EIF CORPORATE OPERATIONAL PLAN 2011-2013 docx

1 Vision,,,, Values aVision Values aValues and Strategynd Strategynd Strategy of of of EIF EIF EIF Vision Vision “Europe’s leading developer of risk financing for entrepreneurship and i

EIF CORPORATE OPERATIONAL PLAN 2011-2013

Important notices:

The Corporate Operational Plan 2011-2013 was discussed and approved by the Board of Directors

of the European Investment Fund at its meeting of 13 December 2010

Attention is drawn to the fact that data provided on 2010 activity are estimates only which were made prior to the 2010 year-end This document also contains other forward-looking statements such as projections of financial performance Such statements and projections may, by their nature, prove to

Table of Contents

Introduc

Introductiontiontion 33

1 Vision, Values and Strategy of EIFVision, Values and Strategy of EIF 44

2 2010 Activities2010 Activities 66

3 Business EnvironmentBusiness Environment 1010

4 Value Added of EIF OperationsValue Added of EIF Operations 1212

5 Business Planning and Operations: 2011Business Planning and Operations: 2011––––201320132013 1414

5.1 Business Development, Strategic Imperatives and Key Action Items 14

5.1.1 Equity Investments 14

5.1.2 Guarantees and Credit Enhancement 21

5.1.3 Microfinance 24

5.1.4 Regional Support and Advisory Business 26

5.1.5 Strategic Product and Mandate Development 28

5.2 Operational Excellence 29

5.2.1 IT development 29

5.2.2 Finance, Risk and Control 29

5.3 Employer of Choice 30

Annex Annex 111: Acronyms: Acronyms: Acronyms

Introduction

European Investment Fund

European Investment Fund

The European Investment Fund (EIF) is the EIB Group’s specialist provider of risk finance to small and medium-sized enterprises (SME) across Europe, delivering a full spectrum of financing solutions for selected intermediaries It promotes the implementation of Community policies, notably in the fields of entrepreneurship, technology, innovation and regional development Its unique structure also requires the generation of an appropriate return for its shareholders

The

The EIB EIB EIB Group Group Group

The EIB Group consists of the European Investment Bank (EIB) and the European Investment Fund (EIF) The range of products offered within the EIB Group extends from equity to senior loans The principal area of cooperation between EIB and EIF is support of SMEs The Group will continue to develop joint risk sharing solutions and to systematically develop joint client relationships

The Corporate Operational Plan

The Corporate Operational Plan

The Corporate Operational Plan (COP) covers the major priorities and activities of EIF including risk management, budget, and staff matters A separate COP is prepared by the EIB to further detail information relevant to its operations

EIF will sustain its operating profit in 2011 at EUR 59m despite flat treasury and guarantee income Costs will rise by 9% reflecting a slow down in recruitment but increased investment

in IT The resultant cost to income ratio of 46% is in line with last year's COP figure for 2011 Weak economies in most of Europe will mean continued challenges for SMEs and a high

1 Vision,,,, Values aVision Values aValues and Strategynd Strategynd Strategy of of of EIF EIF EIF

Vision Vision

“Europe’s leading developer of risk financing for entrepreneurship and innovation”

Values Values

Excellence * Teamwork * Integrity * Responsibility * Accountability * Customer-driven

Medium Medium term objectives term objectives term objectives

“Maximise “Maximise impact on the smarimpact on the smarimpact on the smart, sustainable and inclusive growth of medium, t, sustainable and inclusive growth of medium, small and microenterprise

small and microenterprisessss in the EU in the EU in the EU AAAccessiccessiccessiooon and EFTA n and EFTA n and EFTA CCCountriesountriesountries””””

o Segment the market in line with the EU 2020 strategy;

o Work intensively with the European Commission (EC) on the most effective instruments;

o Maximise EIF’s value added and catalytic effect;

o Expand the Fund-of-Funds activity through development of relations with a broader range of EU and Accession Member States in order to assist them in developing their risk capital markets;

o Mobilize EUR 1.1bn under the JEREMIE Holding Funds;

o Work with the EC to adapt the Structural Funds regulation to align it better with the constraints of market based financial instruments, ensuring that convergence funds can be efficiently deployed

