Presentation by Peeter Saks, Baltcap

1. Investor’s point of view about investing in the Baltics
BECC, Rise and Shine Estonia
PEETER SAKS, Managing Partner, BaltCap
YOUR PRIVATE EQUITY PARTNER IN THE BALTICS
ESTONIA Tartu mnt. 2, 10145 Tallinn, Tel +372 6650280, Fax +372 6650281
LATVIA Ulmana gatve 86F, Rigas raj, LV-1046, Tel +371 67214225, Fax +371 67356 395
LITHUANIA J.Jasinskio 16B, 1112 Vilnius, Tel +370 52546713, Fax +370 52546978
www.baltcap.com

2. Leading Private Equity Firm in The Baltics
• Actively investing since 1995
• Offices in all three Baltic countries, team of 12 investment professionals
• Focused private equity strategy
LITHUANIAN PRIVATE EQUITY &
• €150m in five fund generations, 39 investments, 24 full exits
VENTURE CAPITAL ASSOCIATION
• Management buy-out in 2007, 100% owned by the partners
• Solid investor base (EIF, EBRD, SEB and Swedbank pensions, other Nordic and European financial institutions)
• Founding member of national private equity associations in Estonia, Latvia and Lithuania
Finnish team + Baltic offices & teams Management moved to MBO, BaltCap team
local advisers established Baltics, new team fully independent
established in Lithuania
1995 … 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
1995-1997 2000-2001 2001 2007 2010
Baltic Baltic Baltic BaltCap JEREMIE initiative
Investment Investment SME Fund Private Equity SME funds in Latvia
Fund I & II Fund III €13.8m Fund and Lithuania
$25.0m €36.1m €63m
Target sizes:
€30m in Latvia,
€20m in Lithuania
1

3. Objectives and Strategy
Focused mid-market Buyout of existing shares
approach
Expansion financing, buy and build
Investment Equity investment size €3-10 million
Strategy
Rigorous evaluation and due diligence
Majority or significant minority positions
Active involvement in management via board and council memberships
Clear and defendable core competence
Companies with Strong end-consumer component or export
capability
Professional and experienced management
Consumer related businesses (4 deals done)
Selection B2B (5)
Criteria
Manufacturing (6)
Industries of interest ICT, Media (4)
Construction (1)
Healthcare (2)
Energy (1)
2

4. From Highest Growth to Steepest Decline
2005 2006 2007 2008 2009 2010
• Unbalanced growth of
Latvia
Estonia
10,6
10,5
11,9
11,4
9,6
8,7
-4,6
-3,6
-13,1
-10,3
-3,2
-0,8
2005-2008 was the reason Slovakia 6,0 8,3 8,5 6,4 -2,6 0,7
Lithuania 7,6 7,5 7,3 3,0 -11,0 -4,7
for the depth of the current Romania 4,1 7,7 6,7 7,1 -4,0 0,0
crisis in all Baltic countries Bulgaria 6,2 6,1 6,1 6,0 -1,6 -0,1
Poland 3,5 6,1 6,1 5,0 -1,4 0,8
Ireland 5,5 6,0 5,0 -2,3 -9,0 -2,6
Czech Republic 6,1 6,1 4,9 3,0 -2,7 0,3
• Baltics were “out of sync” Slovenia
Sweden
4,0
2,9
5,2
4,4
4,3
3,8
3,5
-0,2
-3,4
-4,0
0,7
0,8
from rest of Europe by Greece 3,7 4,3 3,7 3,7 -0,9 0,1
enjoying low interest rates Spain
Finland
3,5
2,9
3,9
5,5
3,7
3,1
1,2
1,0
-3,2
-4,7
-1,0
0,2
during the boom times Austria 2,0 3,1 2,9 2,0 -4,0 -0,1
United Kingdom 1,9 2,8 2,8 0,7 -3,8 0,1
Netherlands 1,5 2,9 2,8 2,0 -3,5 -0,4
• Current cost-cutting in the
Euro area
Germany
1,4
0,9
2,7
2,7
2,6
2,5
0,9
1,3
-4,0
-5,4
-0,1
0,3
public sector and tax Hungary
France
4,2
1,2
3,9
2,0
2,4
2,4
0,6
0,4
-6,3
-3,0
-0,3
-0,2
increases had worsening Denmark 3,1 3,1 2,3 -1,2 -3,3 0,3
effect on domestic demand Belgium
Italy
1,1
0,1
3,1
1,9
2,3
1,9
1,1
-1,0
-3,5
-4,4
-0,2
0,1
which was already suffering Portugal 0,5 1,3 1,8 0,0 -3,7 -0,8
from problems in private
sector GDP percentage change on preceding year, Eurostat, Spring 2009
3

