Making the Grade

making the grade A report to supporters of the Private Equity Shares Campaign 2008 for Central & Eastern Europe

NESsT

Nonprofit Enterprise and Self-sustainability Team

Thank you!

NESsT wishes to thank the following donors for their generous contributions to the 2008 Private Equity Shares Campaign for Central & Eastern Europe: Signature Partners Zoltán Tóth 3i

Daniel Lynch 3TS Capital Partners

Joanna James Advent International

Brian Wardrop Arx Equity Partners

Robert Manz Enterprise Investors

William Watson SGAM

Campaign Supporters

The Warburg Pincus Foundation

Anonymous, William Bannister-Parker Capital International, Garret Byrne Deloitte CE, Rob Cohen Benson Oak, European Private Equity Awards 2008, Erik Hallgren Oresa Ventures, Robert Heinczinger Ernst & Young, Nicholas Kabcenell Darby Overseas Investments, Alan MacKay 3i, David Mathewson Bedminster Capital, Christian Mruck Advent International, Emanuela Popa-Radu Advent International, Parham Pouladdej CRG Partners, Joseph Schull Warburg Pincus.

Supporting Partners

Media Partner

Together we have raised over €300,000 to support social enterprises benefiting marginalized communities across Central & Eastern Europe!

www.privateequityshares.org

z

www.nesst.org

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Making the Grade is a report to supporters of the NESsT 2008 Private Equity Shares Campaign for Central and Eastern Europe.

The primary goal of Private Equity Shares 2008 was to enhance the financial capability of NESsT to support social enterprises extending much-needed economic opportunities and social benefits to marginalized communities across the CEE region.

Specifically, Private Equity Shares enabled NESsT to: 1. Increase funds available to support our CEE portfolio Your support increased funds available to NESsT to ‘invest’ in CEE by 68% alongside those raised from other foundations and trusts.

2. Increase the financial & social results of our CEE portfolio Your support helped our portfolio achieve impressive results in 2009: - 100% are meeting or exceeding their social goals and 65% are meeting or exceeding both their financial and social goals; - the portfolio realized an average increase of more than 250% in the number of beneficiaries reached; - the average level of self-generated income increased by 11% across the entire portfolio (with the highest reaching 91%).

Cover photo: Bambino (Slovakia)

3. Increase the number of CEE social enterprises receiving support Your support enabled NESsT to: - more than double the size of our later-stage portfolio from 8 to 17, primarily through PES-funded expansion in Croatia and in Romania; - provide basic training to 78 new, early-stage social enterprises and mentoring to 20 to complete a rigorous business planning process; - complete 4 national social enterprise competitions and launch a second in Romania (following a strong response of 52 applications from Romania alone).

4. Promote private equity philanthropy and volunteerism in CEE Through the Private Equity Shares network, NESsT was able to: - galvanize hundreds of hours of in-kind support from 84 volunteers; - connect over 200 CEE private equity professionals with our portfolio at our 2009 Social Enterprise Marketplace in Budapest; - sign partner agreements with leading private equity associations and media/press reaching thousands of private equity professionals.

We hope you’ll be pleased with the “social return on investment” NESsT has been able to achieve thanks to your generous support!

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From the Private Equity Shares 2008 signatories

The CEE private equity industry set a fundraising record in 2008 to be especially proud of. Together we raised nearly €300,000 through Private Equity Shares to benefit the important work of NESsT in the region.

Venture philanthropy.

Not handouts.

NESsT has managed our collective philanthropic capital with great care, ingenuity and professionalism.

Joanna James Advent International

The fund size, deal size and number of private equity players in Central and Eastern Europe (CEE) have grown significantly in recent years. This “coming of age” has now extended into the philanthropic arena as well, with the record fundraising success you helped to achieve last year. Together we raised nearly €300,000 to benefit the important work of NESsT to support social enterprises benefiting marginalized communities across CEE.

However, instead of sceptism we found a groundswell of interest. Thanks to you, we not only exceeded our expectations but also our original goal (by more than twofold). In the end, over 30 CEE fund managers, LPs and advisors, came forward to support the communities in which we invest. From the big global and regional players to smaller local funds, the Private Equity Shares supporter list is a veritable “Who’s Who” of CEE private equity.

NESsT has been doing incredible work across CEE with very limited resources. We knew NESsT could scale this activity and have greater impact if only they had more significant financial backing. But when we came together in 2008 to launch Private Equity Shares, we were sceptical about reaching our modest goal of raising €125,000 from the CEE private equity industry.

The venture philanthropy approach that NESsT applies is a good match for the private equity industry.

Through NESsT, we’re able to give in a way that relates well with our core investment strategy.

NESsT has managed our collective philanthropic capital with great care, ingenuity and professionalism. NESsT has ‘invested’ capital, time and advice in an impressive portfolio of social enterprises, each

Daniel Lynch 3TS Capital Partners

Robert Manz Enterprise Investors

Zoltán Tóth 3i

addressing a critical social problem in CEE -- and doing so in a financially sustainable way. NESsT has demonstrated that with the right combination of capital, empathy, persistence and business acumen, social enterprises can stand on their own feet.

We believe this approach is one of the best and smartest ways to invest in the long-term development of the social sector in the region.

Private Equity Shares has provided important momentum toward NESsT’s ambitious goals in CEE. We believe you’ll be impressed both by the results NESsT achieved with your support, and moved by the portfolio stories herein. We also hope you’ll be motivated to continue and increase your support to Private Equity Shares this year.

Thank you for your generous support!

Brian Wardrop Arx Equity Partners

William Watson Société Générale Asset Management - SGAM

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Private Equity Shares 2008 Pledges

Private Equity Shares CEE 2008 Supporters 3i 3TS Capital Partners Advent International Alpha Associates Anonymous ARGUS Capital Group Arx Equity Partners CAG Enterprise Investors European Investment Fund (EIF) KPMG Hungary Mezzanine Management Mid Europa Partners Oresa Ventures Royalton Partners Squire Sanders & Dempsey Syntaxis Capital Vienna Capital Partners The Warburg Pincus Foundation Individuals William Bannister-Parker, Capital International Garret Byrne, Deloitte CE Erik Hallgren, Oresa Ventures Robert Heinczinger, Ernst & Young Nicholas Kabcenell, Darby Overseas Investments Alan MacKay, 3i David Mathewson, Bedminster Capital Christian Mruck, Advent International Emanuela Popa-Radu, Advent International Parham Pouladdej, CRG Partners Joseph Schull, Warburg Pincus William Watson, SGAM

The Private Equity Shares 2008 Campaign for Central and Eastern Europe resulted in 31 pledges totalling €304,000 in support of the work of NESsT with our portfolio of social enterprises in Croatia, Czech Republic, Hungary, Romania and Slovakia.

Collectively, the 31 PES CEE 2008 supporters committed more than double the original PES fundraising goal of €125,000.

In total, 23 fund managers (GPs) committed 74 percent of the pledges, alongside six private equity advisors and two limited partners (LPs). Pledges ranged from €400 to €75,000, with the average gift size of approximately €10,000.

Pledges were received from a wide geographic group of individuals and firms from 12 countries, including Austria, Croatia, Czech Republic, France, Hungary, Luxembourg, Poland, Romania, Slovakia, Switzerland, the United Kingdom, and the USA. Of the €304,000 in pledges made (as of the official closing of the campaign on December 31, 2008), €280,000 has been collected by NESsT. The outstanding €24,000 has yet to be collected (as of October 31, 2009).

Private Equity Shares CEE 2008 Pledges Pledges by size

Significant (3) €175,000 58%

Large (4) €40,000 13%

13% 58% 23%

Medium (13) €70,925 23%

6%

Small (11) €18,081 6%

Pledge Ranges: ____________________________ Significant: €25,000 - €75,000 Large: €10,000 - €24,999 Medium: €5,000 - €9,999 Small: €400 - €4,999

Private Equity Shares CEE 2008 Pledges Pledges by source

GPs (23) 74%

Advisors* (6) 19%

19% 6% 74%

LPs (2) 6%

* Accounting, advisory, consulting and law firms

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Private Equity Shares 2008 funds allocation

PES CEE 2008 collected funds of €280,000 will be fully committed by the end of March 2010 in support of the NESsT CEE portfolio.