““““Cornerstone European GrowCornerstone European GrowCornerstone European Growth and Venture Capital and catalyse a th and Venture Capital and catalyse a maximum level of new SME lending

maximum level of new SME lending””””

o Deliver on the renewed EIF Equity and Guarantee strategies to better respond

13bn Equity, Mezzanine and Debt Equity, Mezzanine and Debt Equity, Mezzanine and Debt annuallyannuallyannually””””

o Optimise the usage of available resources in the circumstances of limited capital and budgetary resources at EU and national levels;

o Leverage EUR 10bn by 2011 with a new target of EUR 13bn for the following two years (2012-2013);

o Ensure a high catalytic role on all segments of the market (Guarantees and Securitisation, Venture and Growth Capital, Mezzanine) with an increasing role of EIF as cornerstone investor (increased stakes and added value at earlier stage of the transaction)

““““Generate Generate Generate EUREUREUR 777000 80m80m80m operating profit at 40 operating profit at 40 – 45% cost to income and 45% cost to income and % cost to income and at a at a long run ROE

long run ROE ofofof 555 to 6 to 6 to 6%”%”%”

o Increase efficiency and staff productivity through investments in IT;

o Decentralize budget ownership to give more responsibility to teams;

o Implement cost saving measures and specific recommendations in a number

of cost lines (travel expenses, consultancy, etc)

“Establish value creating Risk Management“Establish value creating Risk Management –––– AAA rating”AAA rating”AAA rating”

o Manage actively the relationship with all three rating agencies to maintain AAA rating;

o Optimise own capital and better assess the balance sheet impact of new volumes of activities;

o Enhance continuously stress testing processes and proactive monitoring;

o Build further excellence in fund management and administration in order to mitigate operational risk

““““Build iBuild iBuild integrated, ntegrated, ntegrated, stable, stable, stable, scaleable systems and processes”scaleable systems and processes”scaleable systems and processes”

o Develop the Long-Term Information Strategy; main initiatives include:

Enhance the different systems and, more specifically, the guarantee platform Development of a tool specific to the microfinance activity;

Leverage the existing infrastructure at EIB Group level, in particular for Group-wide solutions like PeopleSoft, Data-Warehouse and the Collaboration tools

““““Promote and enhance an ePromote and enhance an ePromote and enhance an excellent internal and external reputation”xcellent internal and external reputation”xcellent internal and external reputation”

o Enhance internal and external communication (intranet fully operational complemented by quarterly all staff meetings; new head of communication recruited);

o Manage proactively the relationships with mandators and stakeholders, adhere to EU policy objectives and EIB Group goals;

o Develop initiatives towards the goal of being employer of choice

G&S & Micro

Risk fees 38.6 25.2 28.9 3.7

Mgmt fees (0.8) 2.2 3.7 1.5Equity

Equity gains 0.9 2.8 10.9 8.1

Mgmt fees 19.6 22.7 21.9 (0.8)Regional & Advisory 8.1 11.7 11.6 (0.1)

Cost / Income from Ops * 55.7% 68.7% 58.6%

* Total Income - Treasury

2010

Total 2010 income exceeded the COP target of EUR 96.8m

The risk fees on the own risk guarantees business surpassed the COP forecast of EUR 25.2m, partly as a result of the extension of the maturity dates of a few transactions However, the portfolio requires a rapid replenishment in order to make this revenue stream sustainable for the years to come

Following a phase in 2009 in which the revenues from equity exits were hit by the limited activity of the IPO and M&A markets, the performance in 2010 has been very positive with global revenue repayments reaching EUR 10.9m

The management fees for both the equity and guarantees business are in line with the COP targets of EUR 22.7m and EUR 2.2m respectively

The EUR 32.1m target on the treasury income was built on a scenario which anticipated higher yields in the second part of the year, which did not fully materialize Yet, a more active management of the portfolio with the optimisation of the liquidity policy and the exploitation

of a few market opportunities helped to close the gap

JEREMIE grew to become a well diversified and predictable income line, with a more balanced structure between fee and cost recovery agreements

