas.
Solidium expects Sponda’s cash
flow to remain stable in the next few
years, because the company’s major
tenants include solvent corporations
and on average the leases are long-term.
The financing market has stabilised and
thus, Sponda will be in a good position
to make financing decisions.
Turnover
Operating profit
Operating profit, %
Net profit
Return on equity
Equity ratio
Gearing
Market value
Balance sheet total
Number of employees
Profit distribution
1–6/2010
2009
2008
116
93
80.2
47
243
-13
-5.5
-82
-8%
0%
37%
141%
-0.35
758
2 990
134
33
11
224
117
52.3
29
3%
4%
32%
180%
0.16
344
3 175
141
0
0
37%
142%
0.15
688
2 993
121
Russia, 9%
Solidium Oy
Cohen & Steers, Inc. *
Ilmarinen
Varma
State Pension Fund
Number of
shares
and votes, (%)
95 163 745
13 898 317
12 052 730
1 956 617
1 706 111
34.3
5.0
4.3
0.7
0.6
25
Stora Enso Oyj
12.3
7.5
590
38.8
Market value of
(EUR million)
Profit distribution
to Solidium,
1.7.2009–30.6.2010
(EUR million)
STrATEGY
Stora Enso is one of the biggest forest
industry companies in the world. Its
main products are newsprint and book
paper, magazine and fine paper, consumer
and industrial packaging and wood
products. The company also sells
market pulp.
The Group employs some 27,000
people and runs 85 mills and production
26
plants in more than 35 countries.
Around 8,200 of its employees work
in Finland. In terms of turnover, a good
one-third of the production originates
in Finland.
Stora Enso’s customers include
publishers, printing houses, paper
merchants as well as the packaging,
joinery and construction industries.
The company’s turnover in 2009 was
EUR 8.9 billion and the operating profit,
excluding non-recurring items and
impairments, was EUR 320 million.
Stora Enso generates the majority
of its turnover in Europe, where market
growth is either slow or negative, in
publication and fine paper in particular.
To compound, almost every paper segment in Europe suffers from structural
overcapacity, due to over-investment
and weak growth in demand. This
significantly impairs producers’ pricing
power and lowers the mills’ utilisation
rates, thereby weakening profitability.
Market restructuring and structural
development is a laborious and costly
process and, in addition to production
closures, it may require consolidation.
The problems in the sector have
continued, partly because sufficiently
large-scale capacity closures and the
resulting write-downs are a challenge
for many companies due to their weak
balance sheets.
Stora Enso’s strategy includes
future focus on growing markets, with
emphasis on Latin America and China.
Both production and consumption will
grow significantly in these markets,
driven by growth in standards of living
and a resulting increase in the per capita
consumption of paper and board. In
pulp production, the company will focus
on plantation-based pulp, which has
a low cost structure. This offers a
significant cost benefit thanks to the
rapid growth of pulpwood. Stora Enso
has notable areas of plantations in
Latin America and China, which can
accommodate investment in extensive
pulp production. Stora Enso currently
has a joint venture in Brazil, which
produces 1.1 million tonnes of shortfibre pulp.
Fibre-based packaging is set to
take a significantly larger role in the
company’s operations. Even at present,
Stora Enso is globally a major manufacturer of consumer packaging board and
a dominant producer of board used
in liquids packaging. Fibre-packaging
overall is a globally growing segment
Chairmanofthe
boardofDirectors:
Gunnar Brock
ChiefExecutive
Officer:
Jouko Karvinen
PORTFOLIO
and is likely to replace much of the
plastic packaging used at present, not
least because it is an environmentally
friendly solution.
In line with its strategy, instead of
the current wide product range, Stora
Enso will focus on selected paper
grades. The aim is to concentrate on
product areas, where there is potential
to achieve a notable market position
and competitive edge and a satisfactory
level of return. Increasingly, investments
will be specifically targeted in accordance
with long-term outlooks.
adjustments involving the closure of
several production plants as well as
outsourcing activities and paring down
the administrative structure. The latest
measures include the shutdown of
newsprint production at the Varkaus
mill by the end of October 2010 and
the sale of the mills in Kotka.
In the first half of 2010, Stora Enso’s
profitability continued to improve,
thanks to the efficiency measures and
a pick-up in demand. Increased volumes,
improved pricing and favourable
exchange rates meant that turnover
grew considerably on the previous
year’s level. Demand remains, however,
at a historically low level. Operating
profit, excluding non-recurring items,
increased from the 2009 benchmark’s
zero level to almost EUR 400 million.
The proportion of working capital
has been reduced substantially as part
of the efficiency measures. In the space
of 12 months, the ratio between working
capital and turnover decreased from
22 per cent to 17 per cent, which
equates to around half a billion euros.
Despite recent sizeable write-downs
and operating losses, the company’s
balance sheet remains strong, and
refinancing problems have not emerged.
rECENTDEVELOpMENTS
Stora Enso Group has undergone a
phase of rigorous change and reorganisation in recent years. New strategy and
operating models have been introduced
throughout the organisation. Thorough
reform has been necessary for the company to have a chance of success in the
changed environment in which forest
industry now operates. For example,
with reference to paper production in
Europe the company is replacing an
investment policy that sought increase
in production with a policy that focuses
on profitability and the lifecycle of
assets. The reform also includes capacity
1
EUR
16
14
12
10
8
6
4
2
0
5
00
.1.2
6
00
.2
1.1
SOLIDIUM’SVIEW
Stora Enso is still in the process of
transforming itself from a global forest
industry conglomerate to a focused
paper and pulp and packaging company.
Solidium believes that the company’s
strategy is the right one and will considerably improve its competitiveness and
value creation in the long run. The
business potential in Latin America and
China is good, and the ground gained by
the company in fibre-based packaging
and particularly in liquid packaging
boards may lead to significant value
creation. Stora Enso is in a good position
to participate in the structural transformation of forest industry in Europe,
should the company wish to be
involved. Biofuels and biorefinery
products, as well as products used in
wood building, for example, incorporate
notable business opportunities.
KEY INDICATORS
EUR million
7
00
.2
1.1
In February 2010, Stora Enso
launched an feasibility study for the
Punta Pereira mill area in Uruguay.
A joint venture between Stora Enso and
Arauco is planning a major pulp mill in
the area. The study will be completed
during 2010.
08
.20
1.1
09
.20
1.1
10
.20
1.1
Bloomberg World Forest Products & Paper Index
Stora Enso
the company share
1–6/2010
2009
2008
4 988
339
6.8
262
10%
8%
45%
49%
0.33
4 740
12 296
28 040
8 945
321
3.6
153
3%
6%
45%
55%
0.19
4 020
11 593
27 390
158
19
11 029
388
3.5
143
2%
4%
46%
60%
0.18
4 373
12 241
31 667
158
19
Turnover
Operating profit
Operating profit, %
Net profit
Return on equity
Equity ratio
Gearing
Market value
Balance sheet total
Number of employees
Profit distribution
MAJOR SHAREHOLDERS, 30.6.2010
Number of
A series
shares
Germany, 18%
Sweden, 9%
Finland, 7%
Rest of Europe, 47%
Other countries, 20%
Solidium Oy
Foundation Asset
Management
Social Insurance
Institution of
Finland
Ilmarinen
Varma
Number of Proportion Proportion
R series of shares
of votes
shares
(%)
(%)
55 595 937
41 483 501
12.3
25.1
63 123 386
17 000 000
10.1
27.2
23 825 086
3 492 740
15 572 117
2 775 965
20 794 108
140 874
3.4
3.1
2.0
10.1
2.3
6.5
27
mobile devices is still low. In these
markets the fixed networks are not up
to western standards, and the use of
communications devices relies on
mobile station networks. TeliaSonera’s
subsidiaries are the market leaders in
Kazakhstan, Azerbaijan, Tajikistan and
Georgia and the second biggest in
Uzbekistan, Moldova and Nepal.
TeliaSonera AB
13.7
41.2
3259
141.9
Market value of
(EUR million)
Profit distribution
to Solidium,
1.7.2009–30.6.2010
(EUR million)
STrATEGY
TeliaSonera is the biggest provider of
telecommunications services in the
Nordic and Baltic countries. It also
operates in the Eastern European and
Asian mobile communications markets
and in Spain. The company’s operations
(including associated companies) span
20 countries, with a total of 450 million
inhabitants. TeliaSonera’s main products
are mobile and fixed-network services.
The company’s headquarters are in
28
Stockholm, Sweden, and it employs
a total of around 29,700 people.
In the Nordic region, TeliaSonera is
the market leader in Sweden, in both
mobile communications and broadband
services. In Finland and Norway, TeliaSonera is the second largest market
operator, whilst in Denmark the
company’s position is that of challenger.
In the Baltic States, TeliaSonera is the
biggest operator in both mobile communications and broadband services.
The priority in these mature markets is
to optimise profitability and cash flow.
A significant proportion of TeliaSonera’s value is generated by two
associated companies, Turkcell which
is a Turkish enterprise, and the Russian
MegaFon. Turkcell is by far the biggest
mobile operator in Turkey. MegaFon is
the second largest provider of mobile
services in Russia.
TeliaSonera’s goal is to expand
operations in the emerging markets of
Eurasia, where the penetration of
rECENTDEVELOpMENTS
TeliaSonera has coped very well in the
recession, with profitability at particularly good levels in the Nordic countries
and Eurasia. In Sweden, TeliaSonera was
able to increase its turnover in mobile
communications services by 8 per cent
and EBITDA -% to 41 per cent (H1/2009:
39 per cent year-on-year in the first half
of 2010). This was partly due to
increased returns on mobile data
services. In Finland TeliaSonera lost the
market leadership (measured in subscriptions) in mobile communications
services to Elisa in 2009. The associated
company Turkcell has displayed weaker
performance than previously, with a 37
per cent year-on-year drop in returns in
the first six months of the year. This
was due, in part, to non-recurring items.
The most significant event taking
place in 2009 was the agreement
concluded with the Russian company
Altimo on the merger of the MegaFon
Chairmanofthe
boardofDirectors:
Anders Narvinger
president&CEO:
Lars Nyberg
PORTFOLIO
and Turkcell holdings. Once implemented,
the arrangement means that the holdings will be transferred to a new holding
company. The objective of the arrangement is to increase control as well as to
improve the liquidity of the holdings
and resolve long-standing disputes
between the owners, in both MegaFon
and in Turkcell.
