EPOS II – The "Climate Awareness Bond" EIB promotes climate protection via pan-EU public offering

First bond to offer:

• Proceeds earmarked for future projects in the fields of renewable energy and energy efficiency, thereby supporting climate protection
• Return linked to the performance of the new FTSE4Good Environmental Leaders Europe 40 Index
• Investor option to purchase and cancel CO2 Allowances (EUAs) in a simple and transparent way at maturity
• Public offering in all 27 domestic markets of the EU, resulting in the largest- ever syndicated index-linked bond

 The European Investment Bank (EIB), the Bank promoting European objectives, owned by the EU Member States and rated Aaa/AAA/AAA (Moody’s/Standard and Poor’s/Fitch), plans to issue a new EUR bond that combines innovative features focused on climate protection and offers a unique investment opportunity. This issue, EIB’s second ‘European Public Offering of Securities’ (EPOS II) is the first bond to be sold via public offering in all 27 EU Member States. The 5-year bond is capital protected and offers a return in the form of a single payment at maturity linked to an equity index, the FTSE4Good Environmental Leaders Europe 40 Index, with a minimum of 5% at maturity. Lead managers of the transaction are Dresdner Kleinwort, Merrill Lynch International and UniCredit Markets & Investment Banking.

The EU has taken a leading role in addressing climate change, as illustrated by the latest EU policy initiatives - the EU Commission publication in January 2007 of “An Energy Policy for Europe” and the Action Plan for energy policy adopted by the European Council in March 2007. The EIB, as the Bank promoting European objectives, therefore continues to be an active lender in this field, and this bond issue further highlights EIB’s commitment. 

Use of funds for cleaner energy

The funds raised are earmarked for investment in future EIB lending projects within the fields of renewable energy and energy efficiency. These areas are key for international climate protection and the EU has committed to taking leadership in their development.

EIB is an important and active instrument of this policy. A description of EIB’s objectives in these fields, which include an annual target of EUR 600-800 million per year for renewable energies projects, can be found in EIB’s Corporate Operational Plan for 2007-2009, available on EIB’s website (www.eib.org).   The earmarking will be effected by allocation of the proceeds within EIB’s Treasury, pending disbursement, to a specially created and segregated sub-portfolio invested in money market instruments. These arrangements will be reflected in EIB’s financial statements, permitting public monitoring of disbursements.

New FTSE Index with focus on European Corporates’ Environmental Responsibility

The return of the bonds will be linked to the performance of a new equity index expressly created by FTSE for this transaction – the FTSE4GOOD ENVIRONMENTAL LEADERS EUROPE 40 INDEX. The index will consist of corporates from the existing FTSE4Good Europe Index, which includes large and mid-cap European corporates. The components of the existing index will be rated by FTSE according to the FTSE4Good Environmental Scoring Methodology and selected for the new index only if they achieve a scoring of “best practice”.  With this index link, EIB offers investors a new means of exposure to – and the ability to follow - large European companies with leading environmental management practices.   These indices are designed and calculated by global index company FTSE Group, and overseen by an independent FTSE4Good Policy Committee. The new index will be proprietary only for 6 months. Thereafter, it will be available also for third parties, serving overall market interest. For further information, please see www.ftse.com/ftse4good.

Investor option to reduce room for carbon emissions

Investors will have the option (not the obligation) to use part of their return to buy and cancel CO2 EU allowances, reducing the room for future carbon emissions in the EU within the scope of the EU Emission Trading Scheme (referred to under EU Directive 2003/87/EC as well as relevant national implementing regulations). The EU Emission Trading Scheme (ETS) is a cornerstone in the fight against climate change. It is the first international trading system for CO2 emissions in the world and covers over 11,500 installations in the EU, which represent close to half of Europe’s emissions of CO2. The aim of the EU ETS is to help EU Member States achieve compliance with their commitments under the Kyoto Protocol. For more information on the ETS, please see: http://ec.europa.eu/environment/climat/emission.htm

European Public Offering of Securities throughout the EU

Facilitated by the “passporting” established by the EU Prospectus Directive, this bond will be the first to be sold via a simultaneous Public Offering in all 27 domestic markets of the EU. The issue extends to the whole EU the ‘EPOS’ format used for EPOS I in the Eurozone last year. The Prospectus has already been approved and passported by the CSSF, the Luxembourg market supervisory authority. The public offering is expected to run from 29.05.2007 to 22.06.2007, allowing sufficient time for both institutional and retail investors to participate. The distribution of the bond will take place via a syndicate of 15 banks.

Largest-ever syndicated equity index-linked bond

Based on its EPOS benchmark size, the bond is expected to be the largest syndicated equity index-linked bond ever launched, providing an exceptionally liquid size for a structured bond in EUR.    The exceptionally broad syndication and the pan-European public offering are intended to enhance service, transparency and distribution to investors, delivering to a wider audience – in particular retail investors - material advantages from the increasing integration of European capital markets.

Bertrand de Mazières, Director General of Finance at the European Investment Bank, said: “The EU has taken a leading role in tackling climate change. With this bond EIB is inviting investors and the banking community to join that endeavor, further highlighting EIB’s commitment to promoting EU objectives.”

