Volunteer Africa 2017

ISE Animal Healthcare Financing Pitch 17 May 2017

Entrepreneur: Team: Charles Mariana Barrientos Juan Esteban Jijon Francesco Petracca Table of Contents

1. Business Overview 1

2. Growth Opportunities 4

3. Required Resources and Execution Plan 10

Appendix

A. Business Model Canvas (BMC) Analysis 16

B. Other Opportunities Explored 17

C. Additional Information 19

Q&A 1. Business Overview Charles Isabirye – ISE Animal Healthcare Background:  Charles has a three-year Associate’s Degree on Animal Production & Management mainly focused on the production of dairy and meat – Charles also has a Certificate in Artificial Insemination, Customer Service and Business Management  He is a seasoned veterinary technician with c. 10 years of experience – In 2015 he started a successful veterinary drug service shop, ISE, to help Nakaloke farmers boost productivity by enhancing animal health – Previous experience include working for National Agricultural Advisory Services, an NGO doing consulting work in Uganda for 5 years  In 2016 Charles successfully completed Balloon’s ICS program, which enabled him to improve his current operations and secure a UGX 1.2m loan – Charles is on track to fully repay the loan, establishing a strong credit record, and is ready to access more capital to further grow his business – In November 2016 Charles was involved in a motorcycle accident involving a large settlement that affected his working capital, yet Charles managed to overcome adversity and sustain ISE’s operations  Charles is the father of two children, and has been married to his wife Sarah for the past 5 years

1 Business Overview Business Snapshot

Key Financials  ISE Animal Healthcare (“ISE” or the “Company”) was founded by Charles in 2015 Average Monthly UGX 000 Figures 2017YTD  ISE is a vet-drug store based in Nakaloke, Revenue (Net of Commissions to Sales Agent) 2,800 Business Sironko District Purchase of Products (1,891) Description  The Company employs two people, a full Gross Profit 909 time employee who mans the shop and sells Margin % 32.5% products when Charles is in field visits and a License (19) sales person paid on a commission basis Rent (100)

Salaries (1 employee) (50)

Utilities (Electricity) (40)

 Sale of veterinary drugs Net Profit 700

Margin % 25.0% Key Products  Farm planning and management advisory and Services  Sale of animal feed mix and supplements Breakdown by Channel  Delivery of treatments in-field Revenue: UGX 2,800k Gross Profit: UGX 909k

Key  Small and medium local farmers Sales Customers Sales  Local practitioners Agent Agent 11% 7%

In Store  Sale of veterinary drugs and supplements in 35% store

 On-site delivery of treatment and drugs Field Channels 32% In Store administration 57%  Sales through sales agent paid on On Field commission basis 58%

Note: for more detailed information see Business Model Canvas in Appendix A.

2 Business Overview Vet Drugs Industry Overview and Competitive Landscape Market Research Key Findings Key Competitors

Agrimed Super Quick Van Jonnet Agri- Services Veterinary Veterinary Agri Ins ISE Surveys to 5 vet drug stores in Mbale Vet Supply revealed the following: International Drugstore Drug Shop Years of 10 years 3 months 5 years 20+ years 8 months 2 years 1 100% of players interviewed believe Operation Mbale Mbale Mbale Mbale Bus Mbale Bus that technical advice and Location Nakaloke consulting services represent a Downtown Downtown Downtown Park Park Number of 1 + 1 Sales competitive advantage 1 2 0 0 1 Employees Agent 2 100% of players provide animal • Full • Vet Drugs • Vet Drugs • Vet Drugs Spectrum of • Vet Drugs treatment services Services • Consultation • Consultation • Consultation Vet Drugs Vet Drugs • Consultation Offered • Treatments • Treatments • Treatments • Consultation • Treatments 3 40% players provide delivery • Treatments services Delivery? × √ √ × × √ 4 100% of players believe to have a On-Site loyal and recurrent customer base Treatments? √ √ √ × × √ Average Single 5 100% of players mention that Purchase 30k 20-30k 20-30k 20k 20-30k 20-30k inventory constraints are an issue (UGX) # of Recurrent 20 30 30 50 10 50 6 No players buy products on credit Customers Stock 7 No players use salesmen for selling Constraints? √ √ √ × √ √ products Credit from suppliers? × × × × × √ 8 100% of players sell broken down √ Credit sales? × × × × × products (i.e. 1 pill from a package (3-7 days) instead of the whole package) Artificial Insemination? × × × × × WIP

3 Business Overview 2. Growth Opportunities ISE’s Growth Opportunities Overview

Opportunity Upside Challenges Priority Loan Request

1 ▲ Strong earnings upside: Incremental profit of UGX2.3m with only 69 ▼ Upfront capex investment: Requires purchase of treatments/year equipment worth UGX2.3m ▲ Latent demand: Proven willingness to pay the product, with 2 sales and ▼ New product: AI with hormones is a relatively new 5 scheduled treatments for AI with hormones after surveying 10 farmers Artificial treatment that will require educating farmers about ▲ High barriers to entry: Equipment and higher education are required to Insemination benefits of investing in it UGX 2.3m provide treatment (“AI”) ▼ High treatment price: Proposed price for hormone ▲ Ease of execution: Charles has successfully performed AI with treatment is relatively high at UGX120k. Marketing borrowed equipment 7 times in the past needs to drive the point that this is an investment ▲ Nakaloke community benefits: AI will boost dairy farmers’ productivity, rather than an expense providing visibility over reproductive cycles and stable revenue

2 ▲ Profitability boost: Restocking would generate incremental cash flow ▼ Upfront capital investment: Requires purchase of of UGX3.7m/year (breakeven case) enabling Charles to re-invest in the inventory worth UGX3.7m business Store UGX 3.7m ▲ Proven demand: Historically, ISE has been able to rotate UGX6m of Restocking inventory in 2 months ▲ Ease of execution: ISE has a qualified employee able to sell products when Charles is on the field and the shop has shelf space for inventory

3 Working ▲ Cash flow boost: Maximizes DOP and boosting in-store rotation ▼ Complexity: Could lead to unfulfilled payables if not Capital ▲ Successful testing: In 10 days of testing Charles has demonstrated executed correctly -- Optimization cash management discipline and adequate book keeping

4 ▲ Boosts sales from most profitable channel: On-site delivery of ▼ Time consuming as Charles will need to invest time services is ISE’s most profitable channel with 58% of profits. Charles in thinking more strategically about his clients Relationship can increase revenue by establishing a proactive relationship Management -- management strategy Strategy ▲ Ease of implementation: Launch only requires development of client profiles and disciplined follow-up

5 ▲ Ease of execution: Readily available ingredients that Charles can ▼ Volatile margin: Testing revealed that ingredient cost Product purchase to obtain the feed mix (See Appendix for detailed analysis on is volatile reflecting crop costs whereas prices are Extension: testing and results) sticky, resulting in pressured margins -- Feed Mix ▼ Low product differentiation as farmers perceive they can mix ingredients themselves

6 ▲ Boost sales: Interviews revealed that convenience is a key driver for in- ▼ Complex execution: Opening a new store while Channel store sales. Nkoma is a busy, growing town with a large Sunday market launching AI services and boosting store sales would Expansion: that would drive store traffic be a stretch implementation wise as all initiatives will -- New Store ▲ Wholesale volume: By purchasing products for two stores, Charles’ require strong marketing efforts would be able to capture higher, wholesale-like margins ▼ High upfront investment: In the UGX8-9m range

High Priority Opportunities Growth Support Strategy Medium Term Opportunities 4 Growth Opportunities 1 Artificial Insemination Loan Request: UGX 2.3m

Opportunity  Expand offering by providing high-margin (40%) AI services

 AI services in the Nakaloke area are provided by only two practitioners who have the necessary equipment, driving supply shortages Rationale  Based on preliminary assumptions on demand and pricing, by offering this service ISE’s profitability could increase by 67%, generating incremental cash flow of UGX 2.3m/ year1

Assumptions Test and Results

1 There is demand to provide 1 Conducted interviews to a sample of 10 farmers Nakaloke to test demand at least 69 treatments per and willingness to pay for AI treatments year at a price ranging ▲ Obtained 2 sales and 5 pre-orders for AI using hormones at a price of between UGX 50K to UGX UGX 120K with launch scheduled for 12/5/2017 using a colleague’s 120K equipment 2 Initial investment of UGX 2 Obtain quote from the Kenya Agricultural Research Center 2.3m and availability of ▲ Quote obtained on 4/5/2017 confirming upfront investment and equipment for purchase verifying in-stock availability 3 Charles is qualified to provide 3 Verify Charles’ qualifications and ask farmers about the strength of their the service and his clients relationship with Charles trust him to be able to deliver ▲ Charles has a certificate in AI and is qualified to provide these on quality and effectiveness services promises ▲ Client interviews revealed strong, long standing relationships and preference for his services