The following foundations and trusts are among those providing co-financing to NESsT in 2008-09 alongside Private Equity Shares:

Ausherman Family Foundation www.aushermanfamilyfoundation.org

Charities Aid Foundation www.cafonline.org

Citi Foundation ww.citifoundation.com

Emerging Markets Charity Benefit (EMCB) www.emta.org

Trust for Civil Society in Central & Eastern Europe www.ceetrust.org

NESsT has applied €246,000 of PES CEE 2008 funds to support the NESsT portfolio of social enterprises in CEE. This represents combined venture grants of approximately €104,000 and €142,000 to enable our CEE portfolio team to provide the much-needed business development support, mentoring and training to our early- and later-stage portfolios (see chart, right). NESsT estimates that by 2009 year end, 75% (€209,000) of the €280,000 in PES CEE 2008 funds will be used.

The remaining €71,000 is already designated for portfolio commitments in early 2010. It is estimated that PES CEE 2008 funds will be entirely committed

by March 2010.

The €209,000 in PES CEE 2008 funds used in 2009 represents 41% of NESsT’s total CEE budget for the year of roughly €515,000 (US$770,000).

Private Equity Shares funds were used to support NESsT’s portfolio and operations alongside donations from other

PES CEE 2008: Allocation of Funds Total Pledged: €304,000 Total Collected: €280,000* PES Portfolio Support (mentoring & training support to early- and later-stage portfolios) €142,400

37% 51%

PES Portfolio Venture Grants (venture grants to portfolio for planning, startup, expansion, working capital; €104,000

12% Fundraising & Operations+ (administration, equipment, investor relations, office rent & supplies) €33,600 * Pledges made as of PES CEE 2008 campaign closing on 31 December 2008 that have yet to be collected = €24,000. + Fundraising and operations for NESsT globally represent a similar proportion of NESsT’s overall annual budget.

foundations and trusts (see left) and from NESsT self-generated funds from our own social enterprise, NESsT Consulting.

NESsT has consistently maintained a very low overhead rate, spending only 6% each on fundraising and operations expenses.

PES CEE 2008 funds were used for the following primary purposes:

- expand NESsT’s portfolio in Romania: PES funds enabled NESsT to complete its first national social enterprise competition in Romania that received an unprecidented 52 applications.

PES funds allowed NESsT to provide continued training and mentoring to competition finalists and to support five new later-stage social enterprises in

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Romania (now the largest national group in our regional portfolio). PES CEE 2008 funds were used alongside partial financing from the Emerging Markets Charity Benefit (EMCB) and to fill the funding gap following the closure of the ABN AMRO Foundation, a key funder of NESsT in Romania.

PES funds are also helping to cover costs of a second competition in autumn 2009 to train new social enterprises in Romania.

Fruit of Care (Hungary)

- expand NESsT’s portfolio in Croatia: Likewise in Croatia, PES funds allowed NESsT to provide two new later-stage social enterprises (RODA and PRONI) with a first round of venture grants and continued business development support from the NESsT portfolio team;

"It was essential for us to combine the business philosophy with our social goals and to create an enterprise that is viable in a competitive market environment.

The on-going support from NESsT enabled us to grow and professionalize our social enterprise while keeping its core attributes -- handmade, designer products and social responsibility."

- Aron Jakab, Fruit of Care

- co-financing for Czech Republic, Hungary and Slovakia: PES CEE 2008 funds were used to provide co-financing to winners of the early-stage, national social enterprise competitions funded by Citi Foundation in Czech Republic, Hungary and Slovakia, and to co-invest alongside the Ausherman Family Foundation in later-stage social enterprises in the three countries.

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NESsT Strategy

NESsT is the only philanthropic investment fund dedicated to supporting high-impact social enterprises in CEE. NESsT currently operates in five countries: Croatia, Czech Republic, Hungary, Romania and Slovakia.

The NESsT strategy responds to two key obstacles for social enterprises:

Key NESsT Selection Criteria - high impact: realistic but ambitious plan for addressing a critical social problem; - leadership: committed and proven management team; - role model: potential to create replicable roles model; - sustainability: potential to be financially viable; - values: commitment to transparency; ethical, environmental and social responsibility; - NESsT fit: opportunity for NESsT to add value; willingness to work with highly-engaged philanthropic investor.

- insufficient capital for start-up and expansion; - insufficient capacity in business experience, skills and systems.

NESsT identifies highimpact social enterprises in CEE through national Social Enterprise Competitions, referrals and proactive searches.

Early-stage support NESsT invests heavily in helping early-stage social enterprises to better plan and prepare for the risks common during start-up.

Average NESsT later-stage portfolio investment (per social enterprise over 3-5 years) Amount (€) Capital Investment (venture planning grants + venture grants)*

€20,000

Capacity Investment (NESsT mentoring, training, business and management support)

€30,000

TOTAL (Capital + Capacity investments)

€50,000

* In 2010, NESsT will pilot the Social Enterprise Loan Fund with our first loans to portfolio enterprises for expansion & working capital.

Since 2001, we have trained over 1,000 social enterprises in CEE. Over the last year, NESsT provided training to 78 earlystage social enterprises to complete a rigorous process to test the feasibility of enterprise ideas. 20 completed business plans with NESsT help and went on to present and defend their plan to an investment committee including the NESsT CEE team and volunteer Business Advisory Network (BAN) members. This “defense” helps enterprise managers develop the confidence and skills necessary to articulate the value proposition, financial projections and operational plan of their enterprise.

Later-stage support NESsT is currently supporting a later-stage portfolio of 17 CEE social enterprises with a multiyear package of financing and business mentoring to expand their business and/or improve its effectiveness and impact. Our typical portfolio investment includes a multi-year (3-5 year) package of, on

average, €50,000 in combined capital and capacitybuilding support (see box).

Our relationship with our portfolio is highly engaged. The NESsT team provides direct, one-onone mentoring and training to each enterprise.

We also involve a Business Advisory Network of over 80 active members across CEE who provide pro bono advice and assistance to our portfolio. These volunteers include private equity professionals and others in accounting, finance, law, marketing, etc. (see BAN, pages 22-23) Monitoring Performance NESsT monitors the performance of its later-stage portfolio in two key areas: - social impact: the gains to the social mission as a result of the social enteprise; - financial impact: the performance of the enterprise towards its financial goals.

Just as each portfolio enterprise is different, so too are the performance goals and indicators of each. We establish per-

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formance indicators and baseline data -- qualitative and quantitative, financial and social -- from each portfolio business plan.

We closely monitor the progress of each portfolio enterprise through regular site visits. Portfolio enterprises submit mandetory, quarterly financial and social data using our NESsT Performance Management Tool (PMT).

Portfolio Exits P-Centrum demonstrated that social enterprise can be a NESsT considers exiting powerful way to build the financial capacity of a charity while portfolio enterprises when also empowering at-risk youth to covercome drug addiction. they either reach or exceed agreed-upon financial and social goals Czech Republic. In 2001, totalling US$28,000. This marketing strategy, a new and/or they no longer P-Centrum came to NESsT enabled P-Centrum to product catalog and webneed NESsT support. seeking support to transrenovate and equip a larg- site, purchase a welding form a wood-carving shop er workshop space, machine, saws, and hire a An example of one of into a self-sustaining social employ a manager, blacksmith. Alongside this NESsT’s eight exits in CEE enterprise. The goal was to revamp its financial capital was mentoring is P-Centrum in Olomouc, decrease donor dependsystem, diversify its from NESsT and BAN volence and to pro- product line of wood and unteers to develop a new vide job training wrought-iron products, marketing plan, pricing and rehabilitaexplore retail and export policy, and information tion to young opportunities, develop a management system. people overcoming drug addiction.

NESsT support to P-Centrum helped to produce a new product catalog (top) and marketing plan and to renovate, enlarge and equip a new workshop building (above left) in order to expand sales and employ more at-risk youth in the production of handmade metal and wood products, sculptures and toys.

NESsT helped P-Centrum to complete a feasibility study for the expansion, followed by a venture planning grant and mentoring to complete a business plan. PCentrum defended its plan and was invited into the later-stage portfolio.

From 2002-2006, NESsT provided three rounds of financing to P-Centrum

P-Centrum Exit Results Social Impact - more than doubled clients employed in the enterprise; - 50% of youth in workshop found permanent employment upon ‘graduating’; - 85% of shop participants overcame addiction.

Financial Performance - increased cost recovery of workshop from 16% to 40%; - increased enterprise sales by 15%; - expanded production capacity and product mix; - revamped financial system, improved financial projections and cash flow.

www.p-centrum.cz

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Portfolio Overview

Support from Private Equity Shares has enabled social enterprises in the NESsT portfolio to extend economic opportunity and social benefits to marginalized communities across Central and Eastern Europe.

