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€12 million Impact Investment Fund for Uganda, focused on the agriculture sector Investing in the Agribusiness Value Chain 1 An Introduction to Yield zz PCP Uganda is launching a €12 million Fund to invest in Small & Growing Agribusinesses (SGAs) positioned in agricultural supply chains in Uganda, the Yield Uganda Investment Fund zz Yield is being formed with the support of the European Union (EU) Delegation to Uganda and the International Fund for Agricultural Development (IFAD), who have provided an initial funding of €10 million, providing first loss protection to equity investors zz NSSF Uganda is providing funding of €2 million to the Fund zz This event marks the first closing of the Fund. Due diligence is ongoing with prospective investors, looking to achieve a second closing by November 2017 with a total Fund size of €25 million capital zz The Fund is registered, domiciled, and managed in Uganda 2 Yield Uganda Investment Fund: Why Agribusiness? zz High impact and solid fundamentals zz Stable government, sound macro-economic policy framework, free movement of capital zz Ugandan agriculture has extremely high potential: • Favourable rainfall patterns mean that annual double-cropping is possible in most parts of the country • Abundant supply of labour in rural areas • Growth in domestic and regional demand for food products zz Improvements in rural infrastructure beginning to drive reductions in transaction costs zz Strong demand for investment capital from an increasing volume of agriculture-related entrepreneurs 3 Yield Uganda Investment Fund: The Opportunity YIELD Summary zz Single country-focus: •No dilution of focus by the Fund Manager, boots on the ground zz High impact proposition: •Focus on Economic Internal Rate of Return, employment and impact on rural households zz Supported by practical and commercial approach to financial investing: mix of instruments (debt and equity) zz Supported by a dedicated Business Development Support grant facility available to Yield investees, as soon as the investment decision is made Macroeconomic Environment Agriculture in Uganda zz Uganda’s GDP growth was 5.3% in 2015, higher than the Sub-Saharan average of 4.5%, with projections for 2020 at 6.3% and 5.4% for Uganda and Sub-Saharan Africa respectively zz Agriculture continues to be the most important sector in Uganda’s economy in terms of raw materials for industry, food and nutrition security, employment, income and exports to regional and international markets zz The outlook for inflation and interest rates shows gradual decline over the next 5 years to 2020, which will provide a conducive operating environment for businesses zz The sector grew by 2.8% in 2014/2015, contributing 24% of the total GDP zz Over 65% of Uganda’s population is engaged in agriculture 4 Yield Uganda Investment Fund: Case for the Fund zz The Yield Uganda Investment Fund is positioned for the impact investor seeking to achieve: • Risk adjusted financial returns • First loss protection from the Fund’s Anchor Investor (European Union) • Strategic call option on sustained high commodity prices zz Investment returns and amounts: • Mix of equity, quasi-equity, and debt designed to generate Euro returns of 16% (equity) and 11% (debt) • Investment range from €250,000 to €2 million zz Plus high measurable social returns: • Economic Internal Rate of Return of 30% • Contribution to improved food security • Commitment to sustainable economic growth in Uganda • Tax-resident in Uganda 5 Yield Uganda Investment Fund: The Fund Manager zz PCP Uganda is a wholly-owned subsidiary of Pearl Capital Partners, an investment fund manager resident in Mauritius and licensed by the Financial services Authority of Mauritius. PCP Uganda is regulated by the Capital Markets Authority of Uganda zz PCP Uganda is managed from offices in Kampala. The PCP Uganda team has been operating since 2005, and has unparalleled experience of investing in Ugandan agriculture-related businesses zz PCP Uganda has in-depth experience of tailoring investment structures to the needs of the individual investee, including both equity and medium/long term debt zz PCP Uganda will be supported by Deloitte (Uganda) Limited, which will conduct thorough financial due diligence (including tax compliance and status review) on all investees which pass initial screening 6 PCP Uganda – Track Record zz PCP has demonstrated “proof of concept” during its 11 years of operations zz Investments in more than 