0. 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 Any estimates and projections contained herein involve significant elements of subjective judgment and analysis, which may or may not be correct.

1. EIF at a glance

2. 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

3. 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

4. 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

5. JEREMIE Holding Funds in support of SMEs

6. 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

7. 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

8. 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

9. 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

10. JEREMIE Holding Funds

11. The JEREMIE process

12. 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

13. 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

14. 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

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

16. Amount of Private Finance Attracted

17. JEREMIE mandates & their financial engineering products

18. 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.

19. 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

20. 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

21. 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).

22. 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

23. Contact
European Investment Fund 96 boulevard Konrad Adenauer L-2968 Luxembourg Tel.: (+352) Fax: (+352)