EU Investor Presentation

Investor Presentation

December 2016

European Commission Economic and Financial Affairs

European Union AAA/Aaa/AA/AAA

Under the European Financial Stabilisation Mechanism (EFSM),

all EU Member States can receive support, up to an agreed limit of EUR 60 billion, of which EUR 13.2 billion are remaining (EUR 46.8 billion requested and disbursed to Ireland and Portugal).

On 20 July 2015, EUR 7.2 billion were disbursed to Greece as a bridge loan. The loan was fully repaid by Greece on 20 August 2015.

Ireland's EFSM loan maturing on 4 December 2015 was lengthened; the corresponding refinancing operations have been executed between 15 September 2015 and 8 October 2015.

Portugal's EFSM loan maturing on 3 June 2016 was lengthened; the corresponding refinancing operations have been executed between 8 March 2016 and 12 April 2016.

The Balance of Payments (BoP) programme

provides support up to EUR 50 billion to non-euro-area Member States.

EUR 13.4 billion were disbursed to Hungary, Latvia and Romania between 2008 and 2010 , of which EUR 4.2 billion are outstanding*. Following Hungary's repayment of EUR 1.5bn in April, the remaining outstanding loans are with Romania (EUR 3.5 bn) and Latvia (EUR 0.7 bn).

Macro-Financial Assistance (MFA)

is a financial aid programme to assist non-EU countries benefiting from an IMF programme (EUR 2.95 billion outstanding*).

Funding framework

2

The European Commission, on behalf of the EU, operates three loan programmes which are funded in the capital markets:

*as of 30/11/2016

Characteristics of EU funding

3

Funds raised are lent back-to-back to beneficiary country

Specific Council Decision* determines amount of country programme, instalments and maximum (average) maturity of loan package

Loan disbursements depend on compliance with policy conditionality, subject to regular reviews

Funding exclusively denominated in euro

Maturities: 3 - 30 years

Syndicated bond issues or private placements

*Together with the European Parliament if applicable

EU/EFSM financial assistance packages

Ireland December 2010

€67.5 bn 1

Portugal May 2011

€78 bn

1 The Irish programme comprised an additional own contribution of €17.5 billion from the Treasury and National Pension Reserve Fund, thus totalling EUR 85 billion.

Contribution Disbursed Outstanding

€22.5 bn EU (EFSM) €22.5 bn €22.5 bn

€17.7 bn EFSF + €4.8 bn bilateral loans*

€22.5 bn €22.5 bn

€22.5 bn IMF** €22.5 bn** €4.4 bn**

*Bilateral loans from UK (€3.8 bn), Denmark (€0.4 bn), Sweden (€0.6 bn) **Amounts in Euros subject to currency fluctuations as IMF support is based on Special Drawing rights (SDRs).

4

Contribution Disbursed Outstanding

€26 bn EU (EFSM) €24.3 bn* €24.3 bn

€26 bn EFSF

€26 bn €26 bn

€26 bn IMF** €26 bn** €20.8 bn**

* €1.7 bn not requested by Portugal. **Amounts in Euros subject to currency fluctuations as IMF support is based on SDRs

MFA (Ukraine): up to EUR 1.2 billion (in two instalments)

MFA (Tunisia): up to EUR 600 million (in up to four instalments)

Other MFA operations: up to EUR 200 million

EU Funding Plan 2017

5

Notes: i. EUR 2.21 billion of MFA loans to Ukraine have been disbursed. A total of up to EUR 1.2 billion

in two instalments of EUR 600 million each remains to be disbursed under the current programme. The tranche that was tentatively scheduled for Q4/2016 is shifted to 2017.

ii. The final tranche of the first programme for Tunisia (EUR 100 million) is expected to be disbursed in 2017. Tunisia has applied for a second MFA programme for a total amount of EUR 500 million, which will be implemented from 2017. This second programme foresees three instalments (first: EUR 200 million, second and third: EUR 150 million each).

iii. A follow-on programme has also been proposed for Jordan. This will be disbursed in two instalments of 100 million each. First disbursement expected in 2017.

iv. Loan tranches that are not ready for disbursement in a given year will be funded and disbursed in the following year, subject to fulfilment of conditions by the loan beneficiary.

Up to EUR 2.0 billion:

EU Funding Plan 2018

6

Notes: i. Portugal and Ireland are entitled to request a lengthening of maturities on their existing EU

loans, which would result in one or several borrowing transactions for each maturity. Portugal's EUR 4.75 billion loan due 3 June 2016 was lengthened. The refinancing operations were executed between 8 March and 12 April 2016.

ii. The next maturing EFSM loans are due in 2018: EUR 3.4 billion on 4 April 2018 and EUR 1.1 billion on 4 October 2018.

iii. MFA funding requirements for 2018 are not known yet.