In 2009, and continuing into 2010,
TeliaSonera implemented its strategy
and increased its shareholdings in
subsidiaries with minority shareholders.
TeliaSonera made a public tender offer
to buy the remaining Eesti Telekom
shares (it had an approximately 60 per
cent shareholding before the tender). In
January it acquired the company’s entire
share capital. In October 2009, TeliaSonera increased its shareholding in the
Lithuanian company TEO LT from just
under 63 per cent to a good 68 per
cent. In February 2010, TeliaSonera
announced that it had increased to 94
per cent its shareholding in UCell, an
Uzbek company, by buying a 20 per cent
stake for USD 220 million. In July 2010,
TeliaSonera sold its Danish subsidiary,
Stofa, to Ratos for DKK 1.1 billion.
In 2009, TeliaSonera was the first
operator to launch commercial 4G
services. During 2010, the construction
of the 4G network will progress to
25 cities in Sweden and four Norwegian
cities. The company has also been
granted a 4G operating licence in Finland
and Denmark. TeliaSonera is investing
heavily in the improvement of the
mobile networks in Eurasia. It has also
invested in fibre optic networks in the
Nordic and Baltic regions. TeliaSonera
curbed its investment programme in
2009 due to the general economic
situation, continuing the restrained
approach in the first months of 2010.
According to the company, investment
levels will rise in the second half of
2010.
SOLIDIUM’SVIEW
TeliaSonera has taken determined and
effective steps to ensure that profitability improves. Because competition
will remain fierce and growth modest in
mature markets, in the Nordic region
and the Baltic countries, the focus will
be on maintaining cost-effectiveness.
In the next few years, the company
will make significant investments to
improve both mobile and fixed-network
services in Sweden and Finland as well
as in its other operating regions, in order
to be able to cope with the rapidly
growing volumes of data transfers.
TeliaSonera’s share price has been
influenced by a cash flow and dividend
1
SEK
70
60
50
40
30
20
10
0
5
00
.1.2
6
00
.2
1.1
7
00
.2
1.1
KEY INDICATORS
SEK million
8
00
.2
1.1
9
00
.2
1.1
10
.20
1.1
Dow Jones STOXX 600 Telecommunications Index
TeliaSonera
the company share
Sweden, 33%
Finland, 16%
Turnover
Operating profit
Operating profit, %
Net profit
Return on equity
Equity ratio
Gearing
Earnings per share (SEK)
Market value
Balance sheet total
Number of employees
Profit distribution
1–6/2010
2009
2008
53 054
15 146
28.5
9 960
16%
16%
51%
40%
2.22
226 095
255 515
29 726
109 161
31 679
29.0
19 820
15%
15%
53%
34%
4.41
232 830
269 670
29 734
10 104
1 386
103 585
30 041
29.0
19 827
16%
16%
54%
37%
4.42
174 679
264 286
32 171
8 083
1 109
Norway, 9%
income that are somewhat weaker than
those of its competitors. Primarily the
problem stems from the differences
in views between the owners of the
Russian company, MegaFon, which have
prevented dividend payment despite
MegaFon’s positive levels of profitability.
Solidium supports TeliaSonera’s efforts
to resolve the problem. TeliaSonera has
a strong balance sheet, which means
that the company’s profit distribution
capacity will be good for the next few
years.
In the 2010 shareholders’ general
meeting the largest shareholder, the
State of Sweden, managed to push
through its proposal concerning the
removal of the management’s variable
remuneration components. Out of the
20 largest shareholders, all but the
State of Sweden supported the Board
of Director’s conservative proposal to
include variable remuneration components in the compensation packages of
Group Management. As a result of the
decision, Group Management’s fixed
salaries had to be increased by 30 per
cent. In Solidium’s view, performancerelated, moderate variable remuneration
components are a useful tool for the
company’s board to reward management and promote commitment.
State of Sweden
Solidium Oy
Swedbank Robur Funds
Alecta
SEB Funds
Number of
shares
and votes, (%)
1 674 310 553
616 128 221
148 762 123
122 525 000
75 133 259
37.3
13.7
3.3
2.7
1.7
29
Tieto Corporation
10.3
1.3
101
-
Market value of
(EUR million)
Profit distribution
to Solidium,
1.7.2009–30.6.2010
(EUR million)
STrATEGY
Tieto is an IT service company, providing
information technology, product development and consultancy services. The
company is one of the largest IT service
companies in Northern Europe and a
global market leader in selected segments.
Tieto aims to become the leading IT
service company in Northern Europe by
30
2011. Tieto also also seeks to establish
a strong presence in Russia and become
the world-leading R&D partner in the
telecom sector.
Tieto’s turnover in 2009 was
around EUR 1.7 billion, while the operating profit, excluding non-recurring
items, came to EUR 108 million. At the
end of June 2010, the Group employed
a total of 17,000 people in 26 countries,
of which 5,800 in Finland.
Over one half of Tieto’s turnover
is generated by project and application
management services. Project services
incorporate services involving the design
and implementation of and consultancy
in new information technology solutions
as well as the development and integration of existing solutions. Project duration
varies considerably, and the business
operation is characterised by cycles that
follow the general economic trends.
Application management and utilisation
services include the maintenance,
development and improvement of
existing applications.
Around one-fifth of the turnover is
generated by ICT infrastructure services.
Frequently, the customer outsources
the management of its entire physical
ICT infrastructure to Tieto. Agreements
are typically long-term and the cyclical
fluctuations generally more moderate
than in the project service business
area.
Tieto is Europe’s largest supplier
of telecom R&D services. Its service
offering covers software design and
development as well as the maintenance
of the software in the customer’s own
products.
Tieto’s headcount develops differently between countries with high costs
and those with a lower cost structure.
The company is recruiting employees in
countries with low levels of costs,
where 34 per cent of Tieto’s employees
are already situated. In these global
Chairmanofthe
boardofDirectors:
Markku Pohjola
president&CEO:
Hannu Syrjälä
PORTFOLIO
operating centres, the numbers of
employees have risen by 31 per cent
from last year’s figure, to total more
than 5,700. Increasing human resources
in these offshoring countries is essential,
in order to safeguard competitiveness.
The shift in personnel decreases
turnover because of the lower invoice
levels, but conversely it boosts relative
profitability thanks to the reasonable
level of costs.
Tieto’s most significant customer
clusters are in the finance and telecommunications and media sectors. In aggregate they produce a good half of the
turnover. Other important sectors
include healthcare, along with the rest
of the public sector, forest industry and
the energy sector.
cost levels. The company aims to
increase the offshoring degree to 35 per
cent in 2010. At the end of June the
figure stood at 34 per cent.
Thanks to efficiency measures, Tieto
has managed to steer its downturn-hit
profitability onto a growth path. In the
first half of 2010, the company’s operating margin (4.5 per cent) improved
from the previous year’s figure, but it
was still substantially weaker than
before the downturn.
Finnish business brought in a
reduced turnover and the operating
profit remained at the 2009 level. In
Sweden, turnover decreased in the local
currency, but profitability maintained its
positive trend. The loss suffered by the
International segment was considerably
smaller than before.
Tieto sold two of its foreign units, in
France and the United States, in 2010.
This was part of the reorganisation
measures targeting the International
segment, which were announced by the
company earlier.
rECENTDEVELOpMENTS
Tieto’s turnover in the first half of 2010
was around three per cent less than in
the previous year, due to the slower
than expected recovery of the IT service
market as well as the divestment of
some business operations. The forecast
for market growth in the rest of the
year is modest.
Tieto’s mean unit prices continued
to decrease with a continuing shift of
manpower to countries with favourable
SOLIDIUM’SVIEW
Competition will continue to be tough
in the IT service markets. In the telecom
R&D, in particular, companies operating
efficiently at low cost levels will be
EUR
40
35
30
25
20
15
10
5
0
05
.20
1.1
06
.20
1.1
07
.20
1.1
KEY INDICATORS
EUR million
08
.20
1.1
09
.20
1.1
10
.20
1.1
BE500 Computer service index
Tieto
the company share.
Finland, 48%
1–6/2010
2009
2008
854
38
4.5
24
14%
21%
48%
17%
0.33
971
1 172
16 885
1 706
108
6.3
80
16%
16%
46%
13%
1.13
1 036
1 195
16 663
36
1 866
150
8.0
88
18%
19%
41%
21%
1.23
557
1 255
16 618
36
Turnover
Operating profit
Operating profit, %
Net profit
Return on equity
Equity ratio
Gearing
Market value
Balance sheet total
Number of employees
Profit distribution
Sweden, 25%
exerting pressure. With a view to
maintaining its competitive edge, Tieto
is investing heavily in increasing its
offshoring operations; the target is
40 per cent in 2011.
In geographical terms, Tieto will
focus operations on Finland, Sweden
and Russia. The company will also
continue to reorganise the International
segment.
The company has a long-term
customer base and a strong market
position in the Finnish IT service markets
and it has a good competitive edge.
In Sweden, Tieto has made efficiency
measures and continues to seek
profitable growth. The IT service market
remains very fragmented in Sweden.
In Solidium’s view Tieto has the
potential for profitable development
in its selected areas. Russia offers
especially promising opportunities for
growth, because the Russian information
technology market is still undeveloped
and the outsourcing of IT services is
limited.
Tieto has a strong balance sheet,
and gearing is considerably below the
target rate of 40 per cent. This allows
the company to make the strategic
investments in growth and acquisitions
in the core market areas.
Number of
shares
and votes, (%)
7 415 418
10.3
6.9
5.1
Solidium Oy
Cevian Capital *
Swedbank Robur Funds
4 969 385
3 702 584
Ilmarinen
OP Pohjola Group
2 545 504
2 564 367
3.6
3.5
* Based on the situation as at 15.3.2010.
31
Tikkurila Oyj
14.7
1.3
100
-
Market value of
(EUR million)
Profit distribution
to Solidium,
1.7.2009–30.6.2010
(EUR million)
STrATEGY
Tikkurila provides consumers, professionals and industrial users with userfriendly, environmentally sustainable
solutions for the protection and decoration of various surfaces. Tikkurila was
established in 1862 and it was part of the
Kemira Group until 2010. Tikkurila has
production facilities in seven countries
and sales companies in 18 countries.
