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Recent developments in the Baltic PE and VC markets and EIF's role in them 24 th October 2013

Recent developments in the Baltic PE and VC markets and EIF's role in them 24 th October 2013. Richard Pelly Chief Executive of European Investment Fund. Agenda. Overview of EIF Our Presence in the Region Past: Individual Countries & Transactions Present: Pan-Baltic Activities

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Recent developments in the Baltic PE and VC markets and EIF's role in them 24 th October 2013

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  1. Recent developments in the Baltic PE and VC markets and EIF's role in them24th October 2013 Richard Pelly ChiefExecutive of EuropeanInvestmentFund

  2. Agenda • Overview of EIF • Our Presence in the Region • Past: Individual Countries & Transactions • Present: Pan-Baltic Activities • Ideas for Future Development

  3. What is the EIF? “ We’re the leading developer ofrisk financing for entrepreneurshipand innovation across the EU ” HelpingSMEs, micro-enterprises and European regions innovate and grow by making finance more accessible Fulfillingour dual goal and pursuing EUpolicy objectives as well as financial sustainability Addressingmarket needs by acting as a countercyclicalinvestor in tough economic times Workingwith financial intermediaries across the 27 EU countries, EFTA and all Accession countries

  4. A few key facts about us… “ We’ve supported over 1 Million SMEsover 15 years ” 1994founded and started providing venture capital to European businesses in 1997 2000Majority owned by the European Investment Bank (EIB) Shareholders62% EIB, 30% EC, 24 public andprivate financial institutions holding the remaining 8% AAA-ratedWe’re AAA-rated byall major rating agencies, with a strong capital base

  5. Helping start-ups “ Young, innovative companies are keyto our knowledge society, but they can beseen as risky and thus hard to fund ” Working withleading venture capital fund investors,backingventure funds including the top quartile We’re helping build an effective, liquid European Venture Capital market to supportthese start-ups; EIF has invested in 80% of active European Venture Capital

  6. EIF-managed Fund-of-Funds and Holding Funds across Europe Fund-of-Fund Activity Holding Funds Supported by Structural Funds (JEREMIE) LITHUANIA: EUR 67.1m ROMANIA: EUR 100m MALTA: EUR 10m PACA (FR): EUR 20m SLOVAKIA: EUR 100m SICILY (I): EUR 60m SICILY ESF (I): EUR 15m UK FTF: GBP 200m ERP (DE): EUR 1000m LFA-EIF (DE): EUR 50m Dahlia (FR): EUR 300m NEOTEC (SP): EUR 183m PVCi (PT): EUR 111m iVCi (TR): EUR 160m • BIF (LT,LV,EE): EUR100m • DVI (NL): EUR 150m • PGFF (PL): EUR 90m BULGARIA: EUR 349m CALABRIA (I): EUR 45m CAMPANIA (I): EUR 90m CYPRUS: EUR 20m EXTREMADURA (ES) : EUR 10m GREECE: EUR 250m LANGUEDOCROUSSILLON (FR): EUR 30m Future initiatives LFF (LU): EUR 150m

  7. Past: summary of EIF’s history in the Baltic countries EIF’s longstanding activity in the region is marked by these milestones: BALTIC INNOVATION FUND ? Up to €166m Committed JEREMIE LATVIA & LITHUANIA CIP 2001 2008 2010 2012 2013 7

  8. Present: EIF becomes member of VCAs of all Baltic countries Earlier in 2013, EIF was delighted to join the other Baltic investors as an associate member of all three Venture Capital Associations Another step in EIF’s quest to build the industry across the Baltics

  9. Baltic Innovation Fund update Inception: Livonia €20m from BIF €20m from BIF, Total €75m expected €15m from BIF, €15m from MFG Total €60m expected Up to €55m Committed 2013 June 2013 October 2013 February 2012 September EIF has received inquiries from more than 20 potential fund managers

  10. Livonia – latest BIF addition EIF Board approval on October 21st 2013, subject to legal agreement • Livonia is a new independent pan-Baltic private equity fund manager established by the former investment team of LHV Capital • The minimum fund size is EUR 50m, with an EUR 85m target • The team intends to build a balanced portfolio of 8 to 12 companies, with investment size in the range of EUR 3-15m, following the “buy-and-build” strategy successfully deployed by LHV Capital across the Baltic States Mindaugas Utkevicius Rain Lõhmus Kristine Berzina Kaido Veske Adam Vaina

  11. Future: Our Goals • Our goal is to create a healthy and sustainable private equity and venture capital market across the Baltics with: • Qualified fund managers that can raise private capital without public cornerstone investors • Strong flow of startups and SMEs that are able to attract financial investors and deliver positive returns • There mayalwaysbe the need for public support of emerging local and regionalfund managers that support emerging local enteprises, beforethey ‘graduate’ to non-public stage

  12. Market Development Plan BIF is focused on this stage Formal VC & Mezzanine Funds EUR50-60m VC & Early Stage SME Cash Flows / Investment Rounds EUR50-60m EUR100m Baltcap EUR20m EUR11m EUR25m EUR60m EUR8m EUR6m BPM Mezz Business Angels, Seed EUR8m PRE-SEED PHASE SEED PHASE START-UP PHASE EMERGING GROWTH DEVELOPMENT SME Development Stages Fund mix SFs to be used to stimulate early stage market Public HIGHER RISK LOWER RISK Private

  13. Future development: EIF view

  14. Future Developments:Promoting Excellence in Region EIF’s Annual Breakthrough Achievement Award for Private Equity in the Baltics 2014 To be selected based on nominations from national VC Associations, LGA, Invega and KredEx

  15. Summary • EIF is the leading developer of risk financing for entrepreneurship and innovation across the EU • In the Baltic region, EIF has been present since the first BaltCap transaction in 2001, followed by JEREMIE funds in 2008-2012 • Last year, EIF launched the EUR100m Baltic Innovation Fund in co-operation with LGA, KredEx and INVEGA • In the long term, EIF’s goal is to assist the Baltic governments in creating a well-functioning private equity infrastructure for all stages

  16. Thank You. Questions? EIF’s Baltic Focussed Team: Graham Cope, Senior Head of Region g.cope@eif.org Tel: + 352 24 85 81 236 Martins Jansons, Mandate Manager m.jansons@eif.org Tel: + 352 24 85 81 381 JurateAzelionyte, Mandate Manager j.azelionyte@eif.org Tel: + 370 5269 0104 Kart Siilats, Regional Mandate Officer k.siilats@eif.org Tel: + 352 24 85 81 506 www.eif.org

  17. Appendix

  18. Government-created Fund of Funds in the Northern Europe region Sweden - Work in progress • Since 1995, EUR 475m • Since 2001, EUR 1,300m Denmark • Since 2011, EUR EUR 475m Baltic States • Baltic Innovation Fund • 2012, EUR 100m UK Future Technologies Fund • Since 2010, GBP 200m Germany • Since 2004, EUR 1,000m Poland • Since 2013, EUR 180m Dutch Venture Initiative • Since 2012, EUR 300m 18

  19. Next to Baltics: PGFF Overview Expansion VC Program Growth Equity Program Investments in later stage businesses through equity and quasi-equity financing Investments in early and growth stage emerging and established technology VC Funds preferably based in Poland and targeting investments of at least EUR 2.5m in Poland. • Typical size of investments made by the selected funds: Minority and majority investments above EUR 5m • Type of companies: SMEs and lower mid-market • Sector focus: Generalist • Geographical focus: At least 2X the PGFF’s commitment to the funds must be invested into Polish companies. • Investment period: typically 5 years • Typical Fund size: c. EUR 50-300m • Typical commitment in each fund: EUR 10-30m • Target diversification: c. 3-5 funds • Typical size of investments made by the selected funds: Minority investments of EUR 2.5-10m • Type of companies: SMEs • Sector focus: ICT, Healthcare, Cleantech • Geographical focus: At least 2X the PGFF’s commitment to the funds must be invested into Polish companies. • Investment period: typically 5 years • Typical Fund size: c. EUR 25-50m • Typical commitment to each fund: EUR 10-20m • Target diversification of the program: c. 2 funds • Support of later stage businesses • Building and strengthening the PE Fund infrastructure • Approx. size of the program: c. ~ EUR 70m • Support of Poland expansion stage tech SMEs • Approx. size of the program: c. ~EUR 20m Expected IRR : 4% to 6% Expected IRR : -2% to 0.5% Polish Growth Fund of Funds First closing at EUR 90m Expected IRR : 1% to 4% Note: no very early stage activities in PGFF

  20. Baltic Innovation Fundoverview €20m €40m €20m €20m Baltic Innovation Fund = EUR 100m Managed by EIF, in cooperation with local agencieswith Inv. period 2013 - 2016 Invests in funds with geographic focus (min 50%) in Baltics. Standard terms, BIF will invest max 49.9% of any fund’s capital or of a co-investment Additional minimum of 100m expected to be raised from institutional investors €15m €20m €20m €15m €5m €5m Co-Invest. E, Year 4 Fund C, Year 2 Fund D, Year 3 Co-Invest. F, Year 4 Private investors and HNWs Fund B, Year 1 Fund A, Year 1 SMEs c. EUR 200m invested in Baltic Region SME Community

  21. As Manager of JEREMIE Holding Fund in Latviafrom 2008 Invested in BaltcapLatvia VC Fund for EUR 20m in 2009 Invested in Imprimatur Capital Seed & Start-Up Fund for EUR 17m in 2010 As Manager of JEREMIE Holding Fund in Lithuaniafrom 2008 Invested in BaltcapLithunia VC Fund for EUR 14m in 2010 Invested in LitCapital VC Fund for EUR 14m in 2010 Invested in Strata/MES Co-InvestmentFund for EUR 8m in 2010 Invested in PracticaSeed & Venture Capital Fund for EUR 17m in 2012 EIF’s use of SFs in early stage equity Key role as developer of venture capital markets EUR 100m invested into Baltic market

  22. JEREMIE Lithuania results at a glance 50 23 22 13

  23. JEREMIE Lithuania results at a glance

  24. Highlights: Imprimatur Capital and Practica • Imprimatur Capital launched in June 2010; Practica launched in July 2011 • EUR 7.2m invested in Imprimatur Capital (LGA invested a further EUR 1.8m in 2013) • EUR 16.5m invested in Practica • Separate windows for seed funding (100% public) and venture capital (70% public and 30% private financing) • Imprimatur Capital has made 13 investments and Practica 9 investments into seed/start-up companies • In May 2011, Imprimatur Capital invested in Naco Technologies • A young high-tech company based in Riga • Commercialising for a global market patented nano-coating technology developed at a leading research institute in Moscow • In 2013, Naco Technologies was chosen as European Project of the Week

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