Annual report 2008.
Date: 2009-05-20
Institutions: European Investment Fund
Subjects: European Investment Fund, activity report

Annual Report 

2008

European Investment Fund  |  Annual Report 2008  |  Table of contents

Table of contents

1 Introduction to the Annual Report

EIF highlights
Strategic statement
Overview of financial performance
Overview of activity
Foreword by the Chairman of the Board
Introduction by the Chief Executive
Reorganisation
The European market environment

2 An active role in European venture capital and private equity

Outstanding equity portfolio
Equity overview
Equity resources and mandates
Total portfolio
Equity signatures in 2008
Risk Capital Mandate and own resources
European Commission resources
Overview of joint ventures and funds of funds
Case study: WHEB Ventures Private Equity Fund 2
Technology transfer

3 A prime position in the guarantee and credit enhancement markets

Guarantee portfolio exposure
Guarantee operations overview
Total portfolio
Guarantees and securitisation in 2008
Case study: Zephyros Finance
Case study: MicroBank

4 Regional Business Development

JEREMIE implementation
JEREMIE state of play

5 Mandate Management, Product Development and Incubation

JASMINE
Mezzanine

6 Governing bodies and key people

Capital and shareholders
Board of Directors
Management and key people
Audit Board
Audit and controls
Risk management
EIF Compliance and Operational Risk

7 IFRS financial statements 2008
Independent Auditor's Report
Statement by the Audit Board
Balance sheet, income statement, cash flow statement, statement of changes in equity
Notes to the accounts

8 Contacts and references

4

6
7
8
9
10
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12
13

14
16
17
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48
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52
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55

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58
59
60
64

128

3

Contents

1 Introduction to the Annual Report

EIF highlights
Strategic statement
Overview of financial performance
Overview of activity
Foreword by the Chairman of the Board
Introduction by the Chief Executive
Reorganisation
The European market environment

6
7

8
9
10
11
12
13

1 Introduction 

Introduction to the Annual Report 

European Investment Fund  |  Annual Report 2008 
European Investment Fund  |  Annual Report 2008 

Introduction to the Annual Report

EIF highlights

at 31 December 2008

EURm

2008 activity

Equity signatures

Guarantee signatures

JEREMIE signatures

Total outstandings

Private equity assets under management

Guarantee exposure

Financial data 

Simplified profit and loss statement

Guarantee income

Equity income

Advisory and regional mandate income

Treasury income

Total income

Staff costs

Overheads

Total expenses

Operating profit

Exceptional items

Net income

Return on average equity

Dividends declared

Simplified balance sheet

Assets

Cash

Investments

Other assets

Total assets

Liabilities

Financial liabilities

Other liabilities

Equity

Total liabilities

Shareholders

European Investment Bank

European Union via the European Commission

31 Financial Institutions

6

(32 funds)

(20 operations)

(6 agreements)

(299 funds)

(189 operations)

2007

30

22

6

28

86

19

8

27

58

‑ 8

50

6.2%

20

292

690

42

1 024

18

21

985

1 024

409

2 143

604

3 535

12 333

2008

26

21

7

39

93

22

9

31

62

‑ 27

35

3.6%

14

384

654

38

1 076

31

31

1 014

1 076

63.6%

27.4%

9.0%

European Investment Fund  |  Annual Report 2008 

European Investment Fund  |  Annual Report 2008 

Introduction to the Annual Report

Strategic statement

The European Investment Fund (EIF) is the European 
Union (EU) body specialised in small and medium‑sized 
enterprise (SME) risk financing. It is owned by the 
European Investment Bank (EIB) (64%) and the European 
Community, through the European Commission (27%). 
Additionally, EIF has a significant shareholding from 
public or private banks and financial institutions (31 
from 17 countries, making up 9%). Uniquely for a 
European body, EIF has a core objective to earn 
an appropriate return for its shareholders, through a 
commercial pricing policy and a balance of fee and 
risk based income, alongside its goal to contribute to 
the pursuit of Community objectives.

EIF indirectly supports SMEs by means of equity (venture 
capital and private equity) and guarantee instruments, 
using either its own funds or those available through 
mandates given by EIB (the Risk Capital Mandate or 
RCM), the EU (the Competitiveness and Innovation 
Framework Programme or CIP), Member States or 
other third parties. 

Complementing EIB’s product offering, EIF has a crucial 
role to play throughout the value chain of enterprise 
creation, from the earliest stages of intellectual property 

development to mid and later‑stage SMEs. EIF provides 
an “integrated offer” of SME finance covering a wide 
range of market segments and through a diverse array 
of financial institutions. 

While EIF’s equity instruments aim to improve the 
availability  of  risk  capital  for  high‑growth  and 
innovative SMEs, it is equally important to target the 
debt requirements, as many SMEs seek finance through 
this more traditional route. By providing guarantees and 
credit enhancement through securitisation, EIF improves 
the lending capacity of financial intermediaries and, 
therefore,  the  availability  and  terms  of  debt  for 
beneficiary SMEs.

EIF has systematically developed skills in providing 
financial engineering products to SMEs in Europe. 
Capitalising on this expertise, the European Commission 
decided, in 2006, to mandate EIF as manager of the 
JEREMIE initiative. This initiative aims at using a portion 
of EU Member State Structural Funds to improve SME 
access to finance. EIF assesses the demand for SME 
financial instruments in regions and Member States 
and is now assisting Managing Authorities in the 
implementation of JEREMIE Holding Funds.

7

European Investment Fund  |  Annual Report 2008 
European Investment Fund  |  Annual Report 2008 

Introduction to the Annual Report

Overview of financial performance

EURm

Profits for the financial year

Net profit

Return on average equity (%)

Dividends declared

Net asset value **

GAAP

2004

27.2

4.9

10.9

2003

19.7

3.6

7.9

2005

36.7

5.8

17.1

2006

48.6

7.3

19.4

2007

50.4

6.2

20.2

IFRS

2008

35.1

3.6

14.3 *

567.3

586.6

667.8

692.5

985.4

1 014.1

EIF Net Asset Value

EURm

1 100

1 000

900

800

700

600

500

400

300

200

100

2003

2004

2005

2006

2007

2008

Net profit against return on equity

EURm

60

50

40

30

20

10

12%

10%

8%

6%

4%

2%

2003

2004

2005

2006

2007

2008

Net profit GAAP

Net profit IFRS

Return on average equity (%) GAAP

Return on average equity (%) IFRS

8

     * Subject to approval by the AGM
** Before appropriation of dividends

European Investment Fund  |  Annual Report 2008 

European Investment Fund  |  Annual Report 2008 

Introduction to the Annual Report

Overview of activity

EURm

Equity signatures *

EIF own resources

2004

48.3

2005

31.3

2006

74.5

2007

70.7

EIB Risk Capital Mandate

257.1

265.1

482.7

379.4

2008

19.2

187.6

134.3

43.6

24.2

408.9

14.8

37.5

‑

38.9

32.5

‑

89.4

41.4

‑

49.7

21.0

3.6

357.7

367.8

687.9

524.3

2004

2005

2006

2007

2008

‑

‑

‑

‑

‑

‑

1

7

100.0

704.0

European Commission

ERP‑EIF Dachfonds

Funds of funds activity

Total

JEREMIE

Cumulative mandates

Cumulative total of fund 
agreements signed (EURm)

EURm

Guarantee commitments

2004

2005

2006

2007

2008

European Commission

EIF own resources

Total

749.7

1 213.3

1 028.2

8.0

1 308.7

697.1

472.1

1 194.3

1 389.2

834.2

1 446.7

1 685.4

2 222.5

1 397.2

2 142.9

EIF tool kit for SMEs

s
w
o
fl

h
s
a
c

E
M
S

Business Angels, Tech Transfer

Higher risk

SME development stages

Lower risk

{ Pre-seed
  phase }

{ Seed phase }

{ Start-up phase }

{ Emerging growth }

{ Development }

* Including commitments in funds of funds structures in 2006, 2007 and 2008. Historical exchange rates.

9

 
 
European Investment Fund  |  Annual Report 2008 
European Investment Fund  |  Annual Report 2008 

Introduction to the Annual Report

Foreword by the

Chairman of the Board

"  In the face of this difficult economic 
environment, the new management 
recognised the need to strengthen 
the EIF product offering and range of 
financial solutions available "

On many fronts, 2008 was an eventful year for EIF. 
First of all, it witnessed the arrival of the Fund's new 
Chief Executive and Deputy. The implementation of 
their Strategic Charter is driving EIF forwards in terms 
of business development and operational excellence 
and has received full support from both the Board of 
Directors and EIF's shareholders.

The full year results of EIF demonstrate the impact of 
the financial crisis, which has made it increasingly 
challenging to achieve the levels of activity and 
financial performance seen in recent years. A highlight 
has  however  been  the  European  Commission's 
Competitiveness and Innovation Framework Programme 
2007‑2013, through which EIF provides significantly 
increased guarantee and risk capital in support of small 
and medium‑sized enterprises (SMEs) across the EU.

Since September 2008, the worsening economic 
situation  has  magnified  EIF's  importance  as  a 
countercyclical element in the European Economic 
Recovery Plan, at a time when financing options for 
SMEs have become increasingly limited and the need 
to implement EU policy objectives in their support is 
all‑important.

In the face of this difficult economic environment, the 
new management recognised the need to strengthen 
the  EIF  product  offering  and  range  of  financial 
solutions available to SMEs as an integral part of 
the EIB Group's new SME strategy. Actions have 
therefore already been taken to launch innovative 
new instruments necessary to meet changing market 

demands as well as to increase the financial resources 
available to EIF.

The Fund has launched two new products, firstly a 
EUR 1bn mezzanine finance facility, mandated by EIB 
and distributed through Fund Management teams. This 
initiative aims to fill gaps in the funding solutions for 
stable cash‑generative SMEs.

At  the  small  end  of  the  SME  spectrum,  EIF  has 
introduced the microcredit initiative JASMINE (Joint 
Action to Support Micro‑finance Institutions in Europe) 
where it will be instrumental in channelling some 
EUR 50m of equity and debt support from EIB, the 
European Commission, the European Parliament, and 
financial institutions.

These are good examples of increased cooperation 
between EIB and EIF but it is not only from a business 
perspective that EIB and EIF are working together. 
Indeed, both institutions were reunited on the same 
campus when, in the summer, EIF moved into the new 
East Building, whose environmental consciousness 
and transparency is symbolic of the EIB Group's 
approach.

Looking forwards, EIF has now been reinforced with 
investment in staff and systems to face the challenges 
ahead in what could be one of the most demanding 
years of its relatively short lifetime.

Philippe Maystadt

10

European Investment Fund  |  Annual Report 2008 

European Investment Fund  |  Annual Report 2008 

Introduction to the Annual Report

Introduction by the

Chief Executive

"  Developing an integrated range of risk 
based products and solutions, which 
can respond broadly to the growing 
financial needs of European SMEs "

The past year has seen a major change to EIF in its 
leadership and organisation, and in the necessity to 
respond to the looming economic crisis.

The simultaneous appointment of a new Chief Executive 
and a Deputy, in April, presented the opportunity 
to renew the strategy of EIF, its governance and its 
relationship with the EIB.

The  Strategic  Charter,  approved  by  the  Board 
of Directors in June, has been developed into a 
comprehensive Corporate Operating Plan for 2009‑11. 
This plan underlines the importance of developing an 
integrated range of risk‑based products and solutions, 
which can respond broadly to the growing financial 
needs of European SMEs. Over the next three years, 
EIF aims to mobilise significantly greater risk capacity 
from its shareholders and mandators, in order to 
increase its impact and enhance access to finance.

EIF’s equity investment and guarantee activity in 2008 
was affected by the financial crisis but finished the year 
at satisfactory levels. Total equity signatures amounted 
to EUR 409m across a very wide range of funds, using 
capacity from all the mandators and investing from the 
very early technology transfer stage through to more 
established growth funds.

Guarantee signatures in 2008 reflect the successful 
deployment of the first CIP capacity in nine transactions 
across six countries. The Structured Finance activity 
was also sustained at high levels right up to year‑end, 

underlining the critical importance in this market of the 
capacity of EIF to take risk on portfolios of SME debt.

EIF’s financial performance in 2008 reflects the 
challenges in the markets in which we are invested. 
Net profit for the year is EUR 35.1m, down from the 
record level of 2007. This is largely due to EUR 26.9m 
of impairments and provisions. These impairments and 
provisions have been assessed using prudent models 
and approaches and have been endorsed by the 
external auditors.

Overall income for the year was ahead of budget at 
EUR 92.7m, reflecting growing guarantee commissions 
and significantly higher treasury income from the 
increased capital. Total costs were kept below budget 
at EUR 30.7m. Total year‑end paid‑in equity before 
dividends amounts to EUR 1 014.1m, which provides 
a very stable base for the Fund’s continuing role as a 
pillar of SME finance.

From a personal  point of view, I am proud  and 
honoured to have been selected to lead EIF. Jean‑Marie 
Magnette and I have forged a close partnership based 
on our mutual desire to serve our stakeholders to the 
best of our ability. We would like to pay tribute to the 
quality and dedication of all the staff who have made 
EIF what it is today.

Richard Pelly

11

European Investment Fund  |  Annual Report 2008 
European Investment Fund  |  Annual Report 2008 

Introduction to the Annual Report

are responsible for the professional execution 
of all transactions and the maintenance and 
development of relationships with intermediaries 
across the EU.

A new Regional Business Development (RBD) 
group has been established which is responsible 
for  the  management  of  regional  mandates 
and, in particular, the seven JEREMIE Holding 
Fund agreements now signed. The group has 
established offices in a number of locations, 
reflecting this new activity and the geographic 
configuration of EIF resources is planned to 
develop over time. This group maintains a high 
level relationship with the European Commission 
Directorate‑General for Regional Policy (DG 
REGIO) and mandate overview, while regional 
teams will handle the relationships with local 
Management Authorities.

Furthermore, the overall governance of EIF now benefits 
from the structuring of the responsibilities for Finance, 
Risk Management and Compliance under the Deputy 
Chief Executive. This ensures a form of dual control 
over these critical aspects of the Fund’s management.

Reorganisation

EIF will continue to develop the operational excellence 
and quality of its processes so as to service better 
its intermediaries and to control and monitor its risks. 
Following the arrival of its new Chief Executive and 
Deputy Chief Executive, EIF has reorganised its market 
facing teams into the following three groups to reflect 
this more integrated approach.

•	

•	

The  new  Mandate  Management,  Product 
Development and Incubation (MMPDI) group is 
dedicated to the strategic evolution of the Fund. 
A proactive approach to relations with mandators 
(EIB, the European Commission and Managing 
Authorities) has resulted in very intensive and 
constructive  dialogue,  which  is  particularly 
important in the current crisis. In parallel, this 
group  is  developing  new  products  (venture 
capital, guarantees and funded risk sharing) 
with the aim of responding more quickly and 
with greater impact.

•	

The Transaction and Relationship Management 
(TRM) group incorporates the venture capital and 
lower mid‑market equity investment, as well as 
the Guarantee and Securitisation teams. They 

12

European Investment Fund  |  Annual Report 2008 

European Investment Fund  |  Annual Report 2008 

Introduction to the Annual Report

The European market environment

Challenging times

The  global  economy  is  going  through  a  totally 
unprecedented crisis, which began in 2008 and 
is  continuing  into  2009.  During  2008,  market 
confidence deteriorated and remained fragile, leading 
to the collapse or near‑collapse of large financial 
institutions and resulting in public intervention in the 
financial system on a scale not seen for decades.

The financial system has been severely weakened 
by mounting losses on impaired and illiquid assets, 
uncertainty regarding the availability and cost of 
funding, and further deterioration of loan portfolios. 
Since October 2008 risks to financial stability have 
intensified and funding costs have increased, causing 
the credit crunch to spread globally.

Reduced valuations 
for private equity

As financial institutions began to feel the dramatic 
effect of mounting leveraged and structured finance 
related write‑downs, the impact of these losses spread 
to the private equity industry and the valuation and 
performance of this industry has suffered. Market 
conditions have caused investors to avoid high risk 
investments and, as a result, risky and illiquid private 
equity assets have become less attractive.

With a decreasing number of investors, the volume 
of private equity deals is expected to decline during 
2009, as it becomes increasingly difficult to attract 
the co‑investment necessary to achieve target fund 
sizes. Additionally, there is a current focus on existing 
portfolio consolidation and management, rather 
than increased investments.

Increased SME default rates for 
guarantees and securitisation

The crisis is now simultaneously affecting the financial 
sphere and the real economy. Through the second half 
of 2008, banks became more reluctant to lend and 
have started to tighten their lending standards. This 
behaviour has had negative effects on SME access 
to finance and it is expected that SME default rates 
will further increase significantly in 2009. In the 
current market environment many players, originators, 
investors, and arrangers of structured transactions, 
have left the market, at least temporarily. The number of 
new guarantee and securitisation transactions in 2008 
significantly decreased and were not publicly placed 
in the capital markets.

Due to the negative feedback loop, stemming from 
cost cutting measures, increasing default rates, tighter 
credit conditions, the crisis is going to continue and the 
2009 GDP forecasts for the European countries have 
been downgraded significantly.

With this financial environment, the role of EIF as 
specialised and stable long‑term investor and guarantor 
in the SME market becomes even more crucial. EIF will 
continue to support the appropriate venture capital and 
private equity teams, taking, if necessary, somewhat 
higher participations at first closing. A new effort will be 
made to support mezzanine teams in their goal to inject 
a favorable debt structure into their SME portfolios. EIF 
will continue its role as guarantor of certain portfolio 
risks in order to facilitate and encourage the further 
provision of debt finance to SMEs. 

13

Contents

2 An active role in European venture capital and private equity

Outstanding equity portfolio
Equity overview
Equity resources and mandates
Total portfolio
Equity signatures in 2008
Risk Capital Mandate and own resources
European Commission resources
Overview of joint ventures and funds of funds
Case study: WHEB Ventures Private Equity Fund 2
Technology transfer

16
17
18
19
21
22
23
24
26
27

An active role in European venture capital and private equity

2 Equity 

European Investment Fund  |  Annual Report 2008 
European Investment Fund  |  Annual Report 2008 

An active role in European venture capital and private equity

Outstanding equity portfolio 

EUR 3 536m at 31 December 2008

EU 27

Austria

Belgium

Bulgaria

Cyprus

Czech Republic 

Denmark

Estonia

Finland

France

Germany

Greece

Hungary

Ireland

Italy

Latvia

Lithuania

Luxembourg

Malta

Netherlands

Poland

Portugal

Romania

Slovakia

Spain

Sweden

EURm

61

82

1

4

18

99

4

104

626

446

13

14

97

238

16

8

11

6

83

48

46

8

8

292

179

United Kingdom 636

Candidate Countries

Turkey

104

EFTA Countries

Norway

Switzerland

15

61

Multi-Country / Other

Central and 
Eastern Europe

Other

38

170

16

European Investment Fund  |  Annual Report 2008 

European Investment Fund  |  Annual Report 2008 

An active role in European venture capital and private equity

Equity overview

Through  its  venture  capital  and  private  equity 
interventions, EIF plays a crucial role in the creation 
and development of high‑growth and innovative SMEs 
by facilitating access to equity for these companies 
across the entire life cycle of corporate innovation. It 
does so by investing in venture capital and mid‑market 
funds, from the very earliest stages of intellectual 
property development into technology transfer, to more 
mature phases of development.

resources mandated by its shareholders or third parties 
depending on the nature of the investment. Through 
the varied resources managed by EIF, mandators 
can make use of EIF operational expertise to reach 
specific targets, such as eco‑innovation and technology 
transfer funds through the European Commission’s 
Competitiveness and Innovation Framework Programme 
(CIP), or fine‑tune the financial support for SMEs to meet 
local market gaps through the JEREMIE initiative.

As one of the largest investors in European venture 
capital, supporting both well‑known and first time 
teams, EIF has built a strong track record in the industry. 
Through this reputation, while maintaining a highly 
selective process, EIF takes significant minority stakes in 
funds which provides a catalytic effect on commitments 
from a wide range of investors, particularly in the 
private sector. The scale and scope of EIF investment, 
along with its added value on fundraising, allows 
EIF to promote best market practice and corporate 
governance for the teams it chooses to support. As a 
result, EIF is recognised as a leading financial institution 
in the European private equity market.

EIF acts as an integrated operational platform for 
SME finance, deploying either its own resources, or 

In parallel with the two main mandates, the Risk 
Capital Mandate (RCM) and the CIP, which are 
managed by EIF on behalf of, respectively, EIB and 
the European Community, EIF has sought to enhance 
further its market impact and reach. This has resulted 
in the establishment of joint investment facilities with 
public and private entities through its country specific 
funds of funds (ERP in Germany, NEOTEC in Spain, 
iVCi in Turkey, PVCi in Portugal) and multi‑country 
or sector specific (Dahlia in France and GEEREF for 
environmental projects in emerging markets) fund of 
funds. A similar increased impact is being achieved 
through the management of holding funds under the 
JEREMIE initiative, a significant portion of whose funds 
are directed towards venture capital investment in the 
Member States or regions concerned.

17

European Investment Fund  |  Annual Report 2008 
European Investment Fund  |  Annual Report 2008 

An active role in European venture capital and private equity

Equity resources and mandates

EURm

EIB Group

RCM 

Own resources

European Commission

MAP and G&E

CIP envelope

Other fund of funds activity

ERP

Dahlia

NEOTEC

iVCi

PVCi

% signed

92%

65%

100%

30%

67%

60%

37%

0%

0%

4 000

489

342

550

500

300

183

160 *

111

18

* After final closing in early 2009, iVCi has a total of EUR 160m under management.

European Investment Fund  |  Annual Report 2008 

European Investment Fund  |  Annual Report 2008 

An active role in European venture capital and private equity

Total portfolio

In 2008, EIF signed venture capital and private 
equity agreements totalling close to EUR 409m in 
30 funds and two funds of funds. Despite the difficult 
market conditions, EIF has been able to invest, not 
only in established teams, but also in first time funds. 
EIF maintained its core focus on seed and early 
stage investments through two technology transfer 
and  19  venture capital agreements, which was 
complemented by 11 expansion and lower mid‑market 
operations. The latter contributes to balancing the EIF 
portfolio by offsetting the higher risk that is usually 
inherent in early‑stage investments.

From a geographical perspective, EIF backed teams, 
established in 11 different European countries, which 
provide financial support for SMEs spread across 
Europe. Finally, sectorwise, EIF continues its investment 

in the Cleantech sector, through agreements with two 
new teams, the remaining venture capital signatures 
being equally spread between life science and ICT.

At the end of 2008, total net equity commitments 
amount  to  EUR  3.5bn.  EIF  market  interventions 
contribute to leverage some EUR 23bn for over 3 000 
high growth and innovative SMEs. With investments 
in 299 funds, EIF is a leading player in the European 
venture capital market for seed to mid‑cap funds. 

EIF’s portfolio, derived from all resources, remains 
focused on the early‑stage sector with over 40% 
of the portfolio in seed and start‑up funds, and a 
geographically diversified portfolio, covering EU, 
candidate and potential candidate countries as well 
as the EFTA area.

19

European Investment Fund  |  Annual Report 2008 
European Investment Fund  |  Annual Report 2008 

An active role in European venture capital and private equity

Equity stage focus

EURm

Venture Capital
(Seed to Expansion)

Lower Mid-Market
(Growth, Small Cap, Mid-Market)

Fund of Funds/
Special Structures

1 966

1 189

381

Total: 3 536

Equity sector focus

EURm

Generalist (Non-Tech)

Tech

38

484

721

843

Cleantech

Life Science

ICT

ICT-Life Science

Generalist (Non-Tech)

Total: 3 536

1 450

20

European Investment Fund  |  Annual Report 2008 

European Investment Fund  |  Annual Report 2008 

An active role in European venture capital and private equity

Equity signatures in 2008

EURm

Fund vehicle

360 Capital Partners

Albuquerque, FCR

Alcedo III

Arx III

Baring Iberia III

BioMedInvest Fonds II

Capricorn Cleantech Fund

Chalmers Innovation Fund

Coinversion Neotec, SA, SCR

Dritte SHS Technologie GmbH & Co. KG

Earlybird IV

Eden Two

Eqvitec Mezzanine Fund III

Fountain Healthcare Partners Fund I

Inventure Fund Ky (ex Holtron)

Lead Equities II

Life Sciences Partners IV B.V.

