No cause for concern with regard to pricing in Samherji’s business transactions with Seagold Ltd.

- according to an audit carried out by the British audit firm Baker Tilly LLP

• With respect to allegations from the Central Bank of Iceland as to the underpricing of Samherji’s products sold to related parties, Seagold Ltd, Samherji’s affiliate in the UK, commissioned an independent analysis and audit of the company’s operation.
• The task was carried out by experts from Baker Tilly UK Audit LLP (www.bakertilly.co.uk), an independent member of Baker Tilly International which is one of the world’s larger firms within its area of expertise, with a total staff of approximately 25,000.
• It was the clear and categorical conclusion of this audit that the transactions in question gave no cause for concern and that the business dealings of Seagold Ltd. with related parties were carried out in the same way as transactions between non-related parties. Thus, there was no cause for making any alterations, neither with regard to pricing nor pricing policy. 
• Samherji has already published a report from IFS-FINANCE AND RESEARCH which arrives at the same conclusion; no problems exist relating to the pricing of Samherji’s products.
• During the period covered by the Central Bank investigation, Samherji/Ice Fresh Seafood exported products amounting to a total of ISK 113 billion. From its own products, the company’s sales to related parties came to ISK 15.4 billion; thereof ISK 14.3 billion, or approximately 93%, from transactions with Seagold.
• The conclusions of the audit conducted by Baker Tilly UK Audit LLP, as well as results obtained from IFS-FINANCE AND RESEARCH conclusively indicate that the Central Bank of Iceland’s allegations of underpricing by Samherji, in transactions with related companies, are without foundation.

Dear Samherji staff members.

Once again we feel it is necessary to update you on the current position with regard to the Central Bank of Iceland’s investigation of Samherji’s operation. Although all assertions made by bank directors regarding Samherji’s alleged product underpricing in transactions with related parties have been rebutted, the bank nevertheless maintains its course, refusing to provide any details regarding the progress of the investigation or its anticipated termination.

The results of a recent audit have now been published, confirming that the Central Bank’s allegations are unfounded.

An audit requested into the operation of Seagold Ltd.

The Central Bank of Iceland has repeatedly asserted in court that its staff members have discovered evidence which supports allegations of Samherji’s underpricing of fish products sold to related parties. After the bank’s allegations with regard to underpriced redfish had been refuted, and in light of the fact that 93% of sales by Samherji in Iceland to related parties are transactions to Seagold, the directors of Seagold decided to request an analysis of the company’s business transactions with Samherji/Ice Fresh Seafood and an audit into the company’s operation. Experts from the British audit firm Baker Tilly UK Audit LLP were commissioned to carry out this task.

The aim of the analysis was to investigate whether Seagold’s business dealings with related parties were on “an arm’s length basis”, as it is expressed in English; that is to say the transactions were conducted as if between non-related parties. This is a standard form of analysis, carried out in accordance with the methodology outlined by HM Revenue & Customs and the OECD.

The operation of Seagold Ltd. was investigated, as were all its business transactions. This was a comprehensive task, including, among other things:

• Interviews were conducted with directors and key employees of Seagold Ltd. where information was gathered about the company’s operation, business transactions with related parties and the pricing of such transactions.
• Annual financial statements and other analytical finance records were audited.
• A summary was compiled of transactions with related parties.
• Comparable transactions between non-related parties were investigated to obtain information on pricing criteria which would subsequently be compared with pricing by Seagold Ltd.
• Pricing policies agreed by the OECD were analysed and selected for comparison with the pricing methodology used by Seagold Ltd.

Conclusive result by Baker Tilly: No cause for concern

Baker Tilly’s report concluded that sea product transactions between Seagold Ltd. and related parties had been conducted as if between non-related companies. Thus, there was no need to change anything, either regarding actual pricing or the methodology on which it is based.

To demonstrate the thoroughness of the audit conducted by Baker Tilly, the only comment the audit firm made with regard to transactions between related parties is included here. This had to do with the apportioning between foreign companies of travel expenses incurred by the employees of Samherji subsidiaries when attending a joint annual staff party in Iceland this winter. According to the auditor, Seagold paid a higher share of the travel expenses than justified by its number of employees!

