Risks

Investments in Triodos Organic Growth Fund are subject to several risks, which are described in detail in the sub-fund’s particular of the prospectus of Triodos SICAV II. Some of the risks are highlighted below.

Market risk (investee returns)

The fact that the returns generated by the investee companies are determined by various uncertain factors constitutes a long-term risk. Returns on individual investments arise through a combination of dividend distributions, growth in business value, or, in certain cases, through the partial or total sale of investments. In case of adverse business developments, dividend distributions may decline, as may the valuation of underlying investments. In case of a major default or bankruptcy of a portfolio company, the (expected) return may not be realised. No assurance can therefore be given that the fund’s return objectives will be achieved. Over time, sufficient diversification in the portfolio will mitigate this risk.

Liquidity risk

As Triodos Organic Growth Fund is a semi open-end fund it can in theory be confronted on each valuation day with large redemptions. Investors should be aware that any request for redemption of shares in the fund within the first three years after the initial launch date may be denied or postponed in case the net assets of the fund are lower than EUR 30 million. The fund does not perform quarterly stress tests, since the risk of shortage of liquidity is not apparent during the build-up period. On December 31, 2015, Triodos Organic Growth Fund held 66.0%1 of its net assets in cash and cash equivalents (at year-end 2014: 67.5%). Although currently unnecessary, the fund may additionally borrow up to 10% of its net assets for short-term liquidity requirements. The current liquidity risk is the high proportion of cash as asset class relative to the fund’s total assets. This risk correlates to the availability of appropriate investment opportunities and the ability of the fund to successfully negotiate investments in qualifying companies. The risk that the overall return of the fund would suffer as a result of the fund holding a relatively large proportion of cash is mitigated by building up a pipeline of investment opportunities to match the depth of the cash position of the fund.

1 Investment restrictions are presented against total assets. The liquidity ratio is presented against net assets.

Concentration risk

Triodos Organic Growth Fund has a very specific, sector-based investment focus on the organic food and sustainable consumer sector in Europe. If a downturn occurs in this market, or relevant sub-sectors of this market, this will likely have a negative impact on the performance of investee companies and therefore on the return of the fund. Also, the fund will achieve only limited diversification in geographical terms and across sub-sectors and value chain segments. Consequently, the fund’s return may be negatively impacted by the performance of any particular investee company, country, sub-sector or value chain segment within the overall organic and sustainable consumer market.

Country risk

Triodos Organic Growth Fund invests in several European countries. The country risk mainly consists of the risk of changes in economic conditions such as consumer confidence and regional appetite for and faith in the products and services of the companies that the fund has invested in. The country risk is mitigated by investing primarily in western European countries and having an upper limit of 40% of the fund’s total assets in one country, with the exception of Germany, where the fund may invest up to 50% of its total assets. The largest single country exposure in 2015 was in Denmark with 25.5% (17.6% in 2014), comfortably under the limit of 40% of the fund’s total assets.

Valuation risk

Valuation risk refers to the risk that the values of assets do not reflect the fair market value, since valuations are based among others on infrequent market-based data, assumptions and peer group comparisons. As Triodos Organic Growth Fund invests exclusively in assets not traded on a regulated market and not listed on any stock exchange, its investments will not have readily available prices and may be difficult to value. In order to determine the value of these investments, the fund employs a consistent, transparent and appropriate valuation methodology, based on the International Private Equity and Venture Capital Valuation Guidelines (IPEV), as published by the IPEV Board and endorsed by the European Private Equity and Venture Capital Association (EVCA). To the extent that this methodology relies on periodic market-based data and peer group comparisons, the valuation of the assets may fluctuate with the variations in such data.

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