EFSM (Ireland): up to EUR 3.9 billion

EFSM (Portugal): up to EUR 600 million

MFA: to be defined

Up to EUR 4.5 billion:

Ireland and Portugal have the option to lengthen the maturity of the EFSM loans based on the extension of the maximum weighted average maturity of these loans from 12.5 to 19.5 years (April 2013 Eurogroup/Ecofin decision).

Back-to-back principle between EU borrowing and lending will be fully maintained. All outstanding or refinancing bonds with maturities up to 2026 may be refinanced prior to their redemption date. Prolonged loans maturing until 2026 can be refinanced again on the request of the beneficiary (serial refinancing).

EU will not assume any refinancing risk related to this exercise: Refinancing operations are executed beforehand and loans are lengthened on maturity.

The Commission determines the maturities depending on market conditions and funding strategy, taking into account the country's and EU's redemption profiles.

For Ireland the first refinancing operations have been executed in September/October 2015 in order to lengthen Ireland's loan coming due on 4 December 2015. The average maturity of Ireland's EFSM loans is now 15.4 years.

For Portugal the first refinancing operations have been executed in March/April 2016 in order to lengthen Portugal's loan coming due on 3 June 2016. The average maturity of Portugal's EFSM loans is now 14.9 years.

Since 2015: Lengthening of maturities

for Ireland and Portugal

7

European Union – Ratings

8

Agency Rating Rating agency comments

AAA /

Outlook stable

On 28 June 2016, Fitch re-affirmed the EU's AAA long-term rating. EU's debt is ultimately backed by the EU budget. The EU's ratings are underpinned by support from its 28 member states, whose ability and willingness to contribute to the EU budget are strong. The EU's loan portfolio is highly concentrated, but the EU enjoys preferred creditor status; it has never suffered a loss on its loan portfolio.

According to Fitch, the UK vote to withdraw from the European Union and Fitch's subsequent downgrade of the UK sovereign rating to 'AA'/Negative Outlook is unlikely to have any immediate impact on the 'AAA' ratings of EU-related Supranationals including the EU.

However, Fitch believes that the UK's vote could have longer-term negative implications for the EU's creditworthiness if it results in a weakening of support for the EU by other highly rated member states.

Aaa /

Outlook stable

On 24 June 2016, Moody's reaffirmed the EU's Aaa long-term rating with stable outlook. This rests principally on the credit strength of its most highly rated members, and on their commitment to ensuring the continued soundness of its finances, underpinned by the joint and several obligations each member assumes to provide it with financial support where needed.

Moody's does not expect that the UK's vote to leave and its eventual exit will alter either the capacity or the willingness of those very highly rated members to continue to honour their obligations to support the EU.

AA /

Outlook stable

Since 30 June 2016, S&P's EU rating is AA, with a stable outlook.

EU has a contingent claim on Member States. This pledge is made for the express purpose of backing EU’s financial obligations. This pledge and any budgetary payments are joint and several obligations of the EU Member States, as confirmed by S&P.

AAA* /

Outlook stable

DBRS' unsolicited long-term issuer rating of AAA to the European Union with stable outlook was reaffirmed on 29 June 2016, following the result of the UK referendum on EU membership. The Stable trend reflects DBRS’s view that EU is well-positioned to manage near-term risks, despite the outcome of the UK’s referendum.

DBRS takes the conservative assumption to exclude the UK from the core shareholder group for the time being. The creditworthiness and support of the other 27 member states is reflected in this rating, in addition to the EU’s conservative budgetary management with multiple arrangements that protect creditors and the EU's de facto preferred creditor status.

* unsolicited

EU borrowings are direct and unconditional obligations of the EU. The EU is legally bound by the Treaty on the Functioning of the EU (Articles 310, 323) to service EU debt obligations.

In case the EU's loan beneficiaries should default, the required funds are provided through the EU budget. The budget is, based on Treaty, established for 7-year periods: The Multi-annual Financial Framework (MFF).

The budgetary margin (the difference between the annual MFF ceiling and the EU budget) serves as protection to investors by providing coverage against unexpected payment obligations.

In addition, should the funds available from the EU budget be insufficient, the Commission may directly draw on the Member States, without any extra decision making being required.

