15-16 November 2012, Nicosia, Cyprus

1st SME Assembly & European Enterprise Promotion Awards 2012

European Investment Fund

Hubert Cottogni
Deputy Director Head of Regional Business Development

GROWING THROUGH FINANCE

This presentation was prepared by EIF. The information included in this presentation is based on figures available for October 2012. Any estimates and projections contained herein involve significant elements of subjective judgment and analysis, which may or may not be correct.

Growing through finance

what action should be taken to get finance to SMEs to help them grow?
1. European Investment Fund 2. The JEREMIE model

3. EIFs intervention in financing in Cyprus

4. Case study: Languedoc Roussillon (Fr)

1. EIFs Business
EIFs main objective is to support SMEs financing. Through its commitment EIF acts as a catalyst attracting additional private investments and achieving a broad impact. EIF operates via guarantees and credit enhancement activity:
EIF is a major provider of
SME loan portfolio guarantees, Credit enhancement, and Microfinance.

EIF also operates via equity activity:

Private Equity and Mezzanine (fund of funds), EIF is the leading European fund-of-funds investor in private equity and growth capital.

Europes Leading Developer of Risk Financing for Entrepreneurship & Innovation

1. Operating model of EIF

Transformational Role of EIF

Transformational

Suppliers / Mandators

Key Success Factors

Intermediaries

Own resources EIB (RCM, MEZ) EC (CIP) MA (JEREMIE) MS (ERP) Funds of Funds Regional (LfA)

Product Development Mandate Management Transaction Execution Risk Management

Commercial Banks
Development &
Promotional Banks

SMEs

Guarantee Institutions Fund Managers

Follow-up &
Relationship Focus

VALUE ADDED

1. EIF managed European Fund-of-Funds programmes

EIF Managed FoFs
UK FTF GBP 200m
ERP (DE) EUR 1000m LfA-EIF(DE) EUR 100m Dahlia (FR) EUR 300m NEOTEC (SP) EUR 183 m PVCi (PT) EU R 111m iVCi (TR) EUR 160m Greece EUR 250m Romania EUR 100m Lithuania EUR 210m Slovakia EUR 100m

EIF Managed JEREMIE Holding Fund (FoFs)

Languedoc
Roussillon (FR) EUR 30m

Campania (I) EUR 90m Cyprus EUR 20m Bulgaria EUR 199m

New Funds in 2012

MDD (DE) EUR 200m

IFL (LU) EUR 120m

DVCi (NL) EUR 150m Baltic Innovation
Fund EUR 100m

Sicily (I) EUR 60m

Malta EUR 10m Sicily ESF EUR 15m Calabria (I) EUR 45m PACA (FR) EUR 20m

EIF FoFs

EIF JEREMIE

2. EIFs management approach to JEREMIE Holding Funds

Structural Funds ERDF (& ESF)

Tailor-made portfolios of financial engineering instruments to meet SME needs Strong governance through Investment Board process Transparent call process to select best financial intermediaries Professional negotiation of contracts leading to contract signatures A network of private investors to manage and mobilise structural funds

National Contribution

Investment Board Holding Fund

Holding Fund Manager( HF )

Financial intermediaries

SMEs

Quick response to adverse economic climate

3. EIFs intervention in financing in Cyprus

JEREMIE Holding Fund EUR 20m via Bank of Cyprus
Funded Risk Sharing Product for EUR 10m First Loss Portfolio Guarantee for start-ups EUR 2m First Loss Portfolio Guarantee for SMEs EUR 6m

= Total leveraged amount EUR 71m a leverage factor of x4 Progress via Central Cooperative Bank EUR 16m
Status quo: portfolio of EUR 23m has reached over 400 micro enterprises and SMEs, with EUR 64m still available

South of France; borders: PACA, Rhne-Alpes, Auvergne, Midi-Pyrnes, Catalua Main features Inhabitants: 2.5m (10th region in France) Demog. growth: 12.3% over last 10 years (1994-2004) vs 4.8% in France (1st region in France) Unemployment rate in 2006 : 13% vs 9.5% in France Only 96 firms (0.08%) with more than 200 employees

4. Case study Languedoc-Roussillon: background

But : Attractive region for innovation: Infrastructures: scientific parks & incubators Universities: medicine, biology; high level engineering schools A region committed to support innovation: World class clusters More than 7,000 researchers (highest density in France) The most important growth of R&D expenses in France (more than 50% during the last 3 years)

 Debt:

4. Gap analysis: main conclusions

increasing the available resources in the segment of seed technological or innovative projects.

Support the financing of innovative start-ups by

Equity:
Promote equity or quasi equity to support the
emergence of a small supply of financing for highpotential SMEs.

Guarantee: Facilitate SMEs access to finance more easily

(under better terms, both by means of lower prices and/or lower collateral)

4. JEREMIE LR: the investment strategy

Inception Debt Equity Guarantee Start up Funded Risk Sharing
Seed

Development

Co-investment instrument Guarantee Instrument FLPG (First Loss portfolio guarantee)

4. JEREMIE LR: Product portfolio

SME Cash Flows

Private money EUR 116m JEREMIE LR EUR 27 m

4.3x portfolio multiplier effect

EUR 117m facilitate SMEs access to finance at preferential conditions: finance the whole economy, reinforce competitiveness, face against unemployment.

EUR 4m Seed loans for entrepreneurs/SMEs with an innovative project. Pre-seed Phase Seed Phase Start-up Phase
Development of entrepreneurship culture Use of smart money instead of grants Support of innovative business concepts

EUR 22m Co-investment for SMEs with high potential of growth.

Emerging Growth

Development

SME Development Stages

Access to early stage equity funding & support of development needs of established companies through equity Support of development needs of established companies (mainly) through guarantee products

4. JEREMIE : the implementation concept

Structural Funds ERDF
EUR 15 m

Managing Authority

Contribution from the LR Region: EUR 15m + ERDF

Investment Board (COPIL): French State / REGION / EIF

JEREMIE Holding Fund LR (JHF): EUR 30m

Holding Fund Manager(EIF)

Seed loans Instrument: EUR 2m Leverage of 2 i.e. EUR 4m for LRs SMEs

Co-investment Instrument: EUR 11m Leverage of 2 i.e. EUR 22m for LRs SMEs

Guarantee Instrument: EUR 14m Leverage of 8.4 i.e. EUR 117m for LRs SMEs

i.e. a total of EUR 143m for LRs SMEs

4. Progress achieved (end of October

Seed loans
Demand for credit in the Euro zone and in France
62 entrepreneurs financed (for projects with a significant component of innovation) EUR 737 750 disbursed (JEREMIE part) EUR 1 475 500 total amount Leverage (direct): 2x To be noted: First amounts are reimbursed to the JEREMIE HF from the FIs

2012)

Co-investment Instrument
16 investments into SMEs with a high potential of development EUR 3 750 000 invested directly by JEREMIE EUR 16 035 017 : total amount invested JEREMIE + Private coinvestors Leverage: 4.2x (expected at the beginning only 2x) To be noted: Significant interest from the private market (included VC firms based outside LR)

Guarantee Instrument
237 SMEs financed EUR 24 299 926 : total loan amount disbursed to SMEs (covered by JEREMIE) Direct leverage : 8.4x To be noted : Significant advantage passed onto LRs SMEs (interest rate reduction + reduction of personal collateral requirement)

TOTAL:
315 SMEs/entrepreneurs financed EUR 41 810 443 disbursed to SMEs out of EUR 143m by end 2015

Contacts
European Investment Fund 96 boulevard Konrad Adenauer L-2968 Luxembourg www.eif.org