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Gunnar B. Mai

Gunnar B. Mai. CIP Workshop. Zagreb, 3 March 2010. This presentation was prepared by EIF. The information included in this presentation is based on figures available for January 2010

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Gunnar B. Mai

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  1. Gunnar B. Mai CIP Workshop Zagreb, 3 March 2010 This presentation was prepared by EIF. The information included in this presentation is based on figures available for January 2010 Any estimates and projections contained herein involve significant elements of subjective judgment and analysis, which may or may not be correct.

  2. Table of Contents • Some Information about EIF • The CIP Programme • The venture capital instruments under CIP • The guarantee instruments under CIP

  3. The Challenge: Financing Innovation amongst SMEs in Europe • SMEs account for a large proportion of Europe’s economic activity • Micro-businesses dominate employment in countries such as Italy (48%) and Greece (57%) • Successive EU summits put issues of growth, employment, innovation and competitivenesshigh on agenda • Support to SMEs: one of the top six EIB Group priorities • EIF is the SME arm of the EIB Group Source:Eurostat, Commission Communication on Modern SME policy for Growth and Employment Importance of SMEs as the Foundation Stone for Tomorrow’s Prosperity

  4. EIF at a Glance EU specialised institution for SMEs, risk financing Venture Capitaland Mezzanine (fund of funds) Structuring and Guaranteeing portfolios of SME and microfinance loans/leases Authorised Capital € 3bn EIB: 61% EU: 29 % Fin. institutions: 9 % To be issued: 1% Geographic Focus / Intermediaries EU 27, EFTA, Candidate Countries Distributing through Banks and Funds AAA rated Staffing, Culture and Values Leading-edge modern institution Adapting to changing market conditions Attracting talented staff High standards of compliance and integrity Dual Objective of Meeting EU Policy Goals & Generating a Satisfactory Return on Equity

  5. EIF’s Shareholders* • EIB: Main Shareholder (61%) • European Investment Bank’s shareholders: 27 EU Member States • Subscribed capital: €165 bn • Total lending : € 350 bn • 2009 new lending € 79 bn, an increase of 37% • European Community represented by the European Commission (29%) • 30 public and private financial institutions from 17 countries (9%) * 1% of EIF’s shares are still to be issued

  6. Capacity - Guarantees Under EIF Management at 30/06/2009 €m Next 4 Years(new commitments) 30/06/2009(outstanding) EU Leveraged Portfolio Budgetary Resources 7 300 450 9 300 550 EIF Own Resources Estimated Leveraged Portfolio EIF Exposure 10 500 1 500 23 800 3 400 JEREMIE Leveraged Portfolio Budgetary Resources 4 200 700 N/A N/A TOT Leveraged Portfolio Budgetary Resources/Exposure 22 000 2 650 33 100 3 950

  7. Capacity – Venture Capital Under EIF Management at 30/06/2009 Next 4 Years(new commitments) 30/06/2009(outstanding) €m EU Leveraged Portfolio Net Commitment* 2 400 400 2 400 400 EIB/EIF VC& MezzanineLeveraged Portfolio Net Commitment* 9 000 1 800 20 700 3 100 JEREMIE Leveraged Portfolio Net Commitment 1 500 300 N/A N/A 23 100 3 500 12 900 2 500 TOTAL Portfolio of Funds Net Commitment * Does not include fund of funds and ERP initiatives

  8. Table of Contents • Some Information about EIF • The CIP Programme • The venture capital instruments under CIP • The guarantee instruments under CIP

  9. Competitiveness & Innovation Framework Programme (CIP) • CIP financial instruments managed by EIF on behalf of the EC • 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 • Products • Guarantees: SME Guarantee Facility • Venture capital: High Growth and Innovative SME Facility

  10. Table of Contents • Some Information about EIF • The CIP Programme • The venture capital instruments under CIP • The guarantee instruments under CIP

  11. CIP GIF Venture Capital Facility • Two windows • GIF 1: Seed & Start-Up Stage • GIF 2: Expansion Stage • Targeting >50% innovative SMEs • Eco-innovation & Business Angel aspects • Strong demand to date

