International Forum of Sovereign Wealth Funds

FIEX: In accordance with the provisions of section one of article 114 of Law 66/1997 this Fund aims to promote the internationalization of Spanish enterprises, and, in general, of the Spanish economy, through temporary and minority equity investments in Spanish companies, their affiliates located abroad or through other any participative financial instruments.

FONPYME: In accordance with the provisions of section one of article 115 of Law 66/1997, this Fund has the same mandate as FIEX in relation exclusively to the internationalization of the activity of small and medium Spanish enterprises, and, in general, of the Spanish economy.

FONREC: In accordance with the provisions of section two of article 17 of Regulation 5/2021 this Fund will provide temporary public support under criteria of profitability, risk and impact on sustainable development, in order to strengthen the solvency of companies headquartered in Spain that are experiencing temporary hardship as a result of the Covid-19 pandemic.

See referred legal framework at (Spanish language only available):

https://www.boe.es/buscar/act.php?id=BOE-A-1997-28053

https://www.boe.es/buscar/act.php?id=BOE-A-2021-3946

The industries, geographical scope and different instruments invested by FIEX and FONPYME are directed by the Executive Committee (hereinafter “EC”), formed by public servants from different Spanish ministries. As Funds are assigned to the SEC, EC decisions are aligned with the general Spanish trade policy in force from time to time. Daily management of the Funds are driven by the Operational Guidelines approved by the EF (see section 18). In particular, members of the EC check the financial support from different public entities received by a particular project.

FONREC has been invested in industries affected by Covid-19

Assets of FIEX, FONPYME and FONREC funds managed by COFIDES are not significant within the general macroeconomic policy instruments. 

FIEX and FONPYME Funds’ source of funding is the yearly General State Budget (ex. Article 20 Regulation 1226/2006). The General State Budget is prepared by the Spanish central government to be approved yearly as an act by the Spanish Parliament and is publicly disclosed at the Spanish Official Gazette (“Boletín Oficial del Estado”).

The proposal for new funding each year is made by COFIDES, to be passed by the corresponding EC, based on financial needs in accordance with FIEX and FONOYME Funds’ business forecasts. This proposal is studied by the Spanish Central Government for its inclusion in the corresponding Budget. The FIEX and FONPYME Funds have always been funded by annual Budget.

All the Funds’ investment income is reinvested. (ex. Article 18.2 Development Regulation).

FONREC has been endowed in its constitution according to the Regulation 5/2021. No additional endows are foreseen.

The funds’ assets are consolidated within the Spanish General Budget. Each account is reported within its classification (financial assets, participations or cash). 

Figures are publicly disclosed in an aggregated manner for the Spanish public budget and are not identifiable for each Fund.

The Funds report the following statistical data both to the OECD via the Ministry of International Affairs and yearly to the State via the Secretary of Trade. 

Investments abroad

Number of employees of investee companies

Investments per country

Investments per industry

Total investments of the year

Total divestments of the year

Assets Under Management

The Funds’ transactions, as mainly addressed to foreign entities, are reported for statistical purposes to the Spanish Central Bank (cross-border financing) and the Ministry of Industry, Trade and Tourism (foreign equity investments).

The objective of the Funds has been set by Law 66/1997 (see Section 2) and, therefore, it cannot be changed save as by means of a change of said law for FIEX and FONPYME; and Regulation 5/2021 for FONREC

Oversight by the Funds’ owner (i.e. Spanish Central Government/State) is developed by the state agencies that audit public sector (IGAE and Tribunal de Cuentas -see Section 12).

Likewise, structural changes in the Funds can be made by means of new regulations enacted by the owner, amending therefore the Development Regulation.

For FIEX and FONPYME, the composition of the EC is directly set up by the Development Regulation. They are formed by:

A president, who by legal provision is the Secretary of State for Commerce.

A first vice president, who is, by legal provision, the general director of International Trade and Investments.

A second vice president, who by legal provision is the president of COFIDES.