Global expenses were slightly higher than the COP forecast of EUR 44.4m, mainly represented by staff and staff-related costs, consultancy and IT projects

As a result of higher than expected revenues, and global expenses in line with the plan, the operating income target of EUR 52.4m was exceeded, with a cost-to-income ratio of 41% (compared to the 46% planned)

Further material downgrades have been booked in the last quarter, leading to provisioning for guarantees of about EUR 54m for 2010 Equity impairments amounted to EUR 4.5m at year end

Client / Client / BusinessBusinessBusiness Volumes Volumes Volumes

EUR m 2009 COP Actual MFG 160 205 224

Own resources 40 34 47

RCM 365 307 356

CIP 42 80 72

Other mandates 123 124 150

Subtotal 730 750 848

JEREMIE - 121 82

Total 730 871 930

Own resources - 400 260

CIP (budget) 116 100 97

Subtotal 116 500 357

JEREMIE (FRSP/FLPG) 75 444 229

Total 191 944 586

Joint Group Operations - 75 26

Progress FMA - 1

Progress FCP -

EPPA - 2

RCM micro 2 12 5

GAGF micro -

Subtotal 2 12 8

JEREMIE micro - 33

Total 2 45 8

2010

In terms of volumes of signatures, 2010 has been a busy year The COP equity target of EUR 871m was met and exceeded This represented a significant increase over 2009 and

For the Guarantees and Securitisation business, 2010 has been another challenging year: the team delivered on both the CIP/SMEG products and the own risk securitisation business, the latter with final signatures of EUR 260m Only one transaction (by Lloyds bank) had come to the market by August, with the public placement of the most senior notes (EIF guaranteed EUR 60m) In September, EIF issued a new guarantee for EUR 200m for the super senior class of notes backed by SME loans originated by Unicredit AG (Germany), a transaction that would not have taken place without EIF

EIF continued working on the development of risk sharing products and joint EIB Group schemes to extend the product range available to intermediaries in order to stimulate SME financing At the same time new facilities like the Greater Anatolia Guarantee Facility (GAGF) and the Progress Microfinance Facility (PMF) were signed and started to be deployed

The signature of the PMF marked an important milestone for EIF, adding a third business pillar targeting micro businesses to the range of risk financing products A new fully dedicated team is already in place and operational

Finally, JEREMIE resources have been deployed according to plan, but with some delays due

to slippages to early 2011 or to the longer than expected phase of product development in order to meet the regional market needs Additionally, EIF has deployed a substantial effort

to promote best market practices and support candidate and potential candidate countries to reach a satisfactory level in SME access to finance (inter alia, EIF carried out gap analyses for SMEs financing in Croatia and Western Balkans) Finally, through its local presence, innovative products and investment structures have been put in place, such as GAGF in Turkey and the First Loss Portfolio Guarantee (FLPG) product in various JEREMIE countries

In relation to the CIP mandate and specifically to the GIF window, EIF closed the year a bit short of the planned signature target Yet, the full budget is foreseen to be utilised by February 20111

Mandate and Product DMandate and Product Developmentevelopmentevelopment

EIF’s activity during 2010 in terms of strategic mandate and product development has been marked by the structuring and implementation of the Progress Microfinance Facility, a complex and innovative mandate that was completed within seven months from approval of the European Commission legal base that established the programme In this exercise, EIF successfully leveraged its competences in market research, new product development and mandate structuring The novel implementation framework in the form of a Luxembourg FCP (Fonds Commun de Placement) can become an effective template for replication in future multi-party initiatives

The development of new activities at EIF has received a structured internal framework with the set up of formal mandate and product development procedures and the establishment of

a dedicated Steering Committee

Product development has focused on enhancing the design of guarantee and equity products

in support of the deployment of the JEREMIE holding funds and of the establishment of new mandates

1 The table shows the position as of December 2010

EIF has also been intensively involved in the joint discussions with the European Commission and the EIB in relation to the preparation of the EU2020 strategy In this context, EIF has prepared a 10-year equity strategy and the review of the RCM mandate

