Financial Engineering Instruments 5 December, 2012

Current implementation status Programme/ mil. LVLAvailable financeContracts signedPaid-outStill available EU funds Public finance Total Number of projects EU fundsTotalEU fundsTotalEU fundsTotal activity FRS*4,920,4910,82334,9210,824,469,79 Venture capital12,791,2721,0883,285,413,225,319,5115,67 Seed capital fund1,920,192,1190,60,650,470,521,321,46 Start-up capital fund2,580,254,2320,340,560,30,492,243,67 Total contracted22,212,238,24 9,1417,448,4516,1113,0720,8 Not contracted 39, activity Credit & export guarantees ,66+6,34 0,00** activity Loans38,394,9158,55729,4844,9227,7542,278,9113, activity Mezzanine10,677,0717,7420,61,010,270,4510,0716, activity (ESF) Start-up loans + grants12,172,1523,067796,2512,165,6210,985,9210,9 *Programm finished on 26 September, 2012 **Amount of guarantees need to issue to reach multiplier of 4

97% of final recipients in all activities are SMEs Additional resources at SME level: activity  more than 180 mil. LVL issued in loans due to guarantees activity  at least 25% of loan amount must be added to the project by company SME 3

activity  9 credit guarantees, 0,58 mil. LVL (0,78% from total)  2 export credit guarantees, 0,047 mil. LVL (0,74% from total) activity  6 loans with delayed payments of 90 days in amount of 1,16 mil. LVL (3% from total)  Recovery process for 2 loans in amount of 1,18 mil. LVL (3% from total) Non-performing investments 4

 Agreements with intermediaries foresees that revolving resources must be used for similar purposes  After implementation responsible bodies will specifically decide on further use of revolving resources Exit strategy 5

Growth capital fund to provide venture capital finance for growth and expansion of companies, improvement of venture capital market in Latvia Micro loan fund to facilitate access to micro loans for Latvian micro and small enterprises via wider network of financial intermediaries Accelerator funding to improve availability of finance for early stage companies in Latvia Further activities

Market gaps (1) development stages business idea start-upearly stage Expansion growth Maturity Finance Entrepreneur, family, friends, grants, seed capital funds Venture capital funds Commercial banks (loans, leasing, factoring) Private investors (business angels) Subordinated debt (mezzanine) The earlier the stage, the less developed private market LowRiskHigh Profitability High Low

 Micro and small companies access to finance  High administrative costs for small investments, unstable cash flow, lack of collateral  Newly created companies access to finance  Unstable cash flow, high business risk, lack of collateral  Export oriented, innovative and technological companies access to finance  High business risk, hard to evaluate, specific project analysis, specific collaterals, unpredictable export market  Export risk insurance  Limited possibility to control business and political risks in export markets  Innovative and hi-tech product development  High business risk, information asymmetry, specific analysis, necessary large amounts of working capital  Equity and quasi-equity instruments  Specific analysis required, informationn asymmetry, high business risk, overleveraged  Lack of collateral, illiquid collateral Market gaps (2)

 LGA has attracted employee from EIF  Professional Board of LGA (new board member attracted)  Tender completed and agreement on audit signed in November 2012  Final report of LGA capacity assessment sent to EC by first quarter 2013 Capacity of Latvian Guarantee Agency

Thank you! Adress: Brīvības iela 55, Rīga, LV-1519 Phone: Fax: Web: Youtube: