The Prya Foundation Mrs Sheila BAILEY Mr John DITCHFIELD 10 - - PowerPoint PPT Presentation

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The Prya Foundation Mrs Sheila BAILEY Mr John DITCHFIELD 10 November 2005 This presentation was prepared by EIF exclusively for the benefit and internal use of the Prya Foundation. It is strictly confidential and does not

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The Prya Foundation
 


Mrs Sheila BAILEY
 Mr John DITCHFIELD
 


10 November 2005

This presentation was prepared by EIF exclusively for the benefit and internal use of the Prya Foundation. It is strictly confidential and does not constitute a sollicitation to acquire shares in EIF.

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Presentation outline

  • EIF overview and policy focus
  • Activities and resources
  • Venture capital performance
  • Portofolio guarantee: microfinance
  • Future developments
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EIF at a glance

Subscribed capital: EUR 2 billion Paid in: EUR 400 million Own funds: EUR 600 million Article 2: «pursuit of Community objectives» such as growth, employment, knowledge-based economy, innovation, regional development, Lisbon Article 24: «generate an appropriate return on its resources» Created in 1994 Part of EIB Group

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Shareholders (i)

Tripartite shareholding: European Investment Bank: 61.9% European Union represented by the European Commission: 30% A range of European banks and financial institutions: 8.1%

% of shareholding Austria Bank Austria Creditanstalt AG 0.15 Erste Bank Der Oesterreichischen Sparkassen AG 0.15 Raiffeisen Zentralbank Oesterreich AG 0.15 Bulgaria Encouragement Bank AD 0.15 Denmark Vaekstfonden 0.15 Finland Finnvera plc 0.30 France Caisse des Dépôts et Consignations (CDC) 0.75 Dexia Credit Local 0.50 Germany Kreditanstalt für Wiederaufbau 2.25 Landeskreditbank Baden-Württemberg – Förderbank 0.25 Lfa Förderbank Bayern 0.25

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Shareholders (ii)

% of shareholding Hungary Hungarian Development Bank Ltd. 0.25 Italy Dexia Crediop SPA 0.50 Sanpaolo Imi Private Equity SPA 0.50 Banca Intesa SPA 0.25 Luxembourg Banque et Caisse d’Epargne de l’Etat 0.15 BGL Investment Partners SA 0.15 Malta Bank of Valletta plc 0.25 Netherlands NIB Capital Bank NV 0.15 Portugal Banco BPI SA 0.30 Spain Instituto de Crédito Oficial (ICO) 0.25 Sweden Stiftelsen Industrifonden 0.15 United Kingdom Barclays Bank plc 0.15

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Key characteristics

  • Multilateral Development Bank (MDB) status
  • AAA/Aaa/AAA ratings (S&P/Moody’s/Fitch)
  • Basel II 0% risk weighting
  • EU specialised vehicle for venture capital and guarantees
  • One of Europe’s largest fund of funds
  • Europe’s key provider of SME guarantees
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  • The Lisbon Process (March 2000): transform the EU into « the

most competitive and dynamic knowledge-based economy in the world ».

  • The Barcelona EU Summit (March 2002): increase overall

spending on R&D on innovation in Europe .. with the aim of approaching 3% of GDP by 2010 ».

  • The Luxembourg EU Summit (March 2005): European Council

urged EIF « to diversify its activities, in particular towards the financing of innovative SMEs through individual-investor (business-angel) and technology-transfer networks ».

EIF institutional drivers

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Policy focus

According to its Statutes, EIF implements EU objectives including:
 
 SME finance for:

  • Innovation
  • Research and development
  • Entrepreneurship
  • Growth
  • Job creation

...as well as ensuring an appropriate return on its own resources

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EIF resources

EUR 600m EUR 4 000m EUR 450m EUR 250m – EUR 1bn

To be committed in venture capital funds and financial institutions in the EU and Candidate Countries

European Community

ERP+

  • thers...

Being increased Being increased Being increased Evergreen

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Overview of EIF products

Venture capital: equity investments in venture capital funds and business incubators that support SMEs, particularly those that are early stage and technology-oriented. SME guarantees: guarantees to financial institutions that cover credits to SMEs. Microfinance: guarantees and securitisation. Technical assistance: fee-paying activity providing the Fund's expertise to regional, national or international

  • rganisations in the fields of VC, portfolio guarantees and,

more generally, innovative financial engineering.