Portfolio Overview by country Slovakia (2) Croatia (3)

Total: 17* 12%

18%

29%

Czech Republic (3)

18% 24%

Romania (5) Hungary (4)

Portfolio Overview by sector Total: 17* Community development (strengthening civil society, democracy, independent press)

Rural development (economic opportunity & employment in lowincome communities)

12% Environment (conservation & protection)

6%

24%

Disabilities (intellectual & physical disabilities)

6% 24%

Education/Youth (disadvantaged & at-risk youth)

29% Health (child & maternal health, HIV/AIDS)

* Later-stage portfolio only. Does not include early-stage pipeline.

types of social enterprises in our portfolio. Roughly a third (29%) is operating leisure or tourism enterprises (e.g., coastal conference/retreat centers, arts/sports facilities rental, tourist gift shops, a mountain resort, and catering, cafe and restaurant businesses). Roughly a quarter (24%) are operating product-based enterprises (e.g., selling candles, paper, textiles, toys, office supplies, cloth diapers and audio books for the blind). Just under half (47%) are offering professional services (e.g., accounting, neonatal/maternal care coursThe largest number (29%) of social enterprises es, conflict resolution facilitation, photocopying and are working in the health binding, recycled paper sector, primarily in child collection, or online news and maternal health and services).

HIV/AIDS. Nearly a half are working to create ecoGiven high unemploynomic and employment ment rates in CEE, it’s opportunities for at-risk important to note that youth or for people with intellectual or physical dis- more than half (53%) of the portfolio (9 of 17) abilities. The remaining offer job training or quarter is focused on strengthening democratic employment for the rural unemployed, single mothinstitutions, stimulating economic development in ers, HIV+ or otherwise atrural communities or envi- risk youth, or for the physically or intellectually disronmental conservation. abled.

Equally diverse are the NESsT more than doubled the size of its laterstage portfolio from 8 social enterprises in 2008 to 17 in 2009, thanks to support from PES CEE 2008. The portfolio of 17 includes social enterprises in Croatia, Czech Republic, Hungary, Romania and Slovakia (see left). The Romania portfolio is the largest with five new social enterprises entering the portfolio following the strong response (52 applications) to our first national Social Enterprise Competition.

NESsT Portfolio Profile

“Our business planning skills have improved considerably. Before the NESsT process, we were unsure about developing our business further and we made decisions based on feelings and hunches.”

- Jasena Knez Radolovic, RODA

RODA (Croatia) RODA’s eco-friendly cloth diapers have environmental, health and social benefits.

With support from NESsT, RODA launched a new informational website for Croatian mothers on cloth diapers (www.pelene.info) which has increased traffic and sales.

Rodina Pusa also opened a new webshop (above) that has produced excellent results.

NESsT support also enabled RODA to add two new diaper models and new accessories (e.g., bamboo and hemp inserts, packets of wipes, and cotton bags and wetbags) to its product lines.

RODA works to educate parents and policymakers about maternal/child health. NESsT is working with RODA to expand its enterprise, Rodina Pusa, producing high-quality, eco-friendly cloth diapers.

The diapers are made from natural materials like organic cotton, bamboo and hemp.

Rodina Pusa furthers RODA’s work to educate mothers about the benefits of natural childbirth and breastfeeding.

In the first half of 2008, Rodina Pusa sold 210 diapers per month (13% of the estimated cloth diaper market in Croatia). By April 2009, this monthly figure nearly doubled to 400 per month.

Revenues in January 2009 started slowly prior to launching the webshop and marketing of the new product line. By the end of March, sales were on target for diapers and all products, putting RODA on target to achieve (perhaps exceed) its year-end 2009 goals. Rodina Pusa is already generating a profit, on target for the year.

RODA’s ultimate goal is to generate 15-20% of its annual budget from the profits of Rodina Pusa within four years to cover the costs of RODA’s child and maternal health programs.

The increase in sales is primarily a result of RODA’s creative marketing strategy, developed with support from NESsT. The new webshop brought in 200 new customers between February and April alone, generating 30% of total sales.

RODA has more doubled its market share since 2008.

Competitors’ sales appear also on the rise, indicating that the overall cloth diaper market is increasing. www.roda.hr

Social

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Financial ;

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Later-Stage Portfolio Performance

The NESsT portfolio achieved impressive results in 2009, thanks in part to Private Equity Shares. All are meeting or exceeding their social goals and two-thirds are meeting or exceeding social and financial goals.

“NESsT funding and business support steers portfolio members toward greater selfsufficiency so that funds can then be targeted elsewhere for good use.”

- Daniel Lynch, 3TS Capital Partners

The chart on page 11 NESsT support has enabled our portfolio to: represents a “snapshot” of the NESsT portfolio’s ... reach more beneficiaries performance as of Q3 Our CEE portfolio has realized, 2009. It should not be on average, a 253% increase surprising that all of the in the number of beneficiaries social enterprises are they are able to reach. either meeting or exceeding their social goals as this is a NESsT imperative. ... increase self-generated income

253%

Social enterprises like Rodina Pusa are not only performing well financially (on target with sales and likely to surpass projections for the year) but also contributing directly to RODA’s social mission of educating new mothers on healthier child care practices. By mid-2009, Rodina Pusa was generated a profit that also helps to finance RODA’s health and policy programs. The increase in sales is primarily a result of RODA’s creative marketing strategy, developed with support from NESsT. The new webshop brought in new customers and helped RODA to more than double its market share in the growing cloth diaper market in Croatia.

Support from NESsT has

20%

Organizations generated an average of 20% of their annual budget from social enterprise income (up from 17% in previous year), with the highest at 91%.

... increase social impact & financial performance* 65% (11 of 17) of portfolio social enterprises are meeting or exceeding both social & financial goals:

100%

65%

100% of the CEE portfolio are meeting their social goals; 59% are exceeding social goals.

also helped Moznosti tu jsou to expand Café Kacaba. The café is meeting financial projections for 2009. Further NESsT support is helping to expand the café by adding a catering business and a kitchen to offer warm meals. NESsT support was also used to produce promotional materials, purchase new

furniture and a mobile kiosk to reach more customers. The café is also under consideration by the municipality to be the featured café if Plzen is designated ‘Cultural Capital of Europe.’

Kék Madár’s Ízlelo restaurant employing people with disabilities is performing beyond pro-

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jections and has been held up as a national and regional model for the successful transition of people with disabilities to fulltime employment. Ízlelo has generated significant media interest to issues of disability and was the first non-four-star restaurant to receive the coveted “White Lilly” award for restaurant hygiene in Hungary.

Portfolio Performance Snapshot All later-stage portfolio social enterprises are meeting or exceeding their social goals and 65% (11 of 17) are meeting or exceeding their social and financial goals.

Social Impact !

Below goals

;

3 Meeting goals

Exceeding goals

Financial Impact

FCC* Kék Madár

FCC’s social enterprise producing audio books for people with vision impairment is also growing rapidly. Revenues from sales as of August 2009 was on target to break even. NESsT is providing support to FCC to increase sales through marketing and new distribution channels, particularly targeted to public libraries. This has been very successful and FCC is now also working with the Ministry of Social Affairs to have the format of its audio books recognized as an official accessibility standard in Romania.

FCC received wide media exposure for producing the first film adapted for the visually-impaired (premiered at Romania’s leading film festival), allowing visually-impaired people to attend public cinemas for the first time.

high results in multiple social enterprises providing economic opportunities and employment in the rural area (and now generating over 90% of Vydra’s annual budget).

NESsT’s most recent support has focused on helping with the marketing and promotion of Vydra’s eco-tourism packages.

Vydra has been in the portfolio the longest (since 2003) and has delivering consistently

NESsT is working closely with the six social enterprises falling short of financial goals (half are

RODA* Vydra Káva OGI Noi Orizonturi* PRONI* Bambino RAAF* TOL

ADV* Moznosti tu jsou Zöld Kör*

ACSIS* Fruit of Care* Spolek Prátel

; Exceeding goals

3 Meeting goals

!

Below goals

* new portfolio (joined Q3-Q4 2008)

completing only their first year in the portfolio) to overcome challenges ranging from lower than expected sales, construction delays, leadership changes, seasonal sales, increased production or staff costs. For example, NESsT is working with TOL to implement a new strategic plan, to improve its financial management system (to improve cash flow and oversee debt management), and to increase income through

a new sales plan and the integration of new services. NESsT is also providing on-going management support to RAAF to improve its First Bebe enterprise, including: advice on human resource strategy; development of a sales strategy; improvement of financial systems to process invoices and better track financial performance; and exploration of potential geographic expansion and new services.