30 East African businesses to date, including 9 in Uganda zz Current Ugandan portfolio projected to yield 10-12% with significant social impact zz Average investment holding period 5-7 years zz First exit occurred in June 2009 zz As a result of PCP risk capital investments, existing portfolio companies have attracted substantial additional capital from traditional investors (examples available upon request) zz Detailed track record available upon request 7 Yield Uganda Investment Fund: The Fund Manager Edward Isingoma Wanjohi Ndagu Chartered Accountant/MBA Managing Partner. Has over 10 years with PCP first as CFO, then on Direct Investments. Partner. Joined the team in 2007. Has over 9 years with PCP, initially as Investment Manager. Holds an MBA. Kenneth Ibbett Investment Advisor. Has over 20 years experience as NED, Managing or Main Board Director of public and private equitybacked companies in several sectors. Mike Kinuthia David Wangolo Investment Director. Joined team in 2011 with over 8 years experience in investment advisory and corporate finance. Investment Manager. Joined team in 2012. Has 5 years experience in transaction advisory and capital raising. He is a CFA. Wiem A. Bernet Investment Manager. Joined team in Dec 2015. Has over 6 years experience in financial markets, banking and risk. Holds a MSc International Finance/Engineer. 8 Yield Uganda Investment Fund: Key Terms Target Fund Size Blended Value Fund €25 million Target 9% IRR (net) for equity investors, 7% IRR (net) for Anchor Investor First loss protection for equity investors Defined social return Manager PCP Uganda Limited First Close Q4 2016 at € 12 million, Second Close: Q4 2017 (latest) Investment Period 5 years Term 10 years, extendible for 2 successive years 9 Yield Uganda Investment Fund: Business Development Support (BDS) Facility Rationale for a BDS facility Sound business administration, systems and internal controls are critically important to build management capacity beyond the entrepreneur • Experience in SGA investing shows that complete pre-investment assessment of business administration, systems and internal controls, followed by active post-investment support is essential to enterprise growth • BDS facility allows for specific allocation of time and capital resources to meet this need Structure of BDS facility Separate BDS project to run alongside the Fund and capitalised with a € 3 million grant funding, provided by the EU and managed by IFAD BDS provision process BDS needs assessment as part of due diligence. Results in a bespoke business development support plan agreed at time of investment • Cost sharing between BDS Facility and Investee Companies 10 Yield Uganda Investment Fund: The Prospective Investees Investees' investment criteria A. Business environment criteria • No state marketing interventions in the sub-sector • Absence of domestic price controls on agricultural products • No unduly restrictive regulatory burdens on the sub-sector B. Enterprise criteria • Growth trend shown in historical and forecast demand volume • Competitive advantage: regionally competitive cost of production, product quality matching or exceeding regional industry standards • Stable prices: increasing or stable forecast product prices C. Performance criteria • Track record: minimum one year audited financial records and positive reputation with banks, suppliers and customers • Excellent management team with good entrepreneurial quality • Well-researched and realistic marketing plan D. Social and developmental criteria • Targeted Economic Internal Rate of Return of 30% • Social impact including overall job creation resulting from the growth plan • Equal opportunities by age, gender and health status • No adverse environmental impact Investment Process Investee Origination: identify investee in targeted sub-sectors Investee Screening: assess investees against investment criteria, financial and social returns Investee Due Diligence: detailed due diligence to support Fund Investment Committee and Board approval Investment Completion: signing of investment documents and disbursement Investee Management: continuous monitoring and review of investee performance Investment Exit: self-liquidation, trade sale, secondary buyout, IPO, etc. Key Contact Information Edward Isingoma PCP Managing Partner Tel.: +256 312 264983/4 Mob: +256 772 663564 [email protected] www. pearlcapital.net Kenneth Legesi Deloitte Manager – Advisory Tel.: +256 417 701329 Mob: +256 776 391939 [email protected] www. deloitte.com