Role

The role of the Enterprise Investment Fund (EIF) is to participate in shaping the financial and operational revitalisation of the Icelandic economy after the financial system collapse of 2008. EIF aims to invest in Icelandic companies and will not exclude any sector of the economy. The Fund will focus in particular on large companies which are viable but find themselves in financial difficulties. The Fund will also consider other companies that represent attractive investment options provided that the meet certain minimum size requirements. The Fund will invest only in currently operating companies, and not in growth companies or new ventures. The Fund’s aim is to achieve solid returns on its shareholders’ capital contributions. There are no limitations on EIF shareholdings in companies. In general, however, the Fund’s holding will be maintained in the 20-55% range, which confers an appropriate level of influence on management and strategy. An Advisory Board is responsible for providing advice on the Fund‘s investment strategy based on investment proposals submitted by the EIF Board of Directors.

The Fund will participate in investments that are designed to maximise target companies’ margins. The Fund is also authorised to invest outside Iceland to facilitate cross-border market penetration by Icelandic companies, particularly when opportunities present themselves for mergers with Fund-owned companies in Iceland.

The Fund intends to take part in the revitalisation of the Icelandic equity market by increasing the number of listed companies that are capable of active participation in the labour market while contributing to job security and financial viability in the Icelandic economy. The Fund’s goal is to list its companies in the stock market (OMIX ICE) as soon as possible following financial restructuring. Normally, companies will be sold no later than 4-7 years following initial investment. The proceeds from each sale will be paid out to shareholders on a pro rata basis and not reinvested in EIF. It is understood that the Fund’s tenure of operations could last up to 10 years, with a possible short-term extension, after  which it will be dissolved.

Policy

At the core of the Fund’s shareholder policy is EIF’s role as a primary investor who, in addition to achieving the best possible returns on its holdings, aims to promote the growth and success of the businesses in which it invests. Also, the Fund is guided by the United Nations Principles for Responsible Investment (UNPRI). These Principles, which cover environmental, social, and corporate governance issues, have been adopted by several Icelandic pension funds. EIF will also adopt its own general guidelines regarding environmental issues, social responsibility, and human rights.

 

Priorities

  • EIF‘s aim is to achieve solid returns on shareholders’ capital contributions.
  • The Fund invests in currently active businesses with a strong operational foundation.
  • The minimum investment is ISK 500 million.
  • The maximum single investment is approximately 15% of Fund shareholders’ stock subscriptions.
  • The maximum investment in any industrial sector is 30% of  the Fund‘s shareholders’ equity subscriptions.
  • The maximum investment in other funds is 20% of the share capital of the funds in question.
  • Investments generally range between 20% and 55% of the share capital of the company in question.
  • The Fund aims to list the companies in a stock exchange (OMX ICE).
  • The Fund intends to sell its holdings no later than 4-7 years following initial investment.

EIF emphasises professionalism, so as to generate confidence and trust among its backers  – pension funds, private sector stakeholders, government authorities and business partners – as well as the companies in which it invests. EIF’s investment strategy will be carried out in accordance with mandate, the rules of procedure of its Board, and its code of conduct.

The Enterprise Investment Fund intends to place strong emphasis on performing in its role as an institutional investor in a responsible manner, basing its activities on central  social values and sound governance, so as to protect the interests of the Fund as an investor to the maximum extent possible.

 

Competition Authority Decision No. 1/2011

The acquisitions by the Iceland Enterprise Investment Fund (EIF) of Vestia ehf holding company and a majority share in Icelandic Group hf. were seen to constitute mergers in the understanding of Article 17 of the Competition Act No. 44/2005 according to Competition Authority Decision No. 1/2011 of 14 January 2011. The Authority’s decision therefore entailed certain conditions for the mergers. The objective of the decision was to prevent any harmful combinations of interests or other anticompetitive consequences that might result from EIF’s ownership and the resulting indirect ownership by the Fund’s owners of business enterprises operating in competitive markets. According to the decision, the EIF is required to entrust an employee of the Fund, or an independent party appointed by the board of directors of the Fund, with the role of monitoring compliance with the conditions of the decision. Accordingly, EIF has appointed Herdís Dröfn Fjeldsted, an EIF employee, to undertake this supervisory role. She will be required to submit to the Competition Authority a report on her work before the end of April and October each year. The reporting, and other regular monitoring by the supervisor, will ensure compliance with the Competition Authority’s decision.