NESsT Portfolio Profile

“We are very pleased with the partnership with NESsT. The business plan we developed with NESsT's help was our chance to put our café on a sustainable track. Café Kacaba is now generating a significant portion of the total budget of our organization.”

- Sarka Kanova, Moznosti tu jsou

Moznosti tu jsou (Czech Republic) Café Kacaba is generating significant revenues for Moznosti tu jsou while also transitioning disabled youth to the job market.

Moznosti tu jsou won the 2008 NESsTCiti Social Enterprise Award for outstanding performance of its Café Kacaba, a social enterprise providing professional job training and work rehabilitation for young people with intellectual disabilities, enabling them to successfully integrate into the mainstream job market.

www.diakoniecce.cz

NESsT support has enabled Café Kacaba to grow in 2009 by: adding extra seats in the café to accommodate more customers; organizing more events and providing space for exhibitions and cultural performances; and by providing corporate meetings space.

NESsT is also assisting Kacaba on a strategy to respond to lower-cost competitors through cost efficiencies, creative marketing aimed at attracting more corporate and catering business, as well as

www.kacaba.cz

increasing average consumption per customer, adding warm food and beer for higher margins. Through NESsT Business Advisory Network contacts, Kacaba is negotiating with leading Czech brewery, Plzensky Prazdroj, to obtain a tap for offering beer in the café.

Enterprise performance: - average monthly customers exceeded projections by 54% in 2008, reaching 1100/month; - 2009 revenues increased by 30% from 2008 level; - increased consumption per customer by 44%.

Social impact: - successfully placed 87% of beneficiaries in open job market;

- operating three shifts in the café to provide constant employment and rehabilitation of intellectually-disabled youth; - reputation for quality has increased demand with waiting list of 8-9 people.

Future plans: Further support from NESsT will enable Kacaba to improve its financial systems and expand the kitchen to increase revenue and create additional employment and training for youth on the waiting list.

Social

;

Financial 3

Later-Stage Portfolio Profiles

13 ;

Exceeding Goals

3 Meeting Goals

Below ! Goals

NESsT is assisting OGI to expand its accounting and financial services to nonprofits in Slavonija and Baranja, helping them to improve financial planning and management capacities.

OGI aims to raise 15% of its annual budget from the revenues of the social enterprise, also covering the salaries of OGI's financial management team. In 2008, OGI began with two clients. They calculated break even at 15 clients. In 2009, OGI has signed on 19 clients and hired a new accounting manager (from a competing firm). Demand for their accounting and training services is expected to increase as NGOs have to re-register per a new government regulation.

OGI (Osijek, Croatia) www.ogi.hr

Social 3

Financial 3

PRONI works with at-risk youth to overcome alcohol and drug addiction and to find employment. NESsT is working with PRONI to increase revenues from its residential center on the Adriatic Coast by offering commercial rentals for seminars, retreats and private recreational use. PRONI has expanded its offerings to include training and event facilitation services. PRONI is on target toward its year-end goal of increasing overnight stays from 520 to 760, focusing on three market segments: nonprofits, school groups and children’s centers. PRONI seeks to generate 10-15% of its annual budget from the enterprise to cover its overhead expenses.

PRONI Centre (Osijek, Croatia) www.proni.hr

Social 3

Financial 3 Spolek Prátel seeks to improve the quality of life for local low-income, at-risk youth through cultural, recreational, and educational programs. NESsT is helping Spolek to increase income from the rental of its theater and sport facilities and equipment to local sports teams, theater groups, families and companies.

Spolek Prátel (Frýdek – Místek, Czech Republic) www.pratelefm.org

Social

;

Financial

!

Financial results through the end of September showed an increase in revenue from rental fees and concession sales (drinks and snacks) but concerns remains regarding the enterprise’s ability to achieve its year-end projections.

NESsT supported OGI to improve its technology capacity, including the purchase of new accounting software to service more clients more efficiently. NESsT also assisted with a marketing strategy to attract new clients.

NESsT is working with PRONI on the design and implementation of its marketing and sales strategy; refining its financial systems; and adjusting pricing and projections for the center.

NESsT’s 2009 investment in Spolek was used for purchasing equipment and renovations in the theater, including refurbishing the stage and refitting the heating system to extend the facility’s use beyond the warmer months.

The completion of the theater hall boosted autumn and winter revenues from rental fees.

TOL strengthens the professionalism, independence and impact of media in post-communist countries of CEE through its online news magazine and training to young journalists.

Transitions Online (TOL) (Prague, Czech Republic) www.tol.cz

Social 3

Financial

!

NESsT is working with TOL to increase self-generated revenue to 15-20% of its annual budget through paid subscriptions, advertising and journalism courses. TOL’s self-generated income climbed by 34% in 2008 albeit 12% below target. The magazine performed well in the first quarter of 2009 with revenues covering 45% of costs.

Revenue has increased sharply from syndicating partner sales of which TOL receives 70% of revenue per article.

The renewal rate for TOL’s online magazine is high at 94% for institutional subscribers.

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Later-Stage Portfolio Profiles (continued)

Fruit of Care (Budapest, Hungary) www.fruitofcare.hu

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Kava uses theatrical workshops to teach disadvantaged children about serious social problems such as discrimination, drug use and crime. NESsT is helping Kava to expand its forprofit arm, Dramatrening kft, selling interactive, drama-based trainings to private companies on topics like worker burnout, conflict resolution and gender issues.

Káva Kulturális Mûhely (Budapest, Hungary) www.kavaszinhaz.hu www.dramatrening.hu

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Zöld Kör (Hajdúböszörmény, Hungary) www.zoldkor.net

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Dramatrening has witnessed constant demand and praise for its trainings despite the recession, receiving a lot of visibility in both print and radio. In 2008, they exceeded the number of trainings projected for the year. The enterprise generated 6.5% of Kava’s annual budget (their goal is to reach 15%).

NESsT is helping with market analysis, financial planning, planning efficient collection routes, and developing new services. NESsT connected Zöld Kör to other recycling enterprises to increase outreach. The enterprise increased paper collection by 100% in the last year, and is on target to generate 10% of Zöld Kör total revenues by 2011.

NESsT is helping ACSIS to expand its textile toy production workshops employing low-income women. Support from NESsT has enabled ACSIS to surpass its sales projections for 2009, to purchase new sewing machines, cover partial salaries and rent, and to launch an enterprise website, blog, and newsletter.

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With support from NESsT, Aktív Muhely is expanding the Fruit of Care line to include handmade soaps and other designer products. NESsT has also assisted with the development of a branding, marketing and sales strategy and launch of an online shop.

Demand and customer satisfaction are high, but Dramatrening is struggling with growth as they have a limited number of qualified trainers to offer adult and corporate training sessions.

Zöld Kör (Green Circle) works to establish a living, liveable and sustainable future through environmental and nature protection activities. NESsT is helping Zöld Kör to expand its municipal paper waste collection and recycling business (4.4 million tons of municipal waste are disposed of in landfills/incinerators in Hungary - 15% is discarded paper).

ACSIS works to protect children’s rights and to prevent child abandonment by helping at-risk mothers become financially independent through employment and job training.

ACSIS (Bucharest, Romania) www.acsis.ro

Social

Fruit of Care is a social enterprise product line offering high-quality designer home decoration and gift items, including handmade candles, textiles, wood and paper products. The social enterprise is owned and operated by Aktív Muhely, a network of organizations working to provide employment for people with severe intellectual disabilities, providing them with an income and means of living independently. Members of Aktív Muhely collectively provide products from their workshops for sale through Fruit of Care. The Fruit of Care enterprise employs people with disabilities and generates income to support health, housing services and education programs to combat discrimination.

Zöld Kör used a NESsT venture grant to purchase a truck, enabling it to expand its service to Debrecen and include companies and office buildings in the recycling program.

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Later-Stage Portfolio Profiles (continued) ADV works to ensure that the 11,200 people living with HIV/AIDS in Romania have access to the services and support they need to improve their quality of life. NESsT is working with ADV to expand Util Deco, an enterprise employing HIV+ youth. Util Deco provides photocopying and binding services, and produces personalized agendas, calendars and gifts.

Fundatia Alaturi de Voi (Iasi, Romania) www.alaturidevoi.ro

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NESsT support has focused on improvements in copy equipment to improve quality and on marketing strategy. Util Deco was very successful in increasing its profile in local media in 2009. Enterprise sales are on target with a gross profit for the year but with a net loss due to increased equipment and human resource costs.

