EU Access to Finance DayParis – 23 May 2014

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European Investment FundVincent van Steensel & David Dana

A few key facts about us…

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We’ve supported over 1 Million SMEsover 15 years“ ”

2000Majority owned by the European Investment Bank (EIB)

Shareholders62% EIB, 30% EC, 24 public andprivate financial institutions holding the remaining 8%

AAA-ratedWe’re AAA-rated byall major rating agencies, with a strong capital base

1994founded and started providing venture capital to European businesses in 1997

EIF at a Glance

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EU specialised institution for SMEs risk financing Debt - Structuring and Guaranteeing portfolios of SME

loans/leases and microcredit Equity - Venture Capital and Mezzanine (fund of funds)

Founded in 1994 & startedproviding VC to businesses in1997

Multilateral DevelopmentBank (MDB) status

Basel II 0% risk weighting Aaa/AAA/AAA ratings

(Moody’s/S&P/Fitch)

Geographic Focus: EU 28, EFTA, Candidate Countries

Distribution through Banks and Funds (Full delegation)

Shareholding Structure: EIB: 62.2%, EIB shareholders: 28 EU Member States EC: 30% European Financial Institutions: 7.8 %

Our resources

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We manage resourcesfrom different stakeholders“ ”

European Investment Bank Risk Capital Resources

(RCR)EUR 7bn

EREM Mandate: up to EUR 4bn over the next 7 years

European Commission 2007-2013

Competitiveness and Innovation Framework Progr. (CIP) EUR 1bn allocated to equity and guarantees

Risk-Sharing Instrument (RSI) EUR 270m

Progress Microfinance EUR 205m

National & Regional Funds 13 European and regional

Funds-of-Funds includingthe Baltics, Germany, Portugal, Spain,Turkey, UK

14 Holding Fundssupported by structural funds EUR 1.2bn

Third Party Mandates

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European Investment Bank Risk Capital

Resources (RCR)EUR 7bn

European Commission

Competitiveness and Innovation Progr. (CIP) EUR 1bn (equity & g’tees)

Risk-Sharing Instrument (RSI) EUR 270m

Progress Microfinance EUR 200m

National & Regional Funds

20 European and regional Funds-of-Funds includingGermany, Portugal, Spain, Turkey, UK

14 Holding Fundssupported by structural funds EUR 1.3bn

Mixed

Western Balkans Enterprise Development & Innovation FacilityEUR 142m (equity & g’tees)

EIB Group RiskEnhancementMandate (up to EUR 6 bn)

COSME H2020 - RSI2 Erasmus Loan

Guarante Facility

New initiatives under discussion

SME initiative Others

EIF’s commitments at 31.12.2013

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Equity

EUR 146m

EUR 466m

Microfinance

EUR 7.9bn

EUR 42bn EUR 36.8bn

EUR 5.6bn

Guarantees/securitisation

480 venture and growth funds306 banks, guarantee and promotional institutions27 funds of funds, regional and national initiatives and holding funds

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Equity Investments

LowerMid-Market

Expansion/Development

Capital

EarlyStage

Business Angels

Equity: Involved throughoutthe business cycle

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EIF

Cur

rent

In

vest

men

t Foc

usS

trate

gic

Cha

lleng

es

Technology TransferProof of ConceptBusiness Angels

Seed Stage

TechnologyTransfer Accelerator

Catalyse hybrid debtfinance for growth

Support VCecosystemand decreasedependencyon public finance

Fill funding gap left by institutional investors

Instruments to stimulateinnovation, competitivenessand cross-border investment

Investing inVC funds Investing in

Growth Capital

Mezzanine

European Commission Resources EIB / EIF Resources Member States / Private Sector Resources

Helping businesses at every stage

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SME Development StagesPRE-SEED PHASE SEED PHASE START-UP PHASE EMERGING GROWTH DEVELOPMENT

HIGHER RISK LOWER RISK

Public Stock Markets

Business Angels,Technology Transfer

Microcredit

VC Seed & Early Stage

Portfolio Guarantees & Credit Enhancement

Formal VC Funds & Mezzanine Funds

EIF-managed Fund-of-Funds, regional initiatives and Holding Funds across Europe

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Fund‐of‐Funds and other Initiatives

UK FTF: GBP 200m

ERP (DE): EUR 1000m

LFA-EIF (DE): EUR 50m

NEOTEC (SP): EUR 183m

PVCi (PT): EUR 111m

iVCi (TR): EUR 160m

Future initiativesLFF (LU): EUR 150m

BIF (LT,LV,EE): EUR100m

DVI (NL): EUR 150m

PGFF (PL): EUR 90m

MDD (GER): EUR 200m

WBEDIF (AL,BA,HR,MK,ME,RS,XK): EUR 145m

CYPEF (CYP) : EUR 200m

Holding Funds Supported by Structural Funds (JEREMIE)

BULGARIA: EUR 349m

CALABRIA (I): EUR 45m

CAMPANIA (I): EUR 90m

CYPRUS: EUR 20m

EXTREMADURA (ES) : EUR 10m

GREECE: EUR 250m

LANGUEDOCROUSSILLON (FR): EUR 30m

LITHUANIA: EUR 67.1m

ROMANIA: EUR 100m

MALTA: EUR 12m

PACA (FR): EUR 20m

SLOVAKIA: EUR 100m

SICILY (I): EUR 60m

SICILY ESF (I): EUR 15m

Overview of the EIF VC activity in 2013

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EIF Investments 601 million Euro

committed 25 VC funds and

Business Angels (+ 4 increases)