EU borrowings may not be used to finance a budget deficit, and the EU budget does not assume any interest rate or foreign exchange risk.

European Union – Credit strengths

9

1.15 1.2 1.5

1.1

5.0

2.7 2.0

2.6

4.0

3.0 2.3

1.4 2.25

3.0

2.0

1.0 1.8

3.0

0.6

0.6

0.85

0.01

3.4

4.75

1.5

0

1

2

3

4

5

6

7

8

9

10

11

12

€ billion per calendar year

BOP EFSM MFA

EU outstanding amounts of benchmark bonds

10

Interpolated yield curve of EU versus Germany and France

11 Source: Bloomberg, 02 December 2016

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

Jan-15 Oct-17 Jun-20 Mar-23 Dec-25 Sep-28 Jun-31 Mar-34 Dec-36 Aug-39 May-42 Feb-45

FR

DE

EU

Yields of EU, Germany and France

Interpolated yield curve of EU versus EIB, KfW and ESM


-1.0

-0.5

0.0

0.5

1.0

1.5

Jul-15 Apr-18 Jan-21 Oct-23 Jun-26 Mar-29 Dec-31 Sep-34 Jun-37 Mar-40 Nov-42 Aug-45 May-48

ESM

KfW

EU

EIB

Yields of EU, EIB, KfW and ESM

EU and peers - 5 yr spread to Germany


+0.0

+5.0

+10.0

+15.0

+20.0

+25.0

+30.0

+35.0

Spread to Germany 5y bonds

EU 06/2021

EFSF 06/2021

EIB 04/2021

ESM 03/2021

FRTR 04/2021

KFW 07/2021


14

Note: An 8-year tenor was chosen because many peer issuers (including Germany) have no 10-year bond with at least 12 months history.

Source: Bloomberg, 02 December 2016

+0.0

+5.0

+10.0

+15.0

+20.0

+25.0

+30.0

+35.0

+40.0

+45.0


EU 04/2024

EFSF 02/2024

EIB 01/2024

ESM 11/2023

FRTR 05/2024

KFW 06/2024


15

Note: There is no ESM bond in the 15 year maturity bucket for which a 12-months history could be shown.

Source: Bloomberg, 02 December 2016

+0.0

+10.0

+20.0

+30.0

+40.0

+50.0

+60.0

+70.0


EU 04/2032

EFSF 03/2032

EIB 03/2031

FRTR 10/2032

KFW 04/2030

16

EU: outstanding benchmark bonds issued since 2009

* I-Spread levels as of 02 December 2016 - Source: Bloomberg

** first number: spread at issuance, remaining: spreads of taps

Benchmark Payment date Maturity Amount (€) Spread vs. mid swap (bps)

at issuance current*

EU 2.375 2017 22/09/2010 22/09/2017 1,150,000,000 8 -37

EU 3.250 2018 24/03/2011 04/04/2018 4,600,000,000 8 -32

EU 2.375 2018 06/10/2011 04/10/2018 1,100,000,000 15 -28

EU 3.375 2019 10/03/2010 10/05/2019 1,500,000,000 20 -27

EU 0.250 2020 22/07/2015 04/07/2020 600,000,000 -20 -27

EU 3.500 2021 31/05/2011 04/06/2021 4,750,000,000 14 -27

EU 2.750 2021 21/09/2011 21/09/2021 5,000,000,000 20 -29

EU 2.750 2022 04/05/2012 04/04/2022 2,700,000,000 56 -33

EU 0.625 2023 01/10/2015 04/11/2023 3,500,000,000 -12 / -15** -33

EU 1.875 2024 25/03/2014 04/04/2024 3,200,000,000 9 / 6 / 3** -36

EU 3.000 2026 29/09/2011 04/09/2026 4,000,000,000 40 -30

EU 2.500 2027 30/10/2012 04/11/2027 3,000,000,000 36 -28

EU 2.875 2028 03/07/2012 04/04/2028 2,300,000,000 68 -31

EU 1.375 2029 12/11/2014 04/10/2029 2,245,000,000 3 / 2 / -5** -26

EU 0.75 2031 13/04/2016 04/04/2031 2,260,000,000 2 -22

EU 3.375 2032 05/03/2012 04/04/2032 3,000,000,000 78 -25

EU 1.500 2035 22/09/2015 04/10/2035 2,000,000,000 4 -20

EU 1.125 2036 15/03/2016 04/04/2036 1,000,000,000 8 -23

EU 3.375 2038 24/04/2012 04/04/2038 1,800,000,000 87 -17

EU 3.750 2042 16/01/2012 04/04/2042 3,000,000,000 125 -5

17

Outstanding EU loans by beneficiary/programme

Romania (BOP), 6.5%

Latvia (BOP), 1.3%

Ireland (EFSM), 41.7%

Portugal (EFSM), 45.0%

MFA (Others), 1.4%

MFA (Ukraine), 4.1%

Distribution of outstanding loans by beneficiary

Romania (BOP)