5. Painful Adjustment
GDP Growth
15%
• Credibility of the region has been 10%
5%
damaged, but has started to 0%
-5%
improve -10%
-15%
-20%
• Instead of devaluation the
economy is adjusting via
10% Current and Capital Account Balance, % of GDP
reducing cost base 5%
0%
-5%
• Economy shifting towards
-10%
-15%
-20%
tradable sectors and exports -25%
show signs of recovery
Average Consumer Price Growth, %
• Inflation replaced by deflation,
20%
15%
but budget deficits require 10%
serious attention 5%
0%
• Previously high current account
-5%
deficits replaced by some surplus
Estonia Latvia Lithuania
• Estonia to join Euro in 2011
* Source: Swedbank Macro Update, July, September 2009
4

6. Impact of Recession on Sectors
Source: Kohlberg & Company
5

7. Business Environment
• Most businesses still suffering
• Banks slow to write down bad debts
• Fewer than expected distressed sale processes
• Valuation expectations of sellers have come down, but future earnings remain
uncertain
• Limited financing options for buyout deals
• Vendor financing possible, but most cases require fresh capital injection
• Deals mostly driven by market consolidation
6

8. BaltCap’s Approach in Economic Downturn
• Actively govern the portfolio companies and be consistent in creating and
preserving value
• Identify any weaknesses as early as possible (management, products,
performance)
• Seek potential add-on acquisition targets
• Keep costs under control and maintain conservative capital structure
• Maintain long-term vision
• Approach new cases with caution
• Construct a balanced portfolio
• Focus on defensive industries
• Seek market leaders at reasonable prices
• “Buy and build” cases
• Have clear exit strategies
7

9. New Transaction – Air Maintenance Estonia
Company in Short Transaction Summary
• Aircraft Maintenance and Repair Organisation, • Acquired from SAS Tech, auction arranged by SEB
located in Tallinn Airport Enskilda
• Solid financial performance • Initial ownership 100%
• Signed in January 2010
Key Elements
• Successful business
- AME has run a profitable business with an increasing customer base. 2010 is almost fully booked.
• Attractive Industry
- MRO industry is going through spin-off and consolidation phase, creating lot of opportunities for
exit as well as expanding the business. In Europe market trends are especially beneficial for
MROs located in the CEE countries.
• Good Location
- AME is the only MRO in Estonia. It is well positioned to service airlines in the Nordic area as well
as CIS countries.
• Strong Team & Management
- The Company’s management will continue after the buy-out and share the drive for expansion.
• Ambitious Plans & Potential for Additional Investments
- The Company has developed several key areas for expansion, including building 2nd hangar and
therefore doubling its service capacity.
8

10. Selected Investments
EGeen AS NeoQi INTRAC
Quattromed Energate OÜ Interinfo International Group AB
HTI
Laborid OÜ Clinical research Body care
Gas distribution Directory organisation equipment Machinery trade
Laboratory services (yellow pages)
Entry: 2008 Entry: 2008 Entry: 2008 Entry: 2005 Entry: 2005 Entry: 2002
Koolitööde AS IT Koolitus V&K Holding AS AS Ecometal OÜ Tallinna AS MicroLink
keskuse OÜ Pesumaja
Software solution Video rental chain Batteries Information
for schools IT training recycling Laundry house technology
Entry: 2005 Entry: 2003 Entry: 2001 Entry: 1999
Entry: 2005 Exit: 2008 Exit: 2004 Exit: 2006 Entry: 2006 Exit: 2005
A.Le Coq AS Teede REV-2 AS Standard AS SIA Hanzas UAB Zetcom SIA DT Mobile
Elektronika
Food and kindred Road construction Office furniture Virtual mobile Retail of mobile
products production Electronic network phones
component
production
Entry: 1998 Entry: 1998 Entry: 1996 Entry: 2005 Entry: 2003
Exit: 2001 Exit: 2003 Exit: 2004 Entry: 2002 Exit: 2007 Exit: 2006
UAB Daily UAB Voira AB Svyturys AB Snaige
SIA Adam Auto SIA V.L.T. Service
Food and kindred Production of white
Retail of office Retail of products goods
Car dealership Moulded fiber supplies children’s goods
packaging
Entry: 2004 Entry: 2005 Entry: 1998 Entry: 1998
Entry: 2004 Entry: 2004 Exit: 2007 Exit: 2009 Exit: 1999 Exit: 2001
9