32
Tikkurila’s strategy focuses on paint
brands for consumers. The company
has a strong geographical focus on
Scandinavia and Eastern Europe as well
as Russia. It also supplies products to
industrial users.
Tikkurila’s strategic goal is to be the
most prominent operator in its selected
market areas. The company puts strong
emphasis on instructional customer
service at the point of sale. To this end,
sales personnel undergo continuous
training. This is justified since customers
do not necessarily have the most up-todate product information because,
compared with other consumer
products, paints are not purchased
on a regular basis.
Tikkurila’s product development
concentrates on developing user- and
eco-friendly paints and other coatings.
The majority of Tikkurila’s products are
waterborne, which minimises the impact
on the environment. A growing number
of customers is concerned about the
environmental effects. Furthermore,
thanks to easier handling properties,
waterborne paints are far more userfriendly than oil-based paints.
Last year, Tikkurila changed its
organisational structure. The changes
aim to streamline the operation and
promote smooth cooperation between
the different segments and support
functions. The new organisational
model is expected to optimise operations in 2010. Tikkurila continues to
develop the new shop-in-shop concept,
which has already proved its effectiveness. The operating model emphasises
competence throughout the sales
channel as well as the ability of the
sales personnel to recommend the most
effective solution to meet the customer’s
needs. Tikkurila’s prime distribution
channels are hardware stores and other
outlets for building material.
Tikkurila opened a new logistics and
customer service centre in Mytishchi,
near Moscow, last year. Sales,
Chairmanofthe
boardofDirectors:
Jari Paasikivi
president&CEO:
Erkki Järvinen
PORTFOLIO
marketing and warehousing, covering
the entire Moscow region, are centralised
in one location. At the end of 2009,
a new production line for waterborne
paints was opened in St Petersburg. As
a result of the new production facilities,
Tikkurila’s waterborne paint production
is now concentrated in one location, and
this has increased production capacity
significantly. There are plans to further
develop production in the St Petersburg
area. The measures are proof of Tikkurila’s commitment to invest in emerging
markets.
rECENTDEVELOpMENTS
The early months of 2010 have been
evidence of slowly recovering demand
after the previous year’s difficult market
conditions caused by the financial crisis,
which were particularly keenly felt in
the eastern growth markets. Despite the
rising raw material prices, the company’s
profitability at the start of the year was
better than expected. Tikkurila’s financial
result is strongly influenced by the
currency markets, as well, with the
exchange rate between the euro and the
Russian rouble and the Swedish krona
of particular importance. A significant
proportion of Tikkurila’s profit is generated in the outdoor painting season.
Despite the positive trend evidenced
in early 2010, Tikkurila remains cautious
about the near future in its main market
areas. The revival in the construction
and renovation markets has not yet
fully translated into demand for paint
products. In economically uncertain
times the significance of brand names
increases in the marketplace. The company forecasts higher turnover and
result year-on-year. However, challenges
faced in obtaining raw materials as well
as raw material price pressures may put
a damper on the company’s current
positive development.
Consumers make up Tikkurila’s most
important customer group. Consequently,
changes in consumers’ buying power
and consumption habits are reflected in
the demand for the company’s products.
In the Russian markets, in particular,
factors supporting a recovery in demand
include the rise in the export prices of
raw materials (mainly oil), the renewed
availability of financing as banking
operations stabilise and stronger
domestic demand.
In March 2010, Tikkurila was spun
off from Kemira Group to acquire a
listing on NASDAQ OMX Helsinki. The
spin-off was executed by distributing
Tikkurila shares as dividends to Kemira
EUR
18
16
14
12
10
8
6
4
2
0
10
10
20
.20
.3.
1.4
26
SOLIDIUM’SVIEW
Tikkurila is a growth company that is
in an interesting phase of development.
Its target markets in Russia and Eastern
Europe offer significant potential for
growth. The company’s continuing
growth is supported by the widening of
the middle classes, migration of demand
to products of higher quality and price
and the increasing buying power in the
developing markets. Tikkurila has a
strong domestic ownership base, which
has the capacity to bolster the future
growth of the company.
Tikkurila’s challenge consists of
maintaining its market leadership in
strengthening local and international
competition, not least in the developing
markets. Maintaining and developing
the brands will require increasing
investment in marketing and in the
competence of the sales network.
On the other hand, Tikkurila’s current
production capacity can handle significant increases in sales without a need
for additional investment.
KEY INDICATORS
EUR million
10
.20
1.5
10
.20
1.6
Euro STOXX Construction & Materials
Tikkurila
the company share.
Finland, 20%
Turnover
Operating profit
Operating profit, %
Net profit
Return on equity
Equity ratio
Gearing
Market value
Balance sheet total
Number of employees
Profit distribution
Russia and other CIS countries, 31%
1–6/2010
2009
2008
302
37
12.1
24
530
50
9.4
30
26%
17%
36%
90%
648
59
9.1
37
37%
19%
20%
208%
403
3 538
428
3 867
19%
34%
87%
0.55
679
522
3 946
Number of
shares
and votes, (%)
Oras Invest Oy
Solidium Oy
Kemira Oyj
Varma
6 483 404 6 474 021 6 175 155 3 796 459 14.7 14.7 14.0 8.6 Ilmarinen
2 370 823 5.4 Other Nordic countries, 30%
Rest of Europe, 19%
shareholders. Thus Tikkurila, a newly
listed company, obtained an extensive
shareholder base. Kemira retained
a 14 per cent holding in Tikkurila.
33
Board of Directors
34
BOARD OF DIRECTORS
KEIJOSUILA,CHAIrMAN
4. ANTTIHErLIN
Pension Insurance Company, Deputy
born 1945, BSc (Econ. and Bus. Adm.),
born 1956, DSc (Econ) h.c., D. Arts h.c.
Chairman of the Board, 1990–2009
Vuorineuvos (Finnish honorary title)
2003–present Kone Corporation,
member of the Economic Council of
1999–2005 Finnair Plc, President and
Chairman of the Board, 1996–2006
Finland
CEO, 1992–1998 Huhtamäki Oyj, Deputy
Kone Corporation, President & CEO,
6. MArKETTAKOKKONEN
Managing Director, 1988–1998 Leaf
1996–2003 Kone Corporation, Deputy
Corporation, Managing Director,
Chairman of the Board, 1991–present
born 1946, MA
2008–present FINNEXPO, Chairman
Kone Corporation, board member,
1995–2010 City of Espoo, Mayor, 1992–
of the Board, 2006–present: Nokia
2007–2008 Confederation of Finnish
1995 Vihti municipality, Mayor, 1991–
Corporation, board member, 2001–
Industries, Chairman, 2005–2006 Fed1992 Savings Banks service companies,
2009 Kesko Corporation, board
eration of Finnish Technology Industries,
Head of Department, 1988–1990 SKOP,
member (2006–2009 Vice Chairman
Chairman, 1996–present Federation of
Head of Department, 1986–1987 Finnish
of the Board), 2000–2006 Elisa
Finnish Technology Industries, board
Real Estate Bank, Head of Department,
Corporation, Chairman
member, 2004–present YIT Corporation,
2005–present FCG Finnish Consulting
board member, 2004–present Ilmarinen
Group Ltd, board member
2. EIJAAILASMAA,VICECHAIrMAN
Mutual Pension Insurance Company,
7. ANNIVEpSÄLÄINEN
born 1950, MSc (Pol. Sc.)
Deputy Chairman of the Supervisory
2003–present Sanoma Magazines B.V.,
Board
born 1963, MSc (Eng)
President & CEO, 2001–2003 Sanoma
2009–present Diacor Oy, Managing
5. LAUrIIHALAINEN
Magazines Finland Ltd, CEO,
Director, 2006–2008 HRM Partners
2000–2001 Helsinki Media, CEO,
Born 1947, Minister
Ltd., Managing Director, 2003–2005
2010–present Outotec Oyj, board
1990–2009 The Central Organisation of
TeliaSonera Finland Oyj, Managing
member, 2004–present Huhtamäki Oyj,
Finnish Trade Unions – SAK, President,
Director, 1987–2003 Sonera Oyj and
board member
1970–1990 The Central Organisation of
TeliaSonera Oyj, various management
Finnish Trade Unions – SAK,
positions
3. JOUNIHAKALA
2009–present VR Group Ltd, board
born 1961, LL.M, MBA
member, 1988–2009 Ilmarinen Mutual
Lagman Pekka Merilampi acts as
2008–present Finnish Industry
Secretary to the Board.
Investment Ltd, Fund Director, member
of Management Group, 2007–2008
Special Adviser to the Minister, Owner3
5
6
1
7
2
4
ship Steering Department, 2005–2007
European Investment Fund, Deputy
Head of Equity Investments, 2003–
2005 European Investment Bank Group,
Adviser to Vice President
1.
35
Personnel
36
PERSONNEL
1.
2.
3.
4.
KArIA.J.JÄrVINEN,
MANAGINGDIrECTOr
born 1962, MSc (Eng), MBA
2003–2007 Mandatum & Co Oy,
Managing Director, 1995–2003
Mandatum Bank Oy and Mandatum &
Co Oy, Director, 1992–1995 McKinsey &
Company, Consultant, 1987–1991
Sanoma Group, Development Manager.
TApANIVArJAS,
CHIEFLEGALCOUNSEL
born 1970, LL.M
2003–2009 Aventum Partners Ltd,
Chief Legal Counsel, 2001–2003 Mandatum & Co Oy, Chief Legal Counsel,
1998–2000 Mandatum Bank Oy, Assistant Director, 1997–1998 Mandatum &
Co Oy, Analyst, 1996–1997 Law Office
Heikki Haapaniemi Oy, Associate.
