Impact Assessment

Source: esma

International Auditing and Assurance Standards Board

Source: esma

International Accounting Standards Board

Source: esma

International Financial Reporting Standards

Source: esma

International Financial Reporting Standards Interpretations Committee

Source: esma

Investments that may be difficult to sell without a price reduction or that cannot be sold quickly because of a lack of market or ready/willing investors.

Source: GIPS

AC/BU - Acquisition or buyout. BIO - Biotechnology. C - Corporate fund. COMM - Communications and networking. COMP - Computer software. CON - Consumer products and services. ELEC - Electronics and semiconductors. ES - Early stage. EX - Expansion. FI - Foreign investor. G - Government fund. GP - General Partner. INT - Internet specific. IT - Information technology. IN - Institutional investor. LP - Limited Partner. LPA - Limited Partnership Agreement. LS - Life sciences. LSVCC - Labour-sponsored venture capital corporation. MAN - Manufacturing and processing. MED - Medical/health related. MIS - Miscellaneous sectors. OT - Other (i.e. investor type, sector, stage of development). PI - Private independent fund. SE - Seed stage. ST - Start-up. TU - Turnaround. VC - Venture capital.

Source: ILPA

The investment income earned on all investments (including cash and cash equivalents) during the measurement period, net of all non-recoverable expenditures, interest expense on debt, and property taxes. The income return is computed as a percentage of the capital employed.

Source: GIPS

An entity designed to nurture business concepts or new technologies to the point that they become attractive to venture capitalists. An incubator typically provides both physical space and some or all of the services-legal, managerial, and/or technical-needed for a business concept to be developed. Incubators often are backed by venture firms, which use them to generate early-stage investment opportunities.

Source: ILPA

“Captive funds” refers to funds that are 100% owned by the parent organisation, while “independent funds” relates to semi-captive funds (those in which the parent owns less than 100%) as well as wholly independent funds. A fund that is 100% owned by capital markets or individuals is considered independent, so only 100% ownership by an institution qualifies the fund as captive

Source: Invest Europe

Refers to the private equity, venture capital and infrastructure industry, which includes GPs, LPs and the service providers to its participants. For the purposes of this Handbook, “industry” is used as a generic term to refer to and to encompass the full industry, including venture capital, infrastructure and private equity.

Source: Invest EUROPE

See: Angel Investor.

Source: ILPA

Rights granting access to company's information, i.e. inspecting the company books and receiving financial statements, budgets and executive summaries.

Source: ILPA

The date a fund completed its first contribution of capital to an underlying holding.

Source: ILPA

ILPA: The sale or distribution of the privately-held stock of a Portfolio Company on public markets for the first time. This is a common Exit Mechanism for private equity funds, especially venture capital funds. The sale or distribution of a stock of a portfolio company to the public for the first time. IPOs are often an opportunity for the existing investors (often venture capitalists) to receive significant returns on their original investment. During periods of market downturns or corrections the opposite is true.

Esma: Initial Public Offering

Source: ILPA, Esma

Pension funds, insurance companies, endowments, charitable foundations, mutual funds and other non-bank financial institutions that are often key suppliers to private equity funds. Organizations that professionally invest, including insurance companies, depository institutions, pension funds, investment companies, mutual funds, et endowment funds.

Source: ILPA

The organized market for venture activity, based on an industry of management firms and funds, as distinct from the informal investment market (see: Angel Investors). Venture financing has taken place in Canada for decades, but a core industry emerged for the first time in the early 1980s.

Source: ILPA

A venture's intangible assets, such as patents, copyrights, trademarks, and brand name.

Source: ILPA

A measure of the spread of the annual returns of individual portfolios within a composite. Measures may include, but are not limited to, high/low, range, and standard deviation (asset weighted or equal weighted) of portfolio returns.

Source: GIPS

The discount rate at which the present value of future cash flows of an investment equals to the cost of the investment. It is determined when the net present value of the cash outflows (the cost of the investment) and the cash inflows (returns on the investment) equal zero, with the discount rate equal to the IRR.

Source: ILPA

The total amount of drawndown capital which has actually been invested in companies. In practice, this will be equal to the amount of drawndown capital less amounts which have been used to pay fees, or which are awaiting investment.

Source: ILPA

The term Investee Company refers to a single Enterprise or group of Enterprises in which a Fonds is invested either directly or through a number of dedicated holding companies.

Source: IPEV

ILPA: See: Financings and Investments.

IPEV: An Investment refers to the individual financial instruments held by the Fonds in an Investee Company.

Source: ILPA, IPEV

These are the set of agreements relating to the acquisition of a portfolio company by the fund. They typically include a Share Purchase Agreement, regulating the actual purchase of interests in the company, and ancillary agreements, such as a Shareholders Agreement, setting out the understanding among the portfolio company’s shareholders with respect to the management and governance of the portfolio company post transaction. Investment Agreements may also include the arrangements with the management of the portfolio company. For the purposes of section 3 of this Handbook, reference to Investment Agreement also includes the articles of association of the portfolio company, shareholder loan agreements, investor rights’ agreements and other such agreements between the portfolio company shareholders.

Source: Invest EUROPE

Representatives of financial institutions engaged in the issue of new securities, including management and underwriting of issues as well as securities trading and distribution.

Source: ILPA

It is normal for a GP to have an Investment Committee, which is the board of the GP or a specific body within the GP making the ultimate investment and divestment decisions. It will typically also make ownership-related decisions during the holding period of those investments, including follow-on investment decisions.

Source: Invest EUROPE

Investment Company Act shall mean the Investment Company Act of 1940, as amended, including the rules and regulations promulgated there under.

Source: ILPA

A letter signed by an investor purchasing unregistered long securities under Regulation D, in which the investor attests to the long-term investment nature of the purchase. These securities must be held for a minimum of 1 year before they can be sold.

Source: ILPA

The fee payable to the firm for management of a portfolio. Investment management fees are typically asset based (percentage of assets), performance based (see “performance-based fee”), or a combination of the two but may take different forms as well. Investment management fees also include carried interest.

Source: GIPS

ILPA: Calculation performed by adding the reported value and the distributions received and subsequently dividing that amount by the total capital contributed.

GIPS: Total value divided by since-inception paid-in capital.

Source: ILPA, GIPS

Typically the initial few years of a fund’s term, during which time it is intended that the fund will make its investments.

Source: Invest EUROPE

An investment trust is a form of collective investment found mostly in the United Kingdom which holds a portfolio of securities on behalf of its own shareholders. Because an investment trust is itself a listed company, its shares can be bought and sold in the usual way. An investment trust manager is legally allowed to borrow capital to purchase shares. This leverage may increase investment gains but also increases investor risk. Investment trusts can also invest in unquoted or unlisted companies, which may not be trading on the stock exchange either because they don't wish to or because they do not meet the given criteria. This possibility, combined with the ability to borrow money for investments, can make investment trusts more volatile. Unlike hedge funds, most investment trusts are open to retail/inexperienced investors.

Source: europarl

The key players in the private equity industry, based on particular fund structures and sources of capital supply. In the United States, private equity is dominated by Private-Independent Funds, while Canadian activity is diversified across several major groups. Corporate funds (C): Subsidiaries of financial or industrial corporations. Government funds (G): Agencies or crown corporations owned by government. Institutional investors (IN): Funds managed inside certain large institutions. Retail Funds: Funds (e.g., LSVCCs, PVCCs) established with benefit of government tax credits to individuals. Private-Independent Funds (PI): Funds structured on Limited Partnerships and related vehicles. Foreign investors (FI): Non-resident private equity funds or corporations active in Canada. Other investors (OT): Investors with an interest in specific private equity deals, but without a permanent market presence.

Source: ILPA

International Organisation of Securities Commissions

Source: esma

The reinvestment of assets received as a lump-sum distribution from a qualified tax-deferred retirement plan. Reinvestment may be the entire lump sum or a portion thereof. If reinvestment is done within 60 days, there are no tax consequences.

Source: ILPA

ILPA: Internal Rate of Return. A typical measure of how VC Funds measure performance. IRR is a technically a discount rate: the rate at which the present value of a series of investments is equal to the present value of the returns on those investments.

Invest EUROPE: The Internal Rate of Return or “IRR” is one of the calculations used to measure the return of a private equity fund. IRRs are used in private equity instead of time-weighted returns (“TWRs”), which are more common in other asset classes. Technically, the IRR is defined as the discount rate which, when applied to all the cash flows in the fund and the fair value of the fund’s assets at a point in time, would produce a net present value of zero. In other words, the IRR represents an absolute measure of the cash flow return of a fund at a point in time. It is therefore one of the most common measures for comparing the performance of different funds covering different time periods. The IRR can be calculated on a net basis (meaning net of fees, expenses and carried interest) or a gross basis (meaning before fees, expenses and deduction of carried interest). The IRR is calculated as an annualised compounded rate of return, using actual cash flows and annual valuations.

Source: ILPA, Invest EUROPE

Incentive Stock Option. Plan which qualifying options are free of tax at the date of grant and the date of exercise. Profits on shares sold after being held at least 2 years from the date of grant or 1 year from the date of exercise are subject to favorable capital gains tax rate.

Source: ILPA

The price per share deemed to have been paid for a series of Preferred Stock. This number is important because Cumulative Dividends, Liquidation Preference and Conversion Ratios are all based on Issue Price. In some cases, it is not the actual price paid. The most common example is where a company does a bridge financing (a common way for investors to provide capital without having to value the Company as a whole) and sells debt that is convertible into the next series of Preferred Stock sold by the Company at a discount to the Issue Price.

Source: ILPA

The amount of common shares that a corporation has sold (issued).

Source: ILPA

Refers to the organization issuing or proposing to issue a security.

Source: ILPA

Information Technology

Source: esma