FNO works to strengthen the character and vocational skills of at-risk youth through youth camps and clubs. NESsT is working with FNO on its enterprise providing accommodation for hiking and ski tourists in its 20-person chalet property in the resort of Straja.

Fundatia Noi Orizonturi (Hunedoara, Romania) www.noi-orizonturi.ro

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Bambino Mother’s Center (Poprad, Slovakia) www.mcbambino.sk

First Bebe remains below annual sales projections, primarily due to problems with marketing and distribution of its DVDs and delays in producing the third DVD in its series. Social impact is on target for the 2009, with 2000 couples having received trainings (2500 goal) and 3500 new users on their website.

Bambino supports families and children by offering education and self-help classes for pregnant women and young families.

NESsT has supported Bambino’s School of Healthy Motherhood dedicated to improving obstetrics in Slovakia providing courses on natural child delivery, parenting and family health.

NESsT support has focused on helping Bambino develop a promotion and communications plan, launch new services on breast feeding and courses for new parents on caring for newborns, and supporting a fulltime enterprise manager.

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Financial

NESsT has provided mentoring to FNO on marketing and financial management for the chalet. These skills have also helped FNO improve the management of its other programs like Tabara Viata, an outdoor teambuilding program.

RAAF works to improve the quality of life for youth and families living with chronic illnesses such as HIV/AIDS through its medical and educational services. NESsT is working with RAAF to expand First Bebe, an enterprise offering courses and educational DVDs for pregnant women and couples on maternal and neonatal health care.

Fundatia Romanian Angel - RAAF (Bucharest, Romania) www.raa.ro

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NESsT support has focused on refurbishing the chalet which reopened for the busy summer camp season. 2009 sales are on target to date (60 more kids than 2008 level), covering 3% of FNO’s budget (ultimate goal is 15%); and 675 accommodation spaces for winter are already sold.

Enterprise income allows FNO to reserve 100 spaces for disadvantaged kids each summer.

With NESsT support, ADV has expanded Util Deco to employ 15 HIV-infected youth and opened locations in two new cities.

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Bambino’s reputation has improved considerably with growing interest in its services from women and doctors. Bambino was one of only five organizations in the country selected for a visit from Queen Elizabeth II during her recent visit to Slovakia.

NESsT Portfolio Profile

“The enterprise development support of NESsT was key in the planning and launch phases when we were figuring out the business strategy with the highest possible potential to put the restaurant on a sustainable track.”

- Andrea Meszaros, Executive Director, Kék Madár

Kék Madár (Hungary)

Ízlelo, the profitable social enterprise of Kék Madár, has become a model for transitional employment for people with disabilities.

With support from NESsT, Ízlelo has produced impressive results in 2008-09:

Ízlelo is the first restaurant without a four-star rating to receive the coveted “White Lilly" award for restaurant hygiene in Hungary. http://izleloetterem.hu/ www.kek-madar.hu

Enterprise performance: - revenues increased sevenfold since opening in 2007; - customers served increased by 50% over last year; - high customer satisfaction: 80% return customers; and food and service rated 4.81 out of 5.0 score;

- new healthy take-away lunches for school children generates 40% of sales; - Ízlelo profits cover 13% of Kék Madár’s annual expenses (exceeds projected goal of 6-8%).

With support from NESsT, Ízlelo developed several creative marketing strategies, including: cooperation with famous local winemakers to hosts wine dinners (generating higher profit margins and helping to build their brand); “cooking clubs” with 80-100 families; and plans to edit a series of thematic cookbooks with local winemakers.

Social impact: - employs 15 people with disabilities full-time; - 8 people have have been placed in the open job market since opening; - Ízlelo has generated significant media interest and visibility to issues of disability.

Kék Madár plans to expand the restaurant to increase job placements and revenues.

Support from NESsT will enable plans to increase seating capacity to accommodate 100 (from 24) and to add capacity for catering larger events and weddings.

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Early-Stage Portfolio

NESsT-Citi 2008 Social Enterprise Competition Private Equity Shares funding was used as cofinancing to early-stage social enterprises alongside support from the Citi Foundation. Since 2006, Citi has financed NESsT’s Social Enterprise Competitions in Czech Republic, Hungary and Slovakia. These national competitions are designed to promote excellence in social enterprise development in CEE. The three winners, Kék Madár (Hungary), Moznosti tu jsou (Czech Republic) and Vydra (Slovakia) were announced at the Portfolio - HVCA CEE Corporate Finance and Private Equity Conference in Budapest in April 2009.

Private Equity Shares funds enabled NESsT to ‘invest’ in a promising new pipeline of early-stage social enterprises in CEE, helping them to plan for or start up an enterprise.

Over the last year, NESsT trained 78 early-stage social enterprises to assess their readiness for social enterprise and test the feasibility of enterprise ideas; 20 went on to complete a full business plan.

Our 2009 Social Enterprise Competitions resulted in 26 new submissions from Czech Republic (6), Hungary (12) and Slovakia (8) (see profiles pages 18-19).

Our first national Social Enterprise Competition in Romania received a tremendous response with 52 applications. Of these, 16 completed feasi-

"NESsT's portfolio creates employment and extends economic and social benefits to communities in need across CEE. This is especially important in the current market environment."

- Batara Sianturi, Citi

Above left, Batara Sianturi, Citi Country Officer for Hungary and Eva Varga of NESsT with the competition winners. Left, Eva Varga presents the awards.

bility studies with NESsT support and 9 completed business plans, five of which were invited to join the NESsT later-stage portfolio in late 2008 (see profiles, page 14-15). A new Romania competition was announced in September.

From 2006-2008, an aver-

age of 20% of these earlystage social enterprises ‘graduated’ to our laterstage portfolio, indicating they have developed the necessary capacity and viable plan to implement a high-impact social enterprise idea.

Early-Stage Portfolio: Increasing Capacity The early-stage portfolio serves as a pipeline for our laterstage portfolio as well as a strategy to provide training support to a wider number of social enterprises.

Roughly 20% of early-stage enterprises complete the entire NESsT process and enter our later-stage portfolio.

On a scale of 1 to 5, early-stage participants rated their overall experience with NESsT’s process at 4.24 “very useful.”

4.24

20% 100% 85%

100% of early-stage participants recommend the process to others; 85% in CEE would be interested to re-enter the process again.

As a result of NESsT early-stage support, organizations gained the knowledge and skills to: … complete cash flow & balance sheet … create a sales & marketing plan … complete market research & analysis … develop an operational & management plan … assess financial potential of enterprise ideas … assess their readiness for social enterprise

86% 88% 92% 100%

88% 95%

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Early-Stage Profiles Máme otevreno, o. s.

(Prague, Czech Republic) www.mameotevreno.cz

Máme otevreno provides support services to adults and children with intellectual disabilities, primarily those with autism. NESsT is assisting Máme otevreno with a plan to expand its Vesmirna Café providing employment to people with disabilities.

Letohrádek Vendula provides accommodation, employment and health services to people with disabilities.

NESsT is assisting Letohrádek Vendula with a plan to run a handicraft workshop employing beneficiaries and Letohrádek Vendula to establish a physiotherapy center.

(Horní Bezdekov, Czech Republic) www.letohradekvendula.cz

Pohoda (Prague, Czech Republic) www.pohoda-help.cz

“The whole NESsT process has been an extremely valuable experience for us and essential for the future of our social enterprise.”

- World Carfree Network Europe (Czech Republic)

Csoport-téka Egyesület (Budapest, Hungary) www.csoportteka.hu

Magyar Williams Szindróma Társaság (Budapest, Hungary) www.williams.ngo.hu

Pohoda provides social services to people with disabilities and to help them to improve the quality of their lives. NESsT is assisting Pohoda with a plan to provide professional training to social workers.

Csoport-téka Egyesület provides job training and search services to the unemployed and to recent graduates to help them find employment. NESsT is working with Csoport-téka Egyesület on a fee-for-service structure for new customers to make its services self-sustainable.

MWSzT provides support to people with Williams Syndrome and educates the public about the syndrome. NESsT is assisting with a plan for a fundraising and direct marketing consultancy to nonprofits that employes their beneficiaries.

Vadvirág Alapítvány works to improve the life of children with physical disabilities, primarily through the provision of special aquatic therapy. NESsT is workVadvirág Alapítvány ing with Vadvirág on a fee-for-service (Kaposvár, Hungary) strategy for its rehabilitation services. www.vadvirag-alapitvany.hu

Kurt Lewin Alapítvány (Budapest, Hungary) www.kla.hu

Budapesti Vöröskereszt (Budapest, Hungary) www.voroskeresztbp.hu

Kurt Lewin Alapítvány offers civic education programs around issues of tolerance and eliminating discrimination. NESsT is working with KLA on a plan for a consulting service offering diversity trainings.