1. Breakeven case assumptions which are more conservative than Charle’ estimates, see following page for details

5 Growth Opportunities 1 Artificial Insemination – Competitive Landscape Market Research Key Findings

Surveys to 5 vet drug stores in Mbale revealed the following:

1 None of the vet drug stores interviewed provide AI services

2 Only one player would like to provide the service in the future 3 Interviews confirmed that there are only two players currently operating in Mbale

4 100% of players confirmed that only treatments with no hormones are currently available in Mbale

5 67% of farmers interviewed mentioned that lack of AI service availability is a problem and that they have missed breeding cycles due to unavailability in the past

Key Competitors

Dr. Godfrey Wakwere Dr. Nabende ISE

Location Mbale Downtown Mbale Downtown Nakaloke

Equipment Ownership √ × × Treatment with Hormones? × × √

Price with Hormones NA NA 120k

Price without Hormones 50k 40k 50k

6 Growth Opportunities 2 Inventory Restocking Loan Request: UGX 3.7m

Opportunity  Boost in-store sales by restocking current inventory with UGX 3.7m worth of products

 Restocking ISE’s inventory to historic levels of UGX 6m has a potential upside of UGX 4.4m/year1 (ca. 40% of current yearly gross profit) Rationale  Up until 3Q16 ISE rotated UGX 6m of stock in 60 days, proving that there is demand for veterinary products in the Nakaloke area

Assumptions Test and Results

1 Interviewed 10 Nakaloke farmers to understand drivers of in-store 1 ISE loses sale opportunities purchases because of lack of stock in ▲ 7 out of 10 participants identified availability as a key driver for in-store store purchases ▲ 6 out of 72 of ISE’s customers mentioned that Charles frequently runs out of stock, which represents a problem and stops them from going to 2 ISE has the resources and the shop skill to sell ~3x current levels 2 Evaluated ISE’s staffing and space resources of inventory ▲ ISE has a full time employee whose job is to sell products in store and who has received adequate training over the past 2.5 years. The shop also has empty shelves that can store more products and stock is non- perishable 3 ISE can comfortably repay 3 Conducted breakeven analysis and compared results against historic the loan based on figures conservative assumptions ▲ Analysis showed that ISE can break even on the investment even if assuming 72 days of sales, 20% higher than historic levels

1. Assumes 60 days of sales in line with historic figures , generating incremental cashflow of UGX4.4m per year. 2. One out of 7 customers purchases products through her son in Kenya, so does not purchase products in Ugandan stores. 7 Growth Opportunities 3 Working Capital Optimization Loan Request: UGX --m

 Purchase products on credit to improve cash-flow generation and in-store product rotation, Opportunity resulting in incremental profit per year

 Currently Charles is paying suppliers immediately, at time of delivery of the products Rationale  By purchasing products on credit Charles would be able to generate profit faster

Assumptions Test

1 On 5 May Charles purchased: i) 24 packs of Vetmycin; ii) 10 sachets of OTC 20%; iii) 10 sachets of OTC 25%; iv) 10 1 Charles is able to purchase products sachets of Coccid at 30 days of payable date on credit from some of his suppliers ▲ The assumption of buying some products on credit has been satisfied thanks to Charles’ strong relationships with suppliers 2  Charles is able to manage the debt 2 For 10 days, Charles has kept record of all sales of exposure to his suppliers by saving products purchased on credit and has saved the per unit the per unit COGS to be able to pay COGS to fulfil his accounts payable on June 5th suppliers on time ▲ Charles is on track to repay his suppliers on the scheduled date

8 Growth Opportunities

 Charles has bought on

Test 4 Relationship Management Strategy Loan Request: UGX --m

 Develop a relationship management methodology that will allow Charles to approach his clients Opportunity proactively in order to increase sales and prioritize clients and opportunities

