Brent knudsen

Corporate Governance & Integrity | 10 November 2011

Brent Knudsen, Founder and Managing Partner, Partnership Capital Growth

The Pursuit of Value AND Values in Merchant Banking

CONFIDENTIAL

• Introduction

• Merchant Banking Approach

Agenda

1

CONFIDENTIAL

Principles

Integrity

Mission

Core Values

To create superior economic and social value through advising and investing in great

companies in the areas of healthy, active and sustainable living.

We practice our values through an absolute

commitment to:

• Creating Value by practicing our Values

• Partnership and Teamwork

• Bringing entrepreneurial Passion and creativity

to all that we do

• Focus on the healthy, active and sustainable

living market

• Enjoying what we do!

Some of the keys to our unique approach

include:

• Tabula Rasa: we start with a blank slate, with no

predetermined agenda, and develop

Customized Approaches to suit unique

situations and client needs.

• We leverage our Deep Network and long-

standing relationships to find the right partner

and Bridge the Gap between current ownership

groups and investors to create strong, long-term

partnerships.

Trust Respect BalanceExcellence

Practices

2

Introduction - Foundation

CONFIDENTIAL

• Always act in the client’s

best interest

• Choosing clients and

partners wisely

• Clear alignment with

management

• Capital partners who

operate with integrity

INTEGRITY

1) The quality of being honest

and having strong moral principles.

2) The condition of being unified

and unimpaired;

sound in construction.

Clients and Portfolio

Companies

Introduction - Integrity

3

Integrity is a cornerstone of value and values investment banking and private equity investing.

Peers and Partners

Work Product

Self

• Thorough

• Accurate

• Original

• Fact-based

• Transparent

• Based on sound

assumptions

• Integrity is the foundation for

TRUST and RESPECT

among colleagues

• Key to building strong teams

• Ultimate compass is the self

CONFIDENTIAL

Transparency

Introduction - Principles

4

With partnerships based on integrity, effective corporate governance is achieved through principles of

transparency, accountability and the alignment of incentives.

Aligned IncentivesAccountability

• Shared upside

• Shared downside

• No moral hazard

• No “back room” deals

• “Daylight” on financial

arrangements

• Clear expectations for all

parties

• Where does the buck stop?

• Trust in teammates

• Appropriate roles for

relevant skills / experience

Effective corporate governance is essential to

the pursuit of VALUE AND VALUES

CONFIDENTIAL

• Introduction

• Merchant Banking Approach

Agenda

5

CONFIDENTIAL

SIPC/FINRA-Licensed Investment Bank

Partnership Capital Growth, LLC is a

licensed broker-dealer able to

complete any private or

public security

transaction.

Capital Structure &

Strategic Consulting

Strategic consulting

services to the healthy,

active and sustainable

living industry focused

on investment transactions.

Fund Management Services

Administrative services and portfolio

management for TBL Capital & Sea Change.

PCGI Fund I

Invested $287 million* in

nine portfolio companies.

PCGI Fund II

Invested $26 million**

– single entity structured

debt fund.

PCGI Fund III

$200 million healthy living fund.

Direct, or with co-investment

partners. Augmented team.

Healthy,

Active and

Sustainable

Living

PCG Investors PCG Advisors

Partnership Capital Growth

Merchant Banking Approach

6

Partnership Capital Growth provides investment capital and advisory services to companies in the

healthy, active and sustainable living sector.

* Includes third-party co-investment.

** Includes $1 million from PCGI Fund I.

CONFIDENTIAL

Benefit Corporation

• B Corporations: A new type of company that uses the power of

business to solve social and environmental problems.

• B Corporations:

- Meet high social & environmental standards

- Expand corporate accountability

- Build collective voice for good companies

- PCG donates 10% of its profits to charitable causes in the area of

healthy, active & sustainable living

- PCGA is a Pioneer in the new Impact Ratings System, GIIRS,

through PCGI and our affiliate, TBL Capital.

Learn more here: http://better.bcorporation.net/ and here: http://www.bcorporation.net

Select beneficiaries

is proud to be a

Certified B Corporation


7

http://www.pcg-advisors.com/CharitableGiving

http://better.bcorporation.net/

http://www.bcorporation.net/

CONFIDENTIAL

• Recent Harvard Business Review article by

Michael Porter and Mark Kramer advocated for

shared value:

– Policies and operating practices that enhance the

competitiveness of a company while

simultaneously advancing the economic and

social conditions in the communities in which it

operates.