Budapesti Vöröskereszt offers critical health services and relief to victims of disasters. NESsT is working with BV on a social enterprise to offer janitorial and woodworking jobs to homeless people.

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Retextil Alapítvány (Pécs, Hungary) http://retextil.shp.hu

Pressley Ridge Hungary (Budapest, Hungary) www.pressleyridge.org

Retextil Alapítvány has developed and promotes a unique recycling methodology for textile waste. NESsT is working with Retextil on a plan for a social enterprise workshop to produce Retextil products using the methodology and providing employment and rehabilitation opportunities to marginalized groups.

Pressley Ridge Hungary offers education, communitybased, residential and treatment foster care services to troubled children, youth, and their families. NESsT is working with Pressley Ridge on a plan to establish an “Experiential Learning Center.”

VVA provides health care, education, training, employment, and legal aid for the visually impaired.

NESsT is helping VVA on its plan to provide employment opportunities for its beneficiaries in a social Világ Világossága Alapítvány enterprise selling catering and printing services, (Pécs, Hungary) handicrafts and other products. www.vva.hu The Rákosmenti Waldorf Iskola operates an independent school that integrates the arts and academics and committed to inspiring the unique capacities of each student and a lifelong love of learning. NESsT is working with Waldorf on Rákosmenti Waldorf Iskola a plan for an online store selling its unique arts and educa(Budapest, Hungary) tional products. www.waldorfsuli.hu

WellGiving (Bratislava, Slovakia) www.charityshop.sk

Jablonka (Jablonové, Slovakia) www.jablonka.org

LOKI (Nové Zámky, Slovakia) www.loki-lpsi.sk

OZ VIPA (Banská Bystrica, Slovakia) www.vipa.sk

WellGiving is dedicated to helping at-risk young adults to become self-sufficient and integrated into the society. NESsT is working with WellGiving on a plan for its online Charity Shop to create employment for marginalized individuals by selling products and services produced in womens’ workshops.

Jablonka is dedicated to the preservation of cultural heritage and sustainable development of the Záhorie region.

NESsT is working with Jablonka on a plan for the construction of fruit nurseries to produce and sell seeds, plants and bio-products, and to offer garden design services.

LOKI is dedicated to addressing critical social issues in the Nové Zámky community through advocacy, community outreach and education. NESsT is working with LOKI on a plan for an online bookstore, compiling and selling publications on social issues and the social sector.

OZ VIPA is committed to sustainable, rural development in the Bystrica region.

NESsT is working with OZ VIPA on a plan to create local employment through the promotion and sale of handicrafts and other locally-made products and food.

“The knowledge gained during the NESsT process is simply priceless.”

- International Young Nature Friends (Czech Republic)

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Social Enterprise Marketplace 2009 Among the nearly 200 private equity professionals who visited the NESsT Social Enterprise Marketplace in April 2009 in Budapest, were: Dan Lynch, 3TS Capital Partners (1), Zoltan Bruckner, Primus Capital (2), Nicholas Kabcenell, Darby Overseas Investments (3), Bela Seres, Deloitte (4), Robert Manz, Enterprise Investors (5), Joanna James, Advent International (6), and Craig Butcher, Mid Europa Partners (7).

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Social Enterprise Marketplace 2009

The NESsT 2009 Social Enterprise Marketplace brought together over 200 CEE private equity professionals to learn first-hand about the social enterprises in the NESsT portfolio.

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NESsT hosted the 2009 Social Enterprise Marketplace in April in Budapest during the Portfolio - HVCA CEE Corporate Finance and Private Equity Conference, thanks to the support of Citi, the Hungarian Private Equity and Venture Capital Association (HVCA), Portfolio.hu, Squire Sanders, and the Trust for Civil Society in Central and Eastern Europe.

The Marketplace provided an unique opportunity for Private Equity Shares

supporters to meet the NESsT portfolio of social enterprises first-hand.

Fifteen social enterprises in the NESsT later-stage portfolio from Croatia, Czech Republic, Hungary, Romania and Slovakia had the opportunity to present their services and products to over 200 representatives of the CEE private equity community.

3i, Advent International, European Investment Fund (EIF) and Gamma Capital Partners (GCP) had an opportunity to visit the candle, paper, textile and wood work shops employing people with intellectual disabilities, and to learn about the practical challenges and opportunities facing the management team.

The Marketplace was preceded by a Private Equity Shares site visit to the Fruit of Care social enterprise in Budapest. Private equity professionals from

The site visit was followed by a VIP dinner for 22 Private Equity Shares CEE supporters, hosted by NESsT and Squire Sanders.

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Visitors to the Marketplace received a sweet welcome gift thanks to the generous donation of Bonbonetti, a portfolio company of Pivate Equity Shares supporter CRG Capital.

Above, Istvan Lakos (8) of CRG, draws the winning raffle ticket; while winner Nikolaus Spieckermann-Hutter (9) of Gamma Capital Partners, is presented with a selection of social enterprise products.

The Fruit of Care handmade candles and soaps were a popular item at the marketplace.

Below, the new line of soaps launched with NESsT support.

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Business Advisory Network CEE

The Business Advisory Network (BAN) is a group of professionals, many from the CEE private equity industry, who collectively provide hundreds of hours of pro bono assistance each year to the NESsT portfolio.

"It is important for us, private equity practitioners, to reach out to social enterprises and share our ‘tool kit’; NESsT has been a great catalyst in this respect, and its dedication and track record have to be commended.”

- Thierry Baudon, Mid Europa Partners

The over 80 volunteer members of the NESsT BAN provide a critical component of our investment each year in our portfolio of social enterprises in CEE. This group offers countless hours of pro bono support to NESsT and to our portfolio. Some members of the CEE BAN have reviewed feasibility studies and business plans from our earlystage portfolio and helped us to make investment decisions as members of our investment committee. Others have offered training workshops to our portfolio. For example, Attila Schillinger of Avantgarde Group, offered a training on communications and public relations for all NESsT portfolio enterprises.

Pro bono legal support: NESsT Romania Thanks to the pro bono support of Squire Sanders and Romanian partner firm Voicu & Filipescu in Bucharest, NESsT will soon be a registered, nonprofit foundation in Romania.

Cristian Nacu, a Partner at Enterprise Investors and Wilson Balachandra, a Partner at KPMG will join as Board members to the new entity. The NESsT Romania office is based in Timisoara.

Business Advisory Network for CEE The BAN for CEE includes over 80 professionals in 20 cities who collectively provided hundreds of hours of pro bono support to NESsT and our portfolio in 2009.

Members include professionals in private equity, accounting, banking, consulting, finance, law, marketing and public relations.

Other BAN members have provided one-on-one mentoring to portfolio enterprises. For example, BAN members Alina and Paul Kasprovschi in Romania are assisting FCC with a public media campaign on visual disabilities.

Other BAN members have helped NESsT with fundraising efforts to benefit our CEE portfolio.

(The signatories of the Private Equity Shares campaign are a perfect example). Likewise, BAN members in CEE, Austria and the UK helped to identify donated items for the European Private Equity Awards (EPEA) charity raffle of which NESsT was a beneficiary (see page 27).

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members

in cities in 10 countries across Europe and North America

Squire Sanders has been a very generous donor of pro bono legal support for NESsT and our portfolio (see box below left). Boris Savoric of Savoric and Partners and Daniel Radic of KMPG have been helping advise portfolio members on the implications of new trade laws for social enterprises in Croatia.

Others have helped by purchasing products or services directly from our portfolio. For example, KPMG Hungary purchased candles from the Fruit of Care enterprise as holiday gifts for clients.

Enterprise Investors Romania purchased holiday cards and printing services from ADV.

