1. 1 « EIB GROUP SUPPORTING THE REGIONAL SME FINANCING OPERATIONS » 4 th Theme Seminar, Financial Engineering Friday 27 October 2006 SAULI NIINISTÖ Vice President

2. 2 EIB  GLOBAL LOANS EIF  VENTURE CAPITAL  GUARANTEES & SECURITISATION  JEREMIE 2

3. 3 SMEs IN EUROPE 23 million SMEs account for 75% of jobs 99% of businesses in Europe are SMEs 91% of all SMEs are micro-enterprises (with staff of less than 10) EU puts issues of growth, employment, innovation and competitiveness high on agenda (Lisbon Summit amongst others) Support to SMEs: one of the top 5 EIB Group priorities Europe’s enterprises are composed of  Medium-sized firms, 50 to 250 employees  Large enterprises  Small firms 10 to 49 employees  Micro-business 1 to 9 employees KE Y Source: Eurostat, Commission Communication on Modern SME policy for Growth and Employment (2005)

4. 4 EIB - European Union’s financing institution:  Created by the Treaty of Rome in 1958, to provide long-term finance for projects promoting European integration  Subscribed capital EUR 163.7 bn  EIB shareholders: 25 Member States of the European Union  Lending in 2005: EUR 47bn ( EUR 43 bn in 2004 ) EUR 42 bn within the EU ( EUR 40 bn in 2004 )  Borrowing in 2005: EUR 50 bn, through 330 bond issues in 15 currencies ( EUR 50 bn in 2004 )* *The 2005 programme was completed as of 04.11.2005. Funds raised after this date to year-end (EUR 2.9 bn equivalent) are attributed to the 2006 programme. THE EIB GROUP – THE EIB

5. 5 EIB OWNERSHIP EIB’s shareholders

6. 6 EIB is the World’s largest Supranational Issuer * source: Barclays, Dealogic bondware,as of 31 December 2005 Outstanding debt of suprantional borrowers * source: Barclays, Bloomberg DDIS function, as of 31 december 2005 EUR bn* EIB IS LARGEST SUPRANATIONAL ISSUER

7. 7 EIB STRATEGIC OUTLOOK 6 Corporate Priority Objectives  Economic and social cohesion in an enlarged EU  Implementing of the Innovation 2010 Initiative (i2i)  Development of Trans-European and Access networks (TENs)  Support for Small & Medium Sized Enterprises  Environmental Sustainability  Support of EU Development and Cooperation Policies in Partner Countries EIB implements EU policies; a policy driven Bank

8. 8 EIB SUPPORT FOR SMALL & MEDIUM SIZED ENTREPRISES (2005: EUR 4.3 bn EIB plus EUR 2.1 bn EIF)  EIB Global Loans 2005EUR 4.3 bn (EUR 4.7 bn in 2004) EIB long-term loans for SME financing  EIF Venture Capital 2005EUR 368 m (358m in 2004)in 21 operations TotalEUR 3.1 bnin 217 funds  EIF SME Guarantees 2005EUR 1.7 bn (1.4 bn in 2004)in 35 operations TotalEUR 9.3 bn 164 intermediaries SME’s account for 99% of private enterprise in the EU

9. 9 EIB CORPORATE OPERATIONAL OBJECTIVES (2005)  EUR 34 bn for regional development - 80% of total lending in the EU  EUR 10.7 bn for the Innovation 2010 Initiative (i2i)  EUR 8.3 bn for Trans-European Networks (TENs)  Emphasis on SMEs: EUR 4.3 bn EIB long-term loans, through the EIF: EUR 468 m in venture capital EUR 1.7 bn in guarantees  EUR 12.3 bn dedicated to the environment and sustainable development  EUR 3.6 bn support for EU external development and cooperation policies Financing balanced development

10. 10 Top financing priority ECONOMIC AND SOCIAL COHESION / REGIONAL DEVELOPMENT 2005: EUR 34 bn  Strengthening of the economic potential of “convergence regions” in the EU  EUR 28 bn in individual loan  EUR 6 bn Global Loans for SME financing and small scale public infrastructure  Main sectors Communication infrastructure (46%) Industry & services sectors (22%) Health & education infrastructure (9%) Top financing priority