MCH Private Equity Fund III

Middle Market Fund IV

Montefiore Investment II

Neuhaus III GmbH & Co.KG

Nordic Biotech Opportunity Fund KS

Odin Equity Partners Fund II

Pentech Fund II

Pinova Fund I

Portugal Venture Capital Initiative PVCi

ProA Capital Iberian Buyout Fund I USA, FCR

Royalton Capital Investors II

Serena Capital

The UK High Technology Fund Ltd (secondary)

UMIP‑MTI TTA Fund

WHEB Ventures Private Equity Fund 2

Subtotal

Funds of funds activity 

Baring Iberia III 

Coinversion Neotec, SA, SCR 

ProA Capital Iberian Buyout Fund I USA, FCR 

Subtotal

Total 

Resources

Geographic focus

Signatures

EC

EC

EIB/EIF

Multi‑country

Portugal

Italy

EIB/EIF

Central and Eastern Europe

14.8

13.1

25.0

20.0

3.1

18.4

15.0

5.8

0.5

15.2

30.0

6.8

15.0

15.0

9.9

10.0

22.9

15.0

14.3

15.0

0.7

4.9

12.7

5.0

12.5

15.0 *

5.5

3.3

12.5

Spain

Multi‑country

Multi‑country

Sweden

Spain

Germany

Multi‑country

United Kingdom

Multi‑country

Ireland

Finland

Austria

Multi‑country

Multi‑country

France

France

Multi‑country

Denmark

Denmark

United Kingdom

Germany

Portugal

Spain

Central and Eastern Europe

Multi‑country

United Kingdom

1.8 *

United Kingdom

Multi‑country

Spain

Spain

Spain

11.5

14.5

384.7

8.2

1.4

14.5

24.2

408.9

EIB

ERP/EIB/EIF

EC

EC/EIB/EIF

EIB

ERP/EC

ERP/EIB/EIF

EIB/EIF

EIB/EIF

EC

EC

EIB/EIF

ERP/EIB/EIF

EIB/EIF

EIB/EIF

EIB/EIF

ERP/EIB/EIF

EIB/EIF

EIB/EIF

EC

EC

EIB

EIB

EIB

EC

EIB

EC

EC

NEOTEC

NEOTEC

NEOTEC

* Commitment in fund of funds structure.

21

European Investment Fund  |  Annual Report 2008 
European Investment Fund  |  Annual Report 2008 

An active role in European venture capital and private equity

EIB Group resources

EIF has managed EIB resources for equity (venture 
capital and mid‑market) in Europe since 2000 through 
the Risk Capital Mandate (RCM). The mandate’s core 
objective is to support technology and industrial 
innovation through early stage, expansion and lower 
mid‑market capital, with an emphasis on specialist funds 
investing in the EU and generalist funds in the enlarged 
Europe. EIF’s venture capital operations are conducted 
through this EUR 4bn evergreen facility, and are 
complemented by EIF own resource co‑investments.

In 2008, signatures under RCM and EIF resources 
totalled EUR 207m. In terms of cash flow, disbursements 

for the year reached EUR 324m, with reflows of 
EUR 194m (capital repayments of EUR 160m and 
revenue repayments of EUR 34m).

At end 2008, net amounts signed using EIB Group 
resources reached nearly EUR 3bn. Since inception, 
total disbursements have amounted to EUR 2.8bn with 
total reflows of EUR 1.1bn (capital repayments of 
EUR 936m and revenue repayments of EUR 170m).

From 2009, these resources will be complemented by 
a EUR 1bn mezzanine facility.

EIB Group disbursements and reflows

EURm

RCM + own resources

2004

2005

2006

2007

2008

Since inception

Disbursements

Capital repayments

Revenue repayments

232.8

289.7

349.9

371.0

324.6

2 792.1

74.4

131.0

208.2

203.0

160.0

3.9

12.2

29.9

58.3

33.9

936.3

170.0

22

European Investment Fund  |  Annual Report 2008 

European Investment Fund  |  Annual Report 2008 

An active role in European venture capital and private equity

European Commission resources

In 2008, EIF began to invest the budgetary envelope 
of EUR 1.1bn as part of the Competitiveness and 
Innovation Framework Programme 2007‑2013 (CIP) 
for SME access to finance. This resource is equally split 
between venture capital and guarantee products and 
replaces the Multiannual Programme for Enterprise and 
Entrepreneurship 2001‑2006 (MAP).

The CIP is a more ambitious programme than its 
predecessor as it covers a wider geographical area, 
extends the targets of its support and has a larger 
budget. This programme applies to the EU 27, EEA, 
and other European countries such as Croatia, Former 
Yugoslav Republic of Macedonia, Montenegro and, 
since the start of 2009, Turkey and Serbia.

Through the CIP, EIF has been able to expand the 
range of instruments in support of new SME market 
segments and products, including technology transfer, 
business angels, and eco‑innovation.

The equity segment of the CIP known as GIF (High 
Growth and Innovative SME Facility) is split between 
GIF 1, which covers early stage (seed and start‑up) 
investments and GIF 2, which covers expansion 
stage (mid‑market) investments. The GIF objective is to 
improve access to finance for the start‑up and growth 
of SMEs, and investment in innovation activities, 
including eco‑innovation.

At  end  2008,  EIF  had  made  a  total  of  13  CIP 
investments amounting to EUR 144m (EUR 108m under 
GIF 1 and EUR 36m under GIF 2). In terms of 2008 
cash flow, for all Commission mandates (CIP, MAP 
and the Growth and Employment scheme or G&E) 
EUR 51m was disbursed, with reflows of EUR 4m.

This activity brings the net signatures of the European 
Commission portfolios (G&E, CIP and MAP) at end 
2008, to EUR 375m.

EC mandates disbursements and reflows

EURm

European Commission

2004

2005

2006

2007

2008

Since inception

Disbursements

Capital repayments

Revenue repayments

9.5

0.8

0.1

14.5

12.1

7.3

23.2

7.6

3.9

38.7

12.8

1.9

50.7

3.6

0.2

212.6

48.3

18.3

23

European Investment Fund  |  Annual Report 2008 
European Investment Fund  |  Annual Report 2008 

An active role in European venture capital and private equity

Overview of joint ventures and funds of funds

ERP-EIF Dachfonds

The ERP‑EIF Dachfonds is a EUR 500m fund of funds 
investing in venture capital funds focusing mainly on 
Germany‑based, high‑tech early and development 
stage companies. EIF manages this co‑investment 
facility on behalf of the German Federal Ministry of 
Economics and Technology (BMWi) and the European 
Recovery Programme (ERP), from which EUR 250m 
were committed, matched by co‑investments from EIF, 
EIB and European Community resources. 

In 2008, the ERP‑EIF Dachfonds committed some 
EUR 87m in five funds. At end 2008, the ERP‑EIF 
Dachfonds is 67% committed with signatures totalling 
EUR 342m in 13 funds.

NEOTEC

The Spain‑based NEOTEC fund of funds was launched 
in February 2006 with the sponsorship of EIF and the 
Centre for the Development of Industrial Technology 
(CDTI:  Centro  para  el  Desarrollo  Technológico 
Industrial), the technology centre office of the Spanish 
Ministry of Industry, Tourism and Commerce. 

This high‑tech and innovation co‑investment facility 
was subscribed by CDTI, EIF and several other private 
investors, mainly Spanish blue chip companies. It 
closed at EUR 183m in June 2006, of which the EIF 
commitment was EUR 50m. 

In 2008, three deals were signed under NEOTEC for 
a total of around EUR 33m, with EUR 9m brought by 
EIF. At end 2008, NEOTEC is 37% committed with 
signatures totalling EUR 68m in seven funds and co‑
investment agreements.

Dahlia

Dahlia  is  a  pan‑European  fund  of  funds,  jointly 
sponsored by EIF and Natixis Private Equity (NPE), to 
which EIF provided EUR 75m and Natixis EUR 225m. 
An interesting feature of the initiative is that it combines 
primary and secondary investments, building upon the 
respective strengths of EIF and Natixis in those two 
market segments. 

Almost 60% of Dahlia funding has now been committed, 
with a target of full investment by mid‑2010.

24

European Investment Fund  |  Annual Report 2008 

European Investment Fund  |  Annual Report 2008 

An active role in European venture capital and private equity

Istanbul Venture Capital 
initiative (iVCi)

iVCi is a dedicated Turkish fund of funds advised by 
EIF. First closing took place in November 2007 with 
cornerstone investors the SME Development Institute of 
Turkey (KOSGEB), the Technology Foundation of Turkey 
(TTGV), the public Development Bank of Turkey (TKB) 
and EIF. After final closing in early 2009, iVCi has a 
total of EUR 160m under management.

The initial main objective is to serve as catalyst for 
the development of risk capital in Turkey. Since the 
fund’s first closing, there has been a strong pipeline 
of investment proposals and EIF is currently screening 
them and undertaking the due diligence process to 
identify suitable investment possibilities.

Portugal Venture Capital 
initiative (PVCi)

At the end of 2007, EIF created, alongside private 
financial institutions, public bodies and selected 
foundations, a EUR 111m private equity/venture 
capital fund of funds ‑ the Portugal Venture Capital 
Initiative (PVCi) to invest in Portuguese and international 
funds focusing primarily on Portugal.

EIF is responsible for the management of PVCi. The 
Investment Board is now established and a pipeline of 
opportunities is being screened. 

GEEREF

GEEREF (Global Energy Efficiency and Renewable 
Energy Fund) is a fund of funds set up at the initiative 
of the European Commission. Its objective is to make 
investments in private equity funds that focus on the 
fields of renewable energy and energy efficiency in 
emerging markets (ACP, ALA and European neighbour 
countries). GEEREF is a closed‑end fund set up under 
Luxembourg law for which EIF has been appointed 
overall Fund Manager because of its expertise in fund 
management. However, the geographical focus of 
the fund is outside the EU and hence a combined 
team has been established with the EIB to pursue the 
investment programme. 

Currently,  its  shareholders  are  the  European 
Commission, Germany and Norway. GEEREF has 
already accumulated EUR 109m in subscriptions. The 
aim is to attract up to EUR 200m under management 
in the coming months, calling on other public and 
private investors.

25

European Investment Fund  |  Annual Report 2008 
European Investment Fund  |  Annual Report 2008 

An active role in European venture capital and private equity

Case study 
WHEB Ventures Private 
Equity Fund 2

Background

In recent years, there has been a growing interest in using clean technologies to promote more efficient and 
responsible use of natural resources and thereby reducing negative impacts on the environment. This growing interest 
in sustainable development is driven by public policy initiatives as well as consumer and corporate demand.

In this context, WHEB Ventures Partners, a UK based fund manager, is one of the pioneers in the sector having raised 
one of Europe’s first dedicated cleantech venture capital funds in 2005.

In 2008, WHEB Ventures Partners launched the fundraising of its second cleantech venture capital fund, WHEB 
Ventures Private Equity Fund 2. In July 2008, the fund achieved a first closing at GBP 57m from private individuals 
and family offices. In December 2008, the fund held a second closing at GBP 74m, where the EIF, the first and 
main institutional investor, committed GBP 12m to the fund.

Profile

WHEB Ventures Private Equity Fund 2 invests in European innovative, young, high growth companies that 
place sustainable development, efficiency and reduction of negative environmental impacts at the heart of 
their business models.

The fund targets a variety of businesses in the energy, materials, waste and water industries. The efficient and 
responsible use of natural resources by these businesses results in an enhancement of economic value and strong 
competitive positioning.

Added value

Through its investment, EIF is providing support to eco‑innovative SMEs with high growth potential in their early stage 
phase. At the same time, the EIF investment is supporting the creation of a long‑standing infrastructure for the funding 
and development of clean technologies in Europe. Moreover, as the first institutional investor, EIF is playing a crucial 
catalytic role towards other institutional investors allowing this promising team to reach the fund target size and to 
successfully complete the transition from a firm backed by private individuals and family offices to a firm with a solid 
and diversified institutional investors’ base.

Notes

This EIF investment was funded with EU CIP resources endorsing the programme’s objectives of boosting the 
development of eco‑innovation in Europe. 

26

European Investment Fund  |  Annual Report 2008 

European Investment Fund  |  Annual Report 2008 

An active role in European venture capital and private equity

Technology transfer

Technology transfer is the process by which the results 
of research and development are transformed into 
marketable products and services. This transformation 
can take place through a number of means, in particular 
the collaboration between research organisations and 
industry, the licensing or assignment of property rights, 
and the creation of start‑up businesses or university 
spin‑out companies. 

Although technology transfer and seed investments in 
Europe are triggering increasing interest from investors, 
results of fundamental research are often considered to 
be 'too new' or 'too high‑risk' to be transferred out of 
the research laboratory and pursued by the industry. 
New discoveries and technologies developed in 
academic laboratories or early‑stage companies 
may fail to realise their potential unless they become 
attractive to industry or downstream investors and this 
is where EIF aims to play an important role.

EIF will generally seek to support financially sustainable 
technology transfer structures through pre‑seed funding, 
prior to company or intellectual property formation, and 
seed funding, once the company is established, as well 
as funding in the context of licensing and intellectual 
property transaction deals. EIF may also advise on the 
structuring of appropriate technology transfer instruments, 
provide technical assistance, and assist the management 
team in the fundraising process. 

Since 2005, EIF has evolved towards being one 
of the major European players, providing guidance 
and cornerstone funding to players in this emerging 
asset class, notably CD3 (Belgium), the IP Group 
co‑investment fund (UK), Chalmers Innovation Capital 
(Sweden), and the UMIP fund in Manchester (UK), 
the latter two which were signed in 2008 for a total 
of EUR 17.3m.

27

Contents

3 A prime position in the guarantee and credit enhancement markets

Guarantee portfolio exposure
Guarantee operations overview
Total portfolio
Guarantees and securitisation in 2008
Case study: Zephyros Finance
Case study: MicroBank

30
31
32
33
34
35

 Guarantees and 

3 Credit Enhancement 

A prime position in the guarantee and credit enhancement markets

European Investment Fund  |  Annual Report 2008 
European Investment Fund  |  Annual Report 2008 

A prime position in the guarantee and credit enhancement markets

Guarantee portfolio exposure 

EUR 12 333m at 31 December 2008

EU 27

Austria

Belgium

Bulgaria

Cyprus

EURm

288

614

101

< 1

Czech Republic

164

Denmark

Estonia

Finland

France

Germany

Greece

Hungary

Ireland

Italy

Latvia

Lithuania

Luxembourg

Malta

Netherlands

Poland

Portugal

Romania

Slovakia

Slovenia

Spain

Sweden

246

16

214

1 624

1 008

83

67

6

3 486

22

40

< 1

1

908

490

374

53

45

31

1 490

321

United Kingdom

490

Candidate Countries

Turkey

9

EFTA Countries

Liechtenstein

< 1

Norway

Switzerland

5

2

Multi-Country / Other

Other

Pan EU and 
Multi

Serbia

21

61

50

30

European Investment Fund  |  Annual Report 2008 

European Investment Fund  |  Annual Report 2008 

A prime position in the guarantee and credit enhancement markets

Guarantee portfolio exposure 

EUR 12 333m at 31 December 2008

Guarantee operations overview

EIF guarantee operations can be broadly split into 
'mandate' and 'own risk' activities. 

EIF's  mandate  activity  is  backed  by  European 
Commission (EC), through EIF’s management of the 
SME Guarantee Facility, as part of the Competitiveness 
& Innovation Framework Programme (CIP). Under 
this  facility,  the  EC  provides  guarantees  and 
counter‑guarantees of part of the expected losses 
for portfolios of SME or microcredit loans or leases 
to local financial institutions. The objectives of the 
programme are, as for the private equity side, to 
provide a tool for the benefit of SMEs which would 
otherwise have limited access to finance, as well as 
to boost productivity, competitiveness and innovation 
capacity in the EU. 

Under the CIP facility, EIF provides capped guarantees to 
partially cover portfolios of financing to SMEs. The facility 
comprises of four business lines, known as "windows":

•	

•	

Loan Guarantees

 cover portfolios of mid‑ to 
long‑term debt finance targeting SMEs and focus 
on investment financing.

Micro-Credit Guarantees

 cover portfolios of 
micro‑credits to encourage financial institutions to 
provide financing to micro‑enterprises, especially 
start‑ups. 

•	

•	

Equity Guarantees

 cover portfolios of investments 
in SMEs in the seed and start‑up phases; Quasi 
Equity  Guarantees  are  available  to  cover 
portfolios of mezzanine financing. 

Securitisation

 consists of guarantees to support 
securitisation transactions by financial institutions so 
as to mobilise additional debt financing for SMEs.

The CIP mandate is a very efficient budgetary tool due 
to the high leverage effect of EIF capped guarantees.

EIF collaborates with the EC, notably (DG ECFIN and 
DG ENTR) to ensure an optimal implementation of 
EU mandates *. 

For own risk transactions, EIF employs its own capital 
to credit enhance securitised SME loans or leases 
portfolios for capital market transactions. Alternatively, 
EIF provides own risk credit insurance for similar 
portfolios to financial institutions on a bilateral basis. 
Through its credit enhancement activity, EIF achieves 
substantial added value by facilitating SME credit risk 
transfer from financial institutions to the capital markets. 
As a consequence, EIF facilitates capital relief of 
financial institutions, therefore increasing their lending 
capacity to SMEs.

* Further information regarding CIP financial instruments may be found at www.access2finance.eu

31

European Investment Fund  |  Annual Report 2008 
European Investment Fund  |  Annual Report 2008 

A prime position in the guarantee and credit enhancement markets

Total portfolio

EIF’s net guarantee portfolio (own risk and mandated 
business together) amounted to EUR 12.3bn at the end 
of 2008, consisting of 189 transactions spread over 
the vast majority of EIF’s countries of operation.

The  net  own  risk  guarantee  portfolio  (including 
outstanding and undrawn amounts) amounted to 
EUR 3.8bn, compared to EUR 3.6bn the year before, 
and mainly consists of credit enhancement products. 
EIF remained a key player in the SME securitisation 
market and continues to operate selectively with SME 
originators. Underlying portfolio assets consist of a variety 
of financing instruments to SMEs, such as commercial 
loans, subordinated loans, venture financing, leasing 
receivables, microcredit, loan guarantees, etc.

Rating

Aaa

Aa1 to Aa3

A1 to A3

Baa1 to Baa2

Subtotal investment grade

Ba1 to Ba3

B1 to D

Subtotal non-investment grade

Total

EIF further maintained its balanced portfolio strategy, 
guaranteeing a variety of tranches resulting in a 
steady Baa1 weighted average rating of its portfolio. 
The majority of the portfolio consists of investment 
grade, as demonstrated in the table below. Since 
2007, the trend shows a slight (‑2%) decrease in 
investment grade.

The net guarantee portfolio under mandate activity 
amounted  to  EUR  8.5bn  as  of  December  2008 
(corresponding to a maximum first loss liability of 
EUR 0.5bn), up from EUR 7.3bn in 2007. The strong 
increase in portfolio is due to the implementation of the 
new CIP guarantee facility.

% of outstanding at 31.12.08

30.6%

20.4%

19.4%

18.5%

88.9%

10.5%

0.6%

11.1%

100%

Guarantee product breakdown portfolio

EURm

32

Mandates:

CIP

SMEG GF

MAP

Own funds

1 309

2 400

4 787

3 838

Total: 12 333

European Investment Fund  |  Annual Report 2008 

European Investment Fund  |  Annual Report 2008 

A prime position in the guarantee and credit enhancement markets

Guarantees and securitisation in 2008

Own funds: credit enhancement 
and securitisation

The market conditions of 2008 led to fewer but more 
targeted own resources signatures. EIF continued to be 
a key player in the SME securitisation market with 11 
operations totalling approximately EUR 834m signed 
this year. These operations feature a high level of 
diversity in terms of originators, underlying assets and 
geographic areas, covering eight countries.

New commitments include the securitisation inter alia 
of a portfolio of SME loan guarantees originated by 
regional mutual guarantee funds (Rete Fidi Liguria), 
small  ticket  leasing  receivables  (originated  by 
Commercio e Finanza, a specialised regional player) 
and large balance sheet CLOs originated by major 
European financial institutions such as Fortis, UniCredit 
and Rabobank. In addition, EIF provided its guarantee 
in the context of ProCredit Serbia’s first asset‑backed 
financing transaction.

European Commission mandate

In line with the European Commission CIP mandate, 
guarantees are provided against the beneficiary’s 
undertaking to enable more financing to SMEs and to 
increase the risk‑taking in their SME financing. 

In 2008, the first full year of implementation, CIP 
activity accounted for EUR 1.3bn in guarantees, with 
a maximum liability of EUR 75m. This activity consists 
of nine guarantee signatures (seven under the Loan 
Guarantee window and two under the Micro‑Credit 
window) covering six countries.

EIF  has  received  applications  from  many  of  the 
countries eligible for the programme and CIP deals 
will remain an area of focus into 2009.

EURm

Deal name

ADIE

BEST SME 2008

CERSA

Cordusio SME 2008‑1

CoSMO Finance 2008

Fonds de Participation

KfW Bankengruppe

Microbank La Caixa

Park Mountain Lease 2008‑I

Pharma Finance 3

ProCredit Bulgaria

ProCredit Serbia 2008‑1

Raiffeisen Leasing Polska

Rete Fidi Liguria

S‑Core 2008‑1

SIAGI

Slovene Enterprise Fund

SOCAMA

UniCredit Bank Hungary

Zephyros Finance

Total

Resources

Geographic focus

Signatures 

EC

EIF

EC

EIF

EIF

EC

EC

EC

EIF

EIF

EIF

EIF

EIF

EIF

EIF

EC

EC

EC

EC

EIF

France

Netherlands

Spain

Italy

Germany

Belgium

Germany

Spain

Multi‑country

Italy

Bulgaria

Serbia

Poland

Italy

Germany

France

Slovania

France

Hungary

Italy

45.0

60.0

322.0

254.2

10.0

22.2

146.0

98.3

109.9

13.8

20.0

50.0

33.5

88.4

44.4

48.8

16.5

575.0

35.0

150.0

2 142.9

33

European Investment Fund  |  Annual Report 2008 
European Investment Fund  |  Annual Report 2008 

A prime position in the guarantee and credit enhancement markets

Case study 
Zephyros Finance

Background

EIF guaranteed EUR 150m of senior asset‑backed notes issued by Zephyros Finance Srl, an Italian securitisation 
vehicle. The securitised portfolio consists of small ticket financial leases to SMEs originated by Commercio e Finanza 
S.p.A, a small and dynamic leasing company targeting SMEs as core clients and belonging to a regional mid‑sized 
bank, Cassa di Risparmio di Ferrara.

Transaction profile

The initial portfolio of EUR 381m consists of 8 340 lease contracts to SMEs operating in the South of Italy and in 
particular in the Campania region (25%), where the originator is based.

The transaction is a good example of the role that EIF can play in enhancing access to finance to SMEs through 
market‑oriented SME securitisation transactions. It also underlines EIF’s support to a regional originator operating in an 
Objective I area, where the levels of economic disparities and economic developmental needs are more pronounced.

With the EIF wrap it was possible to place the full amount of the guaranteed notes with market investors and to obtain 
medium‑term funding for the originator’s ongoing leasing operations.

Added value

•	

•	

•	
•	

•	

Facilitating access to capital markets for the originator which intends to use the proceeds of the transaction to 
continue developing its SME financing activity;
given the current market conditions, EIF’s involvement sends a strong, positive signal to market participants as to 
the ongoing EIF support for SME financing and the viability of publicly placed SME securitisation transactions;
a large portion of the leases are to SMEs operating in the South of Italy, an Objective I region;
the nature of the originator Commercio e Finanza, a small and dynamic leasing company targeting SMEs as 
core clients and belonging to a regional mid‑sized bank, Carife;
the envisaged replenishment features, which will allow the originator to include further leases in the securitised 
pool during the revolving period.

Notes

The EIF guarantee is in the form of a wrap covering timely payment of interest and ultimate repayment 
of principal of Class A1 Notes. Both classes of senior notes (A1 and A2) are rated Aaa/AAA by 
Moody’s and Fitch.

34

European Investment Fund  |  Annual Report 2008 

European Investment Fund  |  Annual Report 2008 

A prime position in the guarantee and credit enhancement markets

Case study 
MicroBank

Background

Microcredit is an essential start‑up tool for helping entrepreneurs create and develop their own businesses. 

EIF first partnered with MicroBank (a subsidiary of ”la Caixa” – the largest savings bank in Europe), in a microcredit 
deal providing access to finance to micro‑enterprises in Spain, in 2006. EIF and MicroBank recently signed a new 
agreement with a guarantee amount of EUR 98m, under the European Union's (EU) Competitiveness and Innovation 
Framework Programme (CIP). 

Profile

MicroBank is a social bank, primarily providing microcredit – through a network of 5 500 branches of “la Caixa” 
– and mentoring services to applicants with limited access to finance helping them to set up or develop their own 
business. A large number of its customers are micro‑entrepeneurs, unemployed or receiving social revenues.

MicroBank provides loans of up to EUR 25 000 to be reimbursed within a maximum time period of seven years. 
Entrepreneurs not only get a loan, but can also rely on free of charge mentoring services to finalise business plans, 
cope with administrative formalities, accounting requirements or to give them business advice through MicroBank’s 
partner bodies. MicroBank also created the internet based mentoring platform “the virtual campus”. 

Added value

•	

•	

The CIP guarantee risk‑sharing agreement will contribute to enhance MicroBank lending capacity to the benefit 
of microcredit borrowers; 
the combination of funding and mentoring services allows a high level of loan reimbursement and success rate 
of micro‑projects.

