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« EIB GROUP SUPPORTING THE REGIONAL SME FINANCING OPERATIONS »

4th Theme Seminar, Financial Engineering

Friday 27 October 2006

SAULI NIINISTÖVice President

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EIB

GLOBAL LOANS

EIF

VENTURE CAPITAL

GUARANTEES & SECURITISATION

JEREMIE

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1%1%7%

91%

SMEs IN EUROPE

23 million SMEs account for 75% of jobs

99% of businesses in Europe are SMEs

91% of all SMEs are micro-enterprises (with staff of less than 10)

EU puts issues of growth, employment, innovation and competitiveness high on agenda (Lisbon Summit amongst others)

Support to SMEs: one of the top 5 EIB Group priorities

Europe’s enterprises are composed of

Medium-sized firms, 50 to 250 employees

Large enterprises

Small firms 10 to 49 employees

Micro-business 1 to 9 employees

KEY

Source: Eurostat, Commission Communication on Modern SME policy for Growth and Employment (2005)

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EIB - European Union’s financing institution: Created by the Treaty of Rome in 1958, to provide

long-term finance for projects promoting European integration

Subscribed capital EUR 163.7 bn

EIB shareholders: 25 Member States of the European Union

Lending in 2005: EUR 47bn (EUR 43 bn in 2004) EUR 42 bn within the EU (EUR 40 bn in 2004)

Borrowing in 2005: EUR 50 bn, through 330 bond issues in 15 currencies (EUR 50 bn in 2004)*

*The 2005 programme was completed as of 04.11.2005.

Funds raised after this date to year-end (EUR 2.9 bn equivalent) are attributed to the 2006 programme.

THE EIB GROUP – THE EIB

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EIB OWNERSHIP

A5.5%AA

21.8%

AAA72.7%

EIB’s shareholders

In case of split rating, the highest rating has been taken

Germany AAA 16.28%France AAA 16.28%Italy AA 16.28%United Kingdom AAA 16.28%Spain AAA 9.77%

Belgium AA 4.51%The Netherlands AAA 4.51%Sweden AAA 2.99%Denmark AAA 2.28%Austria AAA 2.24%Poland A 2.08%Finland AAA 1.29%Greece A 1.22%Portugal AA 0.79%Czech Republic A 0.77%Hungary A 0.73%Ireland AAA 0.57%Slovakia A 0.26%Slovenia AA 0.24%Lithuania A 0.15%Luxembourg AAA 0.11%Cyprus A 0.11%Latvia A 0.09%Estonia A 0.07%Malta A 0.04%

Source: Bloomberg, as of 31 December 2005

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0

10

20

30

40

50

EIB IBRD IADB ADB IFC EBRD AfDB

0

50

100

150

200

250

EIB IBRD IADB EBRD ADB IFC AfDB

EIB is the World’s largestSupranational Issuer* source: Barclays, Dealogic bondware,as of 31 December 2005

Outstanding debt of suprantional

borrowers* source: Barclays, Bloomberg DDIS function, as of 31 december 2005

EUR bn*

EUR bn*

EIB IS LARGEST SUPRANATIONAL ISSUER

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EIB STRATEGIC OUTLOOK

6 Corporate Priority Objectives

Economic and social cohesion in an enlarged EU

Implementing of the Innovation 2010 Initiative (i2i)

Development of Trans-European and Access networks (TENs)

Support for Small & Medium Sized Enterprises

Environmental Sustainability

Support of EU Development and Cooperation Policies in Partner Countries

EIB implements EU policies; a policy driven Bank

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EIB SUPPORT FOR SMALL & MEDIUM SIZED ENTREPRISES (2005: EUR 4.3 bn EIB plus EUR 2.1 bn EIF)

EIB Global Loans

2005 EUR 4.3 bn (EUR 4.7 bn in 2004) EIB long-term loans for SME financing

EIF Venture Capital

2005 EUR 368 m (358m in 2004) in 21 operations

Total EUR 3.1 bn in 217 funds

EIF SME Guarantees

2005 EUR 1.7 bn (1.4 bn in 2004) in 35 operations

Total EUR 9.3 bn 164 intermediariesSME’s account for 99% of private enterprise in the EU

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EIB CORPORATE OPERATIONAL OBJECTIVES (2005)

EUR 34 bn for regional development - 80% of total lending in the EU

EUR 10.7 bn for the Innovation 2010 Initiative (i2i)

EUR 8.3 bn for Trans-European Networks (TENs)

Emphasis on SMEs: EUR 4.3 bn EIB long-term loans, through the EIF: EUR 468 m in venture capital