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EIF investment focus

Tech Transfer Incubators Business Angels Pre-Seed Expansion / Development Capital Early Stage Seed Stage « VENTURE CAPITAL » « PRIVATE EQUITY » NEW EIF AREAS Later-stage Buy-out EIF INVESTMENT FOCUS Mid / Late Stage Stock Exchange / Public Equity Tech Transfer Incubators Business Angels Pre-Seed Expansion / Development Capital Early Stage Seed Stage « VENTURE CAPITAL » « PRIVATE EQUITY » NEW EIF AREAS Later-stage Buy-out EIF INVESTMENT FOCUS Mid / Late Stage Stock Exchange / Public Equity

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Venture capital

EIF own resources: expected final pooled IRR distribution

Effect of rebalancing showing positive effects in performance

  • 2.0

4.0 6.0 8.0 10.0 12.0 14.0 16.0 18.0

  • 6.7%
  • 5.7%
  • 4.7%
  • 3.7%
  • 2.7%
  • 1.7%
  • 0.7%

0.3% 1.3% 2.3% 3.3% 4.3% 5.3% 6.3% 7.3% 8.3% 9.3% 10.3% 11.3% 12.3% 13.3% 14.3% I R R

Probability

Projection as at 31/12/04 Projection as at 30/06/05 optimist. Projection as at 30/06/05 Base-case Projection as at 31/12/03

Base case scenario

12/04 +3.5%

Optimistic case scenario

06/05: +8.4% 12/03 + 0.5% 06/05 + 4.7%

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Portfolio guarantees: microfinance

  • Guarantees provided for almost EUR 200m at 31/10/05 to:

1. The Prince’s Trust (GB) 2. First Step Ltd (IE) 3. Fonds de Participation (BE) 4. Instituto de Crédito Oficial (ES) 5. Kreditanstalt für Wiederaufbau (DE) 6. Association pour le Droit à l’Initiative Economique (FR)

  • Securitisation of a portfolio of microcredit loans for a total of

EUR 32.8m. ➢ Credit providers in Albania, Bulgaria, Macedonia, Montenegro, Romania, Russia and Serbia. ➢ EIF guarantee for almost EUR 25m principal. ➢ The first such operation in Europe (completion in 11/2005).

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Future developments

  • CIP: Competitiveness and Innovation Programme
  • TTA: Technology Transfer Accelerator project
  • JEREMIE:


Joint European Resources for Micro to Medium Enterprises

  • Other expected mandates
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CIP: Competitiveness & Innovation Programme

  • Commission proposal adopted on 6 April 2005 (EUR 1bn)
  • Co-decision procedure (Council + European Parliament)
  • MAP successor programme for the period 2007–2013
  • Objectives:

– Generate economic growth and create more jobs in SMEs – Boost productivity, competitiveness and innovation capacity of SMEs – Support SMEs developing or using environmental technologies

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Technology Transfer: the focus of funding

R&D university/ Research centre Tech transfer / 
 Proof-of-concept Marketable product

«Technology» IP Virtual LAB Created by leading R&D centers « Licensing » SPVs « Spin off » SPVs « Hybrid » SPVs Licensing to corporation Sale to corporation Purchase / investment by 


  • ther investors

IPO Potential exits for the 
 SPV projects Investment focus of TTA «Prototype» IP Funding:
 FP7 Funding
 Gap Funding:
 CIP

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Why Tech Transfer? The size of the problem...

US University Revenues (EUR m) Columbia University 115.4 University of California x65.3 Stanford University x50.0 University of New York x49.9 Sloan Kettering Institute for Cancer Research x43.3 University of Rochester x33.5 City of Hope National x31.4 MIT x30.2 University of Wisconsin- Madison x25.6

EUROPE University Revenues (EUR m) Pasteur 32.6 Edinburgh University x4.5 Utrecht* x4.0 Cambridge x3.1 INRIA* x3.0 VIB* x2.7 LMU Munich x0.2

In the EU, structures perform well but are not market driven

* Includes other forms of revenues Source: European Innovation Scoreboard, BCG Cluster Report 2001, EIF analysis and interviews

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JEREMIE: a new major EU SME initiative

  • Joint process between DG REGIO and the EIB group, for improved

access to finance by SMEs and micro-enterprises: JEREMIE (Joint European REsources for MIcro to medium Enterprises) unveiled at the 11 October 2005 Ministerial Seminar

  • EIF will manage - channel the European Regional Development

Funding (ERDF) to SMEs and micro-enterprises through financial intermediaries in ”objective regions” in the form of equity, venture capital, guarantees and technical assistance (2007-2013)

  • EIB and other IFIs will be associated through the provision of loans

allowing the JEREMIE platform to provide the full range of financial support to SMEs and micro-enterprises: leverage

  • Preparation to start in 2006
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JEREMIE: a possible model?

FUNDING

  • Equity
  • Loans
  • Guarantees

TECHNICAL ASSISTANCE

SMEs

▪ Microfinance Providers (MCPs) ▪ Tech Transfer Activities ▪ Financial Institutions ▪ Guarantee schemes ▪ Venture Capital Funds

Operational Programmes

ERDF

  • NAT. ACCOUNTS

OTHER IFIs

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Other expected mandates

  • Expected third party mandates from public and private

sources:

– EUR 200m for technology and generalist funds:
 close end 2005 / early 2006 – Up to EUR 300-500m fund-of-funds targeting as investors mid-size insurance companies in a Joint Venture:
 close early 2006

  • Other VC mandate under discussion for 2006...