17. Article

Final Provisions 17.1 Any notice or communication by one Party to the other Party shall be made in writing and shall be delivered by registered mail or telefax (with transmission confirmation clearly stating in the subject JER-003) to the following addresses: If to the Government of Latvia: Ministry of Economics Attn: State Secretary 55, Brivibas street LV 1519 Riga LATVIA Fax no: +371 67280882 If to EIF: European Investment Fund Attn: Project Manager JEREMIE Hol ding Fund 43, avenue J.F. Kennedy L-2968 Luxembourg LUXEMBOURG Fax no: +352 426688 280 With copy to EIF project manager acting as the contact point for and in Latvia. Either Party shall inform the respective other Party in writing without undue delay of any change of the above address details. Until receipt of notification of such changes, a Party may validly serve notice to the last address duly notified to it. Any notice or communication to the Managing Authority shall be made in writing and shall be delivered by registered mail or telefax (with transmission confirmation clearly stating in the subject JER-003) to the following address: Ministry of Finance Attn: Managing Authority 1, Smilsu Street, LV 1919, Riga, LATVIA Fax no: +37167095503 17.2 This Agreement constitutes the entire agreement of the Parties on the subject hereof and replaces and supersedes any prior agreement. 17.3 Amendments to this Agreement shall be made in writing and shall become effective upon execution by the Parties thereto. Amendments to any of the Appendixes shall be made in writing and shall become effective upon execution by the Responsible Authority, on the one side, and EIF, on the other side. 17.4 If a provision of this Agreement shall become or be held invalid or unenforceable, the validity and enforceability of the remaining provisions of this Agreement shall not be affected. The invalid or unenforceable provision shall be deemed replaced by a valid and enforceable provision which represents the intentions of the Parties when agreeing on the invalid or unenforceable provision to the utmost possible extent. 17.5 The Parties shall negotiate in good faith and execute any amendments to the terms of this Agreement, which may become necessary or desirable in case of an amendment of the EU Structural Funds Regulations or laws or other regulations of the Republic of Latvia. 17.6 This Agreement has been executed in two counterparts in the English language and two counterparts in Latvian language, each of which represents an authentic original of this document. In case of discrepancies between the English version and the Latvian one, the English version shall prevail. Riga, Latvia, 16 July, 2008. For the Government of the Republic of Latvia Minister of Economics For the European Investment Fund Chief Executive _________________ / Kaspars Gerhards/ _________________ /Richard Pelly / Appendix A INVESTMENT STRATEGY AND PLANNING 1. Background JEREMIE is a joint initiative of the European Commission (DG REGIO) and the European Investment Bank Group, designed to give Member States the option of using a portion of their Structural Funds allocations in the budgetary period 2007-2013 to establish a revolving Holding Fund. The aim of a Holding Fund is to improve access to finance for small and medium-sized enterprises (SMEs) through a tailored portfolio of financial products. This Holding Fund can be managed by the European Investment Fund (EIF), an institution selected by public procurement procedure or a national financial institution. Since early 2007, the Government of Latvia has been working closely with EIF to explore the benefits from implementing the Holding Fund concept. A key part of this process was the completion of a 'Market Failure Analysis report' completed by EIF in July 2007 which gave a series of recommendations to the Ministry of Economics to consider. After due deliberation, the Government decided in April 2008 to implement the JEREMIE concept using a Holding Fund to be managed initially by EIF. The main areas of assessed 'market failure' include: • Existing guarantee schemes have insufficient resources and their market penetration is limited compared to potential market size; the existing schemes do no present the efficiency of a guarantee scheme on a portfolio basis that will be more appealing to banks so that they promote it with more vigour; • Entrepreneurs indicate lack of financing as the main obstacle to start-up a business; • Banks should be encouraged to operate in the SME segment and to assume more risk and shift the focus of evaluation of an application from the collateral to the viability of the business plan; • Insufficient private equity investments in the seed and start-up segments. First-time entrepreneurs have access to a number of programmes offering small grants, but largely lack equity products which offer adequate financing to support them through the critical first years of life; • Gap of expansion investment for the smaller established companies needing capital to increase production capacity, working capital and capital for the further development of the product or market; • Insufficient level of Business Angels activity. This Appendix A to the Funding Agreement sets out the Investment Strategy and Planning that EIF intends to implement on behalf of and with the support of the Government of Latvia to help address these failures. This Investment Strategy and Planning has been prepared utilising the expertise and experience EIF has developed in managing similar mandates for other Member States and through the support of the Latvian Guarantee Agency and the Ministry of Economics. Furthermore in developing this strategy, a series of discussion meetings with market participants (financial intermediaries) in various areas of the Latvian SME financing sector have contributed to the process of refining the proposed instruments. These discussions will need to continue as implementation activities progress as the financial intermediaries will play a key role in the implementation of the financial engineering instruments.