The European Investment Bank (EIB), the European Union's long-term financing arm, is subscribing EUR 20 million(1) initially to the Arca Imprese Duemila closed-end fund.
The agreement on the EIB's participation in this fund was signed two days after the public offer to invest in Arca Fund units. It provides the Bank with the opportunity to step up EIB support for small and medium-sized industrial and service-sector businesses in both Italy and other EU Member States, while also contributing to the development of Italy's domestic venture capital market. The 10-year fund is to be endowed with a total of EUR 104 million.
The Arca Fund will be targeting its investments primarily at unlisted SMEs offering a sound track record, those in need of an injection of fresh capital to fund their growth programmes, thereby helping to create or safeguard employment, smaller businesses faced with a new generation or change of management, as well as listed medium-sized firms sufficiently well quoted to offer investors the prospect of good returns.
The Arca Impresa Duemila Fund is managed by Arca Impresa Gestioni SGR S.p.A., a company established in 1994 by Arca Merchant S.p.A.. Arca Impresa Gestioni SGR was the first company to set up a closed-end investment fund incorporated in Italy and with it has already mounted 24 venture capital operations. Its expertise in this area will be combined with the entrepreneurial maturity of Arca Merchant S.p.A., which has more than a decade's experience of acquiring participations in and offering financial services to Italian firms.
The EIB finances capital investment designed to further European integration, particularly in the following areas: regional development, trans-European transport, telecommunications and energy networks, industrial competitiveness and integration, SMEs, environmental protection, and capital investment securing energy supplies. Outside the EU, the EIB's operations support Community development aid and cooperation policies. The EIB's shareholders are the EU Member States. The Bank raises its resources on the capital markets where its "AAA" rating enables it to command the finest terms. The EIB's Amsterdam Special Action Programme (ASAP), set up with a view to promoting employment, has a special venture capital financing window for high-growth SMEs. It also enables the Bank to expand its lending into new areas, notably health, education and urban renewal, and to step up financing for Trans-European Networks and other infrastructural schemes. In June 1999, the EIB decided to double both the amount allocated to the European Technology Facility (ETF), managed by the European Investment Fund (EIF), from EUR 125 million to EUR 250 million, and the reserve set aside for covering the credit risk associated with its venture capital operations from EUR 500 million to EUR 1 billion. It also agreed on the principle of subsequently allocating a further EUR 1 billion to this reserve for the period 2000-2003.
(1) EUR 1 = 1 936.27 ITL.