Gústaf Baldvinsson managing director of Seagold: Being exposed to such allegations is intolerable

“I feel I have done good work in marketing and selling fish products for Samherji, among others, here in the British Isles during the past 17 years. I have made a special effort to carry out my work in an efficient and honest manner and neither HM Revenue and Customs nor other British authorities have ever found fault with Seagold’s accounts.  I am proud of this, and of the fish prices Seagold has obtained for Samherji and other Icelandic companies through the years.  A recent audit by IFS-FINANCE AND RESEARCH into Icelandic fish export, as well as investigations I myself and my staff members in England have carried out, demonstrate that the Central Bank’s allegations to the effect that we have purchased underpriced products from Samherji are totally unfounded.

To remove all doubt in this matter, both in relation to our foreign customers and suppliers in Iceland and in other locations, we commissioned an independent audit of the company’s operation, including its pricing to related as well as non-related parties. The conclusion presented by Baker Tilly could not be clearer: transactions by Seagold Ltd. are identical, regardless of whether the parties concerned are related or non-related! Consequently, this independent auditor does not see any need for change, to either our pricing methodology or anything else. The audit also confirmed that our pricing fully complies with laws and regulations, both in the UK and the EU with regard to transactions between related parties. We shall present this clear and explicit conclusion to our customers.

It is strange, to say the least, that the Central Bank of Iceland has not informed the directors of Seagold Ltd. that the company is under investigation. This is highly unprofessional conduct and I would not be surprised if it was in direct conflict with legislation. To have been exposed to allegations of this nature, from an institution such as the Central Bank of Iceland for almost a year now, without communication of any kind, is completely intolerable and could not happen here in the UK.” says Gústaf Baldvinsson, managing director of Seagold Ltd.

Misstatements and an unsubstantiated attack

This conclusion from the British audit firm confirms, once again, that the directors of the Central Bank of Iceland have repeatedly misrepresented the facts in their unfounded attack on Samherji.  It has been confirmed by the courts that the search warrant was based on incorrect redfish price calculations. The directors of the bank have, since that time, repeatedly instructed their legal representative to state in court that the bank has obtained new evidence which confirms Samherji’s underpricing to related parties.

The report by IFS-FINANCE AND RESEARCH whose main conclusions we have published, and now the report from Baker Tilly, confirm what we have always maintained: Samherji has NOT sold underpriced fish.

With best regards,

Þorsteinn Már Baldvinsson

Kristján Vilhelmsson

Further information regarding Seagold Ltd.:

• Seagold Ltd. was established 1 May 1996 with the objective of marketing, selling and distributing Samherji’s fish products in the British Isles.  The company was founded in order to achieve an improved and closer relationship with customers in England than had been possible through a sales office in Iceland. This would result in a heightened level of service and more reliable information on which to base production-related decisions in Iceland. Samherji hf. is by far the largest owner of Seagold Ltd.
• From its foundation in 1996 and to date, Seagold Ltd. has sold seafood products for GBP 700 million, or approximately ISK 150 billion, based on the current exchange rate.
• During the period covered by the Central Bank’s investigation, Samherji/Ice Fresh Seafood exported products worth a total of ISK 113 billion. Out of the company’s own production, seafood sold to related parties amounted to ISK 15.4 billion, or about 13.6%. Thereof transactions with Seagold Ltd. amounted to ISK 14.3 billion, which constitutes 12.6% of Samherji’s exports. Transactions with Ice Fresh Gmbh were ISK 1.1 billion, or 1%.
• During the period covered by the Central Bank’s investigation, the turnover of Seagold Ltd. was approximately GBP 216 million. Thereof 91 million arose from transactions with Samherji/Ice Fresh Seafood, or 42%.
• During the four-year period, 2008-2011, the profits of Seagold Ltd. were GBP 1.5 million before tax and GBP 1.0 million after tax, or approximately 0.35% of the company’s turnover during the period in question.
• Gústaf Baldvinsson has been managing director of Seagold Ltd. from the company’s foundation and has been resident in Hull in England since 1986.

Offices of Seagold Ltd. in Great Britain