Lourdes Rodríguez, IRO, European Investment Bank

November 2005

Debt IR,

a perspective from the Fixed Income Markets

Not listed => Fixed income securities are the only access to capital markets

Shareholders: EU Member States

AAA rating

Large issuance volume: around EUR 50bn

Regularity: among most frequent issuers

Diversity: in terms of products and currencies (15 used in 2004)

EIB as an issuer: characteristics

2

Summarising complex issuance at EIB

2004

Volume EUR 50 bn

Nr of issues 282

Nr of currencies 15

Core currencies (EUR, GBP, USD)

90%

Structured 20%

Types of structure Over 10 types, many variations

3

In perspective - most frequent issuer in public international market according to IFR (‘Top 250’ 2005)

The challenge – tailoring information to different currency / product market segments, as well as

differing investor needs

Why do we communicate?

Value of debt securities is determined by• macroeconomic factors, such as interest rates• bond characteristics (coupon, yield, “spreads”, seniority, …)• the credit standing of the issuer• existing or anticipated supply of “fungible” debt securities

Investment Grade Sovereigns

Investment Grade Corporate Debt

High Yield Corporate Debt

Information on the issuer

Less important!

Important!

Very important!

rating / characteristics and positioning of the issuer

The value of a debt security is “subjective”

4

Differentiation within rating categories is visible in the variation of spreads: credit differentiation is one factor

This also applies among AAA sovereigns and sovereign surrogates such as EIB

Credit story identifies credit strengths, relative to peers

Therefore appropriate emphasis in Communications is required to duly explain differences

Differentiation beyond the rating

5

Rating “Sector” Issuer Bond ASW

AAA supra IADB 5.5% 01/10 -8

AAA supra EIB 4% 04/09 -11

AAA agency KfW 3.5% 04/09 -8

AAA agency Freddie Mac 3.75% 07/09 +2

AAA sovereign Spain 3.6% 01/09 -11

AAA sovereign Finland 5% 04/09 -12

Why do we communicate?

Source: Market, May 2005

Structuring the team

Importance of investment banks / dealers in a relatively dealer-driven market

However, effective IR activity enables better leveraging of dealers in investor communication

Complex and high frequency international issuance programs lend themselves to use of sizeable in-house teams with specialist origination and IR executives

This contrasts with the traditional Treasury led operation

Organisational issues

6

Who communicates?

1. Diversity of debt products

Equity: one “brand”, one product

Debt: one “brand”, multiple products• Information on the array of products available

Accessibility to listings of outstanding issues and its characteristics

• Documentation: Accessible (before and after issuance) Clarity of the information Is it up to the standards required by our investor

base?

Adapting to the market

7

How do we communicate?

2. Different content emphasis – reflects audience needs Equity: shareholder value story, sectoral and market cap factors Debt: credit story / market segmentation, issuance strategy, product

market specifics

3. Trading & transparency differentials Equity:

• Exchange / electronic trading leads –> transparency benefits • Accessible for retail, strong direct participation

Debt: • Electronic platforms important for highly liquid benchmarks• But, dealer-provided liquidity is central• Otherwise strong OTC culture / poor transparency • Relatively large trades / low frequency• Less direct access for retail -> cost issues

Implication: greater demand for information from debt issuer

Adapting to the market

8

How do we communicate?

4. IR tools similar than in Equity IR, except in investor data

Prevalence of bearer securities reduces debtholder visibility

Cost for debtholder ID across multiple bonds can be punitive, (which reinforces the importance internal data warehouses)

Integrated data/CRM systems, which allow for the diversity and complexity of the debt securities, not offered by large providers

In terms of consultancy/outsourcing

Adapting to the market

9

How do we communicate?

EIB issuer category: sovereign class : “Consolidated European Sovereign Issuer”

Points of differentiation include:• Pan-European exposure “The Way to buy Europe”• Risk diversification via ownership structure: 25 Member States of

the EU

Credit quality: Top “AAA”• Exceptional asset quality• Strong shareholders’ support – EU members States

Minimal headline risk

Mission – activity: “Policy-driven public bank”: promotes EU policies by financing investments that further European integration

Focus on relevant credit strengthsWhat do we communicate?

Standard and Poor’sCredit Quality Index

Ultimate obligors of EIB loansas of 31 December 2004

- The Member States and EU Public Institutions are ultimate obligors for over 50% of the loans

- 78% of EIB loans are backed by a formal guarantee

The index measures the risk embedded in the country loan portfolio of Multilateral Lending Institution.

Source: Standard & Poor’s (Credit Report, March 2005)

0

2

4

6

8

10

2000 H1 2004

EIB MLI Average

Banks24%

Member States

33%

EU Public Institutions

18%Corporates17%

Community Budget

8%

Loan quality in perspective – an exampleWhat do we communicate?

Funding strategy:

• Pursuit of liquidity across comprehensive yield curves

• Close attention to secondary market performance

Types of products:

• Sole supranational benchmark issuer across the curve in the three core currencies: EUR, GBP and USD

• Tailor-made plain vanilla and structured issues in various currencies

Market characteristics:

• Responsiveness: to the market in terms of timing, product and maturity selection

• Quality of execution – Transparency – Liquidity - Performance

Funding strategy and positioning

12

What do we communicate?

Introducing presence in a currency- an example

€ 5bn 2006

€ 2.6bn 2007

€ 6.1bn 2008

€ 5.5bn 2009

€ 5bn 2010

€ 5bn 2007

€ 5bn 2012

€ 5bn 2005

€ 5.5bn 2008

€ 5bn 2013

€ 5bn 2007

€ 5bn 2020

€

(A trademark of EuroMTS)

EIB IN EUR

2004: EUR 17.4bn via 54 transactions

Ground-breaking 15-year EARN benchmark

As of Oct 2005

€ 5bn 2037

2005 Highlights: EUR 18.3bn via 84 transactions

Ground-breaking 30-year EARN benchmark

Record issuance of structured transactions (around 50% of issuance in EUR)

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What do we communicate?

€ 5bn 2015

Selling points for a market segment – an example

14

EUR Benchmarks – Euro Area Reference Notes (EARNs)

Total benchmark outstanding approx. EUR 64 bn

Diversified exposure to all EU sovereigns (a reminder)

Sovereign class liquidity and tight bid-offer spreads

Most heavily traded quasi-sovereign on MTS system

Transparency: Electronic trading on leading platforms

Liquidity maintenance in the secondary market (e.g. EUR 474 million

increase of EARN 3.25% Oct 08)

What do we communicate?

A variety of value drivers other than credit may be considered:

issuer positioning and commitment in this segment macroeconomic factors, such as interest rates

bond characteristics (coupon, yield, “spreads”, seniority, …)

relative value

supply of comparable debt securities

Selected topics during an issueWhat do we communicate?

What do we communicate?

EARN 2015 is launched at a moment of…

… limited government supply

… low yield in short maturities

and offers…

… good value versus core governments

EARN 2015 fits the market environment

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Selected topics during an issue – an example

-20

-15

-10

-5

0

5

10

15

20

25

2008 2011 2014 2017 2020 2023 2026 2029 2032 2035 2038

EIB Italy Spain Netherlands France Germany

bps

EARN 2015

Good value versus core governments

Source: CSFB, as of Sep. 9th 2005

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Selected topics during an issue – an exampleWhat do we communicate?

Investors Analysts

Rating agencies

Internal audiences

Specialized press

Same audiencesTo whom do we communicate?

Top Borrowers as voted by Banks

No.1 Most impressive borrower of 2004No.1 Best Supranational / AgencyNo.1 Most innovative Borrower

Overall Deals of the Year 2004:

No.1 EUR 4bn 4.625% April 2020No.5 USD 1.5bn 4.625% May 2014

Deals of the year by category:

No1. EURO Sovereign / Supranational / Agency EUR 4bn 4.625% Apr. 2020

No.1 USD Sovereign / Supranational / AgencyUSD 1.5bn 4.625% May 2014

Currencies:

Deal of the year in New Zealand Dollar (NZD 200m 6.5% Sep 2014)No.2 Emerging Markets (HUF 46bn 9% Jul 2007)

• Borrower of the Year 2004• European Borrower • Agency / Supranational Borrower• Supranational / Sovereign /

Agency bond

Best Supranational Borrower in Western Europe 2004

• Institutional Performance Award 2004

• 3 Deals of the Year:

• JPY 50bn Japanese CPI-Linked Notes• EUR 190m/EUR 250m CMS Spread Target

Redemption Notes• EUR 625m CMS Periodic Capped FRN

Best Borrower in CEE for the year 2004

• Best bond deal in local currency USD 75m / RUB 2.1bn 2010 Synthetic Transaction

• Best bond deal in a G7 currency EUR 4bn 4.625% April 2020

And deal specific awards:

Press convey recognition among dealers for EIB

The Way to Buy Europe