Financial Engineering Modification of the Council Regulation The General Regulation already modified by the Council Revised Article 44 confirms and clarifies the possibility of direct award of holding fund tasks to the EIB and EIF A grant to the EIB or EIF is no longer necessary

Financial Engineering Modification of the Council Regulation Article 56 In-kind contributions by managing authorities to holding funds or funds is eligible at an early stage under revised Article 56(2)

Financial Engineering Commission Regulation (Articles 43-46) Overview Details on content of business plan removed (Article 43) Increase of eligible management costs by 0.5% for outermost regions (Article 43(4)) Clarification of possibility to combine grants and support from financial engineering instruments to the same enterprise, PPP or other urban project (Article 43(6)) Re-organisation and simplification of the text in Articles 43, 44 and 46

Financial Engineering Commission Regulation Article 43 Old Version Modified Version 43(1) “Articles 43 to 46 shall Unchanged apply to financial engineering instruments in the form of actions …” 43(2) Contents of the business plan Cancelled 43(3) Definition of Financial Engineering instruments ”Financial engineering instruments Renumbered 43(2) including holding funds …” 43(4) “Management costs may not exceed …. “ Unchanged 43(5) & 43(6) Funding Agreements “The terms and conditions from merged and simplified into new 43(3) operational programmes …” “The funding agreement referred to in paragraph 1”

Financial Engineering Commission Regulation Article 43 Old Version Modified Version 43(7)(1) “Managing authorities shall take precautions Managing authorities shall take precautions to minimise distortion of competition in the to minimise distortion of competition in the venture capital or lending markets” venture capital or lending markets and the private guarantee market New text including guarantee markets in 43(7) 43(7)(2) “Returns from equity investments and loans ..”Moved and renumbered as 43(5) Returns from repayable investments, such as equity and loans, and from guarantees for repayable investments, less a pro rata share of the management costs and performance incentives, may be allocated preferentially to investors operating under the market economy investor principle. Such returns may be allocated up to the level of remuneration laid down in the by- laws of the financial engineering instruments, and they shall then be allocated proportionally among all co-financing partners or shareholders.

Financial Engineering Commission Regulation Article 43 Old version of 46(2) Modified Version in new 43(6) New Article 43(6)(2) clarifies combining grants and financial engineering when supporting the same enterprise or urban project New Article 43(6) replaces 46(2) “Urban projects receiving grant “Enterprises, as well as public private partnerships assistance from an operational and other projects included in an integrated plan programme may also be supported for sustainable development, which are supported by financial by urban development funds.” engineering instruments, may also receive grant assistance from an operational programme”

Financial Engineering Commission Regulation Article 44 Old Version Modified Version Title: Additional provisions Title: Holding Funds applicable to holding funds Art44(1) “Where the Structural Funds Unchanged finance financial engineering …” Art 44(2) “The funding agreement referred to Drafting clarifications and changes in paragraph 1 shall, in particular, make provision for:” “(a) the terms and conditions for contributions from the operational programme to the holding fund; (b) calls for expression of interest addressed to financial engineering instruments in accordance with applicable rules; (c) the appraisal and selection of financial engineering instruments by the holding fund; (d) the setting up and monitoring of the investment policy or the targeted urban development plans and actions; in case of financial engineering instruments supporting enterprises, the investment policy shall comprise at least an indication of the targeted enterprises and the financial engineering products to be supported;

Financial Engineering Commission Regulation Article 44 Old Version Modified Version Art 44(2) ctd When the Structural Funds finance operations comprising financial engineering instruments, a business plan or other appropriate document shall be submitted to the managing authority or to the holding fund. The terms and conditions for contributions from operational programmes to financial engineering instruments shall be set out in a funding agreement, to be concluded between the duly mandated representative of the financial engineering instrument and the Member State or the managing authority, or the holding fund where applicable. The funding agreement shall include at least the following elements: (a) the investment strategy and planning; (b) provisions for monitoring of implementation; (c) an exit policy for the contribution from the operational programme out of the financial engineering instrument; (d) the winding-up provisions of the financial engineering instrument, including the reutilisation of resources returned to the financial engineering instrument from investments or left over after all guarantees have been honoured that are attributable to the contribution from the operational programme.” Art 44(3) Cancelled and covered by new 43(3)

Financial Engineering Commission Regulation Articles 45, 46 Old Version Modified Version Art 45 Unchanged Title: Additional provisions applicable to Title: Urban development funds urban development funds Art 46(1) “Where Structural Funds finance urban The word “enterprises” is added at the end development funds, those funds shall of the new version clarifying this provision, development funds, those funds shall invest meaning that urban development funds in public-private partnerships or under JESSICA cannot invest in SMEs. for sustainable urban development. Such public-private partnerships or other projects of financial instruments such as venture capital guarantee funds for enterprises.”

Financial Engineering Commission Regulation Article 46 Old Version Modified Version Art 46(2) “For the purposes of paragraph I, urban Possible minor drafting changes development funds shall invest by means of equity, loans and guarantees. Urban projects receiving grant assistance from an operational programme may also be supported by urban development funds.” Second sub-paragraph deleted and incorporated into new 43(6)