Notes

EIF’s goal is to make microfinance a fully‑fledged segment of the European financial sector, alongside 
the more traditional ways of banking. EIF has an essential role to play in pursuing the development of 
microfinance throughout the enlarged Union, thus pursuing core EU objectives such as entrepreneurship, 
growth and job creation.

35

Contents

4 Regional Business Development

JEREMIE implementation
JEREMIE state of play

38
39

4 Business Development 

Regional 

JEREMIE: Joint European Resources for Micro to Medium Enterprises

European Investment Fund  |  Annual Report 2008 
European Investment Fund  |  Annual Report 2008 

JEREMIE: Joint European Resources for Micro to Medium Enterprises

JEREMIE implementation

EUR 704m signatures at 31 December 2008

EU 27

Candidate Countries

EFTA Countries

Multi-Country / Other

Romania

Latvia *

Lithuania

Greece

Slovakia

Italy (Campania)

France 
(Languedoc‑Roussillon)

EURm

100

183

80

100

121

90

30

38

*  The Project Steering Committee of the JEREMIE Holding Fund for Latvia expressed an intent to reduce the size of the funding to 

EUR 91.5m on 30 January 2009. Slovakia Framework Agreement signed on 22 December 2008 for EUR 121.2m. 

European Investment Fund  |  Annual Report 2008 

European Investment Fund  |  Annual Report 2008 

JEREMIE: Joint European Resources for Micro to Medium Enterprises

JEREMIE state of play

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 intermediaries, by means of equity, 
loans or guarantees, through revolving Holding Funds. 
In accordance with the structural funds regulations, 
these Holding Funds can be managed either by the 
EIF or national institutions.

EIF  partnered  with  the  European  Commission, 
represented by DG REGIO, in 2006 to prepare the 
ground for this initiative and that partnership remains 
strong today. The first steps of the initiative included 
assessing the demand for SME financial instruments 
in regions and Member States (evaluation studies), 
assisting Managing Authorities in the programming 
phase of the cohesion policy and advising interested 
Managing Authorities on practical arrangements for 
the implementation of these JEREMIE funds.

By end 2008, EIF finalised 53 national and regional 
evaluation studies, marking the end of the evaluation 
and preparatory phase of the initiative.

The main JEREMIE benefits are:

•	

•	

Flexibility

: Contributions from the Operational 
Programmes to the JEREMIE Holding Fund will 
be 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 portfolio approach

: The Holding 
Fund will be able to re‑allocate the resources to 
one or more financial products in a flexible way, 
depending on the actual demand over time. The 
umbrella fund approach will allow a diversification 
of risks and expected returns due to financial 
products having different default rates, as well as 
active cash flow management to allow for a swift 
response to changing market requirements.

•	

•	

•	

•	

Recycling of funds

: The Holding Fund is of a 
revolving nature, receiving repayments from the 
financial intermediaries for further investments 
in the SME sector. This makes SME support via 
EU Structural Funds sustainable, unlike the pure 
grant approach.

Leverage

: A significant implied advantage of 
JEREMIE is its 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.

EIF’s expertise as a Holding Fund manager can be 
of particular added value in the lesser‑developed 
regions/Member States, where there is a need 
for capacity‑building initiatives and transfer of 
know‑how between local institutions and EIF.

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

A number of Member States and regions have formalised 
their cooperation with EIF. To date, JEREMIE agreements 
have been signed totalling EUR 704m. In 2008, 
agreements were signed with Romania (EUR 100m), 
Latvia (EUR 183m*), Lithuania (EUR 80m) and Slovakia 
(EUR 121m). Two regional agreements were signed, 
one in France, with Languedoc‑Roussillon (EUR 30m), 
and one in Italy, with Campania (EUR 90m). The 
JEREMIE Holding Funds, managed by EIF, will provide 
a wide range of financial instruments for SMEs, such as 
microcredit, guarantees, venture capital and equity‑type 
instruments, or export‑credit insurance.

39

Contents

5 Mandate Management, Product Development and Incubation

JASMINE
Mezzanine

42
43

Mandate
Management, Product 

5 Development and Incubation 

Pilot products for the future

European Investment Fund  |  Annual Report 2008 
European Investment Fund  |  Annual Report 2008 

Pilot products for the future

JASMINE

JASMINE (“Joint Action to Support Microfinance 
Institutions in Europe”) is a new EU initiative promoted 
by the European Commission, at the end of 2007, 
which aims at the development of microcredit for 
entrepreneurs that are otherwise excluded from the 
banking sector in the EU. 

Within the framework of the initiative, EIF will manage 
a two‑year pilot facility to provide funding (equity and 
loans) and technical assistance to microcredit providers 
in the EU and Candidate Countries. For the funding, 
EIB has already committed EUR 20m through the Risk 
Capital Mandate (RCM), while technical assistance will 
be financed by the EC. Overall, the facility is expected 
to pool more than EUR 50m from a wide range of 
financial institutions, the European Commission and 
the European Parliament. 

Evaluation studies have been conducted in 2008 to 
assess the demand and supply for microcredit in 12 EU 
countries by the European Microfinance Network 
and the Microfinance Centre, on behalf of the EIF. 
The overall estimated demand amounts to EUR 6bn in 
potential microcredit borrowers in the EU *.

Compared to the microfinance markets in South Asia, 
South America or Africa, the European market is less 
developed, highly heterogeneous and disposes of 
limited resources. However, the microcredit landscape 
of Europe is changing, notably in new Member 
States and some western countries, usually when the 
regulatory framework is conducive to this activity, with 
microcredit institutions aiming at self sustainability, 
increased microlending capacity and, in some cases, 
transformation into banks. 

Against this background, JASMINE will target a wide 
range of microcredit providers to adapt to specific 
market conditions and identify the most suitable 
structures which will provide the optimal benefit for 
target microfinance institutions and microentrepreneurs. 
By equipping those microcredit institutions with state‑
of‑the art internal processes, such as risk management 
techniques or lending policies, and additional funding 
capacity, this initiative will contribute to supporting 
some 10 to 15 microcredit institutions across the EU 
and help bridge the gap between microcredit providers 
and the banking sector.

42
42

* http://eur‑lex.europa.eu/LexUriServ/site/en/com/2007/com2007_0708en01.pdf (p.18)

European Investment Fund  |  Annual Report 2008 

European Investment Fund  |  Annual Report 2008 

Pilot products for the future

Mezzanine

In December 2008, after extensive consultation with 
market participants, the EIB approved a Mezzanine 
Facility for Growth mandate asking EIF to invest 
EUR 1bn in hybrid debt/equity funds over the coming 
three years. 

This facility by nature complements the existing EIF 
mandates, the EIB Risk Capital Mandate (RCM), the 
European Commission programmes and all the other 
mandates managed by the EIF. 

The mezzanine facility will enlarge EIF’s product 
offering. It aims at filling the SME or MidCaps financing 
gap by providing hybrid debt/equity products for 

the benefit of mature European small companies 
with strong market positions and further scope for 
growth, as well as high technology companies in their 
expansion stage. 

EIF’s experience as a fund of funds manager promoting 
best market practice will ensure efficient deployment 
of the facility.

EIF investment in mezzanine funds will send a positive 
signal to the markets, directly contributing to the EIB 
objective of promoting access to finance for companies 
facing difficulties in raising liquidities.

43

Contents

6 Governing bodies and key people

Capital and shareholders
Board of Directors
Management and key people
Audit Board
Audit and controls
Risk management
EIF Compliance and Operational Risk

46
48
50
52
53
54
55

6     Governance 

Governing bodies and key people

European Investment Fund  |  Annual Report 2008 
European Investment Fund  |  Annual Report 2008 

Governing bodies and key people

Capital and shareholders *

EIF has an authorised capital of EUR 3 000m, divided 
into 3 000 shares of EUR 1m each. On 31 December 
2008, 135 of these shares were authorised but not 
yet issued. Of the issued 2 865, EIB held 63.6%, the 
European Community represented by the European 

Commission  27.4%  and  a  number  of  European 
banks and financial institutions 9%. It is planned that 
the EU will gradually increase its shareholding to 
30% of the total.

Country

Financial Institutions

No. of shares

Austria

Bulgaria

Croatia

Denmark

Finland

France

Germany

Bank Austria Creditanstalt AG

Erste Bank der Osterreichishen Sparkassen AG

Raiffeisen Zentralbank Oesterreich AG

Raiffeisen International Bank‑Holding AG

Bulgarian Development Bank A.D.

Croatian Bank for Reconstruction and Development (HBOR)

Vaekstfonden

FIH

Finnvera Plc

Caisse des Dépôts et Consignations (CDC)

Dexia Credit Local

Kreditanstalt für Wiederaufbau

Landeskreditbank Baden‑Wüttenberg‑Förderbank

LfA Förderbank Bayern

Nordrhein‑Westfalen Bank (NRW.BANK)

Sächsische Aufbaubank ‑ Förderbank (SAB)

46

* at 31 December 2008

11

3

3

3

2

3

5

3

8

6

30

10

91

68

8

7

3

5

European Investment Fund  |  Annual Report 2008 

European Investment Fund  |  Annual Report 2008 

Governing bodies and key people

Hungary

Italy

Luxembourg

Malta

Netherlands

Portugal

Spain

Sweden

Turkey

Hungarian Development Bank Ltd

Dexia Crediop S.p.A.

IMI Investimenti S.p.A.

Intesa Sanpaolo S.p.A.

Banque et Caisse d'Epargne de l'Etat

BIP Investment Partners S.A.

Bank of Valletta p.l.c.

NIBC

Banco BPI S.A.

Instituto de Crédito Oficial (ICO)

Agencia de Innovación y Desarrollo de Andalucía (IDEA)

Stiftelsen Industrifonden

Industrial Development Bank of Turkey (TSKB)

United Kingdom

Barclays Bank PLC

Scottish Enterprise

Total

5

5

15

8

5

4

8

3

9

8

4

3

5

5

3

257

47

European Investment Fund  |  Annual Report 2008 
European Investment Fund  |  Annual Report 2008 

Governing bodies and key people

Board of Directors *

Philippe MAYSTADT

Philippe de FONTAINE VIVE CURTAZ

David McGLUE

Tytti NORAS

Werner OERTER

Ralph MÜLLER

Heinz ZOUREK

48

* at 24 April 2009

European Investment Fund  |  Annual Report 2008 

European Investment Fund  |  Annual Report 2008 

Governing bodies and key people

Chairman

Philippe MAYSTADT

President, European Investment Bank, Luxembourg

Members

Philippe de FONTAINE VIVE CURTAZ

Vice‑President, European Investment Bank, Luxembourg

David McGLUE

Ralph MÜLLER

Former Director, Directorate for Financial Operations, Programme 
Management and Liaison with the EIB Group, Directorate‑General for 
Economic and Financial Affairs, European Commission, Luxembourg

Ministerialrat, Leiter des Referates Haushalt der EU und der 
EIB Gruppe, Bundesministerium der Finanzen, Berlin

Tytti NORAS

Legal Counsellor, Ministry of Finance, Helsinki

Werner OERTER

Heinz ZOUREK

Alternates

Dirk AHNER

Senior Vice President, Head of the SME Division, 
KfW Bankengruppe, Frankfurt/Main

Director General, Directorate‑General for Enterprise 
and Industry, European Commission, Brussels

Director General, Directorate‑General for Regional 
Policy, European Commission, Brussels

Marc AUBERGER

Directeur Général, CDC Capital Investissement, Paris

Peter BASCH

Thomas HACKETT

Rémy JACOB

Acting Director, Directorate for Financial Operations, Programme 
Management and Liaison with the EIB Group, Directorate‑General for 
Economic and Financial Affairs, European Commission, Luxembourg

Director General, Directorate for Bank Lending 
Operations in the European Union and Candidate 
Countries, European Investment Bank, Luxembourg

Director General, Strategy and Corporate Centre, 
European Investment Bank, Luxembourg

Gaston REINESCH

Director General, Ministry of Finance, Luxembourg 

49

European Investment Fund  |  Annual Report 2008 
European Investment Fund  |  Annual Report 2008 

Governing bodies and key people

Management and key people *

1

5

9

2

6

3

7

10

11

4

8

Chief Executive: Richard PELLY 1
Deputy Chief Executive: Jean‑Marie MAGNETTE 2
Secretary: Maria LEANDER 3

Director, Transaction and Relationship Management: John A. HOLLOWAY 4
Transaction and Relationship Management (TRM)
Head of Lower Mid-Market: Jean‑Philippe BURCKLEN 5
Principal: Christine PANIER 6
Head of Venture Capital: Ulrich GRABENWARTER 7
Deputy Head: David WALKER 8
Head of ERP Team: Matthias UMMENHOFER 9
Head of Guarantees and Securitisation: Alessandro TAPPI 10
Deputy Head: Christa KARIS 11

Project and Change Management Office (PCMO)
Management Advisor: José GRINCHO 12

50

* at 24 April 2009

European Investment Fund  |  Annual Report 2008 

European Investment Fund  |  Annual Report 2008 

Governing bodies and key people

12

13

14

15

16

17

18

19

20

Director, Mandate Management, Product Development and Incubation: Marc SCHUBLIN 13
Mandate Management, Product Development and Incubation (MMPDI)
Head of Product Development and Incubation: Jacques DARCY 14
Head of Mandate Management: Birthe BRUHN‑LEON 15

Regional Business Development (RBD)
Head of RBD: Hubert COTTOGNI 16

Risk Management and Monitoring (RMM)
Head of RMM: Federico GALIZIA 17

Finance
Head of Finance: Frédérique SCHEPENS 18

Legal
Head of Legal: Maria LEANDER 3
Deputy Head: Marco MARRONE 19

Compliance
Head of Compliance: Jobst NEUSS 20

51

European Investment Fund  |  Annual Report 2008 
European Investment Fund  |  Annual Report 2008 

Governing bodies and key people

Audit Board *

Chairman: Tony MURPHY

Head of Unit, Internal Audit,  
Directorate‑General for Economic and Financial 
Affairs, European Commission, Luxembourg

Member: Ortwin KLAPPER 
Former Chief Executive Officer, 
Bank Austria Creditanstalt Leasing Group

Member: Gabriela PANTRING 

Managing Director, Head of Corporate 
Steering, NRW.BANK, Düsseldorf

The Audit Board prepares an Activity Report to the General Shareholders Annual Meeting for the preceding financial 
year. The report essentially reviews both internal and external audit work of the year, as well as co‑operation with the 
European Court of Auditors, and it assesses the Fund’s actions in response to the last Audit Board’s recommendations. 
The full Activity Report is available via EIF’s website: www.eif.org

52

* at 24 April 2009

 
 
European Investment Fund  |  Annual Report 2008 

European Investment Fund  |  Annual Report 2008 

Governing bodies and key people

Audit and controls

EIF's principal audit and control mechanisms include 
both internal and external auditors working under the 
supervision of the Audit Board, which maintains the 
independence and integrity of the audit function. The 
audit of EIF's accounts is in principle the duty of the 
Audit Board, as stated in EIF's Statutes (Article 22) and 
Rules of Procedure (Article 17). The Audit Board may 
have recourse to the external auditors as stated in the 
Rules of Procedure (Article 19).

In early 2009, EIF's Rules of Procedure were modified 
to align the description of the Audit Board's remit 
contained in the Rules of Procedure with the Statutes. 
This was carried out in order to clarify the conditions 
under  which  the  Audit  Board  issues  its  yearly 
statement on audited accounts and to clarify the Audit 
Board’s remit regarding audit tasks not referred to 
in the Statutes.

EIF's internal and external auditors liaise with the internal 
and external auditors of EIB, and those of the European 
Commission, with regard to the fiduciary mandates.

EIF is also audited by the European Court of Auditors 
for programmes mandated to EIF by the European 
Commission. In relation to the European Commission's 
shareholder participation in EIF, the Court of Auditors 
operates within a specific tripartite agreement that 
permits the audit of the participation's value.

In 2008, following the decision by the Audit Board to 
pursue a common audit firm with EIB (this was made 

possible by the existence of a termination clause 
foreseen for this event in the current external audit 
contract), a Group joint invitation to tender exercise 
was launched. The EIF Audit Board and the EIB 
Audit Committee followed the consultation procedure 
required by their respective Rules of Procedure and the 
contract was awarded to a new EIB Group external 
auditor for a period of four years, commencing with 
the audit of the financial statements of the Fund for year 
ending 31 December 2009, with a possibility of an 
extension for no more than three years.

The audit methodology used at EIF is the External 
Control  Framework  mechanism  that  covers  all 
key  business  processes.  EIF  equally  operates  a 
comprehensive Internal Control Framework with its 
internal auditor.

Efforts are being made to close an outstanding issue 
in connection with a portfolio guarantee provided 
on behalf of the European Commission, under a 
mandate granted to EIF. This issue is expected to be 
resolved, including any financial implication, in the 
course of 2009.

The Audit Board conducts its activity following the 
standards of the audit profession and has produced an 
Annual Activity Report based on Audit Board activities. 
The Audit Board Charter and the Annual Activity Report 
are published on EIF's website.

53

European Investment Fund  |  Annual Report 2008 
European Investment Fund  |  Annual Report 2008 

Governing bodies and key people

Risk management

Risk management is an integral component of the 
corporate culture at EIF. Though EIF pursues European 
Union policy objectives, it acts commercially under 
market conditions with the statutory obligation to ensure 
an appropriate return for its shareholders. Its businesses 
require the development of market instruments that 
entail certain risks. Hence, a risk management mindset 
needs to permeate all areas of EIF’s business functions 
and processes.

Thanks to this state of organisational risk awareness and 
readiness, EIF was able to rapidly increase its response 
as the financial crisis deepened and spread over the 
course of 2008. At the level of single transactions, 
monitoring efforts were stepped up. At the portfolio 
level, more severe structured stress tests were applied 
and communicated to EIF’s governing bodies.

A detailed overview of EIF’s risk management activities, 
the impact of the crisis and the additional risk mitigation 
measures put in place as a response can be found 
in section 3 of the notes to the annual accounts for 
IFRS 7. This section contains further details on EIF’s 
risk assessment for venture capital, portfolio guarantees 
and treasury activities, covering credit, liquidity and 
market risks.

In what follows, we restrict ourselves to highlighting 
the key organisational responsibilities and activities 
pertaining to risk management. This well established 
setup  has  proven  valuable  in  attending  to  an 
increasingly difficult external environment.

The senior management for EIF ensures that risk 
management  is  implemented  according  to  best 
practice and “four eyes principle”. An independent 
Risk Management function, the Risk Management and 
Monitoring (RMM) division, is under the responsibility of 
the Deputy Chief Executive and directly reports to him. 
However, the role of risk management at EIF does not 
rest exclusively with one division. All of EIF’s functions 
are involved in the process, which includes notably a 
constant collaboration between the RMM division and 
Transaction and Relationship Management (TRM) on 
transactions risk‑return assessment or pricing.

The  main  tasks  of  the  RMM  division  consist  in 
reviewing and facilitating the implementation of new 
processes and methodologies to access the risk‑return 
profile of the Fund’s investment activities. As part of the 
new investment proposals process, the RMM division 
performs an independent analysis of each transaction 
and issues an opinion to the Investment and Risk 
Committee. In this context, it reviews credit ratings 
(portfolio guarantees) and expected performance 
gradings (private equity) assigned by the front office 
to these investments. RMM is responsible for the 
monitoring of guarantee activities under the European 
Commission’s mandates. Moreover, RMM performs 
portfolio reviews for EIF’s private equity investments 
and guarantee instruments.

54

European Investment Fund  |  Annual Report 2008 

European Investment Fund  |  Annual Report 2008 

Governing bodies and key people

EIF Compliance and Operational Risk

Following  the  modification  of  EIF’s  governance 
structure, the reporting line of the Compliance function 
was shifted to the Deputy Chief Executive. This direct 
link to a statutory organ of EIF strengthened the 
organisational integration and independence of the 
Compliance function.

As  a  result  of  the  internal  reorganisation,  the 
Compliance function became responsible for the 
co‑ordination of operational risk within the Fund. This 
task is performed in close co‑operation with the EIF 
Risk Management and Monitoring division and the 
Operational Risk function in EIB. The Head of the 
Compliance function has furthermore assumed the role 
of the Data Protection Officer.

The remit of the Compliance function follows the 
principles of the integrity policy of the EIB Group and is 
based on the standards issued by the Basel Committee 
on Banking Regulation.

In line with the requirements of the EIF Board of 
Directors, all transaction proposals submitted to 
the Board of Directors must contain a compliance 
position related, at least, to (i) integrity checks on EIF's 
counterparts and, where applicable, co‑investors, 
(ii) a verification of the regulatory status of EIF's 
counterparts and (iii) a verification of compliance with 
the applicable policy guidelines.

It is furthermore part of the remit of the Compliance 
function  to  assess  the  compliance  of  proposed 
tenders for supplies, services or works with applicable 
procurement law. This has become particularly important 
in the context of the increasing number of Funding 
Agreements entered into under the JEREMIE initiative.

In 2008, the Compliance function played a key role 
in relation to various policy proposals which were 
approved by the EIF Board of Directors:

•	

•	

•	

•	

the fund of funds guidelines set the framework 
parameters for the involvement of EIF in fund of 
funds structures;

the revised EIF Staff Code of Conduct updated the 
conduct rules applicable to EIF staff on the basis 
of the revised Staff Code of Conduct implemented 
in EIB in 2006;

the EIF Anti‑Fraud Policy set out the principles 
followed by EIF in relation to fraud, corruption, 
money laundering and the financing of terrorism 
and other illegal practices;

the EIF Offshore Policy explained the assessment 
standards applied by EIF to investments involving 
offshore or cross‑border elements.

•	

for the first time, an inventory of operational risk was 
established for events that occurred in 2007.

The Compliance function was reinforced in 2008 
through one additional staff member and a further 
increase is foreseen for the year 2009 with the 
recruitment of one post to focus on operational risk 
and compliance issues.

EIF also provides compliance assessment services to third 
party mandates managed or advised by the Fund. In this 
context, specific attention was paid to the establishment 
of  Anti‑Money  Laundering/Know‑Your‑Customer 
procedures for the Spanish fund of funds NEOTEC, in 
order to align these procedures with the requirements 
of national law.

55

Contents

7 IFRS financial statements 2008
Independent Auditor's Report
Statement by the Audit Board
Balance sheet, income statement, cash flow statement, statement of changes in equity
Notes to the accounts

58
59
60
64

s
t
n
e
m
e
a
t
s

t

l

i

a
c
n
a
n
fi

7     Finance 

IFRS financial statements 2008

 
European Investment Fund  |  Annual Report 2008 
European Investment Fund  |  Annual Report 2008 

Financial statements 2008

Independent Auditor's Report

To the Audit Board of the
EUROPEAN INVESTMENT FUND
96 boulevard Konrad Adenauer L-2968 Luxembourg

Following our appointment by the Audit Board, we have audited the accompanying financial statements of the 
European Investment Fund, which comprise the balance sheet as at 31 December 2008, and the income statement, 
statement of changes in equity and cash flow statement for the year then ended, and a summary of significant 
accounting policies and other explanatory notes.

Management responsibility for the financial statement

The Management is responsible for the preparation and fair presentation of these financial statements in accordance 
with International Financial Reporting Standards as adopted by the European Union. This responsibility includes: 
designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial 
statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate 
accounting policies; and making accounting estimates that are reasonable in the circumstances.

Responsibility of the “Réviseur d’Entreprises”

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit 
in accordance with International Standards on Auditing as adopted by the “Institut des Réviseurs d’Entreprises”. Those 
standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable 
assurance whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial 
statements. The procedures selected depend on the judgement of the “Réviseur d’Entreprises”, including the assessment 
of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those 
risk assessments, the “Réviseur d’Entreprises” considers internal control relevant to the entity’s preparation and fair 
presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, 
but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control.

An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting 
estimates made by the Management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for 
our audit opinion.

Opinion

In our opinion, the financial statements give a true and fair view of the financial position of the European Investment 
Fund as of 31 December 2008, and of its financial performance and its cash flows for the year then ended in 
accordance with International Financial Reporting Standards as adopted by the European Union.