Pierre Blandin, Managing Director and Head of Frequent Borrowers at Dresdner Kleinwort, said: “This transaction combines a number of unique features that demonstrate once more EIB’s outstanding innovation capacity in the capital markets.”

Andrea Podesta, Managing Director and Head of EMEA Debt Wholesale Distribution at Merrill Lynch, said:  "This bond offers a potential gain linked to the performance of Europe’s most environment-friendly European companies, principal protected with the security of EIB’s AAA credit, and a minimum payment of 5% at maturity. This landmark trade builds on the success of the first EPOS executed last year."

Vittorio Ricci, Managing Director, Debt Capital Markets at UniCredit Markets & Investment Banking, said: As a truly European cross-border banking franchise, we, at UniCredit, fully understand the merits and support the concept behind EIB’s EPOS: removing regional barriers across EU financial markets to deliver to retail investors the advantages of European integration. This can serve very important objectives, in this case climate protection and sustainable development”. 

Terms and Conditions 

Size:	EPOS benchmark size
Maturity Date:	28 June 2012 (5-year)
Price:	100%
Syndicate fees:	3% up-front
Coupon:	None
Redemption amount:	100% (capital protected)
Additional redemption amount:	Index-linked Index: FTSE4Good Environmental Leaders Europe 40 Index participation: 75% - 85%, to be determined at  pricing
Minimum additional redemption amount:	5%
CO2 option:	At maturity, investors have the option to use  additional redemption amount in excess of 25% to purchase and cancel EU Allowances (EUAs) allocated and traded in accordance with the EU Emission Trading Scheme referred to under the EU Directive 2003/87/EC
Documentation:	Prospectus prepared in European Public Offering of Securities (EPOS) format, in compliance with the EU Prospectus Directive (prospectus approved and passported by CSSF - Luxembourg into all countries of the EU)
Public offering:	in all 27 countries of the EU
Offering period:	29 May to 22 June 2007
Denomination:	EUR 100
Settlement:	28 June 2007
Listing:	Luxembourg and  possibly other EU stock exchanges
Arrangers and Joint-bookrunners:	Dresdner Kleinwort, Merrill Lynch International and UniCredit Markets & Investment Banking
Syndicate:	Co-lead managers: BBVA, Barclays Capital, NBG, Natixis Co-managers: Dexia Capital Markets, ING Wholesale Banking, UBS Investment Bank Selling Group: Banca Comerciala HVB Tiriac SA, Bank Austria Creditanstalt d.d. Ljubljana, HVB Bank Czech Republic A.s., Rasbank S.p.A., UniCredit Bank Slovakia a.s.

Background on EIB as an Issuer

The Bank’s funding strategy combines consistency and transparency with flexibility and innovation. Under its 2006 funding program it raised EUR 48 billion in 24 different currencies, with EUR, GBP and USD accounting for 83% of the total. The issuance target for 2007 is up to around EUR 50 billion. So far this year, the Bank has raised around EUR 22 billion.

EIB’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.

Cleaner Energy for Europe: A Reinforced EIB Contribution

The EIB has financed renewable energy projects for over EUR 2.2bn in the last 5 years. Last year, sustainable, competitive and secure energy became a core objective of the Bank. The 2007-2009 Corporate Operational Plan sets an annual lending target of EUR 600-800 million for renewable energy projects with, as at present, 50% of EIB lending to electricity generation associated with renewable energy technologies.

Future projects in the fields of renewable energy and energy efficiency include, but are not limited to: 

• Renewable energy projects such as wind, hydro, solar and geothermal production and
• Energy efficiency projects such as district heating, cogeneration, building insulation, energy loss reduction in transmission and distribution and equipment replacement with energy efficiency improvements of 20% or more.

The EIB will continue to reinforce its approach, in light of developments at an EU level.  Note the EU Commission publication in January 2007 of “An Energy Policy for Europe”, and the Action Plan for energy policy adopted by the European Council in March 2007. The latter includes commitments to achieve a reduction in greenhouse gas emissions of at least 20% by 2020 compared to 1990, a binding target of a 20% share of renewable energy in overall EU energy consumption by 2020, and stressed the need to increase energy efficiency in the EU so as to achieve the objective of saving 20% of energy consumption compared to projections for 2020.  

Further Background on the EIB's Corporate Responsibility Credentials

The European Investment Bank (EIB) Group has the core principles of Corporate Social Responsibility (CSR) at the heart of its strategy, objectives and policies. CSR is sound business practice. It emphasises the importance of achieving a balance between economic growth, social well-being and the protection of the environment, in support of the goal of sustainable development. It underwrites institutional sustainability through competitiveness, the productive use of resources and good governance (including anti-fraud and anti-corruption measures). It involves the financial and business sectors, governments, employees and civil society working together for “our common future”.

More information on EIB’s CSR policies and the latest CSR report can be found on EIB’s website: www.eib.org

Disclaimer

This is not a prospectus for the purposes of the prospectus rules of the European Union and of each of the countries where it is disseminated, but it is an advertisement. A prospectus has been published and is available from www.bourse.lu. Investors should not subscribe for any securities referred to herein except on the basis of the information in such prospectus.