Latvia (BOP)

Ireland (EFSM)

Portugal (EFSM)

MFA (Others)

MFA (Ukraine)

as of 30/11/2016

Investor distribution (after allocation)

25 EU benchmark transactions 2011 – to date: € 59.8 bn*

18

* EUR 56.54 billion EFSM + EUR 1.2 billion BoP + EUR 2.06 billion MFA

Fund managers

29%

Banks 27%

Insurance/ Pension

20%

Central banks 21%

Private banks/Retail/

Others 2%

Investor distribution by type

Germany/Austria 33%

UK/Ireland 16%

Benelux 8%

Switzerland 4%

ME/Africa 1% Other Europe

4%

Nordics 7%

Americas 2%

Asia 13%

France 11%

Other 1%

Investor distribution by region

Portugal (1st refinancing – 1st tranche) : 20 year EU 04/2036 1.125%: EUR 1 billion

19

Key terms Investor distribution by type


Issuer European Union (EU)

Issuer ratings AAA/Aaa/AA+/AAA (Fitch/Moody’s/S&P/DBRS)

Pricing date 8th March 2016

Settlement date 15th March 2016

Maturity date 4th April 2036

Size €1 bn

Coupon 1.125%; annual ACT/ACT

Re-offer spread MS + 8 bps (DBR 4.750% 04/07/2034 + 46.1bps)

Re-offer price 99.412%

Re-offer yield 1.158%

ISIN EU000A18YZ05

Listing Luxembourg Stock exchange

Denominations EUR 1,000.00

Bookrunners Barclays, Credit Agricole CIB, Goldman Sachs International, LBBW

Fund managers,

18.0%

Banks, 11.7%

Insurance/ Pension,

53.2%

Central banks, 17.1%

Germany/Austria 65.1%

UK/Ireland 6.0%

Benelux 9.6%

Switzerland 2.6%

Other Europe

1.5%

Nordics 5.9%

France 7.7%

Other 0.4%

Portugal (1st refinancing– 2nd tranche) + MFA: 15 year EU 04/2031 0.750%: EUR 2.26 billion

20

Key terms Investor distribution by type



Issuer ratings AAA(Fitch) / Aaa(Moody’s) / AA+(S&P) / AAA(DBRS)

Pricing date 6th April 2016

Settlement date 13th April 2016

Maturity date 4th April 2031

Size €2.26 bn


Re-offer spread MS + 2 bps (DBR 5.5% 04/01/2031 + 47.1bps)

Re-offer price 98.294%

Re-offer yield 0.872%

ISIN EU000A18Z2D4


Denominations EUR 1,000.00

Bookrunners BNP Paribas, DZ BANK, HSBC, Morgan Stanley, SG CIB

Co-Managers CA CIB, Commerzbank, LBBW, UniCredit

Fund managers,

39.8%

Banks, 40.2%

Insurance/Pension,

14.7%

Central banks, 5.4%

Germany/Austria 47.8%

UK/Ireland 7.2%

Benelux 14.9%

Switzerland 2.2%

Other Europe

0.9%

Southern Europe

6.2%

Nordics 4.4%

Asia 1.7%

France 14.4%

Other 0.3%

Portugal (1st refinancing – 3rd tranche): long 7 year EU 11/2023: € 1,500 m tap on bond issued in 10/2015

21

Key terms Investor distribution (tap) by type

Investor distribution (tap) by region


Issuer ratings AAA(Fitch) / Aaa(Moody’s) / AA+(S&P) / AAA(DBRS)

Pricing date* 24th September 2015 / 12th April 2016

Settlement date*

1st October 2015 / 19th April 2016

Maturity date 4th November 2023

Size €3.5 bn (€2 bn + €1.5 bn)*


Re-offer spread*

MS -12 bps (DBR 2.00% 08/23 +33bps) MS -15 bps (DBR 2.00% 08/23 +32bps)

