A socio-ethical fund is an investment fund that invests in companies and/or projects in developing countries that further economic development and employment. Whether a company or project meets the criteria is determined by the Department for Development Cooperation. To encourage investors to invest in socio-ethical funds, the government grants them a tax benefit. This produces an annual extra return of 2.5%, applicable to a maximum invested amount of approximately €54,000 per person.

The private Bond holders' yield is realised by a tax deduction in boxes 1 and 3. The tax advantage consists of three elements:

1. a tax advantage to a maximum of 3.1% resulting from the gift to the NOTS Foundation;
2. a tax advantage to a maximum of 2.5% resulting from the fiscal arrangement for socio-ethical investments; and
3. a tax advantage to a maximum of 0.3% resulting from the possibility to deduct the proprietary equality of gifts by the Bond holder to the NOTS Foundation from the box 3 assets of the Bond holder.

For a private Bond holder with a marginal tariff for income tax of 52%, the total yearly return is 5.9%. For a private Bond holder with a marginal tariff for income tax of 40%, the total yearly return is 5.2%. This return is applicable to maximum invested amounts of €54,000 for fiscal individuals and €108,000 for fiscal partners.

The following fiscal legislation is relevant to the NOTS microcredit bonds: legislation concerning gifts to Institutions for General Benefit (Algemeen Nut Beogende Instelling - ANBI), legislation concerning socio-ethical investments, and legislation concerning the deduction of the proprietary equality of annuity gifts from box 3 assets.

- Agreement with the Tax Authorities
NOTS has consulted extensively with the Tax Authorities regarding the fiscal management and consequences of the Bonds and gifts. Based on these deliberations, the Tax Authorities have given their written approval to the fiscal aspects of the Bonds. However, it must be emphasized that certainty about personal fiscal consequences of the Bonds cannot be derived from the above stated information. We advise investors to seek the advice of a qualified consultant in this matter.

- Supervision DNB and AFM
Because of its activities, the NOTS Foundation qualifies as a 'bank' as meant in section 1:1 Financial Supervision Act (the 'FSA'). However, the NOTS Foundation is benefitting of an exemption entered in section 3:2 FSA. This exempts the NOTS Foundation from supervision by De Nederlandsche Bank N.V. ('DNB'). In addition, the offering of Bonds by the NOTS Foundation is exempt of the obligation to make generally available a prospectus approved by the Authority Financial Markets ('AFM') under section 53, paragraph 1 subsection d Exemption Regulation FSA, because the NOTS Foundation is a non-profit institution and because the monies raised by the Bonds are applied to non-commercial goals.

- Triple Jump B.V.
Triple Jump was established towards the end of 2005 by Oxfam Novib, ASN Bank and the NOTS Foundation in order to join their expertise in the field of microfinance. The above mentioned parties are shareholders of Triple Jump, together with its management and employees. Triple Jump's main responsibility is identifying, screening and monitoring of the MFIs (Micro Finance Institutions). At the beginning of 2009, Triple Jump is managing approximately €160 million in loans to and participations in MFIs for its shareholders and for third parties. Triple Jump will exercise the stock voting right pertaining to the stock capital of MFIs on behalf of NOTS Investments B.V. (a full subsidiary of the NOTS Investments Foundation, the Foundation issuing the Bonds), and will be guided in this by maximisation of the value of the stocks concerned.

NOTS Foundation lends the entirety of the monies, raised by the NOTS Investments Foundation by issuing the Bonds, to NOTS Investments B.V. NOTS Investments B.V. invests the thus obtained monies in loans to and participations in MFIs. These MFIs have been identified and screened by Triple Jump. Next, Triple Jump sends investment propositions to a credit committee consisting of external experts and subsequently to the board of the NOTS Investments Foundation. If the board approves the investment, Triple Jump attends to the necessary documentation. Triple Jump also sees to it that the invested amount is transferred to the bank account of the MFI.