11. 11 Tailor-made finance to fit project and promoter subject to adequate security Large-scale projects (> EUR 25 million)  direct financing  indirect financing Small and medium-scale projects (EUR 40 000 – 25 million)  Global loans with partner banks  High-growth innovative SMEs: investment funds, venture capital or development capital companies EIB: FINANCING OPTIONS TO PUBLIC AND PRIVATE SECTORS EIB PARTICIPATION IS LIMITED TO 50% OF A PROJECT’S COST

12. 12 INSTRUMENT –Global Loans FINAL BENEFICIARY –SMEs, <250 FTE’s –Local Authorities INTERMEDIARIES –Banks, Financial Institutions VOLUME –EUR 4.3 bn in 2005 (EUR 4.7 bn in 2004) ELIGIBLE SECTORS –Regional Development –European Communications Infrastructure –Environment and quality of life –Energy –International competitiveness of European Industry and support of SMEs –Health –Education –Social Housing EIB FINANCING: GLOBAL LOANS SMALL AND MEDIUM-SCALE PROJECTS <EUR 25 m

13. 13 THE EIB GLOBAL LOAN PRODUCT EIB Intermediary Bank Small / medium sized enterprises lends; takes risk on intermediary provides information on end clients lends and takes risk on end clients

14. 14 RELATIONSHIP EIB / COMMERCIAL BANK INTERMEDIARY Global Loans allow EIB to support SME innovation and thus job creation and economic development in sectors and regions which are considered priority areas across the European Union; EIB funding aims to improve the terms, conditions and availability of finance to SMEs; and EIB Global Loans supports the commercial bank relationship with the end client. Advantages

15. 15 EIB’S SUPPORT THROUGH GLOBAL LOANS Global Loans signed with 200 financial intermediaries throughout all EU member states. Target: 50% dedicated to SME’s. Between 2000 and 2004, EUR 57.7bn was signed for the creation, modernisation and expansion of SMEs throughout the EU.

16. 16 EIB’S GLOBAL LOAN ACTIVITY IN FINLAND 2003-2005 Signatures EUR 475 m Counterparts OKO Bank Aktia Finnvera Municipality Finance

17. 17 EIB’S GLOBAL LOAN PARTNERS IN THE NORDIC REGION Sweden Kommuninvest Swedbank Dexia Kommunbank Denmark Kommunekredit Nykredit Ringkjobing Landbobank

18. 18 Targeted beneficiaries: SMEs & MidCaps (low/sub-investmentgrade) Product Ideas: RSFF Facilites; Interest Contingent Supplier Facility, Co-financing, Global Authorisations EIB value added: Banks: risk sharing, capital relief, new customers/cross selling, Beneficiaries: risk sharing, higher debt capacity, lower financing cost SME/MidCap Corporates Sub- investmentgrae Funding Partner Bank Risk SharingFinancing / RSFF

19. 19 Value added For banks For RSFF Capital relief (bank solvency ratio) Alleviate sector and counterpart financing constraints New product development Signaling effects to markets through EIB presence Sharing of Know-How Rapid rollout of existing network throughout EU Efficiency gain through delegation Expand range of SME products Widen scope of SME beneficiaries Scaleability of products Sharing of Know-How (sector, local market) Support and involve banks, not crowd them out ! RSFF (CONT’D)

20. 20 EIF - EIB’s specialised venture capital arm and SME guarantee provider:  Established in 1994 (Subscribed capital EUR 2bn)  Shareholders: EIB (61.9%), EU Commission (30%) and other financial institutions (8.1%)  Annual volume of operations (2005): EUR 1.7 bn for guarantee operations ( EUR 1.5 bn in 2004 ) EUR 468 m ( EUR 358 m ) for venture capital funds (commitments) THE EIB GROUP – THE EIF.