Re-offer price* 99.968% / 103.644%

Re-offer yield* 0.629% / 0.139%

ISIN EU000A1Z6630


Denominations EUR 1,000

Bookrunners For latest tap

CACIB, JPM, LBBW, UniCredit

Co-Managers For latest tap

BoA-ML / Citi / Natixis / RBS

* first: initial issuance, second and third: reopenings

Insurance/ Pension/

Fund managers,

7.3%

Banks, 45.5%

Central banks, 46.7%

Private banks/Retail/O

thers, 0.5%

Germany/ Austria 39.7%

UK/Ireland 6.0%

Benelux 9.0%

Nordics 6.0%

Asia 19.3%

France 16.6%

Other 3.4%

Synopsis of European supranational issuers

22

European Union (EU) EFSF (data as of 20/09/2016) ESM (data as of 20/09/2016) EIB (data as of 15/05/2016)

Legal

Foundation

Supranational body established

under EU Treaty (TFEU)

Private Company ('Societe

Anonyme') incorporated under

Luxembourg Law, founded on

an international agreement

International financial institution

established under international

treaty - Multilateral Lending

Institution (since October 2012)

Autonomous public financial institution

established under EU Treaty (TFEU,

Art. 308) - Multilateral Lending

Institution

Lending

capacity

EFSM: €60 bn , utilised €46.8bn,

outstanding: €46.8 bn

BoP: €50 bn, utilised: €13.4 bn,

outstanding: €4.2bn

MFA: no ceiling, €2.95 bn outst.

€440 bn

Utilised: €187.35 bn,

Outstanding: €174.61 bn

€500 bn

Utilised: €133.6 bn,

Outstanding: €70.9 bn

Current capacity: €691bn

Utilised: €563bn, of which:

• Loans disbursed: €458bn

• Loans to be disbursed: €106bn

Mandate Provide financial assistance to

countries in financial and

economic difficulty in order to

promote economic and social

integration of the member states

Provide financial assistance

to euro area member states in

difficulties in order to

safeguard financial stability in

Europe

Provide financial assistance to

euro area member states in

difficulties in order to safeguard

financial stability in Europe

EU's long-term lending institution: grant

finance for sound investment projects,

mainly in the EU (approx. 90%), to

promote European economic

development and integration.

Shareholders 28 EU member states 17 euro area member states

(without Latvia and Lithuania)

All 19 euro area member states 28 EU member states

Support to

Bondholders

EU budget and member states'

obligation to provide the funds

necessary to meet the EU’s legal

obligations.

EU Budget 2015: €141.3 bn in

payments (€161.9 bn in

commitments).

Explicit, irrevocable and

unconditional guarantee of the

members; 'several' liability

except for Member States in a

programme (‘stepping out’ )

€726 bn overall guarantees;

bond issuance backed by up

to 165% over guarantees.

Share capital comprising paid in

capital and callable capital.

Explicit, irrevocable and

unconditional obligation to pay the

share of callable capital on

demand; 'several' liability

Callable capital: €624.3 bn

Paid-in capital: €80.55 bn

Explicit obligation on EIB's share-

holders to pay their own share of the

callable capital, on demand from the

Board of Governors; 'several' liability

Callable capital: €221.6bn

Paid-in capital and reserves: €63.3bn

Subscribed capital: €243.3bn

Credit

Ranking

De facto preferred creditor Status Pari passu Preferred Creditor, but junior to

IMF / Pari passu for Spanish bank

recapitalisation

Preferred Creditor Status

Rating¹ AAA/Aaa/AA+/AAA² AA/Aa1/AA/AAA² AAA/Aa1/-/AAA² AAA/Aaa/AAA/AAA²

¹ Fitch / Moody's / S&P / DBRS ² DBRS: unsolicited rating

Jan CARLSSON, Deputy Head of Unit Tel.: +352 4301 36424 [email protected]

Contacts – European Commission

Benjamin ANGEL, Director

Tel.: +352 4301 35263 - [email protected]

23

ECFIN L4: Borrowing and Lending

Stefan KOHLER, CFA, Senior Borrowing Manager Tel.: +352 4301 37453 [email protected]

Direct access to investor relations site: http://ec.europa.eu/economy_finance/eu_borrower

Bloomberg: EUEU

Directorate-General Economic and Financial Affairs (ECFIN), Directorate L, 12 Rue Guillaume Kroll, L-1882 Luxembourg

Thilo SARRE, Manager Borrowing & Lending Tel.: +352 4301 38876 [email protected]

Jean-Pierre RAES, Head of Unit Tel.: +352 4301 30070 [email protected]

ECFIN L: Treasury and financial operations

Documents

EU Investor Presentation