Twelve additional committee members:

Five representatives of the General Directorate of International Trade and Investments

One representative of the General Directorate of Industry and of the Small and Medium Enterprises.

Two representatives of ICEX Spain Export and Investment.

One representative of the General Secretariat of the Treasury and Financial Policy

One representative of the State Secretariat for Budgets and Expenditures.

One representative of the Official Credit Institute, ICO

One representative of the General Secretary of the Industry and of the Small and Medium Enterprises.

A secretary, without voice or vote.

Except for the president and first and second vice-presidents, whose appointment as members of the Committees is automatic because of their position in government, the remaining members must be appointed by the Minister of Industry, Trade and Tourism, at the proposal of the Secretary of State for Commerce.

The mandate of the members of the Committees, except for those who are due to their position (president and vice-presidents), is renewable every two years.

One of the functions of the EC is the reporting to the Spanish Central Government, on the following items:

Annual Accounts and Report of the Fund.

Proposal on Fund’s allocation to be included in the Annual State Budget.

From time to time, proposal on any change deemed necessary in the Fund’s regulation.

For FONREC, the TIC is formed by nine members. 

The Presidency will be held by the person in charge of the State Secretariat of Commerce, of the Ministry of Industry, Commerce and Tourism. The meetings of the TIC shall always be chaired by the Chairperson or the person who deputizes for her/him.

The person in charge of the Directorate General for Trade Policy, of the Secretariat of State for Trade, who shall be the First Vice-Chairman of the TIC.

The person in charge of the General Directorate of International Trade and Investments, of the Secretariat of State for Trade.

The General Director of Industry and Small and Medium Enterprises, of the General Secretariat of Industry and Small and Medium Enterprises.

Two representatives of the Secretariat of State of Economy and Support to the Company.

A representative of the Secretariat of State of Tourism.

A representative of the SEPI

The President of COFIDES.

The governing body of the Funds are the EC (one for each, but with the same members for both bodies), as per article 116.1 Law 66/1997 for FIEX and FONPYME.

Role and responsibilities of the EC are defined in articles 3 (FIEX) and 11 (FONPYME) of the Development Regulation, including a list of administration functions:

Evaluate and approve or deny the operations proposed by the Manager.

Analyze and assess the evolution of the portfolio investments and approve, if required, the measures considered appropriate to ensure the smooth running of said operations to fulfil the objective of the Funds.

Propose to the Government, through the Secretary of State for Commerce, any proposals deemed necessary to ensure the proper functioning of the Fund

Approve and send to the Minister of Industry, Trade and Tourism and to the General Intervention of the State Administration (IGAE) the annual accounts of the Fund, as well as the annual report.

Establish a financing limit per operation under operational criteria and to avoid excessive concentration of risks, based on the annual increase in the Fund's endowment, as well as any other operational limits deemed necessary to establish, to ensure the proper functioning of the Fund and risk monitoring.

Evaluate and approve the collaboration agreements.

Approve the preliminary draft annual budgets of the Fund for submission to the Minister of industry, Trade and Tourism in accordance with the provisions of article 33 of Law 47/2003, of November 26, General Budget. 

Verify the adequacy of the Manager's remuneration set by Law 66/1997.

Approve due diligence cost.

Request the Manager any information necessary to assess the risks assumed by the State as well as determine the economic-financial information that must be sent specifically or periodically to the EC.

Establish the eligibility criteria for investments.

Any other inherent in the administration of the Fund.

Role and responsibilities of the TIC are defined in articles 3 of CM 15/6/2021, including a list of administration functions.

Approve investments

Evaluate the evolution of the portfolio and take measures appropriate to ensure the smooth running of the Fund and compliance with its objectives

Approve execution of certain actions, including but not limited to divestments, reductions and waivers, accession to creditors' agreements, refinancing, restructuring, renegotiations, acknowledgments of debt or judicial or extrajudicial transactions

Approve submission to arbitration or other means of conflict resolution of disputes, the abandonment of legal actions already initiated or the temporary waiver of the exercise of legal actions

Propose to the Government, through the Directorate General for Commercial Policy, any actions that may be considered necessary for the purpose of ensuring the correct operation of the Fund.