EEVAAHDEKIVI,
INVESTMENTDIrECTOr
born 1966, MSc (Econ)
2007–2009 Ownership Steering
Department, Prime Minister’s Office,
Senior Financial Analyst, 2004–2006
Pohjola Asset Management Ltd.,
Director, 1997–2004 Conventum Ltd,
Partner, 1988–1997 Merita Bank/KOP,
various positions, 2009–present
Tikkurila Oyj, board member, 2008–
2009 Patria Plc, board member.
ANNArEETTALUMME-TIMONEN,
INVESTMENTDIrECTOr
born 1967, MSc (Eng), DSc (Tech)
2000–2007 3i Nordic plc, Investment
Manager, 1997–2000 SFK Finance Oy,
Investment Manager, 1995 & 1997
Visiting Scholar, Wharton Business
School, 1995–1996 Kera Oy, Development Manager, 1991–1994 Sitra, the
Finnish Innovation Fund, Industry
Analyst, 2006–2010 Seed Fund Vera
Ltd, board member, 2000–2004 Naps
Systems Ltd, board member, 2000–
2002 Uniglass Engineering Oy, board
member, 1996–2002 MAP Medical
Technologies Oy, board member,
2001–2008 Finnish Venture Capital
Association, board member.
8.
pEKKATÖLLI,ANALYST
2006–2009 Deloitte Corporate Finance
Oy, Associate, 2006 Pöyry Capital Ltd,
Summer Analyst.
9.
TIITTAHELSTELÄ,
FINANCIALASSISTANT
Previous employment: Nokia Corporation,
Deutsche Lufthansa AG
10. HELENALArSSON,
5.
pETTErSÖDErSTrÖM,
INVESTMENTDIrECTOr
2008–2009 Leimdörfer Finland Oy,
Partner, 2002–2008 Mandatum & Co
Oy, Partner, 2000–2002 PricewaterhouseCoopers Oy, Senior Associate.
6.
pAULIANTTILA,ANALYST
2007–2009 Deloitte Corporate Finance
Oy, Associate, 2006 Helsinki School of
Economics, Department of Accounting
and Finance, various duties.
7.
MIKKOHOLOpAINEN,ANALYST
2005–2009 Pohjola Corporate Finance
Ltd, Analyst, 2003–2005 Deloitte
Spain, Junior Analyst.
5
ADMINISTrATIVEASSISTANT
Previous employment: McKinsey &
Company, Marimekko Corporation
11.
NOOMILEHTOSAArI,
EXECUTIVEASSISTANT
Previous employment: Ministry of
Defence
1
9
7
8
4
6
10
3
2
11
37
Corporate governance
SOLIDIUM’SCOrpOrATE
GOVErNANCESYSTEM
of national importance. The goal of the
company’s activities is to increase shareholder value in the long term and to
make economically sound investments.
Solidium complies with the Companies Act, the Securities Market Act,
other legislation and regulations issued
based on them in all of its operations. In
accordance with the Companies Act and
the Articles of Association, Solidium’s
corporate governance has been organised
between the Annual General Meeting,
the Board of Directors and the Managing
Director. Solidium’s operations comply
with the general ownership steering
principles confirmed by the Finnish
Government.
General
Solidium is a limited company that is
wholly-owned by the State of Finland.
Its mission is to strengthen and stabilise
Finnish ownership in nationally important
companies and to increase the value of
its holdings in the long-term. Solidium’s
Articles of Association state that the
company’s field of operation comprises
ownership and management of shares
in operating in Finland and the exercise
of shareholders’ rights in them based
on its ownership. Solidium invests in
companies that are considered to be
Generalmeeting
At Solidium, the highest power of decision is vested in the General Meeting.
The Companies Act and Solidium’s
Annualgeneralmeeting2009
The 2009 Annual General Meeting of
Solidium was held in Helsinki on 30
October 2009. The Annual General
Meeting adopted the company’s financial
statements for the financial period
1 May to 30 June 2009 and discharged
the members of the Board of Directors
FINNISH GOVERNMENT
Operational framework
CABINET COMMITTEE ON ECONOMIC POLICY
MINISTER IN CHARGE
BOARD OF DIRECTORS OF SOLIDIUM OY
Operational decision-making
SOLIDIUM’S
MANAGEMENTMODEL
38
Articles of Association contain regulations concerning matters that must be
handled by the General Meeting.
In addition to the matters belonging
to the General Meeting in accordance
with the Companies Act, according to
the Articles of Association, the General
Meeting
• decides on the principles that the
company follows when disposing of
its property or acquiring new shares
or other property, and determines
the Board of Directors’ authorisations
concerning these
• confirms the principles of good
corporate governance that the
company complies with when
operating as a shareholder of listed
companies
• decides on the company’s reporting
obligation and other communications
to its owner.
SOLIDIUM OY’S MANAGEMENT
Preparation of operations
CORPORATE GOVERNANCE
and the Managing Director from liability.
The General Meeting resolved, in
accordance with the proposal of the
Board, that no dividend be paid for the
financial period.
It was confirmed that the Board of
Directors shall have seven members.
The following persons, who gave their
consent, were elected to the Board of
Directors until the end of the next
Annual General Meeting: Chairman Keijo
Suila, Vice Chairman Eija Ailasmaa and
regular members Jouni Hakala, Antti
Herlin, Lauri Ihalainen, Marketta Kokkonen and Anni Vepsäläinen. All of the
Board members are independent of the
company and its shareholder. Pekka
Merilampi shall act as the secretary of
the Board of Directors.
The Annual General Meeting confirmed that the Chairman of the Board
of Directors shall receive a fee of EUR
5,500 per month, the Vice Chairman
EUR 3,000 per month and the members
EUR 2,500 per month. In addition, a fee
of EUR 600 was confirmed for each
meeting.
The firm of authorised public
accountants KPMG Oy Ab, with APA
Sixten Nyman as the principal auditor,
was appointed as Solidium Oy’s auditor
to serve for a term ending at the end of
the next Annual General Meeting. The
Annual General Meeting resolved to
remunerate the auditors in accordance
with their invoice.
accordance with the Companies Act and
the Articles of Association.
In accordance with the Companies
Act, the Board of Directors is responsible
for the proper management of the
operations and administration of the
company. The Board shall ensure that
the company’s accounting and asset
management are properly organised.
The Board of Directors has approved
a charter defining its principles of operation, according to which the Board must
attend, among other things, to the
following tasks:
• deciding on the company’s business
strategy, within the limits of the
authority granted by the owner
• deciding on Solidium’s acquisitions
or disposals and in the role of shareholder of the restructuring of its
portfolio companies
• approving the company’s annual
budget
• being responsible for the appropriate
organisation of operations
• deciding on the capital structure
required by the company’s business
operations
• confirming the principles of risk
management
• supervising the company’s solvency,
profitability, and liquidity
• electing and discharging the company’s Managing Director and deciding on the terms and conditions of
his or her employment relationship
boardofdirectors
The tasks and responsibilities of the
Board of Directors are determined in
According to the Articles of Association, the Board of Directors consists of
a minimum of three and a maximum of
eight members. A person who has
turned 68 may not be elected to
become Chairman, Vice Chairman or
a member of the Board. The Board of
Directors constitutes a quorum if more
than half of its members are present
at a meeting.
During the financial period, the
Board of Directors did not appoint
any committees. After the end of the
financial period, the Board of Directors
appointed a Compensation Committee
composed of Keijo Suila (Chairman),
Eija Ailasmaa and Jouni Hakala.
The Managing Director and the
Chief Legal Counsel participated in the
meetings of the Board of Directors as
the presenters of agenda items. The
members of Solidium’s Management
Team may participate in the meetings,
if necessary, as presenters of agenda
items.
boardwork2009–2010
The key areas of the Board’s work
included supervising the organisation of
Solidium’s operations, approving strategy and investment strategy, analysing
potential new investments, securing
financing for new investments, deciding
on investing in companies in which
Solidium has a holding and in new portfolio companies, and making decisions
concerning the corporate transactions
of companies in which Solidium has a
holding.
The Board of Directors convened
ten times during the financial period and
the attendance rate of Board members
was 96 per cent.
39
Managingdirector
The Managing Director attends to the
day-to-day administration of the company in compliance with the instructions
and regulations determined by the
Board. The Managing Director shall
provide the Board and its members with
the information needed for Board work.
The Managing Director may adopt
measures that are uncommon or farreaching in view of the size and quality
of the company’s operations only if the
Board has granted prior authorisation
for such action.
The Managing Director of Solidium
is Kari Järvinen.
Managementteam
The company’s Management Team
consists of the Managing Director, the
Investment Directors and the Chief
Legal Counsel.
The company’s Chief Legal Counsel
acts as the compliance officer and the
person in charge of insider issues. The
Chief Legal Counsel participates in
monitoring the operations of portfolio
companies and in projects concerning
potential new investment targets.
The company’s Investment Directors
monitor designated portfolio companies,
report on developments in their strategies, business and financial situation
and participate in projects concerning
designated portfolio companies and in
analysing new investment targets.
In addition, appointed members of
the Management Team are responsible
for, among other things, the company’s
financial administration, financing,
investment of cash flows, communications and corporate responsibility
issues.
40
INTErNALSUpErVISIONANDrISK
MANAGEMENT
Internalsupervision
The objective of internal supervision is
to ensure that the company’s key objectives are achieved; the assessment of
the achievement of objectives is largely
based on reports obtained from business operations. The Managing Director
and the Management Team play a
crucial role in generating reports. In the
company’s business operations, internal
supervision is continuous and forms a
part of daily routine, which is used to
ensure that operations are in line with
the company’s objectives.
Internal supervision is carried out
using several different methods, such as
management, organising operations and
organisational culture, identifying and
assessing risks, continuous supervision,
reporting and communication of
information, and monitoring and audits.
Internal supervision procedures are
directed at all crucial operations and
cover all crucial processes and even
individual tasks. The scope and nature
of the company’s operations are taken
into consideration when defining the
procedures.
The Board of Directors of Solidium
is responsible for organising and maintaining adequate and well-functioning
internal supervision. The company’s
Board of Directors makes sure that
internal supervision functions well and
is adequate and, based on observations
obtained through internal supervision,
makes sure that the principles concerning the organisation of operations
are met and that control within the
company is functioning well.
As part of the organisation of internal supervision and risk management,
the company’s Board of Directors
regularly monitors the company’s
operational result, the development
of the market value of investments
and risks arising from the company’s
operations, and decides on reporting,
procedures and benchmarks measuring
quality and quantity, with which the
efficiency and profitability of operations
are measured. The Board of Directors
is also responsible for ensuring the
liquidity and funding necessary for
the company’s operations.
