Overview

Eastern Caribbean Enterprise Fund Ltd

Presented by Sonny José & Percy HanleyJune 20, 2012

Mission & Vision

To be an innovative, responsive and profitable provider of entrepreneur

development services and to promote sustainable economic growth through the creation of an internationally competitive

OECS private sector.

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Background• Part of ECCB’s overall regional money and capital market development

strategy – broadening, deepening and diversifying the financial markets• Creation of a single financial space in ECCU; developing regional financial

structures– ECHMB (1991); ECSE (2001)

• ECEF incorporated in St. Kitts and Nevis on 11 October 2009• Goals:

– To help transform and strengthen the private sector– To develop enterprises in the region via direct funding and technical assistance

To complement commercial lending by offering equity, quasi-equity and debt equity

• Key role:– To create and lead investments in ‘flagship’ companies and SMEs in sectors with

competitive advantage and export orientation– To establish linkages with regional and global strategic partners– To develop the entrepreneurial standard in the region– To promote a private equity/venture capital industry in the region

• ECEF Ltd, is raising EC$25mn in seed funding through sale of ordinary shares via Private Placement in 2nd half of 2012

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About ECEF Ltd.

• ECEF is a holding company and venture capital firm, as well as an fund sponsor and manager for a family of funds

• Public liability company with authorised share capital of EC$100mn• Initial share subscription of EC$25mn being raised in 2012• Sponsoring 2 asset pools and a donor funded technical assistance

facility– Small- & Medium-Sized Enterprise (SME) Development Fund of US$10mn

(c. EC$25mn) for seed and start-up stage SMEs with good growth and export prospects but which have capital financing and management challenges that can benefit from technical assistance. Typical funding for investees is up to EC$675,000 (US$ $250,000).

– Growth Fund of US$10mn (c. EC$25mn) to invest in more mature companies in the growth and expansion stage and in large cap projects. Minimum financing is expected to be upwards of EC$675,000 (US$250,000).

– Technical Assistance Facility of EC$2mn (c. US$750,000) to provide advisory and technical assistance to SMEs on a partial (to full) cost recovery basis.

ECEF will obtain international donor funding to seed the revolving fund.4

Asset TargetsECEF Ltd.

Initial Subscription: EC$25mnAuthorised Capital: EC$100mn

Growth FundInitial Subscription: EC$25mn

Authorised Capital: EC$100mn

SME Dev’t FundInitial Subscription: EC$25mn

Authorised Capital: EC$100mn

Technical Assistance FacilityDonor Funding: EC$2mn

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Pipeline of Investment Opportunities

• About 143 prospective candidates identified for further review and analysis with expressions of interest received from– Manufacturing firms (woodwork, furniture, building materials, etc.)

– Health and wellness company

– Garment manufacturing companies

– Agro-processing companies

– Distribution and transportation company

– ICT companies

• Shortlist of 17 pipeline companies (potential investees) for further due diligence, company visits and on-site investigation, and management interviews

• New project proposals continue to flow in

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• Stage 1: Business Concept / Investment Proposal

(versus Fund Investment Guidelines)

• Stage 2: Review of Business Plan & Financials

• Stage 3: Due Diligence (detailed review)

• Stage 4: Valuation of Investment & Deal Structure

• Stage 5: Term Sheet, Deal Negotiation and Legal Documents

Investment ProcessScreening Stages

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Initial Evaluation Criteria• The key investment parameters sought for future ECEF portfolio allocation:-

– potential solid returns on equity – positioned in a long-term growth industry– entrepreneurial, competitive and hard-working management – potential to be a local and regional leader – possessing competitive advantages (e.g., brands, relationship networks,

licenses, pricing power, etc.), and – possessing quality tangible assets

• Market risk: – demonstrable market exists? will the product/technology address a problem? can it lead to

a dominant market share/adequate market growth? pricing power?

• Technology risk: – who owns the technology? ‘protectability’ of the product?

• Financial risk: – how much it will take? can sufficient capital be raised? what is the ROR on investment?

• Management risk: – expertise & experience? willingness to give up some control? owner’s skin in the game?

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ECCB

E C E F Limited(Venture Capital Co. & Fund Operator,

Fund Sponsor & Fund Manager of 2 investment vehicles & a TA facility)

Fund Structure & Governance

Technical Assistance

Facility (Grants)

Fund Custodian

Administ’r/RTA

Legal Counsel

Fund Auditor

Fund Service Providers

The Growth Fund

(Separate Fund Entity & Investment Vehicle)

SME Dev’t Fund

(Separate Fund Entity & Investment Vehicle)

ECEF Board of Directors

Gr Fd Portfolio Co. 1

Gr Fd Portfolio Co. 2

Gr Fd Portfolio Co. 3

Gr Fd Portfolio Co. 4

SME Portfolio Co. 1

SME Portfolio Co. 2

SME Portfolio Co. 3

SME Portfolio Co. 4

Social Security & Pension Fds

NBFI, DB, CU, Insurance Cos.

Local & Int’l Comm’l Banks

CDB EIB IFC DFA (Donors)

Investors

The Fund Products• Fund Offering 1: Growth Fund

– Target annual gross return: 22%– Investing in ‘flagship’ and expansion stage businesses in high growth sectors – Multi-asset class / ‘hybrid’ and flexible investment mandate (private equity and listed securities, investing inside and outside of ECCU markets, short- to long-term investment horizon, etc.)– 2% management fee + 20% carried interest (with 6.8% hurdle rate)

• Fund Offering 2: SME Development Fund– Target annual gross return: 12% (de-risked by TA Facility)– Investing in seed stage and new start-up SME ventures– 1.5% management fee + 15% carried interest (no hurdle rate)

• Auxiliary Services: Technical Assistance Facility– Link grant funding with SME equity/quasi-equity/debt package– Outsourced services to pre-qualified and accredited business consultants, mentors and management coaches, BSOs, technical experts, etc.– Target break-even operation of TA grant funding resources– Full or partial cost recovery to replenish revolving fund– Revolving fund (EC$2mn); donor funded

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E C E F Limited(Fund Sponsor & Manager of the

Growth Fund)

ECEFLtd

HNWIs & Private Companies

Growth Fund StructureInvestors

Fund Custodian

Administ’r/RTA

Legal Counsel

Fund Auditor

Fund Service Providers

The Growth Fund

(Separate Legal Entity & Investment Vehicle)

ECEF Board of Directors

Gr Fd Portfolio Co. 1

Gr Fd Portfolio Co. 2

Gr Fd Portfolio Co. 3

Gr Fd Portfolio Co. 4

Manages & advises the

Fund

Pays 2% mgmt fee + 20% carried interest

Invests the Fund assets in

Admin agrmt

Custody agrmt

Audit svc agrmt

Legal svc agrmt

Provideservices toThe Fund

Outsources to

Invest in the Fund

Investor 3Investor 3Investor 2 Investor 5Investor 4

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E C E F Limited(Fund Sponsor & Manager of the

SME Dev’t Fund)

SME Development Fund StructureInvestors

Fund Custodian

Administ’r/RTA

Legal Counsel

Fund Auditor

Fund Service Providers

SME Dev’t Fund

(Separate Legal Entity & Investment Vehicle)

ECEF Board of Directors

SME Fd Portfolio Co. 1

SME Fd Portfolio Co. 2

SME Fd Portfolio Co. 3

SME Fd Portfolio Co. 4

Manages & advises theFund

Pays 1.5% mgmt fee + 15% carried interest

Invests the Fund assets in

Admin agrmt

Custody agrmt

Audit svc agrmt

Legal svc agrmt

Provideservices toThe Fund

Outsources to

Invest in the Fund

Caribbean Dev’t BankMultilateral Financial Inst’n 1 Multilateral Financial Inst’n 2

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E C E F Limited(Fund Sponsor & Manager of the

SME Dev’t Fund)

Technical Assistance FacilityDonors / Aid Agencies

Tech’l Assistance Facility

(Donor Aid Funding Pool for SMEs)

ECEF Board of Directors

SME Fd Portfolio Co. 1

SME Fd Portfolio Co. 2

SME Fd Portfolio Co. 3

SME Fd Portfolio Co. 4

Administers & screens aid

funding requests

Disburses grant funding for the SME portfolio co’s

Grant funding for the TA Facility

DFIDCDB / Carib Export USAID CIDA BDC Cda Other Aid Agencies

Apply for TA grant funding

Grant $$$ +

TA Action Plan

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Fund Governance• ECEF Ltd. is the Fund Sponsor and Investment Manager• Funds are “flow through” vehicles to ensure attractive returns

– Tax-exempt status for the Fund (work in progress) – Fund Term: 8-years + two 1-year extensions

• Investors’ monies will be pooled & managed by ECEF in 2 investment vehicles• Role of the ECEF Board of Directors in managing investments

– Provide strategic direction to the Investment Committee– Delegate portfolio construction, selection and investment allocation decisions to an Investment Committee

• Investment Committee (of 5-6 members)– Composed of CEO, Deputy CEO, 2 Board directors – External members: 1-2 more respected names in the investment community– Investment decision subject to a certain cap (as authorised by the BoD)

