1 The mission allotted by the Act and the direction of the investment business

The mission of Finnish Industry Investment Ltd (hereinafter the company) is to promote the growth and internationalisation of Finnish corporate business by making equity investments both in funds and directly in prospect companies. The investments are made primarily through funds. The investments are targeted principally on the kind of prospects to which the market does to channel sufficient resources.

The company’s investments are directed towards improving the financing of growing and internationalising companies. This is done in particular by setting up funds investing in companies in the venture capital sphere, in the development and capitalisation of which the company participates. Activities are also directed at developing and capitalising the operations of a regional limited partnership-type fund network and on channelling finance from the European Union.

Investments may also be channelled directly to growth companies as well as to larger corporate ventures requiring long-term risk-taking.

The company may control and arrange financing programmes, in poor cyclic conditions, the supply of venture capital can be increased and essential national sector and structural arrangements can be promoted because of the general economic situation

The investments are not limited to any particular sectors of business.

A prerequisite for an investment abroad is that there is a Finnish interest.

2 The objectives of the company’s investment business

The objectives of the company’s investment business are as follows:

· To expand the supply of capital for innovative and internationalising enterprises in the growth stage and to promote the channelling to them of equity investments by private parties
· To promote the operations and internationalisation of the equity investment market
· To accelerate the commercialisation and internationalisation of the results of research and development
· To promote structural change in trade and industry in line with the aims of the trade and industry policy
· To boost enterprises’ opportunities for growth and internationalisation
· To stimulate international investment and the networking of managerial activity

3 The administration of investments

The company will make its investments on the same terms as a private investor. The contribution of private investments is typically at least half of the subject’s financing. (EYVL 2006/C 194/02; section 3.2) In deciding on investments, the subject of appraisal shall be the suitability of the investment to the company’s portfolio and the ratio of public to private financing.

The company’s investments are fixed-term and include an exit plan.

In fund investments, the operation and risks of the venture capital fund are assessed and the fund’s investment activities are monitored for each investment. Particular attention is paid to the management company’s ability to provide the target companies with expertise for business development.

In direct investments in target companies, the co-investor’s role and ability in developing the target company’s business are assessed.

Investment channelled abroad must, directly or indirectly, promote economic development in Finland (Finnish interests). In such a case, investment may be directed to the following:

- a foreign subsidiary or associated company of a Finnish enterprise which may be deemed to have a favourable effect on economic development in Finland;
- a foreign company starting up operations in Finland or in some other way benefitting the Finnish economy, or;
- a foreign equity fund
- part of whose assets are invested in a manner which promotes Finnish corporate activity;
- which helps to create an international manager network;
- which promotes the development of a significant co-investor potential, or;
- which in some other way promotes the interest of foreign funds to invest in Finland.

3.1 Funds concentrating on growing and internationalising enterprises

By targeting public assets on equity investment concentrating on growing and internationalising enterprises, a basis is created for an inflow of private capital into funds specialising in enterprises in the growth and internationalisation stages. Collaboration between state-owned special investors and the coordination of the mutual division of work are important so that the available opportunities may be exploited efficiently in this respect.

In order to promote internationalisation by Finnish business, the company cooperates with international equity investors to expand fund business and to develop the management of funds.

The company contributes its expertise to the management of the European Union’s financing in such a way that venture capital financing by the European Investment Bank (EIB) and the European Investment Fund (EIF) in Finland will grow and focus in a way compatible with the objectives set for the company.

3.2 Direct investment

The purpose of direct investment is to accelerate the growth of the target companies and to lower the threshold for the entry of private investors into risky projects by catalysing the financing of projects and by sharing risk.

Direct investment makes it possible to start up new projects with development potential and significance in terms of trade and industry policy. Projects of this kind may, in particular, involve business sector and structural reorganisation as well as large-scale technology projects. They may also involve major European projects or foreign investment in Finland.

The company makes direct syndicated investments in growth enterprises with the aim of diversifying and underpinning the target companies’ production structure as well as to ensure the exploitation of research and development inputs and the retention of expertise and manufacturing in Finland. In reorganisations of sectors and enterprises, attention is paid to the raising of standards of technology and to employment issues.

3.3 Financing programme to secure the continuity of the business of companies in temporary difficulties and to promote essential restructuring of sectors and enterprises

The company must, within the framework of the 100 million euros directed to it in the 2009 supplementary budget, target the investments in a separately administrable financing programme to viable companies which have run into temporary difficulties due to the prevailing economic conditions and which have no more than 1,000 employees. The company may, through said financing programme, also participate in essential reorganisations or sectors and corporations in Finland.

