EIB opens a new era of truly European bond issuance

EIB launches the first ever Eurozone Public Offering of Securities, EPOS, delivering advantages of growing European financial integration. The issue complies with ECB Standard 3 criteria for eligibility as collateral in Eurosystem monetary operations, and is marketed via a syndicate of strong retail banks, one from each country of the Eurozone, that together serve tens of millions of customers via thousands of bank outlets.

The European Investment Bank (EIB), the long-term financing institution of the EU, plans to open the public offering period for a new benchmark-sized structured EUR issue on Monday, June 26. The offering to retail investors via syndicate banks is expected to run at a fixed price until July 17. The length of the subscription period is in particular intended to allow retail investors adequate time to subscribe.

The expected issue size is EUR 1billion. The bonds carry a fixed coupon of 5% in their first year. Thereafter, coupon payments are linked to inflation, as measured by the year-on-year change in the non-revised Harmonised Index of Consumer Prices (excluding tobacco) for the Eurozone. The issue matures 21 July 2016 and is capital protected.

This issue will be distributed via a Public Offering in the 12 countries of the Euro area, using the passporting mechanism foreseen in the EU Prospectus Directive. It is the first time that the passporting mechanism has been used on this scale in the bond market. This Directive sets out an efficient mechanism for the passporting of prospectuses in the member states of the European Union: Articles 17 and 18 provide for a prospectus approved by the competent authority in one member state (home country regulator) to be used as a valid prospectus in any other member state (host Member State) without the need for any further prospectus approval (mutual recognition). The prospectus has been approved by the CSSF, the Luxembourg regulator and will in due course be available via the website of the Luxembourg Stock Exchange (www.bourse.lu).

The issue sets a new standard for the European bond market. Led by Merrill Lynch International as Global Co-ordinator, the syndicate comprises 12 Co-Lead Managers, one from each country of the Eurozone. This syndicate structure is intended to optimise service and distribution to investors in each of those countries, notably in the retail segment. Retail investors will therefore be offered a European bond with uniform features.

The bond addresses demand for protection against inflation via a structure that provides investors with a return, over an extended period of time, which is a multiple of the year-on-year increase in Eurozone inflation (ex-tobacco). The EUR 1 billion size is unusual for an issue of this kind and enjoys benchmark status in the structured EUR market. EIB thereby aims to help catalyse a new, potentially more liquid segment for retail-friendly structured bonds denominated in EUR. Innovation in terms of distribution channels, size and pan-Eurozone scope is an important benefit of European financial integration.

An additional pioneering characteristic of this issue is that it is in the form of a New Global Note, a new format for international debt securities, which will be operative from July 1. This will ensure compliance of the issue with European Central Bank (ECB') Standard 3 eligibility criteria for use as collateral in Eurosystem monetary operations (as formally announced by the ECB on 13 June 2006).

The bonds are being launched under a new brand - EPOS', or Eurozone Public Offering of Securities. This reflects the innovative characteristics of this issue, and adds a further facet to the existing strength of the EIB brand for plain vanilla EUR benchmark securities - EARNs (Euro Area Reference Notes).

Barbara Bargagli-Petrucci, Director, Head of Capital Markets Department at EIB, said: This first pan-Eurozone public bond offering since the introduction of the Prospectus Directive contributes to the development of a more integrated bond market in Europe. The EU Prospectus Directive has been fundamental in making the project practical. With this transaction, EIB plays a significant role in putting the Prospectus Directive and ECB Standard 3 into practice. Thanks to its multinational dimension, EIB is an ideal vehicle to deliver the advantages of European financial integration in the capital markets."

Stuart McGregor, MD, Head of Frequent Borrowers, Debt Capital Markets, EMEA, at Merrill Lynch said: This is a pioneering transaction. In utilising the prospectus directive legislation to its full potential, EIB has been pivotal in the creation of a level playing field for the European retail market place.

Andrea Podesta, MD, Head of EMEA Debt Wholesale Distribution at Merrill Lynch said: EPOS is a landmark transaction that sets a new standard for retail and institutional offerings in Europe. The combination of a prestigious issuer such as EIB and a Eurozone syndicate group with domestic leadership positions is a key contributor to the compelling appeal of this transaction.

Global Co-ordinator: Merrill Lynch

Co-Lead Managers:

AIB Capital Markets

ALPHA BANK

Banca Akros S.pA.

Banque et Caisse d'Epargne de l'Etat

Caixa Geral de Depositos (CGD)

Caja Madrid

CALYON Corporate and Investment Bank

DZ BANK AG

Erste Bank

Fortis Bank

Nordea

Rabobank International Summary terms and conditions for the new bond issue

EIB's EUR issuance program

EIB's funding policy in euro benefits from more than 30 years of issuance experience in European currencies encompassing the euro and its predecessors. Immediately after inception of the euro in 1999, EIB arranged a large-scale programme for the regular issuance of benchmark transactions in the new currency: the Euro Area Reference Notes (EARNs) Programme. Currently the EARNs curve offers EUR 5 bn benchmarks with maturities from 2007 to 2037 (12 issues accounting for EUR 62 billion outstanding).

EIB's funding activities in euro combine benchmark issuance with tailor-made issuance responding to specific investor requirements. EIB is a large issuer of tailor-made bonds in plain vanilla or structured format, with a flexible approach in terms of product, maturity and size. The Bank has a well established track record in issuing a wide range of innovative structures.

EIB funding strategy and results

EIB is the largest supranational issuer. In its 2005 funding program the Bank raised EUR 50bn across 15 currencies.

The Bank's funding strategy combines a consistent and transparent approach with flexibility and innovation, both in terms of product and maturity. Under its 2006 program the Bank has already raised over EUR 28 billion, against a target for the year of up to EUR 55 billion. The magnitude of this volume of issuance is similar to that of EU Governments.

Background information on EIB

The European Investment Bank, based in Luxembourg, was set up in 1958 under the Treaty of Rome. Owned by the European Union Member States, the EIB is the EU's long-term lending institution, financing projects that promote European economic development and integration. Besides supporting projects in the Member States, its main lending priorities include financing investments in future Member States of the EU. The Bank's loan portfolio is funded through bond issues on the capital markets. The EIB operates on a non-profit maximising basis and lends at close to the cost of borrowing. The Bank's consistent AAA rating is underpinned by firm shareholder support, a strong capital base, exceptional asset quality, conservative risk management and a sound funding strategy.

This press release does not constitute an offer for sale of the securities described and it is made for publicity purposes only. The offering and sale of the securities described in this document are subject to restrictions under the laws of several countries. Securities may not be offered or sold except in compliance with all such laws