PROFILE Tel+233 (0) /

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1 PROFILE Tel+233 (0) / th Floor, Premier Towers, Ministries, Accra. PMB CT 449 Cantonments, Accra Ghana

2 Table of Contents Contents 1.Executive Summary 1 2. Background 3 3. Ghana s Small and Medium Enterprise Sector 4 4. The Venture Capital Trust Fund Mandate Vision Method of Operation VCTF s Achievements Establishment of Venture Capital Finance Companies Summary of Five-Year Outlook Plan Industry Development Efforts 10

3 Pg. 01 Executive Summary 1. Executive Summary The Venture Capital Trust Fund ( VCTF, the Trust Fund ) was established by Act 680 in 2004 as a Government of Ghana initiative to promote and support the private sector as an equal partner in achieving the country s developmental goals. Subsequently, the Trust Fund commenced operations on 16 th January, 2006 with a seed capital of GH 22.4 million (equivalent to US$22.4 million at that time). Additional funding of GH 25 million (approximately US$8 million), was injected by the Government of Ghana in 2012 and The Trust Fund operates by forming venture capital funds (also known in the Act as Venture Capital Finance Companies (VCFCs)) with reputable private institutions. These VCFCs act as the intermediaries between SMEs requiring funds for viable business projects and the Trust Fund. Since inception, the Trust Fund has leveraged its seed funding to increase the pool of funds available for SME investing by US$40 million through the private partnership agreements. Currently, the Trust Fund has committed about US$17million, in five Venture Capital Funds. A portion of these funds has already been invested in 48 SMEs spread across several sectors including Agriculture, Agro-processing, ICT, Pharmaceutical Manufacturing, Education, Real Estate, Waste Management, Healthcare, Manufacturing, and Aquaculture. Among other achievements, these investments have helped create more than 2000 direct and several indirect jobs. Additionally, the VCTF has a Special Purpose Vehicle (SPV) financing scheme, which supports rural agriculture and provides critical financial resources and technical assistance to smallholder sorghum farmers in the Northern parts of the country. These farmers produce and supply grains to the Brewery Industry as a substitute for imported barley. In August 2009, a new platform was prepared to launch the Soybean Value Chain, which led to the establishment of a National Soybean Alliance (NSA). The objective is to grow the Edible Oils and Poultry Industries in Ghana. The success chalked to date include the creation of more than 4,500 jobs for rural sorghum farmers, the supply of quality grains in excess of 4,800 metric tonnes to the Brewery Industry, and the formation of a strategic alliance with the West African Sorghum Value Chain Development Project. For the Soybean project, over 4,700 direct jobs and 4,000 indirect jobs have been created. Accordingly, the Trust Fund has developed a solid five-year strategic plan which is aimed at building the Venture Capital Industry in Ghana, establishing additional Venture Capital Finance Companies, increasing the available pool of funds, increasing market awareness of venture financing options, and extending operations to other regions across the country. However, by establishing and disbursing funds to SMEs through the various intermediaries, VCTF has for 2017 received an allocation of US$ 50m to implement the above mentioned

4 Pg. 02 Executive Summary mandate. A private equity fund, as this, with the agenda of Venture Capital Trust Fund requires massive and continuous funding to ensure that the necessary funding is provided to SMEs to guarantee a sustained national development and champion the Government s development agenda. To this end this paper provides an overview of the Venture Capital Trust Fund and highlights a critical area of need where financing support from the African Development Bank will pave way for the realization of VCTF s goals in the coming years.

