IMPROVING ACCESS TO FINANCING FOR SMEs JEREMIE Initiative Evgeny Angelov – Deputy Minister Economy, Energy and Tourism

Ministry of Economics, Energy and Tourism2 Overview  Bulgarian SMEs “competitive disadvantage” – lack of risk capital  Investments in innovation – a road to higher economic growth  VC/PE funding – a key factor in improving competitiveness  MEET actions - increased the % allocation of risk capital schemes under the JEREMIE initiative

Ministry of Economics, Energy and Tourism3 Gap Analysis - Findings  0.6% drop in aggregate loan portfolio to NFIs for Q1/2010  Risk-aversion of banks - tightened evaluation criteria  Limited guarantee instruments present on the market Debt  Only 2.2% in 07, 7.9% in 08 of all PE investments are early stage  Lack of VC/PE financing  Few meet-up events (i.e. Seedcamp, VC forums) Equity  Few active BSOs (Incubators, Tech parks, etc.)  70% of SMEs rely only on own capital  Under developed entrepreneurial / Investment culture Business Opportunities Source: EIF, BNB

Ministry of Economics, Energy and Tourism4 Financing products SME Cash Flows SME Development Stages Pre-seed PhaseSeed PhaseStart-up Phase Emerging Growth Development Business Angels, TT Microcredit VC Seed & Early Stage Formal VC Funds & Mezzanine Funds Portfolio Guarantees & Credit Enhancement Public Stock Markets

Ministry of Economics, Energy and Tourism5 JEREMIE Concept Structural Funds ERDF (& ESF) Holding Fund (« HF ») National Contribution Investment Board Financial intermediaries SMEs JEREMIE is EU initiative enabling countries to create a Holding Fund using ‘Structural Funds’ to finance a portfolio of Financial Engineering Instruments via selected intermediaries eg: Banks, VCs 3rd party funding Tailor made portfolio of instruments created to address Member States needs in SME Finance.

Ministry of Economics, Energy and Tourism6 JEREMIE 200 May 2010Bulgaria 20April 2009Cyprus 90December 2008Campania (I) 100December 2008Slovakia 30October 2008 Languedoc-Roussillon (F) 60November 2009Sicily 290October 2008Lithuania 91.5July 2008Latvia 100February 2008Romania 100June 2007Greece Amount in EUR m DateCountry

Ministry of Economics, Energy and Tourism7 JEREMIE Bulgaria – Holding Fund Structure Investment Board Ministry of Economy, Energy and Tourism FI 1 EIF SPV FI 2 SMEs

Ministry of Economics, Energy and Tourism8 JEREMIE Bulgaria – Investment Strategy  Overall goals:  Support equity financing initiatives  Enhance micro-lending schemes  Support of SME lending through guarantees  Balanced portfolio of investment products:  EUR 30m venture capital fund (JHF contribution 70% - EUR 21m)  EUR 60m growth capital fund (JHF contribution 50% - EUR 30m)  EUR 60m mezzanine fund (JHF contribution 50% - EUR 30m)  EUR 74m allocation for debt products & guarantees Allocation of the remaining EUR 44m to be decided in the course of 2010 based on market absorption of launched products.

Ministry of Economics, Energy and Tourism9 JEREMIE Bulgaria – Features & Process  Main features of equity products:  Fund investments between 50 – 70%  Only locally registered funds  Bulgarian SMEs to be financed  Restriction of EUR 1.5m per annum per investee (only VC Fund)  Focus on expansion and prior to expansion stages  Fund manager selection process:  Calls for expression of interest (June for VC Fund)  Eligibility criteria evaluation  Commercial due diligence  Signing of operational agreement

Ministry of Economics, Energy and Tourism10 Venture Capital Fund – How it works JEREMIE Holding Fund (JHF) Private Investors Escrow Account Venture Capital Fund SMEs Cash flows paid into escrow as money is drawn from the JHF Cash flows to fund after end of 2015 or when JHF fully drawn Pari-Passu Cash flows to fund from inception till end of 2015 or until JHF commitment is fully drawn Max. 70% Min. 30%

Ministry of Economics, Energy and Tourism11 Thank you …