The company’s Board of Directors,
Managing Director and Management
Team are assisted by external auditors
in ensuring that internal supervision
is adequate and, in particular, that
financial information is correct.
riskmanagement
The company’s internal and external
risks that may adversely affect the
achievement of business objectives are
identified and assessed on a regular
basis. Risk management identifies the
threats and opportunities that affect
the implementation of strategy. The
objective of risk management is to
support the achievement of objectives
set in strategy by making sure that the
risks taken are proportionate to the
company’s risk-bearing capacity and that
the continuity of operations has been
adequately ensured.
The Chief Legal Counsel, who is
responsible for ensuring that regulations are met, works as part of the risk
management function. The Chief Legal
Counsel’s task is to assist the company’s
Board of Directors and active management
CORPORATE GOVERNANCE
in managing the risk of non-compliance
with regulations.
The company does not have a
separate internal supervision and risk
management organisation that is independent of business operations. In
cooperation with the Chairman of the
company’s Board of Directors, the
Managing Director and the Investment
Directors, the company’s Chief Legal
Counsel organises the monitoring of
the company’s operational and financial
objectives, makes sure that management information is correct and internal
regulations are followed, and identifies
and assesses key risks related to business operations.
Externalsupervision
According to Solidium’s Articles of
Association, the Annual General Meeting
must elect one auditor for inspecting
the company’s accounting, financial
statements and corporate governance,
and the auditor must be a firm of
authorised public accountants certified
by the Central Chamber of Commerce
of Finland. The term of the auditor shall
expire at the end of the Annual General
Meeting following the election.
The auditors’ task is to inspect
the company’s accounting, financial
statements and corporate governance
in order to ensure that the operations
of the company and its administrative
bodies comply with the law, and that
financial statements have been prepared
in accordance with valid rules and
regulations and provide shareholders
and other stakeholders with sufficient
information on the result of the company’s operations and the company’s
financial position.
The auditors annually supply
the Annual General Meeting with an
auditor’s report, in which they provide
a statement on the content of the
financial statements, the proposal
for the distribution of profits and the
discharge from liability. In addition, the
auditors prepare audit memos based
on their observations. If necessary, the
auditors may provide oral reports at
meetings of the Board of Directors and
General Meetings.
Internalaudit
Taking into account the scope of the
company’s business operations, the
company does not have a separate
internal audit function.
INSIDErADMINISTrATION
Solidium complies with the insider and
trading guidelines approved by the
company’s Board of Directors.
All securities transactions carried
out by personnel require permission.
Shares owned by the personnel are
recorded in a permanent non-public
insider register.
The company keeps separate
non-public project-specific registers
for projects that contain insider
information.
rEMUNErATION
Solidium complies with the applicable
guidelines issued by the Cabinet Committee on Economic Policy regarding the
executive management remuneration
and pension benefits in state-owned
companies.
The General Meeting decides on
the remuneration paid to the Board of
Directors. The fee paid to the Chairman
and members of the Board of Directors
consists of a fixed monthly salary and
meeting fees, which are paid in cash.
The Board of Directors decides on
the remuneration and other terms and
conditions of the employment relationship of the Managing Director. The
remuneration of the Managing Director
consists of a fixed monthly salary and
a performance bonus of a maximum of
40 per cent of the fixed salary paid
during the year of evaluation. The retirement age of the Managing Director is
63 years. The Managing Director has a
supplementary pension equivalent to
30.3 per cent of the Managing Director’s
annual remuneration. The Managing
Director has a period of notice of nine
months on the company’s part and six
months on the Managing Director’s part
and is entitled to a severance payment
equal to the total salary for 12 months.
The Board of Directors decides on
the remuneration of the Management
Team. The remuneration of the Management Team (excluding the Managing
Director) consists of a fixed monthly
salary and an annual performance bonus
of a maximum of 40 per cent of the
fixed salary paid during the year of
evaluation.
The remuneration of other Solidium
personnel consists of a fixed monthly
salary and an annual performance bonus
of a maximum of 40 per cent of the
fixed salary paid during the year of
evaluation.
41
Corporate responsibility
Corporate responsibility refers to a company’s responsibility for the
effects of its operations on the surrounding society, environment and
stakeholders. Corporate responsibility is often divided into three
areas: financial, social and environmental responsibility. From the
owner’s and investor’s point of view, sound corporate governance
is also an important part of corporate responsibility.
Solidium believes that a high-quality
corporate responsibility policy is one of
the prerequisites for running successful
business operations and generating
long-term financial value. Good management of corporate responsibility matters also provides efficient risk management.
Solidium is a long-term investor that
brings stability to the ownership of
nationally important companies through
its own activities. It is important to
Solidium that the companies in which
it has a holding act responsibly and bear
a financial, environmental and social
responsibility within their own
operating environments.
rESpONSIbILITYVISION
Solidium’s vision is to be a progressive,
professional and responsible owner that
implements corporate responsibility on
a long-term basis and in a way that
increases value. Solidium wishes to
develop its know-how in and attitude
towards corporate responsibility matters
to a level that is appreciated by its
stakeholders.
FOCUSESOFSOLIDIUM’S
COrpOrATErESpONSIbILITYWOrK
Solidium’s corporate responsibility work
is divided into two main points of view:
Solidium as an owner and investor and
Solidium as a company and employer.
42
FOCUSESOFSOLIDIUM’SCOrpOrATE
rESpONSIbILITYWOrKASANOWNEr
ANDINVESTOr:
1
Being informed – as an owner and
investor, Solidium identifies and manages
corporate responsibility matters related
to its investment activities
2
As an owner, Solidium identifies and
defines the crucial corporate
responsibility matters of its portfolio
companies
3
As an active owner, Solidium influences
the corporate responsibility matters of
its portfolio companies in such a way
that their corporate responsibility work
generates value for Solidium as an owner
4
Solidium promotes the role of
responsible owner in corporate
responsibility matters
FOCUSESOFSOLIDIUM’SCOrpOrATE
rESpONSIbILITYWOrKASA
COMpANYANDEMpLOYEr:
1
Solidium's corporate responsibility
follows an integrated operating model in
which corporate responsibility matters
have been included in the company's
normal operations
2
Solidium identifies and analyses the
expectations of its key stakeholders
3
Solidium reports on its corporate
responsibility matters regularly both as
an owner and as a company
4
Solidium pays attention to the corporate
responsibility of service providers and
affiliates
5
Solidium is a responsible employer that
attends to the well-being of its personnel
CORPORATE RESPONSIBILITY
Several of Solidium’s portfolio
companies are major companies with
international operations, whose corporate responsibility matters are extensive
and multi-faceted. Each company is
assessed from the point of view of its
sector and its geographical operating
environment. As a general rule,
Solidium’s portfolio companies are
responsible companies. Several of them
have been recognised for their corporate
responsibility work that was among the
best in their sector, and have been listed
on the equity indexes of responsible
companies.
Solidium complies with legislation
and sound corporate governance when
evaluating the corporate responsibility
matters of its portfolio companies.
The objective of the listed companies
in which Solidium has a holding is to
operate in a financially profitable
manner, and therefore they cannot be
expected to bear a different set of social
obligations from other companies.
COrpOrATErESpONSIbILITY
MATTErSASpArTOFSOLIDIUM’S
OpErATIONS
With respect to corporate responsibility
matters, Solidium implements an integrated operating model in which corporate responsibility matters have been
included in the company’s normal
operations. In the management of
the investment portfolio, corporate
responsibility matters form a crucial
examination and analysis point of view.
The company’s Board of Directors is
responsible for Solidium’s corporate
responsibility matters. The Managing
Director, together with the Management Team, is in charge of corporate
responsibility work. The company’s
personnel, each in their own capacity,
are responsible for the practical implementation. The Investment Directors
and analysts review the corporate
responsibility matters of the portfolio
companies for which they are responsible. Solidium’s entire personnel have
participated in the planning of the company’s corporate responsibility work.
SpECIALFEATUrESINSOLIDIUM’S
COrpOrATErESpONSIbILITY
MATTErS
Solidium is the largest or one of the
largest shareholders of the companies
it invests in, and therefore it has a good
opportunity to have its views regarding
corporate responsibility matters heard.
However, in all of its portfolio companies, Solidium is a minority shareholder
whose views are the views of a single
investor.
Solidium strives to influence the
corporate responsibility matters of its
portfolio companies using the means
available to an active owner. This is
done in cooperation with other shareholders, utilising suitable and effective
channels.
One of the hallmarks of Solidium’s
corporate responsibility work is the aim
towards extensive and active dialogue
with various stakeholders. The corporate responsibility matters of portfolio
companies are managed interactively
with the companies.
Since Solidium is a long-term investor, it is not typical for it to dispose of
its ownership due to potential corporate
responsibility challenges facing its portfolio companies. Instead, it is more
important for Solidium to present its
view as an owner, which is based on an
understanding and analysis of corporate
responsibility matters. With regards to
potential new portfolio companies,
Solidium evaluates the importance of
corporate responsibility matters and the
level of their management as part of its
preparation for an investment decision.
rESpONSIbILITYWOrKHASbEEN
COMMENCED
Solidium started its corporate responsibility work during its first full financial
period of 2009–2010. The company
has defined the focuses and content of
corporate responsibility work and identified the key corporate responsibility
matters of its portfolio companies.
Measures and implementation timetables were defined for each area of
focus. Solidium has also prepared a
background study on the best corporate
responsibility practices in its operating
environment and reference group to
form the basis for its own work.
During the 2010–2011 financial
period, Solidium will prepare a more
extensive and long-term corporate
responsibility work action plan. Solidium
will report on the progress of its corporate responsibility work in its Annual
Reports and on its website.
43
Financial statements
2009–2010
44
FINANCIAL REPORTING
reportoftheboardofDirectors
fortheperiod1July2009–30June2010
The financial period from 1 July 2009 to 30 June 2010 was the
second of Solidium Oy. The length of the previous financial
period from 1 May to 30 June 2009 was two months, and
therefore the figures in the income statement are not
comparable.
Solidium Oy owns and manages shares in companies
operating in Finland and exercises shareholder rights in them
based on its ownership. Solidium invests in companies that
are considered to be of national importance. The goal of the
company’s activities is to increase shareholder value in the
long term and to make economically sound investments.
