Financing for Research & Development 14 th December 2006, Brussels

2 EIF at a glance Specialised European institution for SMEs Established 1994 Operational platform acting through Venture Capital, Guarantees for SME portfolios and financial engineering AAA Rating Standard & Poor’s: AAA Moody’s:Aaa Fitch:AAA MDB status 0% weighting Shareholders EIB, EU, Financial institutions Portfolio EUR 14bn ( SMEs)

3 Resources and objectives BMWA - ERP Dahlia SICAR S.R. European Community EUR 600m + Capital increase EUR 4bn Revolving EUR 450m (MAP) EUR 1.1bn (CIP) Up to EUR 1bn To be committed to venture capital funds and financial institutions (eg: guarantees) SMEs

4 EIF assets under management (at 30/09/06) EUR 940m EUR 490m New commitments (1 January September 2006) 180 banks/ guarante e institutio ns EUR 10.3bn GUARANTE ES EUR 14bnTOTAL 240 funds EUR 3.7bn VENTURE CAPITAL Vehicles Total commitments EUR 450m

5 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 and Eastern Europe Multi-country 29% Italy 7% Germany 8% Spain 7% France 15% United Kingdom 15% Rest Western Europe 14% Central and Eastern Europe 5% Venture capital: portfolio of EUR 3.7bn (at 30/09/06)

6 Private Equity Stage Distribution by % of Amount Invested 2005 European Private Equity Survey Conducted by Thomson Financial and PricewaterhouseCoopers on behalf of EVCA

7 EIF’s experience as a fund-of-VC funds High risk; very qualified management teams needed with all relevant skills (Investment, monitoring and exit) Critical mass requirements Good VC fund governance (independence of managers vs. investors, transparency, etc.) Balance public/ private investors? Optimise the use of public funding, fight for efficiency and quality Proximity of “technological clusters” (Heidelberg, Cambridge, Finland, etc…) very important esp for seed-early stage Focus on market gaps more than money !

8 1.Mixed results of tech transfer initiatives Many universities struggling - technology transfer not their mission Most universities do not have the means to hire professionals with industry background having the right skill set Incubators have a mixed record at best Many initiatives are sub-scale 2. Venture often more suited to grow business rather than seed them Larger deals more attractive Milestone driven approach vs. need for flexibility Fixed life time of funds Inefficiency in Tech Transfer is a major issue for the seed funding gap

9 High Growth Innovative Companies Scheme oEarly and expansion stage VC funds oCo-investments in side-funds with business angels oEco-Tech equity window SME Guarantee Facility oSME loan guarantees oMicro-credit guarantees oMezzanine guarantees oSME loan securitisation Capacity Building Scheme (Seed Capital Action and partnership with international finance institutions) Budgetary envelope: EUR 1.1bn ( ) Competitiveness & Innovation Framework Programme (CIP) EIF responsible for the financial instruments of the Entrepreneurship and Innovation Programme:

10 JEREMIE draws lessons from the past … Under utilisation of financial engineering instruments in Cohesion Policy Grant approach ≠ revolving character Difficulties in implementation (regulation, time frame, procedures, expertise)

11 JEREMIE: The System Venture Capital Funds Preparation of Operational Programmes EVALUATION PHASE IMPLEMENTATION OF HOLDING FUNDS DISBURSEMENT PROCESS Microfinance Providers (MCPs) Tech Transfer Activities Guarantee schemes Transforming parts of the ERDF grants into financial products for SME (Lending of national contribution by EIB possible) SME SMEs SME SMEs SME SMEs SME SMEs SME SMEs

12 JEREMIE or not JEREMIE? No JEREMIEJEREMIE SME Access to Finance Interim Payment Delegation Expertise Use of Market-driven revolving instruments/flexibility, (after 2015!) Management and administration assumed by Fund Manager Lisbon earmarking Portfolio approach Time delays Less flexibility Fragmentation/case by case approach = Less impact in the regions

European Investment Fund EIF 43, avenue J. F. Kennedy L-2968 Luxembourg Tel.: (00 352)