European Investment Bank Group (Bank & Fund) 1 Which financing instruments are offered to project promoters in the Danube Region? Hubert Cottogni, Deputy Director & Head of Regional Business Development, EIF

Overview of future EU-EIF financial instruments 2 Horizon 2020 Pilot Equity Facility for Tech Transfer (GIF successor) SME and Small Mid Caps Guarantee Facility for RI (RSI successor) (700m) EUR 3bn Min. 1/3 (EUR 1bn) for SME/small mid caps Instruments under Structural and Cohesion Funds EU level instrument (contribution of Member State (MS) funds from Operational Programmes to centrally managed EU programs) Tailor-made instruments Significantly higher amounts than currently, but to be decided by each MS Competitiveness & SME (COSME) EUR 1.4bn Equity Facility for Growth EUR 690m Loan Guarantee Facility EUR 700m Social Change & Innovation Progress Microfinance II Social enterprise investing EUR 192m Erasmus for all Student Loan Guarantee Facility 517m Structural/Cohesion FundsCentral EU instruments Source: EC, adapted Jobs, Growth and Social Cohesion Creative Europe Cultural and Creative Sector Guarantee Facility 121m Research, Development, Innovation Off-the shelf instruments

Financial fragmentation 3 FINACIAL CRISIS = banks are hesitant to lend in ‘risky’ countries meaning that funding became expensive in these places. (E.g. on average loans cost 1.6% more in Italy and Spain than in Germany) This means that SMEs with similar risk profiles are not able to borrow the same amounts in different countries, simply because one country is perceived to be more ‘risky’ and thus the SMEs in that country are not eligible for the same interest rates – this causes financial fragmentation. Financial fragmentation = credit rationing in the SME market In the Danube Region bank lending remains the main source of funding for SMEs (with Venture Capital and other alternative forms of financing remaining largely underdeveloped) Due to the fact that the majority of banks in this region are largely owned by Eurozone banks, the financial crisis has had severe knock-on effects. Greek banks in particular continue to own a significant share in economies in the Danube Region.

How to improve access to finance for SMEs in the region? 4 In an environment where banks have become more risk averse and are concentrating on recapitalisation and deleveraging, access to finance for SMEs has dried up. At the same time, precisely due to the financial crisis, SMEs have lost the capacity to self-sustain and now need to seek external sources of funding The solution therefore, is to make risks & rewards acceptable to banks and in parallel to build up new sources of finance such as venture capital and mezzanine markets For example in the Western Balkans region, over 45% of micro and SMEs perceive access to finance as a moderate to severe obstacle when doing business*. *OECD et al. (2012) SME Policy Index: Western Balkans and Turkey 2012: Progress in the Implementation of the Small Business Act for Europe, OECD Publishing

European Investment Bank & Fund: instruments offered 5 EIB is strongly committed to the implementation of the Danube Strategy Out of the total EIB lending in 2012 (EUR 52bn) EUR 7.5bn was allocated to the Danube region EIB offers a wide range of financial products, including traditional loans to banks, co- financing of EU grants, structured finance products (PPPs), specialised instruments such as JESSICA and TA facilities such as JASPERS & ELENA. The EIB has also set up the Budapest Danube Contact Point together with Hungary. LENDING, BLENDING AND ADVISING EIF offers: multi product umbrella funds such as WB Enterprise Development and Innovation Facility, JEREMIE in countries like Romania and Bulgaria European programmes such as CIP, RSI, PROGRESS in future COSME, HORIZON 2020 direct support to regional equity and mezzanine funds co-investment facilities

Guarantee Instruments Development 2013 and beyond Risk tolerance Deal rationale Financial Institutions Pricing Leverage Self-sustainability Target Beneficiaries 6 ProductPortfolio TrancheFormLeverage SMEG Risk Transfer First Loss Direct guarantee Counter - guarantee = 14 FLPG*First Loss + Second LossDirect guarantee= 5 to 7 Credit EnhancementSecond Loss (mezzanine)Direct guarantee= 6 to 8 RSIBlended (uncapped) Direct guarantee Counter-guarantee = 5 (on EC FLPG) ABS wrap Funding SeniorDirect guarantee= 2 to 3 Expected Loss SMEG (First Loss) FLPG (First + 2 nd Loss) Credit Enhancement (Second Loss) RSI (uncapped) ABS wrap (Senior) *First loss product guarantee

Equity Instrument Development 2013 and beyond 7 EIF crisis response toolbox EIF as entrusted entity for Horizon 2020 / COSME European Commission ResourcesEIB / EIF ResourcesMember States / Private Sector Resources Lower Mid-Market Expansion/ Development Capital Early Stage Tech Transfer Proof of Concept Business Angels Seed Stage Social Impact FundMezzanine Facility for GrowthCorporate Innovation Platform European Angel Co-Investment Fund COSME / Equity for GrowthHorizon 2020 / Equity for Research and Innovation TT-POC-Start-up Cohesion Policy Structural Funds / ESIF & JEREMIE

Western Balkan Enterprise Development and Innovation Facility Improving access to finance in the Western Balkans region 8 ENIF Enterprise Innovation Fund WB EDIF Platform is managed by the EIF and is comprised of four different and scalable pillars ENEF Enterprise Expansion Fund Guarantee Facility Technical Assistance A VC fund focusing on innovative SMEs EIF is currently in the process of selecting a Fund manager Target size: EUR 40m Supporting established SMEs with high growth potential Managed by the EBRD with EUR 50m co-investment facility Target size: EUR 100m Guarantees are provided to FIs to incentivise them to build up new SME loan portfolios Generating a loan volume of over EUR 110m Beneficiary governments can obtain support in implementing policy reforms to foster a favourable regulatory environment for SMEs Supporting innovation Improving access to finance Improving venture capital ecosystem Promoting the visibility of region as a market player Enabling integration with EU Policy Backing regulatory reforms

Example: JEREMIE Bulgaria A portfolio approach 9 SME Development Stages PRE-SEED PHASESEED PHASESTART-UP PHASEEMERGING GROWTHDEVELOPMENT HIGHER RISKLOWER RISK Equity products Product under development EUR 350m Holding Fund 5 different financial products are being deployed Via 12 different financial intermediaries Producing a leveraging effect of x 2.5 Allowing for a revolving nature to the funds EUR 22.6m Accelerator/Seed Fund EUR 20.3m Venture Fund EUR 60m Mezzanine EUR 300m Funded Products EUR 392m Guarantees Co-investment Product – negotiations underway Debt products