Establish a risk appetite framework

Verify the correct application of the criteria for calculating the Manager's remuneration, as well as to ratify the payment of such remuneration.

In general, to carry out the control and monitoring of the transactions carried out by the Manager with charge to the Fund, as well as to exercise any other powers deriving from the provisions of the Royal Decree-Law.

The ECs/TIC approve the respective Operational Guidelines, which is a compendium of investment and divestment procedures, including eligible investments, operating issues and reporting activities.

For FIEX and FONPYME, Law 66/1997, in number 2 of its article 116, the designation of COFIDES as manager of the Funds, in its own name and on behalf of the Funds. And For FONREC Regulation 5/2021, article 17.

Operational management role and responsibilities of COFIDES, as Fund manager, are listed in articles 5 (FIEX) and 13 (FONPYME) of the Development Regulation, including inter alia: 

Evaluate investment proposals

Submit to the EC/TIC such proposals

Perform legal and financial closing 

Monitor portfolio investments

Represent the Funds in the decision-making bodies of portfolio companies

Monitor the activity of capital expansion funds or private equity funds participated by the Funds and participate in their decision-making or administration bodies, if this does not entail that COFIDES assumes direct management of the companies in which the fund invests.  Act as depositary of the financial documentation of investments.

Do administration tasks with the strictest principles of financial prudence.

Propose to the EC/TIC divestments

Act legally in the interest and on behalf of the Funds

Sign collaboration agreements that may take place with other investors who wish to participate in the activities of the Funds

To propose to the EC/TIC a limit of assumption of risk per investment, as well as any other operational limits that are considered necessary to establish, to ensure the proper functioning of the Funds and risk monitoring.

Act as Secretary of the EC/TIC

Undertake differentiated and independent accounting for each Fund.

Prepare the annual budgets of the Funds

In general, the Manager will carry out all those actions and initiatives that are necessary for the proper functioning of the Funds and will provide the EC/TIC with all the information and documentation it requests.

For the execution of these management activity, COFIDES structure includes: 

Chairman /CEO, General Manager and General Secretary, usual roles for the positions.

Business development: identification of new investment opportunities

Investment and Portfolio management: analysis of investment opportunities, negotiation of investment terms and conditions, legal and financial closing of investments, monitoring throw out the investment life and divestment 

Risk management: second opinion on every investment decision, monitoring and divestment; portfolio review to direct the business development effort (i.e. countries, industries, size of investee companies)

Impact and Sustainability: review of impact, environment and social risk of invested companies.

Finance department: accounting and treasury management 

Department for internal controlling, auditing and quality: compliance usual roles.

COFIDES Board of Directors, set up by representatives of its shareholders (with the Spanish public State with a majority stake).

COFIDES Steering Committee is composed by its chairman /CEO of COFIDES, the general director and the deputy directors of each area.

It is the responsibility of the Steering Committee to analyze and approve/deny all those issues that must be presented to the EC of the Funds and those that are strategic, routine or specific that are relevant for the proper functioning of the Funds, among which are:

Documents and reports that must be submitted to the instances referred to in the previous paragraph or to other instances. By way of example and not limitation, the following should be noted:

Proposals for investment operations, divestment, refinancing, and other in the portfolio companies.

Proposal for a Strategic Plan, Commercial Plan, portfolio companies monitoring, E&S monitoring plan.

Economic-financial information - Activity Reports, Financial Statements, budgets, other accounting and management documents.

Other matters such as Country Reports, four-monthly updates of the price grid, project reports with judicial proceedings in progress.

Corporate management issues: Objectives and monitoring of Objectives, HR, IT, legal compliance matters, Internal Control and quality including updates of Operating Procedures, Internal and external audits, authorization of contracting of suppliers 

Any other issues, initiatives or weekly priorities deemed appropriate to address the proper functioning of the company.

Each deputy director is responsible for implementing in its department the decisions taken by the EC and the Steering Committee.

COFIDES Steering Committee task and responsibilities are set in the internal management regulations of COFIDES and publicly disclosed for all COFIDES employees. 

As mentioned in sections 6 to 9, accountability framework is defined in the Law 66/1997 and Development Regulation for FIEX and FONPYE and Regulation 5/2021 for FONREC.

Therefore, no other incorporation/constitutive legal documents or management agreements exist.

The Funds annual report and financial statements include in its management report, a brief monitoring of the portfolio companies only disclosed to the EC/TIC and the IGAE (general intervention of the state administration, which is the auditing entity of public companies and entities - see section 12).

The Funds’ financial statements are prepared under Spanish GAAP for funds.

The financial statements include information about contingent liabilities and off-balance sheet items.

The financial statements are subject to yearly auditing procedure of IGAE. Those statements including the auditing report are public for review. 

The General Comptroller of the State Administration (IGAE) is the internal supervisory agency of the state public sector, and the direction and management centre for public accounts.

As a supervisory agency, the IGAE is responsible for verifying, through previous monitoring of legality, continuous financial control, public audits, and financial control of subsidies that the state public sector's economic and financial activity complies with the principles of legality, economy, efficiency and effectiveness.

As a centre for the management of public accounts, it is responsible for providing reliable, complete, professional and independent accounting information about public management. In this regard, it is responsible for drafting the public sector’s financial accounts according to the methodology of the European System of National Accounts, the most specific result of which is the determination of the public deficit, which is essential to the nation’s economic life. It calculates the deficit for both the General Government and each of its sub-sectors.

http://www.igae.pap.hacienda.gob.es/sitios/igae/en-gb/Paginas/Inicio.aspx

Additionally, on demand, the Court of Auditors (Tribunal de Cuentas) audits the operational activity of the Funds.

The Court of Auditors is the external audit body recognized by the Spanish Constitution, which is configured as the supreme audit body of the accounts and the financial management of the public sector, without prejudice to its judicial function focused on the prosecution of accounting liability incurred by those who are responsible for the management of public funds.

https://www.tcu.es/tribunal-de-cuentas/en/

EC/TIC members are subject to the general liability regime for Spanish civil servants, which include the submission to the Code of Conduct provided by Chapter VI Title III of Law 5/2015. Additionally, EC/TIC president and vice-presidents, due to its condition as most senior official of the central administration ("alto cargo"), are subject to special duties of care in the exercise of their public activity, as provided by Law 3/2015. Specifically, EC/TIC members must refrain from participating in any decisions in case of conflict of interest.

Most EC/TIC members are career top civil servants. Under the Spanish public system, civil servants accede via competitive process and career to become in a top civil servant is based on knowledge and professional merits. As mentioned in point 7 above, the composition of the EC/TIC is directly set up by the Development Regulation.

EC/TIC members are subject to the general liability regime for Spanish civil servants. In particular, they must refrain from participating in any decision in case of conflict of interest.

COFIDES staff (not civil servants) is largely recruited from private sector selected by a competitive process.

The recruitment and recruitment processes are regulated by internal procedures and guarantee compliance with the criteria of transparency, publicity, concurrence, equality, capacity and merit.

Members of the Steering Committee are usually selected from among senior staff when the necessity arises and based on experience, capacity and seniority.

COFIDES has a Code of Ethics applicable to all employees, the Code of Ethics is part of the policies of good governance, regulatory compliance, criminal prevention and corporate responsibility of COFIDES.

The Code includes both the conduct that COFIDES expects from its professionals and the Company's actions towards its stakeholders. The objective is to serve as a deontological guide establishing the values and commitments that will guide the professional activity in the Company:

https://www.cofides.es/en/about-us/governance

Members of the EC/TIC and Steering Committee are covered by insurance

COFIDES has internal procedures to deal with third parties with regard:

Suppliers and services providers hiring manual, based on the principles of publicity, concurrence, transparency, confidentiality, equality and non-discrimination, in accordance with Law 9/2017 on Public Sector Contracts.

Money laundering prevention manual

Anti-corruption manual

Confidentiality manual

The Funds’ investments are conducted in compliance with eventual and applicable regulatory and reporting requirement in host countries.

FIEX`s and FONPYME’s investments are linked to internalization of Spanish companies, and mandatorily minority investments, so in principle do not affect host countries from a strategical or macroeconomic point of view. 

FONREC investments are purely domestic, with no activity outside Spain 

For FIEX and FONPYME, governance framework is based on Law 66/1997 and Development Regulation, which are legal provisions of public domain.

For FONREC, governance framework is based on Regulation 5/2021 and CM 15/6/2021, which are legal provisions of public domain.

In the same sense, independent operation of the Funds by COFIDES is public as set up in such legal framework.

See referred legal framework at (Spanish language only available):

https://www.boe.es/buscar/act.php?id=BOE-A-1997-28053 https://www.boe.es/buscar/act.php?lang=en&id=BOE-A-2006-19827&tn=&p=

https://www.boe.es/buscar/act.php?id=BOE-A-2021-3946

https://www.boe.es/buscar/doc.php?id=BOE-A-2021-20880

Funds financial statements are public in COFIDES web page (only in Spanish):

https://www.cofides.es/biblioteca-de-documentos/cuentas-fiex-2020

https://www.cofides.es/biblioteca-de-documentos/cuentas-fonpyme-2020

In COFIDES web page success stories are also published with non-sensitive data.

https://www.cofides.es/en/our-work/success-stories

FIEX and FONPYME objective is to foster the internationalization of Spanish companies and Spanish economy and such main objective is set in the COFIDES web page. Together with the main strategic objective of the Funds, the Operational Guidelines set a financial and profitability objective disclosed as:

Given that the FIEX and FONPYME investment returns are reinvested, to maximize the potential of the Funds, investments must be carried out in viable projects with a medium- and long-term profitability objective. The investment proposals shall have an adequate risk return profitability.

Investment and divestment proposals, as well as portfolio monitoring, are undertaken by the investment department and reviewed by the risk management department. No proposal can be submitted for approval, without the countercheck of the risk management department. The review includes a risk return analysis.

FONREC investments are supported by credit report from an external credit rating agency approved by ESMA (European Securities and Markets Authority). Its credit rating report serves as main basis for TIC decision making.

On top of it the Compliance Department carry out periodical performance reviews.

COFIDES, on behalf of the Funds act always following the additionality principal, by which the offer of the Funds must be additional to the private financial sector and there is thus no concurrence with it.

COFIDES exercise always its ownership rights and in a manner that is consistent with its investment policy to protect the financial value of the Funds’ investments.

The Funds do not invest in public listed companies, do not held majority investments and cannot, following their incorporation Law, manage the investee companies.

Thus, ownership rights are limited to the main corporate governance issues to protect its minority position, such as approval of financial statements, appointment of auditors, change of business, etc.

Voting rights are delegated to COFIDES, and usually a senior analyst of the investment department represents COFIDES in the investee’s board of directors.

The vote is either issued directly or by a proxy.

As the Funds do not invest in listed entities, they do not public the general approach of ownerships rights.

There is a permanent review of investments in the portfolio and a review of the portfolio metrics. 

Each investment is reviewed at least once a year and a check of the main financial, Impact E&S and any other risk is performed. Those risk are valued in the Rating tool and a new rating and scoring is assigned. 

In case of special situations COFIDES carry out monitoring reports oftener (half-yearly to monthly).

Portfolio reports with key indicators are displayed to the Steering Committee on a monthly basis and to the EC/TIC quarterly.

Key indicators are new investment and divestment of current year, portfolio average rating, diversification by country, industry, ticket amount and investment product.

An abstract of the main key indicators is included in the annual report and published in the COFIDES web page (Spanish language).

https://www.cofides.es/en/node/3955

Preparation and implementation of the GAPP is led by the General Manager.

A review of the implementation of the GAPPs will be done as required.