Investment strategy for TONO's total assets

Adopted by TONO's annual meeting on June 10, 2025.

TONO's asset management shall be carried out in a safe manner. Bank deposits and fund portfolios shall be allocated based on considerations of security, return and liquidity. TONO's most weighty management criterion is low risk, but given this assumption, an attempt shall be made to achieve the best possible return on the funds. The asset management strategy, as set out in this document, shall apply until the annual meeting has adopted a new and amended strategy. The investment strategy shall be discussed by TONO's annual meeting each year.

Basic premise

The main objective of TONO's investment strategy is to manage the funds in the best possible way pending their settlement and payment to the licensees. Despite frequent settlements and an increasing number of payments on account, TONO has a large and long-term capital base. The return on this capital must come from investments with low risk and volatility.

Choosing a long-term investment strategy would have resulted in greater value fluctuations, with the result that the financial market would have become too significant a factor in the size of the settlement amount each individual carryover year. TONO has therefore chosen a short-term, low-risk investment strategy, despite the fact that the expected return will be lower than with long-term investments and by taking increased risk.

The basic assumptions regarding long-term investments do not exclude that TONO can place parts of its capital base by purchasing real estate that will also cover the need for the commercial premises that the business requires.

TONO does not use active managers. This is because TONO largely invests its capital in index funds that have low management costs and low risk. With such a portfolio, the expectation of excess return when using active management will not exceed the additional cost of active management.

Management parameters and objectives 

The following shall guide the exercise of asset management in TONO:

• The risk profile should be very low.
• The goal for expected return is to maintain the inflation-adjusted value of the capital assets, and to achieve the highest possible return given low risk.
• TONO has a short-term investment strategy to ensure a good and fair distribution of results each year.
• When choosing locations, the approach should be based on a conservative stance.
• The investment portfolio should only contain traditional asset classes, such as stocks, bonds, the money market, real estate, as well as term deposits or ordinary bank deposits.
• Shares should only be used during periods of extra low historical values, and should be presented to TONO's board of directors before investments are made.
• When investing in commercial buildings, the intention must be that parts of the property will be used by the company's own business.
• Low risk requirements should count more than return requirements.
• The portion of the portfolio that constitutes fixed income securities shall be distributed among at least two managers, in order to reduce management risk.
• The portion of the portfolio mentioned above should be distributed across at least five products, with emphasis on the funds that have the lowest risk within each class.
• Up to 25 percent of the portfolio can be placed in funds with slightly higher risk to increase returns, but never in funds that have more than medium risk within their class.
• Up to 25 percent of the portfolio can be invested in fixed-income securities with a maturity of longer than six months (duration).
• The average maturity of the entire portfolio shall not exceed six months.
• All aspects of risk must be considered. This applies to credit, interest rate, management, liquidity and currency risk.
• Investments should not be made in individual stocks.
• If funds have foreign securities in their portfolio, they must always be currency hedged.
• Within each class, the proportion of foreign securities shall never exceed 25%. Foreign funds shall not constitute more than 25%.

The portfolio can be assembled with the external constraints described in the table below:

Management and interest rate risk

Based on the portfolio that TONO puts together, the two most important risk factors will be management risk and interest rate risk. We therefore consider the most important criteria associated with this risk assessment.

1. Election of trustees

The asset managers must be able to document that the returns in the funds they manage have produced good results over time. The managers must be competitive, and must be selected on the basis of qualitative and quantitative criteria. This must also include ethics and sustainable development when assessing management and product selection. In addition, transaction and management fees must be emphasized in the assessment.

2. Interest rate risk

Both money market and bond portfolios are exposed to interest rate risk. Interest rate fluctuations cause the prices of fixed income securities to rise or fall. The longer the term of the underlying securities, the greater the value changes. To limit this risk, an upper limit on average duration will have a limiting effect on interest rate changes.

Ethical guidelines and sustainable development

TONO will strive to follow strict ethical guidelines where we have the opportunity to do so. This means that we only choose placements that are transparent, so that we have the opportunity to verify our claims to some extent.

In society, great importance is placed on the sustainability of all activities. The field of sustainable management is also constantly developing. TONO will emphasize this in the selection of investment objects, and we will also request quality-assured data related to sustainability considerations.

Management, monitoring and control

The CFO must always submit proposals to change the portfolio composition.

for the CEO if:

• You choose to use managers that you have not used before.
• You choose to invest in products that you have not previously invested in.

When submitting quarterly reports that include comments, a simple presentation of the status of the investments and confirmation that the applicable framework conditions and guidelines have been followed must be provided.

TONO's board will assess management against the strategy each year.