Western NIS Enterprise Fund relocates to Chicago area (04/22/01)

Western NIS Enterprise Fund relocates to Chicago area

CHICAGO - The Western NIS Enterprise Fund (WNISEF), a $150 million early-stage private equity fund that invests in small and medium-sized enterprises in Ukraine and Moldova, announced on February 20 that it is relocating its headquarters to the Chicago area from New York City.

The Western NIS Enterprise Fund, capitalized initially by the U.S. government, was created to invest in small and medium-sized companies in Ukraine and Moldova. Since 1995, the fund has committed $80.5 million to 20 portfolio companies in Ukraine and five in Moldova, which employ close to 11,000 local workers. Both countries were part of the Soviet Union until proclaiming their independence in late 1991.

The fund's move to the Chicago area (the new headquarters is located at 150 N. Martingale Road, Suite 830, in Schaumburg) coincides with its efforts to increase involvement by Chicago and other Midwestern-based businesses and financial organizations in investments in Ukraine and Moldova.

"We view our relocation to Chicago as coming 'home.' Chicago is home to one of the largest Ukrainian communities outside of Ukraine and is the sister city of Ukraine's capital Kyiv," stated WNISEF Executive Vice-President and Chief Investment Officer Natalie Jaresko, herself a Chicago native.

"We want to build upon the tremendous synergies created by the Chicago-Ukraine connection by introducing Chicago-area companies to investment opportunities in the region," stated Ms. Jaresko. "We believe that there are exciting ways for the fund to cooperate with local companies whether it be identifying investment opportunities in Ukraine and Moldova, establishing partnerships with Ukrainian or Moldovan firms, or becoming customers of the fund's portfolio companies."

The fund's 11-member board of directors, which held its first meeting in Chicago on February 6, is chaired by Dennis Johnson, former CEO of St. Paul Bank for Cooperatives, and boasts prominent Chicagoans among its members including Patrick Arbor, former chairman of the Chicago Board of Trade; Jaroslawa Zelinky Johnson, partner, Altheimel & Grey; and Jeffrey Neal, vice-chairman, Investment Banking, Merrill Lynch.

"The 10-year transition of Moldova from government-planned to free market oriented economies has been difficult," Mr. Arbor said. "However, the fund's strategy of capitalizing small private businesses run by entrepreneurs willing to play by internationally accepted business rules is now paying dividends. The fund's investments promote market competition and transparency, enabling these countries to more quickly complete their economic transition and rejoin Europe," he continued. "We anticipate expanding the fund's portfolio in Ukraine and Moldova and will be looking to the Chicago financial and business communities for partnership opportunities."

"The fund's investment strategy has been to identify the best companies operating in the fastest growing sectors of the region's emerging economies," Ms. Jaresko said. "This has brought the fund a strong competitive advantage over other financial investors in Ukraine and Moldova," continued Ms. Jaresko, "and has helped stimulate business growth within each of the fund's portfolio companies."

The Western NIS Enterprise Fund provides portfolio companies with capital and the necessary management tools to evolve from entrepreneurial ventures to professionally managed companies. The fund's equity investments range from $1 million to $7.5 million and are used primarily for restructuring and expansion. In addition, the fund helps implement policies and procedures for good corporate governance and management, and arranges for experienced Western executives to work with local management to prepare and position companies for growth.

Some of the fund's most prominent investments in Ukraine include:

The fund's portfolio company SBK, a leading facade brick manufacturer that increased sales volume in 2000 by 79 percent, with sales totaling $3.5 million. Today SBK produces 20 types of construction, facade and special shape bricks used throughout the country.
The fund's AVK Confectionery, the second largest of Ukraine's 28 chocolate producers, increased sales volume in 2000 by 28 percent and in November, the enterprise launched a new line of elite candies "Talisman."
The fund's portfolio company "EuroMart," the leading cash-and-carry supermarket chain in Ukraine, attracted additional equity investment from another venture capital fund, enabling the company to strengthen its position as the dominant supermarket chain in Ukraine. With five stores currently operating in the Ukrainian cities of Kyiv, Dnipropetrovsk, Kharkiv and Zaporizhia, Euromart plans to expand its retail sites in 2001 by four and expects to open 20 new stores within the next four years.

Ukraine firmly rebounded from the autumn 1998 financial crisis in the region and last year posted a 6 percent rise in gross domestic product over the previous year. Moldova posted a 1.9 percent rise in GDP last year.

Ukraine's food processing industry, a growing sector of the country's emerging market economy and a focus of the fund's early investments posted an annual growth rate of 26.5 percent, while retail sales rose 6.9 percent compared to the previous year.

In 2001, the fund will expand its investment strategy to the information and technology industry, which is forecast to be a growth industry in the region. As improvements in the economies of Ukraine and Moldova continue and the governments' attention to fostering new business development expands, the fund will continue to add value to its portfolio companies to sustain their strong and continuing growth.

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