Risk MRisk Managementanagementanagement & Control & Control & Control

Risk management remains a priority for EIF and close monitoring of the portfolio as well as stress testing to better forecast unexpected losses are regularly carried out The Board is updated on a quarterly basis on the evolution of the exceptional items (equity impairments and guarantee provisions) and a recently enhanced capital allocation model helps to optimize the allocation of resources and the headroom available for investment

As far as audits are concerned, 56 audit points (AAPs) have been closed as of December, and 10 are outstanding (with no high risk AAP) The global closure rate performance stands

at 91%, significantly higher than the 60% long term target

Information and Project ManInformation and Project Manaaagementgementgement

During 2010 EIF brought forward several projects, in particular: the Long-Term Information Strategy (LTIS), Data Lifecycle Management (DLM) Prototype, EIF Timesheet, New Products IT arrangements The most important initiatives are related to: (i) technical development /maintenance of key applications (PeopleSoft, eFront, Guarantees); (ii) business process structuring and improvement; (iii) support to operational activities

Twenty-eight projects have been completed in 2010 and ten will continue during 2011

Employer of CEmployer of Choicehoicehoice

2010 hiring activity was slightly lower compared to the previous year (30 budgeted posts versus 40 in 2009) This has allowed for a focus on efficiency by limiting the duration of the recruitments (80% completed in the range of the 16 weeks target), tightly monitoring the hiring budget and ensuring high quality of the profiles joining EIF in areas including communication, operations and controls, and securitisation

The three induction sessions held throughout the year enabled new staff to learn about all of EIF’s activities and quickly assimilate to the organisation

Internal mobility both from and to EIB as well as internally at EIF has been a constant matter

of attention and provides opportunities to EIF’s growing talents This has resulted in an increased number of internal career moves

Talent development has continued through an extensive technical skills training programme

as well as a continued focus on managerial and leadership development All staff have been involved in an Individual Development Plan (IDP) at the half year, which gave a base for detailed follow up and for a more systematic career and succession planning process at the year end

EIF Management Committee undertook a 360 degree feedback programme and shared the findings and the improvement plan with their direct reports

3 Business EnvironmentBusiness Environmentnment

General economic outlookGeneral economic outlook

The global recovery remains multi-speed, slower for advanced economies and faster for emerging ones However, following a few months of strong activity in a number of countries, the latest data suggest an overall slowing down of the global recovery, driven mainly by:

The fading effect of inventory restocking;

The progressive withdrawal of the unprecedented stimulus packages – it is not clear if private sector’s consumption will compensate for reduced public spending;

Questions about the commitment of some countries to fiscal consolidation, which is impacting consumer confidence

The outlook remains particularly uncertain, as testified by the diverging views of economists

in the austerity vs stimulus debate A double-dip recession remains a distinct possibility, although most economists believe a sluggish recovery in the medium term to be a more likely outcome

Situation of SMEsSituation of SMEs

The global financial crisis heavily impacted the European economy and particularly SMEs in their ability to access finance SMEs have less recourse to market-based financing than larger firms, and as such are more reliant on bank loans However, banks appear to remain risk averse when it comes to SMEs: there has not been any significant improvement in banks’ willingness to provide loans, and SMEs have seen no noticeable change in the terms of their loans, unlike larger firms, which have experienced a decline in interest rates These difficult financing circumstances mean that the market environment remains problematic for SMEs, and bankruptcies are likely to continue to be significant: the Euler Hermes Insolvency Index for the Eurozone is forecast to increase by 6% in 2010

With regard to EIF’s business linesWith regard to EIF’s business lines

Private Equity MarketPrivate Equity Market: European private equity investment activity appears to be picking

up from the doldrums of 2009, although it remains a long way off its peak in 2006/7 The improvement is mostly driven by buyout activity, in turn driven by mid-market deals, a sector that had been particularly hit by the drying up of leverage in the immediate aftermath of the financial crisis Fundraising remains difficult, and has not really shown any significant improvement since it collapsed at the end of 2008 Private equity funds continue to struggle to reach their target size

