BIO Annual Report 2007 by The Crew Communication

Annual report 2007

Development through Investment

BIO supports the establishment and the expansion of local companies in order to contribute to the growth of a sustainable private sector in developing countries and alleviate poverty.

Preface by the Minister The Belgian Development Cooperation is resolutely committed to reducing poverty, taking the Millennium Development Goals (MDG) as a reference. The 2007 United Nations report on the MDGs observes that results as a whole have been modest. Progress has indeed been made in most regions of the world, but much still remains to be done. The report stresses that the MDGs can still be met by promoting the introduction of good governance, increasing public investments and productive capacity, and creating decent jobs. Economic growth is an evident precondition for sustainable development and for effectively fighting poverty. The private sector has a crucial role to play in encouraging this growth in terms of employment, commercial integration and stimulating the development process in general. The successes of certain countries

show that rapid progress can be achieved on a large scale through a combination of strong governmental leadership, good governance and effective strategies to increase public investment in vital areas and to stimulate investment in the private sector as a driver for growth and improving general well-being. A legal framework that is propitious for investment is vital here. BIO brings undisputable and relevant added value to achieving the objectives of the Belgian Deve-lopment Cooperation. In 2008, BIO will have to pursue and strengthen the efforts that have enabled it to successfully support local small and medium-sized enterprises, which are essential players in the economic and social stabilization of developing countries and in particular the partner countries of the Belgian Development Cooperation, whilst making sure that these efforts are pertinent for the growth of its interventions.

Together we shall seek to ensure better coordination and consultation between the different players and instruments of the Belgian Development Cooperation to make our interventions more coherent and effective.

Charles Michel Minister of Development Cooperation

Glossary

Key figures

• ACP: African, Caribbean and Pacific Group of States • DEG: Deutsche Investitions- und Entwicklungsgesellschaft • DGDC: Directorate-Generale for Development Cooperation • EDFI: European Development Finance Institutions • IMF: International Monetary Fund • FMO: Netherlands Development Finance Company • GPR: Geschäftspolitisches Projectrating • DFI: Development Finance Institution • MFI: Microfinance Institution • OECD: Organisation for Economic Co-operation and Development • MDG: Millennium Development Goals • SME: Small and Medium-sized Enterprises • DRC: Democratic Republic of Congo • SBI/BMI: Belgian Corporation for international Investment • TCX: The Currency Exchange Fund

(Amounts en k €)

2007

2006

New commitments

30 325

29 300

Outstanding investments

87 182

58 885

126 006

102 600

44%

46%

Net commitments* Loans Equity

56%

54%

Revenues**

7 085

6 594

Net profit

2 942

2 467

Operational costs/available means

1.87%

1.98%

*Signed contracts – reimbursements + projects BoD approved **Net portfolio revenues + treasury revenues

Highlights • BIO was the first development finance institution to hedge a CFA franc loan through TCX. • BIO has signed a joint statement promoting Corporate Governance with 31 other bilateral and multilateral institutions. • First external evaluation of BIO commissioned by the Belgian Government. • BIO publishes the first GPR reports measuring the impact on development of its 2006 and 2007 commitments.

Table of contents Preface by the Minister Key figures Inside page Message from the Chairman 05 New web site 08 Profile of BIO 10 Impact on Development 12 Portfolio 14 General overview 14 BIO in Africa 16 Geographical spread 18 New Investments 22 Corporate Governance 24 Projects 28 Scavi 31 Rural Impulse Fund 33 Société de Cultures Légumières 34 Zenufa Laboratories Tanzania 36 Prasac 38 Laiterie du Berger 40 The Currency Exchange Fund 42 Board of Directors 46 Team 48

Confianza, Peru

Message from the Chairman The results that BIO has achieved are the outcome of persistent, high quality work Sustainable development is the basis of BIO’s mission. As a development finance institution, BIO plays a particular role and makes a structural contribution to socio-economic growth in developing countries. 2007 was marked by the growth and by the significant strengthening of BIO’s investment portfolio, in terms of direct and indirect financing projects. BIO strengthened its presence in partner countries of the Belgian Development Cooperation, in particular in Africa, in the poorer countries suffering from a generally unfavourable business environment. BIO’s interventions, which are not tied to the economic interests of industrialized countries, are aimed first and foremost at developing local economies and in particular their private sectors. Scrupulous

SCL, Senegal

selection of investments is a key success factor for both direct and indirect investments. In this context, BIO takes into account not just purely financial criteria, but also other factors that reinforce the development impact. Therefore BIO has introduced a new measuring tool, the GPR (Geschäftspolitisches Projectrating), developed by its German colleague, DEG. Results for projects undertaken in 2006 and 2007 are now available. BIO’s participation in the Currency Exchange Fund is another significant step forward. This vehicle, set up by the Netherlands Development Finance Company (FMO) and international financial players, provides a powerful instrument for managing the foreign exchange risks which weigh on investments, and will give BIO the opportunity to invest in economically more fragile countries. The intensity of the foreign exchange risk is an important criterion in decision-making and this initiative will give BIO the

means for offering greater support to local entrepreneurs. BIO is particularly attached to the values of entrepreneurial spirit, good governance and transparency, which shape its investment policy lines. As provided for in its Investment Charter, BIO was subjected for the first time in 2007 to an external audit, commissioned by the Special Evaluation Department of the Ministry of Foreign Affairs, Foreign Trade and Development Cooperation. Overall, the auditors recommend to staying on the same track and confirm the usefulness of an instrument like BIO, in the framework of the Belgian Development Cooperation, to support local entrepreneurship and assist in the struggle against poverty.

BIO Annual report 2007 | Message from the Chairman 05.

This annual report demonstrates the strong dynamism which today lives in our young enterprise, six years after it was established. The investment projects are examined with the utmost care, at both the preparation and follow-up stages. This approach lies behind the good results that BIO issued for 2007. Lastly, BIO’s new web site provides a fresh visibility and a more proactive web presence. This site, now in four languages, aims at giving clear and accessible information on BIO’s instruments, which can benefit to entrepreneurs looking to set up promising projects.

The Board of Directors would like to thank shareholders for the resources made available to BIO to enable the execution of its development finance mission. The Board also wishes to express its gratitude to BIO’s executive management and team for all their hard work.

