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ALTUM Investor presentation, April 2018

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ALTUM Investor presentation, April 2018

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ALTUM Investor presentation, April 2018

  2. 2. DISCLAIMER This presentation and any materials distributed or made available in connection herewith (collectively, the “presentation”) have been prepared solely for your use and benefit for information purposes only and are the sole responsibility of Akciju sabiedrība "Attīstības finanšu institūcija Altum" (the “Company”), and have not been verified, approved or endorsed by any lead manager, bookrunner, underwriter or adviser retained by the Company. This presentation do not contain all of the information that is material to an investor. By accessing, downloading, reading or otherwise making available to yourself any content of the presentation, in whole or in part, you agree to be bound by the following limitations and accept the terms and conditions as set out below. No information contained in the presentation may be copied, photocopied, duplicated, reproduced, passed on, redistributed, published, exhibited or the contents otherwise divulged, released or disseminated, directly or indirectly, in whole or in part, in any form by any means and for any purpose. The presentation does not constitute or form part of, and should not be construed as, an offer, solicitation or invitation to subscribe for, underwrite or otherwise acquire, any securities of the Company or any member of its group nor should it or any part of it form the basis of, or be relied on in connection with, any contract to purchase or subscribe for any securities of the Company or any member of its group, nor shall it or any part of it form the basis of or be relied on in connection with any contract or commitment whatsoever. If any such offer or invitation is made, it will be done pursuant to separate and distinct documentation in the form of a prospectus and any decision to purchase or subscribe for any securities pursuant to such offer or invitation should be made solely on the basis of such prospectus and not this presentation. Any person considering the purchase of any securities of the Company must inform himself or herself independently before taking any investment decision. By accessing this presentation the recipient will be deemed to represent that they possess, either individually or through their advisers, sufficient investment expertise to understand the risks involved in any purchase or sale of any financial instrument or any other information contained herein. This presentation should not be construed as legal, tax, investment or other advice and any recipient is strongly advised to seek their own independent advice in respect of any related investment, financial, legal, tax, accounting or regulatory considerations. The presentation has been provided to you solely for your information and background and is subject to amendment. Further, the information in this presentation has been compiled based on information from a number of sources and reflects prevailing conditions as of its date, which are subject to change. The information in this presentation is subject to verification, completion and change without notice and the Company is not under any obligation to update or keep current the information contained herein. Accordingly, no representation or warranty, express or implied, is made or given by or on behalf of the Company or any of their respective members, directors, officers, advisers or employees or any other person as to the accuracy, completeness or fairness of the information or opinions contained in this presentation, and any reliance you place on such information or opinions will be at your sole risk. Neither the Company nor any of its respective members, directors, officers, advisers or employees nor any other person accepts any liability whatsoever for any loss howsoever arising, directly or indirectly, from any use of this presentation or its contents or otherwise arising in connection therewith. This presentation includes "forward-looking statements," which include all statements other than statements of historical facts, and involve known and unknown risks, uncertainties and other important factors beyond the Company’s control that could cause the actual results, performance or achievements of the Company to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding the Company’s present and future business strategies and the environment in which the Company will operate in the future. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. Accordingly, any reliance you place on such forward-looking statements will be at your sole risk. These forward-looking statements speak only as at the date as of which they are made. Past performance of the Company cannot be relied on as a guide to future performance. No statement in this presentation is intended to be a profit forecast. This presentation is not directed to, or intended for distribution to or use by, any person or entity that is a citizen or resident or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would require any registration or licensing within such jurisdiction. THIS PRESENTATION IS NOT FOR PUBLICATION, RELEASE OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, INTO THE UNITED STATES, AUSTRALIA, CANADA OR JAPAN OR ANY OTHER JURISDICTION IN WHICH SUCH PUBLICATION, RELEASE OR DISTRIBUTION WOULD BE UNLAWFUL. This presentation and the information contained herein are not an offer of securities for sale in the United States. No securities have been or will be registered under the U.S. Securities Act of 1933, as amended (the “Securities Act”) or with any securities regulatory authority of any state or other jurisdiction of the United States and securities may not be offered, sold or delivered within the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and applicable state securities laws and may only be sold outside of the United States in reliance on Regulation S under the Securities Act and otherwise in compliance with all applicable laws and regulations in each country or jurisdiction in which any such offer, sale or delivery of securities is made. The Company does not intend to register or to conduct a public offering of any securities in the United States. This presentation and its contents may not be viewed by persons within the United States (within the meaning of Regulation S under the Securities Act).
