17. pants

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.