ERNST and YOUNG
Société Anonyme
Réviseur d’Entreprises

58

Luxembourg, 10 March 2009
Olivier Jordant                                         Alain Kinsch

European Investment Fund  |  Annual Report 2008 

European Investment Fund  |  Annual Report 2008 

Financial statements 2008

Statement by the Audit Board 

The Audit Board, set up pursuant to article 22 of the Statutes of the European Investment Fund (ElF), 

•	

acting in accordance with the customary standards of the audit profession, 

•	

•	

•	

•	

•	

•	

having designated ERNST & YOUNG Société Anonyme Réviseur d’Entreprises as external auditor of the ElF 
pursuant to Art. 19 of the Rules of Procedure, 

having studied the financial statements and such documents which it deemed necessary to examine in the 
discharge of its duties,

having examined and discussed the report dated 10 March 2009 drawn up by ERNST & YOUNG Société 
Anonyme Réviseur d’Entreprises, 

noting that this report gives an unqualified opinion on the financial statements of ElF for the financial period 
ending 31 December 2008,

having examined and discussed reports and opinions issued by the EIF’s Internal Audit, Risk Management and 
Compliance and Operational Risk functions, 

having received assurance from the Chief Executive in particular concerning the effectiveness of the internal 
control systems, risk management and internal administration,

considering Articles 17, 18 and 19 of the Rules of Procedure, 

hereby confirms that to the best of its knowledge and judgement,

•	

•	

the operations of the Fund have been carried out in compliance with the formalities and procedures laid down 
in the Statutes and the Rules of Procedure; 

the financial statements, comprising the balance sheet, income statements, cash flow statement, statement of 
changes in equity, and notes to the accounts of the European Investment Fund give a true and fair view of 
the financial position of the Fund as regards its assets and liabilities, and of the results of its operations for the 
financial year under review. 

Tony Murphy  

Gabriela Pantring   

Ortwin Klapper

Luxembourg, 10 March 2009
THE AUDIT BOARD 

59

 
 
 
European Investment Fund  |  Annual Report 2008 
European Investment Fund  |  Annual Report 2008 

Financial statements 2008

Balance sheet 

at 31 December 2008

EUR

Assets

Cash and cash equivalents

Investments: 

Debt securities and other fixed income securities 

Shares and other variable income securities

Non‑current assets held for sale

Other assets

Intangible assets

Property and equipment

Total assets

Liabilities

Financial liabilities

Financial guarantees

Derivatives

Provisions for guarantees

Retirement benefit obligations

Other liabilities and provisions

Total liabilities

Equity

Share capital

Subscribed

Uncalled

Share premium

Statutory reserve

Retained earnings

Fair value reserve

Profit for the financial year

Total equity

Total equity and liabilities

Notes

4.1

31.12.2008

31.12.2007

383 502 584

291 604 538

4.2

4.3

4.4

4.5

4.6

4.7

Notes

5.1

5.2

5.3

5.4

Notes

5.5

5.6

5.6

5.7

5.6

495 733 011

522 470 401

158 714 823

167 876 521

654 447 834

690 346 922

7 139 812

0

28 465 987

33 072 223

1 869 793

433 673

1 161 484

8 245 595

1 075 859 683

1 024 430 762

31.12.2008

31.12.2007

18 990 527

11 439 133

2 604 242

8 983 874

1 579 264

5 056 087

30 578 643

18 074 484

16 984 934

13 232 407

14 223 570

61 787 147

7 758 556

39 065 447

31.12.2008

31.12.2007

2 865 000 000

2 770 000 000

(2 292 000 000)

(2 216 000 000)

573 000 000

554 000 000

132 012 377

117 909 669

124 490 745

104 329 810

146 435 341

136 353 969

3 022 993

22 369 530

35 111 080

50 402 337

1 014 072 536

985 365 315

1 075 859 683

1 024 430 762

The notes on pages 64 to 127 are an integral part of these financial statements.

60

European Investment Fund  |  Annual Report 2008 

European Investment Fund  |  Annual Report 2008 

Financial statements 2008

Income statement 

for the year ended 31 December 2008

EUR

Income statement

Net interest and similar income

Income from securities

Income from investments in shares and 
other variable income securities

Net income from guarantee operations

Commission income

Net loss on financial operations

Other operating income

General administrative expenses

Staff costs:

‑ wages and salaries

‑ social security costs

Other administrative expenses

Notes

31.12.2008

31.12.2007

7.1

38 494 827

30 231 070

4 598 262

6 674 654

18 492 375

21 349 024

23 405 855

29 072 382

(5 081 325)

(1 020 711)

24 675

18 955

4.3

7.2

7.3

7.4

7.5

(19 241 179)

(17 317 160)

(3 237 576)

(2 130 900)

(22 478 755)

(19 448 060)

(7 546 298)

(6 665 063)

(30 025 053)

(26 113 123)

Depreciation of property, plant and 
equipment and intangible assets

Impairment losses on available‑for‑sale investments

Profit for the financial year

4.6; 4.7

(894 486)

(1 219 062)

(13 904 050)

(8 590 852)

35 111 080

50 402 337

The notes on pages 64 to 127 are an integral part of these financial statements.

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Financial statements 2008

Cash flow statement 

for the year ended 31 December 2008

EUR

A - Cash flow from operating activities

Notes

Profit for the financial year *

Increase in accrued interest on debt securities

Interest received from debt securities

Impairment on debt securities and 
other fixed income securities

Increase in shares and other variable income securities

Impairment on shares and other variable income securities

4.2

4.2

4.3

4.3

31.12.2008

35 111 080

1 266 700

31.12.2007

50 402 337

465 186

(26 172 698)

(17 648 283)

98 579

197 156

(23 700 054)

(28 789 755)

13 904 051

8 393 697

1 219 062

Depreciation for intangible assets, property and equipment

4.6; 4.7

894 486

Increase in other assets

Increase in retirement benefit obligations

Decrease in effective interest rate on debt securities portfolio

Decrease/(increase) in other liabilities and provisions

Decrease/(increase) in amortization of financial guarantees

Increase in fair value of Derivatives

Provisions for guarantees

Net cash from operating activities

B - Cash flow from investing activities

Purchase of intangible assets

Net movements on purchase of 
property, plant and equipment

Interest received from debt securities

Decreases/(increases) in debt securities 
and other fixed income securities

Net cash from investing activities

C - Cash flow from financing activities

Dividends paid

Capital increase

Net cash from financing activities

4.5

5.3

5.4

Notes

4.6

4.7

Notes

5.6

4 917 312

(13 149 978)

3 752 527

(1 065 404)

6 465 014

7 551 394

1 024 978

3 927 787

3 053 499

(4 187 074)

(1 050 152)

(3 788 076)

435 564

0

27 975 752

(4 446 817)

31.12.2008

31.12.2007

(998 769)

(892 952)

(242 993)

(289 576)

26 172 698

17 648 283

26 048 680

(12 990 590)

50 979 616

3 475 165

31.12.2008

31.12.2007

(20 160 030)

(19 430 000)

33 102 708

259 139 527

12 942 678

239 709 527

Summary statement of cash flows

Notes

31.12.2008

31.12.2007

Cash and cash equivalents at beginning of financial year

291 604 538

52 866 663

Net cash from

Operating activities

Investing activities

Financing activities

27 975 752

(4 446 817)

50 979 616

3 475 165

12 942 678

239 709 527

Cash and cash equivalents at the end of financial year

4.1

383 502 584

291 604 538

The notes on pages 64 to 127 are an integral part of these financial statements.

62

* Profit for the financial year includes dividends received of EUR 4 598 262 (2007: EUR 6 674 654)

 
European Investment Fund  |  Annual Report 2008 

European Investment Fund  |  Annual Report 2008 

Financial statements 2008

Statement of changes in equity 

for the year ended 31 December 2008

EUR

Note

Subscribed
capital

Callable
capital

Share
capital

Share 
premium

Statutory
reserve

Retained
earnings

Fair value
reserve

Profit for the 
year before 
appropriation

Total equity

Balance as at 
01.01.2007 

Appropriation of 
prior year's profit 
inc. dividend

5.6

2 000 000 000 (1 600 000 000)

400 000 000

12 770 142

84 899 624 126 638 689

19 635 766

48 575 466

692 519 687

0

0

0

0 19 430 186

9 715 280

0 (48 575 466)

(19 430 000)

Share issue

5.5 770 000 000

(616 000 000) 154 000 000 105 139 527

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0 259 139 527

2 733 764

0

2 733 764

0

50 402 337

50 402 337

2 770 000 000 (2 216 000 000)

554 000 000

117 909 669 104 329 810 136 353 969

22 369 530

50 402 337

985 365 315

0

0

0

0 20 160 935 10 081 372

0 (50 402 337)

(20 160 030)

Share issue

5.5

95 000 000

(76 000 000)

19 000 000

14 102 708

0

0

0

0

0

0

0

0

0

0

0

0

0

0 (19 346 537)

0

0

33 102 708

(19 346 536)

0

0

35 111 080

35 111 080

2 865 000 000 (2 292 000 000)

573 000 000

132 012 377 124 490 745 146 435 341

3 022 993

35 111 080 1 014 072 536

Fair value 
reserve

5.7

Profit for the year

Balance as at 
31.12.2007

Appropriation of 
prior year's profit 
inc. dividend

5.6

Fair value 
reserve

5.7

Profit for the year

Balance as at 
31.12.2008

The notes on pages 64 to 127 are an integral part of these financial statements.

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Financial statements 2008

Notes to the accounts 

for the year ended 31 December 2008 (in EUR)

1. General

The EUROPEAN INVESTMENT FUND (hereafter the "Fund" or “EIF”) was incorporated on 14 June 1994, in 
Luxembourg, as an international financial institution. The address of its registered office is 96, boulevard Konrad 
Adenauer, L‑2968 Luxembourg.

The primary task of the Fund, while providing adequate return on equity, is to contribute to the pursuit of European 
Community objectives through:

•	
•	
•	
•	

the provision of guarantees to financial institutions that cover credits to small and medium sized entities ”SME”;
the acquisition, holding, managing and disposal of equity participations;
the administration of special resources entrusted by third parties; and
related activities.

The Fund operates as a partnership of which the members are the European Investment Bank (hereafter the “EIB”), 
the European Union, represented by the Commission of the European Communities (the “Commission”), and a group 
of financial institutions of Member States of the European Union and of two candidate countries. The members of 
the Fund shall be liable for the obligations of the Fund only up to the amount of their share of the capital subscribed 
and not paid in.

The financial year of the Fund runs from 1 January to 31 December each year.

The EIB has a majority shareholding in the Fund. Consequently the Fund is included in the consolidated accounts of 
the EIB Group. The consolidated accounts may be obtained from the registered office of the EIB at 100, boulevard 
Konrad Adenauer, L‑2950 Luxembourg.

The Fund’s financial statements have been authorised for issue by the Board of Directors on 10 March 2009.

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Financial statements 2008

2.  Significant accounting policies and basis of preparation

2.1 Basis of preparation

The Fund’s financial statements have been prepared in accordance with International Financial Reporting Standards 
(IFRS), as issued by the International Accounting Standards Board (IASB) and endorsed by the European Union.

The financial statements have been prepared under the historical cost convention, as modified by the revaluation of 
available‑for‑sale financial assets, financial assets and financial liabilities at fair value through profit or loss including 
all derivative contracts which are valued at fair‑value.

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. 
It also requires management to exercise its judgement in the process of applying the Fund's policies. The areas 
involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant 
to the financial statements, are disclosed in more detail below. Use of available information and application of 
judgement are inherent in the formation of estimates. Actual results in the future could differ from such estimates and 
the differences may be material to the financial statements.

Statement of compliance

The Fund’s financial statements have been prepared in accordance with International Financial Reporting Standards 
(IFRS) as adopted by the European Union.

Changes in presentation

The accounting policies adopted are consistent with those used in the previous year. Compared to the previous 
year, changes have been made in the presentation and classification of the guarantees (Note 5.1) and the foreign 
exchange impact on impaired available‑for‑sale investments (Note 4.3):

 ‑

Guarantees operations which were disclosed on a gross basis in the caption “Financial Guarantees receivables” 
on the assets side of the balance sheet and in the caption “Financial Guarantees payables” on the liabilities 
side of the balance sheet as of 31 December 2007, are presented on a net basis as of 31 December 2008. 
For comparative purposes the same presentation was applied as of 31 December 2007. 

The change of presentation has the effect of reducing the total assets by EUR 66 210 505 (2007: EUR 48 592 549). 
The change has no impact on the income statement and on the statement of changes equity as of 31 December 
2008 and 31 December 2007. In addition, a change in the disclosure of Derivatives operations at 31 December 
2007  in the balance sheet has been made and has resulted in the reclassification of EUR 435 130 from caption 
“Assets” to “Liabilities”.

 ‑

Foreign exchange impact on impaired available‑for‑sale investments which was accounted for in the caption 
“net loss on financial operations” as of 31 December 2007 are integrated in the caption “impairment losses 
on available‑for sale investments” as of 31 December 2008. For comparative purposes the same presentation 
was applied as of 31 December 2007.

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Financial statements 2008

The change of presentation has the effect of a transfer of EUR 1 443 626 (2007: EUR 888 169) from “net loss 
on financial operations” to “impairment losses on available for sale investments”. The change has no impact on the 
balance sheet, the statement of changes in equity and on profit for the financial year.

2.2 Foreign currency translation

The Euro (EUR) is the functional and presentation currency.

Non‑monetary items, which include “Intangible assets” and “Tangible assets” denominated in a foreign currency, are 
reported using the exchange rate at the date of the transaction (historical cost). Exchange differences on non‑monetary 
financial assets are a component of the change in their fair value. Depending on the classification of a non‑monetary 
financial asset, exchange differences are either recognized in the income statement or within the equity reserves. 
Non‑monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date 
when the fair value is determined.

Monetary items, which include all other assets and liabilities expressed in a currency other than EUR are reported 
using the closing foreign exchange rate ruling on the date of the closure of the financial statements, as issued by 
the European Central Bank. The exchange differences are recognised in the income statement in the period in 
which they arise.

Income and charges in foreign currencies are translated into EUR at the exchange rate ruling on the date of 
the transaction.

2.3 Investments

2.3.1  CLASSIFICATION AND MEASUREMENT

Classification

The Fund classifies the investments in debt securities and shares in the category "Available For Sale" financial assets 
(“AFS”). The classification of the investments is determined at initial recognition.

AFS financial assets are non‑derivative financial instruments that are either designated in this category at initial 
recognition or not classified in any other categories.

Initial recognition and derecognition

Purchases and sales of AFS financial assets are initially recognised on trade date. They are initially recognised at 
fair value plus transaction costs. Fair value consideration is explained in the section below.

Financial assets are derecognised when the right to receive cash flows from the financial assets has expired or where 
the EIF has substantially transferred all risks and rewards of ownership.

Subsequent measurement

AFS financial assets are subsequently measured at fair value. Changes in fair value of financial assets classified as 
AFS are directly recognised in the fair value reserve in the equity section of the balance sheet, until the financial asset 

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Financial statements 2008

is derecognised or impaired. At this time, the cumulative gain or loss previously recognised in equity is recognised 
in the income statement.

Interest on AFS debt securities and other fixed income securities is calculated using the effective interest method and 
is recognised in the income statements. Dividends on equity investments are recognised in the income statement when 
the Fund’s right to receive payment is established.

Differences from currency translation from non‑monetary financial assets, such as equity instruments, are recognised 
in the fair value reserve in equity.

Impairment of financial assets

EIF assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of 
financial assets is impaired. For equity securities, a significant or prolonged decline in the fair value of the security 
below its cost is considered in determining whether the securities are impaired. If any such evidence exists for AFS 
financial assets, the cumulative loss – measured as the difference between the acquisition cost and the current fair 
value, less any impairment loss on that financial asset previously recognised in the income statement – is removed 
from reserves and recognised in the income statement. Impairment losses on equity instruments previously recognised 
in the income statement are not reversed through the income statement. In contrast, if in a subsequent period, the 
fair value of a debt instrument classified as AFS increases and the increase can be objectively related to an event 
occurring after the impairment loss was recognised, the impairment loss is reversed through the income statement.

2.3.2  INVESTMENTS IN SHARES AND OTHER VARIABLE INCOME SECURITIES

Investments in venture capital funds are included in “Shares and other variable income securities”. They are acquired 
for the longer term in the normal course of the Fund’s activities.

a) Fair value considerations:

Under the valuation technique, the fair value of venture capital (VC) funds is achieved by applying the aggregated 
Net Asset Value (NAV) method. This valuation method implicitly assumes that if the NAVs of underlying funds can be 
considered as equivalent to the fair value as determined under IAS 39, then the aggregation of the NAVs of all funds 
will itself be equivalent to the fair value as determined under IAS 39. If IAS 39 rules have not been followed, other 
guidelines might be acceptable (for example the International Private Equity and Centure Capital Valuation Guidelines, 
IPEV Guidelines, as published by the EVCA) and more detailed monitoring and review will be required.

In accordance with this method, the funds are classified into three categories:

•	

Category I

•	

Category II 

–     funds that have adopted the fair value requirements of IAS 39 or IPEV Guidelines for which 
a specific review is performed to ensure that the NAV is a reliable estimate of fair value.
–     funds that have adopted other valuation guidelines (such as the former 2001 EVCA) or 
standards that can be considered as in line with IAS 39 a specific review is performed to 
ensure that the NAV is a reliable estimate of fair value.

•	

Category III

  –     funds that have not adopted the fair value requirements of IAS 39 or any other valuation 

guidelines in line with IAS 39.

Although it is assumed for category I that the NAV is a reliable estimation of the fair value and specific review is 
performed for categories II and III, it must be stated that underlying investments have been estimated in the absence 

67

 
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Financial statements 2008

of readily ascertainable market values. Because of the inherent uncertainty of valuation and current market conditions, 
actual results in the future could differ from the fund manager’s estimate of values and the difference may be material 
to the financial statements. 

From a risk management perspective, the EIF has developed over the last years, a tool‑set to design, manage 
and monitor VC fund portfolios. This tool‑set is based on an internal model, the Grading‑based Economic Model 
(“GEM”), which allows EIF to systematically and consistently assess and verify funds’ operational quality, valuations 
and expected performances. This effort supported by the development of a proprietary IT system and integrated 
software (front to back) improves the investment decision process and the management of portfolio’s financial risks 
and of liquidities.

EIF’s internal grading methodology allows determining the monitoring coverage and intensity as well as the range 
for the expected performance.

The grading is defined as follows:

Expected performance grade

P‑A

P‑B

At the time of the grading the fund's rank falls into the first quartile of the peer group

At the time of the grading the fund's rank falls into the second quartile of the peer group

P‑C At the time of the grading the fund's rank falls into the third quartile of the peer group

P‑D

At the time of the grading the fund's rank falls into the fourth quartile of the peer group

The peer group is defined as the group of funds that have the same risk profile and exposure as the graded fund.

Operational status grade

0‑A No adverse signals or information so far

0‑B

0‑C

0‑D

Presence of signals or information that ‑ if no appropriate measures are quickly put in place would be atypical 
for a first quartile fund. Absence of signals or information that would be inconsistent with an expected second 
quartile performance

Presence of signals or information that ‑ if no appropriate measures are quickly put in place would be atypical 
for an above average fund. Absence of signals or information that would be inconsistent with an expected third 
quartile performance

Events that if no appropriate measures are quickly put in place, will result in a sub‑standard performance or 
even in a failure or collapse of the private equity fund.

b) Impairment considerations:

Investments in shares and other variable income securities are assessed for objective evidence of impairment. 
Impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events 
that occurred. A significant or prolonged decline in the fair value of an investment in an equity instrument below its 
cost is an objective evidence of impairment. On each official reporting date, the EIF analyses unrealised losses for 
impairment so as to determine whether they shall be recognised as impairment losses in the income statement or as 
changes in the fair value reserve.

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The decline in value will be estimated as significant or prolonged when funds are graded P‑D. In addition EIF defines 
quantitative thresholds for assessing what is significant and what is prolonged which allows the classification of the 
funds as follows:

 ‑
 ‑
 ‑

funds with no indication of impairment;
funds with an indication of potential impairment which are reviewed for impairment by the Fund Risk committee;
funds showing an objective evidence of impairment

Investments belonging to category III are valued at cost less impairment. When an investment falls under this category, 
the amount of impairment is calculated based on a matrix of fixed impairment percentages in tranches of 25% 
depending on the operational and performance grading of the respective funds.

The fair value attributable NAV is determined through applying either the Fund’s percentage ownership in the 
underlying vehicle to the net asset value reflected in the most recent report or, to the extent available, the precise 
share value at the same date, submitted by the respective Fund Manager. In order to bridge the interval between 
the last available NAV and the year‑end reporting period, a monitoring procedure is performed and if necessary 
the reported NAV is adjusted.

2.3.3  INVESTMENTS IN DEBT SECURITIES AND OTHER FIxED INCOME SECURITIES

Debt securities and other fixed‑income securities are categorised as follows:

 ‑

 ‑

floating rate notes with maturities exceeding one year and fixed rate note other than commercial papers are 
included in the “Investment portfolio” or in the “Available‑for‑Sale portfolio”;
money market instruments and long‑term debt instruments with remaining maturities of less than three months are 
included in the “Operational portfolio”.

Securities held by the Fund are all listed on a recognised market. Consequently, the fair value of financial instruments 
is based on bid prices at the balance sheet date.

Premiums paid over the maturity value, discounts received in comparison to the maturity value of securities and interests 
on securities are calculated using the effective interest method and are recognised in the income statement.

2.3.4  INVESTMENT IN INTERESTS IN JOINT VENTURES

Joint ventures are contractual agreements whereby EIF and other parties undertake an economic activity that is subject 
to joint control. The joint control is the contractually agreed sharing of control over an economic activity, and exists 
only when the strategic financial and operating decisions relating to the activity require the unanimous consent of 
the parties sharing the control (the venturers).

EIF has elected to use the venture capital and similar entities exemption and not consolidate under this exemption. 
In this case, the holdings in the joint ventures are upon initial recognition designated as at fair value through profit 
and loss and measured at fair value in accordance to IAS 39, with changes in fair value recognised in profit and 
loss in the period of the change.

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Financial statements 2008

2.4  Classification and measurement of guarantee operations

Initial recognition and classification

EIF has undertaken a classification analysis of each guarantee contract to determine if the definition of a financial 
guarantee in accordance with IAS 39.9 is fulfilled. Financial guarantee contracts are contracts that require the issuer 
to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make 
payments when due in accordance with the terms of a debt instrument. If one of the definition criteria is not met, the 
contract is considered as a derivative.

In accordance with the classification, the guarantees contracts are classified either as "Financial Guarantees" or as 
"Derivatives".

Financial Guarantees measurement:

Financial Guarantees are initially recognised at fair value plus transaction costs that are directly attributable to the 
issuance of the Financial Guarantees. At initial recognition, the fair value of the obligation to pay corresponds to 
the Net Present Value (NPV) of expected premium inflows. EIF has developed a model to estimate the NPV. This 
calculation is performed at the starting date of each transaction.

Subsequent to initial recognition, Financial Guarantees are measured at the higher of:

 ‑
 ‑

the amount determined in accordance with IAS 37 Provisions, Contingent liabilities and Contingent Assets; and
the amount initially recognised less, when appropriate, cumulative amortisation recognised in accordance with 
IAS 18 Revenue.

EIF’s amortisation of the amount initially recognised is in line with the risk profile of the transactions, namely a slow 
linear amortisation over the first two thirds of the Weighted Average Life (WAL) of the transaction, followed by a 
quicker linear amortisation down to zero at expected maturity date.

The best estimate of expenditure is determined in accordance with IAS 37 (provisions, contingent liabilities and 
contingent assets). Guarantee provisions correspond to the cost of settling the obligation, the expected loss, which 
is estimated based on all relevant factors and information existing at the balance sheet date.

Any increase or decrease in the liability relating to Financial Guarantees is taken to the income statement under “Net 
income from guarantee operations”.

Derivatives measurement:

Guarantee transactions, which do not comply with the definition of a Financial Guarantee contract, are regarded 
as Derivatives in terms of IAS 39. A Derivative is a financial instrument or other contract whose value changes 
in response to the change in a specified underlying, and it is settled at a future date. At initial recognition and 
subsequent measurement, Derivatives are measured at fair value. The best approach for fair value will in this case 
be the market price. However, operations in which EIF acts as guarantor are typically illiquid. Hence EIF has derived 
a measurement based on an alternative valuation technique using as much market information as possible. The fair 
value of Derivatives equals to the net of the NPV of expected premium inflow and the cost of settling the exposure. 

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At initial measurement, the fair value equals zero. Subsequent to initial measurement, Derivatives are re‑measured 
to fair value at each balance sheet date. All Derivatives are carried as financial assets when fair value is positive 
and as financial liabilities when fair value is negative. Gains and losses arising from changes in the fair value of 
Derivatives are immediately recognised in the income statement.

2.5 Other assets

Other assets include the funds designated to cover the pension liability and accrued commission income which have 
been classified as loans and receivables.

Loans and receivables are non‑derivative financial assets with fixed or determinable payments that are not quoted 
in an active market.

2.6 Property and equipment and intangible assets

2.6.1 INTANGIBLE ASSETS

Intangible assets are composed of internally generated software and purchased computer software, and they are 
accounted for at cost net of accumulated amortisation and of impairment losses.

Direct costs associated with the development of software are capitalised provided that those costs are separately 
identifiable, that the software provides a future benefit to the Fund and the cost can be reliably measured. 
Maintenance costs are recognised as expenses during the period in which they occur. However costs to develop 
additional functionalities are recognised as separate intangible assets. Intangible assets are reviewed for indicators 
of impairment at the balance sheet date.