Rationale Implementation and Impact

 Low-cost, easy-implementation  Develop client profiles containing: growth support strategy that can – Key client information boost sales amongst Charles’ current – Historic records on client visits, including follow up and future customer base opportunities and corresponding deadlines – Charles to set up phone reminders on follow-ups due  Developing a solid client base will – Scheduled launch: May 18th (see Appendix for prototype) enable Charles to secure recurrent sales and treatments  Execute marketing efforts, including: – Delivery of three seminars/year on topics relevant to the  ISE’s competitors provide services on farming community to retain “top of mind” status with a reactive basis. However, farmer clients interviews revealed that clients value . On 14/5 Charles led a seminar on the benefits of AI on follow-up, novel insights and dairy production, attracting an audience of 37 proactive advice farmers, almost 2x the number of farmers invited (20)  Implementing this strategy will allow . This experience demonstrated that his clients value ISE to segment and prioritize clients Charles’ insights, generating 10 leads for future based on data on revenue generation, treatments enabling Charles to focus on the right – Post street sign on Nakaloke’s main street to boost in- clients and opportunities store traffic (see Appendix for picture)

9 Growth Opportunities

 Charles has bought on

Test 3. Required Resources and Execution Plan Artificial Insemination – Cash Flow and Breakeven Analysis

Financing Request Break-even Analysis  Loan amount: UGX 2.3m  Interest Rate: --%  Term: 12 months  Amortization: 12 monthly payments of UGX 192k To break-even on the Upside  Grace period: 2 months 7,000,000 initial investment of Case: 110 Net Cash 6,000,000 UGX2.3m in the first treatments year of operations Flow 5,000,000 Key Assumptions Charles will need to Revenue and Cost Assumptions 4,000,000 perform 69 treatments  Stable client base at 50 3,000,000 Initial  Average number of animals (cows) per client: 2 2,000,000 Investment  50% of treatments require hormones 1,000,000  Price of UGX120k for hormones and UGX50k without Net CashFlow --  Total cost per treatment with hormones stable at UGX62k (of which UGX45k is for hormones) (1,000,000)  Total cost per treatment without hormones stable at UGX17k per (2,000,000) treatment -- 10 20 30 40 50 60 70 80 90 100 110 120 130 140 150 Number of Treatments per Year

Total Uses of Cash

UGX Impact: First 3 Years Cumulative Cash-flow Generation with 69 Pistollet 47,600 treatments UGXm Hand Gloves 28,390 Forceps 30,600 5.2 (4.7) Upside Thawing Goblets 30,600 Case (3.5) 10.2 Thermometer 30,600 (2.6) Thermos 17,000 12.5 (2.3) 4.6 Harvasack 236,300 Al gun 119,000 Nitrogen Container 1,768,000 Revenue Revenue Cost of Other Nitrogen Cost Initial Total from from No Hormones Operating Investment Cumulated Total Investment 2,308,090 Hormones Hormones Costs Cash-flow Treatments Treatments

10 Required Resources and Execution Plan Restocking – Cash Flow and Breakeven Analysis Financing Request Break-even Analysis  Loan amount: UGX 3.7m  Interest Rate: --%  Term: 12 months  Amortization: 12 monthly 14,000  Grace period: 2 months payments of UGX 308k 12,000 To break-even on the initial investment of UGX 3.7m in the Key Assumptions 10,000 Upside first year of operations Charles Case: 60 will need to obtain average days Revenue and Costs Assumptions 8,000 DOS of sales (DOS) of at max 72 days  Revenue calculated assuming a 72 days rotation of the 6,000 Initial inventories in line with the breakeven analysis 4,000 Investment – Conservative assumption: historically the average Net Cash 2,000 days of sales for the stock has been 60 days Flow

 Gross profit margin of 20% in line with the average First YearNet Cash Flow (UGXk) -- 20 30 40 50 60 70 80 90 100 110 120 130 140 profit margin for in store vet drug sales Days of Sales  Assumes no benefit from working capital management enhancement Impact: First 3 Years Cumulated Cash-flow Generation Total Uses of Cash at Breakeven UGXm UGX k Anti Protozoa 800 Cattle Antibiotics 1,000

Poultry Antibiotics 900 (44.4) 55.5 Upside Drinkers 250 Case (3.7) Acarides 350 9.6

Vaccines and Supplements 400 7.4

Revenue Cost of Product Initial Investment Total Cumulated Cash- Total Investment 3,700 Purchase flow

11 Required Resources and Execution Plan Breakeven Case Pro-forma Cash Flows and Ability to Repay In the Breakeven Case Charles will be able to fully repay the loan in one year. Incremental cash flow of UGX 400k per month will be reinvested to expand his business by launching a second store in Nkoma.