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Current members of the NESsT BAN for Central Europe include:

Croatia (7) Jonathon Cooper Poteza Ventures Nicholas de Frankopan Apex Securities Mirna Marovic Croatian PE/VC Association Tina Odinsky-Zec ZSEM Daniel Radic KPMG Boris Savoric Savoric and Partners Vjenceslav Terzic Quaestus Private Equity Czech Republic (15) Michal Aron Advent International Garret Byrne Deloitte Robert Cohen Benson Oak Stefan Cordiner Ceres Property Services Jaroslav Horak ARX Equity Partners Michal Kohoutek Angel Investor Association Ludek Kraus Plzensky Prazdroj Petra Kursova Czech PE/VC Association Dan Lynch 3TS Capital Partners David Marek ARX Equity Partners Zuzana Novicka Plzensky Prazdroj Peter Ridder Andrew Sandor Royalton Partners Andrea Sitarova Burson & Marsteller Brian Wardrop ARX Equity Partners

Hungary (18) Gabor Baranyai QualyPlan Nilda Bullain ICNL Michael Carlson KPMG Ivan Gara Ridge Road Consulting Robert Heinczinger Ernst & Young Eva Hencz Citibank Zrt. Nicholas Kabcenell Darby Overseas Investment Bela Lendvai-Lintner ARX Equity Partners Robert Line Keystone Anna Meszaros Goldenberg Hehmeyer Judit Mihályi Europe Ltd. Katalin Nádasi Budapesti Corvinus Egyetem Attila Schillinger Avantgarde Group Peter Szlavik Boda & Partners Katalin Szoke Zoltán Tóth 3i László Zolnai Budapesti Corvinus Egyetem Raj Vasanth Citibank Zrt. Poland (2) Robert Manz Enterprise Investors Barbara Nowakowska Polish Private Equity Association (PPEA)

Romania (26) Wilson Balachandra KPMG Cornelia Barancea IBM Codruta Berbecaru Heineken Romania Georgeta Bora Royal Bank of Scotland Daniela Buhus KPMG Cristian Cristea Emporiki Bank Ruxandra Dicu Western Union Marinela Istratescu Punct Advertising Alina Kasprovschi Western Union Paul Kasprovschi Mercury 360 Communication Robert Luke GED Group Horia Manda RAEF Doina Mazilu Leadership Dev. Solutions Meda Miscunescu Arx Equity Partners Cristian Nacu Enterprise Investors Carmen Oprea Tchibo Nuria Oses GED Group Emanuela Popa-Radu Advent International Mihai Sfintescu 3TS Capital Partners Ana Sipciu BBDO Group Radil Stefovski Arx Equity Partners Valentin Tic KPMG

Gabi Toth Razvan Tucaliuc Heineken Romania Andreea Veress Heineken Romania John Wirth Hild Group Slovakia (6) Daniela Cišková Citibank Magdalena Faltanova Citibank Iveta Griacová IMP Michal Nespor Gamma Capital Partners Nikolaus SpieckermannHutter Gamma Capital Partners Igor Sulik Amrop Jenewein Group International (10) Sarah Alexander Emerging Markets Private Equity Association (EMPEA) Thierry Baudon Mid Europa Partners Javier Echarri EVCA Raluca Mihaila Goldman Sachs Kristina Perkin Davison iEurope Capital Christopher Rose Squire Sanders & Dempsey Mary Ross Rakic JPMorgan Chase Laurie Spengler ShoreBank International Marie Trexler William Watson Société Générale Asset Management (SGAM)

NESsT Portfolio Profile

Fundatia Cartea Calatoare (Romania)

The social enterprise of FCC is helping the 90,000 people in Romania who are blind or vision-impaired gain equal access to education, employment, and cultural and public information.

FCC has produced hundreds of audio recordings of books and educational materials distributed to individuals, libraries and schools, and played on the DAISY reader (above). Support from NESsT enabled FCC to launch a new website to promote the enterprise, including a catalog of available recordings. www.cartidaisy.ro www.fcc.ro

NESsT is working with FCC to expand its social enterprise producing audio books in DAISY format for people with vision impairment. With support from NESsT, FCC has expanded its current selection of navigable recordings and is now selling the devices and software to public libraries to accommodate visuallyimpaired readers.

NESsT is providing support to FCC to refine its sales and financial projections, increase production, and to develop a pricing policy and distribution channels as part of the marketing strategy. FCC’s enterprise has grown considerably in 2009. Support from NESsT allowed FCC to hire four new part-time staff for the enterprise to increase capacity.

NESsT has assisted FCC with its marketing strategy, particularly to public libraries.

Currently, 14 public libraries have an official stand promoting FCC’s DAISY books and another in Germany. FCC also managed to leverage donations for public libraries to purchase the DAISY readers, an incentive for the libraries to purchase FCC’s audio book recordings. As a result, libraries have signed agreements with FCC to purchase 1,800 books each by June 2010. Revenues from sales as of August 2009 was on target to break even.

FCC has also started working with the Ministry of Social Affairs to have the DAISY standard recognized as an

official accessibility standard in Romania. If successful, the social security system would reimburse the cost of DAISY readers for individuals, making FCC’s books more affordable to individuals directly rather than only through public libraries.

FCC is exploring new products, including agreements with local authorities to produce audio versions of relevant laws so they are accessible to the visually impaired.

FCC has also begun producing school books for visually impaired children.

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Private Equity Shares Supporting Partners

NESsT partnerships with private equity associations have helped promote Private Equity Shares to the private equity industry more widely and to promote private equity philanthropy and volunteerism across CEE.

"We need to make sure that NESsT’s enthusiasm and dedication to charitable work coupled with focus on sustainability and best management practices have a long lasting impact in the CEE region.”

- Barbara Nowakowska, Polish Private Equity Association (PPEA)

Private Equity Shares has helped to galvanize a new generation of philanthropists and volunteers in the private equity industry across CEE. This heightened interest and awareness is, in part, thanks to our partnerships with the seven national and regional private equity associations representing and promoting the interests of the CEE private equity industry. These important relationships have helped to increase

Above, the SLOVCA website promotes the Private Equity Shares campaign. Left, Lee Davis at the NESsT table at the Global Private Equity Conference in Washington, DC, made possible thanks to EMPEA, a Private Equity Shares Supporting Partner.

awareness of social enterprise and venture philanthropy in CEE among the associations’ members -the hundreds of small and large private equity and venture capital firms and advisers active throughout the region.

In 2008-2009, the associations helped to promote Private Equity Shares through announcements in their newsletters and on dedicated links on their websites. Together with NESsT, they also issued a joint press release (in English and national languages) at the culmination of the campaign, recognizing the campaign supporters and impressive results.

NESsT staff were also able to attend numerous private equity events organized by the associations in Bratislava, Bucharest, Budapest, London, Washington, DC, and Zagreb, and to have exhibit tables to promote Private Equity Shares.

Supporting Partners

NESsT Portfolio Profile

Vydra (Slovakia) Vydra’s comprehensive approach to increasing tourism, creating local employment, and promoting environmental and cultural preservation is a model for developing CEE rural communities.

In 2009, Vydra received the NESsT-Citi Award for Excellence in Social Enterprise for outstanding performance of its social enterprise providing economic opportunities and employment in the rural Cierny Hron micro region.

NESsT support enabled Vydra to build this visitors center that has helped to attract thousands of tourists to the region.

www.vydra.sk www.vydrovskadolina.sk

NESsT has supported Vydra with the development of multiple social enterprises providing economic opportunities and employment in the rural Cierny Hron micro region (where unemployment hovers around 25% and as high as 85% for the Roma minority). Vydra aims to improve sustainable tourism services in the area to increase employment in this economically-depressed area.

NESsT support to Vydra has helped particularly with the marketing and promotion of its tourist packages offer lodging, food services, and eco-tourism activities.Vydra’s social enterprises have performed well. Vydra’s enterprises now generate over 90% of its annual budget.

Enterprise performance: - increased tourism visitors in 2008 to 45,000 (30% increase from 2007 level); - profits in 2008 double the original projections; - 91% of Vydra annual expenses covered by social enterprise (up from 79% in previous year); - increase in revenues representing 20% over 2007.

Social impact: - increased tourist traffic to region provided revenue opportunities to and employment in local businesses (restaurants, accommodations, etc.); - unique partnerships with local private and public institutions (municipality and forest company) are a national model for developing rural tourism.

Future Plans: NESsT is considering further support to Vydra for the refurbishment of its building to include a meeting room and accommodations, in order to increase income in the slow winter months.

“The partnership with NESsT has been a key factor in the development of our organization, our region and our future work. We have learned a lot of very useful business skills and built local partnerships which many other villages are now interested to copy.”

- Zuzana Sitarcikova, Vydra

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Promoting CEE private equity philanthropy

NESsT CEE Venture Philanthropy Award NESsT established its Venture Philanthropy Award for Europe (also known as the “Golden Egg Award”) in 2001 to promote excellence in the field of venture philanthropy and to celebrate private equity philanthropy role models in CEE. Since 2004, the award has been presented at C5’s CEE Private Equity Forum in London.

