Brochure Annona 106r4x

Fighting poverty by investing in sustainable enterprises Our mission The Annona Sustainable Investment Fund was set up in January 2009 for the purpose of investing in small and medium-sized enterprises in Africa and Latin America by providing share capital. The Fund has two tasks: realising a final average financial ROI of 11% and promoting the development of the private sector in a way that helps tackle poverty. In order to fulfil these tasks, the Fund invests in companies which help improve income levels of the poor and of the weaker groups in society. It does this, for example, by involving thousands of small farmers and local traders, providing essential services to small market parties, or by generating substantial direct employment. Annona plays the role of a catalyst; on the one hand, by stepping up where commercial banks ‘chicken out’ because of a presumably excessive risk factor and on the other hand, by applying its specific knowledge of sustainable enterprise in developing countries. This specific knowledge must ensure that investments are made in autonomous commercial companies which are profitable both in the short and long term. Companies that contribute towards fighting poverty by providing more and better work opportunities and income for the poor. Annona aims to acquire an equity interest of 20% to 60% in order to, if required, actively influence the management of the company. Objectives  10-15 sustainable investments in medium-sized companies in Africa and Latin America  an average ROI of 11% in EUR Facts about Annona  The Fund was set up in January 2009  The Fund is a public limited company incorporated under Dutch law  It owns EUR 8 million in share capital, spread over a start-up fund and a growth fund  Investments in new and existing companies in Africa and Latin America  Its aim is to finance 10-15 sustainable enterprises  Active management by own Fund Manager  Annona Sustainable Investment Fund B.V. has a 1-tier Board structure with a Non-Executive and an Executive Director  Independent assessment of business and investment plans by Investment Committee  Pre-screening of investments and to companies through the Sustainable Economic Development department of the Dutch Royal Tropical Institute (KIT)  Participations between EUR 300,000 – EUR 800,000  Exit after 7–10 years, preferably through sale to existing shareholders or local parties

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What is the Fund’s target group? Annona focuses on successful, autonomous, profit-seeking SMEs in need of extra capital in order to expand. In addition, the Fund focuses on entrepreneurs with a clearly developed business plan who need capital for starting up an autonomous profit-seeking company. Characteristics of these companies:   

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Located in Africa (sub-Sahara) or Latin America Active in agriculture, agri-business, biomedical activities, paramedical activities and small-scale sustainable energy solutions Large potential for poverty alleviation, for example through the involvement of thousands of small farmers and/or the creation of many direct employment opportunities, or by providing services enabling small farmers to ask better prices for their products Capital requirement of EUR 300,000 to EUR 800,000 in the form of share capital (equity) Prepared to give up at least 20% of the shares in exchange for capital, as well as to allow a Supervisory Director/Non-Executive Director in the company Recognition of the added value of an investor with knowledge of sustainable economic development in developing countries and a large network

What are the selection criteria? Applications from companies are assessed based on the following criteria: 

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Economic sustainability: is the company profitable in the long term? o Market: is there a clearly-defined market with sufficient depth, significant growth potential and good access? Does the market yield good margins? Is there a clear marketing strategy? o Competitiveness: how strong is the company's competitive position? Does it deliver better quality or a unique product at a fair price? o Added value: does the company have a clear position in the value chain and does it provide added value for other companies in the chain? o Profitability: can the company be profitable within a few years? By when will the company be profitable and is there a positive cash flow? o Risks: are the commercial and financial risks limited and manageable? Impact on poverty: o Number of involved parties: how many people can realise a higher income thanks to the company? Are these employees or suppliers? o Individual impact: to what extent does the income per individual improve? o Are there any exceptionally poor and vulnerable groups involved, such as women, children, landless people or ethnic minorities? o Empowerment: does it help the poor gain more power and control over their lives? Are the skills and knowledge of these groups structurally improved through training and education, as a result of which their chances in society are structurally improved? Can they acquire control over assets, such as land, or become co-owners of the company? Impact on the environment: o Does the company contribute to nature conservation such as the protection of biodiversity, animal species, plants, fresh water sources and forests or by driving back pollution? o Is there question of CO2 storage or emission-reducing measures? o Do the company’s activities have a negative impact on the environment?

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Feasibility of the plan: o Are there customers or traders who have shown real interest and are there long-term contracts? o Have small producers / suppliers been organised and are they reliable partners? o Is cooperation possible with organisations which could assist in the training of personnel, farmers and/or other suppliers? o Is the local investment climate positive? Do local governments the plan? Is ownership recognised by the state? o Are there sufficient natural resources for large-scale production? o Does the company have knowledge of the required technologies and machines and have these been tested and found suitable for the local conditions (easy to operate and repair)? o Do the entrepreneurs have experience and training with regard to the product, region and sector? o Are there employees available who are already trained? Availability of capital and financial performances: o Have all shareholders invested equity capital or are they prepared to do so? o Are other companies from the chain (buyers or suppliers) prepared to co-invest? o Are there other investors who are prepared to invest, such as banks, NGOs and investment funds? o Is the current debt rate limited and acceptable? o Is Annona being offered sufficient ownership and authority? Scalability: o Is an investment of EUR 300,000 to 800,000 necessary? o Will the market and availability of raw materials and labour be sufficient to expand quickly? o Is the business concept easily extendable to other regions and countries, or other product groups?

Structure of the Fund and shareholders The capital is provided by the Holding KIT B.V., the SPF Foundation (Dutch Railways Pension Fund) and the SPOV Foundation (Public Transport Pension Fund), who are the shareholders of Annona Sustainable BV. The Fund Manager assesses the business plan and in the event of a positive evaluation, presents this to the Investment Committee, which consists of a delegate from SPF, a delegate from SPOV and a third independent person. In addition, the Fund Manager supervises the investments and provides quarterly reports on the results.