5 Pg Background 2. Background In Ghana, long-term capital in terms of equity to support growth-oriented small and medium companies was virtually non-existent until the introduction of the Venture Capital Trust Fund Act in 2004 ( VCTF Act ).Prior to establishing the Venture Capital Trust Fund, the Government of Ghana was inundated with calls from the private sector to make finance more accessible and affordable for local businesses. While recognizing the private sector as the engine of growth for the Ghanaian economy, government designed the Venture Capital Trust Fund to provide long-term equity and quasi equity financing for small and medium scale businesses to scale up operations and in process create more jobs and spur socio-economic transformation of the Ghanaian economy. In addition, the Trust Fund was mandated to grow the venture capital industry to become a very reliable source of capital, which could be relied on to support private sector growth. Through the efforts of the Venture Capital Trust Fund, the Venture Capital Industry saw a significant expansion and in 2012 opened itself up to the global venture capital and private equity industry by hosting the 9 th African Venture Capital Association Conference in Accra. VCTF has leveraged its seed capital to create a pool of funds to the tune of US$85.2 million available to be invested in SMEs across the country and are looking to establish more funds to increase the pool of funds available for equity investments in the SME sector of the Ghanaian Economy. The Government of Ghana recognizes Venture Capital Trust Fund as a vital component to solving the financing challenges of Ghanaian SMEs, creating large numbers of jobs, and spurring economic growth. It demonstrated this by way of annual budget allocation of USD 50 million in This will be invested in line with the Government s industrialization policy and private sector growth projects.

6 Pg Ghana s Small and Medium Enterprise Sector 3. Ghana s Small and Medium Enterprise Sector Ghana s Small and Medium Enterprise (SME) sector is the most dynamic sector of the Ghanaian economy, replete with privately owned and informal businesses. Data from the Registrar-General Department suggest that about 90% of companies in Ghana are registered as micro, small and medium enterprises. However, in spite of their dominance in the private sector, SMEs contribute less than 50% to the gross domestic product (GDP) (it is estimated that in 2012 SMEs accounted for 49% of Ghana s GDP).SMEs, when properly capitalized, have the potential to grow and spearhead the accelerated growth of the country into higher middleincome status. However, by virtue of their size and track record, they have such high-risk profiles that the Banks and securities markets generally consider investments in them unattractive. Thus, there is a dearth of long-term investment funds for SMEs aggravating their already vulnerable situation. The most quoted challenges facing SMEs in Ghana is access to and cost of capital, either debt, equity, or both as well as human capital deficiencies, which continue to impede growth. Up until recently, equity finance was non-existent in the country. These limitations and challenges prompted the Government to establish the Venture Capital Trust Fund (VCTF) through an Act of Parliament (Act 680) in However, the enormity of demand for long-term financing for businesses at various stages of the business life cycle, including seed and early-stage funding far outstrips the supply of capital. Total capitalization of formalized venture capital funds focusing in the SME sector is estimated to be under $100 million, which pales in the face of the growing demand for capital against a backdrop of rapid economic growth of the Ghanaian economy. The Association of Ghana Industries Business Barometer for example continue to record access to and cost of finance as among the most significant impediments to business growth in Ghana despite the efforts of the nascent Venture Capital Industry. The dearth of capital for SMEs has spawned a vibrant microfinance industry, which has expanded over the course of 10 years to bridge the financing gap for SMEs in Ghana. However, the low credit amount, high interest rate and short-term nature of microfinance credit, makes it almost impossible for SME business owners to grow their business on the back of micro credit.

7 Pg The Venture Capital Trust Fund 4. The Venture Capital Trust Fund The Parliament of Ghana passed the Venture Capital Trust Fund Act 2004 (Act 680) as a strategic initiative to address the perennial lack of access to long-term funding for Ghanaian SME businesses. Following the passage of Act 680, the President of Ghana appointed VCTF s Board of Trustees, comprised of government and private sector representatives. Shortly thereafter the President also appointed a Chief Executive Officer to the VCTF, a government official responsible for updating the Ministry on the operational status of VCTF. Between 2004 and 2006, a total of 22.4 million Ghana Cedis (at the time, USD22.4 million) 1 was raised for VCTF programs through a 25% commitment of the National Reconstruction Levy (the Levy). The Levy was created to fund government-run development programs and faced opposition by the business communities on which the tax was imposed. In addition to the Levy, Act 680 indicated that additional VCTF funding could be raised through other private investments and donations. Since its inception, the Trust Fund has focused on delivering its mandate by establishing the required infrastructure for a thriving Venture Capital Industry and providing investment funds to indigenous venture capital funds operating in Ghana. 1 Due to an increase in exchange rates, today this amount equates to approximately USD12million. Because the VCTF is structured using US dollars, this exchange rate has had a significant impact on VCTF funds.

8 Pg The Venture Capital Trust Fund 4.1 Mandate In accordance with the VCTF Act 680, 2004, the Trust Fund is mandated to provide financial resources for the development and promotion of venture capital financing for SMEs in Ghana by: I. Providing equity and credit financing to eligible Venture Capital Finance Companies (VCFCs) to support SMEs; and II. Providing funds to support other activities and programs for the promotion of venture capital financing, as the Board may determine in consultation with the Minister. 4.2 Vision VCTF s vision is to create a vibrant and well-structured venture capital industry with investments in various sectors that lead to poverty reduction, job, wealth creation, and general socio economic growth. 4.3 Method of Operation VCTF operates through Institutional Partners, who form joint-venture arrangements to establish Venture Capital Finance Companies (VCFC). Each VCFC is managed by a Fund Manager, licensed as an Investment Advisor by the Securities and Exchange Commission (SEC). VCFCs act as intermediaries between SMEs requiring funds for viable business projects and the Trust Fund. Investment proposals are received and reviewed by the Fund Managers of VCFCs, who have the mandate to decide on investments after a duly approved approval process by the Investment Committees of their respective Boards. VCFCs are encouraged to invest in all sectors of the economy, but are precluded from investing in businesses that engage in direct imports to sell. The current maximum funding limit is 20% of total capitalization of a VCFC and a minimum of US$25,000. For the purposes of VCFC investments, an SME is defined under the VCTF Act 680 as a business whose total assets base, excluding land and building, does not exceed the cedi equivalent of US$1.0 million and whose total number of employees does not exceed 100 persons. The Trust Fund is also involved in direct investment in the Agricultural sector through a Value Chain Financing model using Nucleus Farmer-Out grower scheme. In the past the Trust Fund financed the production of sorghum for the Brewery Industry and soybean for the Edible Oil and Poultry Industries. The Trust Fund in 2011 begun financing yellow maize and currently provides funds for the production and distribution of yellow maize across Ghana. In 2012, the Board of Trustee also approved for the establishment of the Development Assistance Fund, which is an in-house fund dedicated to supporting early-stage companies with short-term credit to enable them bridge capital requirements and develop them for onward transition into the regular venture capital stream.

9 Pg The Venture Capital Trust Fund 4.4 VCTF s Achievements Establishment of Venture Capital Finance Companies Using Levy funds, VCTF invested in market infrastructure by developing intermediaries, known as Venture Capital Finance Companies (Finance Companies). By the end of 2006, the first two venture capital finance Companies were launched - Activity Venture Fund and Gold Venture Capital Fund- seeded with a total of US$6 million from VCTF and US$8 million from other local investors (mainly banks and insurance companies). With these first Finance Companies, VCTF was actively involved in developing the business plans and setting investment criteria standards for investing in small and medium scale enterprises. The inaugural funds provided a reference from which subsequent financial service providers were able to submit proposals in line with VCTF objectives. In 2007, VCTF launched two more Financing Companies, Bedrock Venture Capital and Fidelity Equity Fund II. 2 By the end of 2007, VCTF raised a total of USD47.2 million including both Levy dollars and private investment that leveraged tax incentives for investing in the Venture Capital Finance Companies. In 2009 a fifth Financing Company Ebankese Fund Ltd was established, with our last anchored fund of US$27million coming up in 2016, bringing the total funds under management to US$85.2 million. To date the six VCFCs have invested more than $30 million in 48 portfolio companies by using both equity and quasi equity instruments. These companies have created more than 3,000 direct jobs and several other ancillary jobs, which result from the increased level operations of portfolio companies. In addition to capital, VCFC fund managers put at the disposal of portfolio SMEs a myriad of business support services and strategic inputs both at the board and management levels to put portfolio companies on a proper path for growth. 2 Fidelity Fund II is the second fund of an already established local investment manager, Fidelity Capital Partners, wholly independent from the US firm, Fidelity Investments.