EUR 1.7 bn in guarantees

EUR 12.3 bn dedicated to the environment and sustainable development

EUR 3.6 bn support for EU external development and cooperation policies

Financing balanced development

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ECONOMIC AND SOCIAL COHESION / REGIONAL DEVELOPMENT2005: EUR 34 bn

Strengthening of the economic potential of “convergence

regions” in the EU

EUR 28 bn in individual loan EUR 6 bn Global Loans for SME financing and small

scale public infrastructure

Main sectors

Communication infrastructure (46%)

Industry & services sectors (22%)

Health & education infrastructure (9%)

Top financing priority

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Tailor-made finance to fit project and promotersubject to adequate security

Large-scale projects (> EUR 25 million)

direct financing indirect financing

Small and medium-scale projects (EUR 40 000 – 25 million)

Global loans with partner banks High-growth innovative SMEs: investment funds,

venture capital or development capital companies

EIB: FINANCING OPTIONS TO PUBLIC AND PRIVATE SECTORS

EIB PARTICIPATION IS LIMITED TO 50% OF A PROJECT’S COST

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INSTRUMENT– Global Loans

FINAL BENEFICIARY– SMEs, <250 FTE’s

– Local Authorities

INTERMEDIARIES– Banks, Financial Institutions

VOLUME– EUR 4.3 bn in 2005

(EUR 4.7 bn in 2004)

ELIGIBLE SECTORS– Regional Development

– European Communications Infrastructure

– Environment and quality of life

– Energy

– International competitiveness of European Industry and support of SMEs

– Health

– Education

– Social Housing

EIB FINANCING: GLOBAL LOANSSMALL AND MEDIUM-SCALE PROJECTS <EUR 25 m

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THE EIB GLOBAL LOAN PRODUCT

EIB

Intermediary Bank

Small / medium sized enterprises

lends; takes risk on intermediary

provides information on end clients

lends and takes risk on end clients

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RELATIONSHIP EIB / COMMERCIAL BANK INTERMEDIARY

Global Loans allow EIB to support SME innovation and thus job creation and economic development in sectors and regions which are considered priority areas across the European Union;

EIB funding aims to improve the terms, conditions and availability of finance to SMEs; and

EIB Global Loans supports the commercial bank relationship with the end client.

Advantages

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EIB’S SUPPORT THROUGH GLOBAL LOANS

Global Loans signed with 200 financial intermediariesthroughout all EU member states.

Target: 50% dedicated to SME’s.

Between 2000 and 2004, EUR 57.7bn was signedfor the creation, modernisation and expansion

of SMEs throughout the EU.

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EIB’S GLOBAL LOAN ACTIVITY IN FINLAND2003-2005

Signatures

EUR 475 m

Counterparts

OKO Bank

Aktia

Finnvera

Municipality Finance

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EIB’S GLOBAL LOAN PARTNERS IN THE NORDIC REGION

SwedenKommuninvest

SwedbankDexia Kommunbank

DenmarkKommunekredit

NykreditRingkjobingLandbobank

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• Targeted beneficiaries: SMEs & MidCaps(low/sub-investmentgrade)

• Product Ideas: RSFF Facilites; Interest Contingent Supplier Facility, Co-financing, Global

Authorisations

• EIB value added: Banks: risk sharing, capital relief, new customers/cross selling, Beneficiaries: risk sharing, higher debt capacity, lower financing cost

SME/MidCapCorporates

Sub-investmentgrae

FundingPartner Bank

Risk SharingFinancing

/

RSFF

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Value added

For banks For RSFF

• Capital relief (bank solvency ratio)

• Alleviate sector and counterpart

financing constraints

• New product development

• Signaling effects to markets

through EIB presence

• Sharing of Know-How

• Rapid rollout of existing network

throughout EU

• Efficiency gain through delegation

• Expand range of SME products

• Widen scope of SME beneficiaries

• Scaleability of products

• Sharing of Know-How (sector,

local market)

Support and involve banks, not crowd them out !

RSFF (CONT’D)

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EIF - EIB’s specialised venture capital arm and SME guarantee provider: Established in 1994 (Subscribed capital EUR 2bn)

Shareholders: EIB (61.9%), EU Commission (30%) and other financial institutions (8.1%)

Annual volume of operations (2005):

• EUR 1.7 bn for guarantee operations (EUR 1.5 bn in 2004)

• EUR 468 m (EUR 358 m) for venture capital funds (commitments)

THE EIB GROUP – THE EIF.

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Business Lines:

VENTURE CAPITAL as “fund of funds”; acquiring holdings in Venture Capital Funds

GUARANTEES and SECURITISATION for the banking sector in favour of SMEs; structured SME operations such as credit lines, counter-guarantees, credit enhancement

EIF: “PURSUIT OF COMMUNITY OBJECTIVES”

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EIF: RESOURCES AND OBJECTIVES

BMWA - ERP

Dahlia SICAR S.R.

European Community

EUR 600m+ Capital increase

(Approx. EUR 325m target under way)

EUR 4bn Revolving

EUR 450m (MAP)EUR 1.1bn (CIP)

Up to EUR 1bn

To be committed to venture capital funds and guarantees

in the EU and Candidate Countries

AND generate strong return on equity

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EIF: ASSETS UNDER MANAGEMENT(AT 30/09/06)

TOTAL COMMITMENTS

NEW COMMITMENTS (1 Jan –30 Sept 2006)

VEHICLES

VENTURE CAPITAL EUR 3.6 bn EUR 450 m 238 funds

GUARANTEES & SECURITISATION

EUR 10.3 bn EUR 490 m

181

banks/

guarantee institutions

TOTAL EUR 13.9 bn EUR 940 m

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EIF: EXAMPLE OF A VENTURE CAPITAL FUND

CO-INVESTOR

(Limited Partners)

CO-INVESTOR

(Limited Partners)

CO-INVESTOR

(Limited Partners)

Venture

Capital

Fund

Management team

SMEs

SMEs

SMEs

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EIF: VENTURE CAPITAL PORTFOLIO (AT 30/09/06)

Key investor in major markets

Niche opportunity player in smaller markets

Geographic spread

Balance portfolio between expansion capital and start-up/ early stage

Portfolio biased towards technology

(65% in ICT & life sciences) Around 30% of portfolio in

multi-country funds Track record in backing new

teams in Central & Eastern Europe

Multi-country34%

Italy7% Germany

8%Spain

7%

France

15%

United Kingdom 15%

Rest Western Europe14%

EUR 3.6bn

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EIF: VENTURE PORTFOLIO STAGE BREAKDOWN (AT 31/08/06)

Heavy share of technology

Buyout12%Expansion

19%

Seed2%

Generalist30%Start-Up

37%

EUR 3.6 bn

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EIF: EXAMPLE OF SECURITISATION

SanpaoloIMI

Originator

SanpaoloIMI

Originator

SeniorSenior

MezzanineMezzanine

JuniorJunior

SMESME

SMESME

SMESME

SMESME

SME loanportfolio

Guaranteedby Confidi

Issuance

of ABS

SPVSPV

Purchase of SME loan portfolio

Originator(Bank)

Originator(Bank)

SeniorSenior

MezzanineMezzanine

JuniorJunior

SMESME

SMESME

SMESME

SMESME

SME loanportfolio

SPVSPV

Purchase of SME loan portfolio

EIF

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Bond-holders Bond-holders AAAAA

A BBB

unrated

AAAAA

A BBB

unrated

Sale of Portfolio or

Aaa/AAACredit default swap

(Reference)Portfolio

Originator SPV

Bond-holders Bond-holders

EIF External guarantor

20% risk weighting

EIF External guarantor

20% risk weighting

EIF: EXAMPLE OF FINANCIAL GUARANTEE

Unconditional, irrevocable guarantee of timely payment of interest and ultimate payment of principal

Typically bonds with BB to A underlying rating, wrapped up to AAA level

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EIF: JEREMIE

• JEREMIE intends to use ERDF funding for enhancing the Access to Finance to SMEs in Regional Development areas through sustainable and « revolving » financial instruments

• JEREMIE is a joint initiative of the European Union (DG Regio + EIB-Group)

• « Joint » also because it combines resources from the EU, National Public Authorities, EIF, EIB and/or other Financial Institutions

Main Objectives:

• Develop the role of SMEs / Entrepreneurship in EU Regional Policy

• Depart from a “grant approach”

• Reduce administrative procedures

• Enhance flexible management of financial engineering

• Create leverage

Need to move away from “grant dependency”

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EIF: JEREMIE’S CYCLE

TECHNICAL ASSISTANCE

SMEs

Micro-financeProviders(MCPs)

Tech TransferActivities

Financial Institutions

Guarantee schemes

Venture CapitalFunds

Etc…

ERDF

GRANTS

MANAGEMENT OF

NATIONAL ACCOUNTSEvalua

tion p

hase:

preparation of O

perational P

rogramm

es

EVALUATION

2006 2007 2013

Attract EIB + IFIs lending

(leverage)

FUNDING

Transforming parts of the ERDF grants into

financial products for SME

Multiplier effect on the budget

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http://www.eib.org