Intangible assets are amortised using the straight‑line method over the following estimated useful lives:

Internally developed software: 
Software:  

3 years
2 to 5 years

2.6.2. PROPERTY AND EqUIPMENT

Property and equipment are stated at cost minus accumulated amortisation and impairment losses. Property and 
equipment are reviewed for indications of impairment at the balance sheet date.

Amortisation is calculated on a straight‑line basis over the following estimated useful lives:

Fixtures and Fittings: 
Office Equipment:   
Computer Equipment and Vehicles: 

3 to 10 years
3 to 5 years
3 years

2.6.3 NON CURRENT ASSETS HELD FOR SALE

Non‑current assets classified as held for sale include assets reclassified from property and equipment for which the 
sale is highly probable and the asset is available for immediate sale in its current condition. They are classified as 
held for sale as their carrying amounts will be recovered through a sale transaction rather than through continuing 
use and are measured at the lower of carrying amount and fair value less costs to sell.

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2.7 Employee benefits

2.7.1  POST EMPLOYMENT BENEFITS

Pension fund

The EIF operates an unfunded pension plan of the defined benefit type as defined by IFRS, providing retirement 
benefits based on final salary. The cost of providing this benefit is calculated using the projected unit credit actuarial 
valuation method.

Actuarial gains and losses have been recognised using a faster method than the corridor approach, that is gains and 
losses are amortised over the average remaining working life of the population through the profit and loss account.

The Fund’s defined benefit scheme was initiated in March 2003 to replace the previous defined contribution scheme. 
The scheme is funded by contributions from staff and the EIF. These funds are transferred to the EIB for management 
with the Bank’s own assets and appear on the Fund’s balance sheet as an asset under the caption “other assets”.

The charge for the year, actuarial gains and losses, and the total defined benefit obligation are calculated annually 
by qualified external actuaries.

Health insurance scheme

The Fund has subscribed to a health insurance scheme with an insurance company for the benefit of staff at retirement 
age, financed by contributions from the Fund and its employees. The entitlement is of a defined benefit type and is 
based on the employee remaining in service up to retirement age and the completion of a minimum service period. 
The expected costs of this benefit are accrued over the period of employment, using a methodology similar to that 
for defined benefit pension plans. The health insurance liabilities are determined based on actuarial calculations as 
per the same dates as the pension fund.

2.7.2 SHORT TERM EMPLOYEE BENEFITS

Employee entitlements to annual leave are recognised when they accrue to employees. A provision is made for the 
estimated liability for outstanding annual leave as a result of services rendered by employees up to the balance 
sheet date.

2.7.3 OTHER LONG-TERM EMPLOYEE BENEFITS

An accrual for other long‑term employee benefit costs relating to the period is included in the income statement under 
the caption “Staff Costs”, resulting in a provision for the estimated liability at the balance sheet date.

2.8 Other liabilities and provisions

Other liabilities are classified according to the substance of the contractual arrangements entered into. Trade payables 
are non‑interest bearing liabilities and are stated at amortised cost.

Provisions are recognised when the EIF has a present obligation, legal or constructive, as a result of a past event, 
and it is probable that the EIF will be required to settle that obligation.

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2.9  Net interest income and expenses

Interest income and interest expenses are recognised in the income statement for all interest bearing instruments on 
an accrual basis using the effective interest method based on the actual purchase price including direct transaction 
costs. This is a method of calculating the amortised cost of a financial asset and allocating the interest income over 
the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts through 
the expected life of the financial instrument to the net carrying amount of the financial asset.

2.10  Net income from guarantee operations

Net income from guarantee operations and guarantee commissions mainly includes:

•	

•	

guarantee commissions received on Derivatives contracts and net income arising from changes in the fair value 
of Derivatives;
interest income on the discounting of the expected premium inflows and any amortisation of the Financial 
Guarantees.

2.11 Commission income

This caption is mainly made‑up of fees and commissions on mandates and advisory activities.

Fees and commissions are generally recognised on an accrual basis when the service has been provided. Portfolio 
and management advisory and service fees are recognised based on the applicable service contracts, usually on 
a time‑apportionate basis. Asset management fees related to investment funds are recognised over the period in 
which the service is provided.

2.12 Dividend income

Dividends are recognised in the income statement when the entity’s right to receive payment is established. They are 
included in the caption income from investments in shares and other variable income securities.

2.13 Leases

The leases entered into by EIF as a lessee are operating leases under which all the risks and benefits of ownership 
are effectively retained by the lessor. Payments made under operating leases are charged to the income statement 
in other administrative expenses on a straight‑line basis over the period of the lease.

When an operating lease is terminated before the lease period has expired, any payment required to be made to 
the lessor by way of penalty is recognised as an expense in the period in which termination takes place.

2.14  Accounting estimates and judgements

The preparation of financial statements in conformity with IFRS requires the use of certain accounting estimates. The 
EIF makes estimates and assumptions that affect the reported amounts of assets and liabilities within the next financial 
year. Estimates and judgments are continually evaluated and based on historical experience and other factors. Actual 
results may differ from those estimates and judgmental decisions.

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Where the fair value of financial assets and financial liabilities recorded in the balance sheet cannot be derived 
from active markets, they are determined using a variety of valuation techniques that include the use of mathematical 
models. The input to these models is taken from observable markets where possible, but where this is not feasible, 
a degree of judgment is required in establishing fair values.

Judgments and estimates are applied for the fair value of Financial Guarantees and Derivatives as well as for the 
equity investments. Further details are included in the below notes.

Judgments and estimates are principally made in the following areas:

•	
•	
•	
•	
•	
•	

impairment of available‑for‑sale equity investments (see note 2.3.1);
determination of fair values of equity investments (see note 2.3.2);
determination of the values of Financial Guarantees and the fair value of Derivatives (see note 2.4);
provision for risk on guarantee operations;
other provisions (see note 2.8);
actuaries’ assumptions related to the measurement of pension liabilities (see note 2.7.1 and 5.3).

Estimates: Post‑retirement benefits

The costs of the defined benefit plan and the post‑retirement medical plan as well as the present value of the 
post‑retirement benefits are determined using actuarial valuations. The actuarial valuations involve making assumptions 
about discount rates, expected rates of return of assets, future salary increases, mortality rates and future pension 
increases. All assumptions are reviewed at each reporting date. Due to the long term nature of these plans, such 
estimates are subject to significant uncertainty.

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Financial statements 2008

2.15 Changes in accounting policy

The accounting policies adopted are consistent with those of the previous financial year except as follows:

The Fund has adopted the following new and amended IFRIC interpretation during the year. Adoption of this revised 
interpretation did not have any effect on the financial performance or position of the Fund. They did however give 
rise to additional disclosures.

The principal effect of this change is as follows:

IFRIC 14 IAS 19 – The limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction.

The interpretation addresses how to assess the limit under IAS 19 Employee Benefits, on the amount of the surplus that 
can be recognised as an asset, in particular, when a minimum funding requirement exists. The EIF has amended its 
policy accordingly. The EIF’s post retirement benefit plans are unfunded as defined by IFRS and so the interpretation 
has no impact on its financial position.

The following new standards and interpretations were issued with an effective date for financial periods beginning 
on or after 1 January 2008 but are not applicable to the Fund:

•	
•	

IFRIC 11 IFRS 2 Group and Treasury Share Transactions;
IFRIC 12 Service Concession Arrangements

The following IFRS and IFRIC interpretations were issued but are not yet effective. The Fund has chosen not to early adopt 
these standards and interpretations. When applicable to the Fund, the Fund plans to adopt this interpretation at the date 
of endorsement by the European Union and does not anticipate any significant impacts on its financial statements.

•	
•	
•	
•	
•	

IFRS 2 Share‑based Payment (revised);
IFRS 8 Operating Segments;
IFRIC 13 Customer Loyalty Programmes;
IAS 23 Borrowing Costs (revised);
Improvements to IFRSs issued in May 2008 by the IASB:

 ›
 ›
 ›
 ›
 ›
 ›
 ›

IAS 1 Presentation of Financial Statements
IAS 16 Property, Plant and Equipment
IAS 23 Borrowing Costs
IAS 28 Investment in Associates
IAS 31 Interests in Joint Ventures
IAS 36 Impairment of Assets
IAS 38: Intangible Assets

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Financial statements 2008

3. Financial risk management

3.1  Overview of EIF risk management

EIF aligns its risk management systems to changing economic conditions and evolving regulatory standards. It 
therefore adapts them on an ongoing basis as best market practices develop. Credit, market and operational systems 
are in place to control and report on the main risks inherent to its operations.

An independent Risk Management and Monitoring (RMM) division reports directly to the Deputy Chief Executive. This 
segregation of duties and the “four‑eyes” principle ensures an unbiased review of EIF’s business activities. Moreover, 
within the EIB Group context, RMM operates in close contact with the European Investment Bank’s Risk Management 
Directorate. RMM is divided into three teams: a Venture Capital (VC) Risk Management team, a Portfolio Guarantees 
and Securitisation (G&S) Risk Management team and a Monitoring and Administration (MA) team covering both 
business lines. RMM covers own resources, fully public mandates (RCM, G&E, SME GF 1998, 2001, 2007, 
JEREMIE, ERP Dachfonds), and non‑fully public mandates (Dahlia, Neotec, iVCi and PVCi).

RMM’s functions include the collection of information (information gathering, checking, and inputting), the aggregation 
and analysis of information (assessment of financial risks, valuations, and cash flow projections), risk reporting, and 
advice. The main challenges and limitations to fulfil these functions are the complexity of structure of transactions in 
relatively opaque markets, the absence of transparent market values, and the long‑term nature of the business (up 
to ten years and more).

Generally, EIF aims to control its financial risks by creating a well‑diversified portfolio within the constraints imposed by 
shareholders or mandates. Exposures and risk‑taking are monitored against predetermined tolerances as determined 
by the Board of Directors, senior management or as set under mandates. The basis for an effective risk management 
process is the identification and analysis of existing and potential risks inherent in any product.

RMM covers EIF’s VC and G&S activities, monitors risk regularly on individual transactions as well as on a portfolio 
level, and assesses new and existing transactions. For this purpose, RMM:

•	
•	
•	
•	
•	

reviews the risk management methodologies, processes, and instruments used in front office;
issues independent opinions on all transaction proposals;
independently reviews internal ratings (G&S)/grades (VC) assigned by front office;
applies stress testing scenarios on both portfolios; and
checks limits.

The Investment and Risk Management Committee chaired by the Deputy Chief Executive is responsible for reviewing 
the portfolio and on an ad‑hoc basis to approve transactions prior to the Board.

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Financial statements 2008

3.2  The international financial crisis – impact on EIF's activities

Guarantees

EIF’s own risk portfolio, due to its wide diversification, is likely to be impacted by the systemic risks stemming from 
the expected deterioration of the European credit and economic environment. Banks are becoming more reluctant 
to lend and are tightening their lending criteria. This bank behaviour is expected to have negative effects on SME 
access to finance and more generally on the business cycle.

EIF expects SME default rates to increase significantly – also considering that recent default rate levels have been 
well below historical default rates.

Additional negative impacts are also expected with regard to recovery rates and as a result of the negative correlation 
between default and recovery rates.

EIF’s guarantees are valued as “marked‑to‑model”. The main impact on the valuation stems from the assigned rating 
and the possible subsequent rating changes.

EIF has increased its monitoring efforts to identify potential negative rating migrations in a timely manner. The 
improvement of the monitoring is a continuous process and addresses nonetheless the current financial crisis.

EIF has strengthened the stress testing methodology, i.e. its scenario analysis with regard to portfolio rating movements 
and related impacts on capital allocation, expected losses, as well as on the P&L.

Venture capital

EIF’s own risk VC portfolio, due to its wide diversification, is likely to be impacted by the market risks stemming from 
the deterioration of the European economies and public markets.

EIF’s VC investments are valued according to best market practice and applicable industry valuation guidelines.

EIF has intensified its monitoring done on the valuations reported by VC fund managers, but also on other specific 
risks linked to the current crisis. EIF has also run more stringent stress test scenarios on its VC funds portfolios to assess 
the impact of a worsening and/or continuation of the current crisis.

Treasury

EIF Treasury management has benefited from the same measures taken by the EIB to manage its portfolio during the 
financial crisis (EIF treasury management is outsourced to EIB under a treasury management agreement).

Since the beginning of the credit and liquidity crisis in early August 2007, specific risk mitigation still in force today‑ 
have been put in place in line with those implemented for the EIB:

 ‑
 ‑
 ‑

suspension of the riskiest investments (ABSs, RMBS) and greater selectivity in the choice of investments;
monitoring of the performance of the markets;
reducing the maturity of the investments and, in line with the investment guidelines, suspension of credit limits of 
counterparties impacted by rating downgrades.

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Financial statements 2008

In this context and in line with the asset management guidelines, disposal decisions were taken in relation to the 
downgrading of securities held in the portfolio, with certain losses incurred.

Organisationally within the EIB and EIF, action was taken to set up inter‑Directorate working parties and management 
committees with a view to facilitating communication and rapid reaction at times of financial market instability.

3.3 Venture capital

3.3.1 BACKGROUND

EIF is a fund of venture capital funds, taking equity participations in funds. EIF’s minority stakes in funds have 
catalyzed commitments from a wide range of investors. EIF’s VC operations are mainly focused on early‑stage and 
seed capital. However, the portfolio is also expanding in well‑established mid‑ and later‑stage investments, which, 
generally speaking, have a lower risk profile.

Valuation review under IFRS

Part of the monitoring is the valuation review of VC funds under IFRS. This process includes different steps to get to 
what is called Operational Adjustment:

•	
•	

Collecting financial quarterly reports sent by the fund managers as basis for valuation.
Assessing whether valuations are in line with best market practice and applicable industry valuation guidelines. 
Through its monitoring, EIF produces reports that capture events relevant for valuation, such as:

 ›
 ›
 ›
 ›

“Flash reviews” of regular financial reporting received from VC funds;
monitoring visits;
any significant information with potential evaluation impact;
subsequent events reviews.

•	

•	

Classification of funds: depending on the outcome of the monitoring described above, funds will be judged as 
IFRS compliant or not. Following the analysis performed above, the funds are classified into three categories 
as described in note 2.3.2.
Risk Committee: this committee comprises the Chief Executive, the Deputy Chief Executive, the Head of front 
office, the Head of risk management and the Head of finance. The committee approves the impairment 
classification.

As a conclusion, EIF portfolio management systems are not mechanical exercises, as they rely on the judgement of 
experienced staff.

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Financial statements 2008

3.3.2 PORTFOLIO OVERVIEW

All mandates

At the end of 2008, EIF’s total cumulative VC investments amounted to EUR 4.5bn in terms of commitments. The 
investments were made in 299 funds and helped mobilize total capital of over EUR 27.89bn with other investors. 
The majority of EIF’s VC activities are carried out on behalf of the EIB under the EUR 4bn Risk Capital Mandate 
(RCM). Total signatures using EIB resources reached about EUR 3.5bn. EIF also manages VC investments on behalf 
of the EC under G&E, MAP and since recently CIP mandates. The cumulative portfolio that EIF manages on behalf 
of EC was EUR 421m at the end of December 2008.

EIF has also put in place joint investment facilities with five public and/or private partners.

EIF own resources

At the end of 2008, own‑risk VC commitment (i.e. commitments given to underlying funds to invest) amounted to 
EUR 411m (2007: EUR 413m). EIF maintains a balanced portfolio with a focus on technology‑oriented early‑stage 
and general mid‑ and later‑stage funds. EIF does not directly acquire participations in companies, but instead invests 
in selected VC funds, with the private sector investors providing at least 50% of the equity. All investments are done 
on a pari‑passu basis with other investors, granting then no specific rights (or obligations) to EIF. All of EIF’s risk 
existing from its own‑risk VC operations is fully covered by shareholders’ equity. As a subceiling, VC commitments 
may not exceed 50% of shareholders’ equity, equivalent to EUR 498 502 555 at year‑end 2008. Of the EUR 411m 
of own‑risk funds committed at that time, EUR 272m had been disbursed. VC investments are evaluated quarterly 
according to the best market practice industry valuation guidelines. Following the methodology described in the note 
3.3.1, EIF records value adjustments on a line by line basis, either through the profit and loss in case of impairment 
or through the fair value reserve, which forms part of EIF’s shareholder’s equity. Consequently, net disbursed own‑risk 
funds (at cost) of EUR 178m (vs. EUR 164m at the end of 2007) are valued at EUR 159m in EIF’s 2008 balance 
sheet (vs. EUR 168m at the end of 2007).

3.3.3  SIGNIFICANCE OF FINANCIAL INSTRUMENTS FOR FINANCIAL POSITION AND PERFORMANCE

Activities

In terms of EIF VC portfolio activities, the year 2008 presents a decrease for the figures (signatures, disbursements 
and reflows):

EIF yearly cash flow activity (in EURm)

Signatures

Disbursements

Capital repayments

Income and dividends

31.12.2008

31.12.2007

18.9

70.6

38.5

47.6

15.3

18.9

4.6

6.7

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Financial statements 2008

The proportion of funds considered as impaired have increased from 14% to 23% of the EIF portfolio (see table) based 
on committed funds.

VS assets not impaired vs. impaired (in EURm)

Signatures

Funds

Not impaired

Impaired

Impaired (%)

Diversification

Dec 2007

Dec 2008

347.0

56.3

14%

309.2

91.6

23%

+/-

‑8.91%

+62.8%

EIF own resource portfolio can be considered as well diversified. As of 31 December 2008, EIF has committed 
EUR 411m in 168 private equity funds with the biggest exposure amounting to EUR 15m (4% of total signatures). 
These PE funds have invested in more than 1 400 underlying portfolio companies.

In terms of vintage year, sector and stage the portfolio is well balanced, illustrated by the followings split by signature 
as at 31 December 2008:

Vintage year (signatures in EURm)

1
9
9
4

1
9
9
5

1
9
9
6

1
9
9
7

1
9
9
8

1
9
9
9

2
0
0
0

2
0
0
1

2
0
0
2

2
0
0
3

2
0
0
4

2
0
0
5

2
0
0
6

2
0
0
7

2
0
0
8

90

80

70

60

50

40

30

20

10

80

 
 
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Financial statements 2008

Split per sector (signatures) in percentage

Generalist (Non-Tech)

Tech

Generalist (Non-Tech)

Split per stage (signatures) in percentage

Venture Capital
(Seed to Expansion)

Lower Mid-Market
(Growth, Small Cap, Mid-Market)

Fund of Funds/
Special Structures

Finally, in terms of maturity, the EIF portfolio is still young. Its commitment weighted average age has increased from 
4.2 years in 2007 to 5 years in 2008.

56%

39% 5%

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Financial statements 2008

3.4  Portfolio Guarantees and Securitisation (“G&S”)

3.4.1 BACKGROUND

EIF extends portfolio guarantees to financial intermediaries involved in SME financing, and by covering part of the 
risk faced by those institutions, it helps facilitate funding access, and in turn, it helps to finance SMEs.

For its G&S business, over the last years, EIF staff has developed a tool‑set to analyse portfolio guarantee and 
structured financial transactions in line with best market practices. Before EIF enters legally into a guarantee transaction, 
G&S, within the Transaction and Relationship Management department, assigns an internal rating to each new own 
risk guarantee transaction in accordance with the EIF Credit Risk Policy Guidelines. The rating is based on internal 
models, which analyse and summarise the transaction’s credit quality (expected loss concept), considering not only 
quantitative parameters but also qualitative aspects.

Capital allocation and pricing are functions of the expected loss, i.e. they are risk adjusted and consequently vary 
according to the assigned rating. Over the past years EIF’s conservative capital allocation rules have already taken 
into consideration the Basel II ideas. These rules have now been tailor‑made in line with the Basel II framework.

The implementation of the Ratings Based Approach (RBA) for EIF’s G&S exposures has been done under the technical 
assistance of the “Commission de Surveillance du Secteur Financier” (CSSF) and in close cooperation with the EIB.

As the rating is based on a model, RMM – in the course of the independent opinion process and in line with the 
Model Review Procedure – conducts a model review for each new rating, as well as sample checks of updated 
ratings. The purpose of this procedure is to reduce the model risk and to establish guidelines applicable for the official 
EIF internal rating models. It defines, inter alia, that each basic model has to be independently reviewed within EIF 
and that assumptions to adjust the basic model for individual transactions in the course of the rating process have to 
be documented, and reviewed by RMM.

A transaction is eligible if the assigned rating falls between Aaa‑B1. It is EIF’s intention to maintain an average rating 
portfolio of minimum Baa3. Once EIF guarantees a particular tranche, the individual internal rating assigned to 
such a tranche is reviewed quarterly upon closing. For each of the input variables a trigger value is defined and the 
internal rating model is re‑run when the transaction performance triggers those limits.

Furthermore, the principle of “monitoring by exception” is applied. If there is an event which could cause an upgrade 
or a downgrade of a tranche an analysis and further review is triggered.

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Financial statements 2008

The G&S transactions are monitored regularly. The monitoring process includes:

•	
•	

•	

•	

•	

•	
•	
•	

ongoing risk review of each existing G&S operation;
checking compliance of contractual obligations by the relevant counterparty (e.g. timely reporting, compliance 
with eligibility criteria, verification of financial covenants, timely payment of fees due, etc.);
assessing the expected evolution of each G&S operation in terms of its performance compared to ex‑ante 
estimates set prior to signature of the operation;
apply rating stress testing scenarios and assess whether the level of capital allocation and general provisions 
made for each operation are adequate and to propose, if deemed necessary, specific provisions for individual 
loss items;
establishing and maintaining of the "Watch List" (for transactions rated below Ba2) in accordance with the 
internal guidelines. The potential downgrades are followed‑up by a Watch List Operation Committee (consisting 
of staff from the G&S Division, RMM and the Legal Service) which proposes actions to the Investment and Risk 
Management Committee;
analysis of the Guarantee Portfolio as a whole (Portfolio Review);
on‑site monitoring visits;
valuation of G&S in line with IFRS accounting rules (Financial Guarantees and Derivatives).

3.4.2 PORTFOLIO OVERVIEW

Of the EUR 12.3bn G&S exposure at risk at the end of 31 December 2008, EUR 3.8bn (of which outstanding is 
EUR 3.7bn) (31%) are for “own risk” activities. The remaining EUR 8.5bn (69%) relate to “trust” activities on behalf 
of the EC. These trust activities include EUR 4.8bn under MAP, EUR 2.4bn under the SME Guarantee Facility (SME 
GF) and EUR 1.3bn under CIP.

EIF’s own‑risk operations are based on three product types:

•	

•	

•	

Credit Enhancement products accounted for 96.1% of total own‑risk outstanding guarantees (EUR 3.58bn) 
as of end 2008. Credit enhancement is EIF’s core own‑risk guarantee activity, accounting for EUR 834m of 
own‑risk signatures in 2008. Credit enhancement serves as an unconditional debt service guarantee (or as a 
credit default), covering a specific tranche of a SME loan portfolio, with a maximum weighted average term of 
15 years. The guarantee is called upon once a loss threshold has been reached in the relevant tranche.
Credit Insurance products accounted for 3.4% of all own‑risk outstanding guarantees (EUR 127.2m) as of 
end 2008. In these cases, the fund guarantees up to 50% of a loan or loan portfolio extended to SMEs by 
a financial institution. 24% of this portfolio (EUR 30.6m) consists of the Growth and Environment Programme 
sponsored by the EU.
Structured Investment Vehicles (SIVs) accounted for 0.5% of own‑risk outstanding guarantees (EUR 17.7m) at 
end 2008. In this instance, the EIF guarantees specific tranches (EUR 10m – EUR 50m) of SIVs. These funds 
are set up to make mezzanine or equity investments in SMEs that would not normally qualify for bank financing 
and therefore present a higher risk than typical special‑purpose vehicles.

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Financial statements 2008

3.4.3 PORTFOLIO qUALITY AND PERFORMANCE

End of 2008, the quality of the overall portfolio related to the number of transactions was at investment‑grade level 
(90 % against 89.2 % at end 2007). The weighted average internal rating was Baa2 (of which 75 % was confirmed 
by rating agencies and the remaining relied on EIF’s internal rating). A very low level of exposure to SIVs represented 
the riskiest portion of the portfolio, carrying an average internal rating of Ba1, while the safest guarantee facilities 
were Credit Insurance (A1) and Credit Enhancement (Baa2+). 

At the end of 2008, 86% of the transactions reviewed had a “neutral” outlook (“performance as expected”); 14% 
transactions had a negative outlook and 5 transactions were downgraded.