During the financial period, the Board of Directors of Solidium
confirmed the company’s mission, vision, values, objectives
and investment strategy and criteria, which are described in
more detail in Solidium’s Annual Report and on its website.
The areas of focus during the financial period were on the
management of existing holdings, preparing business sector
reviews and examining the projects of portfolio companies
as well as new investments. Solidium is wholly-owned by
the State of Finland.
In December 2009, Kemira Oyj organised a share issue
with pre-emptive rights, with which it raised about EUR 200
million in new capital. The funds obtained in the share issue
will enable the company to carry out its growth strategy,
to spin off Tikkurila Oyj flexibly and to strengthen Kemira’s
balance sheet. Solidium exercised its pre-emptive subscription
right in Kemira’s share issue in full, subscribing for new Kemira
shares in accordance with its holding, for a total of EUR 34.6
million. In addition, the four largest shareholders of Kemira,
including Solidium, gave an underwriting commitment in
connection with the share issue. Since the share issue was
fully subscribed, the underwriting commitment was not
enforced. Following the share issue, Solidium owns
25,896,087 Kemira shares, and its ownership in the company
is 16.67 per cent of shares and votes. In March 2010, Kemira
distributed 86 per cent of Tikkurila’s shares to Kemira shareholders, in order to facilitate the spin-off and stock exchange
listing of the paints manufacturer. With its 14.68% ownership,
Solidium became Tikkurila’s second largest shareholder.
Solidium owns 6,474,021 Tikkurila shares, which an acquisition
cost of EUR 102 million.
During the financial period, Solidium became Tieto Corporation’s largest shareholder. Solidium acquired 5.0 per cent of
Tieto’s shares in April 2010. In May-June, Solidium increased
its ownership in Tieto to 10.3 per cent, raising the amount
invested by Solidium in Tieto shares to about EUR 116 million.
Tieto is a company that fulfils Solidium’s investment criteria
well. Solidium’s objective is to develop Tieto together with
other shareholders to increase its shareholder value, and to
participate in the election of Tieto’s Board of Directors
through the shareholders’ nomination committee. In Solidium’s
view, Tieto has good potential for profitable growth in the
areas specified in its strategy.
In June 2010, Solidium sold 100 Rautaruukki Corporation
shares for approximately EUR 1,300. The sale was made in
order to clarify Solidium’s tax position. In Solidium’s view, the
shares owned by it should, for taxation purposes, be classified
as fixed assets in accordance with Section 12 of the Business
Income Tax Act. This asset type classification will have a
crucial effect on the tax treatment of capital gains.
At the close of the financial period on 30 June 2010,
Solidium held shares in eleven listed companies: Elisa Corporation, Kemira Oyj, Metso Corporation, Outokumpu Oyj, Rautaruukki Corporation, Sampo plc, Sponda Plc, Stora Enso Oyj,
TeliaSonera AB, Tieto Corporation and Tikkurila Oyj. During
the financial period, Solidium received EUR 458 million in
profits distributed by the companies in which it owns shares,
of which cash dividends accounted for EUR 299 million, repayments of equity for EUR 57 million and dividends paid in the
form of Tikkurila shares for EUR 102 million. The repayments
of equity are recorded against the cost of acquisition and have
no effect on reported profits.
During the financial period, the Chairman of the Board of
Directors and the Managing Director of Solidium participated,
as part of the nomination committees, in the preparation of
proposals concerning the members of the Boards of seven
portfolio companies and their remuneration. A total of 13 new
members were elected to the Boards of companies in which
Solidium owns shares (excluding Tieto Corporation and
Tikkurila Oyj) in spring 2010, of whom 5 were women
(38 per cent).
Solidium’s investments are equity investments and money
market investments. At the close of the financial period, the
market value of the equity investments was EUR 7,914 million
and the value of money market investments was EUR 358
million. Solidium’s investments yielded 34.6 per cent over
the period. Equity investments yielded 35.1 per cent, compared
to a rise of 31.8 per cent in the OMX Helsinki Cap GI index.
Money market investments yielded 0.4 per cent. The company’s net asset value increased by 28 per cent during the
financial period, from EUR 6,042 million to EUR 7,715 million.
Personnel expenses amounted to EUR 2.1 million (EUR 0.3
million). The biggest items in other operating expenses, which
amounted to EUR 1.5 million (EUR 0.7 million), were administration expenses and costs for facilities. The company’s
operating loss was EUR 3.7 million (EUR 1.1 million). Financial
income, which totalled EUR 401.9 million (EUR 0.4 million),
mainly consisted of dividend income (EUR 401.0 million) and
interest income from money market investments (EUR 0.9
million). Financial expenses, totalling EUR 0.9 million (EUR 0.0
45
million), consisted of fees related to a EUR 300 million
revolving credit facility agreement. Profit for the period was
EUR 397.3 million (EUR 0.7 million).
The largest item in Solidium’s non-current assets is the
equity portfolio, with a cost of acquisition totalling EUR 5,782
million (EUR 5,587 million). Investments, totalling EUR 151
million (EUR 81 million), consisted mainly of share acquisitions.
At the end of the financial period, Solidium’s liquid assets
were EUR 358 million (EUR 153 million) and the balance sheet
total was EUR 6,141 million (EUR 5,740 million).
The period-end equity ratio was 100 per cent (100 per cent)
and liquidity was excellent, taking into account the liquid
assets of EUR 358 million, the EUR 300 million revolving
credit facility and the EUR 300 million commercial paper
programme. Solidium entered into a EUR 300 million unsecured
revolving credit facility agreement on 30 November 2009.
The facility is a committed credit line for general corporate
purposes and is a back-up facility for the commercial paper
programme. The facility is a one-year arrangement with a
one-year extension option subject to agreements between the
parties. The size of Solidium’s commercial paper programme
was at the same time increased from EUR 100 million to
EUR 300 million. The programme permits the company to
issue commercial papers with a maturity of less than one year.
These financing arrangements will enable the company to
ensure, in line with its treasury policy, that it has sufficient
financial instruments at its disposal for its potential capital
requirements. The capital structure of Solidium may be
complemented by other financial instruments in the future. At
the end of the financial period on 30 June 2010, the revolving
credit facility was unused and there were no commercial
papers outstanding.
The Annual General Meeting of Solidium was held in
Helsinki on 30 October 2009. The Annual General Meeting
adopted the company’s financial statements for the financial
period 1 May to 30 June 2009 and discharged the members
of the Board of Directors and the Managing Director from
liability. The General Meeting resolved, in accordance with
the proposal of the Board, that no dividend be paid for the
financial period. The members of the Board of Directors and
their remuneration were confirmed. The firm of authorised
public accountants KPMG Oy Ab, with APA Sixten Nyman as
the principal auditor, was appointed as the company’s auditor
to serve for a term ending at the end of the next Annual
General Meeting. The Annual General Meeting resolved to
remunerate the auditors in accordance with their invoice.
bOArDOFDIrECTOrS
The Board of Directors consists of the Chairman, Keijo Suila
(b. 1945) and the Vice Chairman, Eija Ailasmaa (b. 1950), as
well as members Jouni Hakala (b. 1961), Antti Herlin (b. 1956),
Lauri Ihalainen (b. 1947), Marketta Kokkonen (b. 1946), and
Anni Vepsäläinen (b. 1963). All of the Board members are
independent of the company and the shareholder. The Board
members do not hold company shares, and the company has
not adopted any option schemes.
The monthly salary of the Board’s Chairman is EUR 5,500,
that of the Vice Chairman is EUR 3,000, and that of the
regular members is EUR 2,500, in addition to which a meeting
46
fee of EUR 600 is paid per meeting attended. The monthly
and meeting fees paid to the members of Solidium’s Board of
Directors totalled EUR 303,000 (EUR 51,700). The Board
convened 10 times during the financial period and the
attendance rate of its members was 95.7 per cent.
Solidium’s Board of Directors has a written charter. It
complements the Board’s duties as set forth in the Companies
Act and in the Articles of Association by specifying that
Solidium’s Board decides on the company’s business strategy
within the limits of the authority granted by the owner,
decides on share purchases and disposals, and confirms the
principles of risk management. The charter contains procedural
guidelines for meeting preparations, documentation and
regularly handled matters. The Board has not set up any
committees.
Solidium Oy complies with the Corporate Governance
Code for Finnish listed companies, with certain exceptions
due to the nature of the company’s business and ownership
structure.
pErSONNEL
The Managing Director of Solidium is Kari Järvinen, MSc (Eng),
MBA (b. 1962). The Managing Director does not own any
company shares or options. The salaries (including fringe
benefits) paid to the Managing Director was EUR 338,820
(EUR 53,316) and the performance bonuses paid were EUR
26,500 (0), in total EUR 365,520 (53,316) during the financial
period. The performance bonuses of the Managing Director
for the period were EUR 47,500 (26,500), which will be paid
after the financial period-end. The Managing Director has a
defined-contribution supplementary pension and may retire
at the age of 63. The supplementary pension is equivalent to
30.3 per cent of the Managing Director’s annual remuneration.
The expenses of the supplementary pension amounted to EUR
124,084 (EUR 32,268), of which EUR 7,029 was related to the
previous financial period. The Managing Director has a
9-month period of notice and is entitled to a severance
payment equal to the total salary for 12 months.
Solidium had an average of 11 permanent employees in the
financial period and 11 permanent employees at the end of the
period.
ASSESSMENTOFKEYrISKSAND
SOUrCESOFUNCErTAINTY
The key strategic risks and business risks related to Solidium’s
operations consist of volatility in market values, which significantly influence changes in the values of the company’s investments and the company’s profits, the availability of financing
and the achievement of long-term business objectives. Strategic and business risks may also arise from the selection of a
wrong strategy, from deficient management and monitoring,
or from slow reaction to changes taking place in the market
situation and the operating environment.
The most significant business risks affecting the company’s
operations consist of equity, interest rate, currency and
liquidity risks related to investment operations. These marketrelated risks may have a significant impact on the company’s
profits and the values of the shares owned by the company as
a result of changes in market prices (interest rates, currency
FINANCIAL REPORTING
exchange rates, share prices, credit risk margins) or changes
in price fluctuations. As a general rule, the company does
not hedge its equity investments with derivatives or other
instruments.