Michel van der Stichele Chairman

Zenufa, Tanzania

06. BIO Annual report 2007 | Message from the Chairman

BIO Annual report 2007 | Message from the Chairman 07.

New web site BIO unveils brand new web site BIO’s web site underwent a serious facelift in 2007 and is now online at a new address (www.bio-invest.be). With the former site no longer meeting visitor needs, it had become imperative to improve BIO’s presence on the web. The new site seeks to give BIO the effective, interactive virtual presence which is essential for putting across its

intervention and financing principles to project promoters and to the general public. The site is in four languages (French, Dutch, English and Spanish) in order to reach the three continents. Its main purpose is to provide, in a few clicks, all the essential information on BIO’s activities, in clear, concise language, with direct access to the technical datasheets,

08. BIO Annual report 2007 | New web site

eligibility criteria and all necessary documents for applying for financing. It can be expected to become a privileged tool for entrepreneurs looking for financial resources and for explaining BIO’s role in financing the private sector.

Profile of BIO BIO is a development finance institution established in 2001 in the form of a company limited by shares (SA/NV) deriving from a public-private partnership between the Belgian State, represented by the Minister of Development Cooperation, and the Belgian Corporation for international Investment (SBI/BMI), each owning 50% of the capital. BIO’s mission is to promote and support the private sector in developing countries by granting long-term financing to SMEs and microfinancing institutions in the form of direct and indirect investments. Development of the private sector is indeed viewed as a critical factor in reducing poverty, as it: • Makes the productive sectors more competitive in the local and international economy; • Contributes to economic growth, creating employment and increasing poor people’s income..

BIO looks for sustainable development, plays a catalyst role (mobilisation of funds), is managed in a transparent way and does not favour foreign enterprises over local ones. BIO is a member of EDFI (European Development Finance Institutions – www.edfi.be). The instruments BIO provides a diverse range of financing tools. These can be either direct, in SMEs, or indirect, in financial institutions or investment funds, providing that the financial, economic, social and environmental criteria are met. Amounts vary in amount between € 300 000 and around € 8 000 000.

Loans BIO grants medium and long-term loans in euro, US dollars or local currency. • Convertible loans; • Subordinated loans; • Long-term loans. Subsidies BIO grants subsidies to co-finance feasibility studies. BIO’s technical assistance facility also allocates specific subsidies for financing technical assistance, training and other forms of post start-up support for projects in which BIO has invested.

Equity BIO acquires minority shareholdings in the capital of SMEs, investment funds and financial institutions and companies.

10. BIO Annual report 2007 | Profile of BIO

SCL, Senegal

Impact on development First reports on the commitments made in 2006 and 2007 BIO has introduced a new tool for assessing the impact of its investment projects. This tool (Geschäftspolitisches Projectrating or GPR ©), was developed by the Deutsche Entwicklungsgesellschaft (DEG) and is currently being implemented by other DFIs in Europe.

2007 are positive.1 The analysis includes ex-ante GPRs covering producing companies/ SMEs, financial institutions and private equity funds, representing new commitments totalling nearly € 28 million. In collaboration with the project promoters, other investors and the local banks, we are expecting the following macroeconomic effects from BIO’s contribution:

For each project this instrument measures: • Its impact in development terms; • BIO’s strategic role.

• Contribution to government revenues: Net government revenues of about € 3.4 million in 2007 (2006: € 0.7 million);

Projects and investments are assessed according to different evaluation criteria on a six-point scale ranging from “very good” to “insufficient”). The GPR is applied to each project throughout the investment process, from the identification and structuring of the investment until portfolio exit. The assessment results on the impact of the commitments made in

• Net Foreign Currency effects: Net effects of 26 million EUR p.a. (2006: € 4.1 Million). The increases in net government revenues and foreign currency effects are mainly due to the larger number of commitments under the SME fund, which rose significantly from 6 projects in 2006 to 13 projects in 2007.

• Employment effects: A total of approximately 20 000 jobs (2006: 33 000 jobs2 ). In the project companies, about 5 000 people are directly employed. Through indirect jobs created by productive companies through supplier linkages, by financial institutions at sub-borrower-level and by private equity funds at investee company level, roughly 15 000 people are expected to be employed indirectly.

The full report is available on the BIO internet site (www.bio-invest.be). The reduction in employment effects can be attributed to two labor-intensive projects in 2006 - two large banks accounted for over 70% of the entire employment effects (around 24 000 out of 33 000 jobs). Leaving aside those two projects, total employment effects of BIO’s new commitments would have risen from around 9 000 jobs in 2006 to 20 000 in 2007.

12. BIO Annual report 2007 | Impact on development

Portfolio General overview Until recently, BIO deployed around 40% of its resources in microfinance. BIO operates in various ways, by granting credit lines to microfinance institutions (MFIs), via direct investments in their capital, or through funds that invest in or refinance MFIs. These funds can be regional (e.g. AfriCap, a venture capital fund that invests in African MFIs) or multiregional with investments of similar format in each selected country (like ProCredit Holding).

These are essentially regional, like AfricInvest, Grofin (Eastern Africa) and Mekong I & II (Asia), or sector-related, (Carec: renewable energies). In addition, BIO is contributing to the strengthening of the financial sector by making SME refinancing available through local financing institutions like Access Bank (Nigeria), African Financial Holding (Africa), Banco Interfin (Central America) or through microfinance funds. This helps local financiers in becoming familiar with the world of small businesses.

Supporting SMEs is another major cornerstone of BIOâ&#x20AC;&#x2122;s activity, these being a vector of economic activity and poverty alleviation. The SME activity today accounts for over 60% of the portfolio and represents the largest number of interventions.

Lastly, BIO also supports nonbanking financial service enterprises in order to enlarge the range of financial services accessible to local SMEs. Refinancing granted to Mauritanie Leasing, Burkina Bail, SREI and Quipo (India) very well illustrates this kind of support.

On the one hand, BIO participates with venture capital in investment funds aimed at SMEs (private equity funds).

The portfolio situation as of 31.12.07 is shown in the table on p. 22 of the supplement containing the financial results.

14. BIO Annual report 2007 | Portfolio

Rwanda Mountain Tea, project approved in 2007

BIO in Africa The African economy has been experiencing strong and sustained growth since the early 2000s, in both the Maghreb and Sub-Saharan Africa, to the extent that investors are today returning to this continent of 800 million inhabitants. A report published in February 2008 by the International Monetary Fund3 (IMF) indicates that SubSaharan Africa is reporting its highest growth rates for decades. In 2008 the IMF is expecting growth of 6.8% in Africa, compared with 4.1% for the global economy as a whole. Disparities persist, it is true, with the GDPs of oil exporting countries – Nigeria, Gabon, Congo, Sudan – expected to rise by close to 10%, and those of importing countries limited to a respectable 5% on average.

Development Cooperation, currently 18 in number. This geographical priority has been pushed further to Central Africa (Burundi, Democratic Republic of Congo and Rwanda) after additional funds were made available to BIO. The Conventions between the Belgian Government and BIO set an investment effort of at least 50% of its resources in partner countries, and at least 10% in Central Africa. On 31.12.2007, Africa represented around 30% of BIO’s outstanding investments. BIO has already performed several investments in Central Africa. However, to support and encourage private initiative, further efforts are needed to improve legal security and to tackle the administrative red tape which is still all too present in certain countries.

ProCredit Bank Congo (DRC) Type: Microfinance institution Type of investment: USD 300 000 equity Scavi (DRC) Type: SME, meat chicken breeding Type of investment: USD 300 000 loan Rwandan Mountain Tea (Rwanda) Type: SME, production and export of tea Type of investment: € 700 000 loan

The government has requested BIO to prioritize investments in the partner countries of the Belgian Moablaou, Burkina Faso

Source: Africa Growing Rapidly, But Faces Risks, By Calvin McDonald and Paulo Drummond, IMF African Department, 28 February 2008

16. BIO Annual report 2007 | Portfolio

BIO Annual report 2007 | Portfolio 17.

Multiregional

Asia

Cambodia India Vietnam Sri Lanka

SME 22%

MFI 4%

MFI 78%

Africa

Burkina Faso Tanzania Mauritania Senegal Cameroon Nigeria DRC Tunisia Mali Morocco Eastern Africa

Geographical spread

of outstanding investments as at 31.12.07 Multiregional 36%

Africa 30%

Latin America Bolivia Ecuador Honduras Peru Nicaragua Central America

SME 96%

MFI 3%

SME 97%

Latin America 16% Asia 18% SME 44%

MFI 56%

18. BIO Annual report 2007 | Portfolio

BIO Annual report 2007 | Portfolio 19.

BIO is particularly sensitive to the viability of its projects and their impact on local development.

New investments Projects signed in 2007

Projects

Country/Region

Activity

ProCredit Bank Congo Access Bank Nigeria Access Bank Tanzania Moablaou SCL Laiterie du Berger Scavi CTIA 37.5 Avifarm BOA Bank Tanzania Locfund BanCovelo CASEIF II Grand Place Vietnam Rural Impulse Fund TCX

Africa Nigeria Tanzania Burkina Faso Senegal Senegal DRC Tunisia Senegal Mali Tanzania Latin America Honduras Central America Vietnam Multiregional Multiregional

MFI Bank Bank Egg production Vegetable growing Milk industry Meat chicken breeding Production of peeled tomatoes Mobile movie theatre Chicken breeding Bank Local currency fund MFI Investment fund SME Production of chocolate Investment fund MFI Currency and interest risk hedging vehicle

22. BIO Annual report 2007 | New investments

Edyficar, Peru

Corporate Governance BIO signs joint statement on Corporate Governance In October 2007, BIO joined other bilateral and multilateral development finance institutions in signing a joint statement positioning corporate governance at the top of the list of their requirements in promoting sustainable development in emerging countries. This initiative highlights the growing role of corporate governance as an incentive to facilitate flows of international capital towards companies operating on these markets.

The statement, which is based on the OECDâ&#x20AC;&#x2122;s corporate governance principles, offers a framework for identifying the main practical aspects, such as the rights and fair treatment of shareholders, the roles of the different stakeholders, the principles of disclosure and transparency and the responsibilities of the board of directors. It also suggests a common approach for the DFIs (Development Finance Institutions) on these issues.

By signing this statement, BIO acknowledges not only the importance of good corporate governance practices for promoting sustainable economic development, but also the crucial role it is able to play in promoting these practices towards the companies it supports.

24. BIO Annual report 2007 | Corporate Governance

Granting SMEs and microfinance institutions loans and capital to strengthen their growth.

Projects Support for the private sector is therefore an essential link in the development cooperation chain, as it drives economic growth. By producing goods and services, local enterprises help improve the populationâ&#x20AC;&#x2122;s living standards, accelerate technological developments and lower prices by stimulating competition and increasing the countryâ&#x20AC;&#x2122;s tax base, which is essential for the financing of infrastructures, education and health.

BIO has invested in over 57 projects and is present in nearly 60 countries directly or indirectly. BIO has allowed many entrepreneurs who lacked the appropriate financial resources to see their projects materialise. Here are a few cases that illustrate the different types of investments made by BIO in the 3 continents.

BIO works as a catalyst by operating in areas that are generally neglected by the commercial banks as they believe the risk factor is too high. The financial returns are clearly very important, but BIO also takes into account other parameters that are equally essential, by investing in projects that contribute to sustainable development and that offer a definitive socioeconomic added value.

28. BIO Annual report 2007 | Projects

Moablaou, Burkina Faso

BIO encourages local agro-food sector in DRC

Of French nationality and Congolese origin, Anicet Lokenyo had long wanted to return to Congo and develop his business there. Nothing, however, predestined this father of a family, an accountant by profession and trained in aviculture techniques who had lived in France for a number of years, to start producing meat chickens. It was his visits to the country and meetings with CDE specialists that convinced him of the potential of this activity. Mr Lokenyo started his activities in 1999 by creating the Etablissements Lonâ&#x20AC;&#x2122;Ileko. A few years later, the company mastered every stage of meat chicken production, in particular the breeding of reproducers and the production of one-day chickens. Anicet had quickly understood that to be productive, you have to master the entire value chain, which is something daring in this particularly difficult environment.

opened the door to setting up a new chicken farm in the suburbs of Kinshasa, able to produce over 500,000 meat chickens a year once it has reached full capacity, and helping to create nearly 80 jobs. This sizeable offering of locally produced chickens makes the company a pioneer in the Democratic Republic of Congo, where the very large majority of the chicken eaten in the capital is imported, most of them arriving deep-frozen from Europe. In addition, chicken are a popular food in the DRC, being cheaper than other meats and free of religious or ethnic constraints.