1717 million Euro of LP investment catalysed

EIF portfolio activity 2840 million Euro

invested by our funds / BAs

of which 1370million Euro into new investments in 275 early to growth stage tech companies

Classification of LPs investing in VC in 2013 Private Institutional: 41%

EIF: 22%

Public Institutional: 17%

HNWI & Family Offices: 9%

Corporates: 7%

GP Commitment: 4%

Some of the high potentials powered by our funds / BAs

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Debt Products

Guarantee Instruments Development 2013 and beyond

Risk tolerance

Deal rationale

Financial Institutions

Pricing

Leverage

Self-sustainability

Target Beneficiaries

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Product Portfolio Tranche Form Leverage

SME Guarantee Facility

Risk Transfer

First Loss Direct guaranteeCounter ‐ guarantee = 14

FLPG* First Loss + Second Loss Direct guarantee = 5 to 7

Credit Enhancement Second Loss (mezzanine) Direct guarantee = 6 to 8

RSI Blended (uncapped)Direct guaranteeCounter‐guarantee = 5 (on EC 

FLPG)

ABS wrap Funding Senior Direct guarantee = 2 to 3

ExpectedLoss

ExpectedLoss

ExpectedLoss

Expected Loss

ExpectedLoss

SME GF(First Loss)

FLPG(First + 2nd Loss)

Credit Enhancement(Second Loss)

RSI(uncapped/pari passu)

ABS wrap(Senior)

* First Loss Portfolio Guarantee

EIF Credit Guarantee

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Notes guaranteed by EIF have 0% RWA under CRD and Solvency II

SME Portfolio

Notes

Class A Notes(AAA to A)

Class S Notes

IssuerOriginator

Cash

Servicing

Class B Notes (BBB to BB)

NotesInvestors

Cash

Guarantor Aaa/AAA

EIF provides an unconditional and irrevocable guarantee on the Notes:- timely payment of interest (at any payment date); and- ultimate payment of principal (at maturity).

Risk Sharing Instrument (RSI)

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47 Applications received

15 countries covered so far (3 more to come )

34 Guarantee contracts signed (7 more to come)

EUR 1.446 m committed so far

c. EUR 3bn available to innovative SMEs and small Mid-caps

Background (Risk Sharing Finance Facility)

2007‐2013: European Commission + EIB joint instrument to address lack of debt financing for risky Research, Development and Innovation projects

Combines funding and risk‐taking, typically for larger projects on a case by case basis, mostly by midcaps and large corporates:

Risk Sharing instrument

Pilot (counter)‐guarantee scheme launched in December 2011 to address market gaps for Innovative SMEs and Small Mid‐caps

Jointly developed by EC (DG Research and Innovation), EIB and EIF 

Guarantee products within the existing RSFF mandate

RSI Purpose

improve access to debt finance for innovative SMEs and Small Mid‐Caps (Beneficiaries)

EIF Portfolio GuaranteeRisk Sharing Instrument

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The EIF guarantee bears a 0% RWA under CRD and Solvency II

EIF provides an unconditional and irrevocable guarantee on a loan portfolio:

Risk covered by EIF as guarantor

Loan 1Loan 2 Loan n

Fee

Guarantee

Risk retained by the Bank

Financial Intermediary

SMEs

SM

E 1

SM

E n

Guarantor

SM

E 2 The EIF guarantee may cover losses

- Pari passu with originator; or- In the form of portfolio tranched cover

Competitiveness & Innovation Programme

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66 agreements signed by December 2013

22 countries covered

c. EUR 520m committed as guarantee cap amount

c. EUR 16bn mobilised in additional lending

c. 311,000 SMEs reached and over 1m jobs supported

>30 Leverage already achieved and growing

CIP financial instruments managed by EIF on behalf of the EC (2007 to 2013) with the successor programme COSME expected to be available 3/4Q 2014

CIP Purposes

Encourage the competitiveness of European enterprises 

Support innovation and entrepreneurship activities

Provide better access to finance 

Promote the increased use of renewable energies and energy efficiency

CIP Products

Venture capital: High Growth and Innovative SME Facility

Guarantees: SME Guarantee Facility:

Guarantee Rate on a loan by loan basis up to 50%

Financial Intermediary 1

ECEU

FI

FI Guarantee Cap Rate (Expected Loss)

FI

FI

FI

FI

EIBAs

Lender

EIFAs

guarantorGlobal Loan

Financial Intermediary 2

Financial Intermediary N

COSME Loan Guarantee Facility

EIB Group’s support to SME Debt Finance

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Senior

Capital Relief

Credit Guarantees

Banks SMEs

Credit risk Cost of financing

Funding Capital

Junior

Portfolioguarantees

New lending

SME Securitisation

Challenges for SMEsChallenges for SMEsChallenges for BanksChallenges for Banks

Mezzanine

Loans for SMEsEIB instrumentsLoans for SMEsABS investments

EIB instrumentsLoans for SMEsABS investments

EIF instrumentsCredit enhancementPortfolio guaranteesFunded risk sharing

EIF instrumentsCredit enhancementPortfolio guaranteesFunded risk sharing

Term Funding ABS investments

Contact Details

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Vincent van Steensel

Head of Risk Sharing Instruments Guarantees, Securitisation & MicrofinancePhone: (+352) 2485 81351email: v.vansteensel@eif.org

David Dana

Investment ManagerEquity InvestmentsPhone: (+352) 2485 81489email: d.dana@eif.org