  12. GIF signed commitments:More than EUR185m in 17 funds

  13. COUNTRIES COVERED BY CIP GIF 17 AGREEMENTS SIGNED for over EUR 185m Competitiveness & Innovation Framework Programme (CIP) Inventure Fund Ky (ex Holtron) Bullnet Fund II Cape Regione Siciliana Dritte SHS Technologie GmbH & Co. KG Demeter II Pinova Fund I Fountain Healthcare Partners Fund I Albuquerque FCR Chalmers Innovation Fund Pentech Fund II UMIP-MTI TTA Fund 360 Capital One Baltcap Private Equity Fund Capricorn Cleantech Fund Serena Capital WHEB Ventures Private Equity Fund II Conor Technology Fund II Countries covered by CIP i.e. GIF agreements signed Countries eligible for CIP where no GIF agreement has been signed to date Other Countries

  14. GIF sector focus:17 funds, total fund sizes EUR1,18bn

  15. How to Apply • All information is published on EIF’s website • No formal application • Fundraising teams send documentation to EIF • Initial screening => second screening => due diligence Proposal to EIF Board and the EC for approval • Timing: case by case basis. Typically 12 to 18 months

  16. Table of Contents • Some Information about EIF • The CIP Programme • The venture capital instruments under CIP • The guarantee instruments under CIP

  17. CIP SME Guarantee Facility • Free of charge capped guarantees provided for additional risk-taking by intermediaries (guarantee schemes, banks, leasing companies…) resulting in Enhanced Access to Finance for SMEs • Enables lenders in the current economic environment to further support SMEs (tighter lending criteria to be relaxed) • Guarantees for investment loans and working capital • Selection of intermediaries with wide geographical cover in each country so that as many SMEs as possible have access • Minimum selection criteria (commitment to SME financing, financing volumes, geographical reach etc.) • Visibility and promotion of EC support

  18. CIP SME Guarantee Facility Instruments Four business lines, known as "windows“ • Loan Guarantee Coverage of portfolios of mid- to long-term debt finance targeting SMEs and focused on investment financing. Flagship window thanks to its flexibility and wide-ranging characteristics • Micro-Credit Guarantee Coverage of portfolios of micro-credits to encourage financial institutions to provide financing to microenterprises, especially start-ups • Equity Guarantee Coverage of portfolios of equity and mezzanine investments in SMEs in the seed and start-up phases. Aim to help SMEs improve their financial structure • Securitisation Guarantees to support securitisation transactions so that financial institutions may mobilise additional debt financing for SMEs

  19. COUNTRIES COVERED BY CIP GUARANTEES AGREEMENTS SIGNED 22 F.I. to date for over €3.5bn(EUR 195 m of budget) Competitiveness & Innovation Framework Programme (CIP) SME Guarantees Austria: Austria Wirtschaftsservice Belgium: FdP Bulgaria: BDB, Raiffeisenbank Bulgaria France: SOCAMA, ADIE, Siagi, Crédit Coopératif Germany: KfW Hungary: UniCredit Bank Ireland: First Step Microfinance Italy: Alleanza di Garanzia, ATI ITALIA PMI, Federfidi Lombarda, ATI Fidi. Gar. Latvia: Hipoteku Banka Norway: Cultura Sparebank Poland: BPH Slovenia: Slovene Enterprise Fund Spain: CERSA, MicroBank La Caixa Turkey: KGF Countries covered by CIP i.e. agreements signed Countries eligible for CIP Guarantees where no agreement has been signed to date Other Countries

  20. General Features (I) • Free of charge guarantee • Enhanced Access to finance Requirement that the Guarantee Facility covers risk that is additional to the one already taken by the intermediary • increases in lending volumes, loan maturities, rate of financing covered • waiver of collateral requirements • riskier target groups (start-ups, new areas of operation) the requirement is translated into specific and quantified obligations: target volumes • Guarantee conditional on achieving specific volumes • Special focus on eco-innovation, business transfers, etc. • Capped guarantees at a pre-agreed level taking into account expected default and recovery rates, risk premium charged by the intermediary, requirements as to Enhanced Access to Finance

