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  • INVESTING FOR SUSTAINABLE GLOBAL FISHERIES

    With support from:

    Bloomberg Philanthropies Vibrant Oceans Initiative

    The Rockefeller Foundation

  • Executive Summary

    Introduction

    Small-Scale Fisheries Investment Blueprints

    The Mariscos Strategy

    The Mangue Strategy

    The Isda Strategy

    Industrial-Scale Fisheries Investment Blueprints

    The Merluza Strategy

    The Sapo Strategy

    National-Scale Fisheries Investment Blueprint

    The Nexus Blue Strategy

  • ENCOURAGE CAPITAL PUBLICATION DISCLAIMER

    This publication has been prepared solely for informational purposes, and has

    been prepared in good faith on the basis of information available at the date of

    publication without any independent verification. The information in this publication

    is based on historical or current political or economic conditions, which may be

    superseded by later events. Encourage Capital, LLC (Encourage Capital) does not

    guarantee or warrant the accuracy, reliability, adequacy, completeness or currency

    of the information in this publication nor its usefulness in achieving any purpose.

    Charts and graphs provided herein are for illustrative purposes only. Nothing

    contained herein constitutes investment, legal, tax, or other advice nor is it to

    be relied on in making an investment or other decision. Readers are responsible

    for assessing the relevance and accuracy of the content of this publication. This

    publication should not be viewed as a current or past recommendation or a

    solicitation of an offer to buy or sell securities or to adopt any investment strategy.

    The information in this publication may contain projections or other forward-looking

    statements regarding future events, targets, forecasts or expectations described

    herein, and is only current as of the date indicated. There is no assurance that such

    events, targets, forecasts or expectations will be achieved, and any such events,

    targets, forecasts or expectations may be significantly different from that shown

    herein. Past performance is not indicative of future results. Encourage Capital will

    not be liable for any loss, damage, cost or expense incurred or arising by reason of

    any person using or relying on information in this publication.

  • TABLE OF CONTENTS

    The Mariscos Strategy 1

    The Mariscos Strategy 2

    Key Value Drivers 4

    Profile of the Mariscos Strategy Fisheries 5

    Chilean Small-Scale Fisheries 5

    The Mariscos Strategy Portfolio 6

    Current Regulatory Framework 8

    Condition of Nearshore Species 9

    Socio-Economic Context 10

    The Current Supply Chain 10

    The Mariscos Impact Strategy 12

    Impact Investment Thesis 12

    Step 1: Fisheries Management Improvements 13

    The Fisheries Management Plan 14

    Sustainable Fishing Rewards Program 15

    Management and Implementation 17

    Fisheries Management Improvements Budget 18

    Targeted Social and Environmental Impacts 20

    The Mariscos Commercial Investment Thesis 21

    Step 2: The Expansion of Gustomar 21

    Value Proposition 21

    Company Description and Mission Alignment 22

    Growth Strategy 23

    Historical Performance 27

    Market Trends 29

    Competition 30

    The Mariscos Strategy Financial Assumptions and Drivers 31

    Revenue Model and Pricing 31

    Cost Structure 32

    The Mariscos Strategy Transaction Structure 34

    Sources and Uses of Funds 34

    Ownership Structure and Governance 34

    Summary of Returns 35

    Sensitivity Analysis 36

    Key Mariscos Strategy Risks and Mitigants 38

    Appendix 41

  • FIGURES

    FIGURE 1: Target Species of The Mariscos Strategy 6

    FIGURE 2: Location and Principal Species of the Caletas 7

    FIGURE 3: Total Number of Fishers and Vessels from Prototype Caletas 8

    FIGURE 4: Fisheries Governance Index 8

    FIGURE 5: Nationwide Chilean Landings and Stock Status of Featured Species 9

    FIGURE 6: Annual Fisher Income by Caleta Relative to Chilean Poverty Line and Extreme Poverty Line 10

    FIGURE 7: Margin Increases at Each Turn in the Supply Chain 11

    FIGURE 8: The Mariscos Strategys Investments 12

    FIGURE 9: Profit Share Program Expansion (FCT and Premium) 16

    FIGURE 10: Fisheries Management Improvements Annual Budget 18

    FIGURE 11: Fishery Improvement Costs as a Share of Seafood Revenue 19

    FIGURE 12: Final Presentation of Gustomars Products 22

    FIGURE 13: Gustomar Sourcing Network Strategy Showing Locations of Seven

    Portfolio Caletas, Key Species, and Target Markets for Finished Goods 23

    FIGURE 14: Sourcing Plan with Relative Contribution of Each Species to Total Volume 24