The 2009 award was presented to Robert Manz, a Managing Partner at Enterprise Investors in Warsaw. The Award recognizes Mr. Manz's leadership as an active advisor and donor to NESsT and a leader in promoting philanthropy in the private equity industry in CEE. Previous award recipients include: Zoltán Tóth, 3i; William Watson, SGAM; Brian Wardrop, Arx Equity Partners; Daniel Lynch, 3TS Capital Partners.

An important goal of Private Equity Shares is to promote CEE private equity philanthropy, to celebrate effective role models in the region, and to recognize the generosity of the private equity industry more widely.

In 2009, Private Equity Shares benefited greatly from the important inkind contributions of private equity media supporters across Europe.

Shares on its website as well as through its CEE Corporate Finance and Private Equity Conference, co-hosted with HVCA (see page 21). Emerging Private Equity generously donated C5 generously allowed a full-page A4 ad space for NESsT to participate in our Private Equity Shares and have Private Equity “Thank you!” ad (see inside Shares tables at its CEE front cover) in its January Private Equity Fora in both 2009 issue. Likewise, London and Vienna. Since Incisive Media’s Unquote 2004, the C5 London included our A4 “Thank event has served as the you”!” ad in its CEE venue for the presentation private equity bulletin. of NESsT’s European The European Venture Venture Philanthropy Philanthropy Association Award (see side bar, left).

(EVPA), of which NESsT is a CEE member, also Online financial journal included stories about Portfolio.hu generously PES in its European Venture promoted Private Equity Philanthropy News.

NESsT was selected as the nominated charity for the 2008 European Private Equity Awards hosted by EVCA and Real Deals in Paris, November 21.

NESsT CEO Lee Davis (right) introduced Private Equity Shares to the 250 guests. Proceeds raised from a raffle benefited NESsT’s work in CEE. Thanks to raffle item donors: Lord Garel-Jones, William Emmott, William Watson (SGAM), DAM Capital, Marisa Drew (Credit Suisse), Mark Pougatch (BBC), Donald Johnston (Christie’s London), CRG Capital and Société Générale.

Thanks to the following who helped to promote Private Equity Shares:

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NESsT Team

NESsT Senior Management Team Loïc Comolli Director of Client & Investor Relations Lee Davis Co-Founder & CEO

"NESsT has an innovative way of supporting good causes in less developed countries and it fosters an efficient use of donor's money in the organizations it supports. I have a high regard for the NESsT team.”

Kerry Dudman Director of Communications & Operations Nicole Etchart Co-Founder & CEO

Gonzalo San Martín Enterprise Development Director, Latin America Eva Varga Enterprise Development Director, Europe

NESsT Europe Team Regional Head Office Budapest, Hungary Ildikó Szolga Administrative Associate

- Zoltán Tóth, 3i

Orsolya Tarjanyi Enterprise Development Associate Laura Toth Communications & Operations Associate Eva Varga Enterprise Development Director, Europe Peter Varga Enterprise Development Manager, Europe

Czech Republic & Slovakia Prague, Czech Republic Marta Ricci Enterprise Development Associate

Romania Timisoara, Romania Zoltán Bereczki Enterprise Development Associate Roxana Damaschin-Tecu Enterprise Development Manager

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NESsT Governance

NESsT International Board of Directors Karyn Barsa CEO, Coyuchi, Inc. (San Francisco, California, USA) Joseph Schull joins NESsT International Board Joseph Schull, Managing Director at Warburg Pincus, has joined the NESsT International Board of Directors.

Joe focuses on the firm's European technology, media and communications investments and investment activities in CEE.

Julian Garel-Jones (Treasurer)* Director, Latin America, Polunin Capital Partners (London, UK)

Steve Smith (Secretary) Co-Founder & President, Media for Development International (Glenwood Springs, Colorado, USA)

Ernest Boles CEO, Auda International and Managing Director, Harald Quandt Holding (New York, NY, USA & Bad Homburg, Germany)

Rachel Golden President, Rachel E. Golden Foundation (Chicago, Illinois, USA)

Lee Davis* Co-Founder & CEO, NESsT (Turlock, California, USA)

Felipe Medina (Chair) Regional Director Latin America Investment Management Division, Goldman Sachs (Miami, Florida, USA)

Frank van Beuningen Managing Director, GreenPartners B.V. (Amsterdam, Netherlands)

Katherine Downs Principal Investment Officer, International Finance Corporation (IFC) (Washington, DC, USA)

Joseph Schull Managing Director, Warburg Pincus (London, UK)

Tulio Vera Chief Strategist and Head of Client Relations, Bladex Asset Management (BAM) (New York, NY, USA)

Nicole Etchart Co-Founder & CEO, NESsT (Santiago, Chile)

NESsT International is a nonprofit, IRS 501c3 organization incorporated in the US State of Maryland. (Tax ID: 52-2018791)

Richard Surrey* Principal, 1989 Partners (Kent, UK)

NESsT UK Board of Directors Joanna James joins NESsT UK Board Joanna James, Managing Partner & Co-Head of Central Europe at Advent International, has joined the NESsT UK Board of Directors.

Basil Demeroutis Partner, Capricorn Investment Group (London, UK)

Malcolm Hayday Chief Executive, Charity Bank (Kent, UK)

Marisa Drew Managing Director, Co-Head European Global Markets Solutions Group, Credit Suisse (London, UK)

Joanna James Managing Director, Central & Eastern Europe Advent International (London, UK)

NESsT UK is an independent, charitable corporation registered with the UK Charity Commission.

(Registration number 1128823)

* also a member of the NESsT UK Board of Directors.

ACSIS (Romania)

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Private Equity Shares 2009: Future Goals Private Equity Shares 2008 was a great success and one we plan to build upon. The campaign will be annual, providing the CEE private equity industry an easy and effective way to invest in the community.

The Private Equity Shares Campaign 2009 opens with the ambitious goal of raising €300,000 to benefit marginalized communities in Croatia, Czech Republic, Hungary, Romania and Slovakia in 2010.

"NESsT has an outstanding proposition in that it helps people to help themselves. It strives to achieve lasting impact by delivering sustainable results.”

- Joanna James, Advent International

Resources raised will enable NESsT to: - provide continued financing and mentoring support to our current later-stage portfolio of 17 CEE social enterprises; - expand our later-stage portfolio to include an additional 10-12 CEE social enterprises by 2011; - complete national Social Enterprise Competitions in 5 countries, providing training to 50 new early-stage social enterprises; - launch the Social Enterprise Loan Fund (SELF) to provide debt financing to social enterprises in CEE; - explore expansion to support social enterprises in Poland.

We hope you’re pleased with our accomplishments this year and that you’ll entrust us again with your support. Thank you! www.privateequityshares.org

What makes NESsT unique?

Sustainability.

Not charity.

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NESsT emphasizes sustainability and entrepreneurship, not charity and hand-outs.

NESsT is an accomplished, market leader with a 12-year track record, having trained over 1,000 social enterprises in CEE since 1997.

NESsT

NESsT has an experienced team of 8 CEE professionals supported by a global emerging markets team in Europe and the Americas.

NESsT is close to our work with staff in Budapest, Prague and Timisoara.

NESsT maintains low overhead costs (we don’t waste donor resources on “headquarters” costs).

At NESsT we “practice what we preach” -20% of our income we generate ourselves through our own social enterprise, NESsT Consulting.

NESsT is accountable and transparent with an international Board of Directors and stringent auditing and financial oversight in the EU and USA. NESsT is an innovator and thought leader and a recipient of the prestigious Skoll Award for Social Entrepreneurship.

Thank you!

Vydra (Slovakia)

NESsT works to solve critical social problems in emerging market countries by developing and supporting social enterprises. NESsT has provided financial capital and business management support to over 1,000 social enterprises in Central & Eastern Europe (CEE) to help them plan for, launch and better manage their activities.

NESsT's CEE portfolio currently includes social enterprises in five countries: Croatia, Czech Republic, Hungary, Romania and Slovakia. www.nesst.org

Private Equity Shares was created by NESsT to make philanthropic giving easier and more effective for the emerging market private equity industry. In CEE, Private Equity Shares was established by six private equity professionals to raise support for NESsT's portfolio of social enterprises. Since 2008, 30 fund managers, LPs and advisors have committed over €300,000 and countless hours of volunteer time to support social enterprises across the region. www.privateequityshares.org

Reproduction of “Making the Grade” was made possible thanks to the generous support of Squire Sanders.

www.ssd.com