TABLE OF CONTENTS
- General summary and FSÍ’s investment focus
- Corporate governance
- Socially responsible investing
1. General summary and FSÍ’s investment focus
The role of the Enterprise Investment Fund slhf. (FSÍ) is to participate in the financial and operational revitalisation of the Icelandic economy in the wake of the financial system collapse. The FSÍ aims to invest in Icelandic companies and does not exclude any sector of the economy. The Fund places particular focus on large companies that are viable but are in financial difficulties because of the current situation, and on other companies that it considers interesting investment options. The FSÍ invests only in currently operating companies, and not in growth companies or new ventures, because other specialised investment funds concentrate on that segment of the business sector. The FSÍ’s aim is to achieve solid returns on shareholders’ capital contributions. The Advisory Board provides commentary on the FSÍ’s investment policy, upon receipt of recommendations from the FSÍ Board.
The Fund will participate in investments that maximise the companies’ margins. It is also authorised to invest abroad in connection with market penetration by Icelandic companies, not least when there is the possibility of a merger with Fund-owned companies in Iceland.
The FSÍ intends to take part in the revitalisation of the Icelandic equity market by increasing the number of listed companies that are able to participate actively in the labour market while contributing to job security and efficiency in the economy. The Fund’s goal is to list its companies on a public securities exchange as soon as possible following financial restructuring. It aims to sell the companies no later than 4-7 years after investing in them. The proceeds from each sale will be paid out to shareholders on a pro rata basis, and not reinvested in the FSÍ. It is assumed that the Fund’s tenure of operations could be up to 10 years, with a possible extension of up to two more years, upon which it will be dissolved.
The FSÍ emphasises professionalism, so as to generate confidence and trust among its supporters – pension funds, members of the private sector, Government authorities, and business partners – as well as the companies in which it invests. The FSÍ’s investment policy will be implemented in accordance with its terms of operation, the rules of procedure for its Board, and its code of conduct (see Appendix).
The FSÍ’s investment strategy focuses on the following:
- The FSÍ’s aim is to achieve solid returns on shareholders’ capital contributions.
- The Fund invests in currently operating firms with potential.
- The minimum investment is ISK 200 million.
- The maximum single investment is about 15% of the company shareholders’ stock subscriptions.
- The maximum investment in any industrial sector is 30% of Fund shareholders’ stock 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 on a stock exchange.
- The Fund intends to sell the companies no later than 4-7 years after investing in them.
2. Corporate governance
The FSÍ’s operations will emphasise compliance with guidelines on sound corporate governance. In deciding on investments in limited liability companies, the Fund will consider the OECD Principles of Corporate Governance, as well as the Guidelines on Corporate Governance issued by the Iceland Chamber of Commerce, the Iceland Stock Exchange (OMX Nordic Exchange in Iceland), and the Confederation of Icelandic Employers (SA). It will also give consideration to the newly issued Guidelines on Governance of Public Entities, published by the Iceland Chamber of Commerce, the Nasdaq OMX Nordic Exchange in Iceland, and the Confederation of Icelandic Employers (SA). Furthermore, the Fund will consider the Icelandic Federation of Labour rules on socially responsible investing.
The FSÍ will actively carry out its ownership duties and will communicate suggestions and comments on the operation, policy, and governance of the companies in which it invests through its shareholder policy, via shareholder agreements, at board meetings and shareholders’ meetings, and through direct interactions with the management of the companies concerned.
The provisions of the Administrative Procedures Act pertaining to eligibility of board members will apply to the treatment of individual matters and to decision-making within the Board of the FSÍ. This implies that, at meetings of the FSÍ Board, members will not participate in discussions or decisions concerning companies in which they have interests at stake. As appropriate, the FSÍ will emphasise using the same policy is followed by the boards of companies in which it invests.
The FSÍ is a primary investor that, in addition to achieving excellent returns on its holdings, aims to promote the growth and success of the firms in which it invests. The FSÍ intends to place strong emphasis on carrying out its tasks as an investor in a responsible manner and basing its activities on important social values and sound governance practice, so as to protect the interests of the Fund as an investor to the maximum extent possible. It will take into account the United Nations Principles for Responsible Investment. The FSÍ will also adopt general guidelines regarding environmental issues, social responsibility, and human rights. It is important that the Fund keep its investors well informed of its investments and activities.
3. Socially responsible investing
The Fund does not participate in investments of doubtful ethical quality. The Fund carries out a detailed assessment of its investment options and strives to invest in well-run firms that maintain sound governance practice and demonstrate responsibility in social and environmental affairs.
The Fund stresses that the companies in which it invests operate in compliance with the law and other regulatory instruments, as well as international agreements on human rights and the rights of workers.
The FSÍ conducts a comprehensive assessment of the management and operations of each company as regards factors such as its products, production methods, customer relations, corporate culture, ownership, and owners’ interests. The Fund bases its assessment of each company on publicly available information and information provided by the company itself. An assessment is made of the board’s attitude and the company’s responsibility and management in view of the above-mentioned factors. In its Annual Report, the Fund shall provide an account of its investments, with particular reference to its policy on socially responsible investing.
The FSÍ’s participation will take place primarily through share capital increases and the purchase of shares in the companies concerned. The Fund will not restrict its investments to specified industries or business sectors, and it will aim to achieve long-term diversification of risk. No single investment may constitute more than 15% of Fund shareholders’ total investment pledges. In general, it is prohibited to invest in a single business sector in an amount exceeding 30% of Fund shareholders’ total investment pledges.
The Fund’s long-term objective is that annual total returns on dividend payments and rising market value of Fund assets will be such that returns on shareholder contributions will, in general, exceed customary returns on pension fund investments in a normal economic climate.
Requirements will be set at any given time concerning the minimum size of companies in which the Fund invests. One criterion for minimum size is the number of full-time position equivalents. In general, the minimum investment in an individual company is ISK 200 million, and the maximum initial investment in an individual firm is ISK 4,000 million. It is permissible to invest in other investment funds if their investment policy satisfies the FSÍ’s requirements and can be accommodated within the FSÍ’s investment policy. In this context, it is permissible to consider the possibility of investing in smaller firms through the intermediation of such funds. Investments in such funds may not exceed 20% of the total share capital of the fund in question.
There are no limitations on FSÍ shareholdings in companies. In general, however, the Fund’s holding will be in the 20%-55% range, which confers a suitable amount of influence over the management of the firms in question. Before the investment amount is disbursed, a shareholder agreement aligning the interests and policies of major investors must be finalised.
The Enterprise Investment Fund slhf. is authorised to invest in companies together with other parties (co-investors). If the FSÍ decides to invite FSÍ shareholders to engage in joint investments, shareholders shall be offered the opportunity to invest in proportion to their share capital contribution.