The total exposure at risk (commitment less repayments) for EIF’s own risk guarantees amounts to EUR 3.8m with the 
following split:

Weighted

Average 
Rating

Exposure at risk (commitment 
minus repayment in EURm)

2008

Baa2

A1

Ba1

D

2007

Baa1

A2

Ba1

D

2008

3 658

160

17

3

2007

3 367

212

25

3

 3 838

 3 607

% of total

2008

2007

95.30%

93.34%

4.17%

0.45%

0.08%

100%

5.86%

0.70%

0.10%

100%

Credit Enhancement

Credit Insurance

SIV

Defaulted

Total

In 2008, no new contract was classified as defaulted. During the year 2008, guarantees have been called on 6 
deals for a total amount paid of EUR 0.4m. The portfolio’s overall weighted average life was stabilised at 4.7 years 
at end 2008, compared with 4.9 years at end 2007.

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Financial statements 2008

3.5 Treasury

3.5.1 BACKGROUND

Treasury management has been outsourced to EIB under a treasury management agreement and is carried out 
according to EIF treasury guidelines.

EIF’s operations are not cash based but rather use shareholders’ equity, which is the basis for VC investments and 
capital allocation for guarantees. Consequently, EIF does not borrow funds.

The treasury is managed in such a way as to protect the value of the paid‑in capital, to ensure an adequate level of 
liquidity to meet possible guarantee calls, PE commitments and administrative expenditure and earn a reasonable 
return on assets invested with due regard to minimisation of risk (see also section 3.1 on special risk mitigation 
measure adopted in the context of the financial crisis).

3.5.2 PORTFOLIO OVERVIEW

The treasury portfolio is split into four distinct sub‑portfolios:

•	
•	

•	

the operational portfolio (containing short‑term instruments);
the investment portfolio and available‑for‑sale portfolio (made up of long‑term debt instruments; floating‑rate and 
fixed rate instruments); 
a cash portfolio.

EUR

Cash portfolio

Operational portfolio

Investment and available‑for‑sale portfolio

Total treasury portfolio

31.12.2008

31.12.2007

30 543 163

21 874 539

352 959 421

269 729 999

383 502 584

291 604 538

495 733 011

522 470 401

879 235 595

814 074 939

The portfolio’s average maturity is 2.66 years (2007: 3.79 years). In recent years, the EIF core business has surpassed treasury 
as the main income provider, accounting for 55% of total income in 2008 (2007: 66%).

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Financial statements 2008

3.6  Nature and extent of risks arising from financial instruments

The following tables provide information relating to the categories of financial instruments:

EUR

31.12.2008

Cash and cash 
equivalents

Investments: 

Debt securities 
and other fixed 
income securities

Shares and 
other variable 
income securities

Non current 
assets held 
for sale

Other assets 
(note 4.5)

Loans and 
receivable

Fair value 
through profit 
and loss

Available 
for sale

Financial 
guarantees

Non-financial 
assets/
liabilities

Total

Fair value

383 502 584

0

0

0

0 495 733 011

0

2 625 429 156 089 394

0

10 632 934

0

0

0

0

0

0

0

0

0

0

0

383 502 584

383 502 584

0

495 733 011

495 733 011

0

158 714 823

158 714 823

7 139 812

7 139 812

7 139 812

17 833 053

28 465 987

28 465 987

24 972 865 1 073 556 217 1 073 556 217

Total assets

394 135 518

2 625 429

651 822 405

Financial 
liabilities

Financial 
guarantees

Derivatives

Provisions for 
guarantees

Total liabilities

0

0

0 18 990 527

2 604 242

0

0

0

0

18 990 527

18 990 527

2 604 242

2 604 242

0

2 604 242

0

18 990 527

8 983 874

30 578 643

30 578 643

8 983 874

8 983 874

8 983 874

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Loans and 
receivable

Fair value 
through profit 
and loss

Available 
for sale

Financial 
guarantees

Non-financial 
assets/
liabilities

Total

Fair value

EUR

31.12.2007

Cash and cash 
equivalents

Investments: 

Debt securities 
and other fixed 
income securities

Shares and 
other variable 
income securities

Other assets 
(note 4.5)

291 604 538

0

0

0

0 522 470 401

0

1 599 263 166 277 258

19 739 594

0

0

Total assets

311 344 132

1 599 263

688 747 659

Financial 
liabilities

Financial 
guarantees

Derivatives

Provisions for 
guarantees

Total liabilities

0

0

0

0

0

0 11 439 133

1 579 264

0

1 579 264

0

0

0

0

0

0

0

0

0

0

0

291 604 538

291 604 538

0

522 470 401

522 470 401

0

167 876 521

167 876 521

13 332 629

33 072 223

33 072 223

13 332 629 1 015 023 683 1 015 023 683

0

0

11 439 133

11 439 133

1 579 264

1 579 264

5 056 087

5 056 087

5 056 087

11 439 133

5 056 087

18 074 484

18 074 484

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Financial statements 2008

3.6.1 CREDIT RISK

Credit risk concerns mainly the EIF guarantee activity and, to a lesser extent, treasury instruments such as fixed 
income securities and floating rate notes held in the AFS portfolio, commercial papers and deposits. The Fund uses 
appropriate instruments, policies, and processes to manage the credit risk.

The table below shows the maximum exposure to credit risk without taking into account any collateral:

Split by classes of balance sheet and off balance sheet (in EUR)

Cash and cash equivalent

Investments ‑ AFS

Maximum exposure 2008

Maximum exposure 2007

383 502 584

291 604 538

Debt securities and other fixed income securities

495 733 011

522 470 401

Financial liabilities

Financial guarantees 

Derivatives

Total BS 

Guarantees

Fiduciary operations

Assets held on behalf of third parties

Total off BS 

Total credit risk exposure 

3.6.1.A Venture capital

18 990 527

2 604 242

900 830 364

11 439 133

1 579 264

827 093 336

3 838 815 813

3 606 967 244

11 714 808 220

10 467 106 367

 742 254 398

16 295 878 431

17 196 708 795

 423 136 577

14 497 210 188

15 324 303 524

For EIF own risk VC portfolio, there is no credit exposure as investments are always done through an equity 
participation. As such, EIF is only exposed to market risk.

3.6.1.B Portfolio guarantees and securitisation

Credit risk arises mainly from EIF’s guarantees transactions funded by own resources.

This risk is managed by conservative risk management policies covered by the statutory and Credit Risk 
Policy Guidelines.

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Financial statements 2008

The statutes of the Fund limit own‑risk guarantees to 3.0x subscribed capital, which amounted to EUR 2.9bn at end 
2008. Hence, the EUR 3.8bn exposure at risk at end 2008 was well below the statutory limit of EUR 8.7bn.

EIF Credit Risk Policy Guidelines ensure that EIF continues to develop a diversified guarantee portfolio in terms of 
product range, geographic coverage, counterparty exposure, obligor exposure, industry concentration and also set 
out the capital allocation rules based on the ratings of the exposures.

Concentration risk is limited because of the granular nature of EIF’s transactions; typically the underlying portfolios are 
highly diversified in terms of single obligor concentration, sectors, and also with regard to regional diversification.

To cover concentration risk, EIF has strict limits (based on capital allocation) for individual transactions and on 
originator level (maximum aggregate exposures for originators and originator groups).

End of 2008, EIF’s overall own risk guarantee portfolio was spread over 20 countries. The largest nominal individual country 
net exposures were Italy, Belgium, UK and Portugal, which jointly accounted for 53% of total guarantee commitments.

Own funds guarantees: exposures at risk by country as of 31.12.2008

2008 EURm

2008 Share

2007 Share

Country

Austria

Belgium

Bulgaria

Denmark

Finland

France

Germany

Greece

Ireland

Italy

Netherlands

Non EU

Pan EU and Multi

Poland

Portugal

Serbia

Spain

Sweden

Ccy

EUR

EUR

EUR

DKK; EUR

EUR

EUR

EUR

EUR

EUR

EUR

EUR

EUR

EUR

PLN

EUR

EUR

EUR

SEK

United Kingdom

GBP; EUR

1

467

70

162

15

53

150

61

4

894

194

20

599

89

279

50

211

125

395

Total

3 839

0.0%

12.2%

1.8%

4.2%

0.4%

1.4%

3.9%

1.6%

0.1%

23.3%

5.1%

0.5%

15.6%

2.3%

7.3%

1.3%

5.5%

3.3%

10.2%

100%

0.1%

13.1%

1.4%

4.5%

0.5%

1.7%

10.5%

1.7%

0.1%

13.7%

4.0%

0.5%

14.6%

2.2%

7.7%

0.0%

6.3%

4.0%

13.2%

100%

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Financial statements 2008

In the context of EIF’s own risk guarantees operations, the credit risk is tracked since the very beginning on a 
deal‑by‑deal basis whilst adopting a different model analysis approach depending on the granularity and homogeneity 
of the underlying portfolios.

The industry sector exposures are analysed on a deal‑by‑deal basis through their impact on the ratings assigned by 
EIF to each transaction/tranche. For instance, dependent on the financial model to analyse the transaction, industry 
exposures can be reflected in diversity scores or can be indirectly captured through the assumption on default rate 
volatility, as a key model input variable.

Furthermore, concentration exposures are analysed in the context of each deal using qualitative measures such as 
current status and forecast for sectors with high concentrations in the portfolio. Exceptionally, some deals have a 
concentrated exposure in the same (broad) sector. This is typically captured through increased credit enhancement 
(e.g. subordination) to the benefit of EIF. Typically, deals with replenishing features have portfolio criteria, such as 
maximum single obligor, maximum top 5 obligors, and maximum industry concentration levels.

All together help to model industry concentration and portfolio correlation. Furthermore, the consideration of sector 
exposures is part of EIF’s overall portfolio analysis.

Counterparty risk is mitigated by the quality of EIF counterparties which are usually major market players. EIF performs 
additional on‑site monitoring visits to ensure compliance with procedures and processes during the transaction life. 
Stress‑test scenarios for the portfolio of guarantees, including extreme case assumptions, are regularly carried out to 
determine the ability of the capital base to sustain adverse shocks.

Actual performance on the guarantees operations to date has been very satisfactory, reflecting the high credit quality 
of exposures, the diversification of assets and the granularity of the portfolio.

3.6.1.C Treasury

The Fund is exposed to residual credit risk relating to its liquid assets portfolio. However, the EIF adheres to 
conservative credit investment guidelines and internal limits. For each portfolio under the EIF’s management, the 
eligibility criteria for counterparts are fixed according to their nature and credit quality (as measured by their external 
agency rating), while limits are fixed according to counterparts’ own funds.

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Financial statements 2008

Any currency arbitrage not directly required to carry out EIF’s operations is ruled out by the statutes.

The following tables outline the credit quality by investment grade of the Fund’s debt securities as on 31 December 
2008 and 2007, based on external ratings. Figures are presented without accrued interests.

AFS - Debt securities and 
other fixed income securities

2008

2007

Rating

AAA

AA1

AA2

AA3

AA+

A1

A2

A3

BAA1

BAA2

NR *

P1 **

Total

Amount in EUR

In percentage

Amount in EUR

In percentage

332 070 748

68.33%

379 388 527

74.18%

0

19 461 862

36 078 102

0

48 966 722

44 963 456

0

0

4 420 961

0

485 961 851

0.00%

4.00%

7.42%

0.00%

12 541 320

23 278 108

38 649 549

0

10.08%

11 247 280

9.25%

0.00%

0.00%

0.91%

0.00%

0.00%

100%

41 417 450

0

4 811 728

0

98 579

0

511 432 541

2.45%

4.55%

7.56%

0.00%

2.20%

8.10%

0.00%

0.94%

0.00%

0.02%

0.00%

100%

EIF treasury portfolio has delivered a performance within the expectations.

3.6.2 LIqUIDITY RISK

The liquidity risk is closely related to the Fund’s solvency and to the confidence that creditors have in the Fund to meet 
its commitments. The treasury is managed in such a way as to protect the value of the paid‑in capital, ensure an 
adequate level of liquidity to meet possible guarantee calls, private equity commitments and administrative expenditure 
and earn a reasonable return on assets invested with due regard to minimisation of risk.

      *  Non‑rated
 ** Short‑term rating, equivalent of (Aaa‑A2)

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Financial statements 2008

The tables below show the Fund’s assets and liabilities classified into relevant maturity groupings based on the 
remaining period to the contractual maturity date. It is presented using the most prudent expectation of maturity 
dates.  Therefore, in the case of liabilities the earliest possible repayment date is shown, while for assets it is the latest 
possible repayment date. Guarantees commitments are analysed with reference to their expected maturity date.

EUR

Maturity at 31.12.2008

Not more than 
three months

Three months 
to one year

One year to 
five years

More than 
five years

Undefined maturity

Total

Cash and cash equivalent

383 502 584

0

0

0

0

383 502 584

Investments 

Debt securities and other 
fixed income securities

Shares and other variable 
income securities

Non‑current assets 
held for sale

11 465 733

101 124 388

259 575 018

123 567 872

3 394 570

3 212 310

65 201 355

86 906 588

0

7 139 812

0

0

Other assets

7 614 072

0

2 924 089

17 927 826

Intangible assets

198 241

525 588

1 145 964

Property, equipment

57 352

158 883

208 674

0

8 764

Total assets

406 232 552

112 160 981

329 055 100

228 411 050

Financial liabilities

Financial guarantees

79 654

819 482

14 442 448

3 648 943

Derivatives

149

257 611

939 789

1 406 693

Provisions for guarantees

2 153 622

6 830 252

0

Retirements benefit 
obligations

Other liabilities 
and provisions

Equity

0

0

0

6 616 028

3 506 496

0

0

16 984 934

4 101 046

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

495 733 011

158 714 823

7 139 812

28 465 987

1 869 793

433 673

1 075 859 683

18 990 527

2 604 242

8 983 874

16 984 934

14 223 570

0

1 014 072 536 1 014 072 536

Total liabilities

8 849 453

4 583 589

22 212 489

26 141 616

1 014 072 536

1 075 859 683

Net liquidity position 
at 31.12.2008

Cumulative liquidity 
position at 31.12.2008

Commitments to 
venture capital

Guarantees

Total off BS

397 383 099

107 577 391

306 842 610

202 269 436

(1 014 072 536)

397 383 099

504 960 490

811 803 100 1 014 072 536

34 172 142

23 810 943

134 962 799

217 917 078

0

0

0

0

410 862 962

609 261 744

379 737 730 1 955 768 091

894 048 248

643 433 886

403 548 673

2 090 730 890

1 111 965 326

0 3 838 815 813

0

4 249 678 775

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Financial statements 2008

EUR

Maturity at 31.12.2007

Not more than 
three months

Thee months 
to one year

One year to 
five years

More than 
five years

Undefined maturity

Total

Cash and cash equivalent

291 604 538

0

0

0

Investments 

Debt securities and other 
fixed income securities

Shares and other variable 
income securities

Other assets

Intangible assets

Property, equipment

26 263 699

73 880 810

226 810 079

195 515 813

3 078 893

13 081 039

72 402 857

79 313 732

13 554 019

0

4 144 063

15 374 141

592

4 394

51 068

29 275

1 109 824

0

415 657

7 796 269

Total assets

334 506 135

87 042 192

304 882 479

297 999 955

Financial liabilities

Financial guarantees

Derivatives

Provisions for guarantees

Retirements benefit 
obligations

Other liabilities 
and provisions

Equity

0

0

0

0

439 797

10 147 746

582 930

65 920

5 056 087

851 590

930 414

0

0

13 232 407

0

0

1 880 898

2 844 388

50 000

2 983 270

0

0

0

0

0

0

0

0

0

0

0

291 604 538

522 470 401

167 876 521

33 072 223

1 161 484

8 245 595

1 024 430 762

11 439 133

1 579 264

5 056 087

13 232 407

7 758 556

0

0

0

0

985 365 315

985 365 315

Total liabilities

1 880 898

3 867 115

15 319 753

17 997 681

985 365 315

1 024 430 762

Net liquidity position 
at 31.12.2007

Cumulative liquidity 
position at 31.12.2007

Commitments to 
venture capital

Guarantees

Total off BS

332 625 237

83 175 077

289 562 727

280 002 275

(985 365 315)

332 625 237 415 800 314

705 363 041

985 365 315

29 100 371

49 405 259

106 032 678

228 749 142

228 885 425 192 150 747 2 361 417 882

825 324 501

257 985 796

241 556 006

2 467 450 560

1 054 073 643

0

0

0

0

0

0

413 287 450

3 607 778 555

4 021 066 005

Guarantees issued on behalf of the EIF can also be analysed with reference to their current contractual maturity as follows:

EUR

Total Drawn

Undrawn

Total at 
31.12.2008

Total Drawn

Undrawn

Total at 
31.12.2007

Up to five years

343 115 823

30 799 194

373 915 017

462 218 868

42 879 931

505 098 799

From five years to ten years

1 584 257 058

19 225 705

1 603 482 763

1 328 407 368

43 087 734

1 371 495 102

From ten years to 15 years

786 654 567

16 641 150

803 295 717

1 018 783 584

29 022 657

1 047 806 241

Over 15 years

1 014 885 573

43 236 744

1 058 122 317

683 378 414

0

683 378 414

3 728 913 021  109 902 793 

3 838 815 814 

3 492 788 234 

114 990 322 

3 607 778 556 

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Financial statements 2008

The amount disclosed in respect of issued guarantees represents the total commitment which refers to both the drawn 
and un‑drawn principal amounts of the underlying loans and, if relevant, to the present value of the flow of future 
interest payments covered by the guarantees.

Of the above total amount, EUR 0 (2007: EUR 1 627 750) have been issued in favour of the EIB.

The drawn‑down portion of the guarantees issued includes an amount of EUR 949 857 representing the present 
value of future interest for guarantees contracts in default (2007: EUR 811 311).

3.6.2.A Venture capital

The private equity market is by nature not liquid as the vehicles are closed‑end funds with in general a ten ‑ year 
lifetime. After the first closing, it is difficult for an investor to get out from its position except if it can find a buyer 
through the secondary market.

The total commitments to venture capital funds are limited to 50% of shareholders’ equity. EIF portfolio is well 
diversified in terms of vintage years which has a smoothing effect on its cash‑flows. (see EIF own resource portfolio 
split by vintage year under section 3.3.3).

3.6.2.B Portfolio guarantees and securitisation

The nature of EIF’s capital structure and the capital charge limits defined in the EIF Credit Risk Policy Guidelines ensures 
a high degree of liquidity to cover unexpected losses arising from the guarantee activity.

The total capital charge for guarantees is limited to 50% of shareholders’ equity.

At year‑end 2008, the capital charge represented 51% of the limit versus 54% in 2007.

31.12.2008

31.12.2007

256

499

51%

243

4 412

110

3 839

0.4

259

483

54%

224

4 153

115

3 607

0.6

EURm

Capital charges

Capital ceiling

Utilisation

Headroom

Guarantees drawn

Guarantees undrawn

Maximum exposure

Yearly guarantee calls

94

 
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Financial statements 2008

3.6.2.C Treasury

At the end of 2008, 68.33% of the Fund’s liquid asset exposure was rated ‘AAA’. 11.43% were rated ‘AA’‑entities. 
In view of the quality of the securities held (averaging ‘AA+’), liquidity risk on this portfolio is not significant.

3.6.3 MARKET RISK

3.6.3.1 Market Risk-Interest rate risk

More than half of the Fund’s income and operating cash flows are independent of changes in market interest rates. The 
Fund’s interest rate risk arises mainly from cash and cash equivalents positions as well as investments in debt securities.

3.6.3.1.A Venture capital

VC being an equity product, sensitivity to interest rate is not performed.

3.6.3.1.B Portfolio guarantees and securitisation

Transactions in which EIF acts as guarantor are typically in non liquid markets and representative market prices are 
not available. Hence, EIF has developed a mark‑to‑model approach to value these transactions, using external and 
internal ratings, information from the regular monitoring, and discounted cash‑flow analysis.

The value of guarantee transactions classified as Financial Guarantees are not subject to fluctuations on interest rates 
during transactions’ life since valuations are carried under IAS 37 provisions rules.

Conversely, the guarantee transactions classified as Derivatives (which do not comply with all the definition criteria of 
a financial guarantee contract in terms of IAS 39) are valued monthly and current market interest rates are inputted in 
the model. However, the interest rates used by the model are only applied to calculate the present value of expected 
premiums. Fluctuations in the interest rates do not carry any fluctuation to the EIF profit and loss accounts.

The interest rate risk impact on underlying portfolios is indirectly assessed by the portfolio quarterly review of the 
transactions’ performance.

At the end of 2008, own risk guarantees transactions classified as “Derivatives” amount to EUR 1.2bn and represent 
31.6% of total guarantee exposure at risk (EUR 3.8bn). Capital allocation charges for Derivatives amounting to 
EUR 54.7m represent 21.3 % of total guarantee capital allocation charges (EUR 256m).

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Financial statements 2008

3.6.3.1.C Treasury

Approximately 80% of the liquid assets held have an average duration of up to five years, thereby safeguarding the 
Fund against the substantial fluctuations in its long term revenues.

Moreover, operations of a speculative nature shall not be authorised. Investment decisions are based on the interest 
rates available in the market at the time of investment. Interest rate expectations shall not be taken into account.

The following table illustrates the Fund’s exposure to interest rate risk (figures are presented at fair value):

EUR

31.12.2008

Fixed rate

Variable rate

Total

Less than 
three months

Three months 
to one year

One to five 
years

More than 
five years

Cash and cash equivalents

383 502 584

0

0

0

0

383 502 584

AFS ‑ Debt securities and 
other fixed income securities

10 892 068

96 282 103

209 243 693

107 300 813

72 014 334

495 733 011

Total

Percentage

EUR

31.12.2007

394 394 652

96 282 103

209 243 693

107 300 813

72 014 334

879 235 595

44.86%

10.95%

23.80%

12.20%

8.19%

100%

Fixed rate

Variable rate

Total

Less than 
three months

Three months 
to one year

One to five 
years

More than 
five years

Cash and cash equivalents

291 604 538

0

0

0

0

291 604 538

AFS ‑ Debt securities and 
other fixed income securities

Total

Percentage

26 263 699

73 880 810

179 547 928

165 071 575

77 706 389

522 470 401

317 868 237

73 880 810

179 547 928

165 071 575

77 706 389

814 074 939

39.05%

9.08%

22.06%

20.28%

9.55%

100%

The average effective interest rate on term deposit in EUR is 4.49% for the year 2008 (2007: 4.05%). The average 
effective interest rate on the AFS securities portfolio in EUR is 4.35% for 2008 (2007: 4.54%).

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Financial statements 2008

Sensitivity of earnings

The sensitivity of the earnings is an estimate of the change during the next 12 months in the earnings of the EIF treasury 
portfolio managed by the EIB if all interest rate curves rise by one percentage point or decrease by one percentage 
point. The sensitivity measure is computed by taking into consideration the coupon repricings of all the positions 
present in the portfolio on a deal by deal basis. Each fixed rate asset is assumed to be reinvested at maturity in a 
new asset with the same residual life of the previous one as of 31 December 2008. Positions in floating rate assets 
are assumed to have quarterly repricings. With the positions in place as of 31 December 2007, the earnings of 
the EIF treasury portfolio would increase by EUR 2.8m if interest rates increase by 100 basis points and decrease 
by the same amount if interest rates decrease by 100 basis points. With the positions in place as of 31 December 
2008, the earnings of the EIF treasury portfolio would increase by EUR 3.4m if interest rates increase by 100 basis 
points and decrease by the same amount if interest rates decrease by 100 basis points.

Value at risk

As of 31 December 2008, the value‑at‑risk of the EIF treasury portfolio was EUR 1.9m (EUR 1.6m as of 31 December 
2007). It was computed on the basis of the RiskMetrics VaR methodology, using a confidence level of 99% and a 
one day time horizon. This means that the VaR figure represents the maximum loss over a one‑day horizon such that 
the probability that the actual loss will be larger is 1%. Given the nature of the EIF treasury positions, the choice of the 
RiskMetrics methodology is deemed appropriate to measure their exposure to interest rate risk. In the current context 
of financial crisis and highly volatile markets, the evolution of the VaR of own funds reflects the effective increase of 
the volatility of interest rate.

3.6.3.2 Market risk: foreign currency risk

The following section provides information on the risk that fair values and future cash flows of financial assets fluctuate 
due to changes in foreign exchange rates.

The Fund’s objective is to reduce exchange risk by limiting its investment in out‑currency. The Fund’s capital is 
denominated in EUR and the majority of its assets and liabilities are in that currency.

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Financial statements 2008

The tables below show the exchange positions (in EUR) of EIF’s main assets and liabilities.

