Regional Business Development Ioannis Tsakiris Head of Region Regional Business Development 11 May 2011 JEREMIE This presentation was prepared by EIF. The information included in this presentation is based on figures available for May 2011 Any estimates and projections contained herein involve significant elements of subjective judgment and analysis, which may or may not be correct.

EIF at a glance

EIF - The Challenge: Financing Innovation amongst SMEs in Europe SMEs account for a large proportion of Europe’s economic activity Micro-businesses dominate employment in countries such as Italy (48%) and Greece (57%) Successive EU summits put issues of growth, employment, innovation and competitiveness high on agenda Support to SMEs: one of the top six EIB Group priorities EIF is the SME risk financing arm of the EIB Group Source: Eurostat, Commission Communication on Modern SME policy for Growth and Employment Importance of SMEs as the Foundation Stone for Tomorrow’s Prosperity

EIF at a Glance EU specialised institution for SMEs, risk financing Venture Capital and Mezzanine (fund of funds) Structuring and Guaranteeing portfolios of SME and microfinance loans/leases Geographic Focus / Intermediaries EU 27, EFTA, Candidate Countries Distributing through Banks and Funds Authorised Capital € 3bn EIB: 61.2% EU: 30 % Fin. institutions: 8.8 % AAA rated Staffing, Culture and Values Leading-edge modern institution Adapting to changing market conditions Attracting talented staff High standards of compliance and integrity Dual Objective of Meeting EU Policy Goals & Generating a Satisfactory Return on Equity

Operating Model of EIF Transformational Role of EIF Suppliers / Mandators Transformational Key Success Factors Intermediaries SMEs Own resources EIB (RCM, MEZ) EC (CIP) MA (JEREMIE) MS (ERP) Funds of Funds Regional (LfA) Product Development Mandate Management Transaction Execution Risk Management Follow-up & Relationship Focus Commercial Banks Development & Promotional Banks Guarantee Institutions Fund Managers VALUE ADDED

JEREMIE Holding Funds in support of SMEs

JEREMIE: Increasing the Deployment of Self-Sustaining Financial Instruments for SMEs The Joint European Resources for Micro to Medium Enterprises Joint initiative of the EU (DG Regio & EIB Group) launched in October 2005 Joint also because it potentially combines resources from the EU, National Public Authorities, EIF, EIB and/or other financial institutions Participation in JEREMIE optional for each country/region – Holding Fund Management Uses European Regional Development Funds or European Social Funds for enhancing SME access to finance in New Member States and in Regional Development areas through sustainable and “revolving” financial instruments Create and foster entrepreneurship in Europe   EVALUATION IMPLEMENTATION DISBURSEMENT PROCESS 2006 2013 JEREMIE Phases

Why JEREMIE? Use ERDF/ESF to improve SME access to finance; Reduce the practice of “grant financing”; Increase the flexibility of financial engineering instruments by making them permanent and ”revolving”; Leverage effect: try to attract other sources of funding (BEI, national funds, regional funds, banks, etc.); The concept of Holding Fund: a new idea, at the root of JEREMIE; HF provides funds to Financial Intermediaries which operate in the relevant market segments: VC, guarantees, micro-credit, etc...; Simplified procedures, thanks to HF concept; Delegation of the selection of the Financial Intermediaries and the monitoring and the reporting to Commission to an independent external expert, Allocation of funds to a series of financial instruments To support SMEs throughout the lifecycle Reallocation of funds within the Holding Fund at any time  

National /or regional Level Key Structural Benefit: Funds Allocated Upfront to Fund Holder and Managed at Local Level EU Level European Commission ERDF – DG Regio Disbursement Up front Irreversible Managing Authority Local holding fund Greater delegation to Local Authorities Management/administration are outsourced to HF Mgr. National /or regional Level Holding Fund (« HF ») HF Manager Structure investments, select Financial Intermediaries Administer, monitor & report on investments Attract a syndicate of investors Closely collaborate with national/regional authorities Role of the HF Manager Financial intermediaries National/regional /Local Level Regional /Local Level SMEs THE MANAGER IS SELECTED BY MEMBER STATE/REGION Microfinance beneficiaries

Funded Risk Sharing for SMEs Portfolio Guarantees & Credit Enhancement EIF Tool Kit for SMEs SME Cash Flows Funded Risk Sharing for SMEs Public Stock Markets Portfolio Guarantees & Credit Enhancement Formal VC Funds & Mezzanine Funds Funded Risk Sharing for SMEs VC Seed & Early Stage Microcredit Les PME ont donc des besoins de financement différents en fonction de leur phase de développement. Les instruments CIP visent à promouvoir les possibilités de financement sur les différents besoins des PME, au cours de leur cycle de vie, de la création jusqu'à la transmission d'entreprise, Ici vous voyez les phases différentes du financement pendant le Cycle de vie de l’entreprise: Pendant la première phase, aussi appelée la « Vallée de la mort », peu d’investisseurs sont enclin à venir épauler l’entrepreneur en phase de démarrage. Les appuis viennent essentiellement de la famille et des amis. C’est ce que l’on appelle le capital de proximité. Apres cette phase difficile, les Business Angels interviennent parfois pour les entreprises représentant un potentiel de croissance particulièrement prometteur. A noter que l’UE est en retard par rapport aux Etats-Unis pour ces sources de capital-risque informelles. En effet en 2004 aux Etats-Unis, le nombre de business Angels par rapport au nombre d’habitants était significativement plus élevé qu’en Europe (4 x selon une étude du FEI de 2004). De plus, les business Angels aux USA investissent des montants en moyenne 6 fois plus élevés qu’en Europe. En ce qui concerne le capital risque dans les phases de démarrage et d’expansion, on note que le rendement aux Etats-Unis, sur une période de 3, 5, 10 et 20 ans est 0, voire négatif. Aux Etats-Unis, par contre, le rendement sur les mêmes périodes est largement positif. En Europe, les investissements pour les mêmes périodes dans les « buy out » est positif et comparable au rendement aux Etats-Unis. C’est sans doute une des explications pour l’affectation du capital risque en Europe au secteur des « buy out », au détriment des phases de démarrage et d’expansion. Source: Thomson Financial, 2006 Business Angels, TT Pre-seed Phase Seed Phase Start-up Phase Emerging Growth Development SME Development Stages HIGHER RISK LOWER RISK

JEREMIE Holding Funds

The JEREMIE process

JEREMIE Process: call for expression of interest Call deadline Progress Q & A process Ensuring answers are communicated to all Publication Website and other media to ensure market awareness State aid assessment Formal state aid assessment by competent local authorities Inv. Board approval Full presentation of product and call documents to local IBs Selection criteria Monitoring committee’s approval of a specific selection criteria Internal approval Internal review and approval process including specialists from legal, risk management & compliance Instrument design Expert driven process to specify product details, to meet market needs whilst respecting regulations Fact finding Follow-on from gap analysis, discussions with key market players and associations Process

JEREMIE Process: selection and approval Communication of decision To FI, mandator and media as appropriate Progress Board submission/approval Proposal presented to EIF Board for approval Draft board report Preparation of decision documents reviewed by all depts. Short-listed applicants undergo intensive 2 day interview process Due diligence Final Selection Presentation of FIs to DD team in loco, scores reviewed & minuted Invitations to 2nd screening issued & DD team formalised Set up of due diligence Desk-based review of submitted documents with initial scoring (QAC) and then team review (minuted) Pre-selection phase Selection Panel Internal agreement of members and observers of core selection team Eligibility check Initial check to ensure ‘EoI’ passes eligibility checklist with support of compliance Call deadline Process

Outcome of the JEREMIE process to date 121 VC applications received 70 Guarantee applications received Greece Romania Latvia Lithuania Slovakia Languedoc Roussillon (FR) Campania (IT) Cyprus Bulgaria Sicily (IT) Malta 42 Due Diligences carried out 31 approved transactions

Holding Funds Portfolio Mix (in %) Funded Risk Sharing Product (FRSP) Microcredit Guarantees Other Equity Risk Capital Fund Flexible non-allocated funds

Amount of Private Finance Attracted

JEREMIE mandates & their financial engineering products

Case Study : JEREMIE via ERDF in Languedoc-Roussillon (FR) market analysis : main conclusions Debt: Smaller funding, typically trough “loans”, for small projects concerning the creation of innovative SMEs with good potential. Such financing, which ensures a link with regional venture capital funds, is extremely limited in L-R. Equity: Funding through equity for the creation of enterprises: local intermediaries tend to move further away from this area of financing to focus investment activity on growth and development of enterprises. This failure is noticed for the creation of innovative enterprises.

JEREMIE Funding Agreement signed for LR Signature: 22 October 2008 Size: EUR 30m in 3 instalments: EUR 11m in 2008, EUR 10m in 2009 and EUR 9m in 2010 Duration: until 31 December 2015 Governance/Management: EIF = responsibility for JHF operations “Comité de Pilotage” (Investment Board) consisting of representatives of the French State and of the L-R Region with an advisory role and responsibility for the supervision of the operations – the 1st meeting took place in December 2008, and bi-monthly meetings have taken place thereafter. EIF = observer status

Languedoc-Roussillon financial instruments Languedoc-Roussillon is characterised by 3 types of financial engineering instruments Seed loans: interest-free loans (up to EUR 100,000) for SMEs operating in innovative sectors Co-investment fund: technology-oriented and innovative SMEs, participation in the equity of the SMEs of up to EUR 2.5m Guarantee: this product can be applied widely, with a minimum leverage effect of x8.4 and better terms for the SMEs (reduction of personal guarantee + interest rate reduction) Financial Intermediaries for all 3 financial products selected

What has the JEREMIE initiative brought to the Languedoc-Roussillon authorities? A better understanding of financial engineering. EIF has defined all the three instruments (seed loans, Co-investment, Guarantee), however the LR authority has been heavily involved since the beginning in the process. Encouragement to move away from grant-dependency to a revolving approach. With a grant approach, there is no leverage. However with the implementation of JEREMIE LR, the EUR 30m (50% ERDF, 50% Region LR) will be leveraged into EUR 143 m that will facilitate SMEs access to finance. JEREMIE in LR does not only benefit SMEs but also the LR economy as a whole. Prioritisation of actions to be implemented in order to develop the SMEs. In other words, instead of various initiatives (which may be difficult to follow and monitor, leading to fragmentation of leverage), the JEREMIE initiative will focus all efforts on one accurate target –thus reinforcing the competitiveness of this target (e.g. SMEs with a significant innovative component).

What has the JEREMIE initiative brought to the Languedoc-Roussillon authorities? Facilitates the monitoring of selected financial intermediaries. So far, it was not easy for the LR authority to monitor financial intermediaries (time consuming, lack of knowledge, etc.). Thanks to JEREMIE (under EIF) the LR authority was able to outsource the management of the reporting documents to the EIF Encourages to extention of concept to other sources of EU funding (for the next programming period) So far, JEREMIE has been implemented through ERDF. Due to the aforementioned benefits, the LR authority would like to carry out JEREMIE with EARDF and ESF source of funding during 2014-2020

Contact European Investment Fund 96 boulevard Konrad Adenauer L-2968 Luxembourg Tel.: (+352) 42 66 881 Fax: (+352) 42 66 88 200 www.eif.org