Page 52 - Annual Report 2010

ANNUAL REPORT 2010

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prof iles, i.e. act ive cash f low management to allow for a swift response to changing market requirements.

Recycling of Funds: The Holding Fund is of a revolving nature, receiving repay-ments from the financial intermediaries for further investments in the SME sector. This puts SME support via EU Structural Funds on a more sustainable basis, un-like the pure grant approach.

Leverage: JEREMIE has the potential ability to engage the financial sector either at the Holding Fund level, with additional capital from financial institutions, or at the level of financial instruments, through co-financing, e.g. in both cases potentially in cooperation with the EIB.

Expertise: EIF’s experience as a fund manager is of partic-ular added value in the lesser-developed regions/Mem-ber States, where there is a need for capacity-building initiatives and the transfer of know-how between local institutions and EIF.

Advisory: In those regions where JEREMIE is managed by another institution, EIF can also be involved as an adviser, for a wide range of services such cash flow management, the structure of Holding Funds, product design in line with European Regional Development Fund regulation, report-ing and monitoring, corporate governance due diligence/ second opinions, setting-up of financial vehicles, etc.

Working toward achieving JEREMIE’s objectives, to date, EIF has set up Holding Funds in 11 countries and regions of Europe providing them with a comprehensive toolbox of financial products for SMEs. As of year-end 2010, the JEREMIE mandates under EIF management amount to a total of EUR 1.18bn.

One of EIF’s significant achievements in 2010 was the set-up of a JEREMIE Holding Fund in the Sicily region under the European Social Fund (ESF). The Funding Agreement for this pilot project was signed in December 2010 and marks EIF´s move into a new and challenging territory, add-ing a social component to the JEREMIE product offering.

General overview

The JEREMIE (Joint European Resources for Micro to Medium Enterprises) initiative offers EU Member States, through their national and regional Managing Authorities, the opportunity to use part of their EU Structural Fund allocation to indirectly finance SMEs, through financial inter-mediaries. These allocations are chan-nelled through revolving Holding Funds which can be managed either by EIF or national institutions.

The intention is to move away from subsidies and lever-age EU Structural Funds available by means of inno-vative financial engineering products, such as equity, loans or guarantees providing a diversified range of financial products for the benefit of SMEs. This will help to reach a much improved ratio of investment versus subsidy, i.e. the volume of sustainable financing solu-tions supported will substantially increase compared to the “traditional” use of subsidies. Moreover, the equity investments, loans or guarantees will generate revenue which will be available for re-use for investments in SMEs even beyond the final availability date of the EU Structural Funds (“evergreen concept”). Finally, the diversified range of financial products offered will help to reach market segments which have so far not been reached by traditional means.

JEREMIE offers many benefits to national and regional management authorities:

Flexibility: Contribut ions from the Operat ional Pro -grammes to the JEREMIE Holding Fund are eligible for interim up-front payments by EU Structural Funds, giving Managing Authorities more flexibility in allocating these resources. Structural Fund contributions to the Holding Funds must be invested in SMEs by 2015.

Benefits of a Por tfolio Approach: The Holding Fund is able to re-allocate the resources to one or more fi -nancial products in a f lexible way, depending on the actual demand over t ime. An umbrella fund ap-proach allows a diversif icat ion of risks and expect -ed returns due to financial products having dif ferent

Addressing

specific needs

of local

markets