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SEAF AGRIBUSINESS OVERVIEW
Istanbul October 14, 2010
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SEAF Overview
501(c)(3) not-for-profit global fund management group founded 1989 Invests growth capital and provides technical assistance to SMEs in
emerging markets Headquartered in Washington, DC 125 employees with a network of 20 offices located across 5
continents. 26 funds (20 currently active) across 30 countries with aggregate
committed capital of $579 million. $356 million invested in 320 SMEs worldwide, with 175 exits since
inception.
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Our current global investment network includes 30 countries on 5 continents.
SEAF was established in 1989;
$579 million under management
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Representative Investors
Development Finance Institutions
Belgian Investment Office Black Sea Trade and Development Bank Deutsche Investions- und Entwicklungsgesellschaft European Bank for Reconstruction and Development FMO Finnish Fund Industrial Cooperation International Finance Corporation Kazakh National Innovation Fund Millennium Challenge Georgia Fund (MCG) Norwegian International Fund for Developing
Countries Overseas Private Investment Corporation (OPIC) Polish Cooperation Fund Small Industries Development Bank of India State Secretariat for Economic Affairs, Switzerland Swedfund International AB United States Agency for International Development
Commercial Investors Kotak Mahindra Bank Life Insurance Corporation of India New York Life International Pound Capital Seguros Suramericana
Socially Responsible Investors
Calvert Social Investment Fund Calvert World Values International Equity Fund Sarona Capital Omidyar Network
Pension Funds AFP Prima AFP Integra Proteccion Provenir Colfondos Evangelische Kirche in Hesse and Nassau
Foundations Ford Foundation Foundation for the Development of Polish
Agriculture
Total Committed Capital $579 million
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SEAF’s Differentiation
SME investments in emerging markets as a core business
Strong team with regional contacts and experience
Global contacts for exit as well as co-financing
Broad experience in most sectors of SME investments
Solid track record and success ratio over 20 years
More than 100 investments in agribusiness alone
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SEAF’s Approach to Business Partnering
CORPORATEGOVERNANCE
FINANCIALCONTROL
ADDITIONALFINANCING
OPERATIONSASSISTANCE
MARKETING &STRATEGY
- Design effective incentive structures- Board of Directors oversight- Legal structure
- Business planning and budgeting- Accounting and management information
systems- Facilitating hiring and training of CFO
- Identify new sources of financing- Leverage relationships with local banks- Provide negotiation and contracting
support
- Cooperatively identify areas for improvement
- Facilitate visits by outside experts
- Develop marketing plans- Support marketing teams
SEAF works with its investee companies to provide a full array of support:
GLOBAL NETWORKING
- Introduce global business networks- Support export and import
strategies
www.seaf.com* Data estimated** The Gross IRR does not include the performance of the IGF, which is a fund not 100% managed by SEAF.
SEAF Performance Benchmarks
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Total Realizations 172
Invested Capital93.1
million
Returned Capital212.3
million
Gross IRR 14.4%
Multiple of Capital Invested
2.3x
Gross IRR 15%
Multiple of Capital Invested
1.7x
Gross IRR 37%
Multiple of Capital Invested
2.9x
Management Buy-Outs (MBOs)
Strategic Sales
Sales to Financial InvestorsGross IRR 59%
Multiple of Capital Invested
3.2x
Exits from all SEAF Investment Funds
Exits from all SEAF Investment Funds
4/22/10
MBOs: improving cash flow, working capital, and pushing for dividendsStrategic Investors: consolidations and foreign investorsFinancial Investors: consolidations and holding companies
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Agribusiness Track Record
Agribusiness Investments PerformanceAs of December 2009 (in USD ‘000)
No. of Investmen
ts
Invested Capital
Realized
Proceeds
Residual FMV Value
Total Realized & Unrealized FMV Value
Gross IRR
Multiple of
Capital Investe
d
Recent Unrealized Investments 9 15,622 626 16,023 16,649 34% 1.1X
Recent Realized Investments 40 21,010 33,227 29,938 63,165 27% 3.0x
Unrealized Valued Investments 15 32,900 3,050 33,932 36,983 4% 1.1X
Total 64 69,532 36,903 79,893 116,796 19% 1.7X
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HOA BINH CORPORATION
INCREASING THE AGRICULTURAL PRODUCTIVITY OF VIETNAM HBC’s harvester reduces harvesting costs for farmers by approx. 40%. Increased efficiency allows farmers to reallocate labor to other activities, diversifying their
products and working to achieve a better quality of life. Farmers who own harvesters often provide harvesting services to other farmers,
promoting entrepreneurship and creating new sources of income for their farms. Though 75% of the Vietnamese population works in agriculture, less than 30% of
agriculture is mechanized. HBC provides affordable, reliable machines to promote a more efficient agriculture industry in Vietnam.