  3. 3. CONTENT: I. Business Overview II. Portfolio Overview and Funding, 12 M 2017 Source: Pixabay.com
  4. 4. KEY CREDIT STRENGHTS  Ownership by The Republic of Latvia rated A3/A-/A- by Moody’s, S&P and Fitch respectively and clearly expressed support  Long-term issuer credit rating Baa1 assigned by Moody’s  Solid equity position (49.3% of total assets*)  Strong liquidity and secured long term funding  Track record of improving operational efficiency  Prudent corporate governance and professional management team  Corporate and Social Responsibility agenda  Modern risk management system *Total capital and reserves/Total assets at 31 Dec 2017
  5. 5. I. BUSINESS OVERVIEW Source: Pixabay.com
  6. 6. GENERAL INFORMATION  100% state-owned financial institution  Provides access to finance in the areas prioritized by the government  Implements the state policy in the national economy Ministry of Economics 30% Ministry of Agriculture 30% Shareholders of Development Finance Institution ALTUM Ministry of Finance 40%
  7. 7. HISTORY AND LEGAL BACKGROUND Latvian Guarantee Agency Rural Development Fund Altum JSC Development Finance Institution Altum  Established by the decision of the Cabinet of Ministers  Special Law on the Single Development Institution  European Commission`s decision
  8. 8. Source: Pixabay.com We help Latvia grow MISSION To be a partner and financial expert in economic development VISION Team Excellence Responsibility VALUES
  9. 9. BUSINESS MODEL  Long-term profitability  Extra credit risk covered by public funding – Risk coverage reserve and Portfolio loss reserve  Guarantees issued by ALTUM have 250 MEUR back-up guarantee from the Latvian state  No dividend payments by law Total assets 451.7* MEUR Number of outstanding contracts 14,402* Loans 207.6* MEUR Guarantees 182.4* MEUR VC 51.3* M * 31 Dec 2017 MID TERM TENDENCIES LOANS VENTURE CAPITAL GUARANTEES
  10. 10. BUSINESS OVERVIEW: CLIENT SEGMENTS  Portfolio increased by 18.1 MEUR in 2017.  The portfolio structures of the loan and guarantee financial instruments echo the state aid implementation priorities of the Latvian government.  Major segments by volume – SMEs & Midcaps and Agriculture.  The fastest growing segment – SMEs & Midcaps, +9% in year 2017.  In 2017 total volumes are 123.1 MEUR (56% - guarantees, 42% - loans and 2% -venture capital investments).  During 2017 volume of guarantees had steep growth compared with 2016 (by 22%).  4,697 projects were supported, incl.: SMEs & Midcaps 751 (+11% vs 2016), Agriculture 717 (-9%), Individuals 3,219 (+9%), Financial intermediaries 10 (-75%).  Financial intermediaries segment decreased due to the end of venture capital fund Investment period. Expected to increase in 2018 when recently signed Fund management agreeaments become effective * Gross value
  11. 11. The Development Finance Institution Law and other legislative acts CORPORATE GOVERNANCE SHAREHOLDERS’MEETING COUNCIL CABINET OF MINISTERS MANAGEMENT BOARD (5 board members) Internal audit unit Audit committee
  12. 12. DECISION MAKING BODIES Jēkabs Krieviņš Member of the Board State support programs and the Latvian Land Fund Reinis Bērziņš Chairman of the Board Finances and administration Inese Zīle Member of the Board Business growth, marketing and customer service Juris Vaskāns Member of the Board Venture capital financial instruments and Stressed assets workout Members of all committees are appointed by the Management Board Credit committee (12 members) Stressed Assets management committee (12 members) Risk and Liquidity management committee (7 members) Information Systems (IT) management committee (6 members) BOARD Aleksandrs Bimbirulis Member of the Board Risk Management and Credit processes Program management committee (8 members)