10 Pg The Venture Capital Trust Fund VCFC Summary Activity Venture Finance Company Bedrock Venture Capital Finance Company Gold Venture Ebankese Oasis Africa 10th September, 2017 Fidelity Equity Fund II Fund Venture Fund Fund II Fund Manager VCTF VCTF Mustard Capital Partners Gold Coast FM Oasis Capital Oasis Capital Vintage Year Total Committed $10,000,000 $10,000,000 $23,200,000 $4,000,000 $10,500,000 $35,000,000 Total Committed by VCTF $4,000,000 $4,000,000 $3,000,000 $2,000,000 $4,000,000 $2,000,000 VCTF % Holding 40.0% 40.0% 12.9% 50.0% 38.1% 5.7% VCTF Financial Instrument Ordinary Equity Ordinary Equity Majority Preference Shares Ordinary Equity Ordinary Equity Ordinary Equity Term in Years Investment Focus by Stage Generalist Generalist Generalist Generalist Predominantly Real Estate Generalist Expected IRR 25% 25% 25% 25% 25% 25% Recallable Distributions 8% 8% 8% 6% 8% 8% Other Investing Partners GCB Bank 40% ADB Bank 20% National Investment Bank 40% State Insurance Company 20% FMO- 22% Swiss Investment for Emerging Markets(SIFEM)- 13% Ghana Growth Fund-50% HFC Bank Limited-30% Ghana Union Assurance-20% IFC-25.93% DGGF-18.52% Social Security & National Insurance Trust- 22% EDC-10% ATHL-25.93% Oikcredit EDCS-9% Finnish Fund for Industrial Cooperation (FINFUND)- 13% Social Venture Capital Fund (SOVEC)-9% Fidelity Capital partners (FCPL)- 1% DFHL-9.26% Oasis-3.70% ENO-3.70% Proparco-20%

11 Pg Summary of Five Year Outlook Plan Summary of Five Year Outlook Plan Parliament passes the Venture Capital Trust Fund Act Venture Capital Trust Fund begins operations in a new physical office Nov VCTF invests US$4 million in Activity Venture Finance Company and US$2 million in Gold Venture Capital Fund. Other investment partners were local finance institutions Jan VCTF invests US$4 million in Bedrock Venture Capital Finance Company Ltd. Other investing partners were one local bank and one local insurance company Jul VCTF invests US$3 million in Fidelity Equity Fund II. Other investing partners included three DFIs, a local pension fund, and the fund manager VCTF invests US$4 million in Ebankese Venture Fund. Other partners included a a bank and an insurance company both based in Ghana VCTF anchors and invests US$ 2million in Oasis Africa fund II with co investors such as the IFC, Africa Tiger Holding and Stichting fondsbeheer DGGF locaal MKB, with investments focus in Ghana and Cote D'Ivoire

12 Pg Summary of Five Year Outlook Plan Industry Development Efforts In keeping with the second mandate of Act 680, VCTF has continued to build the Ghanaian venture capital market, developing a network of private stakeholders to support its fundraising and technical assistance activities. To initiate connections between the Small Growing Business community and investors, VCTF held joint investor/sme roundtables across the country from 2010 to 2015 as well as other stakeholder seminars Angel Investments The Trust Fund has also taken steps to develop fund governing documents and reporting standards, which are designed to reflect international standards. Further, in 2011 VCTF established the Ghanaian Angel Investor Network (GAIN) to formally organize wealthy individuals to invest in and mentor entrepreneurs. GAIN is the first angel investor network of its kind and is designed to promote angel investing as an alternative form of financing business start-ups in Ghana Ghana Alternative Exchange More recently, The Trust Fund was instrumental in creating the Ghana Alternative Market (GAX), an alternate listing on Ghana s stock market specifically established for companies with significant growth potential. As the entry cost into the primary market exchange is too expensive for smaller businesses, the GAX will offer a more accessible option for SMEs to attract investment while at the same time providing an avenue for Venture Capital Fund Managers to exit their portfolio investments. VCTF in collaboration with the Ghana Stock