HBC offers options for well-priced, quality generators—HBC’s products are higher quality than Chinese imports, but more reasonably priced than Japanese imports
HBC coordinates with banks to provide customers with financing options—extending the opportunities and benefits of mechanized agriculture to a greater percentage of the farming population.
Agricultural Machinery and Generator Assembly and Distribution.
Date of Investment: July 2009Amount Invested: $1.7 MillionType of Investment: Convertible bondUse of Funds: Launch sales and service
business line for agricultural machinery.
Vietnam
Company Case Study:
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PIUNIK GEORGIAGeorgia
Company Case Study:
Opportunity: Expansion from poultry imports to own production of hatching & consumer eggs, day-old chicks & animal feed, addressing limited supply from Armenian imports and the growing demand in Georgia
Company largely replaced its imports with its own local production
Loan used to purchase farming equipment, laying hens & working capital.
Development Impact: positively impacted Georgia’s poultry & animal feed agribusiness supply chain by increasing the demand while providing higher quality and lower cost products to Georgian consumers, thus generating greater demand for Georgian products.
Integrated Poultry BusinessDate of Initial Investment: December
2008Amount Invested: $2 MillionType of Investment: Risk CapitalInvestment Fund: Georgia Regional
Development FundUse of Funds: Equipment, hatching
hens, working capital
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FROZEN FOOD LATVIALatvia
Company Case Study:
Opportunity: significant market fragmentation with 26 independent frozen food distributors in Latvia serving a growing number of consumers.
Over 7 year partnership, company rapidly expanded and combined/integrated with 2 other companies.
By 2004, FFL was the leading independent frozen foods distributor in Latvia with 3,500 domestic customers and 3,000 pieces of freezing equipment.
Between 2000 – 2007: Sales increased from $2.3 M to $24.5
M Approx. 30% market share in frozen
seafood distribution & 25% in ice cream distribution
Exit: 100% FFL sold to Estonian company
Frozen Food DistrubtorDate of Initial Investment: July 2000Amount Invested: $934,000Type of Investment: EquityInvestment Fund: Baltics Small Equity FundDate of Exit: October 2007Type of Exit: Trade SaleGross IRR: 38%Multiple of Capital Invested: 6.0X
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SUNSHINE EXPORTSPeru
Company Case Study:
Works with more than 600 large, medium- and small-sized mango producers in Peru
Provides technical assistance & agribusiness training to all farmers
Connects small farmers to int’l markets At time of initial investment, Sunshine
was looking to expand production beyond fresh fruit to include frozen, canned and dried produce. allow company to keep 100% of all
produce received from suppliers, rather than discarding blemished fruit, increasing profits for both the company and the farmers
Largest Peruvian mango exporter: 15% of market (2007/08)
Produce Processor and DistributorDate of Initial Investment: Oct 2005Amount Invested: $6.7 millionType of Investment: Equity & DebtInvestment Fund: Trans-Andean Fund Peru;
SEAF SME Debt Facility; SEAF Global SME Facility
Use of Funds: Purchase property, equipment & facilities; working capital
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At time of initial investment, Artima was 1 year old and operated 3 supermarketsDuring the investment period (2002 – 2005):
Artima expanded to 14 stores in 13 cities Annual revenues grew to EUR 32 million Employment increased from 251 at the time of investment (2002) to 1,097 in
2004, with SEAF arranged training Artima was sold to Enterprise Investors who sold it to Carrefour in 2007 for Euro 21
M
Romania
Supermarket ChainDate of Initial Investment: September 2002Amount Invested: $3.1 MillionType of Investment: EquityInvestment Funds: Trans-Balkan
Romania ;CEE Growth FundDate of Exit: March 2005Type of Exit: Sale to Financial
InvestorGross IRR: 59%Multiple of Capital Invested: 2.6 X
ARTIMACompany Case Study:
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Investment Targets: Lessons Learned
Farmers Aggregators
Processor
s
Logistics service
providers
Distributors /
Wholesales
Retailers Consumers
SEAF seeks to understand the entire value chain to target the companies with greatest leverage to add value
• Primary agriculture generally too volatile (local/global exogenous factors)
• Balancing value chain in concert with understanding market yields good results (PPZP; Sunshine/Symbio/Agroaromas; Ecopex; HuiJi/Hua Long)
• Accounting, cost reduction and transparency key (Bazi;Tinex;Szadrob)
• Productivity enhancement key driver (Indoor, HBC; Aqua Tudakul)
• Consolidation in generally fragmented markets (FFL; Artima)
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• Every $1 invested in the SMEs profiled generated on average an additional $12 in the local economy.