  21. General Features (II) • Visibility SMEs have to be informed of the EC support • Promotion, Marketing • link to a dedicated CIP website • success stories of supported SMEs • State Aid rules are applicable to EU Guarantees (e.g. de minimis), except for the Securitisation Window (where guarantee fees are charged) • Quarterly and annual reporting requirements and monitoring • Commitment fee in case target volumes are not reached, applicable to all windows except Micro Credit Window

  22. Window 1: Loan Guarantee • Purposes of financing: investment in tangible, intangible assets, business transfers, working capital (loans, leasing) • Minimum maturity: priority to minimum 18 months • Borrowers: SMEs according to EU definition (less than 250 employees) • Guarantee Rate: up to 50% • Ranking: pari passu • Guarantee maturity: final maturity of up to 10 years • Guarantee Cap Rate: maximum 10%, based on expected loss • Free of charge guarantee

  23. Window 1: Loan Guarantee - some examples (I) Successful implementation by banks • Germanystart-up loan (up to EUR 50,000) offered via the banking system at standardised conditions combined with a 80% risk coverage • Bulgaria SME secured loan product with reduced collateral requirements, increased maturities and reduced cost of financing • Poland relaxed lending criteria for two existing loan products and launch of a new loan product in times of restrictive lending policies • Latvia new development loan product dedicated to start-ups and young, small companies

  24. Window 1: Loan Guarantee - some examples (II) Successful implementation by guarantee schemes • Italyincreased guaranteerates and guaranteed maximum loan volumes as well as additional industry sectors • Spain increased counter-guarantee rates and strengthened focus on providing coverage to long-term SME loans • France increased volumes of guarantees for small equipment loans and business transfer loans, granted with substantially reduced collateral requirements

  25. Window 2: Micro-Credit Guarantee • Purposes of financing: investments, working capital • Minimum maturity: priority to minimum12 months at least 6 months • Maximum amount: EUR 25,000 • Borrowers: micro enterprises according to EU definition (less than 10 employees) • Guarantee Rate: up to 75% • Guarantee maturity: final maturity of up to 5 years • Guarantee Cap Rate: maximum 20% based on expected loss • Technical support: EUR 200 per borrower financed (up to maximum EUR 50,000) • Free of charge guarantee

  26. Window 2: Micro-Credit GuaranteeSuccessful implementation by banks and MFIs • Spain substantially increased lending volumes to micro enterprises • Norway substantially increased micro-lending volumes that would otherwise be constrained due to the small size of the lender • Ireland substantially increased lending volumes and higher risks accepted

  27. Window 3: Equity/Quasi-Equity Guarantee • Purpose of financing: mezzanine finance, quasi equity or equity • Maximum amount: EUR 500,000 (equity) • Borrowers: SMEs according to EU definition, in seed or start-up phase, or operating for less than 10 years • Guarantee Rate: up to 50% • Guarantee maturity: final maturity of up to 10 years • Guarantee Cap Rate: maximum 20%, based on expected loss • Free of charge guarantee

  28. Window 4: Securitisation • New under the SME Guarantee Facility • Securitisation of SME loan portfolios: • cover for mezzanine and junior tranches • co-investment with EIF own resources may be considered • focus on smaller banks, new markets, multi-country and multi originator transactions • support to cover some costs under discussion • Cash / synthetic transactions • Guarantee rate: up to 100% of guaranteed tranche, max 50% for First Loss Piece • Term: up to 10 years • Guarantee fees will be charged • Enhanced access to finance: Undertaking to use resources to provide new loans to SMEs according to EU definition • EU Requirements apply to the newly created (additional) portfolio (reporting, visibility, audit rights etc)

  29. How to apply and application process • All information is published on EIF’s website: www.eif.org Product description and policy, selection criteria, information requirements • Application process: • Applications in line with the requirements can be pre-selected • Requirement of further information if necessary • Due diligence meeting • Proposal to EIF Board and the EC for approval • Agreement implementation • Timing: between 3- 6 months (depending on the quality of information provided)

  30. Contact details • CIP coordinator: Gunnar MAI g.mai@eif.org +352 426688 358 • European Investment Fund96, boulevard Konrad AdenauerL-2968 Luxembourgcip.guarantees@eif.org

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