Venture CapitalVenture Capital (VC) Market(VC) Market(VC) Market: European venture capital markets have been hit hard by the financial crisis The fundraising environment for VC funds, which already pre-crisis was challenging, has now become extremely difficult With many traditional Limited Partners (LPs) having backed out of the VC market and only few positive signs of recovery, much of the early stage fundraising activity is driven and structured around public or semi-public LPs Quarterly VC fundraising figures increased in Q1 2010 (by about one-fifth, to EUR 1.1bn) but fell back again in Q2 2010 (by more than 60%, to EUR 376m), nearly reaching the Q3 2009 level, the lowest quarterly VC fundraising in

2009 The availability of equity for early stage SMEs which typically do not have access

to loan financing, has been reduced significantly and investments in the early stage segment have fallen to very low levels At the same time this creates extremely

interesting opportunities for VC investors having the means to invest, as valuations are historically low and the quality of deals available tends to be very good in times of recession

Structured Finance/SecuritisationStructured Finance/Securitisation: In Europe, there was a large volume of structured finance issuance in 2009 (approx EUR 426bn, for comparison – 2008: EUR 740bn, 2005: EUR 407bn), but more than 90% was retained by the originators for ECB repurchase purposes The investor-based market remains fragmented and limited to best-in-class and simple structures The ECB’s changes of the eligibility requirements for Asset Backed Securities signals the beginning of a more stringent regime with regard to central bank dependent financing In July 2010, Lloyds TSB re-opened the SME securitisation market with the first term transaction after the crisis which was actually placed with private sector investors The securitisation comprised a portfolio of

UK SME loans and the purpose of the transaction was to provide additional funding for Lloyds TSB EIF supported this market-opening deal with a guarantee over EUR 60m for a mezzanine tranche In general, it is currently too early to identify a sustainable re-opening, even though the projected volumes in this COP for the next 3 years indicate that EIF has confidence in this direction

MicrofinanceMicrofinance: Microfinance institutions have been affected by the adverse economic conditions, generally through significantly higher bad debt rates among their clients and in some cases through increased difficulties in accessing external sources of funding The target group for microfinance, namely the financially excluded but economically active, is faced with a tightening credit supply by mainstream banks due

macro-to higher risk-averseness and deleveraging balance sheets This creates an opportunity for microfinance, but also underlines the paramount importance of credit risk management Microfinance, particularly in Western Europe, continues to be driven by socially motivated investors and entities This has a significant impact on the pricing of financing instruments to such types of entities, sometimes undermining the development of viable microfinance models in terms of self-sustainability

4 Value Added of EIF OValue Added of EIF OAdded of EIF Operationsperationsperations

After the formalisation and the approval of the Value Added Methodology2, EIF has applied the VA assessment to all its equity and own resource guarantee operations presented to the Board The results have demonstrated EIF’s generally strong value added at market level and

in terms of catalytic effect

Two further methodologies have been developed during 2010 to complement the mainly qualitative approach of the ex ante value added assessment with a quantitative evaluation, which creates an integrated framework for tangible demonstration of the catalytic effect and market impact of EIF’s activities

A “leverage” methodology3 proposes a consistent approach across all EIF’s debt and equity products in the estimation of how much third party investors’ money is mobilized and attracted at the intermediary level by EIF’s investments through its signalling and catalytic effect The leverage multiplier is derived by taking into account the nature, the investment rationale, the investment size, and the risk profile

of the transaction The results from the ex ante Value Added assessment serve as a corrective factor to the calculated leverage in EIF’s equity operations;

The ex post value added measurement4 takes the form of an impact assessment at final beneficiary level, measured by the total amount of equity financing raised for final beneficiaries (in equity operations) and cumulative loan volumes originated at SME level (in guarantees) First results are expected to become available in the context of the annual update on the Value Added Methodology at the end of 2011 The actual impact results will validate or correct the parameters used in the Value Added and Leverage Methodologies