EUR

31.12.2008

EUR

Pound Sterling

US Dollars Other currencies Sub total except EUR

Total

Cash and cash equivalent

379 729 500

2 640 867

547 475

584 742

3 773 084

383 502 584

Investments

Debt securities and other 
fixed income securities

Shares and other variable 
income securities

Non‑current assets 
held for sale

Other assets

Intangible assets

Property, equipment

495 733 011

0

0

0

0

495 733 011

125 888 187

22 047 946

5 674 338

5 104 352

32 826 636

158 714 823

7 139 812

28 465 987

1 869 793

 433 673

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

7 139 812

28 465 987

1 869 793

433 673

Total assets

1 039 259 963

24 688 813

6 221 813

5 689 094

36 599 720

1 075 859 683

Financial liabilities

Financial guarantees

17 975 676

906 813

Derivatives

1 654 479

949 763

Provisions for guarantees

4 723 443

484 798

16 984 934

14 223 570

0

0

55 562 102

2 341 374

0

0

0

0

0

0

108 038

1 014 851

18 990 527

0

 949 763

2 604 242

3 775 633

4 260 431

8 983 874

0

0

0

0

16 984 934

14 223 570

3 883 671

6 225 045

61 787 147

314 185 778

70 741 172 12 433 714

13 502 298

96 677 184

410 862 962

3 187 942 884

301 532 627

0

349 340 302

650 872 929 3 838 815 813

3 502 128 662

372 273 799

12 433 714

362 842 600

747 550 113

4 249 678 775

Retirements benefit 
obligations

Other liabilities 
and provisions

Total liabilities

Commitments to 
venture capital

Guarantees

Total off BS

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Financial statements 2008

EUR

31.12.2007

EUR

Pound Sterling

US Dollars Other currencies

Sub total except EUR

Total

Cash and cash equivalent

285 336 884

2 277 354

2 587 458

1 402 842

6 267 654

291 604 538

Investments

Debt securities and other 
fixed income securities

Shares and other variable 
income securities

Non‑current assets 
held for sale

Other assets

Intangible assets

Property, equipment

522 470 401

0

0

0

0

522 470 401

122 267 894

35 053 480

5 150 527

5 404 620

45 608 627

167 876 521

0

33 072 223

1 161 484

8 245 595

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

33 072 223

1 161 484

8 245 595

Total assets

972 554 481

37 330 834

7 737 985

6 807 462

51 876 281

1 024 430 762

Financial liabilities

Financial guarantees

6 190 150

5 248 983

Derivatives

962 719

616 545

Provisions for guarantees

5 056 087

0

0

0

13 232 407

7 758 556

33 199 919

5 865 528

Retirements benefit 
obligations

Other liabilities 
and provisions

Total liabilities

Commitments to 
venture capital

Guarantees

Total off BS

0

0

0

0

0

0

0

0

0

0

0

5 248 983

11 439 133

616 545

1 579 264

0

0

0

5 056 087

13 232 407

7 758 556

5 865 528

39 065 447

299 555 513

90 517 442 11 754 636

11 459 859

113 731 937

413 287 450

2 857 823 627

393 727 589

0

356 227 339

749 954 928 3 607 778 555

3 157 379 140

484 245 031

11 754 636

367 687 198

863 686 865

4 021 066 005

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Financial statements 2008

3.6.3.2.A Venture Capital

On the venture capital side, at 31 December 2008, currency exposure for the investments funds can be split as follows:

1%

2%

4%

14%

DKK

SEK

USD

GBP

EUR

79%

(as % of the total fair value, EUR 159m)

As assets in the EIF balance sheet are recorded at the historical cost (e.g. for each separate operations (disbursements 
and capital repayments) with the exchange rate at the end of the month preceding the operation), they need to be 
readjusted at the exchange rate of the 31 December 2008.

For 2008, changes in foreign exchange rates for shares and other variable income amount to EUR 9 412 160 out 
of which EUR 7 968 533 have been recorded in the fair value reserve.

The sensitivity analysis is performed for all currencies representing more than 5% of the total exposure. As of year end, 
only Pound Sterling falls into this category and has been stress tested with an increase/decrease of 15% vs. the euro.

Foreign exchange rate risk at 31.12.08 (in EUR)

GBP +15%

GBP -15%

Profit and loss account

Equity (Fair value reserve)

Profit and loss account

Equity (Fair value reserve)

496 478

857 233

143 150

857 366

Foreign exchange rate risk at 31.12.07 (in EUR)

GBP +10%

GBP -10%

Profit and loss account

Equity (Fair value reserve)

Profit and loss account

Equity (Fair value reserve)

487 116

1 404 834

487 116

1 404 834

Closing rates at balance sheet date were (1 EUR/CCY)

31.12.08

31.12.07

DKK

7.450 6

7.458 3

GBP

0.952 5

SEK

10.87

0.733 35

9.441 5

USD

1.391 7

1.472 1

CHF

1.485

It has to be noted however, that these impacts are measured at the fund level (impact on the net asset values 
denominated in out‑currency). Therefore, they do not take into account indirect potential effects on the underlying 
portfolio companies which could be in out‑currencies. In practice most of the fund managers try to hedge the positions 
they could have in currency different of the fund main currencies.

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Financial statements 2008

However, the underlying investments are also well diversified and the indirect exposure of EIF is following broadly 
the exposure at the fund level, as illustrated by the graph below:

58%

16%

8%

8%

4%

2%

2%

1%

1%

< 1%

< 1%

EU Zone

GBP

CEE

SEK

US Zone

CHF

DKK

NOK

Other

Israel

Asia

3.6.3.2.B Portfolio guarantees and securitisation

The own risk guarantees portfolio is mainly denominated in euros. As of end 2008, 83% of exposure at risk (90% 
of fair value) were in euros. The GBP is the main foreign currency exposure and represented 8% of exposure at risk 
(9% of fair value).

Non‑euro guarantees operations considered as “Financial Guarantees” do not carry any exchange rate risk with 
impact on EIF P&L accounts.

Non‑euro G&S operations considered as “Derivatives” are required to be revaluated monthly. However, the currency 
risk is limited to the revaluation of the non‑euro expected loss which is not material in size (EUR 0.2m for 2008).

Own risk portfolio breakdowns by currency and assets fair value at 31 December 2008:

Breakdown of assets fair value

90%

1%

9%

Others

GBP

EUR

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Financial statements 2008

Exposure at risk breakdown

EUR

GBP

DKK

SEK

PLN

83%

8%

4%

3%

2%

EIF is monitoring its non‑euro exposure, performs regular stress tests with regard to currency risk and the impact on 
unexpected loss. Additional capital charges on non‑euro exposures are assumed and the outcome is compared 
with the available headroom. Analyses are done on what potential actions are required in order to limit the foreign 
exchange risk exposure. For Trust operations the exchange risk is typically borne by the EIF counterparties. In some 
cases specific budgetary allocations can be made in order to mitigate the risk taken by the intermediary. Related to 
Trust activities no currency exposures emerge on behalf of EIF.

3.6.3.2.C Treasury

No risk is taken regarding EIF’s debt securities’ portfolio, as all investments in debt securities and other fixed income 
securities are denominated in EUR. Included in the above exchange positions are the financial assets classified by 
currency. It shows that risk regarding foreign currency exchange rates is insignificant.

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Financial statements 2008

3.6.3.3 Market risk: public market risk

3.6.3.3.A Venture capital

The specificities of private equity asset class make the use of traditional approaches to market risk analysis difficult 
to apply. Market risk analysis requires the estimation of the correlation between the assessed asset class and the 
public market. This can be done based on the capital asset pricing model. This model requires estimating the beta, 
i.e. a measure of risk relative to the market, which is estimated by regressing returns on an asset against a public 
market index.

While public market managers can rely on reliable statistical data to support their analysis, private equity and in 
particular venture capital lacks such data. Indeed, the analysis of PE returns, volatility and correlations is limited by 
the relatively short time series of the publicly available data, which are not fully representative of the market. Most of 
all, data does not fully capture the uncertainty of the asset class. Furthermore, as the standard performance measure 
used for private equity funds, the IRR, is capital‑weighted, while for the public market assets, it is traditionally time‑
weighted, an analysis of correlation between private equity and other asset classes is not possible without significant 
adjustments and therefore induces potentially important biases.

The EIF uses the beta of a listed PE index, LPX Europe in order to estimate the sensitivity of the valuation of EIF’s private 
equity investment to market prices.

Using the beta from LPX Europe and assuming market price movements of +/‑ 10%, EIF’s private equity investments’ 
value would be impacted as follows:

Public market risk: all private equity (in EUR)

+10%
Beta 1.3
Final sensitivity: +13%

-10%
Beta 1.3
Final sensitivity: -13%

Profit and 
loss account

Equity (fair 
value reserve)

Total effect 
on equity

Profit and 
loss account

Equity (fair 
value reserve)

Total effect 
on equity

31.12.08

370 227

21 356 608

21 726 836

(5 998 656)

(15 386 227)

(21 384 883)

31.12.07

908 738

12 337 191

13 245 929

(940 745)

(12 438 782)

(13 379 527)

The above final sensitivity (i.e beta x +/‑ 10%) is applied to the net asset value giving an adjusted net asset value, 
which is then compared to the net paid in. The calculated value adjustment will then be recorded following the 
methodology described in the “background” part.

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Financial statements 2008

3.7  Fair value of financial assets and financial liabilities

These results can only be seen as indications of the potential sensitivity. Indeed, despite the notions of fair value, 
private equity is an appraised asset class, valued not by the consensus of many market players in an active and 
efficient market but by few experts, normally the fund managers who value each investment based on their views 
of the investment’s earnings potential and/or comparisons with other investments and following normally industry 
valuation guidelines.

Table setting out a comparison by categories of the carrying amounts and fair value of the Fund’s financial assets 
and liabilities:

EUR

2008

2007

Carrying amount

Fair value Carrying amount

Fair value

Financial assets

Loans and receivables

394 135 518

394 135 518

311 344 133

311 344 133

Financial investments ‑ AFS

651 822 405

651 822 405

687 423 673

687 423 673

Financial assets designated 
at fair value through P&L

Total

Financial liabilities

2 625 429

2 625 429

1 511 249

1 511 249

1 048 583 352

1 048 583 352

1 000 279 055

1 000 279 055

Financial guarantees

18 990 527

18 990 527

11 439 133

11 439 133

Financial liabilities designated 
at fair value through P&L

2 604 242

2 604 242

1 579 264

1 579 264

Other liabilities

Total

5 105 933

5 105 933

1 357 583

1 357 583

26 700 702

26 700 702

14 375 980

14 375 980

For loans and receivables as well as other liabilities, the carrying values approximate fair values.

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Financial statements 2008

Tables showing an analysis of financial assets and liabilities recorded at fair value according to how the fair value 
is determined:

EUR

31.12.2008

Financial assets

Loans and receivables

Financial investments ‑ AFS

Financial assets designated 
at fair value through P&L

Financial liabilities

Financial guarantees

Financial liabilities designated 
at fair value through P&L

EUR

31.12.2007

Financial assets

Loans and receivables

Financial investments ‑ AFS

Financial assets designated 
at fair value through P&L

Financial liabilities

Financial guarantees

Financial liabilities designated 
at fair value through P&L

quoted market Valuation techniques-non 
market observable input

Total

394 135 518

496 667 054

0

155 155 351

394 135 518

651 822 405

0

2 625 429

2 625 429

890 802 571

157 780 780

1 048 583 352

0

0

0

18 990 527

18 990 527

2 604 242

2 604 242

21 594 769

21 594 769

quoted market Valuation techniques-non 
market observable input

Total

311 344 132

526 040 135

0

161 383 538

311 344 132

687 423 673

0

1 511 249

1 511 249

837 384 267

162 894 787

1 000 279 054

0

0

0

11 439 133

11 439 133

1 579 264

1 579 264

13 018 397

13 018 397

Fair value of derivative financial instruments.

Valuation techniques - non market observable input (in EUR)

Derivatives

Fair value at 31.12.2008

Fair value at 31.12.2007

Negative value of Derivatives

Positive value of Derivatives

At December

(2 604 242)

0

(2 604 242)

(2 014 394)

435 130

(1 579 264)

Derivatives nominal value amounts to EUR 1 216 570 808 (2007: EUR 1 268 070 381).

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Financial statements 2008

4.  Detailed disclosures relating to asset headings

4.1 Cash and cash equivalents

Cash and cash equivalents are defined as short‑term assets, highly liquid securities. They include cash at bank and 
in hand, interest earning deposits with original maturities of three months or less and bank overdrafts.

The remaining life of cash and cash equivalents is as follows:

EUR

Repayable on demand

Up to three months 

31.12.2008

30 543 163

352 959 421

383 502 584

31.12.2007

21 874 539

269 729 999

291 604 538

The effective interest rate on short‑term bank deposits is 4.49% (2007: 4.05%). These deposits have an average 
maturity of 57 days (2007: 38 days).

4.2  Debt securities and other fixed-income securities

The Fund’s portfolio includes money market funds and other money market instruments; long‑term debt instruments 
e.g. bonds, notes and other obligations.

Debt securities and other fixed‑income securities are analysed as follows:

EUR

Available‑for‑sale portfolio

of which accrued interests

Investment portfolio

of which accrued interests

31.12.2008

149 137 396

1 529 023

346 595 615

8 242 136

495 733 011

31.12.2007

128 936 612

1 398 823

393 533 789

9 639 036

522 470 401

Debt securities and other fixed‑income securities held by the Fund are all listed on an active market. Figures above 
are presented at fair value.

The Fund participates as lender in a Securities Lending and Borrowing Programme with three counterparties, the 
market value of securities lent at year‑end amounts to EUR 60 948 198 (2007: EUR 77 319 235). Derecognition 
criteria in accordance with IAS 39 are not fulfilled.

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Financial statements 2008

Movement in debt securities and other fixed income securities (in EUR)

Fair value at 1 January

Additions

Disposals

Effective interest rate adjustement

Change in fair value reserve

Impairment

Fair value at 31 December

31.12.2008

522 470 401

75 115 790

(101 164 470)

(201 296)

(388 835)

(98 579)

495 733 011

31.12.2007

510 033 602

104 291 000

(91 300 412)

3 721 889

(11 078 522)

(197 156)

522 470 401

The total amount of fair value changes that has been recognised in equity during the year 2008 is EUR ‑ 7 909 961 
(2007: EUR ‑ 7 521 129).

In 2008, impairment for an amount of EUR 98 579 (2007: EUR 197 156) has been recorded. The cumulated 
impairments correspond to the total carrying value as at 31 December 2008.

4.3  Shares and other variable income securities

Shares and other variable income securities include investments in venture capital funds and are analysed 
as follows:

EUR

Investment at cost at 1 January

Additions

Disposals

Investment at cost at 31 December

Value adjustment and foreign 
exchange adjustment at 1 January

Adjustments to fair value reserve

Impairment

Value adjustment and foreign 
exchange adjustment at 31 December

31.12.2008

167 815 866

39 561 022

(15 860 969)

191 515 919

60 656

(18 957 702)

(13 904 050)

(32 801 096)

158 714 823

31.12.2007

139 026 112

47 694 091

(18 904 337)

167 815 866

(5 357 934)

13 812 285

(8 393 696)

60 655

167 876 522

Investments in venture capital funds represent equity investments and related financing structures.

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Financial statements 2008

During the year, dividends in the amount of EUR 4 598 262 (2007: EUR 6 674 654) were paid to the Fund. 
They are shown under the caption “Income from investments in shares and other variable income securities” in the 
income statement.

The cumulated fair value changes recorded in the fair value reserve, in accordance with the valuation method 
described in note 2.3.2, amounts to EUR (18 957 702) (2007: EUR 13 812 286) and includes the impact of the 
changes in the value of investments EUR (10 989 169) (2007: EUR 17 008 020) and the impact of the changes 
in the foreign exchange rates on the investments EUR (7 968 533) (2007: EUR (3 195 734)).

Investments belonging to the Category III are measured at cost less impairment, as no reliable fair value is available. 
These amount to EUR 192 277 (2007: EUR 247 500).

The Fair Value as at 31 December 2008 includes an amount of EUR 2 625 429 (2007: EUR 1 599 263) related 
to Investment in joint‑venture. After initial recognition at fair value, changes in fair value are recognized in the income 
statement.

Significant Influence

The participations entered by EIF for its own account or on behalf of its mandate providers typically represent 
investments in private equity or venture capital funds. According to industry practice, such investments typically are 
investments jointly subscribed by a number of investors, none of which being in a position to individually take influence 
on the daily operations and the investment activity of such fund. As a consequence, any membership of an investor in 
a governing body of such fund does typically not give the right to take influence on the day‑to‑day operations of the 
fund. In addition, individual investors in a private equity or a venture capital fund do not determine policies of a fund 
such as distribution policies on dividends or other distributions. Such decisions are typically taken by the management 
of a fund on the basis of the shareholders agreement governing the rights and obligations of the management and 
all shareholders of the fund. The shareholders agreement also typically prevents individual investors from executing 
bilaterally material transactions with the fund, interchanging managerial personnel or obtaining privileged access to 
essential technical information.

EIF's investments, made for its own account or on behalf of its mandate providers, are executed in line with the above 
stated industry practice, ensuring that EIF does neither control nor exercise any form of significant influence according 
to the definition of IAS 28 on any of these investments, including those investments in which EIF for its own account 
or on behalf of any of its mandates holds a participation in excess of 20% of the voting power.

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Financial statements 2008

4.4 Non-current assets held for sale

The assets concerned relate to a building that is held for sale at a carrying value of EUR 7 139 812 which is lower 
than the fair value less cost to sell.

4.5 Other assets

Other assets are made up of the following:

EUR

Accounts receivable relating to 
pensions managed by the EIB

Advanced payments

Accrued commission on management 
fees and other income

Other debtors

31.12.2008

31.12.2007

17 801 290

13 294 567

 1 920

9 807 870

 854 907

28 465 987

 8 220

14 572 826

5 196 610

33 072 223

Accounts receivables relating to pensions managed by the EIB: following the introduction of a defined benefit pension 
scheme in 2003 (see note 2.7), contributions from staff and the Fund are set aside to cover future obligations. The assets 
of the scheme are transferred to the EIB for management and investment on behalf of the Fund. See also note 5.3.

EUR

2008

2007

Total Neither past due 
nor impaired

Past due but not impaired

0-6 months

6-12 months

> 12 months

28 465 987

28 151 302 

28 905

162 276 

33 072 223

26 647 018

864 124

5 000 000

123 504

561 081

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Financial statements 2008

4.6 Intangible assets

EUR

01.01.2007

Cost

Accumulated depreciation

Net book amount

Opening net book amount

Additions

Depreciation charge

Closing net book amount 2007

EUR

01.01.2008

Cost

Accumulated depreciation

Net book amount

Opening net book amount

Additions

Depreciation charge

Closing net book amount 2008

EUR

31.12.2008

Cost

Accumulated depreciation

Net book amount

Internally 
generated software

Purchased software

Total

2 321 066

(1 520 157)

800 909

800 909

773 516

(508 645)

1 065 780

377 074

(346 353)

30 721

30 721

119 436

(54 453)

95 704

2 698 140

(1 866 510)

831 630

831 630

892 952

(563 098)

1 161 484

Internally 
generated software

Purchased software

Total

3 094 582

(2 028 802)

1 065 780

1 065 780

912 719

(211 433)

1 767 066

496 510

(400 806)

95 704

95 704

86 050

(79 027)

102 727

3 591 092

(2 429 608)

1 161 484

1 161 484

998 769

(290 460)

1 869 793

Internally 
generated software

4 007 301

(2 240 235)

1 767 066

Purchased software

Total

582 560

(479 833)

102 727

4 589 861

(2 720 068)

1 869 793

There were no indications of impairment of intangible assets in either 2008 or 2007.

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Financial statements 2008

4.7 Property and equipment

EUR

01.01.2007

Cost

Accumulated 
depreciation

Land and 
buildings

Fixtures 
and fittings

Office 
equipment

Computer 
equipment

Vehicles Other fixed 
assets

Total

8 590 527

357 469

938 398

656 879

84 073

8 764 10 636 110

(764 846)

(240 032)

(527 132)

(408 044)

(84 073)

0 (2 024 127)

Net book amount

7 825 681

117 437

411 266

248 835

Opening net 
book amount

Additions

Disposals/write‑off

7 825 681

117 437

411 266

248 835

0

0

0

0

115 737

173 839

0

0

Depreciation charge

(374 150)

(24 951)

(94 224)

(162 638)

7 451 531

92 486

432 779

260 036

0

0

0

0

0

0

8 764

8 611 983

8 764

8 611 983

0

0

0

289 576

(655 964)

8 764

8 245 595

Land and 
buildings

Fixtures 
and fittings

Office 
equipment

Computer 
equipment

Vehicles Other fixed 
assets

Total

8 590 527

357 469 1 054 136

592 808

84 073

8 764 10 687 777

(1 138 996)

(264 983)

(621 357)

(332 772)

(84 073)

0 (2 442 182)

Net book amount

7 451 531

92 486

432 779

260 036

Opening net 
book amount

Additions

7 451 531

92 486

432 779

260 036

0

17 447

225 547

Disposals/write‑off

* (7 139 813)

(67 535)

(243 543)

0

Depreciation charge

(311 718)

(24 951)

(92 292)

(175 065)

0

0

114 391

310 518

0

0

0

0

0

0

8 764

8 245 595

8 764

8 245 595

0

242 994

0 (7 450 890)

0

(604 026)

8 764

433 673

Closing net book 
amount 2007

EUR

01.01.2008

Cost

Accumulated 
depreciation

Closing net book 
amount 2008

EUR

31.12.2008

Cost

Accumulated 
depreciation

Net book amount

Land and 
buildings

Fixtures 
and fittings

Office 
equipment

Computer 
equipment

Vehicles Other fixed 
assets

Total

0

0

0

0

0

0

220 668

818 355

(106 277)

(507 837)

114 391

310 518

0

0

0

8 764

1 047 787

0

(614 114)

8 764

433 673

There were no indications of impairment of property and equipment in 2008.

Fixtures and fittings and office equipment with a carrying value of EUR 285 975 was written off relating to items with 
no further value in use after the move to the new office premises. The expense is included in the income statement within 
other administrative expenses.

*  In 2008 the carrying value of Land and Buildings was transferred to Non‑current assets held for sale (see note 4.4). 

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Financial statements 2008

5.  Detailed disclosures relating to liability and equity headings

5.1 Financial liabilities

The movements relating to Financial Guarantees payables are set out below:

EUR

Net Financial Guarantees

Balance at the beginning 
of the financial year

Transfer relating to 
SME guarantees

Utilisation of the financial 
guarantees

Net increase/decrease in 
Financial Guarantees

Transfer to provision for guarantees

Balance at the end of 
the financial year

EUR

Derivatives

Balance at 1 January

Fair value changes

Balance at 31 December

31.12.2008

11 439 133

0

( 353 016)

7 971 596

(67 186)

18 990 527

31.12.2008

1 579 264

1 024 978

2 604 242

31.12.2007

15 227 211

366 472

(896 303)

(3 258 247)

0

11 439 133

31.12.2007

1 143 700

435 564

1 579 264

During the year 2008, a reclassification has been performed on the guarantee operations. Financial Guarantees and 
Derivatives, which were accounted for in the assets as “Financial Guarantees receivable” and “Derivatives” and in the 
liabilities as “Financial guarantee payables” and “Derivatives” are presented on a net basis at 31 December 2008 
with comparative netted figures at 31 December 2007. The opening balance 2007 of the Financial Guarantees 
has also been adjusted to reflect the reclassification of the provisions for guarantees. This represents an amount of 
EUR 3 398 599.

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Financial statements 2008

5.2 Provisions for guarantees 

EUR

Provision for guarantees 

Balance at 1 January

Additions *

Release of provision

Balance at 31 December

31.12.2008

5 056 087

6 276 536

(2 348 749)

8 983 874

31.12.2007

6 450 518

1 122 670

(2 517 101)

5 056 087

When a guarantee operation measured under IAS 39 is derecognised and treated under IAS 37, its value previously 
recorded under Financial Guarantees or the Derivatives is transferred to the caption provisions for guarantees.

A reclassification of the 2007 provision for guarantees has been performed. This represents a total amount of 
EUR 5 056 087 at 31 December 2007 of which EUR 1 657 488 reclassified from caption "Other liabilities and 
provisions" and EUR 3 398 599 from “Financial Guarantees payables”.

5.3 Retirement benefit obligations

The retirement benefit obligations consist of the pension scheme and the health insurance scheme as follows:

EUR

Retirement benefit obligations

Pension scheme

Health insurance scheme

31.12.2008

15 398 934

1 586 000

16 984 934

31.12.2007

11 982 407

1 250 000

13 232 407

Commitments in respect of retirement benefits as at 31 December 2008 have been valued by an independent 
actuary using the projected unit credit method. The calculations are based on the following main assumptions:

Principal assumptions

Discount rate for obligations

Rate of future compensation increases

Rate of pension increases

Actuarial tables

2008

6.00%

4.50%

2.00%

2007

5.52%

4.00%

2.00%

Swiss BVG 2005

Swiss BVG 2005

The pension commitment as evaluated in the independent actuary report dated February 2009 amounts to 
EUR 12 024 000. As of December 2008, the Fund has allocated EUR 16 387 845 (2007: EUR 12 456 911) 
to the provisions relating to pensions to ensure full coverage of the commitments.

The health insurance obligation was measured by a full actuarial calculation at the end of 2008.

