Annual Report 2012

Internal procedures

Confidentiality is essential in the venture capital & private equity industry, and corporate governance is a top priority in internal activities. FII follows the Finnish Venture Capital Association's Code of Conduct and its guidelines for transparency and openness. FII also complies with well-documented internal instructions.

Investment policy

The framework for FII's investment policy is specified in a special law governing the company and in a government resolution setting out the main policy points for the company's investment operations. The company's Board of Directors decides an action plan each year defining the investment plan for specific allocations in the following year.

Investment operations focus on growth-stage investments, which currently account for some 70% of the investment portfolio. Investments are also made in earlier and later stages. The main focus of investments is on companies operating in Finland. The guiding principle is that investments by FII must directly or indirectly benefit the Finnish economy. FII's portfolio can be found on the company website.

Investments and commitments €718m (31.12.2012)

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Investment process

To enhance the reliability of operation and risk management, internal operations are formed into processes, for which the actions, responsibilities and controls are defined and described. The most important functional process is the investment process.

The investment teams have the main responsibility for preparing and monitoring investments. The Management Team evaluates investment proposals, after which the Board of Directors decides on the investments. The Management Team decides on implementing an investment and also on exiting from investments. Investment teams manage and the back office, which is independent of investment operations, monitors all the investments in the portfolio. The investment process comprises a number of documented controls, for which the back office is responsible. Regular reports about the development of investments and risks associated with them are submitted to the company's Board of Directors.

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Risk management policy

Risk management policy aims to ensure that risk management has a harmonized operating model within the company and that the FII's management and Board of Directors have sufficient information about risks to support their decision-making. The policy aims to promote the identification and evaluation of risks, risk awareness and the understanding of risks.

Impartiality Instruction

In line with good corporate governance, the company's operations must be transparent, in order to preserve their credibility, and managed so that external players retain their trust in the company's operations. These aspects are particularly important in a government-owned company. Therefore, FII has a standing Impartiality Instruction containing guidelines for the impartial and ethical behaviour of its personnel and Board of Directors. In compliance with good corporate governance, any persons handling a matter must be impartial in all aspects of the matters they handle.

Insider Instruction

The purpose of the Insider Instruction is to enhance public trustworthiness of the company's investment activities. Proper instructions also increase the knowledge of company personnel and other persons working within the company's sphere of interest, so that regulations are not unwittingly contravened. The Insider Instruction applies to all people employed by FII. The instruction is based on Finland's Securities Markets Act and on the instructions and regulations supplementing it. Although FII is not itself a listed company, it often handles information classified as insider knowledge. Therefore, it is important to define procedures ensuring that people working in the company are aware of their insider status, and that they know how to manage insider information and the trading limitations for those with insider information.

Instruction for Notification of a Concentration

FII's private equity and venture capital investments can make it necessary to file notification of a concentration and to obtain the permission of the Finnish Competition Authority. Instructions approved and issued to personnel in October 2011 describe operating models for ensuring that the duty to notify authorities and to obtain permissions in merger and acquisition cases is properly handled.

Responsible investment principles

In April 2011, FII's Board of Directors confirmed the company's responsible investment principles, which are applied in all the company's investment activities. FII's responsible investment approach is to concentrate on the key factors in all investment activities, to exert influence actively and constructively where this is deemed necessary, and to work together with other stakeholders.

Procurement

The bulk of FII's procurement consists of purchases of consultancy services. In order to efficiently implement investment operations, for instance, the company purchases due diligence services, legal services and sector expertise such as consultancy services relating to mining finance. Sizeable investments and large service procurements are planned in advance, wherever possible, when preparing the budget and business plan for the following year. The company's Board of Directors decides each year on the budget and business plan. The operative management decides on the implementation of procurements included in the budget. The President & CEO can decide on individual ex-budget procurements. Procurements are reported to the Board of Directors as a part of normal financial reporting. Large procurements are opened to competitive bidding, in which case a number of people prepare the invitation to tender.

Environmental responsibility - Green Office

FII endeavours to promote sustainable development in all its activities, and has participated in the WWF Green Office programme since 2010. The Green Office initiative aims for continuous improvement of a company's environmental management system and heightened personnel awareness of environmental issues.

In the assessment process for the right to use the Green Office logo, FII submitted its environmental management system to WWF and its responses to WWF's assessment questionnaire. WWF conducted an inspection of FII's office to confirm practical compliance, and subsequently granted a Green Office diploma to Finnish Industry Investment in 2012. FII will in future report indicator data to WWF each year.

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