• 66% Economic Rate of Return on investments.
• The economic impacts of SME investment are spread among various groups of stakeholders in the respective local economies (see chart below).
Methodology: As part of case studies, using a cash flow model, to which social impacts are added to financial cash flows, SEAF calculated the Net Benefit/Cost Ratio (net financial and social returns / amount invested) at a zero percent discount rate. Social cash flows are estimated based on company/employee interviews and other research.
Development Impact: The Multiplier Effect
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Highlights from our Original Original Research Research on the Development Development Impact Impact of our Investments:*
•17% average annual growth in non-seasonal employment.
•79% of these new jobs go to semi- and unskilled workers.
•70% of companies have women employees in senior management positions.
•31% average annual growth in taxes paid to the government after SEAF investment.
•On average, 5% of company revenues were contributed to local charities and community projects in 2008.
•On average, each company paid approx. $3 Million to local suppliers on a yearly basis.
•SMEs train employees and increase benefits.
SEAF’s Development Impact Record
For more on our Development Impact Reports, please visit: www.seaf.com/impact.htm
*All numbers refer to 2008 development impact data.
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Georgia Regional Development Fund
$30 million fund MCC/MCG ownership
Objective: to invest in SMEs in regions of Georgia outside of Tbilisi
Emphasis on agribusiness and tourism
SEAF selected in a competitive tender in 2006
10 investments thusfar 60% of capital invested $2 million average investment
size
Fund Case Study:
47% AGRIBUSINESS47% AGRIBUSINESS
14% ICT 14% Retail Trade
15% Tourism
9% Construction
INDUSTRY BREAKDOWN
Piunik – Integrated Poultry Business
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Kutaisi
Georgia Regional Development Fund (GRDF)
Batumi
TelaviMtskheta
Mestia
Poti Kaspi
TBILISI
Sighnaghi
Investee
Location
Doki Tbilisi
Dogan Marneuli
Bazi Mtskheta
Rcheuli Telavi Sighnagi Batumi Kutaisi
Piunik Kaspi
Tetnuldi Mestia
Ecopex Mtskheta
Prime Concrete
Poti
Madai Poti
Delta Comm
SW Georgia
Kutaisi
Marneuli
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GRDF Portfolio
MadaiBlack Sea Anchovy Fishing
$3 million investmentparticipatory debt plus equity
Use of Funds: Purchase of ship and equipment and processing plant upgrades
Opportunity: First Georgian company to engage in modern Black Sea fishing
Expected IRR: 38%
PiunikIntegrated poultry business
$2 million investmentparticipatory debt
Use of Funds: Equipment, hatching hens, working capital
Opportunity: Expansion from poultry imports to own production of eggs, incubation and feed, addressing limited supply from Armenia and growing demand
Expected IRR: 24%
BAZIFood canning/jarring and concentrate production
$2 million investmentparticipatory debt plus equity
Use of Funds: Apple concentrate production equipment
Opportunity: Cannery with largest distribution in Georgia entering apple concentrate production, which is in high demand in Europe & globally
Expected IRR: 25%
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GRDF Portfolio
EcopexHazelnut processing/export
$2 million investmentparticipatory debt plus equity
Use of Funds: Purchase of land, processing equipment, and working capital
Opportunity: Opportunity to increase capacity for a technically capable player adhering to global standards. Contracts, LOIs and other leads in place. Steady growing global demand.
Expected IRR: 30%
DoganAnimal feed and pet food producer. Also trades animal medicine and vaccines.
$700,000 investment; debt
Use of Funds: Improve the quality of its extruded feed production line; expand the line to include feed for “pre-starter broilers” (one to seven-day-old chicks); expand the company’s storage and warehousing facilities.
Opportunity: only producer of extruded feed in the Caucasus positioned to grow through import substitution and the growing agribusiness sector in Georgia
Expected IRR: 23%