• National Advisory Committees– Door openers and rainmakers in their respective country markets– Assist in deal sourcing and origination, as well as business networking

• Outsource Fund service providers for the Growth Fund and SME Development Fund– Investment sub-adviser (working for the Fund Manager)– Fund Administrator/RTA– Custodian– Placement Agent – Auditor– Legal counsel – internal & external

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ECEF Ltd’s Target Shareholders

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• ECCB: EC$5mn (20% stake in Class A ‘founder’s shares’)• Public pension funds & social security scheme: EC$5mn (Class B)• Local and foreign commercial banks: EC$5mn (Class C)• NBFIs, local & regional private institutions: EC$3mn (Class C)

– insurance co’s, dev’t banks, credit unions, FNDs, private pension funds, private corporations, etc.)

• Accredited (sophisticated) & HMW investors: EC$2mn (Class C)– Investment funds & private investors (other VC/PE funds)

• Donor agencies, MFIs & supranational bodies: EC$5mn (Class D)– IFC, CDB, EIB, USAID, DFID, etc.

• Target Capitalization: EC$25mn for ECEF Ltd. (VCC/Fund Mgr)− ECCB seed: EC$5mn− External & regional funding sources: EC$20mn

ECEF Ltd.

EC$25mnSocial Security & Pension Fds

Class BEC$5mn

ECCBClass A

EC$5mn

NBFI, DB, CU,Insurance Cos.

Class CEC$3mn

Local & Int’lComm’l Banks

Class CEC$5mn

EIB, CDB, IFC & MFIs

Class DEC$5mn

Private Cos., VCFs, HNWIs

Class CEC$2mn

Target Investors for ECEF Ltd.

Class BEC$5mn

Growth Fund

EC$25mnInvestor 2

Class BEC$3mn

ECEF Ltd.Class A

EC$10mn

Investor 3

Class CEC$3mn

Target Investors for the Growth Fund

Investor 3

Class CEC$3mn

Private Cos., VCFs, HNWIs

Class CEC$5mn

Investor 5

Class DEC$2mn

DFA (Donors)Grant Funding

EC$2mn

MFI - 1Class A

EC$12.5mn + EC$1mn

MFI - 2Class A

EC$12.5mn+ EC$1mn

SME Dev’tFund

EC$25mn

TechnicalAssistance

FacilityEC$2mn

Target Investors for SMED Fd & Target Donors for TA Facility

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Funding Sources

Seed Capital & Fund Mgmt Budget• ECCB to provide an initial EC$5mn seed funding • Capital raising for the Funds to come from institutional investors as well

as MFIs and HNWIs• Annual ECEF overheads ranging from EC$500K (Year 1), EC$940K

(Year 2), and EC$1.3mn (Years 3-5)• Business travel expenses

– Fund raising– Investee company research and due diligence (deal sourcing)

• Media and publicity campaign– ECCB involvement (head office and rep offices)

• logistics• capital intros

– Engaging the BoD in promotion activities• roadshows• capital intros• investment research and leads

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• Step 1: Produce Offering Memos/PPMs and Term Sheets• Step 2: Obtain ‘ECSRC’ blessing & OECS ‘tax exemption’• Step 3: Business Trips & Sales Mission

– Roadshows & business trips• 2-pronged: 3 days fund raising + 2 days deal sourcing• June 2012: St Kitts & Nevis• July 2012: Tier 1 (Antigua, St Lucia & Grenada)• Aug 2012: Tier 2 (Anguilla, Dominica & SVG)• 2nd half of 2012: Montserrat + follow-up visits

– Annual budget: EC$138,650

• Step 4: Closing the sale– email, conference call, videoconference, follow up visits

• Closed-end fund: 3-6 months offering period– with soft close of 12 to 18 month period

• Target Launch: July 1st, 2012• Close offering period by Dec 2012

Marketing StrategyAsset Gathering

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Marketing StrategyBusiness Networking

• Branding– Logo (ASAP)– Website development (WIP)

• developing the content• developing modalities for webcast – manager/investor;

manager/investee interface• business templates for potential investees

– Videoconferencing; mail blast; emails & follow-up calls– Media (publicity) campaign: radio, print, TV advertorials

• Network with alternative investment database & industry

bodies (HedgeCo.net, BVCA, EMPEA, CVCA, AIN, etc)

• Revive contacts with MFIs & regional bodies (IFC, CDB, etc)

• Tap private placement agents and capital intro services– HedgeCo.net

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Organizational & Operational Plan

• Location: ECCB Office Campus• Management & Operation

– 3 person staff (Year 1)

– hire additional financial & marketing persons (Yrs 2/3 - 5)

