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EfTEN Real Estate Fund III AS and EfTEN Kinnisvarafond AS concluded a merger agreement

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On  14 January 2020 EfTEN Real Estate Fund III AS as an acquiring fund and EfTEN
Kinnisvarafond AS as a fund being acquired concluded a merger agreement with the
aim  of  merging  EfTEN  Kinnisvarafond  AS  with  EfTEN Real Estate Fund III AS
without liquidation proceedings. Upon entry into force of the merger, i.e. as of
making  a  merger  entry  in  the  commercial  register, EfTEN Kinnisvarafond AS
dissolves.  Approvals from  the general  meetings of  both funds  is one  of the
preconditions for the merger.

Fund being acquired - EfTEN Kinnisvarafond AS

EfTEN  Kinnisvarafond AS (registry code 11505393; located at Tallinn, A. Lauteri
5), which  shall be merged with EfTEN Real Estate Fund III AS, is a closed-ended
non-public  alternative investment fund  founded as a  public limited company on
2008. Upon  entry into  force of  the merger,  the management contract concluded
between  EfTEN  Kinnisvarafond  AS  and  fund  manager EfTEN Capital AS shall be
terminated  and  on  account  of  the  success  fee deriving from the management
contract  (counted  up  to  29 February  2020) shares in EfTEN Kinnisvarafond AS
shall  be  placed  to  the  fund  manager.  From thereon no success fee shall be
calculated  under the management contract and EfTEN Kinnisvarafond AS shall only
pay the base fee to the fund manager until the merger takes effect. Furthermore,
the  depositary  contract  concluded  between  EfTEN  Kinnisvarafond  AS and the
depositary  shall be terminated upon entry into force of the merger. LHV pension
funds  have informed of their intention  to decrease their shareholding in EfTEN
Kinnisvarafond  AS by 25 million euros before the merger takes effect and divest
a  significant part of the  shareholding to co-founders of  the fund manager and
other  institutional investors. The list of shareholders of EfTEN Kinnisvarafond
AS,  whose shares in the  fund shall be exchanged  with the shares of EfTEN Real
Estate Fund III AS upon the merger, shall be determined as of 31 March 2020.

Reasons for the merger

The  merging funds' management boards consider  the broader market sentiment for
retail  investments to remain positive. Upon the merger, the resulting fund will
have  ca 350 million  euros worth  of assets,  including 29 commercial buildings
across  the Baltic states. As a result  of the merger, diversification of assets
is  increased, incl. geographically, and the weight of individual investments as
well  as the  risks stemming  therefrom to  the merging  funds as  well as their
investors  (shareholders)  is  decreased.  The  opportunistic  and  value-adding
investment  strategy of EfTEN  Kinnisvarafond AS is  identical to the investment
strategy  of EfTEN  Real Estate  Fund III  AS. The  investment strategy and risk
profile  of EfTEN Real Estate Fund  III AS will not be  changed in the course of
the merger.
Due  to  a  greater  market  capitalisation,  the merger will bring along better
visibility, incl. amongst foreign investors, which in turn provides a more solid
foundation  for increasing  market liquidity  and financing  and developing real
estate investments.

The merger and calculating the exchange ratio

In  order to carry out  the merger, the share  capital of EfTEN Real Estate Fund
III  AS  shall  be  increased  on  account  of  the  totality of assets of EfTEN
Kinnisvarafond  AS transferred  to EfTEN  Real Estate  Fund III AS (non-monetary
contribution),  the value of  which shall be  the EPRA Net  Asset Value (NAV) of
EfTEN  Kinnisvarafond AS as at 31 March 2020. Having regard to the fact that the
tax regimes of various countries differ widely (including in the Baltic states),
the European Public Real Estate Association has recommended the use of EPRA NAV,
which   differs   from  the  net  asset  value  calculated  in  accordance  with
International  Financial Reporting  Standards (IFRS)  by excluding  the deferred
income  tax  liabilities  and  interest  derivatives  related to the real estate
investment  from the calculation  of the net  asset value. Considering the long-
term  business strategy  of the  funds where  divestment of  assets in  the near
future  is unlikely and temporary differences in financial assets or liabilities
obscure  the transparency of the fair value of  the net assets of the fund, EPRA
NAV is considered as suitable and appropriate for the purposes of the merger.
The  extent of the increase of share capital of EfTEN Real Estate Fund III AS as
well  as the number of shares to be issued upon the increase shall be calculated
on  the basis  and in  accordance with  the principles  specified in  the merger
agreement  annexed to this notice and the number of shares used for the exchange
and  the increase  of share  capital of  EfTEN Real  Estate Fund III AS shall be
approved  with the resolution of the supervisory board of EfTEN Real Estate Fund
III  AS.  The  calculation  of  the  exchange  ratio  shall  be  verified by the
depositary.
Upon  the  increase  of  share  capital  of  EfTEN  Real  Estate  Fund III AS in
connection with the merger, other shareholders will not have a pre-emptive right
for  the acquisition of the  shares. The shareholders of  EfTEN Real Estate Fund
III AS and EfTEN Kinnisvarafond AS do not have the right to demand redemption of
the fund's shares.

