Darby Converging Europe Fund III

signed

The proposed project is a regional mezzanine fund with a target size of EUR 250 million. The Fund will provide mezzanine financing with equity participation features to small and mid-sized companies. It will focus on enterprises in the Central, Southeast European region and Turkey as well as make selective investments in Ukraineand Russia. Darby Converging Europe Fund III is a follow-on fund to Darby Converging Europe Mezzanine Fund and the Emerging Europe Fund. The transition impact of the proposed project would come from the following areas: (i) Support of the market and availability of mezzanine capital in the CSEE region, including Turkey and selectively extending the development of sophisticated forms of financing to the adjacent countries such as Ukraine, and Russia; (ii) Demonstration effects of the flexible implementation of mezzanine finance in the capital structure of businesses in restructuring and expansion cases as well as providing additional financing for working capital in already established enterprises; (iii) Bridging the funding gap between equity participation and debt provision in acquisition transactions which has widened as a result of the credit tightening; (iv) Implementation of sound corporate governance standards and business conduct in the investee companies through influence on strategic decisions and best operational practices, particularly in transactions with no private equity sponsors. Darby Converging Europe III, will be established as a limited partnership, registered in Luxembourg. It will be managed by its general partner, Darby Converging Europe Fund III Management, a Luxembourg limited liability company. The general partner will be a wholly owned subsidiary of Darby Overseas Investments Ltd., a limited company, registered in Delaware, US that is wholly owned by Franklin Resources Inc. which operates as Franklin Templeton Investments, a Global Fund Manager Commitment to invest up to EUR 40 million. It is expected that the other investors may include a range of institutional investors, banks and other private investors from Europe and US, as well as commitments from the sponsor, Franklin Templeton Investments, and the investment Team. The target size of the Fund is EUR 250 million with a hard cap of EUR 300 million. The Fund will be required to comply with EBRD's Performance Requirement 2 (Labour and Working Conditions) and Performance Requirement 9 (Financial Intermediaries). Investee companies will be required to comply with national and EU environmental and OHS standards and national labour laws and the ILO's core labour standards, An Annual Environmental and Social Report will be prepared by the Fund and submitted to the Bank. None. Nicholas J. Kabcenell Darby Private Equity Managing Director Szabadság Tér 7 Citibank Tower, Suite 107 Budapest, Hungary 1054 Tel: +36 1 474-8192 Fax: +36 1 474-8404 E-mail: nkabcenell@doil.com