1. Monitoring and reporting procedures and key challenges of JEREMIE in Hungary Krisztina Szabó EDOP MA, NDA Hungary JEREMIE Networking Platform Brussels, 20 May 2011

2. Agenda 1.Summary of the JEREMIE institutional set up in Hungary 2.Compliance of Hungarian practice with the new COCOF note 3.Monitoring and reporting procedures 4.Scope of collected monitoring information and data 5.JEREMIE State of Play 2

3. Hungary chose the national institutional framework in 2007 -Existing local experience in public financial engineering programs since early 1990s -More flexibility in designing the institutional setup -Faster implementation Rationale behind a national institutional framework EU legislation provides two possibilities for the institutional framework Contracting the European Investment Fund National Main features In the case of Hungary advantages of the national set-up outweigh the EIF solution -Took part in the preparation of the JEREMIE Initiative -Fix institutional structure with less perceived national authority 3

4. G2G2 C1C1 MnMn The elaborated four level institutional set-up is in line with the EU legislation Institutional set-up of the Hungarian Jeremie-type programmes National Development Agency EDOP MA CHOP MA Venture Finance Hungary (VFH) Plc. Level 1. Level 2. Governance Holding fund manager Level 3. Financial intermediaries Level 4. Final recipients M1M1 M -Microfinance P - Potfolio guarantee V - Venture Capital M2M2 G1G1 GnGn C2C2 CnCn SME 1 SME 2 SME 3 SME 4 SME 5 SME 6 SME 7 SME 8 SME 9 SME 10 SME 11 Institutional levels Contracts Structure Contract 1. Funding agreement Contract 2. Contracts for intermediary services Contract 3. Contracts with SMEs 4

5. Public procurement regulations are fulfilled concerning the selection of the actors Public procurement and selection of actors Venture Finance Hungary appointed by Govt. Decree 4/2011 (I.28.) Financial intermediaries selected by open calls Level 2. Holding Fund Manager Level 3. Financial intermediaries 5

6. The Funding Agreement (FA) defines the main responsibilities of the Managing Authority (MA) Role of the Managing Authority MA reviews and approves -the financial engineering programmes -relevant terms and conditions of the calls for and contracts with intermediaries -selection of financial intermediaries -risk taking policy of the Holding Fund -(r e ) allocation of resources -audit and control requirements Level 1. Governance Contract 1. Funding agreement 6

7. The Funding Agreement also defines the main tasks of the Holding Fund (HF) Role of the Holding Fund Manager 1)Preparing the Financial Programmes –Description of the programmes –Required funding –Role of intermediaries –Scope of final recipients 2) Implementing the Programmes – Evaluation and accreditation of intermediaries – Concluding contracts with intermediaries – Monitoring the use of resources and recommending reallocations – Preparing policy for terminating risk takings, withdrawing from investments Tasks and responsibilities of the HF Manager Level 2. Holding Fund Manager Contract 1. Funding agreement 7

8. Hungarian procedures and regulations comply with the monitoring rules of the latest COCOF note Compliance with latest JEREMIE COCOF note 1 on monitoring issues (1) 1 Guidance Note on Financial Engineering Instruments under Article 44 of Council Regulation (EC) No 1083/2006; COCOF_10-0014-04-EN COCOF Note – 2.7 MonitoringPrevailing Hungarian rules and practice 2.7.1. – … The Funding Agreement shall include provisions for monitoring of implementation in accordance with Art. 43(3) (b) of the Implementing Regulation, as well as general reporting requirements under the SF regulations. 2.7.2 – …the checks and reporting activities it [a financial engineering instrument] carries out do not replace or waive the functions and verification tasks of the managing authority… The Funding Agreement concluded between the MA and HF includes inter alia: Establishment of a unique information technology system with daily data record and automatic forwarding to the Single Monitoring and Information System Detailed monthly report of VFH to the MA Provision on requirement of monitoring of implementation in the contracts with financial intermediaries MA conducts documentum based checks and on the spot visits regarding the implementation of the FA and prepares a verification report with the HF towards the Certifying Authority 8

9. Hungarian procedures and regulations comply with the monitoring rules of the latest COCOF note Compliance with latest JEREMIE COCOF note 1 on monitoring issues (2) 1 Guidance Note on Financial Engineering Instruments under Article 44 of Council Regulation (EC) No 1083/2006; COCOF_10-0014-04-EN COCOF Note – 2.7 Monitoring 2.7.3. – Provisions in the relevant funding agreements should enable monitoring of disbursements of financing at the level of final recipients and financial engineering instruments, as well as returns from equity, loans and other repayable investments, and performance of guarantees for repayable investments… 2.7.4 – The Commission will seek to consolidate aggregate monitoring information provided by managing authorities… Prevailing Hungarian rules and practice Available aggregate monitoring information at MA level: – Annual Implementation Report by MA – Quarterly report by MA – Monthly report by VFH – Weekly monitoring report by VFH The FA concluded between the MA and VFH rules as: Daily record of data concerning monitoring of disbursements of financing at the level of final recipients and financial engineering instruments Returns from equity, loans Performance of guarantees 9

10. Reports on JEREMIE serve to inform stakeholders and substantiate necessary changes Monitoring and reporting procedures Daily data record Quarterly monitoring report Weekly monitoring report Delivered byContentPurposeReport/data provision VFH EDOP MA Annual implementation report by OP EDOP MA, CHOP MA 1 Financial intermediaries Detailed analytic information Inform MA and National Development Ministry on status Progress, results: Total number of involved SMEs/product total numbers/value of contracts with SMEs Number of intermediaries involved/product Provide input to the unique IT system Inform National Development Ministry, control and audit authority Support the initiation of product changes Report to the Commission & all relevant stakeholders on progress of the OP Overall progress of JEREMIE Progress of products Analysis of progress Recommendations to improve the products Overall progress of the JEREMIE priority 1 Central Hungary Operational Programme Managing Authority 1010

11. Most of the data required in the COCOF Note Annex II are already collected by the MA Scope of collected monitoring information and data The MA will be able to produce the COCOF Note Annex II set of data in May 2011 11 A. General information on the HF/FEI B. Contributions to the HF/FEI C. Investments in FEI/Financial products provided to final recipients E. National co-financing and leverage sources provided at the level of final recipient D. Returns and recycling F. Management costs and fees G. Exits from the HF/FEI H. Indicators

12. EUR 175 million contracted with final recipients 3800 SMEs reached Current state of play of JEREMIE in Hungary 12 Total amount of EUR 175 million contracted with final rec i pients EUR 120 million have been disbursed to 3800 final SMEs up until now from the JEREMIE fund Credit instrumentsPortfolio guarantee Venture capitalTotal JEREMIE priorities pcs MEUR pcs MEUR pcs MEUR pcs MEUR

13. Thank you for your attention! E-mail: szabo.krisztina@nfu.gov.huszabo.krisztina@nfu.gov.hu