In accordance with applicable law, the merging funds are not required to prepare
a merger report or interim balance sheet. The merger agreement shall be reviewed
by  the depositary,  which shall  prepare a  report in  which it  shall indicate
whether  the depositary approves the merger.  Furthermore, the merger is subject
to the authorisation from the Financial Supervision Authority. Upon issue of the
authorisation, the merging funds shall publish a respective notice together with
information on the merger addressed the shareholders.
The   approval  from  the  depositary,  the  authorisation  from  the  Financial
Supervision  Authority and the  approval of the  merger agreement by the general
meetings  of the merging funds  are all preconditions for  the completion of the
merger.

Post-merger,  EfTEN Real  Estate Fund  III AS  will continue operating under the
business name EfTEN Real Estate Fund AS.

The indicative timetable of the merger is the following:

+---------------------------+--------------------------------------------------+
|14 January 2020            |Signing of the merger agreement                   |
+---------------------------+--------------------------------------------------+
|On or about 15 January 2020|Approval from the depositary                      |
+---------------------------+--------------------------------------------------+
|                           |Authorisation   from   the  Financial  Supervision|
|                           |Authority  and publication of  a respective notice|
|                           |together  with information on the merger addressed|
|On or about 16 March 2020  |to shareholders                                   |
+---------------------------+--------------------------------------------------+
|                           |General meeting of EfTEN Kinnisvarafond AS for the|
|17 March 2020              |approval of the merger                            |
+---------------------------+--------------------------------------------------+
|                           |General  meeting of EfTEN Real  Estate Fund III AS|
|24 March 2020              |for the approval of the merger                    |
+---------------------------+--------------------------------------------------+
|                           |Balance  sheet  date  of  the  merger.  The  final|
|                           |balance  sheet of EfTEN  Kinnisvarafond AS will be|
|                           |prepared as at the day preceding the balance sheet|
|1 April 2020               |date of the merger, i.e. as at 31 March 2020      |
+---------------------------+--------------------------------------------------+
|                           |Resolution  of the supervisory board of EfTEN Real|
|                           |Estate  Fund  III  AS  for  the  approval  of  the|
|                           |increase  of share capital and number of exchanged|
|                           |shares  calculated in accordance  with the formula|
|13 April 2020              |specified in the merger agreement                 |
+---------------------------+--------------------------------------------------+
|                           |On  the  calculation  of  the  exchange  ratio  an|
|                           |additional  report  on  merger  conditions  by the|
|On or about 25 May 2020    |depositary                                        |
+---------------------------+--------------------------------------------------+
|                           |General meeting of EfTEN Kinnisvarafond AS for the|
|10 June 2020               |approval of the final balance sheet               |
+---------------------------+--------------------------------------------------+
|                           |Expected  effective date  of the  merger (entry in|
|                           |the commercial register of the merger and increase|
|On or about 17 June 2020   |of share capital)                                 |
+---------------------------+--------------------------------------------------+
|                           |Date when trading is expected to commence with the|
|                           |new  shares  on  the  regulated market operated by|
|                           |Nasdaq  Tallinn  AS  (on  the  Baltic Main List of|
|On or about 22 June 2020   |Nasdaq Tallinn Stock Exchange)                    |
+---------------------------+--------------------------------------------------+

The merger agreement is annexed to this notice and available also on the website
of  EfTEN Real  Estate Fund  III AS  www.eref.ee (http://www.eref.ee) and on the
website  of  the  fund  manager  of  the  funds  EfTEN  Capital  AS www.eften.ee
(http://www.eften.ee).  In addition  to the  merger agreement,  a summary of the
merger in a presentation format has been annexed to this notice.

Viljar Arakas
Member of the Management Board
Tel. 655 9515
E-mail: [email protected] (mailto:[email protected])