    FIGURE 15: Volume and Production Share from the Caletas over the 5-Year Plan 24

    FIGURE 16: Sales by Customer Segment Year 5 25

    FIGURE 17: Sales Growth by Country as a Result of International Expansion Plan 27

    FIGURE 18: GustoMar Historical Market Share 27

    FIGURE 19: Sales by Market Segment in Kilos and Dollars of Revenue 28

    FIGURE 20: Growth (Both Historical and Projected) of Key Prepared-Foods

    Product Families in the Chilean Market 30

    FIGURE 21: GustoMar Revenue Projections Through International Expansion Plan 31

    FIGURE 22: GustoMar Revenue Projections in Key Segments 31

    FIGURE 23: Breakdown of COGS by Expense Category 32

    FIGURE 24: Breakdown of SG&A by Expense Category 33

    FIGURE 25: GustoMar Cost Structure (5-Year Average) 33

    FIGURE 26: Capital Providers 35

    FIGURE 27: Base Case Impact and Financial Returns 35

    FIGURE 28: Growth in Projected Revenue and Net Income 36

  • Imp

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    1

    While Project Mariscos is based on analysis of actual fishing communities, fishing conditions, and commercial business operations to

    incorporate realistic assumptions of costs, returns, and risks affecting the potential outcomes of the project, Encourage Capital has

    synthesized its findings into a general case study that we hope can be used as a roadmap for fishery stakeholders interested in impact

    investing opportunities more broadly in the sustainable fisheries space. As such, most of the company and programmatic references herein

    use pseudonyms in place of the actual names of the organizations on which the analysis was based. Where used, such pseudonyms will be

    used consistently throughout the remainder of this text.

    THE MARISCOS STRATEGY: A SMALL-SCALE FISHERIES INVESTMENT IN CHILE

    Encourage Capital has worked with support from Bloomberg Philanthropies and The Rockefeller Foundation to develop an impact investing strategy supporting the implementation of sustainable fishing improvements in a portfolio of small-scale, multispecies fisheries in Chile. The Mariscos Strategy is a hypothetical $7.0 million impact investment to protect seven small-scale fisheries along the Chilean coastline.

    The $7.0 million would fund the implementation of fisheries management improvements across the fisheries, and be used to expand an existing consumer packaged goods company producing gourmet heat-and-eat meals for Latin American consumers. The Mariscos Strategy is focused on generating an 11.1% base-case equity return, while simultaneously protecting the multispecies stock biomass from current and future overfishing, enhancing almost 550 fisher livelihoods across seven fishing communities, and safeguarding the supply of over 5 million meals-to-market annually.

    Illustration by Brett Affrunti

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    Chiles 6,435 km coastline constitutes one of the

    most biodiverse and productive nearshore marine

    environments in the world, accounting for 4% of

    the worlds marine wild-capture fisheries landings.9

    Despite Chiles passing of one of the worlds most

    progressive fisheries management laws in February

    2013, many of the nations stocks remain inadequately

    managed. The species group proposed for sourcing

    in The Mariscos Strategy incorporate a mix of stocks,

    including razor clams, mussels, scallops, king crab,

    stone crab, nylon shrimp, and abalone, each the

    predominant species in one of the seven caletas

    (or coves) incorporated into Mariscoss portfolio of

    small-scale fishing communities. Altogether, nearly

    550 fishers with some 200 vessels harvest the

    aforementioned species, producing roughly 2,900

    metric tons (mt) of seafood landings each year, with

    an aggregated estimated value of $13.5 million in 2014.

    The species vary in terms of their stock status

    and management systems, with four of the seven

    species lacking any stock assessment data, and

    three of the seven communities lacking access

    constraints to limit fishing effort. Only one of the

    seven species has a designated Management

    Committee, as required by law. As such, no

    science-based catch limits are in place for any

    of the species. Lacking critical elements of a

    robust management framework, the fisheries

    are vulnerable to overfishing. Indeed, all of Th