The key operational risks are related to deficiencies or
errors in the functioning of internal processes and systems,
actions of persons or events external to the company, which
may cause direct or indirect losses to the company.
The company may experience direct or indirect losses due
to a counterparty risk, i.e. due to the fact that the company’s
contractual parties are not able to fulfil their agreed obligations and the collateral received does not cover the company’s
receivables. The counterparty risk also includes the country
and clearing risk.
INTErNALCONTrOLANDrISKMANAGEMENT
The principles of the company’s internal control and risk
management are further detailed in the Corporate Governance
section on pages 38–41 of the Annual Report.
prOpOSEDDIVIDEND
The distributable unrestricted equity detailed in the financial
statements totals EUR 5,805,316,109 including EUR
397,317,540 in profit for the financial period. The Board of
Directors proposes that a dividend of EUR 178,000 per share,
or a total of EUR 356,000,000, be paid for the financial
period. The proposed dividend is equivalent to the distributed
cash profits received by Solidium from its portfolio companies
during the financial period.
EVENTSAFTErTHEFINANCIALpErIOD
No significant events have taken place in the company’s operations since the end of the financial period.
OUTLOOK
Dividend income and gains from possible disposals make up
the majority of Solidium’s profits. Solidium’s dividend income
is expected to be on the same level as or to increase slightly
over the financial period 1 July 2009–30 June 2010, when
dividend income amounted to EUR 299 million, excluding
dividend received in the form of Tikkurila shares.
SOLIDIUMOY’SKEYFIGUrES
1.7.2009–30.6.2010
1.5.2009–30.6.2009
-3.7
397.3
397.3
6.7
6.7
34.6
0.05
6 136.8
7 714.8
0.0
99.9
356.0
11
-1.1
-0.7
-0.7
0.0
0.0
1.1
0.11
5 739.5
6 041.6
0.0
100.0
0
7
Operating profit, EUR million
Profit before taxes, EUR million
Profit for the period, EUR million
Return on equity, %
Return on investment, %
Return on investment at fair values, %
Management cost ratio, %
Shareholders’ equity, EUR million
Net asset value, EUR million
Interest-bearing liabilities, EUR million
Equity ratio, %
Proposed dividend, EUR million
Average number of employees
CALCULATIONOFKEYFIGUrES
Return on equity =
Profit for the period
Shareholders’ equity (average of opening and closing balance)
Return on investment =
Pre-tax profit + interest expenses and other financial expenses
Balance sheet total – non-interest-bearing liabilities (average of opening and closing balance)
Management cost ratio =
Personnel expenses + depreciations and impairments + other operating expenses
Net asset value (average of opening and closing balance)
Net asset value =
Equity ratio =
Assets – liabilities
Publicly listed instruments and investment funds have been valued at their last trading price,
taking into account deferred tax liabilities, and other balance sheet items have been valued
at their carrying amount.
Shareholders’ equity
Balance sheet total – prepayments received
47
Incomestatement
EUR
Note
TURNOVER
Other operating income
Personnel expenses
Depreciation and impairment
Other operating expenses
1
2
OPERATING PROFIT (LOSS)
Financial income and expenses
3
PROFIT (LOSS) BEFORE TAX
Income tax
PROFIT (LOSS) FOR THE PERIOD
1.7.2009–30.6.2010
1.5.2009–30.6.2009
0
0
78
0
-2 050 851
-93 764
-1 520 999
-312 499
-534
-748 890
-3 665 535
-1 061 923
400 983 075
400 856
397 317 540
-661 067
0
0
397 317 540
-661 067
balancesheet
EUR
ASSETS
NON-CURRENT ASSETS
Intangible assets
Tangible assets
Investments
TOTAL NON-CURRENT ASSETS
CURRENT ASSETS
Current receivables
Financial securities
Cash and cash equivalents
TOTAL CURRENT ASSETS
Note
LIABILITIES
Current liabilities
TOTAL EQUITY AND LIABILITIES
48
30.6.2009
4
5
6
88 251
244 904
5 782 073 131
5 782 406 286
4 101
9 022
5 587 030 041
5 587 043 164
7
8
690 229
317 897 065
39 635 835
358 223 128
359 589
75 021 355
77 673 259
153 054 202
6 140 629 414
5 740 097 366
331 500 000
5 124 639 966
283 358 603
397 317 540
6 136 816 109
331 500 000
5 124 639 966
284 019 671
-661 067
5 739 498 570
3 813 305
598 796
6 140 629 414
5 740 097 366
TOTAL ASSETS
EQUITY AND LIABILITIES
SHAREHOLDERS’ EQUITY
Share capital
Reserve for invested non-restricted equity
Retained profit (loss)
Profit (loss) for the period
TOTAL SHAREHOLDERS’ EQUITY
30.6.2010
9
10
FINANCIAL REPORTING
Cashflowstatement
EUR
Cash flow from operating activities
Operating profit
Adjustments to operating profit
Dividends and capital repayments received
Other financial items
Tax
1.7.2009–30.6.2010
1.5.2009–30.6.2009
-3 665 535
93 685
356 119 249
-38 791
0
352 508 608
-1 061 923
534
0
400 856
0
-660 534
-330 641
3 214 509
2 883 868
149 216
115 594
264 810
355 392 476
-395 724
Cash flow from investing activities
Investments in tangible and intangible assets
Investments in shares
Gains on sale of shares
-413 797
-150 141 693
1 298
-4 242
-81 166 838
0
Cash flow from investing activities
-150 554 191
-81 171 080
0
-50 714 500
Cash flow for the period
204 838 285
-132 281 304
Liquid funds at the start of the financial period
Liquid funds at the end of the financial period
Change in liquid funds
152 694 614
357 532 899
204 838 285
284 975 918
152 694 614
-132 281 304
Change in working capital
Current receivables: increase (–) / decrease (+)
Non-interest-bearing current liabilities: increase (+) / decrease (–)
Cash flow from operating activities
Cash flow from financing activities
Current loans: raised (+) / repaid (–)
Liquid funds in the cash flow statement include receivables from banks, commercial papers, certificates of deposit, and units in
mutual funds that invest in corresponding financial instruments.
49
Notes to the financial
statements
The financial statements of Solidium Oy have been prepared
in compliance with the Finnish Accounting Act, Accounting
Ordinance, and Companies Act.
Solidium Oy is domiciled in Helsinki. Copies of Solidium
Oy’s financial statements are available at the company’s office
at Unioninkatu 32 B, 00100 Helsinki.
prINCIpLESOFVALUATION
Valuationofnon-currentassets
Tangible and intangible assets are measured at the cost of
acquisition less accumulated depreciation. Planned depreciation
of machinery and equipment corresponds to 25%, the maximum
amount from the residual value as regulated in the tax
legislation. Intangible assets are depreciated on a straight-line
basis over 4–5 years.
Investments in non-current assets are recognised in the
balance sheet at cost of acquisition. Permanent impairment
is deducted from the cost of acquisition.
Notestotheincomestatement
EUR
Valuationofcurrentassets
Current assets are measured at the estimated recoverable
amount.
Financial securities are measured at the lower of the cost
of acquisition and market value.
Receivables and liabilities denominated in foreign currencies have been measured at the average rate for the balance
sheet date as confirmed by the European Central Bank.
pENSIONS
Pensions are recognised in the income statement in the financial period to which they apply. The pension provisions for the
company’s personnel are arranged through statutory TyEL
insurance. The Managing Director has a defined-contribution
supplementary pension.
TAX
The tax expense item in the income statement consists of
current tax. It is calculated on the basis of the Finnish tax rate
and adjusted for any taxes related to previous financial periods.
1.7.2009–30.6.2010 1.5.2009–30.6.2009
1 Personnel expenses
Wages and salaries
Pension costs
Other personnel expenses
Total
1 611 854
389 354
49 644
2 050 851
240 420
29 742
42 338
312 499
The Managing Director was paid a salary (including fringe benefits) of EUR 338,820 (EUR 53,316) and a performance bonus
of EUR 26,500 (EUR 0). The performance bonus for the period was EUR 47,500 (EUR 26,500), which is paid after the period-end.
The costs of the Managing Director’s defined-contribution supplementary pension amounted to EUR 124,084 (EUR 32,268), of
which EUR 7,029 was related to the previous financial period. In the previous financial period, 50% of the performance bonus and
defined-contribution pension costs were related to the preceding financial period.
The 4 persons belonging to the Management Team (excluding the Managing Director) were paid a total of EUR 417,138 in salaries
(including fringe benefits). Performance bonuses paid to these 4 persons totalled EUR 115,000.
The Board of Directors received EUR 303,000 (EUR 51,700) in monthly and meeting fees.