Annona structure Shareholders Investment Committee

KIT-SED Annona 1-tier Board

Ventures

Ventures

Ventures

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The investment process What is the process, starting from the business idea, to t participation, to the sale of the shares? 1. Quick scan The Annona investment process starts with finding entrepreneurs with good business plans. Plans can be put forward by so-called ‘matchmakers’, development organisations, but also directly by entrepreneurs or banks and other investment funds in need of co-investors. How does Annona come by these business plans/ideas? The Dutch Royal Tropical Institute (KIT) often comes in with entrepreneurs who require capital. In addition, it has access to a network of organisations which come into almost daily with entrepreneurs in developing countries. These are private companies, organisations for development cooperation, economic development consultants, embassies and ministries, service providers giving training and information to entrepreneurs in developing countries as well as other investment funds which provide loans and equity capital to entrepreneurs. These organisations are aware of the criteria of the Fund and bring us in with interested entrepreneurs who meet the Fund’s profile. Business plans/ideas can also be presented directly to Annona. However, these will always undergo pre-screening by the KIT. 2. Assessment and Concept Note After the initial screening, a Concept Note is drawn up for assessing the plans with regard to the strength of the value chain. Variables taken into consideration are the number of key players within the value chain, the field of influence within a chain exercised by so-called ‘chain directors’, the need for working capital within the chain, seasonal influence and risks. Subsequently, it is assessed whether chain integration through participation of both suppliers and end customers can yield extra returns. The impact on society and environment is considered separately. The position of an investor in the context of the country is also important in determining whether it is possible to enter into a business venture with an entrepreneur. 3. Business Plan After the internal evaluation of the Concept Note, it is decided whether or not to proceed to the business plan phase. This phase is preceded by the g of a Memorandum of Understanding with the proposed entrepreneur, setting out the framework for the subsequent phases. In the Business Plan phase, an in-depth, independent study is carried out of all basic principles expressed in the entrepreneur’s original plan. Part of this phase is an extensive due diligence process in which the investment climate, customers, buyers, entrepreneur, assets to be contributed and suppliers are studied in detail. A market study follows, as an extension of the chain study in the Concept Note. The business plan is delivered along with a concrete proposal for funding and other needs of the company which must be met. The phases of the process up to the development of the business plan (1 to 3) are carried out or coordinated by KIT employees. 4. Investment In the first three years, investments are made from the start-up fund/growth fund. After that it should be clear whether a company is progressing well and has long-term potential. Subsequently, the growth fund enables to continue investment in companies with growth potential for another five years. After a period of eight years, the companies – which have been assigned both local and external directors – should be financially sound. When this happens, the external directors – who are mainly responsible for steering a company during the build-up phase – step down. On the condition, however, that there is confidence in the quality and sustainability of the company.

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5. Expansion and assistance After a few years, the business concept has proved itself and a company is ready for a considerable expansion, for which it again needs capital. A new business plan must then be developed and presented to the Annona Investment Committee. This can then decide whether or not an additional investment will be made. If required, KIT employees can be engaged to assist with the development of this plan. The company can also call upon KIT for other services, such as market analysis, strategic advice and coaching, or training and organising the farmers. 6. Exit When a company starts operating independently, the Annona Fund sells its shares, preferably to local parties. The intention is to first offer its shares to the other shareholders. The key message is that the sale of the shares should not hamper the social objectives of the company. Therefore, Annona will not simply sell its shares to the highest bidder if that would harm the interests of the employees, suppliers and co-shareholders. Annona and corporate social responsibility We strive towards positive development results. Annona is strongly committed to ensuring that the costs and returns of economic development are well-balanced. In addition, we think it is important that the environment should not be affected and that natural resources are managed efficiently and in a sustainable manner. A summary of the criteria:    

Positive impact on local economic development Proportionate distribution of costs and returns Respect for MVO guidelines (Dutch government guidelines for socially responsible enterprise) and Global Compact directives Management by appointed CEO + local counterpart No negative impact on environment Efficient use of natural resources Chain approach

Development cooperation or venture capitalism? The mission of the Dutch Royal Tropical Institute is to promote sustainable economic growth in rural areas of developing countries through innovation and expertise. During the past years, the need has arisen to exercise more influence on economic activities in developing countries and no longer stand on the sidelines and ‘only’ advise. That is why the KIT, along with the pension funds SPF Foundation and SPOV Foundation, have developed this new model for sustainable enterprise. Annona believes that private investments, expertise and public commitment can help develop sustainable enterprises. By participating in capital, management and the company board, sustainable enterprises can be set up which have a great impact on poverty in Africa and Latin America.

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Track record of results  Yiriwa SA in Mali trades in biological cotton, sesame and soy and has an approved business plan (target 30,000 farmers) @ EUR 1.6 million (Annona, ICCO, AK-O and Farmers’ Trust Fund)  4-5 business plans in design phase  We are rapidly gaining experience in pro-poor business engineering  We have a good selection procedure  Publication: Lessons from Pro-Poor Business  Publication: From Stakeholder to Shareholder, Experiences with Farmers as Shareholders  Round table conferences on risk capital and non-profit organisations

details of Fund Manager Drs. ing. W.J.M. Hetterschijt Executive Director Annona Sustainable Investment Fund B.V. Mauritskade 63 1092 AD Amsterdam Telephone: +31 (0)20 568 8280 E-mail: [email protected]

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