• An increasing number of businesses, including

Google, IBM, Johnson & Johnson, Unilever and

Walmart are embracing shared value.

• This new approach blurs the traditional profit /

nonprofit boundary:

– Revolution Foods provides 60,000 fresh,

nutritious meals to students daily – and does so at

a higher gross margin than its competitors.

– Walmart lowered carbon emissions by reducing

packaging and eliminating 100M miles from the

delivery routes of its trucks – and simultaneously

saved $200M in costs.

There is increasing recognition that pursuing social & environmental impact provides competitive

advantage and improves company value.

Shared Value Serves People, Planet, and Profits

Source: Michael Porter and Mark Kramer, “The Big Idea: Creating Shared Value.” Harvard Business Review, January-February 2011.

The Connection Between Competitive

Advantage and Social Benefit


8

CONFIDENTIAL

PCG Fund, TBL Capital executes a specific Triple Bottom Line mission (people, planet, profit).

TBL Portfolio - Social & Environmental Impact Overview

People• Income

generation for

agents leasing

Solios to rural

households

• Financial

savings for

Solio users

replacing

kerosene,

batteries, and

cell charging at

kiosks

• Improved

health for

consumers

• Increased

income

generation for

fish farmers

and wild

harvesters

• Improved

health for

consumers

• Housing,

transportation,

visa

assistance,

and fair wages

for foreign

farm workers

on the Gaia

Farm

• Improved

health for

consumers

due to nutrition

benefits of

goat’s milk

over cow’s

milk

• Enables time

savings and

incremental

funding for

nonprofits

addressing

social issues

• Increased

income

generation for

tea farmers in

developing

countries

Planet• In Kenya,

carbon

emission

reductions

from the

replacement of

kerosene

• Sustainable

manufacturing

and packaging

• Improved

aquaculture

and fishing

practices

protect and

preserve

ecosystems

• Energy, land,

and water

conservation

through

organic

farming

• Reduced

methane

emissions ,

land usage,

and water

usage from

using dairy

goats instead

of cows

• Enables time

savings and

incremental

funding for

nonprofits

addressing

environmental

issues

• Energy, land,

and water

conservation

through

organic

farming and

eco-friendly

packaging


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http://www.cleanfish.com/

CONFIDENTIAL

Our impact measurement system was designed with several key objectives and attributes in mind.

Comprehensive System for Measuring

Social & Environmental Impact

Measure quantitatively the

value of the social and

environmental impact

created

Objective #1

In addition to financial returns, what social

and environmental returns are generated as a

result of this investment?

Attributes of the System:

Customized for each portfolio company – Each

company has its own dashboard, reflecting

unique products and services

Fully integrated with financial reporting –

Social impact updates are reported alongside

financial updates in TBL’s quarterly report

dashboards

Estimate the bottom-line

impact of companies’

socially and environmentally

responsible practices

Objective #2

How have the financial returns from this

investment been increased by the company’s

social and/or environmental focus?

Value of Impact Data at Exit:

Goals: Maximize company value at exit by

leveraging aggregate quantitative data

demonstrating social & environmental impacts.

If social & environmental impacts are proven

drivers of profitability tied to growth / future

value of Co. to strategic buyer or financial

investor

Screen for Sustainability at Scale: Means to test

if target partner for growth is aligned with social

and environmental objectives of Co. in long term


10

CONFIDENTIAL 11

TBL has articulated key impact objectives across its three focus areas

People Planet Profits

Impact Objectives • For Producers:

Improve livelihoods by

increasing income

and economic

opportunity for

producers and workers

in the supply and

distribution chain

• For Consumers:

Promote improved

health and wellness

through the provision of

healthy products and

services to consumers

• Generate

environmental benefit

to land, water, air

through:

• Eco-friendly

products,

services, and

corporate

practices

• Producer/supplier

practices (e.g.

organic farming,

sustainable

seafood farming)

• Increase portfolio

company profitability

and returns upon exit

due to the adoption of

socially and

environmentally

responsible products

and practices

• Support companies

whose impact grows

as they scale

BeneficiariesSuppliers/Distributors

ConsumersEnvironment

Portfolio Companies

Industry

The new system provides a high-level summary of TBL’s impact on

people, planet, and profits


CONFIDENTIAL 12

Numi Tea Impact Measurement

People

Description of Impact

• Increased income for tea farmers

in developing countries due to

Numi’s commitment to Fair Trade

• 44% of all tea purchased to date is

socially-certified

• Fair trade wages paid result in a

46% increase in income to farmers

to date

• Health benefits for consumers from

drinking high quality, pure tea

• >300M servings of Numi tea sold to

consumers to-date

• Health benefit for producers and

consumers from harvesting and

drinking tea free from pesticides

and synthetic fertilizers

Planet Profits

• Environmental benefits from

organic farming

• To-date, use of 3,000 lbs of

pesticides and 7M lbs of synthetic

fertilizer averted

• Environmental benefits from

recycling and eco-friendly

packaging

• To-date, 27,000 trees saved, 1.7M

pounds of landfill reduced, 14.5B

BTUs of energy reduced, 12.2M

gallons of wastewater reduced, and

2.5M lbs of greenhouse gases

reduced

• Numi Tea products command a

price premium over other

premium tea brands

• Average retail price premium of

46%

• Numi makes business decisions

that are both environmentally

friendly AND contribute to the

bottom line

• Example calculation is cost savings

from environmentally beneficial

shipping and routing decisions

Numi’s commitment to social and environmental impact benefits suppliers,

consumers, the planet and the company’s bottom line


CONFIDENTIAL 13

Sample Inputs

INPUTS FROM NUMI TEA

Description Units

Sales

1 Unit sales, boxed tea (16 bag ct) Number

2 Unit sales, loose leaf tea (4 oz cannisters) Number

3 Unit sales, bottled tea (12-pack) Number

Tea Purchasing

4 Total tea purchased Pounds

5 Total organic tea purchased Pounds

a) Organic tea purchased from India Pounds

b) Organic tea purchased from China Pounds

c) Organic tea purchased from South Africa Pounds

d) Organic tea purchased from Egypt Pounds

e) Organic tea purchased from other locations Pounds

6 Total socially-certified tea purchased Pounds

a) Socially-certified tea purchased from India Pounds

b) Socially-certified tea purchased from China Pounds

c) Socially-certified tea purchased from South Africa Pounds

d) Socially-certified tea purchased from Egypt Pounds

e) Socially-certified tea purchased from other locations Pounds

7 Total fair trade premiums paid US$

a) Fair trade premiums paid to India US$

b) Fair trade premiums paid to China US$

c) Fair trade premiums paid to South Africa US$

d) Fair trade premiums paid to Egypt US$

e) Fair trade premiums paid to other countries US$

Packaging

Using the Environmental Paper Network tool (www.papercalculator.org):

8 Trees (wood use) saved due to eco-friendly packaging Trees

9 Landfill (solid waste) reduced due to eco-friendly packaging Pounds

10 Energy reduced due to eco-friendly packaging BTUs

11 Wastewater reduced due to eco-friendly packaging Gallons

12 Greenhouse gases reduced due to eco-friendly packaging Pounds, CO2 equiv.

Sample Outputs


OUTPUTS

Description Units

PEOPLE

Benefit to Suppliers

Fair Labor Practices

Total socially-certified tea purchased Pounds

1 Socially-certified tea, as a proportion of all tea purchased (by weight) Percent

2 Total incremental Numi income generated by farmers in top supplier countries $US

3 Total fair trade premiums paid to supplier communities (same as below) $US

Organic Farming (same as below)

4 Organic tea, as a proportion of all tea purchased (by weight) Percent

5 Total pesticide use averted by organic farming in top supplier countries Pounds

6 Total synthetic fertilizer use averted by organic farming in top supplier countries Pounds

7 Organic tea from top supplier countries as a % of total tea purchased Percent

8 Organic tea from top supplier countries as a % of total organic tea purchased Percent

Benefit to Consumers

9 Servings of Tea Sold to Consumers Number

a) Servings, bag tea Number

b) Servings, loose-leaf tea Number

c) Servings, bottled tea Number

Organic Farming (same as above)





PLANET

Packaging

14 Trees (wood use) saved due to eco-friendly packaging Number

15 Landfill (solid waste) reduced due to eco-friendly packaging Pounds

16 Energy usage reduced due to eco-friendly packaging BTUs

17 Wastewater reduced due to eco-friendly packaging Gallons

18 Greenhouse gases reduced due to eco-friendly packaging Pounds, CO2 equiv.

Organic Farming (same as above)