Average number of employees
Employees at period end
50
11
11
7
10
FINANCIAL REPORTING
EUR
2 Other operating expenses
Administration costs
Costs for facilities
Other
Total
Fees paid to authorised public accountants
Audit
Tax consultation
Other services
Total
3 Financial income and expenses
Income from other non-current asset investments
Other interest and financial income
Interest and other financial expenses
Total financial income and expenses
Notestothebalancesheet
EUR
1.7.2009–30.6.2010 1.5.2009–30.6.2009
1 057 091
207 915
255 993
1 520 999
677 891
20 296
50 703
748 890
17 910
32 500
191 833
242 243
0
0
0
0
401 021 866
894 190
-932 981
400 983 075
0
435 941
-35 086
400 856
1.7.2009–30.6.2010 1.5.2009–30.6.2009
4 Intangible assets
Intangible rights
Cost of acquisition at the start of the financial period
Additions
Cost of acquisition at the end of the financial period
Accumulated depreciation at the start of the financial period
Depreciation for the period
Accumulated depreciation at the end of the financial period
Disposals
Carrying amount at the end of the financial period
4 242
27 328
31 570
141
1 418
1 559
0
30 011
0
4 242
4 242
0
141
141
0
4 101
Other non-current assets
Additions
Disposals
Total intangible assets
0
72 801
72 801
0
14 560
14 560
0
58 240
88 252
0
0
0
0
0
0
0
0
4 101
51
Notestothebalancesheet
EUR
1.7.2009–30.6.2010 1.5.2009–30.6.2009
5 Tangible assets
Machinery and equipment
Additions
Disposals
9 414
302 121
311 535
392
77 786
78 178
0
233 357
9 414
0
9 414
0
392
392
0
9 022
Other tangible assets
Additions
Disposals
0
11 547
11 547
0
0
0
0
11 547
0
0
0
0
0
0
0
0
Total tangible assets
244 904
6 Investments
Other shares and equity at the start of the financial period
Additions
Disposals
Other shares and equity at the end of the financial period
Share
Elisa
Kemira
Metso
Outokumpu
Rautaruukki K
Sampo A
Sponda
Stora Enso A
Stora Enso R
TeliaSonera
Tieto
Tikkurila
Total
Number of shares
16 631 000
25 896 087
15 695 287
56 440 597
55 656 599
79 280 080
95 163 745
55 595 937
41 483 501
616 128 221
7 415 418
6 474 021
Holding
10.0%
16.7%
10.4%
30.9%
39.7%
14.1%
34.3%
31.4% *
6.8% *
13.7%
10.3%
14.7%
5 587 030 041
252 431 225
-57 388 135
5 782 073 131
5 332 358 163
254 671 878
0
5 587 030 041
Cost of acquisition
on 30 June 2010
161 346 150
163 441 479
140 328 422
455 881 990
679 130 726
1 063 241 009
171 926 628
322 574 298
231 419 859
2 174 932 620
115 560 419
102 289 532
5 782 073 131
Market value
on 30 June 2010
236 492 820
228 403 487
416 239 011
701 556 621
668 992 320
1 377 094 990
236 006 088
341 915 013
247 863 918
3 259 318 289
100 849 685
99 699 923
7 914 432 165
* Solidium Oy’s holding of all of Stora Enso Oyj’s shares is 12.3% and of all votes 25.1%.
52
9 022
FINANCIAL REPORTING
EUR
7 Current receivables
Other receivables
Prepayments and accrued income
Total
Material accruals included in prepayments and accrued income are related to the
fees of the revolving credit facility agreement, staff-related expenses and interest
income from liquid funds.
1.7.2009–30.6.2010 1.5.2009–30.6.2009
0
690 229
690 229
3 380
356 209
359 589
318 087 092
317 897 065
190 027
75 121 278
75 021 355
99 923
331 500 000
0
331 500 000
331 500 000
331 500 000
0
331 500 000
331 500 000
Non-restricted shareholders’ equity
Reserve for invested non-restricted equity at the start of the financial period
Addition
Reserve for invested non-restricted equity at the end of the financial period
Retained profit
Profit for the period
Total non-restricted shareholders’ equity
5 124 639 966
0
5 124 639 966
283 358 603
397 317 540
5 805 316 109
4 951 134 926
173 505 040
5 124 639 966
284 019 671
-661 067
5 407 998 570
Total shareholders’ equity
6 136 816 109
5 739 498 570
66 783
3 049 947
696 575
3 813 305
327 266
40 633
230 897
598 796
8 Financial securities
Fair value
Book value
Difference
9 Shareholders’ equity
Restricted shareholders’ equity
Share capital at the start of the financial period
Addition
Share capital at the end of the financial period
Total restricted shareholders’ equity
Solidium Oy has 2,000 shares. The shares have no nominal value.
10 Current liabilities
Trade payables
Other liabilities
Accrued liabilities
Total
Accruals included in accrued liabilities are related to personnel expenses and
the fees of the revolving credit facility agreement.
11 Other commitments
The company operates in leased facilities. Future minimum lease expenses under lease contracts that cannot be dissolved are
distributed as follows:
Within 12 months
After 12 months but within five years
After five years
Total
229 925
744 886
0
974 812
178 169
810 427
17 361
1 005 958
Following the demerger of the predecessor company, also called Solidium Oy, the company has a joint commitment with
Governia Oy. The commitment is based on the statute in Chapter 17, Section 16 of the Companies Act.
53
proposalforthedistributionofprofit
The distributable non-restricted shareholders’ equity recognised in the financial statements totals EUR 5,805,316,109.
No material changes have taken place in the company’s financial situation since the end of the financial period and, in
the view of the Board of Directors, the proposed dividend does not endanger the company’s ability to fulfill its obligations.
The Board of Directors proposes to the General Meeting that the distributable non-restricted shareholders’ equity be allocated
as follows:
– EUR 178,000 per share distributed as dividend for 2,000 shares
356 000 000
– amount retained in non-restricted shareholders’ equity
5 449 316 109
5805316109
If the Board’s proposal is approved, the shareholders’ equity of Solidium Oy shall consist of the following:
– share capital
331 500 000
– reserve for invested non-restricted equity
5 124 639 966
– retained earnings
324 676 143
5 780816109
SignaturesforthereportoftheboardofDirectorsand
theFinancialStatements
Helsinki, 13 August 2010
Keijo Suila
Chairman
Eija Ailasmaa
Vice Chairman
Jouni Hakala
Lauri Ihalainen
Marketta Kokkonen
Anni Vepsäläinen
Kari Järvinen
Managing Director
Auditor’snote
Our auditor’s report has been issued today on the audit performed.
KPMG Oy Ab
Sixten Nyman
Authorised Public Accountant
54
Antti Herlin
AUDITOR’S REPORT
Auditor’s report
TOTHEANNUALGENErALMEETINGOFSOLIDIUMOY
We have audited the accounting records, the financial statements, the report of the Board of Directors, and the administration of Solidium Oy for the period of 1.7.2009–30.6.2010.
The financial statements comprise the balance sheet, the
income statement, the cash flow statement and notes to
the financial statements.
TheresponsibilityoftheboardofDirectorsand
theManagingDirector
The Board of Directors and the Managing Director are responsible for the preparation and fair presentation of the financial
statements and the report of the Board of Directors in accordance with the laws and regulations governing the preparation
of the financial statements and the report of the Board of
Directors in Finland. The Board of Directors is responsible for
the appropriate arrangement of the control of the company’s
accounts and finances, and the Managing Director shall see
to it that the accounts of the company are in compliance with
the law and that its financial affairs have been arranged in a
reliable manner.
Auditor’sresponsibility
Our responsibility is to perform an audit in accordance with
good auditing practice in Finland, and to express an opinion on
these financial statements and on the report of the Board of
Directors based on our audit. Good auditing practice requires
that we comply with ethical requirements and plan and perform
the audit to obtain reasonable assurance whether the financial
statements or the report of the Board of Directors are free
from material misstatement and whether the members of the
Board of Directors and the Managing Director have complied
with the Limited Liability Companies Act.
An audit involves performing procedures to obtain audit
evidence about the amounts and disclosures in the financial
statements and the report of the Board of Directors. The
procedures selected depend on the auditor’s judgment,
including the assessment of the risks of material misstatement
of the financial statements or of the report of the Board of
Directors, whether due to fraud or error. In making those risk
assessments, the auditor considers internal control relevant to
the entity’s preparation and fair presentation of the financial
statements and the report of the Board of Directors in order
to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness
of accounting policies used and the reasonableness of
accounting estimates made by management, as well as
evaluating the overall presentation of the financial statements
and the report of the Board of Directors.
The audit was performed in accordance with good auditing
practice in Finland. We believe that the audit evidence we
have obtained is sufficient and appropriate to provide a basis
for our audit opinion.
OpinionontheCompany’sFinancialStatementsand
thereportoftheboardofDirectors
In our opinion, the financial statements and the report of the
Board of Directors give a true and fair view of the financial
performance and financial position of the company in accordance with the laws and regulations governing the preparation
of the financial statements and the report of the Board of
Directors in Finland. The information in the report of the
Board of Directors is consistent with the information in the
financial statements.
Opinionondischargefromliabilityand
distributionofprofit
We support that the financial statements should be adopted.
The proposal by the Board of Directors regarding the use of
the profit shown at the balance sheet is in compliance with
the Limited Liability Companies Act. We support that the
Members of the Board of Directors and the Managing Director
should be discharged from liability for the financial period
audited by us.
KPMG OY AB
Sixten Nyman
Authorized Public Accountant
This document is an English translation of the Finnish auditor’s report.
Only the Finnish version of the report is legally binding.
55
Sources and
comments
The key indicators for Solidium’s portfolio have been calculated
by Suomen Sijoitustutkimus Oy, an independent, external
service provider.
The key indicators of Solidium’s portfolio companies
presented in this Annual Report, related to full accounting
periods, have been calculated by Solidium. The calculations
are based on information published by the companies, such as
annual reports, releases and company websites, or on other
publicly available information about the companies and their
industry. Quarterly or half-year indicators are those released
by the companies, because the notes to quarterly financial
statements available are not sufficient for calculation of all
key ratios.
Solidium analyses the financial information about companies in which it has holdings in compliance with generally
accepted accounting principles. Key indicators for companies
often involve choices made on items to be included in the
calculation. Solidium aims to follow a standardised analysis
procedure for all of its portfolio companies and assesses the
nature of the companies’ cash flow independently. Owing to
these interpretations, the key indicators may differ from those
presented by the companies.
With regards to texts and tables concerning the distribution
of profit, it must be taken into consideration that Solidium
was established through a demerger on 1 May 2009, after
which all distributable profits have been paid to Solidium.
The profits distributed for the 2008 accounting period for
shares transferred to Solidium were paid to the predecessor
company Solidium Oy, which was dissolved on 1 May 2009
(excluding distribution from Elisa, which was under direct
government ownership in spring 2009 and which paid its
dividend in spring 2009 to the State of Finland).
Information for the tables concerning the companies’
largest shareholders has been obtained from the shareholder
lists published by the companies as well as their flagging
notifications concerning shareholders that have exceeded the
5 per cent ownership threshold (and have not announced that
their ownership has declined below this threshold). In the
shareholder tables, the name “Varma” refers to Varma Mutual
Pension Insurance Company, “Ilmarinen” to Ilmarinen Mutual
Pension Insurance Company and “Kaleva” to Kaleva Mutual
Insurance Company.
56
Solidium Oy
Unioninkatu 32 B I P.O. Box 1148 I 00101 Helsinki
tel. +358 10 830 8900 I fax +358 10 830 8929
Business ID: 2245475-9 I www.solidium.fi

ownership - e

Transcription

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