NOTS Investments B.V. expects to yield a average net return of 6% yearly on the loans to and participations in MFIs. The NOTS Investments Foundation does not pay out this return to the investors, because the investors, on acquiring the Bonds, have committed themselves to make an annual gift to the NOTS Foundation equal to the return during the maturity of the Bonds. The return the NOTS Investments Foundation annually has to pay out to the investors is then settled with the annual gift of the investors to the NOTS Foundation. This settlement is conducted by an annual transfer of 6% of the nominal amount of the Bonds by the NOTS Investments Foundation to the NOTS Foundation.

The decision-making process consists of the following steps:

• The board of the NOTS Investments Foundation ('NIF') has laid down the criteria that MFIs in which investments that are to be made have to meet.
• Triple Jump B.V. identifies and screens the MFIs on behalf of NIF.
• Triple Jump draws up loan proposals and/or participation proposals.
• A credit committee consisting of external experts reports on the proposals.
• A proposal is put before the board of NIF, together with the corresponding report.
• The board of NIF approves or declines the proposal.

The arrangement for "periodical gifts" pertains to obligations entered into by notarial deed of donation to make fixed and consistent periodical, at least annual, payments or allowances for a period of five or more years, but ceasing on death of the giver. There is no threshold or maximum. When an investor subscribes for the Bonds, the NOTS Investments Foundation will take care of execution and costs of the notarial deed. On death of the Bond holder, the commitment to periodical gifts is terminated. If the heirs (to the Obligations) subsequently commit themselves to periodical gifts during the remainder of the maturity of the Bonds (yet for a minimum of 5 years) the heirs gain the advantage that the Bond holder held previously. If heirs do not commit themselves to periodical gifts, NOTS has the right to buy back the Bonds.

The NOTS Investments Foundation, the foundation set up by NOTS for the sake of issuing the Bonds, has been qualified as a bank by De Nederlandsche Bank, but exempted of supervision. The NOTS Investments Foundation falls within the so-called 'group exemption' of De Nederlandsche Bank. This exemption allows NOTS to issue bonds by itself. Without this exemption, NOTS would have to retain a bank with full banking licence or a licensed investment institute in order to be able to issue bonds. This would involve considerable costs. As it is, NOTS does not have these costs and is moreover able to operate much faster and more flexible.

NOTS Foundation lends the monies, raised by issuing the Bonds, to NOTS Investments B.V. NOTS Investments B.V. uses these monies to give loans to and participate in MFIs in developing countries. NOTS Investments B.V. was founded (as Ouderkerk Investments III) on 29 August 2006 as a private limited company with limited liability and has its statutory seat in Maarssen. NOTS Investments B.V. is registered in the trade register under number 30217952. The ministerial certificate of incorporation was granted by order dd 29 August 2006 under number B.V. 1387462. The NOTS Investments Foundation holds all the shares in NOTS Investments B.V.

Twice every year, in April and October (each: a 'Trading Period'), Bond holders may offer up their Bonds for purchase by the NOTS Foundation for the nominal amount. NOTS may then decide to purchase Bonds, providing it has sufficient fluid assets at the time, without at any moment being obliged to do so. Purchase of Bonds will proceed in chronological order of the Bonds on offer. All Bonds put on offer, but not purchased, during a specific Trading Period, will be the first to be traded in the event of a purchase during the following Trading Period, providing the NOTS Foundation has sufficient means (before any purchase of Bonds put on offer during that following Trading Period). If Bonds are purchased, the NOTS Foundation will deduct transaction charges (1% of the nominal amount of the purchased Bonds) from the purchase price of the Bonds. Bond holders should be aware that the gift commitment does not terminate on accelerated redemption of the Bonds. This commitment, that has been set down in a notarial deed, remains in effect until the maturity date of the Bonds.

Bond holders may offer up their Bonds for purchase to the NOTS Investments Foundation twice each year. This is also possible if the tax regime alters unfavourably. However, the NOTS Investments Foundation is not obligated to purchase Bonds on offer. Should changes in the relevant fiscal legislation cause the return on the Bonds to become substantially smaller, the NOTS Investments Foundation will make an effort to liquidise its investments in MFIs as soon as possible, in order to be able to purchase the Bonds.

Bond holders may not determine on which scholarship projects the return of the Bonds will be spent. This is determined by the board of the NOTS Foundation. However, a Bond holder may at any time bring a specific scholarship program to the attention of NOTS. NOTS will then determine whether the project in question is suitable for NOTS and will feature on the NOTS website as a donation project.

No, not at this time. However, if there is found to be a demand for this within our investors, we will develop sector and/or land Bonds at the moment we have raised a substantial amount (€50 million or more) with our Bonds.

NOTS will make quarterly reports to the Bond holders. These reports will consist of three parts: (1) information about which amount we have invested in which MFIs, on which conditions, and about the rate in which the MFIs satisfy their obligations towards NOTS; (2) results of the MFIs in which has been invested (amount in loans that have been issued, number of clients, number of clients per segment, net yield of loans, etc.); and (3) information about a few clients of MFIs: we will track a few clients (small entrepreneurs) of a number of MFIs we invest in to see whether microcredit actually helps these people to become independent.

Yes, the quarterly reports will contain information about which MFIs we have invested in. A number of core facts on each MFI will be reported on on a quarterly basis.

Every €10,000 pays for microcredits for approximately 50 entrepreneurs each year. An average family in developing countries consists of 6 people. So, by investing €10,000 in our 10-year Bonds you help a total of 3,000 people to achieve independent existences over a period of 10 years.

NOTS launched the NOTS Microcredit Fund in June 2007; a joint account fund to raise monies for microcredits. Particularly Van Lanschot Bankiers was to promote the fund, but this never took off, partly due to the takeover by Kempen & Co. There was a limited number of subscriptions. Feedback from several (potential) investors showed that the investors considered the return of their investments to be of less importance than supporting entrepreneurs in developing countries. This gave birth to the idea of a tax-friendly bond product: the NOTS Microcredit Bonds. The unique feature of the Bonds is the way investors realise a return of 5 - 6% yearly: by paying less taxes. Therefore, the return yield on the investment in microcredits does not have to be paid back to the investors. The yields are utilised by NOTS in the funding of its scholarship projects. Considering these attractive aspects of the Bonds, NOTS decided to terminate the Fund in 2008 to be able to fully concentrate on promoting the Bonds.

Because most of the entrepreneurs who have microcredits conduct their businesses extremely locally, the international crisis has hardly any direct influence on them. MFIs do suffer from the international crisis, because they experience more difficulties in raising capital, but because they are only partially connected to the international capital market, they keep standing in times of a global economical crisis (contrary to well-established banks). The crisis has caused investors to exercise extreme caution in investing in products that carry a higher risk than savings accounts and government bonds. We have sold much less Bonds than planned because of this fact. However, now that the interest rate is falling, the Bonds are becoming more attractive. The moment investors shall get in on products that carry a slightly higher risk than savings accounts again, the Bonds are on top of the list as for desirability (risk/return trade-off).

The Bonds have a relatively high (5 - 6%) and a relatively certain annual return when compared to other microcredit funds. The reason for this is the fiscal construction that underlies the Bonds. Investors in the Bonds run the risk that they are not paid back 100% of their initial investment on the maturity date because of decreased values of investments in MFIs during the maturity. With the Bonds, any loss in value is reflected in the return on the maturity date. With most microcredit funds, any loss in value is reflected in the return daily (with funds quoted on the stock exchange), quarterly or annually. The Bonds are unique in allocating substantial part of the annual return to scholarship projects. This is possible because the Bond holders realise their return by paying less taxes. This is a unique aspect of the Bonds, not offered by any other microcredit investment fund.