The table below reports the estimated leverage multipliers for the main EIF products for the period of 2011-13 and the rationale behind them In section 5, the volume forecasts for the period are reported also in expected “leveraged terms” using a stage by stage approach for the private equity business line and a product by product approach for the guarantees activity

2 Board of Directors of 1 February 2010, Ref BD/148/10, doc 10/086 A final version of the document will be agreed before the end of January 2011, following a review with the EC

3 Board of Directors of 15 November 2010 and 31 January 2011, doc 10/202 and doc 11/240

4 Board of Directors of 15 November 2010, Ref BD/164/10, doc 10/201

Avg multiplier 2011-2013

* Interest held refers to EIF's ticket in the fund

** For the equity/mezzanine investments A, B, C scoring is related to the Catalytic Effect section of the Value added scoresheet

50% loss protection and 50% upfront funding

Similar product to SMEG but higher cap rate Weighted avg leverage on the mix of products offered (equity, loans, risk sharing loans, subordinated loans)

2011: 25% interest, 40% A, 30% B, 30% C; 2012-2013: 25% interest, 30% A, 40% B, 30% C

2011-2012: 33% interest, 100% A; 2013: 33% interest, 80% A, 20% B

Based on the leverage of the 2010 transactions Funding and/or risk transfer rationale.

Based on the historical average multiplier on similar transactions

Similar product to SMEG but higher cap rate

5 Business Planning and OBusiness Planning and O Planning and Operationperationperationssss: 2011: 2011: 2011––––201320132013

5.1 Business Development, Business Development, Strategic Imperatives and Key Action ItemsStrategic Imperatives and Key Action ItemsStrategic Imperatives and Key Action Items

The existing EIF products provide support to a broad spectrum of market segments Forecasts for commitments over the period 2011–2013, as described below, are driven by the availability of resources as well as the expected market environment 5.1.1 Equity InvestmentsEquity Investments

EIF’s equity teams aim to be at the forefront of building self-sustaining venture capital and private equity markets, as Europe’s reference investor in SME and mid-cap oriented intermediaries

Global Global equity tequity tequity targets argets argets EUR m 2011 2012 2013 COP Actual MFG 205 224 210 250 290

Own resources 34 47 43 53 57

RCM 307 356 407 519 572

CIP 80 72 102 101 117

IVCi 35 - 40 45 45

PVCi 20 30 30 30 30

Neotec 29 21 33 -

-UKFTF - 32 86 36 18

Other mandate (ERP, LFA) 40 67 51 46 49

GAP VC - 16 -

-New FoFs/Investment pool - - 92 148 146

Subtotal 750 848 1,110 1,228 1,324 JEREMIE 121 82 200 80

-Total 871 930 1,310 1,308 1,324 Expected leveraged volume 4,500 3,610 3,770 3,990 Venture Capital 44% 47% 54% 55% 51% Lower-Mid-Market 33% 34% 30% 26% 28% Mezzanine 24% 24% 16% 19% 22% 2010 The new EIF strategy in the private equity area was presented to the EIF September Board5 The volume of activity presented in this document supports the early stages of the implementation of this new strategy focussing on the following objectives: IIII Develop markets and products Develop markets and products Develop markets and products by by by helphelphelpinginging the establishment of a well functioning, liquid the establishment of a well functioning, liquid the establishment of a well functioning, liquid e ee equityquityquity market that attracts a wide range of private sector investors: market that attracts a wide range of private sector investors: market that attracts a wide range of private sector investors:

Develop and adapt existing instruments to meet market needs;

5 Board of Directors of September 2010, Ref BD/159/10, doc 10/175

Leverage and extend EIF’s sector expertise with sector-focussed Fund-of-Funds involving industry partners (e.g cleantech, life science or ICT);

Support and catalyse business angel investments and investments of other non-VC type investors;

Equally important is the sustainability of investments in established growth SMEs and EIF will build on its lower mid-market and mezzanine investment activity by:

Adaptation and development of existing instruments to meet market needs;

Support of mid-market teams with solid investment strategies, also in emerging markets

The second objective relates to activities beyond 2013 and is thus not reflected in the volume forecasts of this document To recall, this is:

II

IIII

II Broaden sources of capital and mandates to increase geographic impactBroaden sources of capital and mandates to increase geographic impactBroaden sources of capital and mandates to increase geographic impact

Expand the Fund-of-Funds activity through development of relations with a broader range of EU and Accession Member States in order to assist them in developing their risk capital markets;

Work with the EC (DG Regional Policy) to adapt the Structural Funds regulation to align it better to the constraints of market-based financial instruments in order to ensure that these convergence funds can be efficiently deployed

However, the last two objectives are also reflected in the resource planning for this COP: II

IIII

IIIIII Maximise the leverage of EIB and EIF capital and investment capacityMaximise the leverage of EIB and EIF capital and investment capacityMaximise the leverage of EIB and EIF capital and investment capacity

In the circumstances of limited capital and budgetary resources at EU and national levels, it

is even more important to optimise the use of these resources

IV

IV Disseminate EIF knowlDisseminate EIF knowlDisseminate EIF knowledge, experience and performance and build coedge, experience and performance and build coedge, experience and performance and build co investorinvestorinvestor relations relations relations Develop the resources of EIF to provide advice and technical assistance, industry information and co-investor liaison

The implementation of the equity strategy will require an additional EUR 1bn of RCM resources During the period 2011-13 an exceptionally high level of commitments is foreseen in order to sustain the development of new products and segments and to play a countercyclical role in a still challenging fundraising market The new commitments can only

be partially funded by the reflows on the current portfolio

The increased capacity will fulfil the expected long-term requirement for EIF private equity activity, as from 2014 the level of commitment is expected to decrease and the volume of reflows to be sufficient to guarantee the self sustainability of the RCM facility A detailed request was submitted to the EIB Board and subsequently approved

Venture Venture Capital (Seed to Expansion)Capital (Seed to Expansion)Capital (Seed to Expansion)

EUR m 2011 2012 2013 COP Actual VC - RCM/EIF/CIP resources 160 151 212 293 306

Other mandates - current (ERP/FoF) 80 114 170 82 67

Other mandates - new - - 92 148 146

JEREMIE & GAP VC 121 67 148 80

-Total 361 332 622 603 519

Expected leveraged volume 1,100 1,570 1,610 1,560

2010

The development of EIF’s Venture Capital activity is built around four different axes of priority:

Continuous adaptation and development of the existing instruments to market gaps and opportunities Like in 2010, the investment strategy will continue to be fewer funds but with increased stakes taken by EIF, especially in first closings, to act as a catalyst to help the funds reach viable sizes and attract additional investors This segment of the portfolio (from RCM, own resources, CIP and ERP/LfA/UKFTF) will represent some EUR 300m p.a from 2011 to 2013 This will be complemented by the support to the new equity strategy which will partially compensate for the run-off of the JEREMIE mandate which should be fully deployed by 2012 to leave enough time for the investments to reach final beneficiaries;

Pan-European sector-focussed Funds-of-Funds in specific sectors such as Cleantech, Biotech and ICT and growth themes (e.g healthcare/well being), Beside the EIB, strategic partners and institutionals (mainly family offices) are envisaged as major investors By taking 20% of these funds (90% of which is planned from RCM and 10% from EIF) EIF, acting as fund manager, expects to catalyse around EUR 0.7bn for each Fund-of-Funds, bringing a total leverage of approximately 15 times (EUR 80-100m invested by EIF to result in EUR 1.4bn investments to benefit SMEs);

A Euro Co-Investment Fund which will provide co-investment opportunities with Business Angels and other non-institutionalised investors The Euro Co-Investment Fund will start to operate in a restricted number of Member States and with an initial capitalisation of about EUR 200m for the first three years In the mid-term, it will be rolled out in all relevant Member States and regions that will also be expected to contribute with own funds

An Impact Investing Fund-of-Funds which will have a target size of EUR 100m and an investment period of about four years Investors would include foundations, family offices and public or semi-public institutions First closing is not expected before mid-

2012 with a 30% share from RCM/EIF resources

The table below presents a detailed view of the “Other mandates - new” line of the VC table above: