JEREMIE June 2006

2 Main Agenda European Investment Fund at a glance Why JEREMIE? Key elements of Choice Current Status & Next Steps

3 European Investment Fund - at a glance Tripartite Shareholding = 61.9% by EIB, 30% by EC, 8.1% various International Banks. Subscribed capital: EUR 2 billion Two Primary Objectives:- - The pursuit of Community objectives such as SME creation, growth, employment, regional development, knowledge- based economy and innovation - To generate an appropriate return on its resources Created in 1994, part of EIB Group Operational platform to support SME finance in Europe

4 Total portfolio in EURNumber of intermediaries VENTURE CAPITAL € 3.1bn (€369m signed in 2005) 217 Venture Capital funds GUARANTEES € 9.3bn (€1.685 bn signed in 2005) 165 Banks/Guarantee institutions = EUR 12.4 billion total portfolio under management European Investment Fund Portfolio – Year End 2005

5 The Lisbon Process (March 2000): transform the EU into « the most competitive and dynamic knowledge-based economy in the world ». The Barcelona EU Summit (March 2002): increase overall spending on R&D on innovation in Europe.. with the aim of approaching 3% of GDP by 2010 ». The Brussels EU Summit (March 2005): European Council urged EIF « to diversify its activities, in particular towards the financing of innovative SMEs through individual-investor (business-angel) and technology-transfer networks ». EIF institutional drivers

6 EIF resources EUR 600mEUR 4 000mEUR 450m Up to EUR 1bn To be committed in venture capital funds and financial institutions in the EU and Candidate Countries European Community (MAP) Being increased Evergreen SMEs indirectly benefited from EIF Dahlia SICAR S.R.

7 Main Agenda European Investment Fund at a glance Why JEREMIE? Key elements of Choice Current Status & Next Steps

8 Possible reasons: difficulty to comply with the Commission’s eligibility and timing requirements Possible reasons: difficulty to comply with the Commission’s eligibility and timing requirements Lessons from recent History Only a small portion of the ERDF Funds intended for SME financing was actually utilised across period of Policy Difficulties Hence the need for reviewing the ERDF disbursement procedure in order to optimize the utilization of the funds and support a greater number of SMEs

9 New Factors in Policy EU 15 ERDF Funds will practically cease after 2013 deadline Hence the need to shift from grants to innovative and revolving financial instruments able to provide finance to SMEs after the 2013 deadline For Member States 2013 deadline does not apply But need to create entrepreneurial culture by using financial engineering to stimulate private sector investments

10 « JEREMIE » stands for Joint European Resources for Micro-to- Medium Enterprises Why JEREMIE?

11 Key Factors  JEREMIE is an initiative of the European Union (DG Regio) launched in October 2005  « Joint » because it combines intellectual resources from EC, National Public Authorities, EIF, EIB and/or other International Financial Institutions (IFIs)  JEREMIE is not an organisation, but a series of coherent actions  JEREMIE is an option for each Country Main Targets:  Use ERDF funding for enhancing the Access to Finance to SMEs in Regional Development areas through sustainable and « revolving » financial instruments  Develop the role of SMEs / Entrepreneurship in EU Regional Policy

12 Status as of Today  EC has asked the EIF to undertake evaluations as part of JEREMIE for each country in partnership with National Development Authorities  EIF has formed a JEREMIE team from internal and external specialists  Some regions and countries have begun process - Slovak Republic - Spain (Andalucia, Extremadura, Valencia) - Bulgaria - Hungary  Evaluation Phase to be completed by end of 2007 Note: Evaluations funded by DG REGIO and the EIF

13 JEREMIE: Future Phases Venture Capital Funds Preparation of Operational Programmes EVALUATION PHASE IMPLEMENTATION OF NATIONAL FUNDS DISBURSEMENT PROCESS Microfinance Providers (MCPs) Tech Transfer Activities Guarantee schemes Transforming parts of the ERDF grants into financial products for SME Multiplier effect on the budget by attracting EIB & IFIs’ lending SME SMEs SME SMEs SME SMEs SME SMEs SME SMEs

14 Main Agenda European Investment Fund at a glance Why JEREMIE? Key elements of Choice Current Status & Next Steps

15 The JEREMIE offers several choices to Member States The importance of Choice JEREMIE is an option for Member States

16 JEREMIE is an option for member states/regions Others Guarantees Microfinance Instruments Venture Capital Funds Practical Implentation Programme developed jointly with the EIF Member State selects % of Funds for Financial Engineering Via JEREMIE SME Financing Infrastructure Competition Grants ERDF funds to member state/region Measures for Competitiveness Partly allocated to financial instruments Articulated across various schemes JEREMIE

17 Choice no. 1 for Member States No JEREMIEJEREMIE Member States Choice Advantages  Irreversible disbursements  Greater Delegation to Local Authorities  Use of Market-driven revolving instruments  Management and administration activities assumed by Fund Manager Issues  Structural challenges  2013 deadline  Time delays  No upfront payment

18 Key structural benefit: funds allocated upfront to Fund Holder at local level HF Manager European Commission ERDF – DG Regio European Commission ERDF – DG Regio Managing Authority EU Level National /or regional Level Holding Fund (« HF ») Financial intermediaries National/regional /Local Level Regional /Local Level SMEs Microfinance beneficiaries  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: € € € € € € € € Disbursement:  Up front  Irreversible Local holding fund:  Greater delegation to Local Authorities  Management/administration are outsourced to HF Mgr. THE MANAGER IS SELECTED BY MEMBER STATE/REGION Programming Authority €

19 Choice no. 2 for Member States Tender ProcessSelecting EIF Manager Selection Advantages of EIF as Manager  Proven expertise  European centre of best practice  Jointly developed programmes based on evaluations  One stop shop for multiple instruments  Immediate disbursement  Funds based and managed locally  Cooperation with EIB  Possible Leverage factor Issues  Lengthy process  Commission involvement  EIF may apply alone or as J/V Administer, monitor & report on investments Attract a syndicate of investors Closely collaborate with national authorities Structure investments, select Intermediaries

20 The cooperation with EIF in the context of JEREMIE can occur in four main forms Holding Fund EIF VCGuar Microf EIF as sole Holding Fund manager Beneficiary fin. institutions Holding Fund EIF VCGuar Microf EIF joint manager of Holding Fund (e.g. in with local devt. agency) Beneficiary fin. institutions Co-Mgr Holding Fund EIF VCGuar Microf EIF partial Holding Fund manager Beneficiary fin. institutions Holding Fund Manager VCGuar Microf EIF as advisor to the Holding Fund manager Beneficiary fin. institutions Other Mgr EIF

21 Main Agenda European Investment Fund at a glance Why JEREMIE? Key elements of Choice Current Status & Next Steps

22 Preparation EVALUATION PHASE in cooperation with Local / Regional / National actors Gap analysis in regions / Member States of potential supply / demand of financial engineered products in SME finance Identification of market driven (revolving) instruments, out of grants system, to « fill the gaps » Interim reports: freely available to Regions, Programming and Managing authorities, any interested parties (potential Holding Fund, etc…) PROGRAMME DEVELOPMENT in support of DG REGIO and competent National or Regional Authorities Use of conclusions / recommendations made in Interim Report and (final) Evaluation report Diagnosis / definition of priorities and operations : ACTION PLAN Active cooperation with stakeholders and Financial Intermediaries

23 The JEREMIE Phases & Next Steps 1) Preparation ) Implementation ) SMEs receive financing Evaluations Programme Planning Selection of Fund Manager Allocation of Funds Selection of Intermediaries

JEREMIE is the opportunity for optimising the use of ERDF resources using the possibility to implement tailor-made instruments (efficient and sustainable), selective use of grants etc… leveraging ERDF funding with EIB loans and EIF expertise in support of designed specific needs increasing cooperation / co-investments between DG REGIO, EIF, EIB and national / regional institutions enhancing SMEs access to finance in regions Much more can be done thanks to financial engineering

European Investment Fund JEREMIE Project 43, avenue J. F. Kennedy L-2968 Luxembourg Tel.: (00 352) Fax: (00 352)