* Additions mainly include the increase of provisions on guarantees operations EUR 6 209 350 (2007: EUR 1 122 670) but also 

the value of the guarantees operations transferred from IAS 39 to IAS 37 for an amount of EUR 67 186 (2007: EUR 0).

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Financial statements 2008

The movements in the “retirement benefit obligations” rounded to the nearest EUR 1 000 are as follows:

EUR

Net periodic benefit cost 
as at 31.12.2008

Current net service cost

Interest cost

Amortisation of unrecognised gains/losses

Net benefit expense

EUR

Net periodic benefit cost 
as at 31.12.2007

Current net service cost

Interest cost

Amortisation of unrecognised gains/losses

Net benefit expense

Employer contribution

EIF pension

Health insurance

Total 2008

1 249 000

697 000

37 000

1 983 000

280 000

62 000

(6 000)

336 000

1 529 000

759 000

31 000

2 319 000

EIF pension

Health insurance

Total 2007

1 258 000

477 000

75 000

1 810 000

0

0

0

0

1 258 000

477 000

75 000

1 810 000

As the plan is treated as unfunded under IAS 19, the employer contributions are determined as the difference 
between the net benefit payments and the staff contributions. Any amounts used to purchase benefits by employees 
are treated as negative benefit payments. In the past, the employer contributions, determined as described above, 
have been negative as purchases have exceeded the regular benefit payments. This trend is expected to continue 
and no employer contributions are predicted for the next twelve months.

EUR

Benefit liabilities as at 31.12.2008

EIF pension

Health insurance

Total 2008

Present value of funded obligation

0

0

0

Present value of unfunded obligation

15 340 000

1 298 000

16 638 000

Unrecognised net actuarial gains/(losses)

Net liabilty

EUR

59 000

15 399 000

288 000

1 586 000

347 000

16 985 000

Benefit liabilities as at 31.12.2007

EIF pension

Health insurance

Total 2007

Present value of funded obligation

0

0

0

Present value of unfunded obligation

12 628 000

1 120 000

13 748 000

Unrecognised net actuarial gains/(losses)

Net liabilty

(646 000)

11 982 000

130 000

1 250 000

(516 000)

13 232 000

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Financial statements 2008

EUR

Changes in defined benefit 
obligation as at 31.12.2008

Defined benefit obligation, 
beginning of year

Net service cost

Interest cost

Employee contributions

Benefits paid

Experience (gain)/loss

(Gain)/loss due to assumption changes

Defined benefit obligation

EUR

Changes in defined benefit 
obligation as at 31.12.2007

Defined benefit obligation, 
beginning of year

Net service cost

Interest cost

Employee contributions

Benefits paid

Experience (gain)/loss

(Gain)/loss due to assumption changes

Defined benefit obligation

History of asset values (in EUR)

Amounts for the current and previous 
two periods are as follows:

Fair value of plan assets, end of year

EIF pension

Health insurance

Total 2008

12 628 000

1 120 000

13 748 000

1 249 000

 697 000

 812 000

 622 000

 653 000

(1 321 000)

15 340 000

 280 000

 62 000

( 6 000)

(158 000)

1 298 000

1 529 000

 759 000

 812 000

 622 000

 647 000

(1 479 000)

16 638 000

EIF pension

Health insurance

Total 2007

9 928 000

1 250 000

11 178 000

1 258 000

 477 000

 682 000

 561 000

1 656 000

(1 934 000)

12 628 000

2008

0

0

0

0

0

 293 000

(423 000)

1 120 000

2007

0

1 258 000

 477 000

 682 000

 561 000

1 949 000

(2 357 000)

13 748 000

2006

0

Defined benefit obligation, end of year

(16 638 000)

(13 748 000)

(9 928 000)

Surplus/(deficit) in the plan

(16 638 000)

(13 748 000)

(9 928 000)

Experience gains/(losses) on DBO

( 653 000)

(406 000)

(430 000)

Experience gains/(losses) on plan assets

0

0

0

The effect of a 1% increase or decrease to the medical trend costs on the current service cost and interest cost, or 
the post‑employment benefit obligation, would not have a material impact on the EIF's accounts.

115

  
  
European Investment Fund  |  Annual Report 2008 
European Investment Fund  |  Annual Report 2008 

Financial statements 2008

5.4 Other liabilities and provisions 

EUR

Trade creditors and provisions

Other taxation and 
social security costs

Other payables

31.12.2008

4 886 022

3 510

9 334 038

14 223 570

31.12.2007

775 000

1 182

6 982 374

7 758 556

Trade creditors and provisions mainly include payable amounts related to operations managed by EIF and other 
sundry items. Other payables mostly includes staff‑related costs such Bonus, the Optional Supplementary Pension 
Scheme (OSPS) and the Severance Grant.

5.5 Share capital

The authorised capital amounts to EUR 3 billion, divided into 3 000 shares with a nominal value of EUR 1 000 000 
each of which 2 865 have been issued. The shares confer rights of ownership of the assets of the Fund as 
described in Article 8 of its Statutes. Shareholders are entitled to any distribution of net profits, which is limited by 
the requirements of the statutory reserve.

New shares were issued on the 30 June 2008 from authorised share capital as follows:

Authorised shares 

of which

subscribed

un‑subscribed

31.12.2008

30.06.2008 
New shares issued

31.12.2007

3 000

2 865

135

95

(95)

3 000

2 770

230

The authorised and subscribed share capital of EUR 2 865 000 000 representing 2 865 shares is called and paid 
in for an amount of EUR 573 000 000 representing 20% of the authorised and subscribed share capital.

Further payments of the subscribed but not paid in capital need the approval by the General Meeting of shareholders.

The subscribed share capital is detailed as follows:

EUR

Subscribed and paid in (20%)

Subscribed but not yet called (80%)

31.12.2008

573 000 000

2 292 000 000

2 865 000 000

31.12.2007

554 000 000

2 216 000 000

2 770 000 000

116

European Investment Fund  |  Annual Report 2008 

European Investment Fund  |  Annual Report 2008 

Financial statements 2008

The capital is subscribed as follows:

Number of shares

European Investment Bank

European Commission

Financial Institutions

31.12.2008

31.12.2007

1 822

786

257

2 865

1 822

691

257

2 770

5.6  Statutory reserve and retained earnings

Under the terms of Article 27 of its Statutes, the Fund is required to appropriate to a statutory reserve at least 20% of 
its annual net profit until the aggregate reserve amounts to 10% of subscribed capital. Such reserve is not available 
for distribution.

A minimum amount of EUR 7 022 216 is required to be appropriated in 2009 with respect to the financial year 
ended 31 December 2008. Movements in reserves and profit brought forward are detailed as follows:

EUR

Statutory reserve

Retained earnings

Profit for the 
financial year

Balance at the beginning of the financial year

104 329 810

136 353 969

50 402 337

Dividend paid

0

0

(20 160 030)

Other allocation of last financial year profit

20 160 935

10 081 372

(30 242 307)

Profit for the financial year

0

0

35 111 080

Balance at the end of financial year

124 490 745

146 435 341

35 111 080

The General Meeting of Shareholders of 14 May 2008 approved the distribution of a dividend amounting to 
EUR 20 160 030 relating to the year 2007 (2006: EUR 19 430 000).

5.7 Fair value reserve

The fair value reserve includes the followings:

EUR

Fair value reserve on debt securities 
and other fixed income securities

Fair value reserve on venture capital shares 
and other variable income securities

31.12.2008

(7 909 961)

10 932 954

3 022 993

31.12.2007

(7 521 128)

29 890 658

22 369 530

117

European Investment Fund  |  Annual Report 2008 
European Investment Fund  |  Annual Report 2008 

Financial statements 2008

6.  Disclosures relating to off-balance sheet items

6.1 TEN Guarantees

TEN infrastructure guarantee operations, complementary to EIB’s activities, have been transferred to the latter. The 
relevant contract was signed with the EIB on 7 December 2000. The EIB receives the benefits of the transferred 
portfolio, but also bears the ultimate risk of the transactions, the Fund remaining merely a guarantor of record.

EUR

Drawn

Undrawn

Total 2008

Total 2007

Up to five years

55 217 360

0

55 217 360

112 831 414

From five to ten years

102 427 751

16 750 000

119 177 751

135 937 366

From ten to fifteen years

161 084 835

Over fifteen years

44 188 959

0

0

161 084 835

182 155 122

44 188 959

45 345 263

362 918 905

16 750 000

379 668 905

476 269 165

The drawn‑down portion of the guarantees issued includes an amount of EUR 10 558 800 (2007: EUR 19 014 126) 
representing the present value of future interest covered by guarantees.

6.2 Assets held for third parties

Assets held for third parties, as set out below, represent trust accounts opened and maintained in the name of the 
Fund but for the benefit of the Commission, the EIB, the German Federal Ministry of Economics and Technology 
(Bundesministerium für Wirtschaft und Technologie “BMWi”) and the Member States or regions in the framework of 
the Joint European Resources for Micro to Medium Enterprises (“JEREMIE”) jointly developed by the Commission of 
the European Communities and EIF. Sums held in these accounts remain the property of the Commission, the EIB, 
the BMWi and the Member States or regions so long as they are not disbursed for the purposes set out in relation 
to each programme.

Under the SME Guarantee Facility (SMEG 1998, SMEG 2001 under the Multi‑Annual Programme for enterprises 
(MAP) and SMEG 2007 under the Competitiveness and Innovation Framework Programme), the Fund is empowered 
to issue guarantees in its own name but on behalf and at the risk of the Commission.

Under the ETF Start‑Up Facility (ESU 1998, ESU 2001 under the Multi‑Annual Programme for enterprises (MAP), GIF 
2007 under the Competitiveness and Innovation Framework Programme and the Technology Transfer Pilot Project 
(TTP)), the Fund is empowered to acquire, manage and dispose of ETF start‑up investments, in its own name but on 
behalf and at the risk of the Commission.

The support provided by the Seed Capital Action is aimed at the long‑term recruitment of additional investment 
managers by the venture capital funds to increase the number of qualified personnel and to reinforce the capacity 
of the venture capital and incubator industries to cater for investments in seed capital.

Within the context of its venture capital activity, the Fund manages on behalf and at the risk of the EIB the European 
Technology Facilities (ETF) 1 and 2, which have been implemented by the Fund since 1998.

Within the framework of the Risk Capital Mandate signed with the EIB in 2000, the EIF took over the EIB’s existing 
venture capital portfolio, with further investments being funded as part of the “Innovation 2000 Initiative” of the EIB.

118

European Investment Fund  |  Annual Report 2008 

European Investment Fund  |  Annual Report 2008 

Financial statements 2008

Under the ERP‑EIF Dachfond agreement, initiated in 2004, the Fund manages venture capital activity on behalf, and 
at the risk of the BWMi.

The Fund is managing a European Commission facility, the Preparatory Action Facility (PA 2004 and PA 2005), 
on behalf of the EIB Group. The facility is particularly targeting micro‑lending and will be used for grants to finance 
technical assistance to SMEs, which must be coupled with an EIF guarantee or an EIB global loan. The Preparatory 
Action Facility 2004 was closed on 22 May 2008.

The support provided by the JEREMIE initiative is aimed at promoting SME access to finance and financial engineering 
products, such as venture capital funds, guarantee funds and loan funds, to enterprises. The EIF has signed JEREMIE 
Funding Agreements with the following Member States/regions: Greece, Romania, Latvia, Lithuania, Languedoc‑
Roussillon, Campania, Slovakia.

In the framework of the European Community in the Global Energy Efficiency and Renewable Energy Fund 
(GEEREF), the EIF manages the participation of the European Community in the fund and represents the Commission’s 
interests.

EUR

Preparatory Action Facility 2004

SMEG 1998 (SME Guarantee 1998)

ESU 1998 (ETF Start‑up 1998) *

Seed Capital Action

SMEG 2001 (MAP Guarantee)

ESU 2001 (MAP Equity) *

CIP/SMEG 07

CIP/GIF 07

TTP

GEEREF Trusteeship 

31.12.2008

0

69 876 991

13 584 862

131 012

73 579 928

77 815 569

95 483 380

69 341 505

2 000 938

45 929 105

31.12.2007

16 767

71 885 622

28 509 679

185 233

118 671 399

91 773 212

35 255 356

36 447 745

0

0

Trust accounts with the Commission **

447 743 290

382 745 013

Trust accounts with the EIB

Trust account with the BWMi

Trust account with Member States/
regions JEREMIE initiative

11 279 987

40 372 364

130 340

283 100 781

19 198

0

742 254 398

423 136 575

  *  The figures above do not include the investment in venture capital, of EUR 44 578 139 for ESU 1998 (2007: EUR 44 597 618), 
EUR 68 703 612 for ESU 2001 (2007: EUR 53 806 983) and EUR 20 061 832 for GIF 07 (2007: EUR 0) made on behalf 
of the Commission that are included in 8.3.

**  The trust accounts with the Commission include cash at bank, money market balances, investments in securities at nominal value 

and the relevant security accruals. They do not represent a final valuation of the relevant programmes.

119

European Investment Fund  |  Annual Report 2008 
European Investment Fund  |  Annual Report 2008 

Financial statements 2008

6.3 Fiduciary operations

Pursuant to Article 28 of its Statutes, the Fund may accept the tasks of administering special resources entrusted to it 
by third parties. In execution of this article, the Fund manages and disposes of investments in venture capital funds, 
in its own name but on behalf and at the risk of:

•	

•	

•	

the EIB, in accordance with European Technology Facility, European Technology Facility 2 and Transfer, 
Implementation and Management of Risk Capital Investments (Risk Capital Mandate) agreements;
the Commission, in accordance with ETF Start‑Up Facility, the High Growth and Innovative SME Facility and 
Seed Capital Action agreements; and
the German Ministry of Economics and Technology (Bundesministerium für Wirtschaft und Technologie “BMWi”), 
in accordance with ERP‑EIF Dachfonds agreement.

The Fund is also empowered to issue guarantees in its own name but on behalf and at the risk of the Commission 
according to the Fiduciary and Management Agreement concluded with the Commission (SME Guarantee Facility). 
However, the EC programmes are only liable for a contracted percentage of the full signature amounts shown below, 
up to the limit of the agreed budgetary allocation.

120

European Investment Fund  |  Annual Report 2008 

European Investment Fund  |  Annual Report 2008 

Financial statements 2008

Fiduciary operations concluded pursuant to the Fiduciary and Management Agreements are analysed as follows:

EUR

Guarantees committed on behalf of the Commission

31.12.2008

31.12.2007

Under the SMEG 1998 *

Drawn

Undrawn

Under the SMEG 2001 *

Drawn

Undrawn

Under the SMEG 2007 *

Drawn

Undrawn

Investments made on behalf of the Commission **

Under ESU 1998:

Net disbursed

Undrawn

Under ESU 2001:

Net disbursed

Undrawn

Under GIF 2007:

Net disbursed

Undrawn

Under Seed Capital Action:

Net disbursed

Undrawn

2 400 280 834

2 407 638 575

0

1 664 115

4 786 634 503

4 629 662 857

0

276 876 349

164 687 322

1 144 037 678

31.12.2008

55 405 030

4 182 900

0

0

31.12.2007

55 992 520

8 727 939

75 383 481

100 415 809

57 584 408

131 730 410

20 470 347

118 709 818

0

10 000 000

200 000

0

150 000

50 000

Investments made on behalf of the EIB **

31.12.2008

31.12.2007

Under EIB Risk Capital Mandate

Net disbursed

Undrawn

Under European Technology Facility

Net disbursed

Undrawn

Investments made on behalf of the external mandators **

Under ERP‑EIF Dachfonds

Net disbursed

Undrawn

Total

1 454 881 931

1 370 579 363

1 083 389 509

1 242 905 845

120 954 616

124 725 313

22 116 482

31.12.2008

71 256 541

91 801 419

28 434 532

31.12.2007

47 514 956

72 869 186

11 714 808 220

10 467 106 367

 ‑

 ‑

A value adjustment has been estimated at EUR 316 052 706 (2007: EUR 83 639 222) leading to a net 
adjusted value of EUR 1 259 783 841 (2007: EUR 1 411 665 454), on the investments managed on behalf 
of the EIB.
A value adjustment has been estimated at EUR 17 915 276 (2007: EUR 15 172 327) leading to a net 
adjusted value of EUR 133 343 582 (2007: EUR 98 404 600 estimated amount), on the investments made 
on behalf of the Commission.

  * Those amounts are valued based on the valuation method described in note 2.3.
**  Those amounts are valued at current rate. The drawn amounts correspond to the net disbursed. The value adjustment calculation 

121

is performed based on the valuation method described in note 2.3.

European Investment Fund  |  Annual Report 2008 
European Investment Fund  |  Annual Report 2008 

Financial statements 2008

7.  Detailed information on the income statement

7.1 Net interest and similar income

Net interest and similar income comprises:

EUR

Interest on debt securities

Interest on term deposits

Interest on bank current accounts

Other interest

31.12.2008

22 554 525

13 774 189

1 126 097

1 040 016

38 494 827

31.12.2007

23 853 812

4 778 046

898 741

700 471

30 231 070

As mentioned in the note 2.9, the discounts and premiums are calculated with the effective interest rate method. The 
above figures are presented netted. Discounts amount to EUR 1 282 150 (2007: EUR 3 316 906) and premiums 
amount to EUR 1 156 726 (2007: EUR 1 732 099).

7.2  Net income from guarantees operations

Net income from guarantees operations comprises:

EUR

Net guarantees fees on derivatives

Loss/gain on fair value 
changes on derivatives

Interest (expenses)/income 
on amortisation of NPV

Release of provision

Write‑off on guarantee receivable

Provision for guarantees under IAS 37

Net increase in the financial 
guarantees contracts

31.12.2008

10 520 096

(1 024 978)

1 854 697

2 348 749

(1 223 299)

(6 209 350)

12 226 460

18 492 375

31.12.2007

7 579 840

(870 260)

(341 388)

2 517 101

0

(1 122 670)

13 586 401

21 349 024

122

European Investment Fund  |  Annual Report 2008 

European Investment Fund  |  Annual Report 2008 

Financial statements 2008

7.3 Commission income

Commission income is detailed as follows:

EUR

Commissions on mandates relating 
to venture capital operations

Commissions on mandates 
relating to guarantees

Income from advisory activity

Other provisions

Other commissions

31.12.2008

16 357 090

2 790 820

6 884 565

(2 636 620)

10 000

23 405 855

31.12.2007

14 798 524

8 412 985

5 850 873

0

10 000

29 072 382

7.4 Net loss on financial operations

Net loss on financial operations amounting to EUR 5 081 325 (2007: loss EUR 1 020 711) corresponds to losses 
arising from transactions or cash positions in foreign currencies, of which EUR 2 611 743 is realised loss on debt 
securities portfolio.

123

European Investment Fund  |  Annual Report 2008 
European Investment Fund  |  Annual Report 2008 

Financial statements 2008

7.5 General administrative expenses

EUR

Wages and salaries

Social security costs

Other administrative expenses

31.12.2008

19 241 179

3 237 576

22 478 755

7 546 298

30 025 053

31.12.2007

17 317 160

2 130 900

19 448 060

6 665 063

26 113 123

Wages and salaries include expenses of EUR 3 144 151 (2007: EUR 4 078 735) incurred in relation to staff seconded 
from the EIB.

Key management compensation for the year is EUR 1 474 078 (2007: EUR 1 300 648).

Other administrative expenses include leased office space. Expenses relating to these operational leases amount to 
EUR 1 191 027 (2007: EUR 1 154 045).

EUR

Future minimum lease payments under 
non-cancellable operating leases

Less than 
one year

One to 
five years

More than 
five years

Total

2008

2007

1 139 221

4 951 563 

0

6 090 784

1 053 359

4 213 437

1 053 359

5 320 155

The number of persons, including 12 EIB secondees (2007: 14 EIB secondees), employed at year‑end is as follows:

Chief Executive/Deputy Chief Executive

Employees

Total

Average of the year

31.12.2008

31.12.2007

2

155

157

146

1

141

142

135

124

 
European Investment Fund  |  Annual Report 2008 

European Investment Fund  |  Annual Report 2008 

Financial statements 2008

8. Related parties transactions

The European Investment Bank is the majority owner of the Fund with 63.6% of the shares. The remaining percentage 
is held by the European Commission (27.4%) and the Financial Institutions (9%).

8.1 European Investment Bank

Related party transactions with the European Investment Bank are mainly related to the management by the Fund of 
the venture capital activity as described in the note 6.3. In addition, the European Investment Bank manages the 
EIF treasury, the IT, the pension fund and other services on behalf of the Fund. The amounts included in the financial 
statements and relating to the European Investment Bank are disclosed as follows:

EUR

Assets

Prepayments and accrued income

Other assets

Liabilities

Creditors

Other provisions

Accruals and deferred income

Capital paid in

Off balance sheet

Guarantees drawn

Guarantees undrawn

Assets held for third parties

31.12.2008

388 358

17 801 290

31.12.2008

61 892

1 148 218

170 000

364 400 000

31.12.2008

312 976 362

16 250 000

11 279 987

31.12.2007

795 703

13 294 567

31.12.2007

84 122

1 482 798

180 000

364 400 000

31.12.2007

410 445 884

16 250 000

40 372 364

Investments drawn in venture capital

Investments undrawn in venture capital

1 575 836 547

1 105 505 990

1 495 304 677

1 271 340 376

Income

Management fees

Expenses

Wages and salaries

IT expenses

Services

Treasury management fees

31.12.2008

8 348 975

31.12.2008

2 402 429

910 454

1 609 858

406 496

31.12.2007

8 540 072

31.12.2007

2 928 735

866 775

1 134 982

337 176

125

European Investment Fund  |  Annual Report 2008 
European Investment Fund  |  Annual Report 2008 

Financial statements 2008

8.2  Commission of the European Communities

Related party transactions with the Commission are mainly related to the management by the Fund of the venture 
capital and guarantees activities as described in the note 6.3. In addition, the Commission manages the EC 
programmes treasury on behalf of the Fund. The amounts included in the financial statements and relating to the 
Commission of the European Communities are disclosed as follows:

EUR

Assets

Accounts receivable

Liabilities

Accounts payable

Capital paid in

Off balance sheet

Guarantees drawn

Guarantees undrawn

Assets held for third parties

Net disbursed in venture capital

Investments undrawn in venture capital

Income

Management fees

Expenses

Treasury management fees

31.12.2008

7 582 063

31.12.2008

2 652 671

157 200 000

31.12.2008

7 351 602 659

1 144 037 678

401 814 184

151 458 858

223 308 528

31.12.2008

7 278 146

31.12.2008

138 950

31.12.2007

8 078 322

31.12.2007

499 675

138 200 000

31.12.2007

7 037 301 432

278 540 464

382 745 013

113 726 928

150 508 348

31.12.2007

11 849 856

31.12.2007

57 528

126

European Investment Fund  |  Annual Report 2008 

European Investment Fund  |  Annual Report 2008 

Financial statements 2008

9. Capital management

Even though the EIB Group is not subject to formal supervision, it has generally voluntarily submitted to major EU 
banking regulations and adopted market “best practice”. In particular, this applies to the new banking regulation 
(“Basel II”), issued in 2004 by the Basel Committee on Banking Supervision, approved by the EU and the Member 
States in 2006, and applied in Internal Rating Based EU financial institutions since 1 January 2008 (2006/48/EC 
as of 14 June 2006).

The implementation of the “Ratings Based Approach (RBA)” for EIF's guarantee and securitisation exposures and the 
Simple Risk ‑weight Approach for EIF's VC portfolio has been done under the technical assistance of the Commission 
de Surveillance du Secteur Financier (CSSF) and in close cooperation with EIB.

In addition to the monitoring of Basel II minimum capital requirements, stress tests assess the sensitivity of capital 
requirements to changes in the macroeconomic environment and in the activities of the EIF.

10. Taxation

The Protocol on the Privileges and Immunities of the European Communities, appended to the Treaty of 29 October 
2004 establishing a Constitution for Europe, applies to the Fund, which means that the assets, revenues and other 
property of the Fund are exempt from all direct taxes.

127

Annual Report  |  European Investment Fund

European Investment Fund

96, boulevard Konrad Adenauer
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+352 42 66 88 1
Tel: 
+352 42 66 88 200
Fax: 
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E‑mail: 
Internet:  www.eif.org

EIF also has people in Athens, Bucharest, Brussels, Istanbul,
Madrid, Paris, Riga, Rome, Vienna and Vilnius

Contact and references

EIF is a member of EIB Group

European Investment Bank

100, boulevard Konrad Adenauer
L‑2950 Luxembourg

Tel.:        +352 43 79 22000
Fax:        +352 43 79 62000
E‑mail:                info@eib.org
Internet:              www.eib.org

Annual Report  |  European Investment Fund

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Freephone: 00 800 67 89 10 11

Additional information is also available on the internet: http://europa.eu.int

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ISBN 978‑92‑861‑0807‑5
ISSN 1725‑5392
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Reproduction is authorised provided the source is acknowledged

Printed on white chlorine‑free paper

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