  13. 13. FOCUS AREAS leading to efficiency New products Funding Core business Improve customer service Operational efficiency  New products: - delegated guarantees; - export credit guarantees to EU countries up to EUR 2 mln; - Land Fund`s reverse rent.  Internal processes streamlined and more efficient: - The guarantee maximum limit increased from the EUR 1.5 mln to EUR 3 mln; - The signed agreement on the counter-guarantees of InnovFIN Facility allows to issue guarantees to innovative projects at lower rates.  Strategic shift in funding sources to decrease administrative burden for the staff.  Limitation of non-core business activities - Sales of investment properties in 2017-2018.  Installation of new IT infrastructure in 2018 will lead to a substantial decrease of IT costs. NEW PRODUCTS & EFFICIENCY
  14. 14. II. PORTFOLIO OVERVIEW AND FUNDING, 12 M 2017 Source: Pixabay.com
  15. 15.  In 2017 the financial instruments portfolio has been augmented by 4.3% with reduced management costs to 2.5% (2016: 3.0%)  Costs are expected to decline gradually In the coming years  IT and communications-related costs will be substantially lower after IT infrastructure upgrade IMPROVING OPERATIONAL EFFICIENCY
  16. 16. WELL DIVERSIFIED PORTFOLIOS • Portfolios are diversified across economic sectors • Thus the institution is well positioned to withstand macro- level risk events • The composition of both portfolios reflects Latvian government’s strategic priorities in implementing its growth strategy
  17. 17.  Funding term structure corresponds to the portfolio term structure  The aim is to reduce the dependence on Structural Funds by replacing it with loans from international financial institutions and proceeds from bond issuance 31 Dec 2017
  18. 18. EXCEPTIONALLY STRONG LIQUIDITY POSITION  High liquidity ratio – maintained over 350%*  Diversified exposure  Current buffer – in accordance with the programme rules and agreements with the State Treasury, Altum has unused credit lines from the State Treasury to finance the support programmes (~55 MEUR) * Liquidity ratio: Due from other credit institutions and Treasury with maturity up to 1 month + Investment securities (available for sale)/ Liabilities with the contractual maturity dates up to 6 months + Financial commitments with the contractual maturity dates up to 6 months Cash at Banks (Aa1-Aa3); 21.1 Cash at Banks (A1-A3); Cash at Banks (Ba1- Ba3); 3.2 Cash at State Treasury; 61.8 Bonds issued by the Republic of Latvia ; Liquidity portfolio MEUR
  19. 19. VENTURE CAPITAL: PROFESSIONAL SELECTION AND BALANCED RISKS Business idea Business start-up Early growth Expansion growth Stable growth Risk HighLow Portfolio 51.3 M EUR, 189 projects, 11 funds  Investment decisions made by professional fund managers – publicly procured  Ticket size within diversified range up to 11% Medium Expansion Capital Funds (5) 36.6 MEUR, 76 projects (Additional 1 contracted Q1 2018) Venture Capital Funds (3) 10.2 MEUR, 22 projects (Additional 2 contracted Q1 2018) Seed Capital Funds (2) 4.5 MEUR, 91 projects (Additional 4 contracted Q1 2018) Acceleration Funds (1) 0 MEUR, 0 projects (Additional 2 contracted Q1 2018)
  20. 20. KEY FINANCIAL AND PERFOMANCE INDICATORS (1) Key Financial data 2017 2016 2015 Net income from interest, fees and commissions, TEUR 11,374 11,024 16,419 Profit for the period, TEUR 6,945 2,170 4,924 Cost to income Ratio (CIR) 54.7% 88.4% 55.8% Employees 230 242 282 Total assets, TEUR 451,686 443,126 406,918 Tangible Common Equity(TCE)/Tangible Managed Assets (TMA) 35.6% 35.2% 37.3% Equity, TEUR 222,486 210,094 199,610 Total risk coverage: TEUR 65,002 67,705 41,021 - Risk coverage reserve 60,060 64,833 40,662 - Risk coverage reserve used for provisions -4,753 -4,323 -1,276 - Portfolio loss reserve within Reserves (specific reserve capital) 9,695 7,195 1,635 Liquidity Ratio 180 days 507% 449% 352%
  21. 21. Financial instruments (gross value) 2017 2016 2015 Outstanding (TEUR) (by financial instrument) Loans 207,585 217,429 218,562 Guarantees 182,376 147,175 131,120 Venture capital funds 51,310 58,541 39,929 Total 441,271 423,145 389,611 Number of contracts 14,402 11,449 8,901 Volumes granted (TEUR) (by financial instrument) Loans 51,869 59,465 52,329 Guarantees 68,615 56,109 50,065 Venture capital funds 2,638 21,356 18,798 Total 123,122 136,929 121,192 Number of contracts 4,697 4,461 2,819 Leverage for raised private funding 185% 162% 104% KEY FINANCIAL AND PERFOMANCE INDICATORS (2)
  22. 22. www.altum.lv