Portfolio Investment

Bonds are transferable financial instruments that are valid proof of a debt and are offered for sale in an offering in which all the main features of the bonds in each class are the same, including the name of the issuer (debtor), first interest date and provisions on repayment, interest rate and calling as appropriate. Marketable bonds are made to be bought and sold in the market, either on a stock exchange or directly over the counter between parties.

Types of bonds in Central Bank statistics:

Indexed market bonds
The principal changes in accordance with a certain index and is usually issued in Icelandic krónur. This includes, for example, housing bonds, housing fund bonds, HFF bonds, indexed Treasury bonds (RIKS) and indexed bonds issued by commercial enterprises, financial undertakings and municipalities.

Other marketable bonds and bills
The principal is not linked to any index - is non-indexed. These bonds can be issued in Icelandic krónur or foreign currencies. These include, for example, non-indexed Treasury bonds (RIKB), Treasury bills (RIKV) and bonds issued by commercial enterprises, financial undertakings, municipalities and foreign entities.

Equity
A shareholder’s claim on a given shareholding in a company. A public limited company issues special documents (shares) to prove that the owner of the equities (shareholder) holds a share in the company’s assets and annual profits. Shares are usually commercial papers, i.e. they can be bought and sold as specified in the company’s articles of association, either on a stock exchange or directly over the counter between parties. Upon dissolution of a company, shares become payable after all other debts of the company in question have been paid.

When an investor owns less than 10% of a company, it is considered a securities holding. If the share is larger, it is considered a direct investment and is classified as a share in an associated undertaking or affiliated undertaking.

Associated undertaking
An undertaking where direct and indirect ownership amounts to between 10-50% of the equity or voting rights.

Affiliated undertaking
A subsidiary of an undertaking, its parent company, or a sister company (i.e. a company under the same parent company). The condition is that the ownership stake amounts to > 50%.

Investment fund shares
Financial instruments confirming the claim of all owners of units in an undertaking for collective investment in transferable securities (UCITS) or in its separate divisions, to that fund’s securities holding. All holders of units have an equal claim on the income and assets of the undertaking or of its respective divisions, in proportion to their holdings in the total number of issued unit shares.

Equity liabilites
Equity is the entire shareholdings of the owners of an undertaking. Equity corresponds to the difference between assets and liabilities.

A resident is any individual and legal entity permanently residing in Iceland, irrespective of nationality. Students and embassy employees are exempt from the residency requirement. Therefore, Icelandic students and their families who reside abroad are considered residents, and foreign embassy employees are considered non-residents. Non-residents shall mean all parties except residents.

Remaining maturity is based on the original maturity. Long-term loans and receivables therefore remain long-term loans/receivables even if the effective remaining term is one year or less. The duration of original maturities are either:

Short-term: ≤ 1 year
longer-term: > 1 year