UGX k Jun 2017 Jul 2017 Aug 2017 Sep 2017 Oct 2017 Nov 2017 Dec 2017 Jan 2018 Feb 2018 Mar 2018 Apr 2018 May 2018 Jun 2018 Jul 2018 NTM Current 2,800 2,800 2,800 2,800 2,800 2,800 2,800 2,800 2,800 2,800 2,800 2,800 2,800 2,800 39,200 Artificial Insemination 491 491 491 491 491 491 491 491 491 491 491 491 491 491 6,876 Restorcking 1,542 1,542 1,542 1,542 1,542 1,542 1,542 1,542 1,542 1,542 1,542 1,542 1,542 1,542 21,583 Revenue 4,833 4,833 4,833 4,833 4,833 4,833 4,833 4,833 4,833 4,833 4,833 4,833 4,833 4,833 67,659 COGS (1,891) (1,891) (1,891) (1,891) (1,891) (1,891) (1,891) (1,891) (1,891) (1,891) (1,891) (1,891) (1,891) (1,891) (26,472) License (19) (19) (19) (19) (19) (19) (19) (19) (19) (19) (19) (19) (19) (19) (268) Rent (100) (100) (100) (100) (100) (100) (100) (100) (100) (100) (100) (100) (100) (100) (1,400) Charles Salary (300) (300) (300) (300) (300) (300) (300) (300) (300) (300) (300) (300) (300) (300) (4,200) Employee Salary (50) (50) (50) (50) (50) (50) (50) (50) (50) (50) (50) (50) (50) (50) (700) Utilities (40) (40) (40) (40) (40) (40) (40) (40) (40) (40) (40) (40) (40) (40) (560) Current Opex (2,400) (2,400) (2,400) (2,400) (2,400) (2,400) (2,400) (2,400) (2,400) (2,400) (2,400) (2,400) (2,400) (2,400) (33,600) Cost of Hormons (130) (130) (130) (130) (130) (130) (130) (130) (130) (130) (130) (130) (130) (130) (1,820) Cost of Nitrogen (72) (72) (72) (72) (72) (72) (72) (72) (72) (72) (72) (72) (72) (72) (1,008) Other Costs (97) (97) (97) (97) (97) (97) (97) (97) (97) (97) (97) (97) (97) (97) (1,355) Artificial Insemination Opex (299) (299) (299) (299) (299) (299) (299) (299) (299) (299) (299) (299) (299) (299) (4,183) COGS (1,233) (1,233) (1,233) (1,233) (1,233) (1,233) (1,233) (1,233) (1,233) (1,233) (1,233) (1,233) (1,233) (1,233) (17,267) Restocking Opex (1,233) (1,233) (1,233) (1,233) (1,233) (1,233) (1,233) (1,233) (1,233) (1,233) (1,233) (1,233) (1,233) (1,233) (17,267) Proforma Cash-Flow for Debt Service 901 901 901 901 901 901 901 901 901 901 901 901 901 901 12,609 Artificial Insemination Investment (2,308) ------(2,308) Restocking Loan Investment (3,700) ------(3,700) Artificial Insemination Loan Draw dow n 2,308 ------2,308 Restocking Loan Draw dow n 3,700 ------3,700 Artificial Insemination Loan Instalments -- -- (192) (192) (192) (192) (192) (192) (192) (192) (192) (192) (192) (192) (2,308) Restocking Instalments -- -- (308) (308) (308) (308) (308) (308) (308) (308) (308) (308) (308) (308) (3,700) Loan Grace Free Cash Flow 901 901 400 400 400 400 400 400 400 400 400 400 400 400 6,601 Period Cumulated 901 1,801 2,201 2,601 3,001 3,401 3,801 4,201 4,601 5,001 5,401 5,801 6,201 6,601 6,601 Assumptions 1 Current business revenue and costs in line with the historic monthly average 2 Operating assumptions for artificial insemination and restocking as per previous pages 3 Assumes no impact from working capital optimization to present a conservative case 4 2-month grace period for loan repayment

12 Required Resources and Execution Plan Management Case Pro-forma Cash Flows and Ability to Repay In the Upside Case Charles will be able to generate an additional profit of ca. UGX 600k per month after repayment of the loan that will be used to further expand his business by launching a store in Nkoma in June, 2018.

UGX k Jun 2017 Jul 2017 Aug 2017 Sep 2017 Oct 2017 Nov 2017 Dec 2017 Jan 2018 Feb 2018 Mar 2018 Apr 2018 May 2018 Jun 2018 Jul 2018 NTM Current 2,800 2,800 2,800 2,800 2,800 2,800 2,800 2,800 2,800 2,800 2,800 2,800 2,800 2,800 39,200 Artificial Insemination 779 779 779 779 779 779 779 779 779 779 779 779 779 779 10,908 Restorcking 1,850 1,850 1,850 1,850 1,850 1,850 1,850 1,850 1,850 1,850 1,850 1,850 1,850 1,850 25,900 Revenue 5,429 5,429 5,429 5,429 5,429 5,429 5,429 5,429 5,429 5,429 5,429 5,429 5,429 5,429 76,008 COGS (1,891) (1,891) (1,891) (1,891) (1,891) (1,891) (1,891) (1,891) (1,891) (1,891) (1,891) (1,891) (1,891) (1,891) (26,472) License (19) (19) (19) (19) (19) (19) (19) (19) (19) (19) (19) (19) (19) (19) (268) Rent (100) (100) (100) (100) (100) (100) (100) (100) (100) (100) (100) (100) (100) (100) (1,400) Charles Salary (300) (300) (300) (300) (300) (300) (300) (300) (300) (300) (300) (300) (300) (300) (4,200) Employee Salary (50) (50) (50) (50) (50) (50) (50) (50) (50) (50) (50) (50) (50) (50) (700) Utilities (40) (40) (40) (40) (40) (40) (40) (40) (40) (40) (40) (40) (40) (40) (560) Current Opex (2,400) (2,400) (2,400) (2,400) (2,400) (2,400) (2,400) (2,400) (2,400) (2,400) (2,400) (2,400) (2,400) (2,400) (33,600) Cost of Hormons (206) (206) (206) (206) (206) (206) (206) (206) (206) (206) (206) (206) (206) (206) (2,888) Cost of Nitrogen (72) (72) (72) (72) (72) (72) (72) (72) (72) (72) (72) (72) (72) (72) (1,008) Other Costs (154) (154) (154) (154) (154) (154) (154) (154) (154) (154) (154) (154) (154) (154) (2,150) Artificial Insemination Opex (432) (432) (432) (432) (432) (432) (432) (432) (432) (432) (432) (432) (432) (432) (6,045) COGS (1,480) (1,480) (1,480) (1,480) (1,480) (1,480) (1,480) (1,480) (1,480) (1,480) (1,480) (1,480) (1,480) (1,480) (20,720) Restocking Opex (1,480) (1,480) (1,480) (1,480) (1,480) (1,480) (1,480) (1,480) (1,480) (1,480) (1,480) (1,480) (1,480) (1,480) (20,720) Proforma Cash-Flow for Debt Service 1,117 1,117 1,117 1,117 1,117 1,117 1,117 1,117 1,117 1,117 1,117 1,117 1,117 1,117 15,643 Artificial Insemination Investment (2,308) ------(2,308) Restocking Loan Investment (3,700) ------(3,700) Artificial Insemination Loan Draw dow n 2,308 ------2,308 Restocking Loan Draw dow n 3,700 ------3,700 Artificial Insemination Loan Instalments -- -- (192) (192) (192) (192) (192) (192) (192) (192) (192) (192) (192) (192) (2,308) Restocking Instalments -- -- (308) (308) (308) (308) (308) (308) (308) (308) (308) (308) (308) (308) (3,700) Loan Grace Free Cash Flow 1,117 1,117 617 617 617 617 617 617 617 617 617 617 617 617 9,635 Period Cumulated 1,117 2,235 2,851 3,468 4,085 4,702 5,318 5,935 6,552 7,168 7,785 8,402 9,018 9,635 9,635 Cumulative FCF enough to open Nkoma store Assumptions 3 Operating assumptions for restocking in line with breakeven case but 1 Current business revenue and costs in line with the historic monthly assuming days of sales of 60 days vs 72 per Charles’ estimates average 4 Assumes no impact from working capital optimization to present a 2 Operating assumptions for artificial insemination in line with breakeven conservative case case but assuming 110 treatments per year vs. 69 of the breakeven case 5 2-month grace period for loan repayment as per Charles’ estimates

13 Required Resources and Execution Plan Conclusions and Recommendations We recommend extending a UGX 6m in virtue of ISE’s strategy alignment with key Balloon investment pillars, a strong repayment capacity and spillover benefits for the Nakaloke community.

Criteria Key Strengths Empirical evidence supports demand for both, AI treatments and ISE’s stock: ▲ Field interviews resulted in 2 sales and 5 pre-orders for hormone-based AI, or ~10% of the required 69 treatments to break even Desirability ▲ Historic figures for inventory rotation at 60 days versus the break even case of 72 days ▲ Both, the AI and restocking initiatives will be supported by a sound relationship management strategy, encouraging store traffic and field sales

▲ Charles has a Certificate in Artificial Insemination, Customer Service and Business Management, equipping him to perform AI treatments and complementing his degree on Animal Production and Management, a requirement to operate a vet shop in Uganda ▲ Charles has performed 7 successful AI treatments with borrowed equipment in the past. Equipment and hormones are readily available for Feasibility purchase from the Kenya Agricultural Research Center and he can launch treatments as soon as he purchases the equipment ▲ ISE counts with a trained employee who has worked at the shop for the past ~2.5 years and can sell proposed restocked products when Charles is conducting field visits

▲ ISE has a track record of healthy operating cash flow generation at an average of UGX 700k /month over the past year ▲ Launch of the proposed initiatives will enable ISE to generate FCF of 1.4m/month after repaying the loan, enabling Charles to reinvest in Viability the business and raise capital to open a second store in Nkoma and capture higher, wholesale-like margins ▲ There are high barriers to entry for the proposed initiatives, entailing large upfront capital investments in equipment and stock, and requiring higher education credentials, knowledge and experience to operate

▲ ISE’s cash flow generation ability has enabled Charles to fully repay a prior loan from Balloon for UGX 1.2m to acquire a fridge and solar Repayment panels, providing a solid track record of disciplined cash management and proving ISE and Charles’ credit strength Capacity ▲ Without the loan, it would take Charles 6 months to save enough to purchase AI equipment and nearly 1.5 years to restock the business. and Loan Charles would lose the momentum generated by the success of field interviews and training seminar and likely lose the first mover Purpose advantage for hormone-based treatments. Additionally, without restocking Charles will not be able to generate enough cash from store sales to launch a second store in Nkoma

▲ AI will boost dairy farmers’ productivity, providing visibility over milk production cycles and therefore stable revenue generation. Benefits to – Hormone-based treatments can increase milk production by 4x through cycle synchronization while maximizing the probability of Nakaloke conception and avoiding long calving intervals and potential illnesses from bull-based breeding Community ▲ Boosting sales of ISE’s products and supplements will result in healthy animals and healthy products for human consumption in Nakaloke ▲ A larger client base will result in a greater number of farmers trained on best farm management practices thanks to Charles‘ advice

14 Required Resources and Execution Plan Implementation and Next Steps ISE has a clear path way to accomplish its short and medium term objectives upon execution of proposed opportunities and will be able to generate enough cash-flow to fully finance the opening of a new store in Nkoma by June 2018.

Execution Timeline

 8/5: Launch working  Revisit Nkoma store  Obtain loan capital optimization opening opportunity:  Last loan instalment initiative  Purchase AI  Confirm UGX 8m  Launch Nkoma store First UGX  15/5: Deliver seminar equipment from Kenya upfront investment – Under the management on AI benefits on May Agricultural Research 500k loan case Charles will have a Center installment  Verify status of cumulative cash flow of ca.  18/5: Launch competition relationship  Purchase inventory for UGX 8.5m that will be used  Identify location for management strategy shop restocking to launch he new store shop

May June July August March June / July

2017 2018 Ongoing support initiatives and monthly checks

Working Capital Optimization: Relationship Management: Marketing: Deliver three seminars/year on Maximize supplier credit days while ensuring Follow up on action items from client visits and farming productivity topics to position ISE timely repayment of credit through adequate proactively pursue business versus expecting as a thought leader and top of mind shop in record keeping calls from clients Nakaloke and surrounding areas

1. The last installment for this loan is scheduled to be repaid in June, 2017.

15 Required Resources and Execution Plan Appendix A. Business Model Canvas (BMC) Analysis Business Model Canvas (BMC) Analysis

1 2 4 5 7 Key Partners Key Activities Value Proposition Get Customers  Sale of vet drugs  Word of mouth and  Suppliers  Technical referrals.  Small farmers in store knowledge,  E-updates via text or  Advisory and email  Regulators advisory and  Medium farmers consulting  Survey of non-costumers quality products  Local community services Keep  Practitioners  Balanced product mix and  Sale of animal  Flexible quantity  Sales agent stock availability supplements offering (can sell  Relationships with  On-site treatment small quantities) suppliers administration  Advisory and consulting  Good location Grow 3 and local delivery  Artificial insemination Key Resources  Working capital optimization  Employee  Relationship management  Sales Agent  Open store in Nkoma  Higher education 6 credentials Channels  Reputation  In Stores sales  Store location  Sales agent  On-site  Motorcycle medication administration 8 Costs Sustainability Revenue  Rent  Maintain client base, and attract new  Sale of vet drugs and supplements in customers store  Utilities  Manage working capital and cash flow  Advisory services  Wages  Push sales of high margin products  On-site treatments and medication  License  Boost productivity and improve revenue generation and living conditions for farmers administration  Inventory in Nakaloke and Mbale

Note: for Additional Information see appendix.

16 Business Model Canvas (BMC) Analysis B. Other Opportunities Explored 5 Product Extension in Feed Mix

 Launch of a new poultry feed mix by purchasing the various ingredients and mixing them Opportunity / together Rationale  Charles has all the skills to develop the product and to sell it to his current customer base

 The feed mix is able to generate high and sustainable profits (i.e. availability of low cots raw Assumptions materials)  High demand for the product and consequent high inventory rotation

 Price survey demonstrated that in the past 15 days raw materials cost has more than doubled, de facto jeopardizing the profit potential due to the lack of possibility to push raw materials cost on prices in the short term – Cost per Kg of raw materials went from UGX 833 to UGX 1,500 and the price of the feed mix remained stable at UGX 2,000 per Kg Test and Results  Field visits and price survey demonstrated that: – Feed mix is perceived from the customers as a commoditized product – Most of the big clients with 100+ chickens internally produce the feed mix – The profitability is highly volatile and correlated to the fluctuations of the cost of raw materials

17 Other Opportunities Explored 6 Open a New Store in Nkoma

 Opening of a new store in Nkoma, which represents a biggest market that could boost sales Opportunity among local farmers

 Opening a new store will represent expanding client base Rationale  Accessing new market, which potentially represents significant overall sales increase that will compliment current sales from the store in Mbale

 Increase overall sales, focusing mainly on the high rotation and most profitable products by Strategy opening a second store. In order to open the new store, Charles will probably partner with his current salesman in order for him to run the new store

Key  Demand for veterinary products, animal drugs and medicines will be similar to current levels in Assumptions Nakaloke

 Revisit the opportunity in 6 months time once artificial insemination and inventory restocking Next Steps will be fully implemented and will have generated incremental cash

18 Other Opportunities Explored C. Additional Information 3 Working Capital Optimization – Case Study

By purchasing Vetymycin on 30 days of credit Charles will be able to generate additional cash of UGX 172k per month.

Vetymycin  Purchase of 40 tablets every 15 days for UGX4.3k/tablet. Payment can be extended by up to 30 days  Sale of 40 tablets every 15 days at UGX5.0k/tablet. Sales occur at the end of the period for simplicity

Purchase on UGX 000 Status Quo Credit Purchase of the Purchase of the product at 30 product and days Day 0 (172) immediate cash -- payment

Sale and Cash- in for 200 and repurchase of Day 15 28 200 Sale for 200 and the products at repurchase of 30 days products for 172

Day 30 200 28

Sale for 200 n Sale and Cash- in for 200 and payment of the first purchase of product Total Cash-flow 56 228

19 Additional Information

 Charles has bought on

Test 4 Relationship Management Strategy – Client Profile Prototype

20 Additional Information

 Charles has bought on

Test 4 Relationship Management Strategy – Street Sign Post

21 Additional Information

 Charles has bought on

Test Q&A