Every effort will be made to implement the investments for the financing programme during the period 2009–2011.

A prerequisite for an investment made through the financing programme is collaboration with the target company’s present owners and management and with the investors in the company’s equity. Joint investment, combined with arrangements for the target’s company’s liabilities, are intended to secure the continuity of the company’s business. Another requirement is participation by the target company’s owners in surrendering of property for the financing, reinvestment, or the inclusion of a new investor.

Investments made through the financing programme must constitute at least 50% of the private capital. In individual investment decisions a higher risk than usually may be accepted but the principles of risk management referred to in section 4.2 must be observed.

The target enterprises must have prospects for profitable business and the investments are intended to secure the continuity of the target enterprises’ operations. To spread the risk, the total of an individual investment must not exceed 10 million euros. Investments will typically be made in a quasi-equity form.

A report on the financing programme shall be rendered quarterly to the Ministry of Employment and the Economy.

3.4 Other investments

In addition to the investment activities serving the implementation of the trade and industry policy mission referred to in points 3.1 - 3.3 above, the company may also channel its investments to other funds and to direct investments when this is essential to secure the company’s long-term commercial profitability.

4 Operating principles and procedures

The company makes investments on a market basis together with private investors.

The company must comply with generally accepted governance procedures in its investment activities and other business.

4.1 The profitability of business

The company’s business must be commercially profitable in the long term (5—10 years), in such a way that that the company’s shareholders’ equity grows in real terms.

The company’s investment portfolio must be governed as a whole, in such a way that the company’s investments are sufficiently dispersed and that the long-term profitability of business is not jeopardised.

4.2 Risk management

The company must actively manage its risks. The company must have principles of risk management confirmed by the Board of Directors.

The position of the company’s Board of Directors is particularly important in risk management; the Board of Directors makes decisions on the company’s investments and it monitors the implementation of investment activities.

In order to accomplish the company’s trade and industry policy mission, a larger risk than usual may be accepted in individual investment decisions.

The company must have clear investment principles. Investment decisions must be based on documented investment proposals which include a thorough analysis of the target company in line with practice in the sector. The analysis must assess, inter alia, the investment’s profitability and risks as well as the exit from it.

Equity investments and related risks must be managed and monitored actively throughout the life cycle of the investment.

The company operates primarily as a minority investor both in venture capital funds and in individual target companies.

The company must make sure that the Ministry of Employment and the Economy has a possibility, as the representative of the owner, to monitor the risks involved in the investments.

4.3 Investment of liquid assets

The company must have enough liquid assets for it to be able to answer for the investment commitments it gives. Liquid assets may be invested briefly so that the value of the investment is maintained. The company must have principles for the investment of liquid assets confirmed by the Board of Directors.

4.4 Forms of investment

Equity investments must essentially meet the following criteria: a lack of collateral, a restriction on repayment, or a restriction on the payment of interest or other earnings. Such investments may be in shares, capital loans and convertible bond stocks. The company may also invest in mezzanine instruments. The distinguishing features of these loan instruments are lack of collateral and subordination.

4.5 The Investment Council

The company has an Investment Council consisting of stakeholder representatives to act as an advisory body to the Board of Directors, serving to support the company’s Board of Directors.

4.6 Cooperation

The company must act in cooperation with the state’s other special financial backers.

5 Supervision, monitoring, and reporting

Ministry of Employment and the Economy will confirm annually for the company the trade and industry and ownership policy targets.

The Ministry of Employment and the Economy will provide the company with instructions on reporting, which will figure in the requirements for supervision and monitoring of the main objectives for the owner and for the policies on trade and industry and on technology. The attainment of the objectives set for the company will be monitored and assessed regularly. The Ministry of Employment and the Economy will provide the company with separate guidelines for monitoring and reporting.

The Ministry of Employment and the Economy may give the company assignments to achieve objectives of importance in terms of trade and industry policy, taking into account the principles referred to in section 3.

In the event that the company makes a single investment amounting to more than 20 million euros, the Ministry of Employment and the Economy will take the matter, after receiving a proposal from the company’s Board of Directors, before the Cabinet Committee on Economic Policy for consideration. The Ministry of Employment and the Economy may, at its discretion, take another individual direct investment before the Cabinet Committee on Economic Policy for consideration.

6 Entry into force

This decision will enter into force on 1 April 2009.

This decision revokes the Council of State’s decision of 1 March 2007 on the general guidelines for Finnish Industry Investment Ltd’s investment activities.