Logistics

23 Greenhouse gases reduced due to business decisions Pounds, CO2 equiv.

PROFIT

Price Premium

24 Avg. price premium commanded by Numi products, over value teas (Bigelow, Stash, Celestial) Percent

25 Avg. price premium commanded by Numi products, over other premium teas (Tazo) Percent

26 Revenues generated due to price premium over other premium teas US$

Logistics

27 Cost savings resulting from business decisions with environmental impact US$

CONFIDENTIAL

SELECTED BALANCE SHEET ITEMS SOCIAL & ENVIRONMENTAL IMPACT

Numbers in $000s 3Q2011 3Q2010 % Change PEOPLE

Cash and Cash Equivalents 1,454 3,464 -58% Fair Labor Practices for Producers

Accounts Receivable, net 1,944 1,383 41% Socially-certified tea purchased (lbs)

Inventories 2,939 2,341 26% Socially-certified tea (% of all tea purchased)

Incremental income for farmers from fair trade wages (US$)

Income increase for farmers from fair trade wages (% US$)

TOTAL ASSETS 9,359 9,369 0% Fair trade premiums paid to supplier companies (US$)

Accounts Payable 1,549 964 61%

L/T Loan Payable - Key Bank 989 1,050 -6% Organic Farming Benefits to Producers and Consumers

L/T Loan Payable - RSF 1,397 1,627 -14% Organic tea purchased (lbs)

L/T Nezar Fund 125 125 0% Organic tea (% of all tea purchased)TOTAL LIABILITIES 6,465 5,707 13% Pesticide use averted by organic farming (lbs)1

Owner's Equity, Contribution 0 0 NM Synthetic fertilizer use averted by organic farming (lbs)1

Owner's Equity, Distribution 0 0 NM

Paid In Capital - Series A 1,832 1,832 0% Health Benefits of Product for Consumers

Paid In Capital - Series B 4,945 4,781 3% Servings of tea sold to consumers (bag, loose-leaf, bottled)

Paid In Capital - Common Stock 488 488 0%

Retained Earnings (3,132) (3,143) 0% PLANET

Year-to-date net income (1,239) (297) 317% Eco-Friendly Packaging

TOTAL EQUITY 2,894 3,661 -21% Trees saved

Landfill reduced (pounds)

RATIO ANALYSIS Energy usage reduced (BTUs)

Wastewater reduced (gallons)

2011 2010 Greenhouse gases reduced (pounds, CO2 equiv)

Profit Margin (%) -8% 2%

Inventory Turnover (x) 2.03 2.14 Organic Farming Environmental Benefits

Collection Period (days) 61.0 48.0 See above

Payables Period (days) 93.4 69.1

Debt to Assets (x) 0.44 0.45 Logistics

Debt to EBITDA (x) (5.56) 5.14 Greenhouse gases reduced (pounds CO2 equiv)

Total Liabilities to Equity (x) 2.23 1.56 PROFIT

Current Ratio (x) 1.81 2.64 Price Premium

Avg price premium over other premium teas

Revenues generated due to price premium (US$)

Logistics

Cost savings from business decisions w/ env. impact (US$)

1 In Numi's top supplier countries: India, China, South Africa, and Egypt (80%+ of organic supply)

SUMMARY OF CASH FLOWS

Numbers in $000s

Aug-10 Sep-10 Oct-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11

Cash and Cash Equivalents at End of Period 3,464 3,133 2,863 2,834 2,845 2,443 2,337 1,996 1,831 1,800 1,565 1,454

TBD

TBD TBD

9,819 133,950

46%

Trailing 12 Months

13-Month Trend Analysis

2,834

Nov-10

136,825 2,476,746

46% 46%

$36,041,393$954,721

TBD

Q2 2011 Total/Avg To-Date

71,273 1,003,088

44%62%

58%

317,938

115,476 2,548,084

19,771

100% 96%3,318

1,513 27,384

165

347,177 6,967,477

8,541,056 309,748,104

1,761,24297,298

800,640,000 14,497,640,000

12,277,367678,416

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Key outputs from the impact measurement system are integrated into TBL’s

quarterly reporting process and appear alongside financial updates


= Denotes undisclosed sensitive company information

CONFIDENTIAL

Thank you!

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Brent knudsen

Economy & Finance

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