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Discussion Session

Discussion Session. Investments for Fisheries Sustainability – Applications in the Russian Far East. Sea Change Investment Fund Environmentally-Driven Venture Fund.

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Discussion Session

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  1. Discussion Session Investments for Fisheries Sustainability – Applications in the Russian Far East

  2. Sea Change Investment FundEnvironmentally-Driven Venture Fund • $20 million dollar fund capitalized by a program-related investment from the David and Lucile Packard Foundation, matched by a private equity investment. • Targets the middle of the seafood supply chain • Focuses solely on environmentally-preferable seafood • Uniquely blends philanthropic and private capital

  3. Cost: $2.00/lb Market value: $4.00/lb Cost: $0.25/lb Market value: $1.80/lb Market price: $1.80/lb

  4. Brokers and traders PROCESSING MARKETING & DISTRIBUTION SUPPLY RETAIL Supermarkets Product Developers Consumers ($63B in purchases) US fisheries US secondary processors US primary processors Seafood wholesalers / distributors Fish markets US aquaculture Restaurants Broadline distributors Foreign fisheries Importers Foreign primary processors Foreign secondary processors Hotels Foreign aquaculture Institutions

  5. Sea Change Investment FundPartial Portfolio September, 2006 September, 2005 EcoFish supplies and markets seafood exclusively from environmentally sustainable sources. All of the company's products are vetted and approved by a panel of fishery conservation experts. The company sells fresh seafood to over 125 upscale restaurants and frozen seafood entrees to over 1,200 gourmet and natural foods stores. Organic Bistro Whole Life MealsTM, are a line of nutritiously rich, gourmet frozen meals. Certified organic, each meal is designed to maximize its ingredient mix for lean protein, fiber, omega-3s and complex carbohydrates to provide a balanced, whole meal. Callaway's support for organic agriculture is complemented by its strong commitment to sustainable seafood.

  6. Sea Change Investment FundTypical Conservation Terms Sustainable seafood sourcing policy – Company makes sustainability of its seafood an explicit component of company policy. Elements typically include: • Product vetting process that allows the company flexibility in its approach (e.g. advisory panel, defined standards, outside consultant) • Commitment to Marine Stewardship Council (MSC); chain of custody certification and product labeling • Commitment to best farmed products, as defined by Monterey Bay Aquarium standards • Communications standards

  7. Sea Change Investment FundTypical Investment Terms Sea Change typically seeks to structure standard convertible preferred securities, including features such as: • Dividends • Liquidation preference • Anti-dilution provisions • Optional conversion • Board seat(s) • Registration rights • ROFR / co-Sale rights • Drag-along rights

  8. Sea Change Investment FundMarket Landscape

  9. The Packard Foundation Equity Investors Equity capital commitment Principal + 1% interest Program-RelatedInvestment (PRI) Profits – subordinated to Packard Sea Change Investment Fund Profits on exit events/cash flow Investments Portfolio of investments

  10. Sea Change Investment FundPotential applications in Russian fisheries • Limited direct applications given the fund’s focus on brands, narrowly defined means of extracting value and geographic limitations • Potential indirect support through investment in US companies that “tell the story” behind sustainably-caught, high quality products • Sea Change serves as a potential model for other funds

  11. ProFund • $22 million fund (10 years) • Investors saw average return of 6% on investments • Exit strategy /opportunity to liquidate ownership in the company was negotiated in each investment • Portfolio was soundly diversified with investments in several countries, organizational forms, market penetration, organizational maturity

  12. California Fisheries Fund • Managed via partnership between Environmental Defense and a qualified lender • Capitalized first by grants, with expansion potentially fueled by a blend of grants and debt (PRIs) • Three lending products (Fishery Foundation Loans, Infrastructure Loans, Business Loans) • Phased expansion

  13. Microfinance • Range of services can be broadly categorized as the following: • Financial intermediation - refers to the provision of financial products and services, notably credit and savings. • Social intermediation - the process of creating and building human and social capital required for sustainable financial intermediation. This is an intervention strategy that helps marginalized clients connect and link up with formal financial institutions. • Business and enterprise development services - include a wide range of non-financial services and interventions that assist borrowers in running their microbusinesses. • Social services - includes non-financial services such as health, nutrition, education and literacy training that aim to improve the well-being of target groups.

  14. Attractive Investment Environment • Sophisticated Financial System • Political Will • Local commitment and ownership • Well-established legal and financial environment

  15. Potential Uses of Capital • To purchase financial assets • Monitoring and enforcement • To increase the value of the product • Improved processing • Marketing • Exposure to new markets • Create economic incentives for stewardship and add value to fishery landings

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