Page 22 - Annual Report 2010

ANNUAL REPORT 2010

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focused on Venture Capital (VC) in the mid-1990s and has since then become the leading European fund-of-fund investor in this segment and acquired a reputation as major player in the European venture capital market.

Through its investment history, EIF has acquired a broad expertise and experience and has built up its knowledge of the performance of players in the market, of successful fund structures, and of potential pit falls to avoid. In 2010, based on this experience and unlike many other European investors, EIF increased its stakes commit ted to high quality funds, thus assisting to pre-serve the valuable European venture capital infrastructure in a period of capital attrition and responding to the financial needs of SMEs.

During the year, EIF signed EUR 332m of commitments in 18 venture capital funds and, going forward, in concerted efforts with all stakeholders, will continue to work towards a self-sufficient European venture capital industry.

Growth capital

Lower Mid-Market

The lower mid-market activity of EIF covers growth, expan-sion and mid-market funds, offering SMEs in their growth phase access to equity finance. EIF typically participates early in the fundraising process to attract other investors and to help the fund managers reach optimal fund sizes. Throughout 2010, EIF has supported established manag-ers and, for this market segment, notably stepped up its commitment, compensating the decrease or disappear-ance of sponsors and large investors. Additionally, EIF in-creased its support to first closings managed by emerging or first time teams providing high added value by expand-ing the equity offer for SMEs.

In 2010, EIF signed EUR 338m in 14 Lower Mid-Market funds, strongly increasing its overall contribution when the

fundraising involvement from institutional investors was still at very low levels.

Mezzanine

The Mezzanine Facility for Growth is a EUR 1bn fund-of-funds mandate granted by EIB which targets hybrid debt/

equity funds throughout Europe, with a view to playing a catalytic role in this market segment.

The purpose of this particular asset class is to provide alternative financing to support, for instance, shareholding reorganisation or expansion for more mature businesses and late stage or expansion technology companies. Mezzanine funding can be tailored to meet the specific financing require-ments of these companies and, is well adapted to long term financing.

EIF is generally involved early in the launch of mezzanine funds, taking a significant participation at first closing and playing a critical role in achieving a first closing at viable fund size.

In 2010, EIF commi t ted a total of EUR 224m in six mezzanine funds, spreading i ts cont ribut ion evenly between f irst t ime teams composed of experienced professionals and established teams raising new funds. Three of these funds backed by EIF in 2009 made further closings in 2010, allowing EIF to increase its commitment. This demonstrated EIF’s catalytic role and confirmed that its participation not only allowed first closings but also facilitated new investors' appetite to further extend fund sizes and increase support to European SMEs. EIF has also been able to support established players as well as emerging teams with focus on SMEs in new markets, expanding its geographical reach to Central and Eastern European countries.

Increase of total equity investments of 30%

in 2010