• Investment Committee (4-6 members)– CEO & Deputy CEO

– 2 Board Reps

– 1 - 2 others: from among investors and business community

• Legal Counsel– Internal: Kerryanne Amritt (Corporate Secretary)

– External counsel (retainer basis only):• St Kitts & Nevis counsel (for ECCU markets)• Fund specialist from Cayman (for international markets)

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• Start-Up Cost: EC$91,332 (excl. EC$5mn ECCB seed)

Financial Plan & ProjectionsStart-Up Cost

• EC$13,000 are Fund-related and can be amortized

by the ECEF-sponsored Funds over 3-5 years

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START-UP COSTS (c/ o ECCB) Mar-Jun Year 1(2012)

Minimum share capitalization (20% ECCB share) 5,000,000 5,000,000Legal drafting & incorporation expenses 10,000 10,000

Fund admin & custodian set up fees 3,000 3,000Trademark-related & business regis'n expenses 7,802 7,802Office furniture 0 0Computer equipment 0 0Fax/copier/scanner/printer 0 0Website dev't & email/ internet hosting 10,530 10,530Others (office vehicle) 60,000 60,000

Total Start-Up Costs 5,091,332 5,091,332

Financial Plan & Projections

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Consolidated Cash Flow for ECEF Ltd: Operating Margin & Cumulative CF

Eastern Caribbean Enterprise Fund Ltd, Growth Fd, SME Fd & TA Facility

Assuming: Tax Exempt Funds & Fund Management Company

(in EC$) Year 1 Year 2 Year 3 Year 4 Year 5(2012) (2013) (2014) (2015) (2016)

GROSS ASSETS UNDER MANAGEMENT 41,674,480 53,709,896 62,983,652 73,851,269 86,622,055

ECEF Ltd's Net Assets 23,628,122 24,491,210 25,150,263 25,998,115 32,630,315

OPERATING REVENUES 171,658 1,802,429 1,961,419 2,150,219 7,934,567

OPERATING EXPENSES 492,210 939,340 1,302,367 1,302,367 1,302,367

Consolidated Operating Margin -320,552 863,088 659,052 847,853 6,632,200Cumulative CASH FLOW -320,552 542,536 1,201,589 2,049,441 8,681,642

Financial Plan & ProjectionsSummary of Cash Flow

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Comparative Cash Flow Internal Rate of Return NPV (EC$; @6.8% discount rate) Net Assets CAGR

Consolidated Cash Flow of ECEF Ltd. 12.8% $1,331,779 5.5%

Cash Flow of Growth Fund -10.4% -$5,031,137 16.5%

Cash Flow for SME Dev't Fund 77.4% $2,636,043 9.3%

Cash Flow for Technical Assistance Facility n.a. n.a. n.a.

Financial Plan & ProjectionsDiscounted Cash Flow Analysis

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• Operating ECEF Ltd. as a Venture Capital Co. and as Fund Sponsor of 2 asset pools (SMEDF and GF), and as Administrator for the TA Facility will result in a positive discounted cash flow of EC$1.3mn over the first 5-year period

- IRR for ECEF Ltd. = +12.8% - ECEF Net Assets CAGR = +5.5%- Critical to profitability is obtaining tax-exempt status for ECEF Ltd. as well as the

investment vehicles that it manages

• The Growth Fund, seeded by ECEF Ltd. (with EC$10mn), will generate positive cash flow (revenue stream) of EC$6.2mn (incl. carried interest) or EC$2.8mn (ex-carried interest)

• The SMED Fund, also operated as a separate investment vehicle but seeded by MFIs (EC$25mn), will generate positive cash flow (revenue stream) for ECEF Ltd. of EC$4.4mn (incl. carried interest) or EC$2.2mn (ex-carried interest)

− SMEDF’s better financial results is due to the absence of a hurdle rate (unlike GF’s 6.8%)

Financial Plan & ProjectionsPayback Period

• ECCB’s initial capitalization of EC$5mn will be recovered through positive annual cash flows in Year 5 (2016)

• Total revenue stream for the 5-year period = EC$14mn with carried interest and EC$8.5mn ex-carried interest (versus ECCB seed capital of EC$5mn) or 2.8 times and 1.7 times payback, respectively

Enterprise Value

• Year 1 net assets of EC$23.6mn; @7.5x earnings multiple = (n.a.)• Year 3 net assets of EC$25.2mn; @7.5x earnings multiple = EC$3.0mn• Year 5 net assets of EC$32.6mn; @7.5x earnings multiple = EC$20.3mn (incl. deferred carried interest) or EC$10.2mn (ex-deferred carried interest)

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Thank You