21. 21  Business Lines:  VENTURE CAPITAL as “fund of funds”; acquiring holdings in Venture Capital Funds  GUARANTEES and SECURITISATION for the banking sector in favour of SMEs; structured SME operations such as credit lines, counter-guarantees, credit enhancement EIF: “PURSUIT OF COMMUNITY OBJECTIVES”

22. 22 EIF: RESOURCES AND OBJECTIVES BMWA - ERP Dahlia SICAR S.R. European Community EUR 600m + Capital increase (Approx. EUR 325m target under way) EUR 4bn Revolving EUR 450m (MAP) EUR 1.1bn (CIP) Up to EUR 1bn To be committed to venture capital funds and guarantees in the EU and Candidate Countries AND generate strong return on equity

23. 23 EIF: ASSETS UNDER MANAGEMENT (AT 30/09/06) TOTAL COMMITMENTS NEW COMMITMENTS (1 Jan –30 Sept 2006) VEHICLES VENTURE CAPITALEUR 3.6 bnEUR 450 m238 funds GUARANTEES & SECURITISATION EUR 10.3 bnEUR 490 m 181 banks/ guarantee institutions TOTALEUR 13.9 bnEUR 940 m

24. 24 EIF: EXAMPLE OF A VENTURE CAPITAL FUND CO-INVESTOR (Limited Partners) CO-INVESTOR (Limited Partners) CO-INVESTOR (Limited Partners) Venture Capital Fund Management team SMEs

25. 25 EIF: VENTURE CAPITAL PORTFOLIO ( AT 30/09/06) Key investor in major markets Niche opportunity player in smaller markets Geographic spread Balance portfolio between expansion capital and start-up/ early stage Portfolio biased towards technology (65% in ICT & life sciences) Around 30% of portfolio in multi-country funds Track record in backing new teams in Central & Eastern Europe Multi-country 34% Italy 7% Germany 8% Spain 7% France 15% United Kingdom 15% Rest Western Europe 14% EUR 3.6bn

26. 26 EIF: VENTURE PORTFOLIO STAGE BREAKDOWN (AT 31/08/06) Heavy share of technology EUR 3.6 bn

27. 27 EIF: EXAMPLE OF SECURITISATION Sanpaolo IMI Originator Sanpaolo IMI Originator Senior Mezzanine Junior SME SME loan portfolio Guaranteed by Confidi Issuance of ABS SPV Purchase of SME loan portfolio Originator (Bank) Originator (Bank) Senior Mezzanine Junior SME SME loan portfolio SPV Purchase of SME loan portfolio EIF

28. 28 Bond-holders AAA AA A BBB unrated AAA AA A BBB unrated Sale of Portfolio or Aaa/AAA Credit default swap (Reference) Portfolio Originator SPV Bond-holders EIF External guarantor 20% risk weighting EIF External guarantor 20% risk weighting EIF: EXAMPLE OF FINANCIAL GUARANTEE  Unconditional, irrevocable guarantee of timely payment of interest and ultimate payment of principal  Typically bonds with BB to A underlying rating, wrapped up to AAA level

29. 29 EIF: JEREMIE JEREMIE intends to use ERDF funding for enhancing the Access to Finance to SMEs in Regional Development areas through sustainable and « revolving » financial instruments JEREMIE is a joint initiative of the European Union (DG Regio + EIB-Group) « Joint » also because it combines resources from the EU, National Public Authorities, EIF, EIB and/or other Financial Institutions Main Objectives: Develop the role of SMEs / Entrepreneurship in EU Regional Policy Depart from a “grant approach” Reduce administrative procedures Enhance flexible management of financial engineering Create leverage Need to move away from “grant dependency”

30. 30 EIF: JEREMIE’S CYCLE TECHNICAL ASSISTANCE SMEs  Micro-finance Providers (MCPs)  Tech Transfer Activities  Financial Institutions  Guarantee schemes  Venture Capital Funds  Etc… ERDF GRANTS MANAGEMENT OF NATIONAL ACCOUNTS Evaluation phase: preparation of Operational Programmes EVALUATION 2006 2007 2013 Attract EIB + IFIs lending (leverage) FUNDING  Transforming parts of the ERDF grants into financial products for SME  Multiplier effect on the budget

31. 31 http://www.eib.org