BIO granted a â&#x201A;Ź 350 000 loan to this company which incorporated in 2007 as SCAVI. This credit-line From left to right: Dimitry Van Raemdonck, Anicet Lokenyo, Hugo Bosmans, Paul Goossens

30. BIO Annual report 2007 | Projects

31. BIO Annual report 2007 | Projects

Rural Impulse Fund, supporting rural microfinance

32. BIO Annual report 2007 | Projects

BIO has committed USD 3.5 million to Rural Impulse Fund (RIF). RIF is a successful example of private-public cooperation, with a balanced portfolio of investors. Besides BIO, the shareholder group includes development finance institutions such as the European Investment Bank, the Netherlands Development Finance Company (FMO) and a group of private investors (BRS, CERA, Incofin, KBC Private Equity, MRBB, Volksvermogen).

The Fund is managed by Fund Advisor, Incofin a socially responsible investment company headquartered in Antwerp, Belgium.

RIF is conceived as a microfinance investment fund, aimed at MFIs working in rural environments. The Fund fills a gap in the microfinance field by strengthening the financial structure of MFIs which have proven their ability to provide financial services to poor people in rural zones and to be financially viable.

The rural MFIs are selected using a methodology that measures the presence of points of sale in rural zones. RIF invests in MFIs which demonstrate financial stability and excellent social performance. RIF sets out to invest 25% of its assets in the ACP countries (Africa, Caribbean and Pacific states) and 25% in Latin America.

The Fundâ&#x20AC;&#x2122;s investment policy is based on a double observation: that rural zones in poor countries are poorly served by MFIs, even though the majority of poor people live in farming areas, and that most microfinance funds are mainly focussed on urban MFIs.

RIF is aiming for an asset base of USD 38 million, including a USD 10 million mezzanine tranche, a USD 19 million senior debt tranche and USD 9 million of equity. RIF has been set up in the form of a specialized Luxembourg investment vehicle (SICAV-FIS), licensed by the Luxembourg financial regulator. RIF is a 10 year closed-end fund.

BIO Annual report 2007 | Projects 33.

BIO supports corn production in Senegal

The Société de Cultures Légumières SA (SCL) was established in 2006 in Saint Louis, by Michaël Laurent, a French agricultural engineer. He recognized that Senegal offers great prospects to produce semi-exotic fresh vegetables, like sweet corn and sweet potatoes, for the European market at a difficult procurement time of the year (the European winter season), as the short supply leads to higher prices. During its first operational year (2006), SCL has grown sweet corn and sold it exclusively to the UK Company Barfoots of Botley (“Barfoots”), during the period January to April. Barfoots is the largest supplier of sweet corn in the UK.

34. BIO Annual report 2007 | Projects

BIO has granted a medium-term loan of € 600 000 to SCL by the end of 2007. BIO’s investment will be used to finance diverse equipment needed for the extension project, which involves the production, packing and export of sweet corn on an additional 127 ha farm land. The initial crops the Company focuses on will be primarily sweet corn and to a lesser extent sweet potatoes and butternut squash. Thereafter there may be opportunities for asparagus, baby corn, beans and other vegetables, which SCL will trial before going into commercial production.

The sweet corn will be handpicked and thereafter hydro-cooled in the Company’s own processing unit, which is yet being built. The sweet corn will be put into refrigerated containers and transported to the UK, via Dakar by sea freight. This project has scored above average in terms of net currency effects, employment effects, environmental standards and the strategic role of BIO.

BIO Annual report 2007 | Projects 35.

Improving generic drug availability in Tanzania

Zenufa Laboratories Tanzania is a pharmaceutical company that produces a wide range of generic drugs including antibiotics, malaria and parasite treatments, pain-killers, analgesics and anti-retroviral therapy. The factory has been built and is managed to international production standards. Zenufa is looking to become the first pharmaceuticals company in Tanzania to be CGMP (Current Good Manufacturing Practices) certified by the WHO (World Health Organization). This will enable it to take part in international calls for tenders. BIO supported the project start-up in 2005 with a loan of USD 3.5 million over 8 years (total project cost: USD 9 million). Local banks were not ready to finance a start-up project, nor did they loan money for longer than four years. BIO was also involved at the technical level to validate and advise promoters on the technologies being used, and on the financial

36. BIO Annual report 2007 | Projects

structuring of the project. BIO also persuaded the promoters to adhere to corporate governance standards, more specifically by hiring an established auditing firm and appointing an independent director. The development of generic drugs in Tanzania will help make quality drugs available both inside and outside the country and improve the health conditions of the Tanzanian people. In particular, local development of anti-retroviral therapy and anti-malaria drugs will make these drugs more widely available among the population.

The environmental impact is well under control as the project meets the World Bankâ&#x20AC;&#x2122;s health and safety standards for the pharmaceuticals industry. An advanced environmental impact study has been carried out on the basis of technical plans and reports, and both the local residents and the economic community were consulted on the project. Reports on the development of the social and environmental aspects are published on a regular basis.

At the social level, the company provides jobs for around 150 people, 40% of them women, with higher and more stable salaries than the average. The fact that employees are trained in the production equipment and in the CGMP standards also promotes technology transfer.

BIO Annual report 2007 | Projects 37.

Microfinance helping rural Cambodia

The “Programme to Rehabilitate and Support the Farming Sector in Cambodia” (Prasac) began in 1995 in the form of a programme covering the six provinces around Phnom Penh. Initial financing came from the European Union. From 2001 onwards, the programme changed gradually into an independent microfinance institution. The Company’s mission is to contribute to sustainable rural economic development so as to improve the living conditions of country-dwellers, by making financial services available to communities and to microenterprises. Together with four other investors, BIO has taken part in institutionalizing and privatizing Prasac MFI. Each investor has taken 19% of the shares, with the remaining 5% held by employees.

38. BIO Annual report 2007 | Projects

With FMO and Oikocredit, BIO played a direct catalyst role by involving two private investors, Dragon Capital and Lanka Orix Leasing Company in negotiations. These shareholders provide Prasac with essential know-how in microfinance services, leasing products and financial solutions which they have already applied successfully in other emerging Asian countries.

USD 1.5 million to consolidate its microfinance portfolio. Support for developing the microfinance sector in rural Cambodia will significantly support the growth of the financial sector as a whole, as for now commercial banks serve only large companies and a marginal portion of the urban population.

The presence of Development Finance Institutions in Prasac’s shareholder group minimizes its dependence on donors. Greater credibility is essential for the longterm growth and the financing of this type of microfinance institution, helping to strengthen its reputation and generate deposit-taking operations, along with commercial financing. As well as its shareholding, BIO has also lent Prasac

BIO Annual report 2007 | Projects 39.

First steps towards industrial milk processing in Senegal

Laiterie du Berger (LDB) is the only commercial dairy in Senegal which provides locally produced milk, collected from farms in the River Senegal zone and not reconstituted from imported milk powder. The promoters of this enterprise are three young Senegalese who together possess solid technical competence in this field. BIO has lent € 380 000 to support the company’s growth. Imports of milk products into Senegal (mainly in powder form) have, for the past 5 years, represented over 40 billion CFA francs (€ 60 million) a year, whilst national milk production, equal in volume to the imports (around 100 million litres a year) is under-exploited. Imported milk, and in particular powdered milk, have long distribution circuits, and can reach the main consumer market of Dakar without transport costs or delays. In order to be available on distant markets, this long life milk comes in sterilized, concentrated or powder form.

By sourcing itself with local fresh milk and not imported powder, LDB is placing itself at the interface between cattle farmers and markets. The challenge is to generalize this approach in order to fully exploit national production. The new dairy unit today ensures a stable monthly income to more than 240 suppliers, who supply fresh milk on a daily basis. This enterprise provides work for 47 permanent employees, collaborates closely with the polytechnic college and other institutions active in this area, and collects its milk daily over a 50-kilometre radius.

in logistics and production. Finally the larger scale marketing will enable informal resellers in particular to increase their incomes. This project also responds to a real concern at the substantial hike in milk prices on world markets. Initially LDB’s products were aimed at better off clients; today they are less expensive than competitive products produced from imported milk powder.

The additional income is allowing the cattle farmers, who are very poor, to feed their cattle better, improve milk production, and by extension their own incomes. The processing of this milk into higher quality products creates know-how in Senegal and generates many jobs Laiterie du Berger, Senegal

40. BIO Annual report 2007 | Projects

BIO Annual report 2007 | Projects 41.

TCX: An innovative instrument for local currency financing in developing countries. BIO has invested USD 10 million in The Currency Exchange Fund (TCX), a financial vehicle that will support a range of local currency products for developing countries. This unique cooperation initiative was launched by FMO in cooperation with international financial players. TCX has set out to significantly reduce the likelihood of default by companies, and in particular by SMEs, and to make a strong contribution to the development of local capital markets. The investors in TCX, 15 on 31.01.08, have provided nearly USD 500 million of capital, allowing a transaction capacity of over USD 1.8 billion. TCXâ&#x20AC;&#x2122;s shareholders are paying

42. BIO Annual report 2007 | Projects

particular attention to SubSaharan Africa, which is also a priority region for BIO, and to the microfinance, housing and infrastructure sectors.

Addressing Market Failure Numerous financial crises attest to the real existence of the currency risk to entrepreneurs and their local banks. Well-known hyperdevaluations in Asia, Turkey, Russia and Argentina in the late 1990s and early 2000s illustrate the devastating effects that unstable financial systems can have on the local and regional economy. Many companies found themselves unable to service suddenly very

expensive dollar and euro debt after such a crisis. This instability also has a profound effect on the economy and society as a whole. TCX assumes the currency risks previously transferred by international financiers to the local entrepreneurs and their local banks, and by doing so improves their business sustainability and reduces defaults. Companies are no longer exposed to currency risks that they cannot manage and systemic risk becomes limited. At the same time, financiers have a much broader commercial market to address with long-term local currency products.

A precious tool for BIO BIOâ&#x20AC;&#x2122;s participation in TCX provides it with a hedging instrument to avoid the foreign exchange risks which weigh on these investments. Foreign exchange risk is an important decision-making criterion and this initiative will give BIO the means to provide greater support to local entrepreneurs, in particular as part of its strategy for SubSaharan Africa. BIO was also the first institution to call on TCX in 2007 to hedge a CFA Franc loan granted to a Senegalese entrepreneur. This loan helped in setting up the Laiterie du Berger, the countryâ&#x20AC;&#x2122;s first local industrial dairy.

BIO Annual report 2007 | Projects 43.

Being a catalyst in mobilising funds and capital for the private sector.

Board of Directors HRH Prince Philippe is Honorary Chairman of BIO Chairman Michel van der Stichele Board Member of Companies Vice-President Marcel Colla Honorary Senator Members Bernard de Gerlache de Gomery Chairman of the Chamber of Commerce, C.B.L.-A.C.P. Board Member of Companies Hedwig De Koker Board Member of Companies Yves Haesendonck Chairman Board of Directors of the Belgian Technical Cooperation, BTC Mark Lambrechts Board Member of Companies Jean-Pierre Smit Deputy Manager, International Relations Department, AGORIA

Walter Stevens Director, Strategic Cell of the Minister of Foreign Affairs Florence Thys Advisor Institute Emile Vandervelde/IEV Annuschka Vandewalle General Secretary FOS – Fund for Development Cooperation Damien Van Eyll Institutional Reforms Department,Strategic Cell of the Deputy Prime Minister and Minister of Finance Michel Van Hecke Vice-Chairman, Belgian Corporation for International Investment/ BMI-SBI, Prof. Em. Economics, University of Antwerp Johan Van Wassenhove Chief Executive Officer, Denys SA Philippe Wilmès Chairman Belgian Corporation for International Investment/ BMI-SBI Prof. Em., UCL Extraordinary Prof., Institute for Business Administration and Management, UCL

46. BIO Annual report 2007 | Board of Directors

Investment Committee Chairman Philippe Wilmès Members Hugo Bosmans Marcel Colla Walter Stevens Florence Thys

Belgian Court of Audit

Government Commissioners Frank Blomme Inspector of Finance Luc Langouche General Secretary, Iles de Paix

Auditor Luc Van Coppenolle Deloitte, Company Revisors / SC s.f.d. SCRL

Jozef Beckers Counsellor

BIO Annual report 2007 | Board of Directors 47.

Team

From left to right: Anne Demeuse Controller

Dimitry Van Raemdonck Investment Officer

Alain De Muyter Chief Financial Officer

Eric Suttor Controller

Karin Cremers Accountant

Bettina Pira Personal Assistant to the CEO

GĂŠraldine Crosset Investment Officer

Carole Maman Manager Development Fund

Mostafa Ouezekhti Manager Study Fund

Paul Goossens Manager SME Fund

Emmanuelle Liessens Communications & Promotion Officer

MichĂ¨le Husson Manager Portfolio Management

48. BIO Annual report 2007 | Team

BIO Annual report 2007 | Team 49.

From left to right:

50. Annual report 2007 | Team

Michelle Speiser Secretary to the Board

Denis Pomikala Investment Officer

Hugo Bosmans Chief Executive Officer

Anne Emmerechts Office manager

Sissi Frank Investment Officer

Nathalie De Windt Secretary

Anita Serrate Investment Officer

Olivia Bourdonge Administration & Finance Assistant

StĂŠphane Ryelandt Investment Officer

Didier Malengreau Senior Investment Officer

Yumi Charbonneau Legal Counsel

Simone Verbraeken Senior Investment Officer

BIO Annual report 2007 | Team 51.

Financial Data 2007

Balance Sheet Assets (in €)

2007

2006

85 935 453

58 332 470

Formation expenses

27 363

52 342

Intangible assets

79 647

23 465

281 245

310 267

173 556

169 024

5 477

12 530

102 212

128 712

85 547 198

57 946 396

Fixed Assets

Tangible assets Furniture and vehicles Leasing and similar rights Other tangible assets Financial assets Participating interests in affiliated enterprises Participating interests in other enterprises

41 425 765

27 356 753

Amounts receivable and cash guarantees

44 121 433

30 589 643

93 965 666

94.766.098

1 294 641

2 213 659

90 361 529

91 143 724

832 955

299 056

1 476 541

1 109 659

179 901 119

153 098 568

Current Assets Amounts receivable within one year Investments Cash at bank and in hand Deferred charges and accrued income

Total Assets

In addition to the notary fees, preliminary expenses related to the setting up of BIO, the establishment of the Local Currency Fund and the SME Fund, the increase of the financial resources of the Development Fund, were capitalised. Formation expenses are depreciated on a straight line basis over 5 years .

Intangible assets Expenses relating to the purchase of software, amounting to at least € 1 250, are capitalised and depreciated on a straight line basis over 3 years from the date of acquisition.

Tangible assets This item relates to office furniture, computers and other office equipment and the furnishing

02. BIO Annual report 2007 | Figures

In 2006, a general provision has been established for expected depreciation and reduction in value, which represents 1.5% of the outstanding amounts of the Development Fund and the Local Currency Fund, plus 10% of the outstanding amounts of the SME Fund. This percentage is adapted annually according to the portfolio turnover and each actual reduction in value is compensated by the provision. This provision will be limited to a maximum of 3% of the outstanding amounts of the Development Fund and the Local Currency Fund at the end of each fiscal year. In 2007, a provision of € 657 789 has been set up,

Amounts receivable within one year

of which € 470 499 for 2 specific port-folio components. The total provision for expected depreciation and reduction in value amounts to € 1 677 077.

These amounts mainly refer to the subsidy granted according to the administration agreement dated 21 December 2006 (€ 1 000 000) and to taxes yet to be re-claimed (€ 263.966). The provision for reduction in value has been created to cover an outstanding claim of USD 53 087 or € 44 080.75 resulting from a transfer of shares to Rwandan Entreprise Investment Company has been recovered. In 2007, a general provision of € 371 for expected reduction in value has been set up, in line with the rule which has been explained under the heading financial assets.

If the exchange risk and the currency risk are covered by a financial instrument that meets the hedging criteria on an ongoing basis, in terms of maturity, interest and currency, valuation of the financial instrument follows the valuation rules for the underlying asset. BIO’s liabilities at the end of the fiscal year are converted at the closing rate of the financial year and referred off-balance sheet. The submission of a letter of intent to a potential customer implies the off-balance sheet registration of the amounts committed.

Liabilities (in €)

notes to balace sheet Formation expenses

to reimbursement of all or part of the amount receivable on the due date.

Capital and Reserves of the rented facilities. Amounts are capitalised as from € 1 250 euros, depreciation is on a straight line basis from the month of acquisition over 10 years for the office furniture, over 3 years for the computer equipment and pro rata to the remaining term of the lease agreement. In 2007, investments mainly involved new computer soft- and hardware, as well as the new web site.

Financial assets This item relates to the investments, irrespective of their percentage, as described in BIO’s mission statement. Unallocated cash remains under investment and/or cash at hand and in bank. The equity participations and shares are stated at acquisition cost. Inci-

dental expenses relating to the acquisition are charged to the financial year during which they were incurred. With regard to the unlisted shares, a decrease in value is applied in the event of capital loss or long-term depreciation. These assets will remain valued at a historical exchange rate. The Board of Directors will determine case by case from when reductions in value are lasting and lead to the booking of an actual depreciation or reduction in value. Receivables are valued at nominal value. Additional costs relating to the acquisition are charged to the financial year during which they were incurred. Depreciation takes place if there is uncertainty as

Capital Reserves Legal reserve Reserves not available for distribution Profit carried forward

Creditors Amounts payable after more than one year Amounts payable within one year Current portion of amounts payable after more than one year Trade debts Taxes, remuneration and social security Other amounts payable Accrued charges and deferred income

Total Liabilities

176 550 326

147 857 841

4 957 873

167 612 191

141 862 191

495 787

167 116 404

141 366 404

3 980 262

1 037 777

3 350 793

5 240 727

3 172

5 721

325 256

1 792 863

2 549

6 392

39 464

59 460

283 243

269 804

1 457 206

3 022 365

3 442 143

179 901 119

153 098 568

BIO Annual report 2007 | Figures 03.

Fixed assets disbursed

EURO disbursed euro equiv.

usd

MAD

INR

KHR

FCFA

Signed projects

56 971 409

16 508 000

3 300 000

2 328 092 000

491 967 749

41 038 184

87 183 510

equity participations investment funds

13 775 401

16 508 000

7 017 329

19 362 448

equity participations

11 078 842

14 344 794

22 718 929

loans investment funds loans

3 300 000

2 328 092 000

4 119 553

175 035

3 394 965

27 997 614

491 967 749

19 501 026

41 707 167

The interest and currency risk related to 13 loans amounting to a total of USD 26.9 million was covered by an interest and currency swap (CCIRS/Cross Currency Interest Rate Swap), converting the counter value of the future instalments and interest payments into EUR loans at fixed interest. Four loans for a total amount of USD 2.6 million were covered by future currency contracts.

Cash at bank and in hand This item includes unallocated cash of which BIO disposes to implement its corporate mission. Deposits and long-term accounts with credit institutions and cash at hand are valued at par. No value adjustments were applied.

Off-balance Committed

committed

usd

MAD

INR

KHR

FCFA

EURO

Signed projects

25 626 088

16 652 736

11 569 329

30 479 953

equity participations investment funds

17 467 888

16 652 736

8 777 598

22 149 354

equity participations

3 000 000

2 036 798

1 620 257

loans

5 158 200

1 171 474

4 673 544

BoD approved projects

6 250 000

4 100 000

8 343 329

equity participations investment funds

5 000 000

3 394 664

equity participations

1 250 000

loans investment funds

loans

1 250 000

2 850 000

3 698 666

Total projects 2007

31 876 088

16 652 736

15 669 329

38 823 283

loans investment funds

04. BIO Annual report 2007 | Figures

euro equiv.

Deferred charges and accrued income This item includes deferred costs (€ 91 854), accrued income (€ 1 294 979) and positive conversion variances € 89 708. Deferred costs of € 91 854 mainly consist of rent, insurance, subscriptions, travel expenses and legal fees. The fees of outside lawyers used in obtaining projects in portfolio are spread, until the end of 2006, over the duration of the project or over 10 years, in case of participations that may remain in the portfolio for an indefinite period. They are recorded in the deferred charges line. Accrued income of € 1 294 979 mainly consists of accrued interest, not overdue on loans granted. The positive conversion rates of € 91 854 hold the difference in rate between the cash rate and cover rate. These conversion rates are spread over the duration of the instrument used and the loans.

Reserves The development certificates are included in unavailable reserves. Depreciation and capital losses are directly charged to these certificates without having to proceed to a modification of the articles of association. At the end of 2002, € 62 070 was charged to the certificates. The result of the fiscal year 2004 was allotted to the legal reserve, bringing it up to € 74 905. Of the 2005 result (€ 448 437) € 420 882 was allotted to the legal reserve, which reached its limit of 10 % of the capital. The balance has been transferred to the next fiscal year. The result of fiscal year 2006 (€ 2 467 428.48) was partly allocated to BIO’s personnel (€ 80.000) by means of profit participation and partly paid as dividend (€ 1 377 205.71). The balance has been transferred to the next fiscal year.

provision for statutory holiday pay and a wage balance of December 2007 amount to a grand total of € 216 627.

Deferred charges and accrued income This heading includes costs to be charged amounting to € 1 150 108. This is mainly the provision for interest incurred and not due to the CCIRS contracts amounting to € 430 951 and a subsidy of € 719 156 granted by contract. The accrued income amounts to € 1 872 257, including Technical Assistance and Study Fund subsidies, which will be granted in later fiscal years.

Amounts payable after more than one year This heading lists the lease due for telecommunication means. Remaining term to maturity is less than 5 years. The outstanding debt resulting from a leasing agreement is calculated every year in line with the capital value listed in the contract and the instalments to be paid in later fiscal years.

Amounts payable within one year Lease debt for telecommunication means, falling due in the fiscal year, are listed in this column. Commercial debts comprise € 26 418 of outstanding invoices and € 12 832 of receivable invoices. Tax debt includes preliminary corporation tax (not due yet) of € 66 615. Debts relating to remunerations and social security concern the

BIO Annual report 2007 | Figures 05.

Notes income statment Operating income Other operating income incorporates the € 870 104 subsidy related to the Technical Assistance and the Study Fund, various fees for € 206 426 and a re-invoicing of costs amounting to € 35 262.

Operating charges The heading “miscellaneous goods and services” includes general operating costs such as rent and related charges, insurance, office supplies, membership fees and documentation, remuneration costs, fees, travel expenses, promotion costs. These charges amounted to € 1 732 922. Remuneration, social security contributions,

€ 703 281. Income from the deposit of unallocated cash of which BIO disposes to implement its corporate mission amounted to € 4 734 545. The income from CCIRS is included under this heading. Other financial income (€ 445) mainly relates to differences of exchange rate and payments.

staff insurance and extra legal benefits amounted to € 1 699 733. Depreciation on tangible assets amounted to € 132 641 and reduction in value on receivables amounted to € 43 709. Other operating charges of € 820 576 relate to € 782 135 approved subsidy for Technical Assistance and Study Fund, various taxes and levies (€ 37 806) and reimbursable expenses (€ 635).

Financial charges The “interest payable and similar charges” heading includes the interest on the leasing contracts and the CCIRS, for a total amount of € 1 522 396. Other financial charges refer to the interests on receivables amounting to € 47 448, the results of exchange rates amounting to € 31 410

Financial income The income from BIO’s core activity in 2007 consists of the returns on loans granted, amounting to € 3 120 116 and dividends amounting to

and € 30 840 of banking costs relating to payments for projects, guarantees and the use of financial systems.

Extraordinary income The extraordinary income includes a € 319 034 appreciation as a result of the realization of assets.

Extraordinary costs

(in €) Operating result / EBIT

2007

2006

Income

9 989 212

8 532 758

Income from financial fixed assets

3 823 397

2 537 593

Income from current assets

4 734 545

3 306 851

445

15 269

1 111 792

746 570

319 033

1 926 475

Charges

7 046 727

6 065 330

Services and other goods

1 732 922

1 671 033

Remuneration, social security costs and pensions

1 699 733

1 429 295

Depreciation

132 641

123 229

Minusvalue

-43 709

44 081

Other operating charges

820 575

523 325

1 632 094

1 219 686

983 279

1 025 705

89 192

28 976

2 942 485

2 467 428

Other financial income Other operating income Exceptional income

Financial charges Extraordinary charges Taxes

Profit for the period

06. BIO Annual report 2007 | Figures

This heading contains foreign taxation on 2007 revenues.

2007

2006

-4 213 649

-4 070 098

Adjustment Depreciation, decrease in value

-458 131

-129 647

Provisions

822 143

2 990 644

-3 849 636

-1 209 101

-548 588

185 783

Cash flow from working capital changes

-4 398 225

-1 023 318

Acquisition of financial assets

-28 214 881

-2 493 730

-460 313

-126 593

-33 073 419

-3 643 641

Income from current assets

4 734 545

3 306 851

Income from financial fixed assets

Current debts & receivables (net)

(in €)

Income taxes

CASH FLOW

Operating cash flow

Income statement

related to the realization of assets comes to € 322 370.

The heading “extraordinary costs” encompasses the paying off of out of service computer hardware, totaling € 3 120. The reduction in value on financial assets consists of the provisions as explained earlier, amounting to € 657 789. The depreciation

Acquisition of tangible and intangible assets

Cash flow from investment activities

3 823 397

2 537 593

Other financial income

445

15 269

Other financial charges

-1 632 094

-1 219 686

319 034

1 926 475

-167 654

-218 532

Net financial income

7 077 672

6 347 970

Free cash flow

-25 995 747

2 704 329

-2 549

-6 399

Plusvalue Taxes

Increase/decrease of longterm financial debts Increase/decrease of capital Development certificates

25 750 000

16 791 176

Proceeds from financing

25 747 451

16 784 777

Net flow of funds

-248 296

19 489 105

Net variation in deposits and cash

-248 296

19 489 105

BIO Annual report 2007 | Figures 07.

Portfolio as at 31.12.2007 (in k â&#x201A;Ź) Project

Country/Region Activity

Equity

Loan Contract

AfriCap

Africa

Investment fund MFI

2002

European Financing Partners

Africa

Co-operating facility

2003

AfricInvest

Africa

Investment fund SME

African Financial Holding

Africa

Financial services

2004

Burkina Bail

Burkina Faso

Leasing

2004

Zenufa Laboratories Tanzania

Tanzania

Pharmaceutical company

2005

Mauritanie leasing

Mauritania

Leasing

European Financing Partners II

Africa

Co-operating facility

Magreb Private Equity Fund II

Africa

Investment fund SME

2006

Capital North Africa Venture Fund

Morocco

Investment fund SME

2006

GroFin

Eastern Africa

Investment fund SME

ART

Senegal

Mechanical maintenance

2006

Secosen

Senegal

Production of drinking water in plastic bags

2006

Parquet Cam

Cameroon

Wooden floors

2006

CEB la meublerie

Cameroon

Woodprocessing

Africa

MFI

Access Bank Nigeria

Nigeria

Bank

Access Bank Tanzania

Tanzania

Bank

Moablaou

Burkina Faso

Egg farm

Equity

Loan Contract

2002

Investment company

Bolivia

IMF

2003

Banco Solidario

Bolivia

MFI

2004

Banco ProCredit Ecuador

Ecuador

MFI

2004

Edyficar

Ecuador

MFI

2004

2005

Banco Interfin (Scotiabank)

Peru

MFI

2005

2006

Banco ProCredit Nicaragua

Central America

Financial institution

2005

Findesa

Nicaragua

MFI

2005

Confianza

Nicaragua

MFI

2006

CAREC

Peru

MFI

Emprede

Latin America

Investment fund SME

LocFund

Ecuador

Fish processing

X X

2006

2007

BanCovelo

Latin America

Local currency fund

2007

CASEIF II

Honduras

MFI

2007

2007 X

2007 2007

2007

SCL

Senegal

Vegetable growing

2007

Senegal

Milk industry

2007

Scavi

DRC

Meat chicken breeding

2007

CTIA

Tunisia

Production of peeled tomatoes

2007

37,5

Senegal

Mobile movie theatre

2007

Avifarm

Mali

Chicken farm

2007

BOA Bank Tanzania

Tanzania

Bank

Investment fund SME

Latin America

2006

Latin America

Alterfin

2004

TransAndean Banco Los Andes ProCredit

Laiterie du Berger

08. BIO Annual report 2007 | Figures

Country/Region Activity

LATIN AMERICA (16 %) - OUTSTANDING INVESTMENTS: 14 065

AFRICA (30 %) - OUTSTANDING INVESTMENTS: 25 861

ProCredit Bank Congo

Project

2007

BIO Annual report 2007 | Figures 09.

Net commitments* (in k €) Project

Country/Region Activity

Equity

Loan Contract

2002

ASIA (18 %) - OUTSTANDING INVESTMENTS: 15 587 Mekong

Asia

Investment fund SME

QIEL (IIEL)

India

Investment fund SME

2004

Cambodian Entrepreneur Building

Cambodia

MFI

2005

Prasac

Cambodia

MFI

2006

Mekong II

Asia

Investment fund SME

2006

SREI

India

Investment fund SME

2006

2007

BTS

India

Investment fund SME

Lanka Orix

Sri Lanka

Investment fund SME

2006

Grand Place Vietnam

Vietnam

Production of chocolate

2007

X X

92 255 126 006

2005

2006

102 600

MULTIREGIONAL (36 %) - OUTSTANDING INVESTMENTS: 31 669 Acción

Multiregional

Investment company MFI

2003

ShoreCap

Multiregional

Investment company MFI

2003

Global Microfinance Facility

Multiregional

Investment fund MFI

2004

Impulse

Multiregional

Investment fund MFI

2005

ProCredit Holding

Multiregional

Investment company MFI

Rural Impulse Fund

Multiregional

Investment fund MFI

TCX

Multiregional

Currency and interest risk hedging vehicle

TOTAL OUTSTANDING INVESTMENTS: 87 182

Breakdown of net commitments per instrument as at 31.12.2007

Breakdown of net commitments per sector as at 31.12.2007

2005 X

2007 2007

Loans

Microfinance

Equity

SMEs

*Signed contracts – reimbursements + projects BoD approved

10. BIO Annual report 2007 | Figures

BIO Annual report 2007 | Figures 11.

Auditor Report

12. BIO Annual report 2007 | Figures

BIO Annual report 2007 | Figures 13.

Report of the Court of Audit

14. BIO Annual report 2007 | Figures

notes

BIO Annual report 2007 | Figures 15.

Development through Investment Avenue de Tervurenlaan, 188A - b4 1150 Brussels - Belgium Tel.: +32 (0)2 778 99 99 Fax: +32 (0)2 778 99 90 www.bio-invest.be Design & production: www.thecrewcommunication.com