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

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Today,  19.09.2022, EfTEN Real Estate Fund III AS as an acquiring fund and EfTEN
Kinnisvarafond  AS  as  a  fund  being  acquired  concluded  on the basis of the
respective  resolutions of the supervisory board 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 shall be
dissolved.  The approval  from the  depositary, the  permission of the Financial
Supervision  Authority and approvals from the general meetings of both funds are
the preconditions for the merger.
Previously, the merger of the funds was planned in 2020, when a merger agreement
was signed on 14.01.2020, an application for the merger permission was submitted
to  the Financial Supervision Authority, and general meetings of shareholders of
the  funds approving the  merger were prepared.  Unfortunately, the corona virus
also  reached Estonia at that time  and on 12.03.2020 an emergency situation was
declared  due to the spread of the  virus. Therefore, it was decided to postpone
the  merger activities  and the  merger agreement  was terminated.  No rights or
obligations arose from the merger agreement to the funds.

Reasons for the merger

In  2020 and at the  present time, the  fund manager and  the managements of the
funds  have the  opinion that  the merger  of EfTEN  Real Estate Fund III AS and
EfTEN  Kinnisvarafond AS  is in  the long-term  interests of the shareholders of
both  funds, without considering  the merger of  the funds as  a goal in itself.
Both  funds came through  the corona pandemic  successfully. After analysing the
results  of the funds' business activities,  loan portfolios, assets, and equity
volumes,  the merging funds' management boards came to the conclusion that it is
an appropriate time to merge the funds. Upon the merger, the resulting fund will
have  ca 370 million euros  worth of assets,  including 35 commercial properties
across  the Baltic states. As a result  of the merger, diversification of assets
is  increased, incl. geographically and  across business sectors. The proportion
of  each  individual  investment  will  decrease  as  well as the risks stemming
therefrom  to the merging  funds as well  as their investors (shareholders). 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. The  acquiring fund will continue to
invest   and   raise   capital  after  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
structure  of  charges  and  expenses  of  the  funds  is similar, including the
principles  of  calculating  the  base  management  fee of the fund manager. The
merging  funds have the same fund manager (i.e. EfTEN Capital AS), auditor (i.e.
AS PricewaterhouseCoopers), depository (i.e. AS Swedbank) and the same appraiser
of  assets (real  estate investments)  (i.e. Colliers  International). Thus, the
merger  will not lead to  an increase in costs.  The valuation principles of the
merging funds are the same.

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 in
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 the account  of the success fee  deriving from the management
contract  (counted up to 30.11.2022) shares in  EfTEN Kinnisvarafond AS shall be
issued  to the fund manager. Thereafter 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. 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 31.12.2022, unless the general meeting of shareholders decides otherwise.

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 the  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 31.12.2022. 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 fair value of the 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 the 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  as of 31.12.2022 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 determined  by 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 the  share capital  of EfTEN  Real Estate  Fund III AS in
connection  with the merger, the  shareholders of EfTEN Real  Estate Fund III AS
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 verified
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 to 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:

 19 September 2022             Signing of the merger agreement

 On or about 23 September 2022 Approval from the depositary

                               Authorisation  from  the  Financial  Supervision
                               Authority and publication of a respective notice
                               together   with   information   on   the  merger
 On or about 05 December 2022  addressed to shareholders

                               General  meeting of EfTEN  Kinnisvarafond AS for
 On or about 14 December 2022  the approval of the merger

                               General meeting of EfTEN Real Estate Fund III AS
 On or about 15 December 2022  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 date of the merger, i.e. as at 31 December
 01 January 2023               2022

                               Resolution  of  the  supervisory  board of EfTEN
                               Real  Estate Fund III AS for the approval of the
 On or about 13 February 2023  increase   of   share   capital  and  number  of
                               exchanged  shares calculated  in accordance with
                               the formula specified in the merger agreement

                               On  the  calculation  of  the  exchange ratio an
                               additional  report on  merger conditions  by the
 On or about 17 February 2023  depositary

                               General  meeting of EfTEN  Kinnisvarafond AS for
 On or about 28 February 2023  the approval of the final balance sheet

                               Expected  effective date of the merger (entry in
                               the   commercial  register  of  the  merger  and
 On or about 08 March 2023     increase 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 15 March 2023     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])